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Mr Mark Spencer (Sherwood) (Con)
I am pleased to have secured this debate on what I consider one of the most important issues the country faces at the moment. It is also a pleasure to serve for the first time under your chairmanship, Mr Howarth.
I have a number of concerns that require a great deal of attention. Principally, our nation’s ability to ensure energy security is very important. Will we be able to keep the lights on in the future? Many customers and constituents are keen to ensure that the Government are focused on that question. How are we to keep the lights on, without becoming completely reliant on our European neighbours? Although we have a European market and many nearby nations are able to supply electricity, I am concerned about how secure that supply is, and how amiable their taxpayers will be about giving British people electricity when they may run short at the same time.
Throughout history, this nation has been served well by coal-fired power stations. Coal as an energy source to generate electricity is flexible, reliable and dependable. However, there are a number of pressures, such as the requirement to reduce our carbon footprint, that are calling that into question.
Mr Marcus Jones (Nuneaton) (Con)
I congratulate my hon. Friend the Member for Sherwood (Mr Spencer) on securing this important debate. Does he agree that it is not just an issue of energy security? There is also an issue in relation to facilities such as Daw Mill colliery in my constituency, where nearly 700 people work. In addition to issues around energy security, should we not be concerned to ensure that we still use the coal that is under our feet in Warwickshire, so that we are not exporting carbon emissions abroad and are supporting UK jobs?
Mr Spencer
I will come to that point later. I should put on record that some of my constituents in Nottinghamshire travel to Warwickshire to work at Daw Mill. That we have so much coal under our feet is pertinent, as is the fact that so many constituents rely on the coal industry for employment.
I will start by outlining the current usage and how we generate power. Coal produces more than 35% of the UK’s base load of electricity during an average year. In recent winters, when the weather has been cold, that base load lifted to 50% of the supply generated by coal. That emphasises not only how dependent we are on coal, but how flexible it is, responding to the requirements of the British public. On a cold Christmas day when everyone is trying to cook their turkey at the same time, we need a great deal of flexibility in the supply chain to be able to respond. I want to touch later on the fact that, unfortunately, the wind does not blow harder on Christmas day than on any other day of the year. We need that flexibility to respond to demand.
Fossil fuels as a whole account for 80% of our energy supply: coal being 25%, gas 21% and petroleum 34%. In addition, nuclear provides 6.5%; hydro 2.2%; and biomass waste 11%. Only 0.4% of global energy demand is met by geothermal, solar and wind. Estimates suggest that world demand for coal-fired generation will increase by 70% in the period up to 2030. China is currently constructing the equivalent of two 500 MW coal-fired power stations a week, a capacity comparable to the entire UK power grid each year. Those figures are quite pertinent and put in perspective where the UK fits into a global generation market. About a third of UK electricity is generated from coal but it currently emits more CO2 per unit of electricity than all other forms of generation. That is something we need to address.
The UK has installed electricity capacity of 77 GW. By 2016, it is expected to face a shortfall of 32 GW, as older coal, nuclear and oil plant is closed down, as demand rises. That is crucial and key to the debate today. Government policy is currently to introduce a floor price for carbon. Many of the coal-fired generators recognise that that is going to put enormous pressure to be economic on their business. In the medium to short term, it will not be possible to secure nuclear power stations that deliver the energy that we require. Generators that produce power via coal are working their units very hard to secure as much return on their investment as possible. There will be a period when our ability to generate power will be short, and the Government need to look long and hard at how we will close that gap.
As my hon. Friend the Member for Nuneaton (Mr Jones) suggested, coal is currently plentiful. It is relatively cheap, flexible and able to respond quickly. We are not prone to outages, and coal is not vulnerable to geopolitical risk. Coal generates about 40% of the world’s electricity, with about 10% each for gas and nuclear. Coal burned by major electricity generators, which account for 80% of total coal use, was up 3% in 2005. Coal burned in UK power stations was 23% higher in the third quarter of 2006 than in the same period in 2005. Coal demand is rising. That demonstrates not only how reliant on coal we are in this country, but the pertinent fact that use is increasing.
UK pits and mines are pretty efficient. We have heard about Daw Mill. Thoresby colliery in my constituency is very efficient in its coal production. I am delighted it has now had permission to explore another seam, which will secure the future of that colliery for at least the next 10 to 12 years.
Given current global energy consumption, it is estimated that there are enough recoverable coal reserves to provide the entire planet with all its energy for the next 600 years, at the current rate of usage. Britain is estimated to have 7 gigatonnes of coal left. In power stations performing carbon capture and storage, we could deliver a sustainable and reliable approach to energy production.
Julian Sturdy (York Outer) (Con)
I thank my hon. Friend the Member for Sherwood (Mr Spencer) for securing the debate. He is right about the importance of energy security, especially over the next 10 to 15 years. Does he agree that we need a balanced energy market and security of supply, in which, as he says, coal will play a key role? He touched on carbon capture, which will be the key way potentially to keep many of our coal-fired power stations burning and supplying energy over the short term of 10 to 15 years.
Mr Spencer
I thank my hon. Friend for that intervention. That point is fundamental to the debate: coal is recognised as being flexible, but we need to embrace the technology of carbon capture and storage. That is something that I want to explore in more detail later. It is interesting that my hon. Friend touches on carbon capture and storage, because those are new clean technologies that have been proven to work. Powerfuel’s new development at Hatfield, Yorkshire, is backed by Friends of the Earth. It is a good example of how new clean coal plant can be developed and can work in practice.
I turn to the environmental side of the argument. Despite legally binding targets to reduce greenhouse gas emissions, in 2008 91.5% of UK energy supply was met by the use of carbon-intensive fossil fuels. We need to address that figure seriously if we are to, first, meet our energy demands and, secondly, reduce this nation’s carbon footprint.
EDF Energy has said that, between now and 2016, 13 GW of coal and oil baseload plant will close. Other ageing coal plants may also close by 2016 and 7.5 GW worth of nuclear closures are scheduled by 2015. EDF Energy reached its figure of a 32 GW shortfall by factoring in the expected closures, the expected growth in demand for electricity and the expected growth in line with the renewables obligation. That figure of a 32 GW shortfall will be a terrifying one unless we find ways of plugging the gap that do not necessarily involve laying cables across the channel so that we become dependent on our near neighbours.
If the UK coal-fired power stations were replaced over time with clean coal plants, the UK would stand at the head of an energy revolution, we would be secure in our energy supply and we would also be comfortably within the environmental emissions targets. I hope that the Government can find a way to support investment in clean coal technology so that we can achieve some of those goals.
Carbon dioxide capture and storage—CCS—is the critical enabling technology that would reduce CO2 emissions significantly while also allowing coal to meet the world’s pressing energy needs. It is important to recognise that this is a global issue. While we are considering UK energy generation, it would be foolish not to observe what is happening on the rest of planet Earth. I have already mentioned China and the number of power plants that it is producing. If we can find, develop and enhance CCS technology, we could position ourselves well in the world.
Mr David Hamilton (Midlothian) (Lab)
I congratulate the hon. Gentleman on raising this very important issue. Given the timetable before us—the site contract is to be signed by Scottish Power by 2011, but we will not see any real production until later—is he as concerned as I am that there will be a gap in the energy market and we will not be able to fulfil the energy requirements of this country? How will we overcome that problem if we do not move the energy agenda forward?
Mr Spencer
I thank the hon. Gentleman for that intervention and that is exactly the point—there is this gap and we must find a way to fill it. A Government of whatever colour have to address this issue quickly and grab it with both hands, because we cannot afford to be in a position where that gap increases and we cannot keep the power on. I therefore commit myself to supporting him in lobbying Government to ensure that we fill that gap. I hope that the Minister will reassure us at some point that we can fill it.
CCS is a means of mitigating the contribution of fossil fuel emissions to global warming. The process is based on capturing CO2 from large point sources, for example power stations, and storing it in such a way that it does not enter the atmosphere. CCS can also be used to describe the “scrubbing” of CO2 from ambient air as a geo-engineering technique. Although CO2 has been injected into geological formations for various purposes, the long-term storage of CO2 is a relatively new concept. The first commercial example of its use was at Weyburn in 2000.
I want to explore the three groups into which CCS can be split: post-combustion; pre-combustion; and oxyfuel.
Andrew Percy (Brigg and Goole) (Con)
I congratulate my hon. Friend on securing this debate, not least because I live opposite Drax power station, which is the most efficient, cleanest and biggest coal-fired power station in the country. Is he aware of the consultation that is going on in my own village of Airmyn today, between 2pm and 7pm, which relates to the National Grid’s proposal for a CCS pipeline that would serve the steelworks at Scunthorpe as well as the power stations across north-west and south Yorkshire? As I say, that consultation is going on at the moment. That pipeline is an exciting prospect and it offers the possibility of extending the life of some of our power stations.
Mr Spencer
I thank my hon. Friend for that intervention. In fact, I have the Drax report here in front of me and I know that he is working very actively to ensure that his constituents are well represented in that consultation. Drax is a very good example of what can be achieved. The work that it has done in blending biomass with coal to improve its carbon footprint is an example of how we can improve things with the technology that exists today. Also, working with other industries, such as the steel industry, is quite an exciting prospect and I welcome that happening; in fact, I recognise that that good work is ongoing.
Flue gas desulphurisation is not a new technology. It has been used for some time. Ratcliffe-on-Soar, the largest power station near my own constituency, has introduced a great deal of new technology to capture the sulphur emitted from the power unit. FGD is simple, actually. It basically works by mixing limestone with water, which is then sprayed into the power station chimneys through which the flue gases pass after the coal is burned. The sulphur in the flue gas reacts chemically with the injected spray and forms calcium sulphate, with only a small proportion of the sulphur being ejected into the atmosphere. The resultant slurry is then pumped away, dried and made into gypsum, which is beneficial to the power station and can be used to generate income for it. FGD equipment also allows coal-fired plants to meet the requirements of the EU large combustion plant directive.
The second group of CCS technologies is integrated gasification combined cycle, which is a pre-combustion technology. IGCC is a near-zero-emissions clean coal solution for the UK. It would significantly reduce CO2 emissions as well as providing pressurised gas for injection into North sea oilfields, thereby enhancing the recovery of oil reserves, which is known as enhanced oil recovery. Powerfuel is now constructing one of Britain’s first IGCC clean coal power stations in Yorkshire, again using British coal from an adjacent colliery. I will try to put the process into simple language. It sometimes becomes very difficult to extract crude oil from wells and there is a technique whereby the CO2 can be mixed to reduce the viscosity of the oil, allowing the oil to be removed from the wells more easily.
Super-critical power plant is a type of clean coal technology whereby it is possible to retrofit this technology to the power stations that we already have. The benefits of operating a super-critical power plant over a conventional plant are clear. Conventional boilers have an operating efficiency of about 30%, which means only 30% of the energy in the coal is converted into electricity with the rest being lost as heat. Super-critical boilers have efficiency levels of around 42% to 46%, so more energy is directed to turning the turbines to generate electricity and therefore less greenhouse gas is produced per kilowatt-hour. Improving the efficiency of boilers used in coal-fired power stations not only reduces CO2 emissions, because less coal is needed to generate the heat energy that turns the steam turbines, but it results in higher generator efficiencies in the provision of the electricity. The boilers are available commercially and can be retrofitted to existing coal-fired plants, which means no major retraining of staff, faster deployment and reduced capital costs with greater efficiency. It seems like a win-win situation to me.
Doosan Babcock Energy has stated that Britain could cut the cost of reducing greenhouse gases by £3 billion if it fitted such clean technology to its ageing power stations. Lobbying goes on for Government to introduce a form of incentive for power generators—one similar to the renewables obligation certificates—to invest in clean coal technology. Creating such an incentive seems the right thing to do and I hope that this debate will assist the Government in some of their thinking, and perhaps we can consider supporting this technology.
Doosan Babcock Energy says that applying this technology to existing coal-fired power stations would be the equivalent of erecting 7,000 to 10,000 wind turbines. Members in Westminster Hall today who have had the pleasure of a local application for a wind turbine will be relieved that we could reduce the number of those applications, one of which I currently have in my constituency. Typical construction costs for current coal-fired power station designs are in the region of £700,000 to £900,000 per megawatt. More advanced integrated gasification combined gas cycle plants cost between £900,000 and £1.3 million per megawatt, although lower capital costs of £750,000 to £900,000 per megawatt are predicted as technology moves forward and we become better at fitting it. The 2002 energy review by the performance and innovation unit put the costs of coal-fired power stations in the 3p to 3.5p per kilowatt-hour range by 2020. That would make coal competitive with nuclear power, if the costs of decommissioning nuclear power stations were included.
Briefly, I want to explore carbon abatement capture. The idea of carbon capture is simple and powerful. The CO2 must be segregated from the fossil fuel combustion products and deposited in a place where it will remain. The CO2 emissions from a clean coal plant will be reduced to virtually zero if the plant has been designed to store the carbon. The CO2 can then be disposed of in, for example, the emptying fields of the North sea, where it can consequently extend the life of those oil fields by applying pressure to an old and difficult-to-extract reserve, thereby prolonging production. I shall try to put that into layman’s terms. The gas is pumped into the hole where the oil is coming from, which assists in removing some of the oil, and stores the CO2 back underground, where the carbon was for millions of years. It is a three-step process, of capturing the CO2 from the power plant, transporting it—as my hon. Friend the Member for Brigg and Goole (Andrew Percy) said—to another place via a pipeline, and finally storing or using it.
The British Geological Survey estimates that the potential carbon dioxide storage in the UK sector of the North sea is 775 gigatonnes. That is a considerable amount, given that worldwide CO2 output is 8 gigatonnes annually, and it means that in the North sea alone there could be almost a century’s worth of CO2 storage for the whole world. That is a fantastic statistic, which proves that we have the storage available as long as we can embrace it and find a way, via the technology, to make use of it.
Carbon capture and storage in a coal-fired plant would cost just over £20 per tonne of CO2, while the figure for a gas-fired plant is about £30 a tonne. It could be argued that that is because a coal plant produces more, but coal is certainly cheaper per tonne than gas for CO2 emitted. Using CO2 for enhanced oil recovery can generate revenue that offsets the other costs of CCS. The cost of storing CO2 in aquifers is close to £l per tonne, and the cost of storing it in oil and gas field plants ranges from £1 to £20 per tonne. Therefore, as well as being fairly reasonable, this method could generate income if we can get it right and make it work. Depleted oil and gas fields are the first sites to be considered for storage capacity because they are known to be equipped with infrastructure such as pipelines and platforms, and are almost ready to run now.
The other area that I really want to explore, and which I know my predecessor as MP for Sherwood, Paddy Tipping, and his predecessor Andy Stewart explored, is underground coal gasification. This is a method of converting unworked coal into a combustible gas, which can be used for industrial heating, power generation and the manufacture of hydrogen, synthetic gas or diesel fuel. The basic UCG process involves drilling two wells into the coal, one for the injection of oxidants and another—some distance away—for bringing the product gas to the surface. I acknowledge that the process involves a number of challenges, not least of which is whether once the process has been started it can be controlled, and there are also the impacts on subsidence above surface level, depending on what happens to the coal below ground. Nevertheless, we should consider using UCG for reserves under the sea. Cost estimates of UCG clean gas stand at £2.50 a gigajoule, whereas the current price of national gas is £6 a gigajoule.
As for the economic merits, clean coal is competitive, with an estimated generating cost of between 2p and 3.5p per kilowatt-hour. Wind power, for example, costs between 3.7p and 5.5p per kilowatt-hour. The Government seem fairly committed at this moment in time to wind power, but when the costs are added up and the subsidies stripped out it is not as competitive as some of the other available technology. Clean coal is also more acceptable to constituents than erecting large wind turbines in the vicinity of their homes.
Graham Stringer (Blackley and Broughton) (Lab)
I am listening carefully to the hon. Gentleman as he makes his powerful case for coal. Is he not overplaying, however, the role of wind power? He indicated earlier that, when wind is needed most, in the cold weather when there are anticyclones, it is not there, so we have to have the coal-fired capacity, and if the wind blows too much, we again have to have that capacity. Wind power is irrelevant to the security of energy supply in this country.
Mr Spencer
The hon. Gentleman is absolutely correct, and I will cite some statistics later that support his view. Offshore wind has a role to play in assisting electricity generation but we do require that base load. I do not want to overemphasise this, but when the World cup final half-time whistle goes or when everyone wants to cook their turkey on Christmas day, we have to have the capacity to lift that generation. However, the Government currently do not have the power to control the wind and can rely only on what is available.
Andrew Percy
I have issues with onshore wind, but I never miss an opportunity to sell the Humber for its offshore wind capacity, particularly in front of the Minister. Is it not a bit of a false argument that we are in favour of either one technology or the other? What my hon. Friend and the Government are saying is that we want a broad mix. A technology that is not as far advanced as perhaps it should be is tidal, to which I understand the Government have just committed some money. It is not about being on one side of the argument; it is about being on all sides and having a balanced energy mix.
Mr Spencer
It is true that we need to take a balanced view and ensure that we explore the new technologies. I think that tidal and wave power are great, and if they work they will contribute a small amount to this nation’s energy security. The important thing to note though is that it will be a small amount, because those technologies do not have a large enough share of the market. The number of areas where we could secure a tidal scheme—the Severn estuary is one example—is small, and there are no opportunities to generate enormous amounts of electricity via such schemes. I acknowledge that we need a mixed portfolio, but that works only if there is something there to pick up the base load. The crux of my argument is that the only methods that can be used to pick up the base load are nuclear power and coal-fired power stations, and we are not in a position to build nuclear power stations fast enough to plug the inevitable gap.
On the merits of clean coal technology for the environment, the biggest long-term problem for coal is its carbon dioxide level. Approximately 90% of the CO2 produced by a coal-fired power station could be captured with CCS, and CCS could help to make up to 20% of the global cuts in emissions that are needed by 2050. Therefore, if we can find the technology that will work, we can sell it to the world, continue to use coal and at the same time cut the amount of CO2 being released into the atmosphere.
Owing to their substantial carbon emissions, coal-fired power stations are currently considered environmentally unacceptable. That is simply because we are looking at the technology of the 1960s and 1970s, rather than at what is available now and might be available in future. Coal-fired power gets a bit of a poor press, but some of what is said about it is not true.
The UK has the opportunity to be at the forefront of developing clean coal technology. That would not only be beneficial to the UK, but be a very effective way of helping developing countries, notably China and India, to take advantage of their own coal reserves in a way that is considered environmentally acceptable. We find ourselves in a situation in which the Department for International Development is funding the World Bank, which in turn is funding electricity generation in other parts of the world, and those countries are spending that cash on coal-fired power stations, which are not as environmentally friendly as they could be. If we can find a way to make the technology work and embrace it, we could sell it to other parts of the world or donate it as part of our aid programme to the more challenged parts of the world, which would benefit the planet and those more challenged countries as well.
It is vital that we are at the forefront of development. That could lead to a whole new industry. Selling the technology and building it for the world would generate enormous amounts of cash and jobs for the UK. If we are not at the forefront of its development, other countries will jump ahead of us and we will lose the opportunity. This great nation of ours has always been at the cutting edge of technology, and certainly of engineering, and we need to maintain that tradition if we possibly can.
The process of coal gasification can capture 90% of CO2 emissions for storage and can also produce a synthetic gas, known as “syngas”, which is 99.5% pure hydrogen. The beauty of that fuel is that, once fired through a conventional gas turbine, the only emission is water vapour. Although cleaning up the existing plants is welcome, it will not have the impact that those who want to reduce our CO2 emissions significantly require, nor will it capture any CO2 for alternative income generation. Coal gasification is the only process that changes one form of energy—coal—into another flexible energy source—hydrogen—but without a clear Government energy policy, IGCC technology will not happen. To be viable, the new IGCC plants require the same allocation of CO2 allowances as existing coal plants, but at present they receive the allowances for a CCGT-fired—combined cycle gas turbine—power station.
So far, generating electricity from coal has failed the environmental test because of its carbon emissions, but clean coal offers a number of strategic advantages, including the ability to ensure sustainable and competitively priced electricity and to offset security issues and the cost of importing from volatile countries in the middle east and Russia, which is key. In the past, when I challenged Ministers who said that they were more than comfortable with our arrangements with overseas suppliers, they pointed me to the fact that we have imported a vast amount of our food over the past 50 years and we have certainly never been too concerned about that. The arrangement has worked very well, but it is important to recognise that that has been during a period in which food production has been on an enormous scale and food has been plentiful. The situation may change the second we reach a position where we are short of food.
Russia decided last year not to export a single grain of wheat. That had an enormous impact on global wheat prices overnight. I can see us in a situation in which a very similar thing happens to energy. We all remember images on the news of French lamb farmers blockading their ports and stopping imports of British lamb. Such images stick with me. Can we really depend on our neighbours when we are up against the wall? Will they look after their own taxpayers and can they look after British taxpayers at the same time? That makes me very nervous. Such situations make me think that we should ensure that we are on a secure footing and that we have enough energy in the UK to supply ourselves.
Mr David Hamilton
The hon. Gentleman does not need to turn to food for an example, because only a few years ago the Russians turned the gas off to the country next to them, and prices spiked right after. If that happened over a long time and more countries did it, it would really harm our energy requirements.
Mr Spencer
I thank the hon. Gentleman for that intervention because he makes a pertinent point. The other areas with which we are dealing, for example those in the middle east, are not as politically stable as they could be. We can easily foresee circumstances in which our ability to source energy from those parts of the world is compromised by political upheavals similar to those happening now. That could leave us exposed. I hope that we can find a way of securing our energy. We must meet rising electricity demand and smooth the less predictable output from renewables. We need to foster and promote a high-growth, low-carbon economy.
I shall now address the point raised by the hon. Member for Blackley and Broughton (Graham Stringer) on wind power and explain why I feel that wind power is not adequate to support our needs. Fitting clean coal technology to the UK’s 16 power plants would cost an estimated £6 billion. In comparison, 2,000 wind turbines will be put up in the UK over the next six years at a cost of £9 billion. The Government’s renewable energy policy is currently over-dependent on wind energy. That imbalance is largely the result of the renewables obligation, which provides no clear boundary as regards the merits of various renewable technologies, so the cheapest option in terms of start-up costs—wind power—has been pursued, irrespective of its failures on grounds of unreliability and secure energy.
The dangers of over-relying on wind power were demonstrated in Ireland on 4 December 2003, when the electricity regulator had to take emergency measures to reduce the amount of wind power on the Irish electric grid following major concerns about the security and stability of the power system. Simply because the wind blew too hard, too much power was being generated, so pretty quick action had to be taken to resolve it.
In contrast, Demark has the most intense concentration of wind generation in Europe. At peak output, Danish wind farms can account for nearly 64% of Danish peak power demand. That rarely occurs, but it does happen on occasion. Last year, Danish carbon emissions rose, because the Danish grid fell back on older fossil fuel generation to plug the gap left by underperforming wind farms. Danish power stations used 50% more coal than in 2005 to cover wind’s failings and wind turbines generated 21.7% of electricity, which is down from 29.4% in 2005. To put it in simple terms, when the wind does not blow, the turbines do not move and the power is not there. As the Danes have to have a stopgap base load, they use coal. Ironically, during that period the use of fossil fuels rose, which demonstrates the frustrations with the system that we are pursuing.
Graham Stringer
I agree with the hon. Gentleman completely, but the situation is actually worse in Denmark. The Danes have stopped investing in wind, because it is too expensive and destabilises the grid. When the wind is blowing, they are effectively subsidising energy in Germany and surrounding countries. They have made a terrible mistake and it would be a great pity if this country carried on subsidising wind farms—quite frankly, it would be insane given the economic state we are in.
Mr Spencer
I thank the hon. Gentleman for that intervention. The irony of the situation is that the German energy the Danish are reliant on is often produced with brown Czech coal, which is worse in terms of carbon emissions than UK coal. It does not make much sense at all.
I am conscious that I am taking up quite a lot of time, and I know that other Members wish to speak, so I will try to conclude as quickly as possible. If we look at the international competition, it is clear that we need to step up and ensure that we keep up with, if not stay in front of, the competition in terms of producing clean coal technology. In 2009, the Australian Government produced a White Paper entitled “Securing Australia’s Energy Future”, which backed the use of clean coal technology with coal from indigenous reserves, and UK climate change economist Sir Nicholas Stern recently told an Australian audience:
“I think Australia will be at the forefront of that technology”.
In the US, coal production is at full capacity. In 2005, 951 million tonnes were produced from indigenous reserves for energy supplies and for industrial use in steel and associated industries. President Obama said:
“We need to act now and make the US a leader in putting in place the incentives that ensure developing countries also embrace clean coal.”
The EU is also adopting a positive attitude towards clean coal technology, with President Jose Manuel Barroso stressing to an audience in February 2007 the need for
“an acceleration of the commercial use of clean coal”.
The UK must demonstrate a firm commitment to clean coal technology if it wishes to influence the behaviour of other nations, such as China and India, where rising C02 emissions from fossil fuels will otherwise dwarf any savings made in the UK. By 2020, China’s consumption of electricity is forecast to increase sixfold and to be 30 times that of the UK.
What is the Government’s role? Ensuring our energy security currently appears to involve laying cables under the channel, and I am concerned about how secure such an arrangement is. I can see how it could work in the short to medium term, when energy is in plentiful supply, but, as I said, I do not think French taxpayers would like their country to move to a three-day week to keep the lights on in southern England. As I said, comparisons are made with the food supply, and it is difficult to understand why we are exposing ourselves to the issues involved, when we could do better.
The Government have said that we will continue public sector investment in carbon capture and storage technology for four coal-fired power stations, but the criticism levelled at us is that we have thus far completed only the first of those four. We really need to speed up and get on with things.
In conclusion, I hope the Minister can lay some of my concerns to rest. We must keep the lights on; it is fundamental that we keep the electricity coming to this nation of ours. All the issues that we fall out about in this place will become insignificant if there is no power. Wind turbines may be of assistance, and offshore wind certainly has a role to play, albeit a small one, but I am concerned about how dependable such turbines are. Fundamentally, the base load must come from nuclear or coal, but the nuclear power stations we need to build will not be on stream in time. We are behind the game, and we need to act now to catch up and secure Britain’s energy supply, if we are to keep the economy running and the lights on.
Mr David Hamilton (Midlothian) (Lab)
I did not intend to speak in the debate, because I did not think I would be here, but another meeting was cancelled. I have nothing much in the way of technical details to add to the 40-odd minute speech by the hon. Member for Sherwood (Mr Spencer), so I will not try.
Many people would assume that I naturally support coal because I am an ex-miner, but there is much more to it than that. I was in the pits for 20 years, although there is not a single pit left in Scotland. We now deal with open-cast mining in Scotland, and there are still one or two pits in England and southern Wales.
If we drive the market through carbon capture, that will give deep mining in the UK long-term security. We do not want to talk about carbon capture and then import all the coal that feeds the power stations. There is therefore an issue about creating employment opportunities in the UK and beginning to develop a strategy for developing our coalfields, which have millions of tonnes of coal. We are fortunate that we have more coal reserves than anywhere else in Europe. That is an important issue, which we must address.
My view is quite specific. Four or five years ago, I changed my opinion about something that had been close to my heart all my life. Until then, I had been anti-nuclear all my life, but I began to realise that this country’s security of supply is far more important than any view that I might or might not have about nuclear energy. When it comes to this country’s energy requirements, everything should be on the table. That is an important issue, which we have to address. This is not a matter of one thing or the other.
I accept the point about wind power and all the problems with it, and I agree with many of the points made by the hon. Gentleman and my hon. Friend the Member for Blackley and Broughton (Graham Stringer). However, we need a big mixture, although the base load must come from a few sources. We cannot rely on Russia for fuel, and we should not rely on the middle east, because the supplies can be stopped at any time. Every week in Parliament, we debate the middle east, and things there could blow up at any time; our energy supplies could be cut off at any time, which would mean another price spike.
China is the engine house of the world. Although it was going through a difficult time, it is coming back. That means that we will have to compete with it when it starts to make gains in terms of power. When it buys the power, we will have to pay astronomical prices, because it will determine what is pulled in. It is building power stations and opening up collieries because that provides quick and easy access to energy supplies.
If we are not careful, our leading position on carbon capture and development will be quickly lost, and we will be overtaken. America is putting a lot of money into carbon capture development, and China is doing the same. Indeed, it already has a project that is supported by Germany and others. We are at the tail end.
I was part of the previous Government, and I know the Minister is supportive of coal. The issue, however, is the timing as we move forward on carbon capture projects. The contract at Longannet has to be signed by the end of the year, but the project will not take off until some years later. We also need to get the other three projects up and running. If we want to be at the forefront, we must be able to develop our strategy quickly. I make a plea to the Minister to sign the contracts by September and to bring the other three projects online as soon as possible for the sake of everyone in this country.
We can have all the arguments we want about clean coal technology, sulphur content and everything else, but if the lights go out, not a single person out there will thank us; indeed, my constituents will drum my door down. The bottom line is that we are here to protect and support the people we represent, and we are here to support industry and this country. The only way we will do that is by ensuring that our energy policy utilises everything we have. This is, therefore, an important debate, and I hope that the Minister takes it on board.
Before I sit down, I have one other thing to ask the Minister. When he has his discussions with the Scottish Government, will he ensure that they invest the same amount as us in the Longannet complex? If that fateful day ever happens and Scotland goes independent—I hope it never does—I would not like this country to be putting money into Longannet, when the Scottish Government are not putting a penny in. I would therefore like to hear what the Minister has to say about the Scottish Government putting money into that important project.
Mr George Howarth (in the Chair)
Order. Before I call the hon. Lady, I should point out that I intend to call the first of the Front-Bench spokespeople at 3.30 pm, and I ask the hon. Lady to bear that in mind.
Jackie Doyle-Price (Thurrock) (Con)
I will be brief, Mr Howarth. First, I congratulate my hon. Friend the Member for Sherwood (Mr Spencer) on introducing this extremely important debate. A compelling case for coal has been made by hon. Members on both sides of the Chamber, and the debate is all the better for that.
I fully endorse my hon. Friend’s comment that energy security is hugely important and that coal must play a major role in it. That said, I want to make a few points about the other opportunities for coal-fired power stations through reference to the Tilbury power station in my constituency.
Tilbury has been running for 50 years on its current site. Until March this year, it was a coal-fired power station, but thanks to investment by RWE npower, it is now becoming the world’s largest biomass-fired power station. That gives the opportunity of a new lease of life for some of our older coal-fired power stations, which will have to be decommissioned because of the EU directives. I therefore beg the indulgence of hon. Members today, while I give the story of Tilbury.
At its peak, Tilbury employed 750 people. Today it employs 250, in highly skilled jobs. It was facing closure in 2014, which would have left a big hole in the economy of Tilbury, which is quite a small town. The power station generates more than 1,000 MW—enough to power 1 million homes. It has never breached its environmental licence, in 50 years of operation. Looking at the debate from the point of view of climate change and environmentalism, it is worth bearing that in mind, particularly as the general manager tells me that when sulphur emissions in the locality have been measured at dangerous levels it is not because of the power station but, generally, when there is traffic congestion on the A13 and the M25. That raises the question whether we are looking at the right things, in our rush away from coal.
RWE npower, which runs the station, originally intended to construct a new cleaner coal power station at Tilbury and its plans were far advanced, but it had to reconsider the decision in November 2009. That was because of the cost, in the economic climate at the time, but also—and this reinforces the point made by my hon. Friend the Member for Sherwood—because of the unclear regulatory status of investment in cleaner coal. It is important to lay the foundations to establish a clear regulatory picture so that companies are prepared to make the investment. Considerable amounts of money are involved.
Having decided not to go ahead with that plan, the company was still wedded to the site at Tilbury—it is a very responsible company and wanted to maintain the relationship. It decided to investigate the burning of wood pellets instead of coal. There was a lot of scratching of heads, but the management decided to have courage and invest money in trying it out. It was a great success.
In March this year the power station burned coal for the final time. I lament that, but what is happening now is very exciting. The company is converting the existing station to burn wood pellets for the remainder of the hours that will take it to 2014; it also intends to invest in creating a new biomass generator beside it. The new arrangement is not quite as efficient at generation as coal. In comparison to the previous figure of 1,000 MW, the wood pellet scheme reaches 750 MW, but it is still an efficient system and it will contribute massively to the national grid—much more than the wind turbines that we have been hearing about, in relation to investment.
The power station will begin generating and contributing to the grid from December. I encourage the Minister to visit the plant. It is exciting and groundbreaking, and gives an opportunity of a new lease of life to some coal-fired power stations. RWE npower deserves to be congratulated on having the courage to make the investment and see whether it would work. It has proved the process, which means that other power stations will find it much less risky.
I endorse the comments made by hon. Members on both sides of the House about coal, which must play a role in this country’s future energy supplies. I reiterate that we should do everything we can to encourage investment in the carbon capture technologies that my hon. Friend the Member for Sherwood so lucidly articulated.
Graham Stringer (Blackley and Broughton) (Lab)
I am grateful for the opportunity to speak, Mr Howarth, and am aware of the time; I did not intend to speak. I congratulate the hon. Member for Sherwood (Mr Spencer) on bringing this important matter before the House.
I have two or three things to say. The policy of the Government—this was true of the previous Government as well—is based on two illusions. One is that what this country does, both in relation to carbon dioxide, and industrially, will affect anyone else in the world. It will not, and the hon. Member for Sherwood developed that argument with his statistics, and illustrated it effectively.
The second illusion is that there is a shortage of fossil fuels in the world. If we read what environmentalists say and look at what is happening, we can see that the real problem will be a huge surplus of fossil fuels in the world in the next 300 or 400 years, not just because of the figures on coal and oil, but because of the new source of shale gas that is being developed, which has already dropped the price of fuel in north America by up to 50%.
That is the background against which this country must consider energy policy. There must be a hierarchy of priorities in thinking about energy policy, and security of energy supply must be at the top. At the moment we are staring at the prospect of a huge problem in three or four years’ time. The Minister shakes his head, and he may or may not be in his post in three or four years’ time, but European obligations at the moment put an absolute limit on the amount of coal that can be burnt in our power stations. If we get another cold winter and they burn twice as much coal as they intended, those power stations will have to be switched off. There will be a gap before we can build new nuclear power stations. Like my hon. Friend the Member for Midlothian (Mr Hamilton), I spent most of my life opposed to nuclear power stations, but in the world we now live in, the facts, and my opinions, have changed.
We must put the facts together. It will take shale gas some time to come on. Because of the dominance of Russia in the gas market, that is insecure. We know what is happening in the Arab world at the moment and we could be in for a real problem. Rather than putting vast subsidy into wind farms, which are likely to destabilise the national grid as they are put in, and to industrialise the countryside—not just because of the wind farms themselves, but because of the power lines, which will have to be taken at huge cost from the wind farms to the grid—we should be bringing the nuclear power programme forward and considering how to develop shale gas in this country. We have some of our own deposits in the north-west. We should also be thinking about how to develop the coal industry.
Unfortunately, because much energy policy is based on illusions, the Government are not focused on the world and the energy market as they are now. They are focused on what the Labour Government saw as priorities 10 to 15 years ago. The Government need to look objectively at the world and think about how to deal with the energy gap that will exist in four, five or six years’ time, and how to get the best value for money out of the investment we make in energy.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
It is a pleasure to serve under your chairmanship for the first time, Mr Howarth. I congratulate the hon. Member for Sherwood (Mr Spencer) on securing the debate and speaking eloquently on behalf of his local colliery.
Many hon. Members have spoken today of serious concerns about capacity and a future energy gap in the UK. My hon. Friends the Members for Midlothian (Mr Hamilton) and for Blackley and Broughton (Graham Stringer) spoke about the urgent need to deal with the issue, and several hon. Members have spoken about carbon capture and storage, which I shall mention later. I want to focus my remarks on how coal-fired power stations fit into Britain’s transition to a low-carbon future, and the integral role that clean coal has to play as we reconcile the competing demands of reducing the country’s greenhouse gas emissions and ensuring that enough energy is generated. I want also to highlight some of the challenges that we face.
It is clear that a low-carbon future will not be realised without some contribution from fossil fuels. The urgent challenge that we must overcome is how to ensure through the use of technological innovation that the fossil fuels that we use are cleaner. The UK must be a world leader in investment, research and development, infrastructure and planning across our energy portfolio; but the window of opportunity is closing. We have drifted from 2010 to 2011, still awaiting crucial decisions: from the re-banding of ROCs, to grid investment, to the detailed sign-off on the first CCS project.
At the UK coal conference in February the Minister said that detailed sign-off for CCS1 would be confirmed by July, but when the Energy Bill was in Committee he referred instead to the summer. I would be grateful if he clarified when we will have detailed sign-off of that crucial first CCS project.
At the risk of stating the obvious, it is worth explaining why we are where we are. A quarter of the UK’s energy generating capacity will close by 2018, and as much as 30% will need to be replaced by 2020. Without prompt action, we face an electricity generation gap in the next 10 to 15 years as our nuclear and coal-powered stations are retired. World energy demand is rising and highly politicised. As North sea reserves decline, we are increasingly reliant on imported oil and gas, and UK electricity demand is forecast to double over the next 40 years. Adapting to that increase in demand will require a rapid decarbonisation of our electricity supply and a diversification of the energy sector, moving us from a reliance on fossil fuels and unabated combustion, to an increased use of low-carbon and decentralised energy.
We need a new energy mix, combining renewables, new nuclear and clean coal, but to achieve that mix and meet our climate change targets we will be required to urgently develop carbon capture and storage technology alongside renewables. We will need to create sufficient capacity to meet electricity generation needs at all times, and we will need to put the necessary supply chains in place. We will require the development of smart grid and electricity networks to meet the needs of a reconfigured, smart and diverse electricity infrastructure and, of course, investment in coal and gas infrastructure. All that does not come cheap. Depending on what we read, it could cost between £200 billion and £450 billion to achieve. I have only touched upon the future of coal in the UK energy mix, but it has a strong future.
In 2009, coal-fired power stations produced approximately 28% of the UK’s electricity supplies, using 40 million tonnes of coal in total. Last November, the Minister said that the UK
“will rely on gas and coal for years to come”,
and he is right. Coal is the most abundant worldwide energy resource, yet, unabated, it is also the most polluting. Without finding a way to reduce its harmful effects, we will not be able to tackle climate change.
The question we therefore face is: how do we ensure that the lights do not go out while at the same time meeting the need for greenhouse gas reductions of at least 80% by 2050? In government, Labour committed to funding the first commercial-scale CCS demonstration plant, so we welcomed the coalition’s decision to continue it. As I mentioned earlier, however, we are still waiting for the detailed sign-off of that project.
In addition, many questions remain unanswered in relation to how the crucial second, third and fourth projects will be funded. The Government have committed to funding them from general taxation, but can the Minister give us more detail about where the money will come from? When does he expect the Treasury to release the funds to pay for the project?
It is not just the direct funding for CCS that is required. We need to build the right infrastructure, conduct further research and development into CCS projects, and develop innovative financial mechanisms to devise solutions to the financial challenges facing CCS. We are encouraged that the current CCS demonstration already includes support for nascent infrastructure that will be needed to support the deployment of CCS, but more needs to be done to develop the infrastructure of pipelines and encourage clusters of those facilities in certain areas beyond the demonstration phase.
What work has the office of carbon capture and storage at the Department of Energy and Climate Change done to ensure that those coal-fired power stations that may come forward are able to share infrastructure, such as pipelines and capture plants, with industry, to reduce the overall cost of CCS and to make those plants more economically viable? How will the electricity market reform proposals ensure that a viable supply chain can develop to deliver CCS retrofits to a time that is compatible with our decarbonisation trajectory, as set out by the Committee on Climate Change?
If CCS is to be an integral part of our future energy security and carbon reduction—although we have to prove the technology on a commercial scale first—and if we wish to be at the forefront of the technology, so that we capture the benefits for the domestic and export markets in the future, from China, to India, to Brazil, to the US, we must provide the means. In fact, we have a duty to develop this technology, alongside our European neighbours, because with rising global use of electricity generated by coal, the downsides of delay are significant.
Any delay in the roll-out of CCS will mean higher atmospheric concentrations of CO2, which in turn will mean that subsequent attempts to limit temperature rises to less than 2°C will be harder to achieve. Some calculations suggest that for every year that widespread global deployment of CCS is delayed after 2020, the long-term atmospheric stabilisation level of CO2 increases by one part per million. Therefore, if we delay by more than a decade, the stabilisation of atmospheric concentrations of CO2 at lower levels becomes near impossible. According to the International Energy Agency, without CCS and if we were to rely on other technologies alone, the costs of tackling global CO2 emissions will rise by more than 70% each year. In simple monetary terms, it is a cost of $1.3 trillion annually by 2050.
During the deliberations of the Energy Bill Committee, the Minister referred to emissions performance standards, but I hope that he will provide more detail today. What will the introduction of EPS mean for the future of coal-fired power stations, and what representations has he received on the issue from industry? Will next month’s electricity White Paper identify the level at which the EPS will be set? What effect does he envisage the EPS having on the British coal industry? As the EPS applies only to new-build coal-fired power stations, is it the Minister’s intention that the carbon floor price will be the mechanism to incentivise a reduction in CO2 emissions from plants?
Despite concerns from those representing coal-fired power stations, particularly about the burden of an extra layer of legislation and the fact that it will apply to new-build stations, the right EPS, for example, could help drive investment in carbon capture and storage, but only if it is set at an intelligent level. In written evidence to the Energy and Climate Change Committee in January, energy solutions company Alstom said:
“An EPS at a technology-neutral level from, say, 2020, could provide support to the deployment of CCS, increasing the diversity and security of supply by enabling continued, but decarbonised, use of coal.”
As such—and while recognising the positive intention of the EPS to ensure that no new coal-fired power station should be built in the UK without CCS, and the danger, highlighted by Alstom, of the wrong EPS level resulting in no new coal builds—this makes it even more critical that the Government drive on with the four CCS projects, pre and post-combustion, with urgency.
Planning is another big and obvious problem for coal and other new generation capacity. Undoubtedly, with the closure of many coal-fired power stations over the next decade, many planning applications will be made for new coal and gas-fired power stations, alongside applications for new nuclear build, onshore and offshore wind, biomass plants, and so on. What will happen, therefore, now that the Infrastructure Planning Commission is being scrapped? Will there be adequate resources and expertise in the Planning Inspectorate to avoid it being overwhelmed by the resulting workload, or will it simply become a rebranded version of the IPC?
Before I finish, I wish to raise a few issues that I hope the Minister will address in his wind-up. What discussions has he had with the coal industry about the carbon floor price mechanism and capacity payments? What impact does he expect those mechanisms to have on the future of coal-fired power stations?
The European Union’s emissions trading scheme is a cap and trade system. If less CO2 is produced in the UK, is the Minister concerned that, as fewer CO2 allowances are used, the introduction of a carbon floor price will simply result in the migration of the carbon to elsewhere in Europe? That point was raised by the hon. Member for Nuneaton (Mr Jones) during an earlier intervention.
Will the proposed single tax rate under the carbon price mechanism disadvantage UK-mined coal against imported coal? There is concern that it will have a detrimental impact on UK coal producers, potentially leading to the closure of more pits, particularly deep mines, and resultant job losses.
Co-firing biomass with coal is a recognised renewable technology and receives renewables obligation support. The hon. Member for Thurrock (Jackie Doyle-Price) has made a powerful case in support of her local plant. However, concerns have been expressed about whether the technology receives sufficient funding. Can the Minister update us on the banding review of renewables obligation certificates? What is his intention in relation to co-firing biomass with coal?
In conclusion, coal is important to the UK’s energy future—as clean coal—to provide the bridge over our energy gap and to a low-carbon future. However, we face significant challenges and must move quickly to develop the required technology to overcome them, if we are to tackle the dangerous threat posed by climate change. I would be grateful if the Minister addresses in his closing remarks the issues I have raised.
Thank you, Mr Howarth, for your stewardship this afternoon. I also thank the hon. Member for Sherwood for securing the debate and all the Members whose eloquent contributions have ensured that we have had an informed discussion.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
It is a great pleasure to serve under your chairmanship this afternoon, Mr Howarth. I congratulate my hon. Friend the Member for Sherwood (Mr Spencer) on securing the debate and on the manner in which he introduced it. If there were any doubt about it, he has proved today that he is a very fine heir to the seat of Sherwood. The bipartisanship, expertise and understanding that he has shown on the coal industry and wider energy issues are certainly traits that Paddy Tipping and Andy Stewart had. I very much welcome the debate that he has instigated. It would also perhaps be appropriate to put on the record that the hon. Member for Ogmore (Huw Irranca-Davies) would normally reply to such a debate for the Opposition. He is understandably not here today because of family circumstances and our thoughts and prayers are with him and his family at a very difficult time.
As I say, we have had an important and useful debate. There should be no doubt that we recognise that coal has been and will continue to be an integral part of our energy infrastructure. As my hon. Friend the Member for Sherwood reminded us, coal makes up on average 35% of our electricity generation, but on a cold winter’s day that figure could readily be 50%. It is therefore vital to our energy security. As we have heard during the debate, coal is also the most carbon intensive form of electricity generation, producing around twice as much CO2 per unit of output compared with a gas-fired power station, together with other environmental pollutants. He put the issue in an international context and outlined the role that coal is likely to play internationally over many years to come.
The imperative of tackling climate change means that we will need to decarbonise our electricity system. In the future, our energy supply will have to be diverse, adaptable and clean. The technologies that can help to deliver that are: nuclear, which should be built without public subsidy; renewable, including biomass, to which I shall return; and fossil fuels with the use of carbon capture and storage. I absolutely agree with the hon. Member for Midlothian (Mr Hamilton) that this should not be a debate about one technology versus another. We need to secure a tremendous amount of investment in our energy infrastructure, and we should be encouraging that to come from a wide balance of resources. I hope that we can agree that our energy security is enhanced by the breadth of that investment portfolio.
As my hon. Friend the Member for Sherwood mentioned, there is certainly a case for having back-up at times when the wind is not blowing, but that would not necessarily have to be coal; it could be gas. At the moment, the investment case would be much stronger for a new gas power plant than for coal with CCS because of the relative costs. That back-up supply could also be provided through interconnectors. For example, an interconnector to Norway could provide a huge amount of potential clean electricity and there could also be additional interconnectors to France or Iceland. They could be part of that process. During this decade, other storage technologies have been developed, such as battery, the use of hydrogen, compressed air or heating hot water. Those are all ways in which one can enhance the reliability of the renewables sector. Nevertheless, we recognise—and the structure we are looking to put in place recognises—that there will also need to be back-up power plant available.
We should also recognise the continuing role for gas in the mix, which has often been missed out in many of these debates. We have increased the expectation of the likely role that gas will play, which picks up the point made by the hon. Member for Blackley and Broughton (Graham Stringer). The world outlook on gas has changed beyond recognition in the past few years and it is right that energy policy should evolve to take account of that reality. When he noted that I was shaking my head, I was not disagreeing with him about the fact that there is an energy crunch, but about the time scale. My expectation is that the problem will not arise in four or five years, but towards the end of the decade.
A lot of new investment is coming through in gas plant. I opened a new Staythorpe 2 GW plant recently in the east midlands and there is also a new 2 GW plant coming onstream shortly in Pembrokeshire. A lot of new investment is coming through in gas; indeed, of the 20-plus GW of consented plant, 60% is gas. A great deal of new plant is coming through, but when we consider that we will lose a third of our coal plant by 2016—it may be more by the end of the decade—and much of our nuclear plant during this decade, there is a real urgency to secure new investment. During this decade, we are talking about an investment figure in excess of £100 billion in terms of electricity generation and the associated infrastructure.
The hon. Member for Liverpool, Wavertree (Luciana Berger) said that we had been drifting in terms of some targets, but I believe it is hard to see that drift. She talks about drifting on the CCS time scale, but in fact, we will secure that first project much quicker than was anticipated under the previous Administration. She talked about us drifting on the renewable obligation review; in fact, we have brought that forward by a full year from the time scale we inherited precisely to give clarity to investors. Where there was ambition before, we have decided to match that with a delivery programme, and put in place a road map for the development of carbon capture and storage, a dedicated Office of Carbon Capture and Storage and a developers forum to identify the barriers to investment, so that we can directly focus on those. I hope that we are putting in place a clear programme whereby we are saying, “We understand what the challenges are. How do we make dealing with those a reality?”
As I said, coal generation remains an important part of our energy mix. UK coal production to date is much stronger this year than last, with surface mine output up 400,000 tonnes and deep mine output up by almost a million tonnes. Consequently, this year, there has been a significant drop in the volume of imports, which I think we would all be pleased about. That is partly a result of destocking and partly because of a steady output from Daw Mill colliery—I was pleased that my hon. Friend the Member for Nuneaton (Mr Jones) was here to pay tribute to that. We very much welcome the development plans that UK Coal has announced for Thorseby and the extension of its life that that might bring about.
Total production in 2010 was up on 2009 at a little over 18 million tonnes, and total coal use was also up. The net effect of contributions from indigenous production and the use of stocked coal was to reduce UK coal imports from 38 million tonnes to 26.5 million tonnes, which is a significant fall of 30%. The generating sector continues to be the main market for coal from all sources, particularly from indigenous production. Some 80% of the coal we consume is used in electricity generation. I want hon. Members from all parties to be in no doubt whatsoever that I, and the Government, believe that there is an important continuing role for coal, including indigenous coal, in the energy mix. We need to put in place the right structure to secure the investment that will bring that forward. Indeed, we also need the right approach to carbon capture and storage.
We know that a third of our coal plant is closing as a result of the large combustion plant directive and that the industrial emissions directive will result in the closure of additional plant. If we reduce the sulphur oxide and nitrogen oxide emissions, it will improve air quality and bring environmental benefits.
I question my hon. Friend the Member for Sherwood when he calls flue gas desulphurisation a simple technology. I have been to Drax to see it. The technology may, indeed, be simple from a chemical and engineering point of view, but it is vast. It covers many acres and costs many hundreds of millions of pounds. The companies that are looking at such technology have to think carefully about the long-term viability of their plant before they decide to go through that process.
It is clear that the market structure as it currently stands will not enable enough new investment to come through in these low-carbon technologies. That is why, during the past year, we have started the process of electricity market reform. Although the old market structure brought benefits to consumers—we had some of the cheapest electricity and gas prices in Europe, although it did not always feel like that—it did not attract important investment in low-carbon technology.
The key elements that make up the electricity market reform process are, first, long-term contracts for low-carbon generation through a feed-in tariff—a contract for difference—linked with a capacity mechanism. That could be used to provide for the additional plant that is needed on stand-by for those cold days when the wind does not blow, for half-time during a world cup football match or whenever additional capacity is required. Alternatively, we could find better ways of spreading the demand more evenly across the day and using that additional plant more sensibly.
The electricity market reform process will also look at the emissions performance standard, which the hon. Member for Liverpool, Wavertree raised. We will set out our plans on that in the forthcoming White Paper. We have listened carefully to the industry. I agree with her that if we set the EPS at the right level, it could be a strong steer towards new investment. Such an approach will make this country more attractive to investors because they will know what is expected of them over the longer term—for example, what the approach to grandfathering will be and when the reviews might happen. The EPS could be a very important steer and plus point in terms of attracting investment into this country, although I think I heard her indicate that there may be a case at this stage for applying it to gas as well. My anxiety about that is that we are not in the position to turn away investors who want to invest in gas at this time, too. We need to be very clear and careful about how it is introduced. The main drivers for low-carbon technology would be less from the emissions performance standard, and more from the feed-in tariff arrangements that we will introduce. We have also said that we will introduce a carbon floor price in 2013, and increasing gradually to 2020. That gives an early and credible long-term signal to investors that we are serious about encouraging investment in low-carbon technologies.
I understand absolutely the point made by the hon. Member for Liverpool, Wavertree. We have been talking closely with the coal industry and other people who are intensive energy users. We have to balance the urgent need to bring forward investment at twice the rate in this decade than was achieved in the previous decade, to meet the security of supply requirements that this country faces, and to do so in a way that does not create carbon leakage. It would not be sensible to drive away from the United Kingdom industries that can be a critical part of our manufacturing process—carbon emitters and heavy energy users. That would only result in that carbon being produced somewhere else in the world. There would be no net gain to the world. We would lose the jobs and have to import the products at the end of it—there would be no gain. That is why we have committed, over the course of the rest of this year, to put in place a series of measures to protect critical industries that are energy intensive users.
That lays the foundations for a sustainable economy, and will help to bring billions of pounds of investment into the United Kingdom through greater certainty. It will help to safeguard jobs, and will help to bring some of that supply-chain investment to this country, too. That is a right and proper target and objective for the Government. It also means that we have to develop carbon capture and storage.
Carbon capture and storage is not a luxury add-on; it is a fundamental part of our energy approach. We recognise the role that coal and gas will play for many years. That is possible with CCS in a way that could not happen without the development of CCS technology. I am pleased to see the progress in this country at a time when we see CCS deployment slipping back in other countries—Norway has put it back to 2018, and Holland is just delaying it, as are other projects elsewhere in the world. Britain remains one of the leaders on this. The £1 billion is the largest contribution that any Government anywhere in the world has committed to a single project. We have built on the work of the previous Government. Paddy Tipping referred to this as the competition without end, because it was going on for so long. I am glad that, in the course of the next few months, we hope to bring that to an end, although it is a complicated process.
The issues raised by the hon. Lady on shared access for infrastructure all need to be tied up in legal contracts with a variety of partners. We want to bring that to a close as soon as we can, ideally in these summer months.
Mr David Hamilton
Will the Minister encourage us to find out just exactly what contribution the Scottish Government are making? I believe that the Scottish Government are entitled to make a contribution, if that is the first big project of its kind to go. Of course, never shall the day come when we have separation—because I am a Unionist through and through—but surely it is right for this Government to check and make sure that the Scottish Government make a contribution if that day ever did come.
Charles Hendry
Energy remains a retained power. Clearly, the Scottish Government have decision-making powers on planning. That is why they have ruled out such things as new nuclear in Scotland. Nevertheless, energy policy is driven from Whitehall and Westminster. We therefore believe that if this is something that we want to achieve as a national Government, then we should be in the driving seat. If the Scottish Government were to say, “Here is a few million pounds to make it happen”, we would of course be very enthusiastic and grateful to them, although there are not many indications so far that the cheque is in the post. Nevertheless, this will be taken forward by us, as a Government and as the Department of Energy and Climate Change, with a cross-party approach here, and I hope that we can find that agreement in the course of the next few months.
We have a range of technologies, an issue touched on by my hon. Friend the Member for Sherwood. This should not just be about post-combustion technology. We need to look at oxy-fuel combustion and pre-combustion technologies, and that is what we want to see coming forward. In the course of the rest of this year we will set out the nature of the competition for the remaining projects—projects 2 to 4—and look at where we would like that to add to our knowledge, the type of technology that we may wish to see coming through with that, and to apply that to gas, too. Again, the world outlook on gas has changed a great deal and we need to take account of that.
I would say to my hon. Friend the Member for Sherwood that this is a technology that is still in its infancy. We know that the individual parts of it can work. We know that it can be separated—we have seen that done on a small scale. We know that it can be transported and we know that it can be injected into the sea bed. However, nobody in the world has done that at scale, so we do not yet know what the challenges are of doing that at scale, or what the costs will be. In terms of a time scale, to have four projects running by 2020 is extremely ambitious. We are not going to arrive at a stage where we can move it beyond that. We can absolutely see this technology moving forward in the 2020s. Global ambition suggests perhaps 100 projects by 2020, but 3,000 projects by 2050. This is therefore a process that will inevitably start carefully, but then build up dramatically over time. Everything that we are doing here is determined to ensure that the United Kingdom can be in a real leadership position. What we also see from industry shows that it wants to be part of that process. The NER300 process is a European competition, and almost half of the schemes coming forward for CCS are in the United Kingdom. That shows the appetite among our industry, our universities and our whole supply chain to help lead in this area.
Mr Spencer
I am grateful to the Minister for giving way, as I have taken up more than my quota of time. Given that the new technology will not be on the street until 2020, we will not be in a position to build nuclear power stations to that time scale, and renewable energy will not be large enough to make the shortfall, does he anticipate that the only way we can supply the nation will be by importing that power from our neighbours?
Charles Hendry
No, I do not, although I see it as being an important contributor. The investment in gas that we are seeing shows that the energy company industry is keen to invest in the gas infrastructure, too. We want to see that bid grow out of renewables, but some of those technologies for UK tidal would be in the 2020s. We want to see offshore wind ramping up in the course of this decade. My hon. Friend is absolutely right that nuclear is towards the end of this decade, but as we start to deal with the crunch to which the hon. Member for Blackley and Broughton referred, we need to see additional gas infrastructure, too. We should not rule out interconnecters as part of that process.
Finally, I want to come to the issue of biomass. I am grateful to my hon. Friend the Member for Thurrock (Jackie Doyle-Price) for the point she made on that. Electricity from biomass is important to our renewable energy targets, because it brings security of supply benefits. It is dispatchable; in other words, when we need more power, we can generate more power. It can be turned up and it can be turned down. It is one of the few renewable energy sources that is genuinely adaptable in that respect. Large-scale dedicated biomass has the potential to develop significant levels of renewable electricity by 2020. Electricity from dedicated biomass is cheaper than some other large-scale electricity sources. If biomass generation needed to meet the renewable energy target was displaced by more expensive technologies, then inevitably there would be a higher cost to consumers.
It is encouraging to see the interest from Drax, which is developing dedicated biomass. The work at Tilbury is ground-breaking and I join my hon. Friend the Member for Thurrock in paying tribute to RWE npower for the work it is doing to make that happen. Part of the renewables obligation banding review, which, as I said, we have brought forward by a year, will be to determine the appropriate level of support to bring forward either biomass conversion or co-firing, because of the contribution that they can make.
In conclusion, we believe, without any doubt, that coal can play an important role in our electricity-generating mix in the future, but only if its carbon dioxide emissions can be reduced significantly. Electricity market reform will provide the commercial incentives to deliver new low-carbon plant, and our CCS demonstration programme will ensure that there is a cost-competitive solution to the emissions from coal.
I congratulate my hon. Friend the Member for Sherwood. This has been a long-overdue debate, and one that has been extremely constructive. I rejoice at the fact that we can talk about coal, with Members on both sides of the House talking about its opportunities and its importance. I welcome that—it is a big step forward.