§ Motion made, and Question proposed, That this House do now adjourn.—[Jim Fitzpatrick.]2.10 pm
§ The Minister for Energy and Construction (Mr. Brian Wilson)
This is a timely debate on energy policy and a good opportunity for me to hear hon. Members' views on its future direction. We are now involved in our consultation on the energy review, which will in turn lead to a White Paper and to actions by the Government that will have repercussions for energy policy for decades to come—hence the title of the debate. It is important that we get it right. Energy is at the centre of all our lives—it lights and heats our homes, powers our industry and fuels our vehicles—so securing affordable, reliable and sustainable energy is of crucial concern to us all. Those objectives should never be taken for granted. It is worth remembering that 2 billion people do not have the benefit of energy at the press of a switch.
Last June, the Prime Minister asked the performance and innovation unit to carry out a major review of strategic issues surrounding energy policy for Great Britain up to 2050. That was in large part a response to the report by the royal commission on environmental pollution, which recommended that the United Kingdom should aim for a 60 per cent. reduction in carbon emissions by 2050. Crucially, that placed the review of energy policy in an environmental context, making it far more pressing than would have been a similar review of 10, or even five, years ago. In future, alongside security of supply, the driving force behind energy policy must be the imperative of countering the immense 21st century challenge of climate change and global warming. We are likely to respond to the royal commission at the same time that we publish the energy White Paper.
The energy review was published on 14 February. Having chaired the advisory group that oversaw that process, I should like to record my appreciation to the members of the team led by Nick Hartley, which produced an excellent report to time. The PIU report was always going to be a report to the Government, rather than of the Government. When the Prime Minister welcomed the review on behalf of the Government, he said that he hoped that it would start a thorough debate. The consultation that we launched on 14 May in the run-up to the White Paper initiated the next stage of that debate.
We are also carefully considering two relevant parliamentary reports—the report by the Select Committee on Trade and Industry on security of energy supply, published on 7 February, and the House of Lords Select Committee report "Energy Supply: How Secure are We?", published on 12 February. which examines the European Green Paper on security of energy supply. Those reports, too, are timely and valuable in signalling Parliament's views about energy issues and indicating where the White Paper should focus.
Just as with the energy review, I am determined to make the consultation process in which we are engaged as open and inclusive as possible. It will run until mid-September and it will help to shape energy policy for decades to come. Of course, as well as looking to the long term, we also face more immediate challenges and decisions. There must be a keen awareness that every 438 policy decision, however short term, should be consistent with the longer-term objectives and obligations that I mentioned. As well as the primary objectives that I described, we are committed to liberalised and competitive markets as cornerstones of future energy policy. Competitiveness and affordability are also key objectives.
Let me turn now to some of the policy areas and key issues that the review will address. I shall deal first with security of supply. Energy security is often characterised as keeping the lights on, but of course it is more than that. It is about having efficient, competitive energy markets with the correct incentives to invest. It is about maximising the economic potential of our own fuel sources and building close relationships with fuel exporting and transporting countries. To that end, we shall, as the PIU recommended, continue to press for liberalisation of energy markets across the European Union, and I shall continue to work with my ministerial colleagues in the Foreign Office to build on the UK's good relations with fuel exporters.
§ Mr. Michael Jack (Fylde)
The Minister mentioned security. Can he tell the House the risk factors used to determine whether a supply of energy can be deemed to be secure?
§ Mr. Wilson
The PIU report dealt with that issue thoroughly. It came to the overall conclusion that the anticipated sources of imports—especially of gas—have been reliable and consistent respecters of contractual obligations, whatever their difficulties in the past. The report suggested no reason to think that that would change in the future. However, vigilance is constantly required, and the risk assessments that the right hon. Gentleman mentioned are part of that. Work continues, not least by the Foreign Office, on such assessment. Such work, and the past record of reliability of supply, has contributed to the PIU's conclusion that there are no grounds on which to fear a crisis in the energy supply in the UK once we become net importers of gas—which will probably happen by 2005.
§ Jon Trickett (Hemsworth)
I welcome this debate and the strategic context that the Minister is laying out. However, supplies of gas will become increasingly stretched in the next few decades. The EU intends to invest some 60 billion euros in gas pipelines from the east—from Russia and Iran. Will not those pipelines become increasingly vulnerable to terrorists or geological problems and will not that pose severe security risks in the medium term, if we become over-dependent on gas?
§ Mr. Wilson
If over-dependence on gas is considered to be a problem, it is a result of what has happened in the past 20 years rather than something that might or might not happen in the future. On present trends, we are projected by 2020 to be 70 per cent. dependent on gas for our energy needs, 90 per cent. of which would be imported. That reinforces the point about the need for vigilance, which formed part of the consultation. The PIU looked closely at the issue, including the past performance of those countries likely to export their gas to us, which include Norway, Russia, Algeria and those in the Caspian area. The report concluded that a crisis in supply was not likely. However, things can change, and common sense 439 suggests that we should seek a balance between dependence on imported sources and the maximisation of indigenous sources of energy.
The point about dependence on imports was reinforced last week when Centrica signed a major new deal for the additional import of 5 billion cu m of gas a year into the UK from Norway. Such arrangements are already being entered into in anticipation of the continuing decline in our indigenous gas supplies. The PIU report said, in short, that that was not a problem and I acknowledge that. The issue should form an important part of the consultation, but I stress that we should be ever vigilant even if we may be reasonably optimistic on the basis of experience.
§ Mr. Peter Duncan (Galloway and Upper Nithsdale)
The Minister mentioned the maximisation of our indigenous resources. What part was played in that strategy by the 10 per cent. additional levy on North sea oil and gas reserves?
§ Mr. Wilson
I can give the hon. Gentleman the good news that it has been confirmed today that the Buzzard field that has been discovered in the North sea will produce 1 billion barrels of oil, making it the biggest discovery there for 25 years. With such positive news on the North sea, on the basis of exploration and investment, I have every confidence that the remaining reserves in the North sea will be developed. We have discussed before and we can discuss again the changes in the Budget, but they are a package that also encourages investment. That is critical to the Government's fallow fields priority, which is to get fields such as Buzzard into production when there are identified reserves that have not been developed by the current licence holders.
I fully recognise the concerns of the industry, and I am working with it to address them. We should also recognise that there are incentives to investment, and we have an interest in working together to make sure that that potential is maximised.
§ Dr. Stephen Ladyman (South Thanet)
My hon. Friend keeps saying that security of supply requires vigilance, but he sets out as a matter of fact what we all know—we will be 80 per cent. dependent on imported fuel by 2020. Vigilance is what one needs when one thinks that everything is all right but one is keeping an eye open in case circumstances change. When he sets out the fact that a problem exists, and we know that it is happening, surely that requires action to reduce our dependency on imported gas.
§ Mr. Wilson
With respect, that is exactly what the energy review is all about. Many other aspects of the energy review recommend action, and the Government are taking those recommendations, for example, on renewables and on other sources of energy supply.
I am merely setting out three facts. First, on current projections, we would be 70 per cent. dependent on gas as a result of what has happened in the past, 90 per cent. of which would be imported. Secondly, the PIU report says that that is not a particular problem because of the record on which suppliers would be depending. Thirdly, I do not take that as a definitive last word on the subject, 440 and it is therefore part of the consultation. That is a logical progression of statements, which does not imply complacency on the issue of sources of gas.
§ Mr. Wilson
I shall make a little more progress, and I shall then be delighted to take more interventions.
In general, we continue to monitor closely security of supply, and we will shortly publish the first report of the joint monitoring group that we set up with the Office of Gas and Electricity Markets. On this, of course, as on other issues, there are different points of view. Some, as we have heard already in this debate, have said that the PIU was too lax on the security issue, and concerns have been expressed inside and outside the House that the market will not deliver and that the Government therefore need to intervene. I emphasise again that we need to understand why those fears persist. Our work leading to the White Paper will help to address those and other security issues.
§ Paddy Tipping
The very valuable point was made a moment ago that we need a balanced energy policy, and I welcome that. I contrast that with the view of the PIU report that 70 per cent. of our energy supply should be dependent on gas, 90 per cent. of which would be imported, by 2020. That is not a balanced energy policy; it is the road to disaster.
§ Mr. Wilson
In fairness to the PIU, it did not say that we should be in that position. It said that, on the basis of current trends and the infrastructure that is in place now, that is where we would be. If other recommendations of the PIU report are implemented, however, as we intend, we will not be 70 per cent. dependent on gas. It is a valid point that, in assessing the extent to which we should be dependent on gas, we should also take account of the extent to which that would be imported gas.
§ Dr. Vincent Cable (Twickenham)
Will the Minister acknowledge that all three of the major disruptions of energy supply in the last three decades have come from within this country, not from overseas? I refer to major industrial action in 1974 and 1986 and the impact of British road hauliers and British farmers in 2000.
§ Mr. Wilson
The hon. Gentleman makes a perfectly valid point. Again, I am merely telling the House the view of the PIU report, which, clearly, has drawn heavily on past experience and does not make lightly the statement that the anticipated sources of gas in the future have been reliable suppliers of gas in the past.
§ Mr. Wilson
That is a statement of fact, and it is part of the mix of consultation that is now taking place.
§ Mr. Dennis Skinner (Bolsover)
This is almost like yesteryear. I am listening to speeches from my hon. Friend about the PIU and the problems in the energy industry. We used to say all that in the 1980s, when we 441 told the Tory Government that, if that happened, it would be dangerous in terms of supplies, which would run out. Everybody said that we were living in cloud cuckoo land and that the pits did not matter. Of course, they went ahead and closed the pits. In 1984, there were about 170 pits, and now there are probably about 14.
The situation would be even more dire if we lost those 14 pits. Under private enterprise, the danger of losing those pits is much starker than it would be if we took them back into public ownership. We could get them for a song.
§ Mr. Wilson
It is always a pleasure to listen to a prophet whose time has come. My hon. Friend is absolutely right, however, as we all were. We said that the dash for gas was bonkers, and it has left us in a situation in which, on current trends, we would be 70 per cent. dependent on gas, 90 per cent. of it imported, by 2020. That is a result of the dash for gas over the past 20 years. My hon. Friend will join me in the satisfaction that, as we are a Labour Government, we are not dashing blindly into the future but carrying out a major energy review that will inform subsequent policy. That will protect us against over-dependence on a single source of energy.
In the context of what my hon. Friend said about coal, I was delighted last week at the Council of Energy Ministers in Luxembourg to be able to finalise the package of measures to support the coal industry. That package includes the flexibility, should the Government choose to use it, to have a scheme based on investment in the deep-mine coal industry. We have argued for and achieved that in the new package, and I am sure that my hon. Friend and others who have a commitment to the coal-mining communities will join me in welcoming it.
§ Mr. Bob Blizzard (Waveney)
Has not the dash for gas done more than anything else to enable this country to meet its Kyoto targets?
§ Mr. Wilson
We will have that debate, but I was about to come on to renewables. If we had done more on renewables 20 years ago, we would have a better balance now, and we would not be starting from such a low ebb in renewables. Nobody underestimates the contribution of gas to the Kyoto targets. Whether that is why the dash for gas was embarked on might be another interesting question. It probably was not. What is undoubtedly true, however, is that, for the past 20 years, we have had a fantastic indigenous resource. We have been gas-rich, which has been a great asset for this country.
Also, given the power of hindsight—as was pointed out, this was not exactly unforeseen to start with—we will, in the space of 25 years, go back to being net importers of gas. At the very least, that seems to call into question whether that great indigenous resource has benefited from prudent stewardship, given that so much of it has gone in such a short time. That is history, however, and we are considering the future, and how dependent we should be on any one energy source.
§ Mr. David Drew (Stroud)
To give complete balance to this picture, the other source of energy that we have not mentioned so far is nuclear. My hon. Friend will be aware that at the moment, in advance of the operation of 442 the liabilities management company, there is a possibility of major realignment in generating capacity in the nuclear industry. Some of us are concerned about the speed at which that is being progressed. Will he assure me that Members of the House will be brought into any discussions that involve a public sector company, BNFL, and a private sector company, British Energy? There are major implications for jobs and the basic integrity of the nuclear industry.
§ Mr. Wilson
I shall say something about the nuclear industry later, but the very first people to know about the proposal to set up the liabilities management authority were Members of the House. My right hon. Friend the Secretary of State made a statement when the process to establish it was started. The work is going forward.
Before I move on to nuclear and other energy sources, I wish to say something about renewable energy and the crucial role that it will play in future. In fact, the PIU report concluded that promoting energy efficiency and the development of renewables should be the immediate priorities of a low-carbon energy policy. Renewables and energy efficiency were the big winners in the energy review.
I was an advocate of renewable energy many years before I took up this post, but I must point out that there must be healthy realism. The unfortunate reality is that renewables start from a very low base. They comprise just under 3 per cent. of our electricity supply. As I never tire of pointing out, most of that 3 per cent. has absolutely nothing to do with anything that has happened in the past three or four decades. It is due to the vision of our political forebears, notably the great Secretary of State for Scotland, Tom Johnston, who had the vision to put in place a programme of hydroelectric schemes. I join my hon. Friend the Member for Bolsover (Mr. Skinner) in pointing out that they were under public ownership. Hydro is still our No. 1 renewable. As a great believer in hydro, I would love to see a renaissance of new projects as well as the refurbishment of existing ones. We have made that possible through the inclusion of hydro in the renewables obligation.
§ Ms Debra Shipley (Stourbridge)
A vision for the future of renewables means tackling the construction industry. Not only does it create a large proportion of harmful pollutants, but it could provide a solution to the problem of renewables. If we take the bull by the horns as far as the construction industry is concerned, every new building that goes up could be energy self-sufficient. The technology now exists. If we required all new buildings to be energy self-sufficient, the price per unit could make the policy economically viable.
§ Mr. Wilson
I entirely agree with my hon. Friend that the construction industry has a huge role to play in energy efficiency and in incorporating renewable technologies into new buildings. I had the pleasure of opening a new primary school—the Catchgate primary school—in County Durham the other day. It had been built along such lines and provides a model. There is no reason why any new school or public building should not be constructed without the same features being built into it. Wearing my other hat as the Minister with responsibility for construction, I make it clear that we are trying to drive forward such a policy through the rethinking construction 443 agenda. That will ensure that features such as those incorporated in that school are provided for in design and construction and at the earliest possible stage in the project.
Hydro is still the main source of renewable energy, and the only other significant contributor in terms of volumes or power generated is wind power. We have a long way to go to meet the challenging target of obtaining 10 per cent. of electricity supply from renewable sources in 2010.
§ Mr. Gareth Thomas (Harrow, West)
As well as the short-sightedness of previous Governments in not developing renewable energy sources, does my hon. Friend not accept that the planning system is probably the other most important factor in preventing the deployment of wind power? The fact that so many wind farm proposals are called in for planning inquiries imposes serious additional costs on the businesses that want to develop them. What hope can he give to the renewables industry that some of those difficulties will be sorted out?
§ Mr. Wilson
I agree with my hon. Friend's premise. Here is a sobering statistic: the forerunner of the renewables obligations was the non-fossil fuels obligation, and two thirds of the projects that were approved under the non-fossil fuels obligation have never happened. The great majority were blocked locally by planning objections. There is a clear dichotomy between the lip service that many people pay to renewable energy as a good thing in principle, and the attitudes that they strike as soon as something is proposed in practice in their localities. Many people in the environmental movement must start to square their conscience with their intellect. If they are in favour of renewables in general, they should also be in favour of renewable projects in practice.
Consultation is going on in England and Wales about the planning guidelines. Again, a balance must be struck. People should have the right to make representations, but they should not use delaying tactics. There must be a bias in favour of a balanced outcome rather than an inbuilt mechanism by which every project can be blocked. I hope that the consultation will be beneficial in clearing the way for many more projects.
Another issue that is being dealt with is the transportability of projects. One of the problems under the previous obligation was that if a project failed to get planning permission in the spot for which it was initially designated, it could not be taken elsewhere. If it becomes possible for a project to try another site where it might obtain planning permission, many of the projects may go ahead.
We can change the planning laws as much as we like, but unless there is a change of attitude and people are prepared to be reasonable, to allow projects to go forward and to recognise that they are beneficial to the local community as well as to the wider society, we will still face bottlenecks. We can have as many targets as we like, but we will not reach them unless the projects come to fruition.
§ Mr. Peter Duncan
The Minister referred to the inbuilt mechanisms for blocking wind projects. He will be aware 444 that one of those inbuilt mechanisms goes by the name of the Ministry of Defence. What discussions is he having with MOD officials to establish how we can get through the bottlenecks that are stopping many projects that would otherwise have great potential for the Scottish and the UK economy?
§ Mr. Wilson
We should be fair to the MOD. It is often said that it is blocking everything, but it is not. Some 18 sites have been designated under the first tranche for offshore wind projects, and the MOD raised objections to only four. I hope that the other 14 can proceed. I do not take the issue of safety lightly. It comes above everything else and there are questions to be answered about flight paths and interference with radar. A wide range of issues apply to civil aviation as well as to military activity. The best approach is to work through the cases individually. I do not think that the problems will be as great as they are presented. I assure the hon. Gentleman that there is active dialogue with the MOD and the Department for Transport. I am due to meet Ministers from other Departments shortly to discuss exactly these issues. There is not a blanket ban from the MOD even on offshore projects. and it would be wrong to get the scale of the problem out of proportion.
Other than hydro, wind is the only other significant contributor to renewable energy. Other technologies exist, but little has been done to turn them into commercial industries. That is the hurdle that we must cross. The key mechanism that we have adopted to achieve that is the new renewables obligation for electricity suppliers that came into effect on 1 April this year. It requires them to provide a rising proportion of their supplies from renewables, reaching 10 per cent. by 2010.
We have also exempted electricity from renewable sources from the climate change levy. All that means that across Great Britain as a whole, the total value of the market for electricity generated from renewables will be between £1.5 billion and £2 billion a year by 2010. A massive new industry is being created. In addition, we are providing support worth £260 million over the next three years to boost technologies that are at the demonstration stage—offshore wind energy, energy crops, wave and tidal and solar photovoltaics—and to enhance our research and development budget for renewables more generally.
I emphasise the point that renewables are not just about energy and the environment; they are also about manufacturing and jobs. There are significant opportunities for UK industry within our current targets, let alone those suggested by the PIU for beyond 2010. Even those do not take account of the massive global market that will exist in renewables technology and hardware. If UK industry responds to that, new generating equipment and services will be supplied by UK firms and the jobs will be located here. If our industry does not respond, however, imports will meet the orders.
I am pleased that there is much activity in that sector and many signs that industry has woken up to the opportunities. That is why I decided to establish a new unit—Renewables UK—within the Department of Trade and Industry. The overall aim of the unit, which is located in Aberdeen, is to maximise UK jobs, exports and investment in renewables by promoting the same enterprise and innovation that occurred in the oil and gas industries 30 years ago. In many ways, Renewables UK 445 is an attempt to replicate the success of the Offshore Supplies Office set up by the Labour Government in the mid-1970s, which took the supply chain contribution by British companies to the North sea from virtually zero to well over 60 per cent. within a few years—and it has stayed at that level. I hope that Renewables UK and everyone else who works in the sector will have the same success in turning renewables into a major British manufacturing industry.
§ Mr. Blizzard
I congratulate my hon. Friend on establishing Renewables UK. It is extremely important. What role does he envisage for regional development agencies in the process, especially in developing the supply chain? That will be the real challenge. We have companies with the skills and expertise that want to build wind turbines, for example, and it is important to get the necessary supply chain for components.
§ Mr. Wilson
My hon. Friend makes an important point about an activity that is truly nationwide because every part of the country can participate in it. Some of the richest renewables resources are in parts of the country that have not traditionally been associated with the generation of electricity. It is logical to locate the manufacturing activities near them. I am sure that the RDAs are alive to the possibilities. I have visited some outstanding examples. I attended an excellent conference in Manchester at which 500 companies were represented. There is a terrific initiative in the north-east of England based in Blyth. The Scottish development agencies are also very much involved.
I know of my hon. Friend's constituency interest in oil and gas. Renewables UK is located in Aberdeen to maximise the synergies between the oil and gas industries and renewables technologies. In places such as Lowestoft and Great Yarmouth, where oil and gas activity is well developed, it must be possible to transfer that into manufacturing activity for renewables.
The most energy efficient programme of all is one to which we can all contribute: it is simply to use less. The hour has come for energy efficiency to be taken far more seriously in this country. A wide range of energy efficiency programmes are in place, and they go with the grain of all our energy policy objectives. They can help us simultaneously to tackle climate change and fuel poverty, and to enhance security and promote competitiveness.
Energy efficiency offers a major chance to save carbon cost-effectively. The major instruments used to improve energy efficiency are the climate change levy, which encourages business to become more energy efficient, and the energy efficiency commitment. Advice on the promotion of energy efficiency is provided by the Energy Saving Trust and the Carbon Trust working together to lower the carbon intensity of both the domestic and the non-domestic sectors.
The energy efficiency commitment launched on 1 April gives energy suppliers an obligation to offer help and advice to domestic customers to help them to reduce their energy consumption. The commitment runs until 2005, by when we expect it to have generated outgoing annual energy savings for consumers worth more than £275 million, as well as annual reductions in carbon emissions of about 0.4 million tonnes.
446 The UK fuel poverty strategy that we recently put in place sets out a range of programmes and measures to address the main causes of fuel poverty. In England, our key mechanism for tackling fuel poverty in the private sector is the home energy efficiency scheme, now marketed as the warm front team. The scheme provides grants of up to £2,500 for a range of insulation and heating measures, and has already assisted 350,000 households.
§ Linda Gilroy (Plymouth, Sutton)
The energy review calls for a step change in household energy efficiency of 20 per cent. by 2010 and a further 20 per cent. by 2020. Will it be possible to bring that together with our attempts to tackle fuel poverty, so that we can square the circle? In particular, will my hon. Friend undertake to listen carefully to representations made by organisations such as National Energy Action about the questions raised in the Government's document on the social implications of fuel poverty and how they can best be addressed?
§ Mr. Wilson
I know of my hon. Friend's interests in such matters, and I agree strongly that the two issues should be brought together. The great benefit of energy efficiency measures is not only that energy costs less, but that we use less of it. There are winners all round. Both those desirable outcomes can be achieved for a very small investment on a household basis. We just have to be more proactive in taking that message to the door of people who can benefit from it, and work with the utilities to put in place programmes that will extend the success of some of the initiatives that have already been taken. We have strong advisory teams on energy efficiency and fuel poverty. I could not agree more that the two should be fused together to maximise the outcomes.
§ Dr. Desmond Turner (Brighton, Kemptown)
The Minister will be aware of my Home Energy Conservation Bill, which deals with energy efficiency. Although the Government support it, there seems to be a minor problem with it. Will my hon. Friend comment on the contribution that the Bill could make, on its great desirability and on how it could help with the issues that he is raising?
§ Mr. Wilson
We are as one on the principles, and I am happy to continue to discuss the detailed implementation. The Bill has played a great role in raising the profile of home energy efficiency and demonstrating the extent of parliamentary support for more action on that issue. I commend my hon. Friend on introducing it.
I shall say a few words on combined heat and power, because I do not want to be accused of avoiding the subject. On 15 May the Department for Environment, Food and Rural Affairs published the draft strategy for combined heat and power, for consultation purposes. It describes the full range of measures, some recently announced, that may be sufficient to meet the target of 10,000 MW of good quality CHP by 2010. We fully recognise the problems that the sector faces, not least because of the impact of high gas and low electricity prices. Full exemption from the climate change levy for exports of CHP-generated electricity, announced by the Chancellor in the Budget, as well as other measures in 447 the strategy, should do much to help. I am seized of the problem and will keep the CHP industry under careful review.
§ Mr. Gareth Thomas
I welcome the Chancellor's decision on the climate change levy and the publication of the strategy. However, will my hon. Friend comment on the desirability of a CHP obligation to mirror the renewables obligation? Could that be the final bit of the jigsaw to turn round the fortunes of the CHP industry?
§ Mr. Wilson
It is an option. A range of technologies would benefit from an obligation. One of the problems is that the more we stack up the obligations, the more impact we have on the price that the consumer pays. There is a fine balance to achieve. Everyone in an informed debate would say that the renewables obligation is a virtuous and good measure, but when it was announced the only media coverage that it received concentrated on what it would cost the consumer. A figure was put on it. I think that consumers accept the renewables obligation in so far as they are aware of it—but at what point we run into difficulties and it becomes counter-productive to keep stacking up obligations is another question, and we have to keep that in mind.
There are several technologies that I should like to help in similar ways, but whether an obligation or a series of obligations is the way to do so is a matter for legitimate discussion. That could form part of the consultation, but I caution hon. Members to take account of what I have just said.
§ Mr. Wilson
Yes, although I want to make progress because I am aware that I have already been on my feet for 40 minutes.
§ Richard Younger-Ross
The Minister is very kind. Will he comment on the fact that the executive summary in the strategy document lists nine points under which CHP can be helped, but none mentions the need to reform the new electricity trading arrangements?
§ Mr. Wilson
I am glad that I gave way to the hon. Gentleman, because he has just acted as my straight man. I want to turn now to the electricity market, and in particular to NETA, which has been going for just over a year. The PIU report argues that institutional barriers to investment in renewables and CHP should be addressed urgently. Those include the impact of NETA, the organisation and finance of local distribution networks and the working of the planning system. Action is already under way to address those issues.
NETA has been successful in reducing the generated cost of electricity, but I recognise that it has raised a range of concerns, including those that impact on small generators. Last November we published a consultation document containing proposals specifically aimed at addressing the concerns of small generators. In response to that, changes are being made gradually in the industry through its dialogue with Ofgem. I am pleased that 448 progress has been made with Ofgem and the industry in tackling some of the technical barriers. The Government recently published a response to the consultation document which sets out further action that we have identified to address the remaining issues.
In addition, a frank review is now taking place of NETA's first year of operation and where it should go from here. Everybody who studies the subject knows that at one level NETA has worked very efficiently, but equally, everybody knows that there have been negative effects that either stem from NETA or are attributed to it, perhaps wrongly. We have to get to the bottom of those and make sure that NETA's benefits are not obscured by its negative impacts. We are also preparing legislation that will extend the trading arrangements throughout Great Britain. Before we do that, we have to make sure that they are working as they were intended to, and in accordance with the Government's wider policy obligations.
§ Richard Younger-Ross
I hope that if I am the straight man, the Minister is not the comedian.
A company in my constituency, British Ceramic Tiles, has a CHP unit that it is not using because of NETA, so it is sitting there wasting away. Reform of NETA is urgent if CHP technologies are to progress.
§ Mr. Wilson
The hon. Gentleman cannot make the ex cathedra statement, "It's all because of NETA." Other factors affect CHP, and I should be pleased to receive correspondence from him about the particular concerns of the company, or, indeed, for the company to talk to my officials or Ofgem to try to identify more closely what the mix of problems is.
Nuclear power makes an important low carbon contribution to our energy mix. While the PIU report stressed the potential for renewables, it also recognised that nuclear, which provides around a quarter of the UK's electricity, offers a low carbon source of electricity which is larger than any of the other foreseeable options. The report also acknowledged that nuclear is effectively an indigenous energy source, and it therefore argues that there are good grounds for keeping the nuclear option open and for taking practical measures to do that.
The key issues for the consultation are how confident we can be that other low carbon options will be available, and what needs to be done to give substance to the words, "keep the nuclear option open". In parallel we also need to consider how quickly we can find an acceptable long-term solution to the problem of managing nuclear waste effectively, although that is overwhelmingly a legacy issue, which is added to only incrementally by current and future generation.
§ Mr. Tom Watson (West Bromwich, East)
My hon. Friend will be aware of the 1976 royal commission chaired by Professor Flowers, which said that the nuclear industry should be extended only if we found a solution for the long-term management of nuclear waste. Does he agree that if we are to get public consensus on how to achieve that, Nirex must be totally independent of the industry, and that we should consider setting up an independent foundation that has an eye not on shareholder value but on the long-term management of waste?
§ Mr. Wilson
The status of Nirex is a secondary issue. I agree that there has to be progress in resolving this issue 449 if we are to gain public acceptance. This is a complex public debate, and the better people understand the difficulty of reaching our Kyoto targets and fighting climate change without the nuclear industry, the more balanced that debate will be. Of course waste is a big issue, and that debate will continue.
§ Dr. Ladyman
I wonder whether my hon. Friend has studied the Finnish experience, in which consultation identified sites and methods of disposing of waste material and gained reasonable public consensus. Will he consider that experience to see whether it could be repeated here?
§ Mr. Wilson
I am familiar with the Finnish experience, the Japanese experience, the Canadian experience and the American experience, and they all lead to the conclusion that nuclear should be replaced with nuclear. Of course there are other experiences, and they too can form part of the consultation.
Although it is largely outside my direct responsibilities, transport accounts for a major proportion of our energy use, and it too has a key role to play in the shift to a low carbon future. The Government have issued and invited comment in our draft powering future vehicles strategy for promoting the development, introduction and take-up of low carbon vehicles and fuels. I cannot over-emphasise the importance of transport to this debate. One point that stands out in my mind is that if we did all the things that we say we will do in our energy policy but did nothing on transport, carbon emissions would still have risen by 2050, rather than fallen.
I cannot finish without saying something about coal, because of the interests of my colleagues. The PIU report sees coal as having a continuing medium-term role to play in the energy mix, but in the longer term, I emphasise, its contribution, too, will depend on finding ways of handling the CO2, that it produces. The cleaner coal technology review, published on 5 February, reached similar conclusions. It sets out the work that is needed to remove a number of legal, practical and environmental uncertainties relating to CO2 capture and storage. I very much want to make progress on clean coal technology, not only for domestic reasons but because globally it has at least as much to offer in reducing carbon emissions as any other strategy that might be conceived. I am acutely aware that there are other more imminent coal-related issues that will be closer to the forefront of the minds of some of my colleagues. I look forward to responding to any points that are raised when I wind up the debate.
It is clear that although energy policy is complex, it is also fascinating and has important implications for us all. There are a range of key objectives: meeting our environmental obligations, guaranteeing security of supply, ensuring competitiveness and contributing to our social objectives, both domestically and internationally, as a Labour Government. All those imperatives have to be prioritised, and as far as possible, made compatible with each other.
I have done what I always said that I would not, and spoken for too long, but I hope that it is acknowledged that in doing so I have taken many interventions and, I hope, dealt with points as we have gone along. In the spirit of wanting an open and informed debate, I look forward to hearing contributions from hon. Members on 450 both sides of the House, and I urge everyone to participate in the consultation exercise. This is an exciting period in energy policy and we can all contribute to it, in the interests of this generation and of our children and their children.
§ Mr. John Whittingdale (Maldon and East Chelmsford)
I welcome the fact that the debate is taking place. We had originally expected that we might have a debate or at least a statement when the energy review was published in February. When that did not happen, we hoped that there would be an opportunity to discuss these issues when the Government published their consultation paper in May, but that also did not come, so my hon. Friend the Member for Salisbury (Mr. Key) tabled an early-day motion calling for the debate, which was signed by some 40 Members.
Today's debate is very welcome and long overdue. Nevertheless, with all due respect to the Minister of State, whose expertise in this area I fully acknowledge, I regret that the Secretary of State did not think it appropriate to open the debate.
I consider it at the very least unfortunate that the Government have chosen to hold the debate on a day when the members of the Select Committee on Trade and Industry are absent on an overseas visit that has been planned for several months. The Select Committee's report on security of supply is rightly one of the documents listed for today's debate. Although I may not always agree with the hon. Member for Ochil (Mr. O'Neill), his Committee has produced a valuable report, and I fear that the debate will be the poorer for the absence of the hon. Gentleman and his colleagues.
On the face of it, we in the United Kingdom are relatively fortunate. We are blessed with our own natural resources of oil, gas and coal. We have a high level of diversity and supply. We have more generating capacity for electricity than we need, and since privatisation, we have competitive energy markets that have helped to bring about a fall in electricity prices for domestic consumers of almost 40 per cent. in real terms. If we look further ahead, we can already see that some of those advantages will not continue indefinitely. The Government are therefore right to say that we need to consider what actions must be taken now to avoid problems in the future.
In considering energy policy, we should bear in mind four key objectives: economic efficiency, security of supply, environmental benefit, and the relief of fuel poverty. The performance and innovation unit report is a valuable document, as it sets out a large part of the context in which decisions must be made, but it does not fully address certain fundamental questions about the balance that needs to be struck between what are sometimes competing objectives.
At present, our electricity needs are met roughly in the proportions 40 per cent. sourced from gas, 30 per cent. from coal, 25 per cent. from nuclear and 5 per cent. from renewables and imports. However, the domestic production of coal is falling and it is becoming steadily less viable to exploit our remaining stocks. Our nuclear stations are reaching the end of their working lives. Just 12 weeks ago, I attended the ceremony to mark the most recent switch-off of a nuclear power station, which was at Bradwell in my constituency. Within 20 years, all but 451 one of the remaining nuclear power stations will have closed, and nuclear's contribution to our energy mix will have fallen to just 7 per cent. unless there is replacement.
On present policies, it is likely, as we have already heard from several Members in the debate, that instead of the present diversity of supply, within 20 years we may be dependent on gas for 70 per cent. of our energy needs.
§ Mr. Drew
Is there not an element of hypocrisy involved? Anyone who wants to discuss what will happen when we import gas from eastern Europe ought to speak to representatives of Ukraine and Russia, both of which have made it abundantly clear that they will use the investment stream to build nuclear stations in their countries. In other words, all we will be doing by importing gas is encouraging nuclear industries elsewhere. That is a strange way of running future energy policy.
§ Mr. Whittingdale
The energy supply of those countries is a matter for them, but it raises questions that the hon. Gentleman is right to point up. I shall come on to those matters shortly.
The UK's domestic supplies of gas are running down. It is likely that by 2006 we will be importing up to 15 per cent. of our gas, and that by 2010 gas import requirements will exceed the existing pipeline capacity. As I said earlier, I was slightly surprised that the PIU report seems to be relatively unconcerned about that. Its conclusions are based on a belief that we will continue to be able to obtain plentiful supplies of relatively cheap gas. That is by no means as certain as the PIU seems to think, and I share some of the concerns that have been expressed about that in the debate.
It is becoming clear that we will have to look steadily further afield for supplies, and that we will become more dependent on gas from Russia, north Africa and the middle east. Quite apart from the problems of transmission and cost, that raises serious questions with regard to the security of supply. We have seen in the past the dangers of being too heavily reliant on one source of energy.
The hon. Member for Twickenham (Dr. Cable) seemed to suggest that the disruption to our energy supplies that we suffered in the past has always come about from actions taken in this country, but we have only to look at the consequences of the oil price shocks on our domestic economy to see what can happen when we become heavily dependent upon an energy source that comes from a particular part of the world which is not always stable.
§ Dr. Ladyman
I largely agree with the points that the hon. Gentleman is making, but I ask him this question: when 80 per cent. of the supply of gas to the west is controlled by Russia and that country is effectively in control of its own cartel, do we expect the price of gas to this country to go up or down?
§ Mr. Whittingdale
I agree with the hon. Gentleman. We could become extremely vulnerable. Almost all the major gas producers of the future upon which we may be forced to rely are countries whose political stability 452 cannot be guaranteed. To become so dependent on a single fuel produced from such an uncertain source lays us open to considerable risk.
The risk does not arise just in those countries on whose reserves we will become dependent. The Select Committee pointed out that there are bottlenecks in the transmission system, particularly at the two main points of entry into the UK, at St. Fergus and Bacton, and relying so heavily on those two terminals could make us vulnerable in the event of an accident or a terrorist attack. I know that that is a matter that the Government have addressed in their response to the Select Committee report, which I have only just seen, as it came out this morning. It is a matter that we must consider.
§ Dr. Brian Iddon (Bolton, South-East)
Does the hon. Gentleman agree that it is not just the external security of gas supplies—the gas transmission networks and the interconnector—but internal security that should concern us? If we have nowhere to store large quantities of gas, should there be political disturbances on the continent, we are up the creek.
§ Mr. Whittingdale
The hon. Gentleman is entirely right. I was about to make that point. As the Select Committee pointed out, we have relatively little strategic storage capacity for gas. That, too, is a matter that we should address as a matter of relative urgency.
§ Mr. Whittingdale
That is certainly the case. It will require the transmission of gas over considerable distances to reach this country, and it will have to be transmitted across several other countries. At present, there are severe problems in achieving that. One of the ways in which we need to address that problem is by achieving greater liberalisation of European energy markets. Limited capacity in European gas pipelines is bound to have an effect on the cost of transmission. The market should deal with that problem, but that will happen only if true liberalisation of European energy markets takes place.
Although the UK has one of the most liberalised and competitive energy markets in the world, our neighbours, particularly Germany and France, still have largely state-owned and highly protected energy companies that are responsible for both transmission and supply. They are reluctant to allow others access to their transmission networks. There is no clear pricing mechanism for doing so, particularly where their network is to be used simply as part of a longer transmission route.
It is vital that we make faster progress in this area. Although the Barcelona summit resulted in some movement in the right direction, I understand the concern expressed by the Select Committee that we should not assume that full liberalisation will take place for some time. In those circumstances, it must be sensible to seek to exploit to the maximum our indigenous sources of supply.
My hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Duncan) has already made well the point that that objective has not been assisted by the Chancellor's Budget. The decision to increase by a third 453 the rate of corporation tax on oil and gas companies is bound to have an impact on future investment in the North sea. A survey conducted by the United Kingdom Offshore Operators Association has shown that half its exploration committee members will be reducing their exploration or reviewing their positions as a result of the tax increase. I have some sympathy with the Minister, because we understand that the DTI was not even consulted by the Treasury before the measure was introduced.
§ Mr. Whittingdale
We have rapidly become used to the fact that almost the entirety of the DTI's policies currently appear to be determined by the Treasury. Indeed, perhaps it would be even more appropriate for a Treasury Minister to respond to the debate. The tax issue is very serious for the oil and gas companies and will have an impact on the future fuel mix. It may well lead to our becoming dependent on imported gas earlier than we would otherwise have needed.
Before I leave the question of European energy markets, it is worth noting one other glaring difference between the open, competitive regime in this country and the highly protected marketplace that applies in much of the rest of Europe. Two days ago, it was announced that LE Group—the London electricity group—was acquiring Seeboard, the supply and distribution business serving the south-east. It is not until one reaches the notes to editors at the very end of the accompanying press release that one finds the statement that, for the past three years, LE Group has been a wholly owned subsidiary of Electricité de France. Of the 14 regional electricity supply companies privatised in 1990—
§ Mr. Andrew Stunell (Hazel Grove)
Is the hon. Gentleman aware that every penny of profit made from burning the electricity that is currently being used in the Chamber goes to the Minister of Finance in Paris as a result of France's ownership of EDF?
§ Mr. Whittingdale
I am entirely aware of that. I am afraid that every penny that is paid for electricity throughout large parts of the country leaves these shores, as most electricity supply companies are in overseas ownership. Of the original supply companies that were privatised, only the Scottish companies are still in UK ownership.
§ Mr. Michael Clapham (Barnsley, West and Penistone)
The hon. Gentleman will recall the privatisation of electricity supply after 1990. When the plans were considered, the people who were at the helm at that time believed that we could create county-type electricity companies that would remain in the UK. However, those people did not take the view that privatising electricity supply even in small companies would result in their becoming very lucrative in the general global market and, therefore, suitable prey for American and French companies. Does he therefore believe that it was a mistake to privatise in such a way?
§ Mr. Whittingdale
No, I do not, because I think that electricity privatisation has delivered tremendous benefits 454 to consumers. I am not complaining about the fact that overseas companies have acquired some other companies in this country. I have no problem with that at all; at least, I would not have a problem if a similar regime applied elsewhere. I object to the fact that, if other European countries were subjected to bids made by companies in this country for some of their supply companies, it is unthinkable that the French or Germans would adopt the same relaxed attitude. They have highly protected markets, so I hope that the Government will continue to push for greater liberalisation of energy markets to take place as quickly as possible not only to enable easier cross-border trading, but to create the level playing field that is needed. At the moment, the playing field is tilted 45 deg against us.
§ Mr. Blizzard
Does the hon. Gentleman think that we will achieve greater liberalisation of European energy markets—an aim that I think we share—by ensuring that this country becomes more or less engaged with the European Union?
§ Mr. Whittingdale
I remain absolutely committed to achieving a free and open market throughout Europe. That is the reason why I have always supported membership of the European Union, and it is why the vast majority of people in this country voted to stay in it.
§ Richard Ottaway (Croydon, South)
My hon. Friend is making an excellent point about the failure of EU liberalisation. Is he aware that, at the present rate of progress, the majority of the EU market will be owned in a few years' time by just three national champions? That failure arises from EU competition policy, whose scope for movement in this sector is very limited.
§ Mr. Whittingdale
I entirely agree with my hon. Friend that that is one of the challenges that we will have to confront. I hope that it will feature in the discussions at Seville this weekend. There is no doubt that there is currently a lack of competition throughout Europe in terms of energy, with the single exception of this country.
§ Mr. Gareth Thomas
The hon. Gentleman rightly talks about the need to continue to develop our indigenous energy resources. In the context of his comments about Europe, does he recognise that in Britain, our wind resource potential is massively better than that of any other country in Europe? Will he try to exercise some influence on some of the more notorious flat earth opponents of wind power, such as the notorious figure Bernard Ingham?
§ Mr. Whittingdale
I have a high regard for Bernard Ingham, as we worked together for a number of years, and he has valid views about wind power. I want to speak further about wind power, as it is a valuable resource that we should exploit, although it is not true to say that it is without its difficulties.
Before I leave security of supply and the energy mix, I point out that, although there is considerable danger of our becoming too heavily dependent on one energy source, I am not suggesting that the Government should seek to dictate our future fuel mix. I agree entirely that that is best left to the market, but the matter is not so simple that we can stand back and let market forces work. Many of 455 the key determinants of the outcome are under the Government's control, and their decisions will hugely influence the economics of investment in different fuels.
§ Dr. Ladyman
Before the hon. Gentleman leaves the subject of liberalisation, I should like to point out that my constituency, in east Kent, uses French nuclear-generated electricity that is sold to us by a French-owned company to boil water in our kettles that is also sold to us by a French-owned company. I wonder what we will sell back to the French in the liberal markets that he is talking about. As we are running down our nuclear power stations, we are unlikely to have any excess capacity to sell.
§ Mr. Whittingdale
I want to say more about nuclear power, but I will not be tempted to do so now. Obviously, we have to look only a short distance across the channel to see a country that has invested heavily in nuclear power and still clearly sees that it has a major part to play in its energy supply.
To finish my point about the mix of fuels, I think that the Select Committee was correct in drawing this conclusion:Even if the exact mix of fuels is left to market forces, it is arguable that the Government should at the very least take no action that closes off options, and perhaps should make adjustments to its policies to keep its options open.That applies especially in respect of nuclear power, which I want to deal with later.
There is one area where the Government have not adopted a market approach. Instead, they have set a very precise figure for the proportion of our energy that must be sourced from renewables. There is a target of 10 per cent. by 2010, with a PIU recommendation that that should rise to 20 per cent. by 2020. However, it is very important to bear in mind that the target is qualified by these words:provided the costs to consumers are acceptable".That is a qualification to which I shall return.
We entirely share the Government's wish to see a significant increase in the proportion of our energy that is provided from renewable sources. The environmental benefits of generation from renewables that harness the energy in our natural world—the wind, tides, sunlight and the earth—are enormous. It is now almost beyond scientific doubt that we must reduce our reliance on energy whose generation results in the emission of carbon dioxide into the atmosphere. That must be done if we are to avoid potentially catastrophic climate change.
§ Ms Shipley
On that point of catastrophe, will the hon. Gentleman be clarifying his party's position on the construction industry, and the real need for that industry to be reformed and given statutory requirements, not merely guidance, on energy and on ways of capturing energy so that new buildings are energy self-sufficient?
§ Mr. Whittingdale
A certain amount of regulation is already in place, but I agree with the hon. Lady that it may well be that more can be done. Energy efficiency is certainly an important component in this debate, but before considering that, I should like to consider renewables, which also constitute an important component.
456 Despite one or two instances of slight party political point scoring, which of course I expect, it is the case that we have sought over quite a long time to encourage the use of renewables under both Conservative and Labour Governments. It is also the case that progress has been extremely slow. There are a number of reasons for that, one of which is planning requirements. As a result, less than 3 per cent. of our energy comes from renewable sources.
The Government's decision to require energy supply companies to increase that proportion to 10 per cent. will bring about change. Although I might not necessarily have chosen such a blunt instrument to effect that change, we fully support the Government's objectives. For that reason, we have not opposed the renewables obligation. However, the Minister will be aware that there are real doubts about whether the target can be achieved. One of the criticisms of the PIU report is that there was insufficient engineering input into the review, with the result that it fails to recognise practical constraints on the speed with which expansion of renewable electricity generation can occur.
Our electricity transmission and distribution system was built to cope with bulk generation from relatively few power stations. A significant increase in renewable energy will require many embedded generators producing small amounts of power and feeding directly into the distribution system. That will increase the potential for local damage to the network in the event of a fault, and the required extra investment in the network has already made some projects uneconomic.
It appears that the National Grid Company is reasonably confident that the 10 per cent. target will not cause insuperable difficulties for the network, but that is not the case for the PIU's 20 per cent. target. Problems become particularly serious if renewable energy comes largely from wind sources, which are both intermittent and unpredictable. These disadvantages mean that it may be necessary to construct standby plant, which can easily be switched on and off, but that will also further increase costs.
It is such considerations that have led Professors Michael Laughton and Bert Whittington to conclude:the brutal reality is that 20GW of wind power cannot be accommodated in the UK electricity system.I am not qualified to judge whether their arguments are corrects, but they must be addressed. That is something that the PIU report fails properly to do.
§ Paddy Tipping
The hon. Gentleman is making an important engineering point. Let me help him on the scale of wind power. Radcliffe power station in Nottinghamshire is an important energy supplier. To build a field of windmills capable of producing the same amount of power would depend upon the spacing of the windmills and the strength of the wind. The best estimates suggest that to produce the equivalent amount of power would require a field of windmills as large as Greater Manchester. That would not be environmentally friendly.
§ Mr. Whittingdale
I want to deal precisely with environmental questions. However, the hon. Gentleman is right. With all the technical advances in wind generation, a wind farm can still produce only a small fraction of the power produced by a conventional power station.
457 Developments of wind power—especially offshore wind power, which probably seems the most promising area for development—are expensive in terms of plant and will require huge investment in the transmission network. That has not yet been properly taken into account. For example. the limited spare capacity in the Anglo-Scottish interconnector is a serious inhibiting factor. Yet the cost of a new west coast electricity interconnector, which was originally estimated at about £500 million, is now estimated to be about £2.3 billion. The economics are enormous and have not yet been properly calculated.
Such developments have not only an economic cost but an environmental price. This is where, perhaps, I have some sympathy with my former colleague in the civil service, Sir Bernard Ingham. Opinions differ about the attractiveness of large numbers of wind turbines, but there is no doubt that one of the biggest obstacles to development has been strong opposition to specific proposals during the planning process. To date, about 80 per cent. of planning applications for onshore wind farms have been rejected. Offshore projects have been the subject of protests from local fishermen and, as we have heard, from the Ministry of Defence. Even if a wind farm can be sited offshore where it does not blot the landscape, the necessary infrastructure to connect it with the grid—pylons and sub-stations—will still require planning consent.
Let us be clear that a deliberate policy to increase the proportion of renewables will have to be paid for by higher electricity prices.
§ Mr. John Hayes (South Holland and The Deepings)
Before my hon. Friend moves from the aesthetic issues that are associated with wind farms and their environmental impact, will he take on board the point that the places that are most attractive for developers of such schemes are often those where the impact is the greatest—for example, the flat fenland landscape of Norfolk, the Cambridgeshire fens and, in my constituency, the Lincolnshire fens? Their effect on the local environment is dramatic because it is disproportionate to the landscape.
§ Mr. Whittingdale
I agree, but a certain amount can be done to hide wind farms. I visited Wales, where I saw two wind farms. One had turbines on the top of every hill, which could be spotted from about 30 or 40 miles away, whereas the turbines at the other site had been rather more sympathetically positioned—it was necessary to get quite close before seeing or hearing them. I accept that in flat countryside they are obvious and that, for many people, they spoil attractive countryside. It is important that we take account of local objections. There is no doubt that to date almost every application has encountered extremely strong local opposition, and that cannot be overlooked.
§ Mr. Gareth Thomas
We must carefully consider the aesthetics of energy-producing plant. I have not yet seen an attractive nuclear power station or coal mine, never mind the issues about windmills and renewables. Does the hon. Gentleman agree that we might need to contemplate a change in our approach to planning policy, and perhaps to designate certain areas of land to be used specifically 458 for wind projects, renewable projects or energy projects, as is done in other countries such as Germany. That has been a key factor in their exploitation of renewables.
§ Mr. Whittingdale
The attraction or otherwise of power stations is debatable. For many years. I lived opposite Bradwell power station. I looked at it from my bedroom window every morning. I thought that it had a certain charm. I accept that that may not be a universally held view.
Some of the problems of aesthetics can be overcome by placing wind farms offshore, which is perhaps why most applications are concentrated in such areas. That, of course, carries with it alternative problems of additional costs and other considerations. I would be reluctant to start to impose on certain parts of the country a requirement that they should be wind farm-friendly areas. I accept, however, that the planning process needs to be addressed, in respect not only of wind farm applications but of the development of all our future energy needs. Again, that is matter to which I want to return.
I want to continue with the point, which I regard as very important, that the renewables obligation, however desirable it may be, will have to be paid for through higher electricity prices. Estimates differ about how great the impact will be, but it is likely that it will push up the cost of domestic electricity by 4 per cent. or thereabouts, and by even more for businesses. The Minister said that he believed that people would be prepared to pay that price, and he may be right, but the Government must be much more open about the cost of the policy and to make it clear to consumers that they are being asked to pay more to promote renewables development.
We need to have a proper debate—this might be the beginning of it—about whether we are willing to pay that price, because, by deliberately setting ambitious targets for renewables as well as overall targets for reductions in greenhouse gas emissions that go beyond our international obligations, we are choosing to put up prices and to increase the cost of energy to business by more than we are required to do. Yet our relatively small size in relation to the total global gross domestic product means that our good example will have little overall effect.
There are other ways in which we could cut our emissions and meet our environmental targets. One is to give a far higher priority to increased energy efficiency. The PIU report contains ambitious targets in this area, too, and there is undoubtedly huge scope for reduction in energy demand by increased efficiency, particularly among domestic consumers. We have supported the Bill introduced by the hon. Member for Brighton, Kemptown (Dr. Turner) and hope that it will reach the statute book despite the obstacles that apparently are being put in its way by Ministers.
Although I have raised questions about the Government's renewables target on grounds of practicality, environmental benefit and cost, let me restate that we support the Government's objective of significantly increasing the amount of renewable energy that we produce. There are, however, serious questions surrounding that issue that have not yet been properly addressed.
Even if the problems that I have already mentioned are overcome, and the target is met, that in itself will not be sufficient to ensure that we meet our Kyoto obligations, 459 let alone the more stringent cuts in greenhouse gas emissions that many people now believe will be required. The target of 20 per cent. from renewables will merely be a substitute for the 20 per cent. of energy that we currently obtain from nuclear power stations, which will be lost over the next 20 years. It is these hard facts that led the Government's chief scientific adviser recently to conclude that the scientific case for building new nuclear power stations is irrefutable.
Nuclear power is the one proven method of large-scale generation that does not produce greenhouse gas emissions. However, it is also controversial and I fully recognise that it has problems attached to it.
§ Mr. Patrick Hall (Bedford)
The hon. Gentleman's claim that nuclear power production does not lead to the production of greenhouse gases is true as far as it goes. Does he not agree, however, that to make a proper assessment we must take into account the CO2 produced in the manufacture of the component parts of a power station, in its construction and decommissioning, and in handling the waste? If we take all that into account, we see that the situation is not quite as is claimed by the industry.
§ Mr. Whittingdale
That is undoubtedly true, and I suppose the answer is that, if we did not have any power stations at all, no greenhouse gases would be produced in constructing them. I agree with the hon. Gentleman that we need to make a proper comparison, but, even having done that, it is almost unarguable that nuclear power is responsible for far fewer carbon dioxide emissions than are fossil fuel-burning power stations.
After the 1997 general election, the Government had a policy that no new nuclear power stations should be built. They now appear to have shifted their position to one in which they state that it is a matter for the market to decide. That is a position that I instinctively find attractive, but it is also highly disingenuous, because the factors that will determine the market's decisions are largely within the control of the Government.
In the last few years, there have been considerable advances in nuclear technology. It is now undoubtedly cleaner, safer and more efficient, but the economic viability of future investment is severely influenced by the time taken to get a power station from the design stage to operation. At the moment, it is estimated that it takes about eight years for a new nuclear power station to be built and, as Sizewell B showed, building on an existing nuclear site makes little difference. If the nuclear option is to be genuinely kept open, the planning and regulatory approval process must be reformed so that decision taking can be speeded up.
Equally, we need a clear policy on the disposal and storage of waste. Other countries have successfully dealt with this problem, but the indecision of the UK Government is blighting the future prospects of the industry. A seven-year consultation period is unnecessary and looks very much like a delaying tactic, although I realise that that is not the responsibility of Ministers at the Department of Trade and Industry. It is a pity that the Treasury Minister who was here earlier has now left the Chamber, because another matter that needs to be 460 addressed is that the contribution of nuclear generation to combating global warming should be recognised by exempting it from the climate change levy—a matter that I shall return to in a moment.
I should like the Minister to confirm that the Government will go ahead with the liabilities management authority Bill in the next Session, as it needs to be put in place to allow British Nuclear Fuels plc to operate as a proper commercial business.
Of course, there will always be legitimate concerns about the safety and security of nuclear power, and they have been heightened since the atrocity of 11 September. Only this week, the BBC television programme "Spooks" had a storyline about a terrorist attack on a nuclear power station. The filming of that episode took place in my constituency, and I am as sensitive as anyone to those concerns. Security worries now affect almost every aspect of modern life, but they alone must not be allowed to change our decisions.
We need to be clear about where we are going. In the past, the Minister has shown a supportive attitude towards nuclear power, as he has done to some extent this afternoon. One of the PIU report's principal conclusions was that a range of actions needs to be taken now to keep the nuclear option open, and the Select Committee called on the Government to make a clear statement on the future of nuclear energy as quickly as possible. At the very least, the Government need not just to say that it is a matter for the market to decide but take the action necessary to ensure that the factors within their control—planning, tax and waste disposal—do not place an insuperable obstacle in the way of a market-driven decision to invest in new nuclear power.
The importance of taking action to tackle global warming is one of the key factors now influencing our future energy policy, so I cannot let this opportunity pass without saying a few words about one of the Government's key instruments for cutting energy demand: the climate change levy. Having only recently put aside his Minister for Industry hat, the hon. Gentleman does not need me to tell him how unpopular that levy is with British industry. By pushing up the cost of energy, it bears most heavily on the manufacturing sector at a time when it already has its back to the wall.
Other countries do not impose a similar burden, so the levy does huge damage to British competitiveness, yet it is almost completely ineffectual in combating climate change. It is a downstream tax, so it makes no distinction between energy generated from fossil fuels and energy derived from non-polluting sources. It is for that reason that my party was committed at the last general election to its abolition.
If the Government wish to use fiscal instruments to combat climate change, there are more effective ways of doing so. In particular, I would gently point out that a carbon tax would represent a true market-driven solution to the problem of reducing greenhouse gas emissions. I hope that that, too, will be taken into account in the debate that the publication of the PIU report has begun.
The Government are to be congratulated on the establishment of the energy review. It would have been easy to duck the hard questions that need to be faced, and to leave them to some future Conservative Administration, who would have to deal with the consequences when the lights started to go out. The 461 Government have chosen instead to have a debate now, and they deserve credit for that, but the PIU report did not address some of the fundamental issues that need to be confronted. The Minister's speech did not advance that a great deal. Having acknowledged the questions, the Government will have to provide answers. I hope that we will find them, if not in this debate, at least in the White Paper that we are promised later in the year.
§ Mr. Deputy Speaker (Sir Alan Haselhurst)
Order. I remind the House that Mr. Speaker has placed a 10-minute limit on Back Benchers' speeches.
§ Mr. Kevin Hughes (Doncaster, North)
I welcome the fact that we are having this important debate, and I congratulate the Government on holding it in Government time. I apologise for the fact that I will not be able to be in the Chamber for the winding-up speeches, for reasons that I have explained to Mr. Speaker. I have also passed a note to my hon. Friend the Minister.
In February this year, the performance and innovation unit published its energy review. The report looks to 2020, and beyond to 2050. The Government are forming their long-term energy policy for our country, and this debate gives Members a welcome opportunity to influence that policy. It cannot be overstated just how important it is that we get it right for the future of this country.
Before being elected to this House, I was a coal miner for 20 years. My constituency once boasted six coal mines, but today, sadly, there is only one, which its owners closed last year. Thanks to the Minister, who agreed to keep the pit on a care and maintenance basis for a few weeks until we found a new owner, it is now doing well and should have a long-term future. Along with the colliers and their families, I remain grateful for his positive intervention. I should also like to pay tribute to Dr. Ian Roxburgh and his team at the Coal Authority, who also played a vital role in keeping the pit open for business until a new owner was found.
It will come as no surprise, therefore. that I will concentrate my contribution on what should be a new and modern future for the coal industry. I do not come from the stable that says only coal can provide the nation's energy requirements. I firmly believe that we need a diverse source of energy supply, and that we should press forward with cleaner, more environmentally friendly energy sources. Gas, oil, coal and renewables all have a role to play in our future energy supply. It is not good sense to rely too heavily on one fuel source alone.
It is important to deal with the carbon output from our generators and to meet our Kyoto targets, which is why I support research and development on renewable energy sources. As I have already said in this Chamber. I do not like wind farms, especially if they are built in the beautiful English countryside. They can be built out at sea, but they should be kept away from the beautiful English landscape. It is early in the development of such farms, and I am sure that with the correct research and development they will get better, as will wave and solar energy, but they are a long way off providing sufficient power to run this great industrial nation of ours.
462 We need to address the security of supply issue. I know that some people think that there is no long-term problem. I cannot believe such complacency. Is it possible that they have already forgotten that we were held to ransom by OPEC in the 1960s? Do they seriously believe that, in this turbulent world, the status quo will prevail for ever, and that the countries from which we import oil, coal and, in the not too distant future, most of our natural gas supplies will stay friendly and maintain a reasonable pricing regime for ever, when we have run down our indigenous industries?
It beggars belief that some people are willing to close down our coal industry and rely totally on imports, and, when our oil and gas run out—there are varying predictions about when that will be—leave us susceptible to the world market. That is madness. We all know that the very basis of a capitalist economy dictates that countries will get the best price possible for their product. When we have none, and they have all the aces, you can bet your sweet life that the price will go only one way—up.
The Government need a strategic overview of security of supply to ensure that the British people are assured of a power supply when and where they want it. Maintaining an indigenous supply source is crucial, and relying totally on market forces is bonkers.
At the moment, we can generate our electricity from various energy sources. As I have already said, that is the most desirable situation, but is it by design or by accident? I think that it is more likely to be the latter, but we should ensure that in future it is totally by design.
We have much to deliberate on, such as what to do about our ageing nuclear generators. It is true that they produce a clean energy supply, but at what cost? We have absolutely no idea of the financial cost, because we do not know how much it will cost to decommission them and to maintain them safely for ever. We do not know what long-term damage they are doing to our environment, or may do in future.
Our natural gas supplies are in decline—some say that they will last about 15 years. We will then have to import gas from the east and north Africa along mega-pipelines across Europe from countries whose political stability is questionable to say the least: Iraq, Iran, Libya, Nigeria, Ukraine, Turkmenistan, Turkey, Russia—the list goes on. That list hardly fills me with great confidence, but some people think that our gas supplies from those sources will be secure and reasonably priced for ever. Coal has served this country well for many years, and can go on for many years to come, provided that we deal with greenhouse gas emissions—and we can.
British coal is the cheapest and most efficient in Europe, and thanks to the operating aid scheme it has managed to stay in the market. However, that scheme comes to an end on 23 July. Again, thanks to the efforts of my hon. Friend the Minister it is set to be replaced next year with an investment aid package. That is a welcome move, but there is a six-month gap between the operating aid scheme finishing and the new scheme commencing. I urge my hon. Friend to ensure that the gap is filled, so that our industry does not suffer financially in that period. We know that there will be no gap in the other European coal-producing countries, and it is important that there is not one here.
§ Mr. Wilson
I intervene on my hon. Friend in the knowledge that he will not be present for the winding-up 463 speeches. If a case arose in that six-month period and we wanted to intervene, as my hon. Friend suggests, it would be open to us to go to Brussels for approval on that specific case. The six-month gap is more of a hypothetical problem than a real one.
§ Mr. Hughes
I am grateful to my hon. Friend for that information.
With the new generation clean-coal technologies, coal can and should once again play a major role in our energy generation. It is important to fit existing coal-fired power stations with flue gas desulphurisation, because they will be around for a good while to come. However, it is also important that we support the development of new technology, such as the integrated gasification combined cycle power stations. I believe that that is where the future lies for our coal industry and the security of supply for our nation's needs.
IGCC is simple in principle. Coal is fed continuously into a closed pressure vessel, where it is partially burnt with pure oxygen. All the fuel is converted into gas and the ash is melted. The raw gas leaving the vessel is cooled and the impurities—mainly sulphur compounds—are removed. The clean gas and steam raised during the cooling process fuel the combined cycle turbines to generate electricity.
Old-fashioned coal burning, as we know, produces sulphur, nitrogen oxides and carbon dioxide. Capturing those pollutants after combustion is costly and inefficient. Gasification enables all harmful emissions to be removed from the fuel before combustion. The advantage of IGCC is the near-total removal of particulates and sulphur—but that is not all. The waste slag is a valuable inert material that can be used for building-block manufacture and road-building foundations. Captured sulphur can be used in the chemical industry and captured hydrogen for fuel cells. It is also possible to use captured carbon dioxide for enhanced North sea oil recovery.
All in all, new clean-coal technology is more environmentally friendly and can help us to meet our Kyoto targets. Some people have already written off the coal industry, but they are clearly wrong to do so. With IGCC, coal should have a bright new future
§ Mr. Andrew Stunell (Hazel Grove)
I, too, welcome this debate, which is necessary and overdue. I very much appreciated the Minister's lengthy and detailed opening speech. I shall ask some questions in the hope that he can find time to squeeze in some answers in his winding-up speech.
Energy is a significant planet-wide problem—we are not simply solving a few domestic political issues. In finding the solution to the United Kingdom's energy problems, we have an opportunity not only to improve our own quality of life but to enjoy major economic growth. I hope that we regard that as a positive challenge, and not just as crisis management or catastrophe aversion. There is no doubt that the growth of CO, in the atmosphere is leading to global climate change. As the search for 464 economic growth and prosperity continues, energy consumption will rise, putting increasing pressure on the planet's ecosphere. The world's population has tripled in the past 50 years from 2 billion to 6 billion. Meeting the aspirations of people born in that period will be a challenge for the planet.
The UK's energy policy must preserve and develop a strong, sustainable economy and environment. If it is out of kilter with that goal we may both damage economic growth and undermine a sustainable environment. There is no doubt that we need a long-term energy policy, which must be pursued with diligence for a number of decades. Energy investments last for 30, 40 or 50 years. Change cannot be imposed by Government diktat in the course of one Parliament.
We also need to remember that things change over time in the energy market. I am not limiting myself solely to the generation of electricity, which has been to the fore of contributions to our debate. We use energy for transport, heating and processing, and for many other things that produce carbon dioxide emissions and contribute to global warming. A hundred years ago, in the decade 1900 to 1910, the energy scene was dominated by coal. Fifty years later, in the 1950s, it was dominated by coal and the nuclear industry. In the first decade of this century, gas and oil are at the forefront. Liberal Democrats believe that we should move strongly and purposefully towards renewable and sustainable energy generation in the decade 2050 to 2060.
Any energy system produces problems for the environment. However, we need to distinguish between life-threatening environmental issues and secondary issues, however important. There is a difference between the problems created by carbon dioxide emissions and the long-standing problem of nuclear waste and those created by the disruption to the visual appearance of the landscape caused by the building of a major power station or windmills. Britain is a leading industrial nation and its landscape is covered with motorways, railway links and electricity pylons, which are visual nightmares. However, we have got used to them. My own town of Stockport is dominated by a massive 13-arch railway viaduct. We put it on our posters—it is our trademark feature. However, if one viewed it as some people view wind farms, it would never have been built and no sensible person would ever have lived near it. We get used to things. Culture changes our views about the things that we see and how dangerous they are.
Since 1997, the Government. to their credit, have had good intentions on energy and have had plenty to say about the subject. However, they have paid intermittent attention to policy, which has been inconsistent and sometimes incoherent. No sooner had we signed up to Kyoto than we had a moratorium on gas and the protection of coal. The climate change levy was introduced for many perfectly sensible and good reasons, but the Government overlooked the benefits of a carbon tax, which would have achieved their objectives far more effectively. The renewables obligation is good and has all-party support, yet our carbon dioxide emissions are set to increase this year. Only this week, the renewables industry said that there is still a residual problem, even with the renewables obligation, as the escalator will not continue.
465 The Government have set welcome targets in the past, but as the Minister himself admitted, the target for combined heat and power will not be met. At the moment, between half and two thirds of CHP generating capacity is out of use because of the combined impact of prices and the new electricity trading arrangements. Other targets are not exactly ambitious. When I visited Germany with parliamentary colleagues earlier this year, we were told that, in the past 12 months, it had installed 2,000 MW of wind turbines, while the UK managed only 80 MW. Whatever we say about the differences in culture, legislation and approach, the reality is that we have set unambitious targets and failed to reach even those.
The energy review is good and positive, and is welcomed by the Liberal Democrats. The Government's consultation is a model one because they did not assume that they knew the answers. In fact, some of us might say that the consultation is so open-ended and wishy-washy that it may have been better to circulate the energy review and say, "What do you think of this?" In all conscience, it is hard to see the direction that the Government are coming from, or the direction that they intend to go.
§ Mr. Stunell
The Conservative Front-Bench spokesman suggests that that is skilful, but I always commend a Government who are listening. I always want more listening, especially to the solutions that I am offering, which is exactly what I want to come on to.
If the Government are serious about meeting and exceeding their Kyoto targets, they must give some long-term signals to the energy industry. First, they must take the renewables obligation beyond its plateau in 2010 and continue the annual 1 per cent. escalator. I talked to the Renewable Power Association earlier this week. It said that bankers and financiers are looking at 2010 and saying, "If we advance you money, how do we know that there will still be a demand for the product beyond 2010?" That is undermining the value of the renewable obligation certificates. We need to take account of that. I hope that the Minister will come to the House soon and say that he will go with the renewables obligation beyond 2010.
We need to simplify the rules for the generation of energy offshore. People have talked about wind, but I hope that in due course wave and tidal will be issues for electricity generation, too. They will be greatly inhibited if we do not tackle some of the bureaucratic and interdepartmental fumbling.
Will the Minister tell us when precisely he will put the social and environmental guidelines for the Office of Gas and Electricity Markets in the post? Drafted they have been, posted they have not.
§ Mr. Stunell
That is excellent news. I talked to the director of Ofgem earlier this week. He was looking at his post every morning, so I am delighted to hear that, and I will study the guidelines with great interest. When the Minister set up Ofgem, he gave it a specific market-orientated remit. To achieve some of the environmental outputs that he seeks to achieve, Ofgem needs more specific guidance that would allow it to take account of that factor more completely.
466 We need more investment in research, although I concede freely that it has been increased significantly, but investment too in pilot projects and the development of near-market technologies. I hope that the Minister will not mind me mentioning a pet hobby horse of mine: the vexed issue of two-way meters. The aim is to have about 3,000 properties equipped with voltaic roofs by 2005, yet there is a major bottleneck in respect of whether, at the small scale, it is possible to resell surplus product to the grid. The development of two-way meters is one way forward.
I have suggested some things that can and should be done on energy policy—things that, on the whole, are not likely to cost the Treasury a great deal of money. I want to move on to conservation and efficiency.
§ Richard Ottaway
Before the hon. Gentleman moves off what he thinks should be done, what is the Liberal Democrats' policy on nuclear power?
§ Mr. Stunell
I am happy to address that issue. Indeed, if I had time, I would read out the two booklets that I have written on the topic. The Liberal Democrats' view is that our existing nuclear capacity should he retained for as long as it is safe and economical to do so, but that it should not be replaced by a further generation of nuclear power. The gap should be filled by two things: first, a greatly increased effort at conservation and efficient use of energy; and secondly, an energy mix.
I was pleased to hear what the Minister said about the importance of conservation and efficiency. I am sure that he recognises that it is the one area where it is very difficult to get market-led developments, because those who supply energy do not have any incentive to supply less of it. It is difficult to make them the drivers for conservation projects and for developing efficient use of energy by the end user.
I know that a number of signals, such as taxation signals are in place but some regulatory decisions need to be made as well. We are toughening up building regulations, but they need to be tougher still. We are still nowhere near the Scandinavian level of requirements for energy efficiency. If the majority of our homes could be solar heated for the majority of the year, we would save a great deal of money. I hear from people that they have a gas-heated home or an oil-heated home, but nearly all of us have a solar heated home for three or four months of the year when we do not have our central heating on. By extending that free period of solar heating, much could be gained in terms of energy and carbon dioxide emissions.
We need tougher regulation of the efficiency of domestic appliances of all sorts. I find it unsatisfactory—to put it in very politely—that a domestic appliance made by a German manufacturer is deliberately fitted with a more stupid electronic chip when it comes here. Germany has regulations that require the efficient use of fuel in products such as dish washers and washing machines. Its regulations are substantially stiffer than those in this country. That small step could be taken quickly by the Government and would make a substantial impact over the life cycle of such machines.
A couple of years ago, another private Member's Bill failed to complete its passage through the House. It would have meant that, at the time of sale, each house had to have an energy MOT, so to speak, with its particulars of 467 sale. All sorts of signals can be sent for the discerning consumer to take account of. At practically nil cost either to industry or to the consumer, the Government could require certain standards to be in place.
§ Ms Shipley
I agree with much of what the hon. Gentleman has said, but does he think that the discerning consumer will be sufficient, or might there have to be a rather larger stick than that?
§ Mr. Stunell
On domestic appliances, it is clear that the way ahead is to regulate and require certain standards to be provided. Just as we expect safety standards to be met as a matter of legal necessity, so we should require environmental standards to be met. The building of new houses is controlled by regulations. The buying and selling of houses is properly left to the market, although if the hon. Lady has suggestions that she would like me to take into account, I would be happy to hear from her on another occasion.
On ways of changing perceptions and moving things on, the Home Energy Conservation Bill, which was introduced by the hon. Member for Brighton, Kemptown (Dr. Turner), moves the argument on. I hope that the Government will find time to accommodate that Bill.
On conservation and efficiency, a recent survey said that the consumption of energy by Government offices was 82 per cent. higher per square metre than that of equivalent commercial offices. The Minister may want to comment on that and suggest how he is approaching other Departments to improve the efficiency with which they consume energy.
I want to say where we should be in 2050. We should look at the direction in which we wish to go, examine what total energy needs will be at that time and balance them by tackling efficiency and the conservation of resources, and by looking at the resources that we use to provide energy.
The Minister—and, indeed, all hon. Members—accept that we need diversity, security, economy and sustainability. Some of those things are best achieved through the liberalisation of markets and the operation of market forces at an international, as well as a domestic, level. Others require direct intervention by Governments and through international agreements.
It is clear that, by 2050, world supplies of oil will be steeply in decline, and gas will soon face such a decline. Perhaps there is a future for nuclear waste—[Laughter.] I meant to say perhaps there is a future for nuclear power, but there is indeed a future for nuclear waste: about 100,000 years-worth. I have made it clear that I do not particularly want the nuclear option to be kept open, but if the Minister wants to do so it is absolutely vital that he tell the House what progress the Government intend to make on dealing with nuclear waste. If, in 2050, the majority of nuclear waste—admittedly, it has already been created—is still sitting in ponds at Sellafield or is dotted around the country at the sites of decommissioned nuclear power stations, the scope for building another generation of such stations will be as limited then as it is now.
§ Bob Spink
Does the hon. Gentleman acknowledge that replacing nuclear with nuclear would increase the 468 total amount of nuclear waste that this country has to deal with by between just 5 and 10 per cent? Waste is therefore a problem that we must manage regardless of the nuclear-for-nuclear replacement question.
§ Mr. Stunell
The hon. Gentleman must recognise that we are here in this Chamber today because of our democratic system. He must face the fact that, unless that system is totally overridden in order to impose a new nuclear industry on this country, and until the issue of nuclear waste is resolved in the long term to the public's satisfaction, it will be almost impossible to develop a second generation of nuclear power. [Interruption.] I am not inviting the hon. Gentleman to agree with me; I am stating my opinion, which is viable in the context of the outside world.
§ Mr. Hayes
There is surely a paradox in the hon. Gentleman's argument. He said that the transfer of emphasis to renewable energy sources is very unlikely to be dealt with locally, and can be addressed only through national and international agreement. Yet in answer to the intervention of my hon. Friend the Member for Castle Point (Bob Spink), he said that the democratic process—presumably, he is including the local democratic process—should not be overridden. It seems that he wants to override that process in respect of renewable energy, but not of nuclear energy.
§ Mr. Stunell
The hon. Gentleman may have misunderstood what I said. I certainly was not implying that the way ahead is to bow to international agreements to which we have not given assent. We signed up to the Kyoto agreement, and we are—I hope—willing participants in ensuring that it reaches a satisfactory conclusion. My point was that Kyoto and beyond will require international action by many nations, not just the United Kingdom. I am sorry if my explanation was not sufficiently clear.
I should tell those hon. Members who are keen to see the nuclear industry redeveloped that not even its best friend would claim that it is the cheapest way to generate electricity. An element of subsidy and support would be required, and my investigations have led me to believe that the Government would get better value by putting the equivalent subsidy into renewables.
§ Dr. Ladyman
I fundamentally disagree with the hon. Gentleman. Objective calculations by independent engineers on a like-for-like basis show that all the so-called renewable energy sources that he is espousing are more expensive than the nuclear option. Nuclear is the only energy source that, by law, must meet the cost of its own waste and decommissioning. He advocates the future use of wave and marine energy sources, but in both cases the production unit cost is twice that of nuclear power.
§ Mr. Stunell
I was about to say that, between now and 2050, there will be at least two generations of technology: land-based and offshore wind farms, to which reference has been made, and biomass and other technologies that are ready to be marketed; and other forms that are not yet ready to be marketed, of which—as the hon. Gentleman rightly says—wave and tidal energy are two examples. Such forms have huge potential, particularly in the context of the UK's geography, but at the moment they are a long 469 way from being marketable. I agree that the use of such sources is some way off, as is the use of fusion nuclear power. However, I do not oppose work continuing on that, or on clean coal. Indeed, I was encouraged by the Minister's comments, and I take his point about the development of proper clean-coal technology and the efficient burning of coal. At the moment, perhaps the best way to reduce global carbon emissions is to fit clean-coal technology to existing plant in China. China's coal-burning technology is running at about 19 per cent. efficiency, and it is one of the planet's major pollutants.
The Minister—and perhaps the Prime Minister, too—has some challenges, and I hope that he can respond to them. One is developing targets beyond Kyoto, expanding the renewables obligation, considering carbon tax as a possible replacement for the climate change levy, and setting targets in general beyond 2010 and 2012. Progress needs to be made on two-way meters and domestic appliance efficiency.
§ Mr. Wilson
The hon. Gentleman said earlier that we should extend the renewables obligation beyond 2010, but perhaps that was a slip of the tongue. In fact, the renewables obligation extends to 2027.
§ Mr. Stunell
I am aware that the obligation will continue at its 10 per cent. level, but as the Minister knows, my plea is that we do not simply go up the escalator and remain on a plateau. We need instead to increase that figure in subsequent years.
§ Mr. Drew
I apologise for missing the first few minutes of the hon. Gentleman's speech. Does he agree that one way to advance the obligation to which he refers is to increase customer involvement? Each generating company could enable its customers to buy renewables through the device of ticking a box. Although they would pay more at the moment, there would be genuine customer involvement. One of the saddest things is that customers are not given the option to buy, and generators need to do much more to ensure that that can, and should, happen.
§ Mr. Stunell
I accept the hon. Gentleman's general point, and I am certainly in favour of much more positive marketing of renewables. Such things can be done—indeed, I myself have signed up to a renewables supplier.
Will the Minister explain what is to be done about interdepartmental co-ordination in this vital policy area? Conservation and efficiency appear to be within the remit of the Department for Environment, Food and Rural Affairs; the generation and supply side is the Minister's own business within the Department of Trade and Industry; taxation is dealt with by the Treasury; the built environment and building regulations are the responsibility of the newly created Office of the Deputy Prime Minister; and transport issues are of course dealt with by the newly created Department for Transport. Five Government Departments are dealing with what should be integrated policy areas. Will the Minister give some assurance that the Government recognise the importance of this topic, and are co-ordinating it properly?
The United Kingdom can benefit from a sound, sustainable renewable energy policy. Such a policy can improve our quality of life, reduce pollution and flooding, and provide greater home comforts for us all. It can lead 470 to growth in our economy domestically and in our exports nationally. It can certainly give us a far more sustainable environment, and produce far fewer harmful residues.
I suggest to the Minister that there is a route map for the future, a road on which to travel and a vehicle to put on that road. I want to hear from the Government that they will stop dithering—that they will stop just talking, and get on with it.
§ Dr. Alan Whitehead (Southampton, Test)
By coincidence, a while ago I was considering what might be the position of my city, Southampton, in 2050 if business continued as usual in terms of energy use in this country and throughout the world, and nothing was done to curb the growth of energy use and the carbon dioxide emissions that go with that. I consulted the Southampton geodata institute's study, which projected sea-level rises of between 0.8 and 1.2 m, and noted the institute's concern about more cyclones and anti-cyclones, greater tidal surges, and specific conditions in the south of England that would prevail by 2050. It predicted that the defensible shoreline resulting from those developments might be up to 5 m above the present level.
I looked at a map of my city, and imagined how it would look. Freemantle and St. Denys, two of its suburbs, would be completely under water, or defensible only with high sea walls. The River Itchen would not be crossable by bridge. All Southampton's main industrial areas and estates would be under water, and the port that is being built largely on reclaimed land would itself be wholly under water.
That is not an academic fantasy any more; it could happen almost in my lifetime. The forecast may be slightly out in terms of sea-level rise, but something along those lines is distinctly likely unless something is done, in the light of climate change, radically to reduce the energy consumption of all our industries and, indeed, all our countries. The report of the performance and innovation unit rightly identified a target of a 60 per cent. reduction in carbon dioxide emissions by 2050.
I am proud that Britain has taken the lead in terms of the Kyoto targets, and is taking the lead in embarking on what is only the first stage of a process that must go much further. We must accept, however, that whether or not we want to take the lead in the future, other countries are likely to reach the same conclusions. They will therefore probably be subject to international long-term targets that will cause us to take the lead in any event.
The PIU report also considered the cost of reaching the target. It suggests that only six months' growth in gross domestic product would be lost over 50 years. Surely, on any reckoning, the benefits of attempting to reach the target easily outweigh the cost, and would do so even if it were much higher.
The report places much emphasis on renewables. We should double our target by 2020, as it suggests, and I think we need to start picking winners. We cannot afford to stand back and hope that the market alone will make some vital technologies marketable. Such action will entail investment, not in permanent subsidy but in making the renewables market ready to play its part.
I consider two aspects particularly important. One was mentioned by the hon. Member for Hazel Grove (Mr. Stunell). Photovoltaics are the only urban renewable 471 that we can seriously consider, given the overwhelmingly urban nature of our environment. When we talk of planning constraints, we are usually talking about constraints on what we want to put in our rural environment. We have millions of roofs, however, and the sun shines on all of them. The fact that they do not play their part in generating energy to heat the houses below them strikes me as a significant omission in terms of our long-term energy strategy.
The main problem with photovoltaics is the lack of demand for the cells that could be placed on the roofs. The problem is not that the technology does not work, or that it needs extensive research; the problem is that mass production and long-term stability of demand are needed if costs are to fall significantly. We can do much at an early stage to enhance market readiness.
There is already one example of the success of building regulations in making the country ready for the challenge of climate change. Building regulation L changes boiler and double-glazing standards. Once the changes are fully in place, some 1.4 MT of carbon dioxide could be saved over 10 years. That approaches the level of savings envisaged by the Government's 10-year transport plan.
We need a change in building regulations to alter the way in which we clad our buildings. That could make a tremendous contribution. I suggest a regulation embedding photovoltaics in the cladding of roofs of new buildings. Even given its present cost, PV is a competitive alternative to cladding. We need a regime in which buying a PV roof is not the result of individual commitment, whim or fancy. We need PV roofs to be there, part of the low-carbon economy and something that people switch on and off every day.
We should also make progress on the use of biomass as fuel. Astonishingly, we have 800,000 hectares of set-aside land that could be used—and, indeed, was used for agricultural purposes—while we have a crisis in employment in rural communities and their sustainability. Using it for biofuel crop production—for biodiesel, short-rotation coppicing or elephant grass to fuel combined heat and power plants—would have multiple benefits. The advantage of combined heat and power is that it can function on a larger or smaller scale, which makes it an ideal partner for such a change in policy. Again, all we need is investment in creation of the necessary climate and the maturing of the arrangements. No costly investment in research and development is necessary.
Those are just two technologies in which we should invest to expand radically the role of renewables in our energy supply. I congratulate the Government on introducing a renewables obligation that will lever confidence and some investment into renewable development, but the PIU report has done us an equal and longer term service. It has set out calmly and unemotionally the scale of the task involved in transforming the landscape of our energy economy, and has drawn our attention to how quickly action needs to be taken even if we want to address ourselves to much longer-term changes. Moreover, it has told us that action on biomass, PV and a range of other new and existing fuel technologies can be taken and can work. Our task now is to ensure that that happens.
§ Mr. Michael Jack (Fylde)
That excellent speech by the hon. Member for Southampton, Test (Dr. Whitehead) illustrates the important interplay, mentioned earlier, between matters connected with the environment, technology, taxation, and, indeed, industry. All those factors affect energy policy.
I agree with what the hon. Gentleman said about the role of the rural economy and agriculture in our future policy. I was heartened for a brief moment when I saw the Secretary of State for Environment, Food and Rural Affairs come into the Chamber, but she disappeared very quickly. Sadly, the Minister was not supported by someone from that Department. Although such support might be symbolic, it would show a dimension that has not been much discussed hitherto in the debate.
This debate shows the House of Commons at its best. We have heard excellent, well informed and knowledgeable speeches, and I have already learned a considerable amount from the contributions of right hon. and hon. Members so far. None the less, energy security lies at the heart of the matter. The PIU report has been cited almost as a security-free zone, but I would counsel colleagues to read page 86. In box 5.1, we find a telling but short sentence. Under the words "natural gas", it says:Strategic security is therefore a concern.That is prefaced by this acknowledgement:By 2050, the UK will, like most other countries, be predominantly dependent on imports.The report acknowledges the importance of what it describes as "geopolitical concerns".
The speeches that we have heard so far illustrate clearly the fact that in the world of energy supply, there are no absolute certainties but a great number of complex issues, so it is important to have a balanced portfolio, as the Minister has said, and the Government have a central role to play. Given the energy providers, it is easy to believe that this is almost a private sector matter—but it is not; it is a very public matter that involves large parts of the public sector.
The public sector sets the environmental targets and the fiscal regime. It deals with agriculture and rural policy. Most importantly, it deals with the establishment of the electricity market, and sets the regulatory framework in which the industry operates. The Government therefore have a central role, so their consultation exercise is to be welcomed, and the questions and challenges thrown up by the PIU are central to our further discussions.
It is important that, unlike the United States, we remain fully wedded to the aim of achieving our Kyoto targets, and address the decline in the amount of electricity that can be generated from nuclear sources in the future. I want to say a few words about that from my constituency standpoint.
My constituency is the home of BNFL's Springfield plant. Apart from the fuel for pressurised water reactors, all the other fuels for nuclear power stations are produced in my constituency. The tremendous efforts that the work force at the Springfield plant have already made to improve not only their efficiency but the safety of their operations are noteworthy. They have recently won a national aware for the way in which they operate.
Although a while ago, the events at Sellafield perhaps represent a blot on the landscape of safety and probity in the nuclear industry. However, post-Windscale, we in the 473 United Kingdom have had a safe, regular and consistent supply of nuclear electricity and the waste has been dealt with, difficult though that may be. The plants that manufacture nuclear fuel have a record of increased investment and improved safety. Without doubt, if my constituents were here today, they would make a plea to be given an early and clear indication of just what the future of the nuclear electricity industry will be.
BNFL, with its expertise now drawn from Westinghouse, which it took over in the United States, has produced new and interesting design prospects. From the United Kingdom's point of view, the best design is the Westinghouse-designed AP1000 reactor, the potential cost of which could certainly match, if not better, anything currently available. In fact, it is said that that design's potential cost of generation could be competitive with the current average bulk electricity price.
Clearly, we all want a competitive and—I suppose most people think—cheap electricity supply. We need a pricing policy that provides affordable energy, but does not preclude a range of options, and helps to provide a secure electricity supply. If the returns are not right, people will not invest in the variety of energy sources that hon. Members have mentioned today. Without that cocktail of different sources, we will not have the security of supply that, above all, should underpin this country's energy policy.
One of the key issues is the disposal of nuclear waste. The Select Committee on the Environment, Food and Rural Affairs, of which I am a member, recently conducted an in-depth study into the consultation exercise that is trying to build a consensus on what we should do with such waste. The time scale is too long and the idea of a universal public debate is heroic. It has been suggested that because there will have been a debate, there will be no explosion of opposition when someone at last points a finger at the map and says, "We'll get rid of it there"—but we have to recognise that that is not the case.
Perhaps we also have to recognise that we are seeking a sort of ideal state that the technology cannot provide, whether for the legacy of waste or for the waste from nuclear power stations. Perhaps we should recognise the fact that what we need to sustain our nuclear industry is an acceptance that we shall do our best with technology at our disposal, such as dry storage, on-site storage at nuclear power stations and some form of deep but perhaps not absolutely final repository, just as the Finns have done. The Finns have recently decided to build a fifth nuclear power station, and they accept that they cannot provide the absolute ultimate answer, because they recognise that the disposal technology is moving on.
BNFL's proposed new nuclear reactor is based on a proven design. Westinghouse has designed about 50 per cent. of the power stations already in service. The design builds on pressurised water reactor technology, which is known and proven. Fail-safe technology has been built into the new AP1000, making it one of the safest designs possible. It relies not on pump technology for cooling water if something goes wrong, but on good old-fashioned gravity. It is an extremely safe design, and I hope that it will commend itself to the House and the Government.
My hon. Friend the Member for Castle Point (Bob Spink) mentioned waste, and opting for like-for-like replacement would effectively produce less waste, given the newer technology. The old "If it ain't broke, don't fix 474 it" formula underpins the question of nuclear power—it is certainly not broken, and it has proved successful. It is worth stating that some 438 commercial nuclear reactors are in operation, 32 are under construction and 35 are planned.
Nuclear power is the largest source of electricity in Europe, and new building programmes are being commenced in Finland and the United States. It is certainly not a redundant technology. As for providing security, it is something that we can have and hold, and secure for ourselves. Certainly, British engineering technology is well up with the rest of the world when it comes to constructing plants and producing fuel.
Risk is a key word in the energy world. The nuclear industry may be risky, and there are certain problems with it, but coal has its risks, too, including carbon dioxide emissions. Clean-coal technology has been discussed, and I support efforts to secure the use of that indigenous technology. Risk is involved in the interruptability of renewable energy sources, but I personally support the development of those sources because that will give us a balanced portfolio. Saving energy using better insulation and building techniques also involves risks.
There is no guarantee that all the sources will deliver simultaneously, so, as the Minister said, we need a balanced energy portfolio. Not just for parochial reasons, but for good national reasons, I believe that nuclear power, with modern new power station designs, can underpin a sensible United Kingdom energy policy, and I support it.
§ Dr. Desmond Turner (Brighton, Kemptown)
I am glad that the PIU report has been produced and that we can debate it today, but I want to challenge some of the terms of the debate and the basic assumptions that underpin it.
The terms of the debate drive the outcomes. The political drivers for both the debate and the PIU report are, as we have just heard from the right hon. Member for Fylde (Mr. Jack), security of supply and the need for cheap affordable energy. That is fine. However, another political driver—the overwhelmingly important one—should be climate change.
The Department for Environment, Food and Rural Affairs publishes climate change scenarios and recently issued an update. I commend those documents to everyone. We should all read them—they are required reading. The scenarios are scientifically sound—I am convinced of that—and they make it clear that even if we start to take action on carbon dioxide emissions now, the milder of their forecasts, at least, will still come into effect. Some of the more extreme scenarios would happen even if we implemented the Kyoto targets, but if we do not do that things will get worse and worse.
If we are to slow down the inevitability of climate change, we need to adopt targets more like the 60 per cent. cut in carbon dioxide emissions proposed by the royal commission on environmental pollution. We should be doing that almost immediately if we are to make a significant difference.
I give much credence to the catastrophic scenarios—they are truly terrifying. As we know, the polar ice caps are already melting at an alarming rate and mountain 475 glaciers are retreating. Once the ice has gone global warming will accelerate, and one of the likely climate changes will mean dry winters in what are currently areas of tropical rain forest. If the Amazonian rain forest were to burn, the huge quantities of carbon locked up in that enormous carbon sink would be released.
Carbon dioxide concentrations in the atmosphere would double and climate change would again accelerate precipitately. It might reach the point at which the northern and southern oceans warmed up sufficiently for the enormous deposits of methane hydrates on the ocean beds to be released—the seas would boil and methane would be released into the atmosphere in massive quantities.
Methane is a far more potent greenhouse gas than carbon dioxide. The planet would fry. Temperatures would go up by at least 20 deg C. The inevitable consequence would be the mass extinction of species, including the human race. That is a truly terrifying scenario and it could even happen in 2050, if we do not start to take action now. There is evidence in recorded geological history that just such a scenario once occurred. That is why carbon dioxide reduction at the earliest possible moment should be the crucial driver.
It is thus imperative that we put the emphasis on production of energy that does not involve carbon dioxide. The report has a great deal to say about that. I agree with its recommendation for a 20 per cent. saving in home energy consumption by 2010, which is completely consistent with the target in the guidance in the Home Energy Conservation Act 1995, of 30 per cent. between 1996 and 2010.
Unfortunately, if things go on as they are and we take no further action, we shall miss those targets by 6 percentage points. The way to fill that gap, which equates to a few million tonnes of carbon dioxide, happens to be through my Bill, so I hope that the House will forgive me if I do a brief plug for it. Only slight obstacles remain and I hope that my hon. Friend the Minister will use his eloquence to maintain Government support for my Bill to ensure its passage. Significant environmental and social benefits could be achieved, and the measure will make a contribution to our energy future.
I want to concentrate on renewables. Although the PIU report recognises that by 2050, wave and tidal energy will make a massive contribution to the UK's energy requirements, I take strong issue with its view that by 2020 there will be almost no such contribution. We are in a unique position geographically, in having energy sources that are capable of supplying more than twice our current electricity generation requirements. It would be complete folly not to exploit them to the greatest possible extent.
Furthermore, to return to security of supply, there is nothing more secure than the waves—who can interfere with them?—and the tide, which flows with exact timing, predictability and strength wherever one goes. Tidal power is just as capable of supplying what is frequently claimed of nuclear power by its proponents—a regular and predictable baseline load. It is vital to develop it.
The assumption is that it will take 30 or 40 years to make significant developments in tidal power. We should consider the example of wind power in Denmark and 476 Germany, where we can see what Government priorities can do—even in a liberalised energy market—to exploit a technology and bring it to a commercial point of development.
There are already demonstrators in the water that are working successfully, and if the Government took wave and tide power seriously and gave the technologies enthusiastic support, which would not need a massive Government investment, those energy sources could be supplying the bulk of the 20 per cent. renewables target by 2020. Furthermore, we would have a wonderful green industrial revolution through the manufacturing industries that supplied the technologies, and we could offer the world a great example by doing something about climate change and providing energy at an economic cost. Even before commercial development and exploitation, the demonstrator machines operate at about 5p per KWh, and it is reasonable to assume that the generating costs will fall to meet the current costs of fossil fuel generation. It is unrealistic to expect that fossil fuel prices will remain at their current low level.
However, there are constraints on the development of those sources—
§ Richard Ottaway (Croydon, South)
The hon. Member for Brighton, Kemptown (Dr. Turner) speaks with great authority. Indeed, so catastrophic was the picture that he painted that I will certainly take him up on his required reading.
I declare an interest as a consultant to AEP Energy Services, as set out in the register.
I welcome the debate, which is long overdue and necessary. The most notable feature of the performance and innovation unit report was the lukewarm commitment to keeping the nuclear option open without any serious proposals on why—or, indeed, how—that should happen. I am pleased that the Minister did nothing to diminish that commitment today. I suspect that he is a supporter of the nuclear option in any case, but he is right to keep it open and to allow the debate and the consultation process to reach a conclusion.
Some seven years ago, when the last nuclear power station came onstream, the Government were in an enviable position—there was an abundance of supply and plenty of capacity. But the world has moved on since then. Clouds have loomed on the horizon: Californian power failures; oil price hikes and associated fuel protests; the collapse of wholesale electricity prices; dwindling North sea gas supplies; and, as has just been amply demonstrated, growing political pressure to address the issue of climate change. That affects our views on the future of nuclear power and the nuclear option.
We all share the aims and objectives of reducing carbon emissions, although I think that the Government will have some difficulty in meeting their target of a 10 per cent. reduction by 2010. It is right to try, but, as the Minister will appreciate, it is a very big job, even with the assistance of nuclear power. As nuclear power will start to be phased out after 2010, and will be totally removed from the energy mix by 2035, the task will be even greater. The probable decline in the use of coal—at least, dirty coal—will make the situation more difficult. There 477 are no easy options, but in my judgment nuclear power has to replace the dwindling reliance on fossil fuels. It gives diversity and security to the energy mix, and is a reliable low-carbon source of energy. We all assume that gas will take its place, but, as other hon. Members hinted, there are inherent dangers in placing an excessive reliance on gas and on reducing the energy mix. The Government should employ whatever options are necessary to support the nuclear industry and to provide a stable regulatory framework for the nuclear sector.
We have to reach a decision on waste disposal. There have been countless consultation processes, and it is time to make up our minds. Until we do so, it will be hard to make decisions on new nuclear plant. We have to make those decisions, otherwise we cannot achieve our low carbon targets.
I welcome the Government's commitment to renewable energy. Barely a day goes by without a Minister announcing another initiative or a subsidy for this project or that piece of research. That is just the sort of role that the Government should be playing, and I congratulate them. Although they will have difficulty in hitting their targets, it will not be down to any lack of energy and effort on the part of the Minister.
I want to discuss a factor that has been hampering the development of green power. In the past, the Minister has welcomed the use of co-firing to meet renewable energy requirements. In layman's language, that is a mix of, say, 90 per cent. coal and 10 per cent. biomass, which produces 100 per cent. electricity with 90 per cent. carbon production. It is therefore a good process, as it reduces carbon output. The problem is that the Environment Agency has less enthusiasm for co-firing than has the Department of Trade and Industry. Its policy is far from being developed—in fact, it is still working on it—and producers trying to embark upon co-firing are having difficulty in persuading the agency to give them its full support. The problem is not insurmountable—it is a question of joined-up government. The Department and the agency need to get together to improve their liaison on that important matter.
The PIU report centres on security of supply. The word "security" can be loosely defined, and in this context it has many definitions, including stable prices, availability of a good energy mix, and physical security of supply.
It is a given that gas will be the central feature of our drive for a low carbon energy sector. However, North sea gas supplies are dwindling, and we will be a net importer by 2006. As more than half the world's gas supplies are based in Russia, it is essential that we build up a good long-term working relationship with that country. We must develop long-term commercial contracts and work with the Russians as partners. Their pipeline system is old and their own demand is growing, and it is essential to get right alongside them to produce security of supply.
European market liberalization—a matter touched on by my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale)—is the area where most problems exist. The PIU report makes it clear that the liberalisation of European Union gas and electricity markets is essential to safeguard national security of supply. That puts the future in doubt, as the one thing that we do not have is EU market liberalisation. The distortions are manifestly obvious to all who study the EU market. The UK cannot be looked at in isolation—it must 478 be regarded as 20 per cent. of the EU market. One cannot draw up a plan for 20 per cent. of the market and ignore the rest. Unexpectedly, the Government seem to be going down that road by acquiescing in EU developments. The Barcelona summit was a failure in that respect, and a comprehensive proposal from the European Parliament was largely ignored. The French made a concession on their domestic market, but not in the business sector. How is it possible to have a genuine market if British generators cannot sell into the French retail markets, but EDF is allow to sell into the British market? We need a level playing field with a symmetrical market structure.
It is a matter of growing concern that the whole EU energy market is slowly falling into the hands of three players—EDF, which already owns a substantial part of the UK market, and the two German companies, RWE and Eon, which are currently buying Innogy and Powergen. The issue is not that those events are taking place in the UK, but that they cannot take place in France or Germany. At every opportunity, those players are buying up all the available assets in the European electricity sector, and within a few years they will control more than 50 per cent. of the European market. That is a totally unacceptable state of affairs, and I am astonished that the Government do not seem to realise the impact of what is happening. We have been through the pain of breaking up the market in this country into small fragments, which has produced genuine competition. To put it back into the hands of three major players that do not have the British interest at heart is to take a dangerous road.
At the root of the problem is a failure of EU competition policy. As far as I can see, the PIU report makes no reference to competition policy whatsoever, yet it is emerging as the most critical aspect of the European energy market. The difficulty is that transnational mergers and acquisitions in the European market are distorting the market as a result of the revenue rules that prevent competition policies from intervening. EU competition law must be revised or a special set of rules must be introduced for the electricity market; otherwise, we will have a completely distorted market dominated by powerful players with little interest in this country. The Government should press for divestment of assets in Germany and France and market-driven access to transmission capacity. That can be achieved only by unbundling the transmission and transportation companies from the supply companies, as was demonstrated and implemented in the UK.
Generators are having a difficult enough time as it is. Wholesale, not retail, energy prices in this country are at a rock-bottom low. That is a result of the NETA rules introduced by Ofgem, which has made it clear that its priority is to reduce prices regardless of the consequences. The sale of electricity in this country is a nakedly open market that reduces prices to the lowest level, and the NETA rules are having an impact. Several power stations have closed down and several generators are in serious financial difficulties. Consequently, the banks will close power stations and maintenance schedules will slip, resulting in brown-outs such as those that happened in California.
I can see that my time is running out. I welcome the report and what the Minister is trying to do, and I look forward to his White Paper.
§ Mr. Tam Dalyell (Linlithgow)
Unashamedly and unambiguously, I say that I would like to see three new nuclear power stations authorised, probably at Sizewell, Hunterston and Hinkley. Of course, the difficulty is the waste issue, as outlined by the hon. Member for Hazel Grove (Mr. Stunell). Therefore, I wish to press the question asked of the Minister by my hon. Friend the Member for South Thanet (Dr. Ladyman), which was also mentioned by the right hon. Member for Fylde (Mr. Jack), about the Finnish situation.
In Britain, we should all take note of the remarkable developments in nuclear energy in Finland, including the progress made in the storage and disposal of spent fuel and radioactive waste—for example, at the Olkiluoto plant.
Some 15 years ago, the Finns built a surface store to keep lifetime spent fuel safely for 50 years and 10 years ago they built a deep underground repository, sized to dispose of all the low and medium level waste products from lifetime operation. They have also selected the site for the ultimate disposal of all Finland's spent nuclear fuel and have parliamentary and local community support for it. People may wish to claim that no community in Britain would act like the Finns, but I think that people would do so in the area of Caithness and Dounreay, where they are familiar with the nuclear industry.
The Finns have reviewed their future energy needs and they have decided to build a new nuclear power station, for which they have got parliamentary and public support. Clearly the Finns have moved on from debate to implementation. They are demonstrating that solutions to the issues do exist. In the light of such progress elsewhere, why are we in Britain making such slow progress in dealing with the waste and the possibility of replacing our existing nuclear stations? The House of Commons has shown this afternoon that it is more pro-nuclear power than I ever remember before. Members may think that they have to fill 10 minutes, but I would be content if the Minister would address the Finnish situation when he winds up. He may have to visit many other places, but he should buy a ticket to Helsinki and see what they are doing there.
§ 5.3 pm
§ Bob Spink (Castle Point)
As a responsible nation, we must move from a carbon-based economy to a hydrogen-based one. Only by retaining a nuclear option can we provide the stepping stone that we need to make that change successfully. A hydrogen-based economy is not yet a practical option—for instance, we need continued research and development into fuel cells—and we need time to reach a longer term solution. A reliable, safe, cheap, environmentally friendly, secure interim solution is not available now. We will have to compromise on some of the criteria, but we cannot sacrifice safety or our environment and, therefore, cost is under great pressure.
The PIU report predicts that gas could supply 70 per cent. of our total electricity needs by 2025, 90 per cent. of which will have to be imported from Russia, north Africa and the middle east, with all the obvious threats to security of supply and cost that that would entail. The suggestion that gas is an easy solution, and that we can be sanguine about our increased exposure to imported gas, is naive. Other hon. Members have called that total madness.
480 The Kyoto protocol sets the goal of a 50 per cent. reduction in carbon dioxide emissions by 2050. Renewables and energy savings, especially in the domestic market, must be energetically pursued and can make a sound contribution, but only at the margins. The real option for replacing the current 27 per cent. nuclear capacity is between new nuclear reactors, based of course on the best available safe and reliable technology with improved economy, or even more carbon, at a time when carbon emissions must be reduced.
Some Labour Members baulk at the word nuclear. They are averse to technology, but Lord Sainsbury—who I presume was speaking for the Government—said that it was most important to convince the public that the application of science and technology is the solution to the present problems, not the cause. He said:Persuading people to change their habits will have only a limited effect but it is the scientists and engineers"—perhaps even the nuclear engineers—who will be mainly responsible for protecting our environment.The belief that people will not change their habits conflicts with the PIU report's recommendation that we should aim for a 20 per cent. power saving in the domestic sector in only eight years, and for 40 per cent. in 18 years. Those targets are overly optimistic.
We need to follow Japan, which is committed to maintaining nuclear power. Like Finland and the US, Japan has a plan for long-term radioactive waste management. It has also committed itself to a major programme of research on nuclear fusion. It is a partner with the EU in the international thermonuclear experimental reactor.
We must hope that nuclear fusion will be the longer term solution, because it is potentially the most significant opportunity facing the scientific world today. Recent developments are encouraging. Physicists in the USA make claims—viable ones, I hope—to have created nuclear fusion through sonoluminescence or bubble fusion, using deuterated acetone. Other scientists have voiced doubts about that method and the truth will emerge from the current debate in good time.
There are other ways to create nuclear fusion. For example, the fast-ignition approach uses intense short-pulse energy to initiate fusion reactions. Those could be generated by the upgraded Vulcan laser at the Rutherford Appleton laboratory near Oxford, which could create temperatures and pressures comparable to those found inside the stars. That is exciting and—to some—frightening, but nuclear fusion offers an unlimited and safe energy source with no waste problems. It is a target for the whole world to aim at, in this blue sky debate.
Other hon. Members have mentioned waste problems, and I shall try to put them into context. If we decide to replace nuclear with nuclear, we would add only 5 to 10 per cent. to the existing stockpiles of nuclear waste that we need to manage regardless of the decision. Therefore waste is not a key issue in the debate, although it is an important problem that we need to tackle.
We have much of the technology to deal with nuclear waste but we have none of the political courage to make the decision to deal with it appropriately. The PIU report seeks, impossibly, to square a circle in advocating low cost and low carbon outputs. Those two are incompatible. It is granted that costs are currently very low—1.7p per kWh— 481 but to achieve those low costs we are running out our oldest, least efficient and dirtiest plants. Indeed, carbon emissions increased last year by 1.5 per cent. at a time when we are promising to reduce carbon emissions by a massive amount, and when global temperature in the first three months of this year was the highest ever. With parts of my constituency—Canvey Island, of which Members will have heard before—below sea level, global warming as a result of increased carbon emissions, which is causing sea levels to rise, is a matter of pragmatic concern. It is not an academic debate for my constituents—they live with it day to day.
Another key and difficult issue is that very low prices inhibit new investment, and, therefore, hold back the development of safer and cleaner technologies. Many commentators regard 2.7p per kWh as a more appropriate current price planning level. Even at that level, however, the private sector would be reluctant to finance innovative new technology such as the new nuclear plants that are now emerging—for instance, pebble bed reactors. Government support will be needed to ensure that we get medium-term energy supply that is secure, reliable, safe, environmentally friendly and as cheap as possible, consistent with those aforementioned criteria.
The PIU has avoided the obvious decision to replace nuclear with nuclear. It talks of 20 per cent. of energy coming from renewables by 2020. I believe that that is an unrealistic target. I suggest a future energy profile, an alternative to the PIU approach, using coal via gasification with CO2 sequestration, balanced with a third of generation from gas—that is just about manageable within our objectives of stability and security—with about 15 per cent. from renewables and savings. That would provide a realistic strategy. It would require the replacement, however, of the UK's existing nuclear capacity with the latest reactor technology, as David White of the Institute of Chemical Engineers has explained. That more balanced strategy is lower risk. It spreads our sources of energy evenly and creates a greater degree of self-sufficiency while we buy time as a nation to pursue the necessary research and development into new hydrogen-based technologies and improved renewables.
In summary, our current energy generation plant and technology is old, inefficient and in dire need of replacement. Our over-dependence on gas is not the answer; it is the soft, sloppy, dangerous option. It would put our supplies at security and cost risk and hand strategic control of our nation's energy to uncertain foreign powers in unstable areas of the world. The sensible solution is a balanced generation strategy, building up renewables to supply about 15 per cent. of our energy requirements, with one third produced from new coal technologies, one third from gas, and 20 to 25 per cent. from new reactor capacity. That is the courageous, and, if I may say so, the Churchillian vision—the rational interim solution. It provides an environmentally sound and geopolitically secure medium-term energy supply while we search for a—
§ Ms Debra Shipley (Stourbridge)
I am pleased to be called today because I want to explore the position of my Government regarding nuclear power, and to consider 482 some of the statements made by Ministers, including the Prime Minister, on the environment and renewables. In brief, the argument appears to be: we are running out of natural energy resources, CO2 is a problem, nuclear power is CO2-free, and renewables cannot meet out power requirements. Let me try to deal with some of those points.
Are we running out of natural energy? A statistical survey by the World Resources Institute of the world's mineral reserves predicted that, in 2050, we will have run out of oil and will have just two years' supply of gas left. Better news is that we will still have 380 years' supply of coal, but, of course, consumption of coal creates CO2, a major greenhouse gas. The same study suggested that we will run out of arsenic—very useful—cadmium, copper, gold, lead, sulphur, tin and zinc, and that recycling will be the only way to get hold of those primary elements.
Meanwhile, the world population is growing quickly. I will be one of 9 billion—not 6 billion—people on the planet. All 9 billion of us will aspire to living standards that Britain currently enjoys. Many visions of a dystopian future are offered to us: apocalypse by volcano, the coming global super storm, global warming, rising sea levels and warfare over diminishing stocks of fresh water and energy. Current nightmares are sparked by 11 September and dirty bombs. All that does not include things such as weird weather conditions and incoming asteroids.
It is important to remember how wrong most warnings have proved to be. In 1914, the US Bureau of Mines forecast that 10 years worth of oil was left. In 1951, the Department of the Interior predicted exhaustion of oil reserves by 1964. However, the overwhelming scientific evidence that we have suggests that global warming indeed exists and that it is a human creation. I therefore commend my right hon. Friend the Prime Minister's timely foresight in reviewing our energy requirements. That review must be wide ranging.
For instance, the politics of some of the most unstable and illiberal regimes critically affect world raw material and energy reserves, and western involvement in the middle east is inextricably linked to the importation of energy. Oilfields and gas pipelines are central to the developed world's concern with Afghanistan, Iran, Iraq, the Gulf and the ex-Soviet states.
A book on the Taliban by Ahmed Rashid revealingly illustrates the existing and proposed oil and gas pipelines in the region and the oil and gasfields that they serve. The suggestion is that energy control is already playing a significant part in warfare on the supply side while, on the demand side of the equation, consumption, consumerism and economic growth seem addicted to using up diminishing energy resources. By 2050, Kyoto will seem to have been a muted wake-up call.
To survive in the current century in a comfortable and relatively peaceful way, we will need to make a supreme political effort and engage in global co-operation. Dystopia is extremely easy to create. The real struggle will be trying to create the conditions for our continued long-term existence. We will have to do so with less, and harvest the sun, wind, rain, tides and energy stored in the core of the earth.
483 What is the Government's position? In response to my question on the environmental impact of the proposed European energy market, my right hon. Friend the Prime Minister illustrated the current dilemmas. He said:We have made it clear that at the same time as opening up the energy market, we must push forward on energy efficiency and fulfilling the Kyoto targets. We are well aware that opening up the market may benefit consumers on price but that it is important to take other measures on energy efficiency that are necessary for the environment.Later in the reply, he stated the current orthodoxy:All the evidence that I read week after week suggests that climate change has become a more serious rather than a less serious issue. It is essential that the Governments of the world face up to its seriousness."—[Official Report, 18 March 2002; Vol. 382, c. 30.]I could not agree more.
I have since asked a series of parliamentary questions on renewable energy to see the state of play of the Government's commitment to alternative energy sources. I received a reply from the Department of Trade and Industry to my question about the renewables obligation. It said:The renewables obligation will require licensed electricity suppliers to demonstrate through a system of renewables obligation certificates (ROCS) that they have brought a specified proportion of their electricity from renewable sources. Alternatively, suppliers may meet their obligation through the independent market purchase of ROCs."—[Official Report, 25 March 2002; Vol. 382, c. 704W.]That is interesting.
I welcome the creation of demand for renewables, however small, and I suggest that it is very small. Furthermore, £260 million over three years to March 2004 is proposed to be spent directly on support for renewable energy initiatives. Again, I welcome that, but proportionately it is a very small sum.
I also asked the DTI how it would ensure that sustainable energy and realistic pricing would not increase fuel poverty. My hon. Friend the Minister for Energy and Construction said:The Government will continue with actions to put downward pressure on prices. The Government's Fuel Poverty Strategy also sets out a range of programmes to improve the energy efficiency of homes of the fuel poor."—[Official Report, 25 March 2002; Vol. 382, c. 694—5W.]In the same reply, however, there was an implication that energy prices would rise. I am therefore not totally reassured that my poorer Stourbridge constituents will be protected from increasing fuel poverty, but I am pleased that some of them have already benefited from the warm homes initiative to insulate their properties.
I also welcome the planning Green Paper, which made several references to sustainability in its introduction. However, sustainability is not embedded in the proposals.
Construction creates nearly half the harmful pollutants that now concern us. It also depletes natural resources and the countryside. My recommendation to the planning Green Paper was that there should be separate statements about the sustainability of any development and that they should include statements on the embodied energy of chosen materials, life cycle costs, adjacency of public transport, car use and pollution generated by use.
484 The previous Minister for Planning and Housing assured me in writing that the omission will be rectified in the White Paper. I am pleased to put his response on record. He said:I can offer definite assurance…We now recognise that the Green Paper did not emphasise sustainability sufficiently. Therefore we intend to set out a statutory purpose for planning that will put sustainability at the heart, of the system. We want planning to promote environmental quality, sustainable economic development and social inclusion.I will be most interested to see how the Government do.
Furthermore, excellent design can meet stringent environmental designs. One of the current awards by the Royal Institute of British Architects is for a barn conversion by Hudson Featherstone that limits materials to those available within a five-mile radius. It is possible to reduce energy expended in construction in a simple and direct way. Energy wasted in construction and in the use of buildings is only just beginning to be tightened in new building regulations. The move to limit the generation of CO2 by domestic buildings could have a significant impact. Dr. Susan Roaf built a suburban house in Oxford using existing technology to reduce the amount of CO2 produced to around 150 kg per annum from the average of 6,500 kg for a comparable conventional house.
The nuclear option ignores two things: the dangerous waste products that are created and the intrinsic threat that nuclear power stations now pose as terrorist targets. What does exist requires generations of political stability, which is unrealistic. In addition, 11 September demonstrated the potential vulnerability of nuclear plants.
The existing nuclear programme is coming to the end of its life, and maintaining a nuclear component for energy production means building new power stations. Private money has yet to be attracted to the lifetime costs of construction, disposal and, importantly, the decommissioning of nuclear power stations. It is an expensive, insecure, uncertain and hazardous option. By contrast, if every dwelling in this country came just part of the way to meet the CO, reductions of the Roaf house, nuclear power would become an irrelevant option. We must consider how much more secure a country is if it is full of dwellings that act as micro-power stations, each self-sufficient in an emergency.
Every surface of every man-made object, from roads to buildings, could collect energy from the sun. Solar trains could have massive collectors on their backs and run on rails ballasted by solar collecting rocks. That is not a utopian dream. It is a real option and we have the nascent technology for it. For example, Marks Barfield Architects, designers of the London Eye, has just won an architectural competition for a solar collecting walkway in Cambridge to power electrical shuttle buses. That uses a developing painted, not manufactured, technology.
Many hon. Members who contributed to the debate have nuclear interests in their constituencies and they rightly pressed their constituents' concerns. I have no such nuclear interests and my constituents probably have different views. I cannot do better than quote from Mr. Lea Williams, who wrote:As one of your constituents I am writing to ask you to join me"—
§ Adam Price (East Carmarthen and Dinefwr)
I congratulate the Government on at least resurrecting the notion of having an energy policy; the previous Administration largely left it to the vicissitudes of the marketplace. I also welcome the fact that the Government are taking a long-term approach to energy trends and are seeking to combine economic and environmental objectives. Having said that, I take issue with some parts of the energy review, although I realise that it is meant as a platform for debate. Following the lead of the hon. Member for Doncaster, North (Mr. Hughes), I will focus principally on the role that the coal industry could play in meeting the Government's objectives of security, diversity and sustainability.
The energy review is a little complacent about the risks of disruption to energy supplies, as hon. Members explained. It observes that the UK will be heavily reliant on gas imports, but does not regard that as too much of a problem. It notes that the gas grid can be disrupted by disabling a relatively small number of key points—landing points—and that the effects could be dramatic. The review largely ignores the risks, however, and it seems that it was written before 11 September. As the report notes, coal is at much less risk of such disruption.
In general, the report highlights the importance of diversity as a means of ensuring security, but it is silent on how that should be achieved. We have heard from several hon. Members about the consequences of falling gas reserves in the UK. Over the past eight years, the remaining lifetime of our gas reserves has fallen by 19 years, so we are obviously using them much faster than they are being replenished. As a consequence, we are increasingly reliant on gas imports. It is estimated that Gazprom in Russia and the Iranian national oil company control almost half of the global gas reserves. The knowledge that the future custodians of our energy security are a company allegedly run by the Russian mafia and another run by Islamic fundamentalists does not inspire much confidence in anyone.
The UK is at the end of a very long pipeline that passes through many countries, which means that we are subject to the highest transportation costs and the greatest risk of supply interruption. The right hon. Member for Fylde (Mr. Jack) mentioned the Californian blackout. The report recognises the significance of that experience and the need for incentives for investment to prevent the same thing from happening here. However, although it says that the UK should learn from that mistake, it is silent about what should be the consequences for policy options.
Coal clearly offers long-term security and diversity of supply at an affordable cost, and the report acknowledges that. Coal reserves in the UK are far greater than those of gas and oil. At the current usage rate, we have at least 50 years of reserves. Coal is a defensive fuel in terms of security of supply because it is plentiful, it is cheap and it is available from a variety of sources. UK producers of deep-mine coal are able to compete on the world market if current subsidies are taken into account. The cost of coal production in the UK compares very favourably with that of other EU producers.
We have heard about the prospects for investment in clean-coal technology, which will enable us to replace the current, ageing coal-fired stations with far more efficient and environmentally friendly capacity, while sustaining 486 diversity. However, that will clearly not happen without Government support. We need to ensure that we invest in new technologies such as clean-coal combustion and the capture and sequestration of carbon dioxide. It should be noted that, globally, the demand for coal is still growing, and we could make a positive contribution to the reduction in CO2 emissions precisely by investing in clean-coal technology. As global demand continues to grow at about 2 per cent. a year, we could ensure that it does not damage the environment through CO2 emissions.
Ensuring diversity and security of supply means that we must protect the indigenous coal industry. One of the worrying factors over the past few years has been the increasing competition caused by coal imports. Imports of steam coal rose from 8 million tonnes in 1996 to over 14 million tonnes just four years later. The Minister talked about keeping the options open with the nuclear industry, but if we are to keep the options open for the domestic coal industry we must take a long-term view. If the remaining deep-mine pits close, those assets will be permanently sterilised. The coal industry faces high set-up costs and relatively low marginal costs, and if supply exceeds demand, investment will be affected in the short term, so we need to look to the long term.
Finally, I should mention my constituency and the specialist coal produced there, anthracite, which is not widely available on world markets. The anthracite industry is important to the domestic heating market in a number of specialist applications. The only alternative sources of anthracite are China and Vietnam, which present particular problems with security of supply.
I have some sympathy with the Minister, who is continually bombarded by various sectional interests, some of which we have heard in the debate. He should be lauded for taking an open-minded and balanced view of the potential role of the various sources of energy. I was grateful to hear his reply to the intervention from the hon. Member for Doncaster, North about the hypothetical six-month gap, which we hope will be closed shortly. I look forward to welcoming the Minister on his visit to Betws colliery, and I hope that there will shortly be an announcement from the Government about continued support for the coal industry.
§ Mr. Michael Clapham (Barnsley, West and Penistone)
I, too, welcome the debate. It is important that the House should have the opportunity of putting its view on the record before the Minister reaches his conclusions in reply to the PIU report. The contribution of my hon. Friend the Member for Brighton, Kemptown (Dr. Turner) showed us clearly why we must develop an energy policy that is considerate of the environment.
I shall develop three points. First, any balanced energy policy takes account of the environment. I support the coal option rather than the nuclear option, and I believe that the coal option addresses the environment argument. Secondly, there is a great danger of UK over-dependence on gas. Thirdly, the coal industry can make its contribution to the UK economy. It can be a competitive and sustainable industry, provided that we get a coal-aid scheme that deals with the investment aspect. I was encouraged by the Minister's comments. From the negotiations in which he has taken part in Brussels, it seems that we will get an aid package that focuses on 487 investment in the coal industry. I shall discuss some of the features that I think should be included in that aid package.
On the environment, it is clear that, as other hon. Members have said, there needs to be a fall in CO2 emissions. We must meet our Kyoto and other international obligations. However, it is worth pointing out to the House that between 1990 and 1994, there was a fall of 18.5 per cent. in carbon emissions in the UK. That was the result of the massive colliery closure programme and the cut in some of the coal generating plant. In a bizarre way, it shows that mining communities have already made their contribution to the environment argument.
There are at present four coal-burning power stations fitted with flue gas desulphurisation, and I understand that another six stations are likely to be equipped with FGD. That short to medium-term option gives us the opportunity to address the long-term issue. Over the next 10 to 20 years, we will require more than 10 GW of replacement for nuclear stations and coal stations. We need to concentrate on clean coal technology to replace those stations.
My hon. Friend the Member for Doncaster, North (Mr. Hughes) referred to IGCC as the technology that should be replacing coal-fired stations. He is correct. The Minister should aim high and that means going for the best that is available. He should consider the current support for clean-coal technology and how we might improve it. The current level of assistance for research and development is £17 million over five years, but that is insufficient. We should consider how we can improve the assistance that we give to clean-coal technology. I believe that IGCC, the gasification way, is the way to the future.
The PIU report refers to an increase of about 20 per cent. in the use of renewables by 2020. We must take that route, but at the same time, we should take into account the fact that renewables are not the whole answer. They are costly, which means that we will need a cheaper supply of electricity to subsidise their development. Again, the energy source that could be used to subsidise investment in renewables is clean-coal technology. I refer the Minister to the International Energy Agency, which recently said that the one option that would reduce CO2 was gasification. It referred to IGCC technology rather than renewables. Indeed, it added that the use of such technology would reduce CO2 faster than investment in renewables. I hope that he will consider that aspect.
§ Mr. Clapham
I am sorry, but we are tied to speeches of only 10 minutes, and I want to make my points.
My second point relates to gas and the increasing over-dependency on it. In 1990, no gas was burned off in power stations, but today, a third of our electricity is generated by gas. The decision made in 1989 to allow gas to be used in power stations was wrong, but it is a matter of history and we must now deal with the consequences. Three years ago, the gas interconnector allowed suppliers to push their gas down into Europe, chasing the higher 488 prices. They pulled UK prices in train behind them. The fact that prices began to increase attracted investment in generating capacity, and the result is overcapacity.
I refer the Minister to the cost of the pipeline from Russia to the European national grid, which will be of the scale of 35 billion euros. I understand that the trans-European network will take another 26 billion euros of investment. In comparison, the infrastructure for transporting coal to our power stations is already in place. World coal production is now in excess of 4.5 billion tones—and that comes from secure sources of production. We should start seriously to consider investing more in clean coal technology, because the source for supplying our electricity is there, safe and secure.
I want to make one point about the gas network. I understand that Coalpro commissioned a study by a military expert and has made the report available to the Government. It shows that the detonation of a bomb placed in the UK network could disrupt about half our gas supply. We must bear it in mind that the supply of gas is vulnerable to terrorist attack.
The coal industry contributes about £1 billion to the economy annually. It is small compared with its previous size, but it is a large national and regional player. In Yorkshire, it contributes about £400 million per annum to the regional economy. Mining machinery manufacturers contribute about £35 million. There has been investment in the industry and we have high-tech collieries. However, we need an investment package of aid that will include certain features. One of the main features should be the inclusion of the Coal Authority—
§ Mr. Peter Duncan (Galloway and Upper Nithsdale)
I welcome the debate, which gives us the opportunity to examine in detail the Government's current energy policy, their review and the implications for the future. I question in passing whether 2050 is the right date for the title of the debate. The issues that I shall outline will require Government action much sooner than that time scale would imply. Some decisions need to be taken now to cover our short and medium-term objectives while securing the United Kingdom's long-term future energy needs.
The debate is also appropriate as we contemplate continuing change in the balance of our energy mix. During the 1950s, almost 90 per cent. of fuel used in the UK was coal. By 2000, that had declined to only 15 per cent. There were major increases in the use of natural gas and oil. Over 50 years, the combination of natural gas and nuclear generation grew to account for more than 65 per cent. of power created. The past 50 years have seen huge changes in the mix, and we should not underestimate our opportunity to make significant changes by 2050.
Without change in energy policy, the UK will become increasingly reliant on natural gas imports. We face being dependent on a single fuel to an extent never before experienced. According to industry consultants Wood Mackenzie, in its report to the Department of Trade and Industry in 1998, it expected the UK to become a net importer of gas any time between 2003 and 2009. It reported that by 2020 the UK may need to import between 55 and 90 per cent. of its gas requirements. The major 489 emerging exporters that will then be keen to exploit the commercial opportunity are Russia, the middle east and north Africa. Put simply, our security of supply will be in question, and supply will certainly be subject to price manipulation in future.
The House will be aware that we have the opportunity to change what seems to be a worrying prospect. Expansion of the renewables sector is perhaps the most media-friendly and certainly the most environmentally acceptable alternative together with promoting continued energy efficiency programmes. However, the objective must be a secure, sustainable and deliverable supply that enjoys consumer support, is environmentally friendly and cost-effective. That will not occur automatically. The Government need to make it happen.
I regret that the Government are prone to putting off decision making to such an extent that existing nuclear stations face imminent demise. Renewables will be unable to fill that gap. It is inevitable that the gap will be filled predominantly by imported natural gas. Even the Minister estimates that the UK will become a net importer of gas by 2005, and points out that we already import natural gas during periods of high demand. We face being highly vulnerable to international price variations.
The Government have set a target of securing 10 per cent. of electricity from the renewable sector by 2010. I sincerely hope that that target will be met. I am delighted that Scotland in general, and my constituency in particular, has the potential to make a significant contribution towards its achievement. Galloway's existing wind turbine scheme at Windy Standard has been a huge success. Interestingly, it has enjoyed its most vocal support from the communities closest to it. Proposals are now going forward for its extension, and I compliment those involved on the sympathetic way in which they have developed their scheme. Notwithstanding the Minister's earlier reassurance, I would point out that the Ministry of Defence consistently remains the biggest single obstacle to these new schemes.
My constituency also faces plans to host one of the new offshore wind farms for Scotland, with proposals being put forward by TXU to build on the Solway Firth, some nine kilometres from the Colvend course. This has understandably elicited considerable public interest, and I have suggested that such a scheme, located, as it is, adjacent to a national scenic area, deserves a full public inquiry. That would enable a proper, full and frank debate on the merits of the proposal. On my recent visit to Denmark—the acknowledged world leader in wind energy—people whom I spoke to revealed that they would not have chosen such a location for this kind of offshore scheme. However, I trust the Scottish Executive, as the ultimate arbiter on planning matters north of the border, to make the right decision after proper scrutiny.
There are also questions about the additional costs involved in developing the infrastructure to distribute the wind energy generated. As is common in most renewable projects in Scotland, the ideal sites are rarely in the ideal places for the national grid. Power Systems, for example, has raised with me its concern that adequate incentives are not yet in place for investment in and development of the renewable energy infrastructure. Indeed, its planned investments have often been ruled out of order by the industry regulator.
490 Scotland faces a new devolved landscape in energy policy. Plans for fossil fuel and nuclear power generation are set by the UK Government, while those for renewables, the environment, and, crucially, consents for power stations are set by the Scottish Executive. There is clear potential for conflicts of interest and confusion, which was considerably added to by our debate in the House on 5 March 2002. On that occasion, the Secretary of State for Scotland and the Minister who is with us today failed to resolve the issue over which Parliament would make the final decision if a nuclear plant was welcomed in Westminster, but planning consent was withheld by Holyrood.
At present, Scotland has a relatively balanced mix of fossil fuel, nuclear, and renewable power sources, together with oil and gas reserves from the North sea. We are currently a net exporter of electricity, although planned plant closures on nuclear sites such as Chapelcross in Dumfries and Galloway indicate that that position could be reversed before the end of the next decade unless new builds on old sites such as Chapelcross can be Government-led.
Scotland has the potential to exploit its geography and become a centre of excellence in all existing and emerging forms of renewable energy. Even the Danes look at the Scottish coastline with envy when contemplating wind and wave developments. The Scottish Executive have recently announced their programme to develop the market, but action is required from central Government to make that happen.
Taxation is reserved, and, as a result, the main mechanisms for encouraging the development of these new technologies remain in the control of Westminster. It is a matter of regret that, in the Chancellor's April budget, he announced a 10 per cent. supplementary charge on the UK's oil and gas production. However, this presents us with an opportunity. The Danish Government saw the strategic advantage of investing in wind power development and research in the late 1960s and 1970s. They created an industry in which they became world-beaters, and now, some 30 years later, it employs 40,000 people in that country.
Surely, by directing a small proportion of the supplementary charge on oil towards renewables research, we too could become world leaders by exploiting fully the economic and environmental potential of the next generation of renewable energy. Wave and tidal power, along with the biogas and biomass industries, are still in the early stages of development. Further Government commitment to investment in research could reap huge rewards for employment in our most vulnerable rural communities.
Nuclear plants remain the backbone of our electricity production, and urgent decisions need to be taken by the Government to encourage their replacement as successive plants approach decommissioning. Failure to do so will further expose the UK consumer to the vagaries of the international natural gas market—a risk that Ministers are duty-bound to address urgently.
This has been an important and balanced debate.
§ Mr. Wilson
In answer to the hon. Gentleman's point, there is no ambiguity about where planning powers for nuclear new build in Scotland would lie. They would lie with the devolved Parliament.
§ Mr. Duncan
I thank the Minister. I simply observe that, if he reads the debate on 5 March, he will see that it was far from clear.
We must remain focused on a balanced future for UK energy production. Anything less would leave us all in the dark.
§ Mr. Patrick Hall (Bedford)
I am pleased to contribute to a debate in which hon. Members from both sides have revealed great enthusiasm for and expertise in a crucial subject with far-reaching implications. I acknowledge the respect that the Minister has shown for the House by remaining in his place for almost all the debate. He has made his point by remaining for so long.
In thinking about energy policy towards 2050, we are also invited to think about the world that we would like to see in 50 years' time, or, as I would be in my 99th year by then, the world that we would like to hand on to our children and to future generations.
The Minister set out the context of the debate. Clearly, there is no shortage of information, reports, interest or research. The record shows that there have been a number of well-informed debates in the House on these matters. That is as it should be and it is understandable because the production and use of energy is fundamental to human activity.
Energy is a crucial and highly political issue. It is central to the economy, and has a significant impact on the environment. It affects every one of us, and has the potential to affect all living things for good or for ill. Energy policy helps to shape society and the world in which we live. Access to energy raises questions of social justice and social equity. Civil nuclear power also has a bearing on the secrecy that Governments want to impose on society, and on the nature and activities of security and surveillance services.
In thinking about the world in 50 years' time, it is uncontentious to look to a world in which energy is produced in a sustainable and efficient manner with the minimum of pollution, in which supplies are secure, accessible and affordable to all, and in which innovation is welcome. In thinking about the next 50 years, I am drawn to reflect about the past 50. That period saw the dramatic demise of coal, which was our major, historic, commercial energy source even though we still have well over 300 years of supplies in the ground untouched. We have seen the rise and the peaking of North sea oil and gas, and we have witnessed the rise and, it would seem, the fall of nuclear power. The energy utilities have changed from the might of the publicly owned Central Electricity Generating Board, and to many private and foreign-owned companies that provide our electricity. We have seen the privatisation of British Petroleum, and the end of the National Coal Board. We have seen the relentless and massive increase in road transport, which is now the major user of oil and the major producer of pollution and greenhouse gases. We have had the Gulf war over oil supplies, the shocks produced by the 1973 OPEC-forced oil price rise, and the widespread panic buying that was triggered by a small group of people who sought to bring down the Government by blockading petrol supplies in September 2000. We have also witnessed incidents at Three Mile Island and Chernobyl, which helped to bring down nuclear power.
492 Significantly, our modern economy has broken the historic link between gross domestic product growth and energy growth, as we have changed from having a heavy industrial base to there being a greater role for service industry, together with greater energy efficiency. Now, by sharp contrast with 50 years ago, we are members of the European Union. and I have every confidence that we will remain members of the EU in 50 years' time.
Three key elements of the proposed long-term EU energy policy provide a framework for the future: security of supply, environmental protection and competitiveness. The lessons of the past suggest that we should be cautious about simplistic campaigns on future energy policy. At different times in the past 50 or 60 years, we have been told that the future is coal; the future is oil; the future is nuclear; the future is gas. Now it is tempting to say the future is renewables.
Renewables have a huge role to play in fulfilling a range of desirable objectives. I would like to believe that the future is renewables, but to get there we cannot just switch off nuclear power stations. There is a big gap between the run-down of the old nuclear capacity and the point at which renewables could take over. We should not seek to close off the possibility, which the European Union is exploring, that future innovation might deliver nuclear fusion. However we look at it, renewables, together with greater efficiency and conservation, must play a significant role. Until now, British Governments have been reluctant to get going. Even now, there is a long way to go.
However, provided that there is leadership from Government, much will be delivered locally. Bedford and Kempston, which I have the honour of representing, need to play their part as does every other area of the country. Bedford was wisely selected by BP as the first place where solar photovoltaic systems were installed on two new petrol stations. At Little Barford on the Bedfordshire-Cambridgeshire border, Innogy has built Britain's first industrial-scale megawatt regenerative battery, which represents a breakthrough in electricity storage and opens exciting possibilities for the more efficient and widespread use of renewables such as wind power.
In the middle of the county, the considerable landfill capacity in worked-out clay pits, which supply the local brick-manufacturing industry, produces a great deal of methane gas which is used to generate 29 MW—enough electricity to meet the needs of 30,000 people. That fits in neatly with plans to build a new settlement for 10,000 people at Elstow in Bedfordshire which will incorporate high energy standards—higher than those required by current building regulations—as well as combined heat and power fuelled by landfilled methane and, in future, by biomass based on forestry waste from the adjoining new national forest. There is a great deal of enthusiasm locally for those initiatives, which in turn have given impetus to the search for local opportunities for sustainable energy measures driven by the local Agenda 21 process.
In looking ahead to 2050, many complex issues are involved. A key requirement is the reduction of carbon dioxide and other greenhouse gases. When making investment decisions, we are all familiar with the concept of economic payback time. In assessing future energy policy, we should enhance our ability to decide the best way to proceed by exploring the idea of energy payback 493 time. The relative savings of carbon dioxide associated with different types of electricity generator are clearly of great importance. Renewables and nuclear fuel do not produce carbon dioxide. Indeed, the nuclear power industry has gone on the offensive to point out that it does not contribute to global warming—a point that I made to the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) earlier.
However, we cannot make a proper calculation unless we account for the carbon dioxide produced in making a generator, building it, running it, decommissioning it and dealing with the waste. Research on those matters suggests, for example, that photovoltaic panels have an energy payback time of two years or a little more. A new nuclear energy plant needs to produce energy for at least 10 years before it has paid back the CO2 produced in its manufacture and construction. That is an important concept, and it could be a useful tool. I urge my hon. Friend the Minister and the Government to explore and to develop it, so that we are better informed and better able to make rational decisions about the best systems for the future.
§ 6 pm
§ Dr. Vincent Cable (Twickenham)
I commend the performance and innovation unit report. It gave not just a good canter around energy issues, but a good sense of strategic direction. It made it clear that although affordable energy was an essential driver, there are a lot of risks. Among those risks, one is pre-eminent: global warming and the need for a low-carbon economy.
The report dealt with security of supply in an intelligent, unemotional and balanced way. It brought out the fact that there are good arguments in relation to security of supply, which we must deal with, but there are also rather disreputable arguments, which are fundamentally economically nationalist and protectionist. I think that we had a bit of that from the Welsh Nationalist and from the Conservative spokesman, who was particularly striking as he was talking about free trade yesterday, but not today.
There was a helpful contribution from the hon. Member for Croydon, South (Richard Ottaway), who made a distinction between different types of energy security. It is worth while breaking them down. One has nothing to do with Russian gangsters and Arab fundamentalists. It is about how to manage the relationship between the producer, the consumer and the regulators—the California problem: how to create an environment where energy producers can invest as, say, oil companies do over 30, 40 or 50 years in gas projects or, for a big new power station, over a decade or more, when consumers are looking for short-term advantage; and how to balance those issues. It is the job of the regulator to do that by creating an environment in which one can have long-term contracts. There is a genuine issue that Mr. McCarthy is familiar with but has not yet fully solved.
There is a second problem, a different issue: disruption of production. There can be disruption of production for a variety of reasons: technical reasons, failures in the grid, man-made disruption—as we had with the energy blockade a couple of years ago—and disruption of raw material supplies from overseas. However, there is a solution: if there are risks and they can be quantified, one builds up strategic reserves. One of the lessons of the 494 blockade two years ago was that the oil companies and the Government had not correctly built up the right level of strategic reserves.
There is a third type of energy security issue, again a different one, which is about price shocks. The problem is that we are not economically an island. The fact that a country has indigenous oil and gas does not protect it from oil and gas shocks internationally. The Brent crude price is linked to the middle east price. There is an international gas price and an international coal price. Having indigenous production does not insulate us from those factors.
When we talk about energy security of supply, we need to be more specific about what time horizons we are talking about. That is crucial. I go back to what my hon. Friend the Member for Hazel Grove (Mr. Stunell) said. The debate should focus on 50 years from now, when the world will be very different. It will be dominated by renewable energy and major advances in energy efficiency, possibly things such as carbon sequestration, which would in the long term be the future of the coal industry. Many of the worries people are expressing are not about that period half a century on, but about the intermediate position, when we have a relatively high proportion of gas in the electricity mix. A lot of those security issues surround that precise issue.
There is a high percentage of gas in the electricity input for good reasons. It has been competing with coal on price because it is cleaner, emits less sulphur and emits 60 per cent. of the carbon dioxide. It is competing with nuclear power on economic grounds because nuclear power has environmental risks, so there are good reasons why gas has that position, at least in the medium term. A lot of the negative comments about gas are misconceived. I make two brief points about it.
The first is the running out of supplies issue. The hon. Member for Stourbridge (Ms Shipley) made some helpful historical points. We always underestimate the availability of reserves. In the oil and gas industry, constant exploration takes place. There is horizontal drilling and deep-water drilling. No one knows how much gas and oil there is west of Shetland in the deep continental shelf. All the current estimates of supplies could be way out. They constantly have to be revised.
The more important point is that the sophistication and robustness of the international gas business and market has been underestimated. Several of the many pipelines that exist are in north Africa, which represents just one corner of the business. There are also pipelines going through Spain, Italy, Algeria and Russia. Although Algeria has experienced a civil war and Russia has been through a period of upheaval, such events have had not the slightest impact on the supply of gas from those countries. Gas is increasingly supplied by boat and liquefied natural gas carriers, rather than through pipelines. Various means of supply therefore exist within the gas industry itself. Although we must be responsible and think about the threat of terrorism and so on, alarmist talk about it has been wildly exaggerated.
In the very long term, gas must of course be phased out, but because it is a carbon-based fuel rather than because of foreign suppliers. The reason why gas will have to go is that some 60 per cent. of the molecule by weight is carbon. In due course, it will have to be replaced by renewables. We should focus on creating a set of 495 incentives through which renewables can be brought onstream rapidly, and in the right manner. The way to do that is to create a level playing field and send the right signals by establishing a carbon tax and a renewables obligation. We should not try to pick winners, or be highly prescriptive about which renewables will be competitive in 20, 30, 40 or 50 years' time, because we do not know the answer.
Yesterday, the European Commission produced a particularly daft initiative: a biofuels directive that establishes a renewables obligation specifically for biomass. Perhaps biomass is the fuel of the future—I have no idea—but to narrow the field in that way is to adopt completely the wrong approach. In establishing a very strong long-term commitment to renewables, we must accept that we do not yet know which are the fuels of the future. A strong argument exists, therefore, for diversity and variety and for having an open mind about which fuels will come through in the long term.
§ 6.7 pm
§ Paddy Tipping (Sherwood)
The title of today's debate—"Energy: Towards 2050"—shows clearly that we are talking about long-term policies. Our discussions and decisions in the coming months and years will have real consequences for the economic activity, living standards and—perhaps most importantly—environment of our children.
I welcome the performance and innovation unit's report and the vigorous debate that is taking place. I want to focus on two key issues raised in the report, one of which is the prospect of cheap energy. Indeed, in his foreword to the report, the Prime Minister says:Securing cheap reliable and sustainable sources of energy supply has long been a major concern for government…Electricity prices are now cheaper than ten years ago.He is of course right, but the conditions have changed. The days of cheap energy and cheap electricity are perhaps behind us. There are various reasons why energy is cheap at the moment, but by and large the practical reasons have disappeared.
There is an issue of principle here. We have discussed the need to invest in new plant and new equipment, but the notions of cheapness and of investment in the future do not sit easily together. One current problem in the nuclear industry is that of replacing nuclear with nuclear, which has not only environmental but cost implications. Power stations that produce electricity from coal are aged and need replacing, and by definition, higher prices will lead to a focus on conservation. I am therefore sceptical of the notion of cheap energy that underpins the report. Indeed, the renewables obligation belies that notion, because it clearly acknowledges that we must pay more for sources of renewable energy.
Another vital issue raised in the PIU report is the notion of a balanced energy policy. I feel that the report is complacent on that score. The hon. Member for Twickenham (Dr. Cable) spoke of the importance of gas. I do not deny its importance, but I think that it would be risky in the long term to allow 70 per cent. of our energy supply to depend on gas, 90 per cent. of it from abroad. by 2020.
496 The Minister spoke emphatically of the need for a balanced energy policy. I want him to trust his own judgment, because the PIU report was made to and not by the Government. I hope that the voices we have heard here today calling strongly for a balanced energy policy will be heeded.
All sources of energy involve difficulties. The hon. Member for Twickenham, who produced a vigorous defence of gas, pointed out that in the long term there were sure to be problems, although they might not be as serious as we think. Although I support them, I consider the targets for renewables very challenging: I anticipate real difficulties in our achieving 10 per cent. by 2010 and 20 per cent. by 2020.
Planning issues have been mentioned, but there are other key problems with the transmission system: recyclables, or renewables, will require a different system. As has been said, the most important issue for the nuclear industry is the cost of disposal and decommissioning, which the private sector alone will not be able to meet.
That brings me to coal. As my hon. Friend the Member for Doncaster, North (Mr. Hughes) said, coal is an old friend. It has done its business over the years. It is indigenous and reliable. The problem is that it is not clean.
The coal industry has short-term difficulties, mid-term prospects and long-term environmental constraints. Let me tell the Minister how delighted I was with the coal aid operating scheme. I am extremely pleased that a new European Union framework has been established. It must, however, be translated into a United Kingdom context, and it is vital for that to happen by January, because, as the Minister knows, the current subsidy scheme runs out on 23 July. I am very keen on the notion of bridging, and I heard the Minister say that he would consider it on a case-by-case basis, but I think the industry needs more clarity.
The idea of investment aid, which is part of the new EU framework, is very important. I know it has been difficult to negotiate with partners, but it is good that for the first time we shall be investing in the long term—in new faces and new seams. At Clipstone colliery, for instance, there is a desire to access the black shale, at a cost of perhaps £20 million. There is a possibility of £6 million in support, which would be vital in the mid term.
In the long term, we need to do more to make coal environmentally friendly. It pains me a great deal that we in the United Kingdom spend less on clean-coal research than is spent in Japan, which has no coal industry. I hope the spending review will acknowledge that, and will make a move on clean coal technology.
It is vital to consider carbon sequestration, which, as has been said, involves real problems but is a source of help for the future. I would like to see a demonstration plant. I would like to see the public and private sectors working together. I would like to see coal producers and generators establish a clean coal plant. As we have heard today, coal is a growing fuel throughout the world—so we can demonstrate new technology and sell it across the world. We can sell it to China and India: it can be a world leader.
We need to consider other issues, too. Coal-mine methane is a legacy of the coal industry, and if we can tackle it, we will be in a win-win situation—it is a pollutant, but we can get energy from it. We made 497 progress in this year's Finance Bill, but it is vital to go further. Methane from landfill is covered by the renewables obligation, but coal-mine methane is not. That issue is being tackled in debates on the Finance Bill at the moment, and I hope that the Minister will carefully consider the amendments that have been tabled, as they would provide an easy way out that would cost the Government nothing.
I hope that the Minister will also think about combined heat and power. He did accept that there were problems, but those problems are very real. Not only will we not achieve our target in 2010, but we have not yet achieved our 2000 target. Again, the renewables obligation for exported electricity and CHP plants, along with other measures, needs to be considered very carefully.
I want to say a few words about different forms of renewable energy sources. Biofuels are very important, and again, progress has been made. Biomass has real environmental benefits as a source of fuel; it is also good for wildlife. We should focus on biomass, but we should also look at the liquid fuels, such as biodiesel and bioethanol. Again, progress has been made in this year's Finance Bill—the rate of duty on biodiesel has been reduced by 20 per cent.—but it ought to be put on the same basis as hydrogen-based liquid fuels such as LPG, which benefit from a 40 per cent. rebate.
It is important that we make further progress in that direction. We need to do better. We need to ensure that we have an energy policy that has good consequences for our children: it must be balanced, and it must recognise the importance of the environment.
§ Richard Younger-Ross (Teignbridge)
My constituents are particularly aware of the importance of this debate in two ways. They are aware of the problems of climate change. The main line from London to Penzance passes along the sea wall between Dawlish and Teignmouth, and services have frequently been interrupted in recent winters by severe storms. We are only too well aware that if the sea level rises by half a metre or a metre, the closures on that line will be more dramatic and more regular. It is clear that we need to act to cut CO2.
We are also aware that there are solutions. At Newton Abbott we have an excellent company called Centrax, which tries to make and market combined heat and power units. I use the word "tries" because although the company makes excellent units, it is not helped by the Government's legislation at the moment.
Do the Government recognise either of those issues? The Secretary of State for Environment, Food and Rural Affairs clearly recognises the first. On 26 April she said:research tells us that the effects of climate change in the UK are likely to be sharper and stronger than many people originally thought.Does she recognise the solutions? On 15 May, in the foreword to the CHP consultation document, she said:The Government is committed to a sustainable approach to energy that reflects the environmental, social and economic impacts of both its supply and use.She went on to say:Combined Heat and Power…has a vital role to play in achieving this.So why have market conditions for CHP been worse in the past 18 months than for a decade?
498 The Combined Heat and Power Association says that that is largely due to the impact of the new NETA electricity market and the loss of local generators. The net effect has been the loss of more than 1,500 jobs directly from the industry, the virtual collapse of new CHP investment and the departure from the CHP industry of major companies, including Powergen, Innogy, Northern Electric and Scottish Power. The Government's formal target of 10,000 MW of CHP by 2010—the current capacity is only 4,600 MW—will be difficult to achieve unless those issues are addressed. Their carbon targets have already been undermined: carbon dioxide emissions have risen during the past two years.
The CHPA and its member companies have been lobbying the Treasury and other Departments to support the industry in order to balance the impact of the unfair market conditions under NETA. I know that the Government have listened to representations about the climate change levy, but they have not yet acknowledged the need to reform the NETA agreement.
The full climate change levy exemption has been welcomed by the CHP industry as a much needed shot in the arm, after two years of unrelenting damage to its prospects. The CCL exemption for power exports will assist companies exporting significant electricity as part of the design of their CHP system or those which need to import and export power to meet the energy needs of their customers during the year. The full exemption will especially help the food and horticulture industries, hospitals using CHP and major industrial sites serving a number of customers.
However, as I pointed out earlier, not everyone is helped by the CCL. Some people are counting on reform of NETA. The CHPA argues that other measures will be needed if we are to accelerate new CHP investment. Such measures include removing the unfair balancing penalties under NETA for CHP and wind power, extending enhanced capital allowances to improve finance-based leasing, and introducing arrangements for CHP similar to those for renewables.
CHP needs to secure financial benefit for the carbon savings that it delivers. That will help to get the industry moving again and could deliver the Government's CHP target. The CHPA has submitted a NETA action plan to the Government. When the Minister sums up the debate, will he address the following points from the plan? The CHPA calls forfair access for small generators and consolidators to all markets and revenue streams; proportional transaction costs; a single cash-out price; removal of the barrier to new market entry imposed by imbalance risk especially during plant commissioning; the end to conflict between industry codes, including restrictions on 'self-balancing' under the Grid Code that affect larger CHP plant; a change of the governance arrangements in the Balancing and Settlement Code to ensure that small and independent participants have an effective voice.There is a future for the CHP industry and the Government are correct in the belief that CHP has a role to play. However, it is difficult to explain to the 300 people in Newton Abbot who are losing their jobs how the Government's actions follow their words.
§ Dr. Brian Iddon (Bolton, South-East)
Governments initiate many important debates, and this is certainly one of them—rightly so, because, like food and shelter, energy is a basic human need. I am pleased to be able to take part in the debate, albeit briefly.
The publication of the UK fuel poverty strategy by DEFRA last year, and of the PIU energy review this year, have catalysed the debate. It is spreading across the nation, and I hope that everyone will be aware of it before the Government take decisions that will be among the most important that they take. Those decisions will lock future generations into an energy policy for decades, so it is important that we get them right.
I am pleased to announce that next Tuesday, the Royal Society of Chemistry is holding a parliamentary links day in the House, to which all Members have been invited. We have chosen as our theme the future of energy, and I hope that many Members will take part in it.
Three Select Committees are already considering the energy debate. The two most important considerations should be security of supply and diversity of supply; the first can be achieved through the second. All options should be left open. We should not put too great a reliance on any one energy source, as we tend to do at present. In the past we thought that we could rely on nuclear power, but for various reasons, we were wrong in that assumption. Then there was the dash for gas. Following privatisation, it was not surprising that the industry turned to gas, because combined cycle gas turbines can be built with very low capital costs and give far faster returns, owing to shorter construction times.
As a chemist, I have always objected to the burning of fossil fuels. That is not only because it produces carbon dioxide, which has become more significant because of climate change, but particularly because our fossil supplies—with the possible exception of gas, but especially coal and oil—are the sources of the chemicals from which we prepare our pharmaceuticals, paints, dyestuffs and other products that we take for granted. It is important to leave those fossil fuels in the ground for as long as possible for the benefit of future generations. That is why I strongly support non-carbon methods of generating energy. Energy conservation, too, must play a large role in the future, and I am pleased that the PIU report recognised that.
Just as Denmark led the way on wind power after our lack of investment caused us to lose out, so we must invest in wind and tidal power. Some people believe that the winds and tides could provide all our energy requirements if we tapped into them. I am pleased that the Government are now turning towards investment in wind and tidal power, although whether the process will be fast enough remains to be seen. Another reason for investing in wind and tidal power is that, despite the Minister's announcement today about the discovery of a new field in the North sea, the North sea oil industry will decline rapidly. A great deal of manufacturing expertise is invested in that industry, which could be transferred to the generation of wind and tidal power—as Denmark employed agricultural equipment manufacturers to manufacture equipment for generating wind power.
I say in passing that I am a strong supporter of the Home Energy Conservation Bill that my hon. Friend the Member for Brighton, Kemptown (Dr. Turner) is steering 500 through the House. I hope that the Minister, and other Ministers and Secretaries of State, will strongly back that Bill when it returns to the House on the last day for private Members' business.
The big debate this year will be about the role of the nuclear power industry and the future of renewables, although gas and its future will obviously play a part in the discussions, too. There is no doubt that renewables, including wind and tidal power, could supply our entire energy needs. Rapid and considerable investment in basic and applied research will be necessary to deliver a range of demonstration projects in the renewables sector. Later, we will need to provide new infrastructure and bring existing infrastructure up to this century's standards.
I have great doubts about whether we can bring renewables on board fast enough to replace the declining fossil fuel-burning industries. Those doubts are echoed in the PIU report. That is why I am a strong supporter of keeping the nuclear power industry going. Its expertise needs to be maintained, for a reason that other hon. Members have mentioned: we are not too far away from nuclear fusion. It has reached phase 2, and the Select Committee on Science and Technology is going to Japan in the autumn to look at the new fusion experiment that is to take place there. Most commentators think that we are about 50 years away from nuclear fusion, which is not long in historical terms. The chief scientific officer, David King, believes that that period can be cut down to about 30 years, and he is very keen on investment in nuclear fusion.
The nuclear power industry is already losing personnel, and it is critical that the Minister and the Government send the right signals to those who remain. They must be retained at least until the Government have made a decision on nuclear energy—and, in fact, until long after that, so that they are there eventually to introduce nuclear fusion. It is a sad reflection of the present situation that new graduates are not choosing to work in the nuclear power industry and it is already suffering from a shortage of skills. It is important that the Government send out strong signals from this debate about the future of the nuclear power industry.
An energy research review group, under the chairmanship of the chief scientific officer, has met and identified six key areas of research that need investment. I hope that the Minister has noted those six areas and will get together with Treasury Ministers to find that investment.
I was a housing chairman for 10 years, which has given me an interest in energy efficiency. Not one contributor this afternoon has mentioned the condition of the housing stock in connection with the debate about energy efficiency. Bolton has 22,000 unfit houses, of which some 5,000 to 6,000 are irredeemably unfit, and they are pumping energy into the atmosphere. I ask the Minister to join other Ministers in an effort to ensure that the condition of the housing stock is improved. I hope that the comprehensive spending review will put housing further up the agenda, so that we can tackle the poor energy efficiency of the clapped-out houses that still exist throughout the country.
§ Mr. Bob Blizzard (Waveney)
It is difficult to look 50 years ahead. If we went back 50 years from today, few people would have foreseen the massive contribution that 501 natural gas from the North sea would make to our energy supply. The world and its technology are changing ever more quickly, so looking ahead is very difficult.
The first principle of any energy policy must be to keep the lights on. Woe betide any Government of any party who cannot achieve that. When people argue against any particular source of energy, they should bear that warning in mind, because we might end up with not enough energy. The second principle is not to waste energy. Energy saving is a prerequisite of any policy, but that issue has been well covered by other hon. Members today.
We have to start from where we are, with oil and gas representing 85 per cent. of total UK energy production, with our own oil and gas supplies constituting 75 per cent. of all the energy we consume. Some 40 per cent. of electricity generation, on which we have concentrated today, is currently from gas. The hon. Member for Twickenham (Dr. Cable) put the gas supply industry fairly In context. It is our gas, so it would be difficult to find a more secure supply. It has enabled us to reach the Kyoto targets and the dash for gas happened because the economics were good, delivering energy without the Government needing to put in taxpayers' money.
An important plank for energy policy, therefore, is to maximise our own gas production and to delay for as long as possible the moment when we have to import big gas supplies. If we look at our gas reserves, we see that 58 trillion cu ft have been produced so far, but it is estimated that 72 trillion cu ft remain. Thirty-five years ago, people said that we had only 20 years' supply left. People now say that we have only 20 years' supply left, but who knows what new technology will bring?
My hon. Friend the Minister was right when he said that we must squeeze every last drop of energy out of the North sea, and that is what the DTI's Pilot strategy has aimed to do. It is against that background that we should consider the tax measures in the Budget. I must say that they came as a bombshell to me and many others, and we will have to look carefully to see whether they prove to be so in terms of what wreckage they may cause. They certainly do not sit easily with the direction that was being pursued by Pilot. My first reaction was to ask how one could take so much money out of an industry and retain the investment in it. I must admit that the Treasury proposals are very clever, because while they increase the tax on existing developments, they provide generous capital allowances that will—at least on paper—make the return on future developments look better.
Those are powerful arguments. I am concerned, however, that decoupling upstream and gas corporation tax from general corporation tax will offer less fiscal stability, pose a greater fiscal risk, and, therefore, have an effect on investment. The Treasury is saying, basically, that we now have fiscal stability, as the 1997 review has been concluded. I am not sure that the industry will necessarily see it that way, however, as the Budget announcement was a surprise compared with the direction in which we had been going. Although Government can say, "Yes, we are not going to change the tax regime for the remainder of this Parliament", that also implies that it could change again after three or four years. Consequently, those investors who have just been burned might not be as keen as they were before.
What can we do under the new regime proposed by the Treasury? We must focus on how to generate the most investment. We should give particular attention to the 502 smaller companies and new entrants, which are the feature of mature provinces around the world. We must focus on the current proposal on financing costs because access to capital is absolutely crucial to the companies. At the moment, it is proposed that financing costs should not be offset against the supplementary charge. Will my hon. Friend the Minister ask the Treasury—as I have asked the Treasury—to reconsider whether that is really necessary? The Treasury says that it is necessary to make the supplementary charge work. I think that that is disputable. There is a risk that double taxation might deter American investment. As we must accept that the Treasury wants to impose a supplementary charge, we should consider again whether there is another way to deliver that without disallowing firms from claiming their financing costs. That is a crucial element in getting the investment needed to realise the underlying assumption of the PIU report—that we must maximise our own gas supplies. That is in line with my hon. Friend the Minister's argument.
One of the advantages of persisting with energy produced from gas is that it is relatively easy to transfer to imported supplies. Our most obviously secure next supply is from Norway—one could hardly ask for a friendlier, more stable neighbour—because we can connect relatively easily to Norwegian gas. It is worth noting that the PIU report says about security of gas supply that those countries about which Members have raised doubts today need the revenues from their gas as much as we need their gas. I know that gas pipelines are vulnerable to terrorism, but that is true of just about any other generating plant, whether a nuclear power station or another type of power station. Somehow, we have to live with terrorism, because if we say, "Terrorism rules this out", we will not be able to do anything in the world. Again, I thought that the hon. Member for Twickenham put security of supply for imported gas in proper perspective.
Clearly, we need a diverse energy policy, and we must focus particularly on renewables. We must look at what is our most obvious natural asset—wind. After all, we are the windiest country in Europe. We must get over some of our self-imposed obstacles to energy production from renewables, however, as we need to make sure that we can create a market in which they can flourish. I was very impressed by what we found on a recent visit of the all-party group on renewable and sustainable energy—PRASEG—to Germany, where there is a kind of feed-in law that gives people a price on which to rely to encourage investment in renewables. I hope that our 10 per cent. obligation to encourage such investment will work. Above all, however, we must sort out the planning laws. We must pursue and persist with the Green Paper's ideas. If it takes 10 years to get planning permission for whatever power source we choose, we will not get very far. The planning system will be one of the biggest obstacles to achieving our energy policy.
We must ensure that we have supply chains in place for the offshore wind industry so that we can develop an indigenous wind turbine manufacturing industry. That would make the economics much better and would enable us seriously to get into renewables and to convince people to invest in them. My one doubt about nuclear power is that, if the Government step in and solve the problems of decommissioning and waste management for the industry, they may deter people from investing in renewables. We need that investment.
§ Mr. Robert Key (Salisbury)
In the 10 minutes left to me, all that I can do is thank the Members on both sides who have taken part in the debate—in particular, I thank my right hon. Friend the Member for Fylde (Mr. Jack) and my hon. Friends the Members for Croydon, South (Richard Ottaway), for Castle Point (Bob Spink) and for Galloway and Upper Nithsdale (Mr. Duncan)—and try to set down an agenda for the future.
It was perhaps a disappointment that so few people who have spoken in the debate have looked forward to 2050 and taken this important opportunity to do so. In the next 40 or 50 years, the issues will be carbon emissions and literally saving the planet. However, the issues will also involve education, and everything from the conservation of energy, the reduction in energy use and the efficiency of energy use in distribution, industry, generation or the home.
The issue is also about science. From primary schools onwards, we have an anti-science popular culture in this country, and that is damaging. It means that we do not have the engineers that we need for the future and that we shall not have the scientists to work in any sophisticated energy field if we are not careful. From primary schools to postgraduate research, we need to devote far more attention to science.
The debate has also been about engineering, engineering and engineering. Whether we are talking nuclear or whether we are talking wind, we are talking engineering. We are desperately short of engineers, and they are perhaps the key to finding the way forward in energy over the next 50 years.
We need to make it clear that renewable energy and nuclear power are part of the same agenda. We will come to different conclusions and different points of balance, but those two sources of energy are not mutually exclusive—far from it. They are part of the same agenda, because they are both carbon-free. If we are serious about carbon emissions, we should not rule out nuclear power. The handling of nuclear waste is a separate issue—a red herring, distraction and diversion. It is a problem and a challenge, but it does not involve the future of the nuclear industry.
The hon. Member for Bolton, South-East (Dr. Iddon) spoke about housing stock and he was entirely right. If we want to do something practical comparatively quickly to start to save energy, we must replace deficient housing stock. The Carbon Trust is doing a fantastic job. Its chief executive, Tom Delay, has said:There is huge scope for better energy efficiency and if we take these opportunities they would carry us half way to the Royal Commission's target. Energy efficiency must become as natural to us all as riding a bike.I could not put it better myself.
The fact is that whole areas of energy production have hardly been mentioned in the debate—solar power, for example. We are near the longest day in the year and nights will start to draw in from tomorrow. Cloudy, grey old Britain is perhaps not the ideal place to install solar power. However, it is not the climate that is holding back solar power, but cost. Photovoltaics have an important future, but we face the problem of the high system costs—£10,000 to £12,000 a house—and that investment will take years to pay back.
504 Solar power—converting sunlight into electricity—is one thing, but water heating units on the roof cost about £2,000 to install. There is great scope for them. There is also huge scope for geothermal heating and air-conditioning systems using heat pump technology. Chesterfield borough council is using them. Why cannot more? That interesting technology is widely used across the United States and more used in Europe than it is here. Energy efficiency is the key to solving most of our problems.
Another important issue that has been mentioned by one or two hon. Members is the possible use of liquid and solid biofuels. The National Farmers Union is right to be keen that we take the idea seriously. We know what the problems are with the energy input into sowing and harvesting those crops and transporting them to central units for burning. We need to explore that further.
We also need to concentrate on nuclear fusion. It is crucial to the future, certainly in 2050. That new nuclear technology is safe. It joins nuclei rather than separating them and is nearer than we think—in fact, it is at Culham now. I have seen the tokamat there and it is extraordinary to realise how close we are to having that technology. The director at Culham pointed out that it is up to politicians to decide how seriously they want to take the technology. Culham can deliver electric generation using fusion in 50 years if we go at the speed we are at now or in 30 years if we increase the budget a bit. However, the budget is being cut this year as a result of a European Commission decision. Although that is not the Minister's fault, I hope that he and the Government's chief scientist will argue strenuously for nuclear fusion to receive a higher priority. Were people to see the process of the creation of nuclear plasma on a television screen inside the tokamat with their own eyes, they would realise that it is not science fiction but today's reality.
Future fuels are important. We cannot ignore transport. The Government are groping their way through a huge range of alternatives as we decide what to do about the motorist and the commercial vehicle. Some important fuel experiments are taking place, none more so than the hydrogen revolution, which will be relevant much sooner than we think. It does not matter whether one believes BMW, which says that it will take 15 years to arrive, or Ford, which says 17. What we know is that it will happen in that time scale because it is market-led by the greatest producers in the world. They want to do it but have not decided which way to go. With hydrogen generation, the fuel will either have to be pressurised and liquefied before it is put into car tanks, which means that it will have to be transported, or there will have to be fuel cells on each vehicle. We do not know what those companies will do. Perhaps the Government could think about giving a steer, if I can put it that way, in that direction.
Much is happening. For example, there are dual-use vehicles. Toyota has produced the Prius which allows electric power and petrol to be used in the same car depending on the type of motoring. Those are great realities. The biggest message that we should give to the Government, however, is that we recognise that it is possible to have a mixture in future. It would not just be a strategic mix, in the interests of the United Kingdom, but an engineering and technology mix. That will ensure that we beat the devil of carbon emission at the same time as providing more efficient use of resources and fuel in our homes and at work.
505 We should rule nothing out. We should have an open mind. We all have vested interests, which are perfectly legitimate. The coalfield communities must, of course, contribute. They will be part of the future equation. Similarly, we must be cautious about the costings of, for example, wind. We should never forget the cost of transmission. We know that a change is happening between embedded generation and transmission over long distances. We need to access technology and put behind us some of the prejudices and battles of the past. In that way, we will set an agenda for 2050 that will work.
§ Mr. Wilson
With permission, I should like to respond to the debate.
I know that it is a cliché to say how good the debate has been, but today it is true, and that is a tribute to all hon. Members who participated. If we compare it with an energy debate at probably any time in the post-war years, it is striking how non-ideological it has been. As an old-fashioned ideological guy, I am not sure how comfortable I am with that. I like to know where the enemy is, and it should be on the Opposition Benches—[Interruption.] Well, so long as it is not on the Benches behind me.
It is a tribute to the way in which the debate has been conducted that there has been great openness of mind and diversity of view in all corners of the House. Labour Members talked about liberalisation and competitiveness, and the Tories, in the person of the right hon. Member for Fylde (Mr. Jack), correctly acknowledged the primacy of the Government's role in maintaining security of supply. Members on both sides acknowledged the environmental imperatives that were barely recognised a decade ago. The policy objectives are pretty clear, and the debate is about means, rather than ends.
The challenge that I set, for myself and my colleagues in government as well as for others, is for intellectual consistency within the parameters of that debate. In other words, the policies for objectives to which we pay lip service should be consistent, and not merely a series of contradictory aspirations or headline-catchers. Each of us has a responsibility to ensure that the bits of our thinking join up. The Government create more initiatives and policies and have more Departments than anyone else, so the responsibility on us is commensurately greater to make sure that there is consistency and intellectual honesty.
That is why I am wary—perhaps more than someone in this position would normally be—of setting targets that will not be tested against reality until we have all moved on, and maybe even passed on. It is infinitely more important to make sure that existing targets are compatible with what is happening on the ground. The usefulness of the debate lies in the fact that Members have tested consistencies and inconsistencies in a very helpful and considered way. It is a good model for the wider debate about energy policy until 2050 that should be taking place in the country, although I am not optimistic that it will be discussed in the pubs and clubs and on the highways and byways of Britain. The conclusions of that wider debate will come together in a White Paper.
Turning to the points made by my hon. Friends the Members for Southampton, Test (Dr. Whitehead) and for Brighton, Kemptown (Dr. Turner) and others, it is 506 important to look at these matters from the perspective imposed on us by the climate change imperative. This is not an academic abstraction. It is about flooding, and the submersion of people and the places in which they live and work. Globally, it is about wholesale loss of life and the means of subsistence. It must be taken seriously, and, faced with that prognosis, we have to be very sceptical about special pleading. Everything that we do in energy policy has to reflect that environmental imperative.
I shall try to tackle some of the specific matters that have been raised, but obviously I will not get to them all, and where appropriate I will write to the Member concerned. The debate about gas supplies is interesting, and this has been a good forum to air both sides of the argument. I have certainly listened carefully to the concerns about the security of gas supply expressed by hon. Members on both sides of the House, and I take them very seriously. Equally important, there was support for the PIU conclusions from the hon. Member for Twickenham (Dr. Cable) and my hon. Friend the Member for Waveney (Mr. Blizzard). This is not a one-sided argument.
It is easy to exaggerate these matters and to suggest that all the pipelines will be vulnerable to threats that for some reason have not manifested themselves in all the years that countries have been supplying us safely. However, security is clearly a source of concern. Perception and acceptability to public opinion are very important, so we must be clear that the gas supplies that we will be relying on, possibly to a large extent, are secure and are seen to be secure. From the tone of today's debate, I am in no doubt that that is an important part of the consultation in which we are involved, and it is an aspect of the PIU report that will be tested in an exchange of views as robust as the one we have heard today.
I was asked by the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) about the liabilities management Bill. I can confirm that a liabilities management unit has been set up in the DTI as a forerunner for the agency that will emerge. The parliamentary programme for the next Session is still the subject of discussion, so I cannot give the hon. Gentleman a definitive answer.
The hon. Member for Hazel Grove (Mr. Stunell) incorrectly said that the renewables obligation plateaus in 2010. As I pointed out, anyone entering into renewables now has the unprecedented security of 25 years of the renewables obligation. It is true that the present target is set for 2010, but I revert to my previous point. It is not due to some inherent caution or lack of commitment that we do not set targets of 10 per cent. a time for 2020, 2030 and so on. Let us hope that that is attainable, but it is far more important to get everyone satisfied that 10 per cent. by 2010 is attainable.
There is no party in government or prospectively in government—hopefully not before 2030, 2040 or 2050—that is not signed up to the renewables obligation and that agenda. Any City financier who is sitting in his tent worrying about the length of the Government's commitment to the renewables obligation is raising a spectre that does not exist, and possibly an alibi for non-investment and non-support, rather than any rational reason.
507 The hon. Member for Hazel Grove made clear his support for wind power. I look forward to the leader of his party coming out clearly in support of the wind farm developments on the Isle of Skye, on which I note he has been conspicuously silent.
On nuclear power, I am not sure that I would go to the length of reading the two booklets written by the hon. Member for Hazel Grove, but I note his views.
On my earlier comments about intellectual consistency, anyone who suggests that we should not replace nuclear with nuclear must say how our environmental obligations are to be met if nuclear is not replaced with nuclear. The debate will move on. The world should not be divided into fan clubs—pro-nuclear or anti-nuclear. People must consider all the arguments, see the advantages that nuclear undoubtedly provides in a low-carbon economy, and balance that against any doubts that they might have. There is the potential for a much more rational debate. I and my hon. Friend the Member for Linlithgow (Mr. Dalyell) have been pleasantly surprised that the nuclear argument in the Chamber today has been so balanced. There is certainly not the blanket hostility to nuclear that some vested interests would like to pretend exists, both politically and in the country as a whole.
I was asked about photovoltaics. I agree that more money is needed in the longer term. We have launched three pilot projects—domestic trials, public building pilots, and the first phase of a large demonstration programme worth £20 million over the next three years. Progress is being made in photovoltaics. As in so many such projects, the tragedy is the low point from which we are starting.
I was pleased to be asked about tidal and wave power—two of my particular favourites. Earlier this week at Wallsend I was pleased to launch the Stingray device, which has been developed in the north-east of England and will be tested in the Sound of Yell in Shetland over the summer. I have been hearing about wave and tidal devices for 25 years, but at present the total industry in wave power, not only in this country but worldwide, is half a megawatt in Islay.
That is great, but it is not conclusive proof that those technologies can make a serious contribution. I desperately want them to make a serious contribution. However, as far as I know, no research and development project has been proposed that does not have the support of Government. I give my personal commitment to try to push those two technologies. I cannot emphasise strongly 508 enough that at some point R and D must be turned into a manufacturing industry if those technologies are to be serious contributors, rather than long-term dreams, as they have been for the past 25 years.
The hon. Member for Croydon, South (Richard Ottaway), who told me that he would have to leave before the end of the debate, spoke about market liberalisation. I agree entirely with what he said. We must create a level playing field throughout Europe. We are working hard and we did make progress in Barcelona, contrary to what the hon. Gentleman said—
§ It being Seven o'clock, the motion for the Adjournment of the House lapsed, without Question put.