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The first issue we are particularly concerned about, which will take a good deal of the Committee’s time, is the feed-in tariff. I have dealt with this for a number of years, introducing a Private Member’s Bill, the Renewable Energy Bill, four years ago, which raised it. I went to the DTI and discussed it, but there was absolutely no interest whatever on the part of the Government; it was seen as a small or non-issue. Of course, the Government are entirely right: it is a small issue, but that is due to their inaction. In France and Germany, for example, whose Governments have taken a great deal of interest, feed-in tariffs have become a major component in meeting their renewables obligations. The Government have said that renewables are being taken seriously, but I see little action on the ground. Without mechanisms to ensure that this area grows, small, or even larger, renewables will not become economically viable, with economies of scale driving their prices down so that they become an everyday feature of life.

If the Minister cannot consider feed-in tariffs now, maybe he could write to me on what the Government see as the power level to be considered. You could have an unlimited feed-in tariff, but many speakers talk about microgeneration and go up to a much larger scale. It would be interesting to discover the Government’s view on a level for feed-in tariffs. They are dealt with differently in Germany—we have the ROC system over here—so it would be interesting to know how the Government see the level affecting the market in ROCs.

The second issue that I am particularly keen on, which, strangely, was not raised in another place, is the change in the primary responsibilities of Ofgem as regulator. It is important that Ofgem considers carbon a major issue and a primary responsibility. It has been argued that Ofgem deals with the market, competition and supply. However, I have spoken to a large number of energy companies over the past few

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years, and they constantly ask how they can invest in new generating capacity if they do not understand what the carbon regulations will be. Carbon, therefore, has completely skewed the market in new generation because, as it has not been dealt with in the right way, there is little confidence in those public sector energy companies that will fill the gap in the energy market over the next few years.

I realise that we now have a Committee on Climate Change, but it will only be making recommendations. We really need to add carbon into the regulator, Ofgem, so that other market mechanisms must take the role of carbon into account. While it would be easy to say that ETS will be the panacea to solve all of our problems, I do not believe that will be the case—and if not, it would be much more helpful if Ofgem were to deal with it. This is particularly important because BERR, in its former role of DTI, has completely ignored carbon as an issue that has to be dealt with aggressively, and has therefore sidestepped its responsibility for it.

Another area we will be looking at is that of carbon storage and capture. As was stated in the Question earlier today from the noble Lord, Lord Ezra, it is unfortunate that the Government have chosen one pilot project. I understand the costs, but we have the opportunity to invest in technologies that could make us a world leader in an area with massive market potential. Look at what happened with wind turbines: we missed an opportunity when we could have been in the forefront. The Danes took wind turbines and now have more than 60,000 people working in that industry. One problem that we now have, especially with offshore where, as the Minister mentioned, there has been a massive expansion, is that we do not produce the turbines ourselves. Therefore, the shortage and growing queue for the turbines to be produced drives up the price of those that we are installing. That is no small consideration when the London Array will be the largest offshore turbine farm in the world, so it is unfortunate that this country had no stake in producing those turbines.

Smart metering is the other major area which we will be looking at and, since the Government have brought forward an amendment, the Bill now includes it. However, I was particularly concerned with the Minister’s choice of words. He said that customers will “potentially” be able to put in a smart meter. Perhaps that is a change in policy, for in a speech of 19 November 2007, the Prime Minister said that,

In that speech, the Prime Minister stated not only that smart meters will be available to everybody within 10 years, but that feed-in tariffs will also be part of that. Is the Minister now saying that that is potentially not the case? The issue that we will raise on smart meters is that, while the clause is fine as far as it goes, there is nothing to make sure that the Government actually bring them about. We will, then, look to introduce a clause giving a timescale under

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which smart meters should be brought about. That is only fair for the energy companies, because there is an enormous amount of investment for them to meet, and for them to be given no specific timescale to work to will cause uncertainty in the market, potentially raising costs.

In these debates on energy, I often talk a great deal about nuclear issues. Many of your Lordships will be glad to know that I am very happy with the Bill’s provisions for nuclear, although I might raise a couple of probing amendments over potential subsidy in the market and whether the Government are getting full cost for the planning gain on land surrounding present British Energy sites, because the new sites will be built next to the old ones. However, that is for a later date.

I am particularly annoyed about the omission of a renewable heat obligation. I have spoken to BERR and the DTI about it on numerous occasions and it has been raised in many debates. It is almost immoral to leave it out, considering the implications for carbon. I very much hope that that issue will be considered as the Bill proceeds. In order to meet our renewable obligations by 2020 without legislation including renewable heat, will the department add renewable heat into their figures? Some of the documentation gives the impression that renewable heat will be added into the figures to meet our renewable target, but there does not seem to be anything in the Bill which gives us hope that renewable heat will be a government priority.

Leaving social tariffs out of the Bill is another rather unfortunate omission. In an age when electricity prices have gone up considerably in the past few weeks, and will go up even further, the failure to include social tariffs to protect those, especially the old and vulnerable, who will increasingly suffer fuel poverty is unfortunate. Another measure that is not included in the Bill, but which I hope to look at, is energy storage. Energy storage for electricity is becoming a major field in America where it is being looked at as a new technology that could iron out the spikes in grid demand. It would be helpful to include provision for that. We are considering the Energy Bill. I cannot see there being an energy Bill in the next term of Parliament, which means that the next Bill to be enacted will be two to three years down the line. If we do not have clear guidance in regulation in many of these areas, new technologies will suffer badly, which will have massive climate change implications.

This is an interesting Bill and Grand Committee will be a relaxed and consensual way of dealing with it, but the Minister should be under no misapprehension —come Report, we will ensure that it will go back to another place for further consideration.

4.22 pm

Lord Birt: My Lords, it is a pleasure for me to encounter the Minister in his new guise for the first time, but I am afraid that I shall strike a somewhat dissonant note. I start by declaring an interest as a director of Infinis, the renewable energy company.

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Unless and until the scientific consensus shifts and produces either new insights or new solutions, the world must make rapid progress towards low or no carbon means of supplying energy. Unavoidably, human kind will in due course have to meet its energy needs by harnessing the power of the sun, or the gravitational pull of the moon, or the turbulence of the weather, or the heat in the earth or the awesome energy locked into every atom in the microsecond that the universe was first created.

In the foreseeable future, however, it is hard to imagine anything other than our all remaining hungry for energy. The Minister gave some chilling statistics. We can be far more energy-efficient, but the notion that we will be able massively to reduce our energy needs appears to me fanciful and at odds with all the evidence. We will not want to stop seeing at night, or to stop being warm in winter, or to stop travelling for business or pleasure. It is likely, however, that the cost of producing energy from non-carbon sources will be high, that the price of energy will rise substantially and that its use will become ever more of a luxury.

Britain cannot be proud of its progress on energy issues, not just over the past decade but over the past few decades compared to other leading countries. We are laggards in nuclear power, having allowed our capacity to diminish and not to grow. We are near to the bottom of the hierarchy of nations embracing renewables. As a result, in the short term we have no choice but to burn even more of the world’s finite and diminishing stocks of hydrocarbons to supply Britain’s future energy needs. At least in the medium term, we will remain net importers of energy, with weak hedging of national risk against the incalculable vicissitudes of a troubled world. As the noble Baroness, Lady Wilcox, reminded us, we are far too exposed, and we have not managed our energy security risk prudently. This Bill is a welcome step, but it is a small step on the way to a position of which we can be more proud. I suspect—this note has already been struck by other noble Lords—that we will need to return to these issues again and again in the coming years before we attain a steady equilibrium.

We shall have to establish that the Government’s framework for nuclear offers sufficient incentives for resurrection and for growth. Nuclear brings attendant risks, as we all know, which are significant and which must be managed; but nuclear must none the less be a major source in the future of our and the world’s energy needs. The energy market untrammelled would just produce black smoke. If we want an energy policy that meets our environmental and security objectives, self-evidently Governments have to intervene, and we shall have to pay more for our energy. Subsidy is hard-wired into the system. In nuclear, we have to hope that the Government’s hands-off policy in passing almost all the risk to the private sector will work and that it will lead to a substantial growth in nuclear power. If it does not, we shall have to think again quickly and consider whether the Government need to shoulder more of the risk, particularly the risk of future Governments adding to the cost of owning a nuclear plant.

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As for renewables, it is very hard—indeed, for me, it is impossible—to see how Britain can meet Europe’s targets and our own, or even come close to them. That should concern us, because those targets are not now plucked from the air but are rooted in the science. There are, beyond the Government’s reach, important reasons why our progress in meeting our renewable energy targets will be slow. Some of the renewable technologies—for example, offshore wind or biomass—are still not robust, though I am sure that they will soon become so. As the noble Lord, Lord Redesdale, reminded us, some of the technologies that are tried and tested are experiencing worldwide demand, so there are now significant supply bottlenecks.

There are many other impediments in the way of reaching our renewable targets that the Government can affect. First, our planning regime is very costly for renewable energy suppliers, and it generally moves at a snail’s pace. We have to hope that the proposed new planning legislation will enable a more timely and cost-effective means of reconciling competing global, national and local objectives.

Secondly, agencies of government, particularly the MoD, as well as other public agencies, need to curb their understandable instinct to object, except on the most material of grounds. Thirdly, our onshore grid was designed for a different power era, and we need to inject some urgency into ensuring access for highly dispersed renewable energy providers.

Fourthly, the Government must be wholly reliable in setting down and keeping to the economic framework that they set if investor confidence is to be maintained in this sector. If the April 2009 date for the new renewable regime were to slip, for instance, it would wholly undermine many investment projects already under way, undertaken on the reasonable assumption that it would not.

Fifthly, compared with best practice in other countries, our incentives for renewable heat do not match those for renewable power. As a result, an enormous amount of heat from our power stations and large plants escapes into space, when, as others have already suggested, it could be used to supply neighbourhood heating systems. Sixthly, again unlike some other countries, we lack a system of feed-in tariffs for microgenerators of renewable power.

The Bill, I am sorry to say, addresses only some of those issues. Given the disproportionately high burden overall that EU renewable energy targets will place on renewable electricity generation in the UK, and given the gulf between where we need to be and where we are, it is hard to escape the conclusion that the Government will need to revisit their renewable energy policy even before the ink is dry on the Bill.

Finally, renewables policy in the next phase may need to focus even more on the natural advantages enjoyed by the British Isles. As the main bulwark against the fierce North Atlantic, a high proportion of Europe's wind blows across our shores. For the same reason, we are buffeted by power for ocean waves. With a huge and complex island coastline, we have access unparalleled in Europe to the push and pull of tidal forces.

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We have a national interest, therefore, in ensuring—if it can be done—that economic technologies for harnessing those energy sources are developed as quickly as possible. As we all understand, however, progress on the national front is not a sufficient condition of real progress on climate change. We will resolve the issue of burgeoning carbon emissions across the planet only if we act globally. That means above all that the EU, the US and other rapidly developing countries must come together to put a global and ever-reducing cap on carbon and institute a regime of carbon pricing and trading. As a nation, we must do all we can to foster that coming together, but we will have the moral authority—let alone a moral compass—to lead that debate if we put our own house in order first.

The Bill is a welcome step on the way, but we have a very long journey ahead of us.

4.33 pm

Lord Truscott: My Lords, in taking part in this debate, I declare my relevant energy interests as stated in the Register of Lords’ Interests and as recorded by the Advisory Committee on Business Appointments.

The greatest security challenge for the 21st century will be the competition for natural resources, primarily water, food and energy. Global warming, population growth and increased competition for resources from elephant emerging economies make that inevitable. From Sakhalin Island to Ashgabat, from Baku to Caracas, from the Arctic north to the southern tip of Africa, we are witnessing a new global great game for influence and resources.

There is nothing new about resource nationalism and the desire of producing nations to keep control of the lion’s share of the profits from their oil, gas and other natural commodities. We have been here before as recently as the oil spike of the 1970s. As the noble Lord, Lord Redesdale, pointed out, with oil touching a record $129 a barrel and with future prices touching $140 a barrel at least until 2016, the era of cheap energy seems well and truly over for the foreseeable future, as suggested by the noble Lord, Lord Birt. There is, however, no real evidence that we have reached peak oil prices, but the global levelof competition for dwindling resources and evermore investment-intensive extractive processes in often hostile political and geological territory is increasing.

The issues that we are debating today in your Lordships’ House echo across Europe and beyond. Central to this discussion is balancing our long-term energy needs with our long-term environmental responsibilities. This debate has a particular resonance in the UK.

It is relatively uncontroversial to say that the UK’s energy profile is going through a transition. I was fortunate and privileged to serve as the Energy Minister in the old Department of Trade and Industry—the DTI, since renamed BERR, or the Department for Business, Enterprise and Regulatory Replication.

Noble Lords: Oh!

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Lord Truscott: My Lords, I am sorry. Did I get that wrong? I am proud to have been involved in drawing up the 2007 Energy White Paper that looked to address many of the energy issues before noble Lords today.

Before turning to the Bill, it is worth dwelling on the wider energy context. As I have mentioned, large portions of the world’s proven hydrocarbons are located in politically unstable or unpredictable environments. Some 80 per cent of oil and gas resources are controlled by national Governments. Security of supply is an issue, and we need to ensure that we do not become dependent on any one country or any one form of energy.

As your Lordships have already heard, the EU imports about a quarter of its gas from Russia alone. The UK will import around 80 per cent of its gas supplies by 2020. Yet the greatest threat to security of supply remains the slow-down in energy investment and production in Russia and the former Soviet Union.

The North Sea is a maturing asset, but there is still much to play for. With some 16 billion to 25 billion barrels of oil remaining from the UK continental shelf, we should not squander the opportunities that they afford us.

The Government must look for greater co-operation with the energy industry and look to provide adequate investment, incentives and an effective decommissioning regime. The Bill takes the right steps in providing the framework for storage and exploitation capabilities. We must also to look to cultivate other indigenous energy sources such as clean coal, which was mentioned earlier by the noble Lord, Lord Ezra. Those should be developed alongside government support for pioneering a wide range of carbon capture and storage technology, which the Bill provides, through the licensing of offshore carbon dioxide storage.

The Bill takes a number of sensible steps. It provides a regulatory framework for our evolving energy infrastructure; it provides for new technologies such as carbon capture and storage and for smart meters; it makes licensing provisions for decommissioning energy installations and provides for offshore electricity transmission. Importantly, it creates the conditions for investment in offshore gas storage. In today’s volatile gas market, it makes a lot of sense to increase the UK’s gas storage capacity. However, the Government must have regard to the need to develop long-term energy supply contracts, as witnessed on the Continent, if they want to ensure security of supply and avoid the level of volatility in energy prices that we are seeing today. European energy liberalisation will not suffice.

The Bill tightens the regulations for nuclear waste management for the next generation of nuclear power stations. The Government’s nuclear waste management proposals are welcome, not only in themselves but also in addressing public concerns about nuclear waste. Nevertheless, the Government should accelerate the programme of securing the UK’s legacy nuclear waste and boost the number of nuclear inspectors.

As already noted by the noble Baroness, Lady Wilcox, the UK will lose a third of its generating capacity during the next 20 years as low-carbon

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directives kick in and existing nuclear power stations are closed. Nuclear currently accounts for 18 per cent of our generating capacity. Most of our existing stations are due for retirement within the next 15 years, as my noble friend the Minister indicated. Current estimates project a need for between 30 and 35 gigawatts of new-generation capacity during the next 20 years.

If we are committed to making any new capacity low carbon and wish to avoid a new dash for gas, a new generation of nuclear power stations must be brought online. This would complement the developing renewable sector alongside greatly improved energy efficiency. I still remain to be convinced that as much is being done in the latter sphere as necessary to meet the Government’s ambitious targets.

The Government’s provisions for smart meters in the Bill are to be welcomed, not least for ending the inequities for pre-payment customers. I know the Government are consulting further with a view to roll out for medium businesses by early 2009. I hope we will hear a similar announcement on rollout to small businesses and domestic consumers later this year, along with a commitment to a definitive timetable.

On biofuels, last year world wheat prices rose 77 per cent and rice 16 per cent. With Indian and Chinese appetites growing, EU and US biofuel programmes are taking cereal and farmland out of the food supply chain and diverting resources into meeting biofuels targets instead. As a result, we are seeing food riots across the developing world and steep increases in food prices and inflationary pressure at home. I know that the Government share these concerns and I hope that they will put pressure on the EU either to revise its 2020 10 per cent biofuels target and/or look to alternatives.

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