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Energy White Paper
5.19 p.m.
Lord Sainsbury of Turville: My Lords, with the permission of the House, I shall repeat a Statement made in another place this afternoon by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:
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"I should like to make a Statement about the energy White Paper, which I and my right honourable friends the Secretary of State for
- Environment, Food and Rural Affairs and the Secretary of State for Transport are publishing today. Copies are available in the Vote Office.
"At the same time, my right honourable friend the Secretary of State for Environment, Food and Rural Affairs is publishing the Government's response to the 22nd report of the Royal Commission on Environmental Pollution, Energy—the Changing Climate. I should also like to draw the attention of the House to the written Statement on British Energy that I made this morning.
"Mr Speaker, I regret as much as I am sure you do that drafts of the White Paper have been leaked over the past few days. Such action is a discourtesy to the House and I deplore it wholeheartedly.
"This White Paper sets out a new energy policy, designed to deal with the three major challenges that now confront our energy system. The first is the challenge of climate change. CO2 levels, which have already risen by more than a third since the Industrial Revolution, are now rising faster than ever before.
"The scientific evidence is quite clear that the consequences of rising global temperatures could be devastating not only in Britain, where floods and storms could cause billions of pounds' worth of damage, but even more so in developing countries where millions of people could be exposed to disease, hunger and flooding.
"Secondly, we face the challenge of our declining indigenous energy supplies. Already we import nearly half the coal we use. By 2006, we shall be a net importer of gas and, by 2010, of oil. By 2020, we could be dependent on imported fuel for three-quarters of our total primary energy needs. As we move from being an exporter to an importer of energy, we need new approaches to reduce the risk of price fluctuations and political instability or conflicts in other parts of the world.
"The third challenge is that of keeping our energy infrastructure up to date with changing technologies and needs. Much of our infrastructure will need to be updated over the next 20 years, particularly to adapt to far higher levels of renewable electricity and to accommodate gas imports.
"Our four new goals for energy policy are: first, cutting greenhouse gas emissions; secondly, securing reliable energy supplies; thirdly, maintaining competitive energy markets in the UK and beyond; and, fourthly, ensuring that every home is adequately and affordably heated.
"The United Kingdom is already on course to achieve our Kyoto commitment to reduce greenhouse gas emissions by 12.5 per cent below 1990 levels by 2008–12. Today, we are making a further commitment to cut UK carbon dioxide emissions by 60 per cent by about 2050, with real progress by 2020. That was the recommendation made by the Royal Commission on Environmental Pollution. We are accepting it.
"Of course, our own actions will affect climate change only if they are part of a concerted international effort. A key objective of British foreign policy in future will therefore be to secure ambitious international commitments to cutting CO2 emissions.
"At the heart of our new framework for energy policy will be a carbon trading system. A new Europe-wide scheme is planned for 2005. It will create a powerful incentive to producers and consumers to use less energy and to switch to lower or zero carbon forms of electricity.
"The cheapest way to tackle all our energy goals is simply to use less energy. But we shall need to achieve far more on energy efficiency in the next 20 years than we have achieved in the last 20 years. Building on the climate change programme, we have therefore decided to consult on an expansion of the energy efficiency commitment to run from 2005 until at least 2008 at possibly twice its current level of activity, and we shall work with energy suppliers and Ofgem to create an effective market in energy services; to bring forward to 2005 the revision of building regulations, with higher standards for efficiency both in new buildings and in refurbishments; to work with our European partners to agree higher standards for consumer and industrial appliances; and to set an example within government, improving energy efficiency in our own buildings and procurement.
"Last year we introduced a renewables obligation to help to deliver our target of 10 per cent renewables electricity by 2010. By that date, the renewables obligation and the exemption from the climate change levy will be worth £1 billion a year to the renewables industry.
"We believe that renewable sources of energy will increasingly demonstrate that they can achieve our goals at an acceptable cost. Our further aspiration is therefore to double renewables' share of electricity from our 2010 target by 2020.
"The White Paper sets out policies to achieve that by investing £60 million in new money for renewable energy projects, bringing spending on renewable energy up to £348 million over four years; simplifying and streamlining the planning system; taking steps with Ofgem and others to improve access by renewable generators to the electricity network; and setting out a new strategic framework for offshore wind.
"Nuclear power is currently an important source of carbon-free electricity. But its current economics make it an unattractive option and there are also important issues of nuclear waste to be resolved. The White Paper does not contain proposals for building new nuclear power stations but does not rule out the possibility that at some point in the future new nuclear build might be necessary if we are to meet our carbon targets. Any further decision to proceed with the building of new nuclear power stations would only follow a full public consultation and publication of a further White Paper.
"Transport, which accounts for around a third of final energy use, will also play its part. We shall continue to improve vehicles' fuel efficiency and to cut carbon emissions through the very successful EU voluntary agreements with car makers. Vehicle taxation now encourages and rewards consumers for choosing clean, low-carbon vehicles. We shall start to make substantial use of low-carbon biofuels. That builds on the policies that we set out in our powering future vehicles strategy, and we welcome industry and other stakeholders' engagement through the new low carbon vehicle partnership.
"In this White Paper, we set out a package of measures to support new energy technologies, including a new industry network on fuel cells and further work on the transition to a hydrogen economy. I also welcome the research councils' proposal for a new energy research centre.
"Turning to energy reliability, becoming an energy importer does not necessarily make it harder to deliver energy reliability. Most other leading industrial nations have achieved economic growth as energy importers and we shall be able to do the same. Securing reliable energy supplies will be an increasingly important part of our European and foreign policy.
"We have already secured a commitment to EU energy liberalisation for industrial customers by 2004 and overall by 2007. That will improve our access to different sources of supply and allow UK companies to compete in wider markets. Competitive markets, as well as keeping prices affordable, also create the right environment for infrastructure investment that will increase our capacity to import gas through the existing interconnector. Renewables and smaller-scale distributed generation will also help to promote greater diversity and security.
"Coal generation provides around a third of our electricity, increases flexibility and contributes to diversity of supplies. The future for coal electricity generation lies in cleaner coal technologies or carbon capture and storage. We already have a programme of support for cleaner technologies and the White Paper includes proposals on capture and storage. Separately we propose to introduce an investment aid scheme to help existing pits to develop new coal reserves, where they are economically viable, and to help to safeguard jobs, and we have already negotiated the flexibility required at an EU level to enable us to do that.
"Tackling fuel poverty remains a key priority. In 1996 there were 5.5 million UK households in fuel poverty. Today, there are around 3 million; 2 million of those are vulnerable households—older households, families with children or householders who are disabled or have a long-term illness.
"In 2001, our fuel poverty strategy set out policies to end fuel poverty in vulnerable households by 2010. We further aim that, as far as reasonably practical, nobody in Britain should be living in fuel poverty by 2016–18.
"Eradicating fuel poverty requires action in homes through better insulation and heating systems. We are tackling that through programmes such as Warm Front and the energy efficiency commitment. We shall publish our first annual report on our fuel poverty strategy shortly, giving more detail of the progress being made.
"Today's White Paper sets out an energy policy for the long term. It will give energy producers and industry the long-term market framework that they need to invest and to plan with confidence. It will ensure that consumers can continue to rely upon safe, affordable energy for all their needs. And it will help us to play a leading role in meeting the challenge of climate change. I commend the White Paper to the House".
5.30 p.m.
Baroness Miller of Hendon: My Lords, I thank the Minister for repeating the Statement made in another place. I hope that it is not too disappointing for him when I say that the White Paper is a deeply disturbing document because it poses many questions but gives few answers. I shall refer to that later. In view of that shortage of answers, why has the White Paper taken so long to see the light of day?
I note the Statement's comments that the Minister in another place regrets the many leaks of the White Paper during the past few days. It is extremely disturbing that there have been so many leaks in the newspapers, on television or on radio. Many members of the public will be unaware that Statements are supposed to be made in the Houses of Parliament in the first instance. This is becoming an everyday occurrence. When will it stop? It is nice to have an apology today that it has happened, but when will it stop? Will the Government do their usual thing and set up a leak inquiry or a taskforce to deal with leaks?
Those may seem frivolous questions, but Parliament not being told in advance of such leaks is a matter of constitutional importance. As the Minister was gracious enough to pass on regret that that happened, perhaps the Government will consider how to try to stop it happening in future.
On the "Today" programme this morning, it was said that the White Paper was long in aspirations but short in targets, which leads me to ask the Minister to clarify what is the difference between a target and an aspiration. Will he clarify for the record whether, when the Government know that a target will not be met, they suddenly downgrade it and call it an aspiration?
In the foreword to the White Paper, the Prime Minister congratulates the Government by saying that they are,
- "putting the UK on a path to a 60% reduction in its carbon dioxide emissions by 2050".
The Minister repeated that there will not be new nuclear power stations when the existing ones are finally decommissioned—they will not be replaced. They do not produce carbon dioxide, despite paying the climate change levy; but they provide much of the electricity that we use. Among other things, the White Paper offers renewables as one solution to fill the gap. Of course we on this side of the House want renewables to produce even more of our energy, but the idea that they could replace the amount to be lost is a little far-fetched. I should be most grateful if the Minister would answer that point.
The Minister mentioned that under Kyoto, we had a target of 10 per cent renewable energy by 2010. That was extended to 20 per cent by 2020 in the United Kingdom, but has now been downgraded to an aspiration. Hence my original question: if the Government decide that they cannot meet a target, will it be usual to turn it into an aspiration?
I said that the review was deeply disturbing. It certainly is. Britain's energy needs will not be met by a hope, a prayer and an aspiration. Britain's energy industry is now vulnerable, and the Government must recognise that renewables alone simply cannot make up the gap. Of course, the Minister will tell me that that will involve not renewables alone but other sources, on which I shall touch later.
However, wind power is one source that the Government are considering. I stand to be corrected by the Minister, but I believe that by the end of 2001, we had 70 wind farms. The Performance and Innovation Unit stated that to meet our target for renewables, we would need 20,000 wind farms. There is quite a difference between 70 and 20,000. My arithmetic is not that great, but I think that that means that we must find 19,930 during the next 17 years. That comes to 22 a week, or three a day. We have built 70 over quite a period and now we suddenly imagine that by investing some money we shall arrive at three a day.
Is that possible? Can the Minister tell us how that will happen? What are the visual environmental implications of that? Where will those wind farms be placed—in parks or off-shore? Can the Minister confirm that the Government intend to scrap or in some way weaken existing planning controls on wind farms in our moorlands and along our coasts to make that possible?
The White Paper tells us that the Government will be investing £1 billion a year in renewables by 2010. What is the current level of funding—which, as I mentioned, has produced only 70 wind farms? Is the £1 billion funding secured in forward spending programmes? Is that also just an aspiration and spin, or will it be there?
On the subject of renewables, I was surprised to read in the press that government sources are today talking of confronting President Bush over energy. I did not think that we were in the business of confronting the
President at this moment. Perhaps I have missed something. Have the Government read the President's State of the Union message? In it, he committed himself to major investment in the search to develop hydrogen-powered cars. What is our policy on that? Where is our drive for hydrogen power? Indeed, is there a date—a target or an aspiration—by which all government cars will have been converted to low carbon fuels to set an example to the public and others?When setting targets, how far have the Government considered the impact on United Kingdom businesses? Are we heading for a repeat of the ill-thought-out climate change levy? Are the Government considering a range of incentives to encourage United Kingdom businesses to meet their ambitious targets? If so, what are those incentives? Will that mean more fiddling with the minutiae of the tax system? British manufacturers are today urging the Chancellor to stop taking in tax money that they could reinvest. Will the Government listen?
I should appreciate clarification of how the Government intend to meet the targets in the White Paper without damaging British business. Specifically, can the Minister tell us whether the Government are considering extending agreements for small and medium-sized companies to obtain discounts on the climate change levy?
The White Paper says that we will be net importers of gas by 2006 and of oil by 2010. It warns:
- "we may become potentially more vulnerable to price fluctuations and interruptions to supply caused by regulatory failures, political instability or conflict in other parts of the world".
Many noble Lords will have hoped for more encouraging words on the subject of coal than the skimpy mention in the White Paper. Can the noble Lord give the House more details of the new aid planned for the coal industry after the end of the UK Coal Operating Aid Scheme? How much will be spent? When will it start being spent?
What is the Government's policy on nuclear energy? On the one hand, the White Paper says that no new build is proposed; on the other hand, the Government say that they do not rule out future build to meet the carbon targets—a 60 per cent reduction target laid down by the Prime Minister. Which is it? Will it be a non-nuclear future or a nuclear future? What is the point of re-visiting the issue in five years? It will be too late to do anything about it then. The Government seem to want to play all the balls in all the ways. Or is there a third way, about which Ministers have not yet told us?
What impact will the strategy have on domestic energy prices overall? The paper says that new policies will add between 5 and 15 per cent to household electricity bills. To those who use most lighting and heating—the elderly, who are in their home all day, and young women with their children—15 per cent is an enormous amount of money. It is not correct just to brush that aside. People will be punished for using more energy. I note that the Statement says that the best thing to do is not to use it and that, if we use less, everything will be well. Some people will continue to use more. How will the increases be phased in?
The White Paper also talks of new charges on air travel, to add to existing taxes. By how much do the Government think it necessary to raise the cost of holiday travel by 2010?
As I read the White Paper—the product of years of toil—I felt that I had never come across a more depressing catalogue of words. The paper talks repeatedly of working parties and reviews. It uses the phrases "We will consider", "We will explore" and "We will examine". We should have got there by now and should not still be exploring, reviewing, looking at or considering things. We have been waiting for the paper for ever. This is not an energy policy. It is a long-winded document, which acts as a fig-leaf to hide the fact that there is no energy policy in it.
In conclusion, I quote the Government's summary:
- "We have reviewed what we will need to have achieved by 2020 if we are to be confident we are moving in the right direction, fast enough, to deliver our aims for 2050".
- "We have not sought to define every detail of the policies we need to pursue over the next 20 years and beyond . . . That would not be realistic".
5.44 p.m.
Lord Ezra: My Lords, in making my remarks on the Statement, I declare an interest as chairman of Micropower. I am grateful to the noble Lord for repeating the Statement, but I must say that, although I find it a worthy, well written document—as all government documents are—I, like the noble Baroness, Lady Miller of Hendon, find it disappointing. It repeats a good deal of what is already known or has been said, particularly in the admirable PIU report produced a year ago. It avoids the fundamental issue of the future of nuclear power, a matter to which the noble Baroness referred. The White Paper suggests some new policies, but, on the whole, it is more of an aspirational than a determinist document. That is the impression that it leaves.
I shall consider the White Paper from three points of view: the encouragement of clean energy; the encouragement of energy efficiency; and the problem
of security of supply. The clean energy aspect is overshadowed by the lack of decision on nuclear energy. I had expected that the document would decide one way or the other. If the Government had decided to go ahead with the construction of new nuclear stations, they should have addressed the problems of nuclear waste, capital costs and security. If, on the other hand, they had decided that there was no need or desire for the construction of new nuclear stations when the present stations come to the end of their life, they should have addressed what is becoming known as the "generation gap". How will the gap be filled in a way that will not harm the atmosphere?In fact, neither of those things were done, and we have been left in a sort of limbo, in which the issue will be reconsidered in five years' time. As the noble Baroness, Lady Miller of Hendon, said, that could be too late. If the Government were to decide to go ahead with new nuclear stations then, the time that it takes to get planning consent, investment and so on would mean that there could be a serious gap between the output of existing stations on the point of being phased out and the input of any new stations.
We could assume that the Government's thinking is that, on the whole, they do not want any further nuclear stations. That seems to be the implication. In that case, I would have hoped to have seen a more determined approach to the production of the clean energy that is to replace the nuclear energy. The Government continue to support renewables, but there are other ways in which clean energy can be provided. Although the report mentions the substantial contribution that can be made by combined heat and power, there is no recognition of the serious difficulty in which CHP finds itself. There have been no new CHP plants for some time, and their contribution has been reduced. Unless there is a major new initiative, the contribution of combined heat and power, by which the Government set so much store, will fail.
The simplest way of dealing with that is something that the noble Lord, Lord Jenkin of Roding, and I referred to at the time of the passage of the Utilities Bill. That is to establish a CHP obligation. In other words, we should treat CHP on the same basis as renewables and get the enormous benefit of almost doubling the efficiency of power generation as a result.
On a more positive note, I see that Ofgem is working closely on ways in which distributed generation—another way of adding to the efficiency of generation by having it more localised—can be established and the obstacles overcome. That is overdue, but it is satisfactory to note that the Government are committed to it.
On clean energy generally, there ought to be an overall approach to all aspects of clean energy, so that the same degree of commitment applied to renewables can be applied to the others. Clean coal technology, to which the noble Baroness referred, comes into that category. I am glad that it has been referred to. What is very necessary is that some clean coal technology plants are established together with CO2 removal.
On the question of energy efficiency, in my opinion, the biggest point missed is that householders today have little incentive to save energy. Energy is relatively cheap and is a small part of household bills. The fuel poor to which the noble Lord referred are being helped separately, but general domestic users are not sufficiently incentivised to save on energy. I do not see in the White Paper any way in which users would be so stimulated. I cannot see the major savings in the domestic consumption of energy that are envisaged in the White Paper.
On the security of supply, the real problem is with gas. If present trends continue and gas is maintained as the main fuel for electricity generation, as the White Paper estimates, this country will be 80 per cent dependent on imports of gas by 2020. That will raise all sorts of strategic problems to which the White Paper, indeed, refers. The way around these problems is to tackle all the alternatives more vigorously than is done in the White Paper.
This is not the end of the story. In the final chapter of the White Paper, reference is made to the continuing work which will be undertaken by the new Energy Strategy Unit of the DTI. Let us hope that the gaps in the White Paper will be filled. In this House, we must be ever-vigilant that that is carried forward.
5.52 p.m.
Lord Sainsbury of Turville: My Lords, I shall deal first with the points raised by the noble Baroness, Lady Miller of Hendon. She asked what is the nature of this document and why has it taken so long to produce. It has taken so long to produce, first, because detailed consultations took place and, secondly, because these are extremely complicated issues and there are a range of targets and objectives which energy policy must meet. It is unrealistic and wrong to suggest that the way this issue should be approached is to set out a 10 or 20-year plan which states exactly what the energy sources are and the specific needs that they will address, and that a long-range plan is produced worthy of the Soviet Union or the Chinese Communist Party.
We live in a world of markets, innovation and changing energy sources. I believe that the Government are right in seeking to set out a strategy and framework on which to build incentives to help us achieve our environmental goals. Above all, to anyone who has examined this area, it is fundamental to build in flexibility. To state at this point that we shall lay down exact energy sources and exact incentives which will apply over the next 50 years, misunderstands the fact that we are dealing here with a whole range of totally unpredictable factors. The only sensible thing to do—as I am sure that the public will understand—is to set a framework and to build in incentives to achieve desired goals and to keep flexibility.
In that context, I turn to the difference between a target and an aspiration. A target is something in which one can be precise, with a good understanding of what the costs of achieving it will be. That is why we have set a target for 2010. However, looking at a figure
of renewables for 2020 without knowing costs, to say that we will achieve it regardless of cost or any implications is foolish. We cannot know the costs. Therefore, the Government have said that they have an aspiration. Clearly, in the light of the costs of different kinds of renewable, one should keep that under review as one goes along.The noble Baroness, Lady Miller of Hendon, was concerned about being put on a path to a 60 per cent reduction in CO2 emissions. Clearly, that cannot be achieved on day one. In the document we have projected a reasonable line between our position now and the position we want in 2050. We have stated our aims beyond that line in order that we can say that we are on a path to getting there.
The noble Baroness also raised the issue of nuclear power. What is the way in which a policy in this area should be approached? At present, our preference is to achieve this through renewables. Nuclear power is an important source of carbon-free electricity, although it is currently economically unattractive and there are important issues concerning the disposal of nuclear waste to be resolved. However, we believe that the ambitious progress on renewables and energy efficiency is achievable. But again, it is uncertain. While the White Paper does not contain specific proposals to support the construction of new nuclear power stations now, it affirms that new nuclear power stations remain—as I think they should be—an option for the future. Whether they become an important option depends on the progress made in other areas.
The noble Baroness, Lady Miller, raised the issue of the £1 billion renewables obligation. The renewables obligation will give a £1 billion incentive to renewables because that is built into the renewables obligation figures. I am not certain from where the noble Baroness's figures have come for wind turbines. We are not saying that the 10 per cent should all come from wind and, particularly, not from onshore wind. We have produced a set of figures which show how the whole range of renewables from biomass, onshore/offshore wind, landfill gas and photovoltaics can contribute to our goals in 2010 and 2020.
Having been rather dismissive of targets, the noble Baroness then raised them in the sense of the hydrogen economy. Looking at the documents and what we said on the field of transport, the powering future vehicles strategy made clear that our objective is that the UK should head the global shift towards a low carbon economy. We have taken steps which are set out on these questions. Equally, we have set out clearly what the Government will do in terms of investment in capital costs of coal. We have covered nuclear.
The other important question that the noble Baroness, Lady Miller, raised was the cost of going green. What would be the cost to industry? Our analysis suggests that the cost of making 60 per cent cuts in carbon dioxide emissions by 2050 is likely to be only 0.5 to 2 per cent of GDP by that time, which is likely to have tripled, should we act with other industrialised countries. In the worst case scenario in which other countries take no action to reduce carbon
emissions, some UK industries facing intense international competition could experience overall cost increases of 1 per cent or more. Those cost estimates would occur over the period to 2020.I turn now to the comments made by the noble Lord, Lord Ezra. I have covered the position on nuclear and why that is a decision to be taken in the future. We shall make progress towards our goal even if we do not have nuclear because we shall be producing renewables to meet the targets set. Of course, the move towards gas will be helpful in meeting those targets.
Furthermore, we concluded from our modelling that CHP would not provide carbon savings cost effectively. For that reason, we have not included a CHP obligation. We have a target of 2010 for 10 gigawatts of Good Quality CHP. We believe that that is within reach and we will strive to attain it.
The noble Lord, Lord Ezra, and I have previously discussed clean coal technology. The Government believe that what is needed has been demonstrated and that it is now for people to come forward with commercial propositions.
The White Paper sets out clearly how we will increase energy efficiency. That includes extending the energy efficiency commitment beyond 2005 for domestic suppliers; bringing forward to 2005 the building regulations for new build and existing stock; and progressively raising building standards so that in new houses by 2012 we will match the much higher levels of thermal efficiency that have been achieved elsewhere in Europe.
Finally, on security of supply, we obtain gas from many parts of the world. We seek to achieve good relationships to provide the infrastructure and ensure that we have liberalised markets in Europe. All those aspects are being pursued.
6.1 p.m.
Lord Mason of Barnsley: My Lords, is my noble friend aware that I am not happy with the energy, fuel and power aspects of the Statement? Our annual imports of electricity from France are the equivalent of 5 million tonnes of coal; 12 million tonnes of coal are imported from 11 different countries; and gas imports are increasing. Indeed, we may be reliant on gas imports in due course. Therefore, as my noble friend indicated—but not as clearly and as frankly as I would have liked—security of supply has vanished. However, I am more concerned that our fuel supplies will be dependent on the politics of our suppliers—and I believe that that will continue ad infinitum.
Furthermore, I notice the White Paper indicates that the coal industry will end within 10 years. Even with Coal Aid, the industry will have disappeared. But, worryingly, there is no planned nuclear expansion. In those circumstances, are we not in future danger—and quite soon—of a bleak fuel and power economy?
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