The Secretary of State for Energy and Climate Change (Mr Edward Davey)
Mr Speaker, I am grateful to you and the House for your patience.
I am pleased, ahead of the Energy Bill’s introduction later today, to publish the annual energy statement. It shows that this Government are making good progress towards our vision of a thriving low-carbon economy with secure energy supplies, and sets out an energy policy that is good for growth and for consumers. Alongside the annual energy statement, I am publishing our energy security strategy, the statutory security of supply report, a consultation on electricity demand reduction, and more detail on electricity market reform. I am today laying copies of all those documents before the House.
Britain’s energy sector is embarking on a period of exceptional renewal and expansion. The scale of the investment required is huge, representing close to half the UK’s total infrastructure investment pipeline. The electricity sector alone needs investment of around £110 billion in the next decade—that is equivalent to building Crossrail seven times over—but the vast majority of it will not be taxpayers’ money, with Government subsidies targeted at levering in private sector investment in low-carbon energy, so our plans are consistent with our overriding goal of deficit reduction.
The energy sector can play a major role in stimulating economic growth, creating jobs and positioning British companies for success in export markets. One third of the UK’s economic growth in the last financial year is likely to have come from green business, and the UK’s low-carbon sector now takes a £122 billion share of a global market worth £3.3 trillion. Many projects are shovel-ready, and they are spread relatively evenly through every nation and region of the UK, so the stimulus to the economy and to supply chains, and the job creation, can come at the right time, which is now, and in the right place, which is nationwide.
Those short-term benefits of our transition to a low-carbon future are followed by still greater ones in the longer term. First, of course, our transition will help us to meet our carbon budgets on the path to our 2050 emissions target, so that Britain will continue to play a leading role in tackling climate change. Secondly, it will diversify our energy mix, improving our energy security, and insulating households and business consumers from high and volatile fossil fuel prices on global markets. Thirdly, it will keep British companies at the forefront of the fast-growing global green sector.
However, investment on the scale needed will not happen under the current framework. Industry and investors have told the Government very clearly that we must play our part, by creating a regulatory framework against which they can invest, and by giving clarity on the level of incentives available. We cannot afford to miss this opportunity. We need those shovel-ready projects to get under way now, and the energy security challenge we face is real, with fossil fuel imports set to increase, electricity demand to rise, and around a fifth of our existing power plant to close by 2020.
We therefore propose nothing less than the biggest transformation of Britain’s electricity market since privatisation. That follows agreement across the coalition, not only on electricity market reform and the Energy Bill, but on a real-terms tripling of the budget for support for low-carbon generation.
We need to improve revenue certainty for investors in low-carbon generation, including renewables, nuclear power, and carbon capture and storage, so we will take powers in the Energy Bill to introduce feed-in tariffs with contracts for difference. That mechanism will give investors precisely the confidence they seek. We have also responded to Select Committee on Energy and Climate Change concerns and will create a single counter-party for the contracts for difference.
We will also introduce a capacity market to ensure that there is sufficient gas generation to provide the back-up and flexibility we will need. Gas remains a vital part of our energy mix, and we will support the exploitation of unconventional gas resources where it is economic and can be carried out with full protection of the environment. Our gas generation strategy will be published alongside the autumn statement of my right hon. Friend the Chancellor.
We will legislate to allow the Government in the next Parliament to set a 2030 decarbonisation target for the power sector, and in the shorter term we will introduce an emissions performance standard. That will ensure that new coal plant can be built only with carbon capture and storage technology. All those mechanisms will be supported by a robust, transparent institutional framework. The reforms will maintain Britain’s energy security while providing a huge opportunity for jobs and growth. Competition for long-term contracts will drive innovation, raise productivity and give UK industries a strong platform from which to compete internationally.
Consumer bills are one of my greatest concerns. They have been driven up remorselessly by wholesale fossil fuel prices: global gas prices were 50% higher in the five years to 2011 than in the previous five years, and they have continued to rise in the past year. High energy bills can put huge pressure on households and businesses, so let me be very clear, especially given recent misleading reports in the media: Government policy is designed specifically to reduce consumer bills. Of course, we cannot control global commodity markets. However, we can and will put consumers in control by driving a wedge between wholesale energy prices and consumer bills. That is why we propose to legislate in the Energy Bill to ensure that consumers are placed on the cheapest tariff that meets their preferences.
We can and will diversify our energy supplies: our policies stand to reduce the UK’s sensitivity to fossil fuel price spikes by approximately 30% by 2020, and by around 60% by 2050. We can and will push energy companies to make switching easier and quicker—households can already save up to £200 per year simply by switching provider. We can and will pursue savings wherever we can find them in the energy system—for example, up to £3.5 billion from offshore transmission co-ordination. We can and will continue to place energy efficiency front and centre. More than 2 million insulation measures were installed in the year to June 2012. The savings are considerable: the 500,000 households who insulated their cavity walls in 2011 are each saving approximately £135 per year. Last month, we put in place the framework for the green deal, which allows households and businesses to install energy efficiency measures without any upfront cost, and to pay for them through the savings on their energy bill.
If we look ahead to energy bills in 2020, we see that energy efficiency savings are set to outweigh—more than outweigh—the cost of supporting low-carbon electricity generation. The net effect of Government policies on energy bills is downwards, not upwards. Of course, vulnerable households need our help now, and they are getting it. More than 1 million low-income pensioners will get £130 off their fuel bills this winter, and all pensioner households will get a winter fuel payment of £200, or £300 for those over 80 years old. Energy suppliers provided approximately £250 million of support under the warm home discount scheme in 2011-12, assisting about 2 million low-income and vulnerable households. The new energy company obligation will channel £540 million-worth of green deal investment per year, reaching approximately 270,000 vulnerable and low-income households and those living in harder-to-treat properties by 2015. To help people better manage their own energy use, we will be rolling out smart meters across Great Britain: 53 million new meters will be installed by 2019, delivering an estimated £7.2 billion in net benefits to the economy.
The heated debate on energy policy can sometimes obscure what is in many ways a great success story for our country. The UK already leads the world in offshore wind, and we are on track to meet our renewables targets. Energy investment in Britain is running at a 20-year high, according to Energy UK. We have the world’s first renewable heat incentive. This year’s offshore oil and gas licensing round received the highest number of applications since licensing began in 1964. Our carbon capture and storage offer, including the £1 billion commercialisation competition, is one of the world’s most comprehensive.
We continue to make progress in international talks on climate change. I will shortly be attending the C0P 18 talks in Doha, working towards the genuinely global deal to which Durban opened the door, to be agreed by 2015 and to come into force from 2020. We are now preparing a once in a generation transformation of the energy landscape to bring on massive private-sector investment, which will boost the economy, create jobs, and power Britain towards a prosperous low-carbon future.
The Government’s energy policy is good for the British economy, good for consumers and good for the planet, and I commend the statement to the House.
Caroline Flint (Don Valley) (Lab)
I thank the Secretary of State for early notice of his statement. I was going to say that I felt deprived at not getting two statements—one from the Secretary of State and one from the Minister of State, Department of Energy and Climate Change, the hon. Member for South Holland and The Deepings (Mr Hayes)—because that seems to be the usual manner of doing things this afternoon, but I think we were lucky just to get one. The Secretary of State can catch his breath now.
I have always made it clear that where we can work with the Government in the national interest, we will do so. In that vein, the Secretary of State will know that we have supported the Government’s efforts to attract investment in new nuclear, and we welcome Hitachi’s decision to buy the Horizon nuclear project. We also welcome the progress made in Durban last year and wish our negotiators in Doha well. It is with genuine regret, however, that over the past year we have seen the Government lurch from one crisis to another on many aspects of energy policy, from the disastrous handling of the cuts to the feed-in tariff for solar power, to the recent outburst on wind power from the Minister of State, the hon. Member for South Holland and The Deepings, and, I am afraid, the Prime Minister’s broken promises on energy bills. The Department has done more than its fair share to get the word “omnishambles” in the “Oxford English Dictionary”.
Today, alongside the statement, the Secretary of State is also publishing the Government’s long-awaited Energy Bill. His Department’s press notice helpfully reminds us that the Bill has faced repeated delays, which I believe has undermined confidence and left much investment in limbo. We will of course look carefully at the Bill and the other proposals the Government have published today on demand reduction, energy security and energy-intensive industries, and I look forward to debating them more fully with the Secretary of State in due course.
I want to pick up on two aspects of the Secretary of State’s announcement and ask him some specific questions: first, on the state of competition in the energy market and, secondly, on the Government’s failure to set a clear target to decarbonise the power sector. This time last year, when the Secretary of State’s predecessor delivered the annual energy statement, he said that people’s bills would be lower during this Parliament. Families and businesses up and down the country that have seen their bills rise by more than £250 know that that is just not true. In response, the Government launched their “click, switch and insulate to save” campaign, but the number of people switching suppliers fell to record lows.
The Secretary of State talked about energy efficiency, but next year this Administration will become the first since the 1970s not to have a Government-funded energy efficiency scheme. The Prime Minister told the House that he would force the energy companies by law to put everyone on the lowest tariff, but it turned out that all the Government are really doing is limiting the number of tariffs those companies can offer. The simple truth is that even the lowest tariff in an uncompetitive market will not be a good deal.
The Secretary of State says that the burden of investment will not fall on taxpayers, but it will fall on bill payers, and, at a time when we are asking them to pay for as much as £200 billion of investment in our energy infrastructure, it is more important than ever that we have an energy market that delivers fair prices and works in the public interest. For too long, the big energy companies have been able to get away with what they want at the expense of everyone else. Those big companies dominate 98% of the market and, decades after privatisation, still have a virtual monopoly in their former electricity regions. They tell us that electricity and gas prices in the UK are among the lowest in Europe, but when tax is taken out of the equation, they are among the highest. Most damning of all, whenever these companies announce their price hikes, they tell us they are only passing on their costs, so why is it that when those costs come down, consumers rarely see the savings?
Whether or not the allegations of price fixing in the gas market turn out to be true, they clearly show that the market is not transparent enough. Let me, then, ask the Secretary of State three very straightforward questions: first, does he believe that there is effective competition in either the wholesale or the retail energy market? Secondly, whether consumers get a fair deal will largely depend on the strike price the Government set for contracts for difference and the reference price in the market at the time, but if the market is structured in such a way that no one knows what the true cost of energy actually is, how will the Government even be able to set a robust strike price? Thirdly, given that the proposals were originally called “electricity market reform”, why does the new Bill fail to make proposals on how energy is bought and sold in order to make it more open, more transparent and more competitive?
This morning, I looked through the “Electricity market reform: policy overview” document. In paragraph 101, there is an indication that the Government are perhaps beginning to recognise that greater competition is necessary, in its reference to
“Powers for the Secretary of State to make changes to electricity generation and supply licences conditions”.
That is quite interesting. Does it indicate that the Secretary of State is moving closer to some of the more radical suggestions for reforming the market which Labour has been putting forward for the past two years and which were referred to in our 2010 manifesto?
The Secretary of State said that investment was running at a 20-year high, but independent figures produced by Bloomberg New Energy Finance show that since this Government came to power, investment in renewable energy has fallen by more than half. He also said that the UK led the world in offshore wind, but figures out just today from Ernst and Young on renewable energy attractiveness show that, for the first time ever, the UK has been knocked off the top spot for offshore wind attractiveness and is now behind Germany. The reason that has happened is the uncertainty the Government have created. That is why firms have put investment on hold or scrapped it altogether.
In June, Vestas abandoned its plans to create a new manufacturing plant in Kent, which would have created 2,000 jobs. What did the local Member of Parliament, the hon. Member for South Thanet (Laura Sandys), who is now Parliamentary Private Secretary to the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), say at the time? She said that Vestas’ decision
“suggests a lack of confidence within the industry over the government’s commitment to the green economy and crucially, offshore wind. The market needs certainty from government if it is to deliver the thousands of jobs and billions of pounds of investment that could secure our economic recovery.”
Whether onshore or offshore, the business of firms such as Vestas is wind. What they wanted more than anything else in the Bill was a clear commitment to decarbonise the power sector by 2030. Just this morning, its chief executive told The Guardian:
“The failure to establish a firm 2030 power sector carbon cap prolongs uncertainty.”
In his words,
“This is a significant missed opportunity,”
and he is not alone in thinking that.
It is not just businesses in the renewables sector but those elsewhere that are concerned about the Government’s lack of vision. I make no bones about it: we support a clear decarbonisation target in the Bill—and from what I read in this morning’s papers, so do many hon. Members on the Government Benches, including the Chair of the Select Committee on Energy and Climate Change. When the time comes, we will work with colleagues across the House to put a decarbonisation target in the Bill.
Mr Davey
I am grateful for the right hon. Lady’s initial remarks. I am delighted that she wants to work with the Government to attract investment and that she wishes us well in the Doha talks next week. I hope we can reach a cross-party consensus on some of these important measures to tackle climate change, which is incredibly important. Both coalition parties gave that support to the last Government, for their Climate Change Act 2008, and I hope we can continue that consensus.
The right hon. Lady said that the Bill had been delayed. Ever since I have been Secretary of State for Energy and Climate Change, I have said it would be published in November and it has been. We are on time and on track. She asked a number of questions, but gave no recognition to the fact that two parties that have had their disagreements have come together with an energy policy. She also failed to mention how that has been received by industry and the investor community. The director general of the CBI, John Cridland, gave a ringing endorsement to the policies that we have announced, after the discussions I had with the Chancellor of the Exchequer. That political certainty, backed with the policy certainty of today’s announcement, will bring the billions of pounds of investment into the UK that our economy and our energy infrastructure needs.
The right hon. Lady asked me about competition. One almost thinks that she is suffering from amnesia, because it was the previous Government who failed to tackle competition. We are determined to tackle it, but we will not be using ideas from the Labour party’s manifesto, because we have our own ideas on how to ensure competition in the retail sector, with our arguments about switching, and in the wholesale sector, with our arguments about greater liquidity and transparency in that market. Of course we have competitive markets, but they could be more competitive. We are determined to drive them further and faster, and our policies will do far more than the ones she is offering the country.
The right hon. Lady questioned our new policies on tariffs, which will simplify them in a way that I believe will drive competition. Time and again, my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) asked the previous Government to simplify tariffs, to drive competition in the consumer’s interest, and what did they do? Absolutely nothing. We will take no lessons from her on that matter.
The right hon. Lady asked about strike prices. She does not seem to understand how they will be set, so let me explain, although we will no doubt do this on Second Reading of the Bill. They will be set administratively until 2017; then they will be set through auctions. Auctions are the way to get the real transparency and competition that the previous Government failed to deliver.
The right hon. Lady asked about the decarbonisation target. That has been a matter of some debate within the Government, and there will no doubt be a debate on it between Members on both sides during the passage of the Bill. I looked at the 2010 manifestos of all the parties—the Green party, the Labour party, the Liberal Democrats and the Conservatives—to see what promises they had made on a decarbonisation target for the power sector. None of us had made any. There were no such promises in the coalition agreement either, but since becoming Secretary of State, I have gone into the discussions determined to make that argument. I have done so, and we will table amendments to the Bill to give the Secretary of State power to set a decarbonisation target. I am proud of that.
The right hon. Lady said that without a decarbonisation target, we would see no investment in the supply chain. I simply refer her to Arriva’s announcement last week on a turbine factory. The weeks and months ahead will show whether we will see that supply chain investment. I believe that we will, because this coalition Government have put the right policies in place.
Mr Peter Lilley (Hitchin and Harpenden) (Con)
Lord Stern, whose discredited report still forms the rationale for the Government’s energy policy, calculated in 2006 the amount by which the price of hydrocarbons needed to be increased in order to decarbonise the economy. Since then, the price of hydrocarbons has risen faster and further than either Lord Stern or the Intergovernmental Panel on Climate Change thought sufficient, so why does my right hon. Friend propose to pile Pelion upon Ossa by burdening British industry and households with these tripled taxes?
Mr Davey
My right hon. Friend has been consistent: he voted against the Climate Change Act 2008 and he clearly does not like our low-carbon policies today. The fact that fossil fuel prices have gone up is yet another argument for our policies. We need to insulate our economy, our consumers and our businesses from those high prices. This country has to import far more fossil fuels than we used to because North sea resources are going down, and that is leaving our economy exposed. We need to tackle that issue for reasons of energy security and to ensure that we have competitive prices.
Dame Joan Ruddock (Lewisham, Deptford) (Lab)
The Secretary of State is obviously very pleased with himself about the tariffs, but will he acknowledge that he has failed to deliver what the Prime Minister promised, which was to put everybody on the lowest tariff? Given that he has not done that, will he consider making a concession to over-75-year-olds, who could save £200 a year by being on the lowest tariff? The 3,500 pensioners in my constituency would greatly appreciate that.
Mr Davey
First, we want to give the benefits of switching to everybody, not just to pensioners. Hard-working families are struggling, and we want to ensure that they get the benefits as well. As for the Prime Minister’s commitment to get people on to the cheapest tariffs, we are delivering that. Ofgem’s retail market review of the four core tariffs will ensure that people who are on stranded or dead tariffs will automatically be switched to the lowest tariff, given their preferences. I would have thought that the Opposition wanted to ensure that people are on the lowest tariff, because it will bring them big savings and ensure that their preferences —whether on payment or other things—are recognised. That is the best of both worlds.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
The Secretary of State mentioned the important role that he sees gas still playing in the transition to the low-carbon economy. Will he give me an assurance that the record licensing round that he has just announced is an indication of the Government’s continued commitment to maximising the remaining potential of our North sea assets?
Mr Davey
Yes, I can give my hon. Friend that assurance. Sometimes the debate is characterised as a choice between gas and renewables, but we need both. That is particularly important as coal-fired power stations go off line. The gas power stations that replace them will help to cut our carbon emissions. It is absolutely right for our country’s energy security and prosperity that we maximise the potential of the North sea and, indeed, the other offshore fields, particularly those west of Shetland, and we will do that.
Ian Lavery (Wansbeck) (Lab)
Can the Secretary of State explain why the Government have decided not to fund the Hatfield project in South Yorkshire, which was the top priority for the European Commission, and to cast it aside by failing to include it on the list of future carbon capture and storage projects?
Mr Davey
Right hon. and hon. Members will know there has been a competition to secure the support that the Government offer for carbon capture and storage. We had eight applications, and we had some rigorous criteria which differed from those of the European Union—ours were more suitable for this country and our energy needs—and which were applied rigorously, robustly and fairly. We have now moved on to the second round. Of course, there will always be some losers—not all eight applicants can win—but we are applying the criteria fairly and robustly.
Charles Hendry (Wealden) (Con)
I congratulate my right hon. Friend on both his statement and the Bill, and I urge him to do all he can to take energy policy out of politics, because investors need to know that there is cross-party support and support across Government for the measures he is introducing for the longer term. In that respect, given the absence of a decarbonisation target in the Bill, how does he intend to reassure investors who need to make investment decisions during this Parliament that there will be a long-term market for the products we want them to build here?
Mr Davey
I start by paying tribute to my hon. Friend: I believe Members of all parties know what a critical role he played in shaping the Energy Bill that is published today. Along with my right hon. Friend the Member for Eastleigh (Chris Huhne), he worked across the parties to bring these proposals forward, and he deserves a huge amount of credit today. I am determined, having made this agreement in the coalition, that we send out a signal—not just to the UK or Europe, but to the whole world—that the UK is open for energy investment. We have built a consensus in the UK Government, and in view of the remarks of the right hon. Member for Don Valley (Caroline Flint), I believe we may well secure cross-party consensus, which would be valuable to this country and its people. My hon. Friend asked how we will continue the consensus. Let us see how we make progress during proceedings on the Bill, in Committee and so forth. I know that my hon. Friend will play his role in making that happen.
Mr Mike Weir (Angus) (SNP)
We, too, welcome the publication of the Energy Bill, much of which we can probably support. If gas is to continue to be an important part of the energy mix, however, it is essential that carbon capture and storage is brought forward quickly. There has been some speculation in the specialist press that the UK Government have missed the European Union’s target for submitting details to ensure funding. Can the Secretary of State assure us that this is not the case, and that CCS will be brought forward quickly?
Mr Davey
I thank the hon. Gentleman for his support, as having cross-party consensus is so important, in Scotland and in the rest of the United Kingdom. As he knows, I think Scotland is stronger in the United Kingdom and that the United Kingdom is stronger with Scotland in it, not least on energy policy. On CCS, we are pursuing our policies as quickly as we can, but we need to make sure that we get value for money for the taxpayer. We were fortunate to have eight applications; we have now whittled that down to four, and we are proceeding apace to choose between those remaining four. It is true that we did not get in the first round of the New Entrants Reserve 300 funding from the EU, but we are wholly able to get into the second round and get the same amount of money. I have spoken to the European Commissioner about that. I see no problem in ensuring that we use the money put aside to get the best value for money for the best CCS projects.
Dr Liam Fox (North Somerset) (Con)
The Government have talked a lot about green energy generation, but I would like to ask the Secretary of State about green energy transmission. A number of countries in Europe are now removing the scars from their countryside of pylons and overhead lines, and there is a wonderful opportunity for us to leave a great environmental legacy to future generations—not least in my North Somerset constituency, where this is a problem. What does the Bill say about green transmission? If it says nothing, I can tell the Secretary of State that a number of Members on both sides of the House will be more than happy to amend it.
Mr Davey
I am grateful for my right hon. Friend’s question. I know that he and my hon. Friend the Member for Wells (Tessa Munt) have been campaigning in Somerset on the new transmission lines proposed by National Grid. He will know that there is a settled approach whereby National Grid consults widely and tries to take concerns into account. This is not a new issue arising from green energy; it has been an issue for many decades. The Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for South Holland and The Deepings, is working hard and I am sure that he would be more than happy to have a meeting with my right hon. Friend.
John Robertson (Glasgow North West) (Lab)
May I give the Secretary of State some advice? He would gain a lot more cross-party support if stopped this petty point-scoring.
The right hon. Gentleman did not mention poor and vulnerable customers in his statement. They are the customers who do not talk to the energy companies and who need people to go and see them. What will he do to ensure that representatives of the energy companies go and find those vulnerable people so that they can help them?
Mr Davey
The hon. Gentleman always gives me a courteous and charming welcome when I appear before the Select Committee of which he is a distinguished member. However, I did refer to vulnerable customers in my statement. They are absolutely at the heart of our policy and at the heart of my concerns as I develop that policy. I have made it clear to the energy companies that I expect them to work hard, as the Government are working hard, to ensure that we reach out to people in fuel poverty.
Mr John Baron (Basildon and Billericay) (Con)
I congratulate the Government and indeed Ofgem on having accepted the key recommendation of the billing stakeholder group, which the Government asked me to chair, that energy companies should make clear in their bills how much their customers would save in pounds and pence if they were on their supplier’s cheapest standard direct debit tariff. That recommendation is open for consultation, and the energy companies do not like it. May I encourage the Secretary of State to do what he can to ensure that they do not push back on it?
Mr Davey
I pay tribute to my hon. Friend for the work he has done. He is absolutely right: we must stand up against people who prevent us from pursuing the consumer interest. It was ignored for far too long, but we are not going to ignore it. One of our reasons for arranging the consultation was that, although Ofgem could proceed with its own work and change licence conditions relating to bills and what is on them, we wanted to provide a statutory underpinning—a back-stop—to ensure that the process took place as quickly and smoothly as possible. I think that that is sending a very strong signal.
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Secretary of State share my regret that, despite the 18-month gestation of the Energy Bill, a consultation paper on the possibility of its including provisions on energy efficiency and demand-side management was not published until today? Will he undertake to rectify that omission by ensuring that the consultation proceeds as speedily as possible, and that amendments are tabled as early as possible, so that the House can debate the matter during the Bill’s passage rather than its being tacked on at the end when the debate is over?
Mr Davey
I am very proud that we have arranged a consultation on electricity demand reduction. Other Governments have continually ducked the issue, but our Government will not, because this could make a major difference to the way in which our energy policy works. There could be great savings for the economy, for businesses and for consumers if we get it right. I urge the hon. Gentleman to engage in the consultation. We do not have a firm proposal, but we have a set of options on which people can comment, and if legislation is required as a result, we will legislate.
Sir Nick Harvey (North Devon) (LD)
I commend my right hon. Friend for his statement and for the work he is doing to tackle climate change, but may I urge him to review the encouragement that his Department is giving to the industrial-scale burning of wood to generate energy? Will he make time to read a recent report by the Royal Society for the Protection of Birds, Friends of the Earth and Greenpeace entitled “Dirtier than coal? Why Government plans to subsidise burning trees are bad news for the planet”? Will he also note the way in which the Scottish Government are using the planning and subsidy regimes to protect the environment, protect existing users of wood, and ensure that help is directed at small community-scale biomass rather than industrial-scale plants?
Mr Davey
I shall be happy to read that report, but I have considered the issue and I have to say that I think that the conversion of coal-fired power stations to biomass will have a beneficial effect on the UK’s carbon emissions. As my hon. Friend will know, a consultation is taking place on sustainability criteria relating to biomass energy. I believe that it will close on 30 November, and obviously we will respond to it.
Albert Owen (Ynys Môn) (Lab)
As a consistent pro-nuclear, pro-renewables and pro-energy efficiency Member, I welcome the announcement as an important step forward—although I have to say that the decarbonisation issue will be seen for what it is: a political fudge. Does the Secretary of State intend to table amendments to the Bill soon, so that Members have a chance to see them before Second Reading and we can have a proper debate, rather than have them hidden away in Committee where only a small group will debate them? Also, has the Secretary of State had time to respond to the Energy and Climate Change Committee’s recommendations?
Mr Davey
The hon. Gentleman is a very well informed and very talented Member, and I congratulate him on having managed to ask three questions. We will introduce amendments on both the tariff proposals and the decarbonisation powers, but we will do so in Committee, not before Second Reading. The whole House will be able to see them at Report stage, however. We want and value parliamentary scrutiny. I have lost track of the hon. Gentleman’s other two questions—he was a little greedy—but I am sure we will get back to him on them.
Jason McCartney (Colne Valley) (Con)
Will the Secretary of State explain again how the UK will be able to meet its commitment to cut CO2 emissions by 80% by 2050 if we are not ready to commit to decarbonising electricity by 2030?
Mr Davey
We are on track and we will hold to our commitments in the Climate Change Act. I refer my hon. Friend to my recent comments on the decarbonisation target being set at the same time as the fifth carbon budget. The fifth carbon budget covers the period from 2028 to 2033, and it therefore covers 2030, the year of the decarbonisation target in the power sector. The two approaches will therefore be brought together.
Ann McKechin (Glasgow North) (Lab)
Can the Secretary of State confirm that people who are on prepayment meters or who cannot access online services will be able to enjoy the cheapest tariff their supplier offers?
Damian Collins (Folkestone and Hythe) (Con)
The Secretary of State’s statement is positive news for the nuclear new build programme. When will he start considering the sites for stations that will open beyond 2025, and will the Government consider sites that are not currently on the approved site list?
Mr Davey
As my hon. Friend knows, there are eight sites in the national plan, which is quite a lot to be getting on with, but any developers of a new nuclear proposition are free to propose sites not currently listed. I know that my hon. Friend has vigorously campaigned for Dungeness to be added to the list. I think there is a letter in the post to him about that, and I will be very happy to talk to him in detail about it.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
Despite the Secretary of State’s responses to two questions about customers, the fact of the matter is that when he referred to regulatory matters in his statement, he mentioned only industry and investors. Who will represent consumers worried about fuel poverty growing and instances of hypothermia increasing, especially as Ofgem seems to be both tepid and toothless?
Mr Davey
First, I worry about consumers; I made them one of my top priorities on day one in office. Ofgem has a duty to consumers, and it is working on their behalf. The Labour party wants to get rid of Ofgem, even though it is currently doing a very good job with its retail market review. The last Government were asked to simplify tariffs in order to help consumers; they failed to do so, but Ofgem has brought forward proposals on that.
Duncan Hames (Chippenham) (LD)
The investment and competition that the energy sector needs will be dependent upon attracting independent generators. Will any of the Secretary of State’s proposals help to ensure that new independent generators can enter our electricity market?
Mr Davey
My hon. Friend makes a good point, and when he reads the Bill in detail he will see that we are addressing this matter. We believe there must be greater liquidity in the wholesale markets, and the independent generators also want that. As my hon. Friend knows, last May we issued a call for evidence on independent generators’ concerns in respect of accessing purchase power agreements, which are crucial to them. We have set out our response and what we intend to do in the Bill and its associated documents published today.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
On 17 October, the Prime Minister promised that he would ensure that energy companies put consumers on the lowest tariff by law. We know that that was a sleight of hand; the Secretary of State has just said that metered customers would not be on the lowest tariff, only the lowest in their band. Will the Secretary of State be clear today that he is limiting the tariffs to only four per company and that there is no guarantee that they will be the lowest? The lowest tariffs will now be higher than they were before.
Mr Davey
If the hon. Lady has read Ofgem’s proposals, she will have seen that it proposes four core tariffs. People can then express preferences in respect of both their payment method and whether they want dual discounts. Our consultation paper’s proposals are very similar to Ofgem’s.
Mr Davey
They are not identical; the right hon. Lady probably needs to read them in a little more detail. However, we believe that Ofgem’s are very good proposals. They were based on two years of study and will see that people, once they have expressed their preferences on how they wish to pay and so on, will be on the lowest tariff. The last Government failed to deliver on that.
Dan Byles (North Warwickshire) (Con)
This week Fatih Birol, chief economist at the International Energy Agency, said three interesting things about the development of unconventional oil and gas. He called it
“the biggest change in the energy world since World War II”,
and went on:
“This is bigger even than the development of nuclear energy…This has implications for the whole world.”
Does my right hon. Friend agree?
Mr Davey
I do think that shale gas has implications for the whole world, although sometimes some commentators get rather expansive and over-enthusiastic. Shale gas is important. I want it developed in the United Kingdom, but we have to make sure that that is done safely and in a way that protects our environment. I believe that that can be done.
Nia Griffith (Llanelli) (Lab)
I very much welcome what the Secretary of State said about trying to put British companies at the forefront of the green energy revolution. However, last week Tata Steel announced 600 job losses in Wales and the future of the British steel industry is very dependent on UK demand. What can the Secretary of State do to encourage the development of renewables such as offshore wind turbines, which use thousands of tonnes of steel per turbine? What can he do to promote the use of UK steel in those endeavours?
Mr Davey
Our legislative, financial and levy control framework has been warmly welcomed by the offshore wind industry as the biggest boost it has ever seen. I hope that that will reassure the hon. Lady.
The hon. Lady mentioned Tata Steel, which, obviously, is an energy-intensive user. Energy-intensive industries have often been concerned about energy prices and the impact of moving to low-carbon energy. In his autumn statement last year, my right hon. Friend the Chancellor put forward proposals for supporting them and those have been taken forward. The hon. Lady will see in today’s announcement that we are helping energy-intensive industries with respect to contracts for difference in the electricity market reform regime. I think that will be widely welcomed.
Lorely Burt (Solihull) (LD)
I welcome today’s statement and the Energy Bill. I hope that my right hon. Friend will confirm that we are now on track with our aspiration to be the greenest Government ever.
Specifically, what effect will his announcement have on projects such as Eggborough power station—a coal-fired station on the starting blocks and ready to convert to biomass and eventually carbon capture? It is waiting to go ahead.
Mr Davey
My hon. Friend is absolutely right: we are on track to be the greenest Government ever. Yesterday, I was at the launch of the green investment bank, which is just one example, in Edinburgh.
My hon. Friend will be pleased to know that the Minister, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes), is meeting Eggborough representatives today. I cannot comment ahead of that meeting, but I believe that Eggborough and other power plants will like our proposals.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
The Secretary of State mentioned the Doha negotiations. What are the Government’s specific objectives —I do not mean just getting agreement—for those negotiations? Which members of the ministerial team will represent the UK there?
Mr Davey
I am grateful for the hon. Gentleman’s question. I will be attending the Doha negotiations, along with the Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker). On our objectives, we have been arguing for a balanced package. In the pre-COP discussions in Seoul, we argued that the European Union and other members of the Kyoto protocol need to commit to a second period and that we need the long-term co-operative action negotiations to come to an end, and in return we need a work plan to take us from now until 2015 so that we can implement the international, legally binding treaty promised at Durban. In addition, we want ambitious proposals to come from other countries on climate change finance and we would like to see more mitigation measures.
Just before this statement, I was at Clarence house with His Royal Highness the Prince of Wales attending a meeting on forests. We have made an announcement today of the use of UK climate change finance money to support new forest projects, which I believe will help the climate change talks and show that this Government have an ambitious agenda.
Andrew Stephenson (Pendle) (Con)
Some great companies in Pendle are working in the energy sector: Graham Engineering works in the nuclear supply chain; and Kirk Environmental is internationally renowned and is the only UK company specialising in the manufacture of large anaerobic digestive tanks and double membrane biogas holders. Will the Secretary of State commit to working closely with Ministers in the Department for Business, Innovation and Skills, who are delivering things such as the advanced manufacturing supply chain initiative, to ensure that British companies, such as those based in my constituency, can deliver the low-carbon economy and the energy security he seeks to achieve?
Mr Davey
My hon. Friend is absolutely right; the potential for growth and jobs resulting from our energy policies is huge. He will be pleased to learn that I have been working with my right hon. Friend the Secretary of State for Business, Innovation and Skills on exactly these issues. We will be producing strategies on the supply chains in nuclear and offshore wind, and we have been working together to maximise the potential for British jobs from this investment and these energy infrastructure plans.
Lindsay Roy (Glenrothes) (Lab)
What level of continuing subsidy does the Secretary of State envisage for wind turbine generation? Does he consider that to be a cost-effective investment?
Mr Davey
Our investments and our policies for offshore wind have been widely welcomed, and we are seeing the industry really get going. We have the largest amount of offshore wind capacity already installed and we have some of the greatest potential in the world. It is important that we get costs down. We are working with the offshore wind developers and the forum that has been established to get cost reductions, and they produced a report just a few months ago showing how we could get cost reductions across the piece, which will make a huge difference to competitiveness.
David Mowat (Warrington South) (Con)
I welcome the Bill, which at last gives us the possibility of unleashing nuclear power at scale in the UK. The Secretary of State will have seen the recent EU figures showing that every EU industrial country except France has higher carbon emissions per head than the UK. Yet Germany, which has 20% more carbon emissions per head than the UK, has recently embarked on a project to build 20 unabated coal power stations. How does he reconcile Germany’s position with ours?
Mr Davey
I work closely with my German counterparts, particularly Peter Altmaier, and I know that they are having a big debate in Germany called the “Energiewende” looking at how they will deal with the implications of reducing their nuclear industry. I am sure that my hon. Friend would understand that, given our close partnership with Germany, I would not wish to tread on Herr Altmaier’s toes, but this country is investing in nuclear. We are putting forward a regime that we think is attractive, and Hitachi’s £700 million investment in the Horizon project shows that international companies and international capital believe we have got it right.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Last but not least, I call Martin Horwood.
Martin Horwood (Cheltenham) (LD)
Does the Secretary of State agree that, in time, feed-in tariffs with contracts for difference will provide a means of supporting a diverse emerging and fast-changing renewables industry that is good for the environment and fairer to households than the outgoing renewables obligation system? Will he reconsider extending that subsidy to a mature and inflexible nuclear industry dominated by a single French nationalised company that is trying to seal the deal in secret before we have even passed the legislation?
Mr Davey
First, on my hon. Friend’s last point, I have made it clear that we will be very transparent about negotiations with EDF or any other company. Of course, he would not expect me to comment on negotiations daily but he would expect me to bring to the House the results of them so that I can be held to account in the proper way.
On my hon. Friend’s first point, he is absolutely right. One of the huge advantages of feed-in tariffs with contracts for difference compared with the renewable obligations certificate system is that the deal is much better for consumers. The policies we are putting in place and electricity market reform will mean that consumer and business bills will be far lower than they otherwise would have been. That is one of the main reasons we are doing this.