Biomass Power Generation
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Nigel Adams (Selby and Ainsty) (Con)
It is a pleasure to serve again under your chairmanship, Mrs Main. I am delighted to have secured this topical and important debate. I fear that other distractions in the House might limit the number of participants, but I am pleased that hon. Members have taken the time to attend. It is particularly important as we debate the Energy Bill, which will shape our country’s energy profile for decades to come, as well as the emerging biomass industry and the entire UK renewable sector.
My constituency is home to two of the country’s largest coal-fired power stations, Drax and Eggborough; I refer hon. Members to my entry in the Register of Members’ Financial Interests. Between them, they supply 11% to 12% of the UK’s electricity supply or, to put it in terms that most people would understand, enough power for 9 million homes. They are essential national assets, with the flexibility to provide dispatchable electricity—electricity when it is needed—which is critical to the nation’s security of supply. Both stations have well-developed plans to convert some or all of their generating units to burn sustainable biomass over the next few years.
It is crucial to appreciate the difference between biomass and biofuels, which one or two journalists who have written articles recently do not seem to understand. Arguments laying concerns about the destruction of rain forests at the feet of the biomass energy industry are simply inappropriate and wrong and have no part in the biomass industry either now or in future. Those arguments relate to liquid biofuels, which should not be confused with solid state biomass, which has robust sustainability criteria. To imply that protected rain forest wood can be used for power generation is simply wrong. Woody biomass, which is made into the more energy-dense and transport-efficient pelleted form used as fuel by stations such as Drax and Eggborough, is sourced mainly from residues, thinnings and less marketable wood, which is not of sufficient quality to be used for other, higher-value applications.
Bioenergy is a relatively new market, and the demand is welcomed by those in the hard-pressed global forest products industry, particularly where more traditional markets are in decline, as it provides the additional income that they need to continue investing in sustainable forestry management. Growing and harvesting trees provides family-supporting jobs for millions of men and women. Aside from the economic and social aspects, work in forests brings environmental benefits.
I will focus on the role of biomass in UK energy security. I know that energy security is a subject close to everybody’s heart, including that of the Energy Minister. The regulator Ofgem’s recent warning of a capacity crunch—we could have a capacity margin of only 4% as early as 2015—should set alarm bells ringing. It could have disastrous impacts on the cost and reliability of electricity for consumers, particularly the fuel-poor and businesses that are already struggling to remain competitive. Due to other regulations, approximately 12 GW of existing coal and oil-fired plant will be retired. One third of our coal-fired generation will close by 2016, and potentially more in the second half of this decade as further legislation and taxes start to bite.
In readiness for the impact of the closures, there is an urgent need to bridge the capacity gap. Even given the welcome announcement yesterday concerning Hinkley Point, new nuclear projects will not start generating until the 2020s, nor will offshore wind on any scale. Consequently, the low-cost solution of converting our existing coal-fired grid-connected plants to renewable, sustainable biomass can and should play an important role in keeping the lights on in the short to medium term.
In the next few weeks, Drax will convert its first unit to burn sustainable biomass rather than coal, and within the next few years, three of Drax’s six units will have been converted to burn sustainable biomass. I welcome the recent announcement in the Budget that £500 million will be invested in carbon capture and storage at Drax, in partnership with Alstom. The news is incredibly welcome in my constituency, and we look forward to seeing how the trial works. I thank the Minister and the Secretary of State for all their efforts to ensure that Drax had the project.
Graham Stringer (Blackley and Broughton) (Lab)
I congratulate the hon. Gentleman on securing this important debate. He has twice used the word “sustainable” to describe biofuels. “Sustainable” is only accurate if one discounts how much carbon dioxide is released from the soil when the trees and vegetation are moved and how many significant journeys will be made to take the biomass from North America to this country. Does he accept that?
Nigel Adams
Yes. The biomass that we use must come from sustainably managed forests, by which I mean forests where growth is at least equal to harvest. Nobody is saying that biomass is carbon-neutral; it is low-carbon. We must ensure a neutral, or ideally a positive, growth-drain ratio. The hon. Gentleman makes a particularly good point, to which I shall come later in my remarks.
Andrew Percy (Brigg and Goole) (Con)
I am a bit alarmed by the comments that seem to be against biomass. There is another issue of sustainability, of course—sustainability of jobs. It would be worse for our constituents if the conversion to biomass did not proceed, and those constituents of ours who work at dirty coal-burning power stations were suddenly thrown out on to the unemployment register. Sustainability is not just about what we burn; it is also about jobs.
Nigel Adams
I could not agree more with my hon. Friend and neighbour. We are fortunate in our neck of the woods; unemployment has fallen considerably in the past couple of years. Funnily enough, as it happens, I had a meeting yesterday with Shepherd Building Group, one of the main construction partners helping Drax convert its biomass plant, and Shepherd told me that more than 1,000 jobs are being generated or safeguarded by the project, and more than £700 million in investment is being made to realise it. We must bear that in mind. The hon. Member for Blackley and Broughton (Graham Stringer) makes a valid point, but we must remember that people’s livelihoods and jobs are on the line.
Kate Green (Stretford and Urmston) (Lab)
I congratulate the hon. Gentleman on securing this debate, which is important to my constituents because an application is in train for a new biomass plant in Davyhulme. One issue is that not all the biomass that will be used is necessarily virgin forest. In the case of the Davyhulme plant, it is proposed to recycle already-used woods. Does he accept that if those woods have been treated with varnishes and paints, it creates a rather different picture for the potential carbon impact?
Nigel Adams
Yes, that is a fair point. I will make a number of points later in my remarks about the sustainability of the raw material.
Andrew George (St Ives) (LD)
While the hon. Gentleman is covering the issue, it would be interesting to hear his comments and advice, because I know far less about it than he does. To achieve the capacity that he is describing, what proportion of source would be imported? Has he seen any comparisons involving the wide range of organics that might be introduced into anaerobic digestion, as an alternative to the materials that he has described?
Nigel Adams
Drax and Eggborough power stations, if their plans are realised, will need 15 million tonnes of that material, the majority of which, it is fair to say, will come from abroad in a pelletised form. The UK simply does not have the forestry or the raw material. It is worth pointing out, however, that those are coal-fired power stations and that the vast majority of the coal—in fact, every bit of coal going into Eggborough—is imported.
Eggborough, as the Minister knows, is in the final stages of some detailed talks with the Department of Energy and Climate Change. The project is shovel-ready for full conversion of all four of its 500 MW units; the first unit could start generating exclusively from biomass in late 2014, if we get things right. Can the Minister reassure us that he will monitor and facilitate the progress of the second conversion project, which is important for my constituency and the UK, as it passes through the internal DECC processes? Over the next few years, as a result of the projects, the predominantly coal-fired stations will become predominantly sustainable biomass-fired stations, providing a significant contribution to the UK’s targets for renewable energy, protecting thousands of jobs, as mentioned by my hon. Friend the Member for Brigg and Goole (Andrew Percy), and enabling hundreds of millions of pounds of investment in the stations, as well as the enormous investment and job potential in the upgrading of our ports and railways to facilitate them.
Sustainable biomass is an essential part of our renewable energy mix: it is low cost, low carbon—if sustainably forested—and, importantly, it fuels reliable, predictable and dispatchable generation. Its availability is not exposed to the day-to-day vagaries of the Great British weather, so it can provide electricity when needed rather than when the weather permits. Also, unlike almost all other renewables, biomass does not require us all to pay for stand-by fossil fuel capacity for the times when the sun does not shine and the wind fails to blow.
By now Members will have gathered that I am immensely proud of and pleased with the progress we have made on biomass in Selby and Ainsty, which will soon be the renewable energy capital of Europe, as I am sure all will agree. We will have the potential for more than 4 GW of renewable generation in a five-mile radius, which is equivalent to some 8,000 of the large 2 MW onshore wind turbines or, put another way, to more than double the total realistic output of all the onshore wind turbines built in the UK by the start of this year.
I am, however, confused by some of the inaccuracies that tend to creep into the debate, often from those who should know better. To be clear, and as I mentioned earlier, biomass is not a zero-carbon technology but a low-carbon one. Emissions are associated with the harvesting and transport of biomass, and they must be extremely closely monitored. I fully support the Government’s efforts to ensure that mandatory sustainability standards are applied, as do Eggborough and Drax, which already insist on robust sustainability standards and criteria.
Most large-scale biomass generation in the UK will use wood, often by-products of other industries, such as forestry and sawmill residues together with non-commercial timber from thinning and forestry management operations. None of those sources cause land use change, which cannot be said of those used for biofuels such as palm oil; none of them results in lost opportunities for food production; and all of them generate substantial overall carbon savings.
Andrew Percy
Biofuels are important to the Humber, which has two bioethanol plants. May I encourage my hon. Friend to split biofuels into biodiesel and bioethanol, because the bioethanol production on the Humber is entirely sustainable and also provides an animal feed by-product? If he separates the two, we on the Humber will see that as helpful.
Nigel Adams
I hope that I have done so by making the point about the completely different product to be used to generate electricity at the power stations in my constituency.
The very process of managing a sustainable forest increases its ability to act as a carbon sink. Most of the biomass used for energy production in the UK will come from abroad, but it should and will come only from sustainably managed forests. In north America alone, the forest products industry harvests more than 500 million tonnes of timber per year, but demand for its products is declining. Unless the forests of the south-eastern USA get new production outlets, the health of those forests will decline.
We should note the scale of what we are discussing. I repeat: in north America alone, more than 500 million tonnes of wood is harvested every year. In only three selected regions of north America—the south-east, eastern Canada and British Columbia—it is conservatively estimated that a further 120 million tonnes could be sustainably harvested and utilised annually. Those figures put into some perspective the 30 million tonnes of wood that Drax and Eggborough need to produce the 15 million tonnes of pellets required.
In Canada, by providing a commercial use for the vast area of beetle-killed boreal forest—an area the size of England and growing year on year—we can help to turn what is currently a huge emitter of harmful greenhouse gases into a new carbon sink through clearance and Government-controlled replanting. Furthermore, the pelletising process enables us to ship the wood safely to the UK without any risk of importing disease, a subject that has been mentioned previously.
Some Members are aware of the so called carbon debt argument: because a tree burns in seconds but grows in years, there is somehow a carbon debt until a new tree has grown. The Department’s bioenergy strategy considered carbon debt in detail, however, and was explicit in its conclusion that, in situations where new forests are created, or existing forests have been under long-term management for production of timber and/or biomass, the harvesting of wood does not incur a carbon debt.
The biomass that Drax and Eggborough will use is to come from sustainably managed forests, which, as I said in response to an intervention, means that the growth must be at least equal to harvest, ensuring a neutral or ideally positive growth-drain ratio. In short, the sustainable management of trees in a productive forest means that they absorb more carbon than they would have done had the forest not been managed. In effect, such trees are building up a carbon credit as they grow. Can the Minister therefore reassure the House that the sustainability criteria for biomass, when the Government confirm them, will be based on the concept that a sustainably managed forest has a stable or increasing carbon stock, meaning that biomass from sustainable forest is at least carbon neutral?
Let me provide a few more basic facts about biomass generation. It is the only renewable technology able to supply base load renewable power at any scale. It is flexible and stable, and it has a continued role in balancing the grid with low-carbon generation. It is an essential part of the low-carbon energy mix and one of the only deliverable and affordable alternatives to the second dash for gas in which we might have to engage. Excluding biomass from the energy mix would significantly increase the cost of decarbonising our energy system. The Department estimates that sustainably sourced bioenergy could contribute around 11% to the UK’s total primary energy demand by 2020 and significantly more by 2050. Even taking into account the energy used to grow, transport and process the fuel, biomass-generated electricity produces substantially fewer emissions than are produced when fossil fuels are used.
Closer to home, I am mindful of the need to respect the effect of using biomass as a renewable fuel on other UK industries. The wood panel industry in particular is concerned about the impact on the historically low wood prices it has benefited from recently, but it should not have to worry because the wood that my power stations will use will come overwhelmingly, if not entirely, from markets in which it does not operate. The biomass industry relies on wood that no one else has a use for, certainly on that scale. It cannot pay the prices that the wood panel, paper, construction and furniture industries can pay, so instead of representing a threat to those industries, it provides a market for much of their previously unusable by-products that would previously have been burnt or put in landfill where they would degrade and emit carbon dioxide or, even worse, methane.
What about the benefits of biomass not just for electricity generation, but for the economics of the country as a whole? I am of the opinion that the biomass industry could generate infrastructure spending over the next three to four years alone of significantly more than £1.5 billion, leaving a lasting legacy of improvements to our ports and rail infrastructure while supporting thousands of jobs in the supply chain throughout the UK. That investment is needed now and should form part of the Government’s growth strategy.
I will come to a conclusion so that the debate can be opened to other hon. Members who have dragged themselves away from the Budget debate. I have stressed, perhaps overly, the conversion of my constituency’s two large coal-fired power stations to burn biomass, but that is just the first chapter, not the whole story, of the future of biomass. The conversion of existing fossil fuel plants is a speedy, low-cost first step in the transition from the use of carbon-intensive fuels to a greener alternative. It is an important part of what I see as a continuum in the use of biomass as a fuel source, which will also see new build, higher-efficiency power stations fuelled by a robust and sustainable fuel supply chain. Converting our coal-fired stations will not only see the country through an important transitional period, but will create a bridge to keep the lights on at the lowest possible cost. I suggest to hon. Members here today that on the grounds of electricity supply security, benefits to the economy and, most of all, emissions, sustainable biomass has a growing and valuable role and is a vital energy source for all our futures.
Ian Swales (Redcar) (LD)
I congratulate the hon. Member for Selby and Ainsty (Nigel Adams) on not only securing the debate, but his comprehensive review of the industry, and its opportunities and issues. My speech will be short because I was aware that, given his expertise, he would cover many of the points that I might make.
There is no doubt that biomass should be an important part of our energy mix. It is the fourth largest energy resource in the world after coal, oil and gas, and of course none of those is renewable, so it is the largest source of renewable energy in the world. However, this is yet another area in which the UK is playing catch-up. The Renewable Energy Association estimates that the industry employs about 2,000 people in the UK, compared with 60,000 in France and 68,000 in Germany. The technology is well established and many countries are exploiting it fully.
My constituency is in the Tees valley and, rather like the hon. Gentleman’s, it is becoming something of a Disneyland for green technology. Specifically on biomass, the advanced manufacturing technology centre, the Centre for Process Innovation and the Department of Energy and Climate Change are part-sponsoring anaerobic digestion research there, and Northumbrian Water has built a £60 million anaerobic digestion plant in the constituency. We have the largest bioethanol plant in Europe working on wheat. At the large Wilton chemicals site, Sembcorp has converted its power station to burn mostly timber. Across the river, Air Products is building a gasification of waste plant and is already planning its next one to make biofuels and even chemicals.
This morning, I was at the Department for Business, Innovation and Skills meeting Korean investors, including Jang Do-soo, the president of Korea South-East Power, which wants to invest in a 300 MW biomass power plant at Teesport. That will involve spending £500 million and follows the signing of a memorandum of understanding in Seoul some months ago, which was attended by a Foreign Office Minister and the UK ambassador. So far, so good, but we keep hearing inconsistent messages from DECC.
I could not attend the meeting of the all-party group on biomass on 26 February, but I was very impressed by the comprehensive notes arising from it—that is another compliment to the hon. Member for Selby and Ainsty, who chairs the group. At the meeting, the Minister repeated his belief that a new-build dedicated biomass plant is more likely to use domestic rather than imported biomass, yet at the same meeting, he referred to 700 million acres of forest in the US alone. The meeting was attended by the Virginia Secretary of Agriculture and Forestry, who is keen for exports. I have been lobbied by the US industry, which is desperately looking for greater use of its commercial timber plantations, as we heard earlier. Surely there is a place for efficient port-based biomass investment to support our base load of electricity in this country. I accept that that might be limited, but surely we should have one or two such facilities.
Some commentators do not seem to understand that wood is a crop just like any other. Sustainable forestry is no different from any other sort of farming; it simply has longer time scales. The industry needs sustainable supplies, because if it puts a substantial amount of capital on the ground, it cannot go round the world looking for spot purchases. A sustainable operation needs a source of sustainable feedstock because the investment is very long term.
I am disappointed about today’s announcement on carbon capture and storage. Teesside came third on a list of two in the CCS competition, but I still believe that it will eventually get a network.
The Minister of State, Department of Energy and Climate Change (Mr John Hayes)
I appreciate my hon. Friend’s disappointment, but I assure him that while we have taken two projects forward, we remain extremely committed to carbon capture and storage generally. I had a meeting this morning specifically to look at how we can work with the other projects involved. There must be a feeling among all those involved in CCS that everyone is a winner.
Ian Swales
I thank the Minister for his intervention, which is exactly the sort of response that the Teesside consortium is looking for, so I am sure that his comments will be noted. I thought that the weight of process industry on Teesside was unlikely to be given due regard in the competition, because that was not one of the criteria, but as we have 18 of the largest 30 carbon emitters in the country, excluding energy, a Teesside project should go ahead at some point. I am pleased by the Minister’s response and I believe that there will be another meeting on the matter with his Department on Friday.
CCS leads me to talk about something that I do not think the hon. Member for Selby and Ainsty mentioned. Biomass with carbon capture and storage is one of the very few technologies that can sequester carbon dioxide from the atmosphere for carbon-negative power. If we think about the problems we have in the world, how big a prize is that? We should seriously consider that combination of biomass with CCS, and the resulting sequestration.
I know that the Minister wants investment in infrastructure, which is a key aspect of current Government policy. The Teesport biomass plant is shovel-ready—I met the investors again this morning. I hope that it will receive his full support, but if his Department wants to cap such investments, will it please provide absolute clarity to investors so that time is not wasted, and we can all move on and think of something else to do? I repeat that the investors in such projects are receiving mixed messages.
Jackie Doyle-Price (Thurrock) (Con)
It is a pleasure to serve under your chairmanship this afternoon, Mrs Main. It is also a pleasure to follow excellent, well-informed speeches by two strong advocates for biomass and its potential for power generation.
I have long felt that biomass was the Cinderella of renewable energy. Although lots of subsidies have been thrown at wind and solar, the development of biomass capacity has been rather left to flourish by itself. As a good Conservative, with a clear understanding of the limits of Government, I feel it is probably better off for that. However, I am really grateful to my hon. Friend the Member for Selby and Ainsty (Nigel Adams) for securing the debate, as it is high time that the potential of biomass generation is fully recognised by Government, so that sufficient effort can be made to secure a regulatory environment with the certainty that my hon. Friend the Member for Redcar (Ian Swales) referred to, which facilitates its expansion.
I know the Government believe that biomass can play an important role in the future UK energy mix, and that is set out in the bioenergy strategy. They recognise that it is a dispatchable technology that has the ability to produce low-carbon energy quickly and, as my hon. Friend the Member for Selby and Ainsty pointed out, in response to demand—that is, it is not dependent on weather conditions that can affect other renewable technologies, such as, most notably, wind.
I am proud to represent Tilbury, which is in my constituency and has what is currently the world’s largest dedicated biomass power station. The history of Tilbury is interesting, because the power station was until very recently coal-fired, and it has been generating sufficient power for the whole of Essex for the past 50 years. However, the large combustion plant directive finished off Tilbury as a coal-fired power station, and I know that my hon. Friend the Minister will be very aware of how much impact the directive is having on our power generation capability. That really brings into stark relief the need for more certainty around the regulation and future environment for biomass, so that we can unlock investment in what is a very good technology for generating low-carbon power.
At its peak, Tilbury employed 750 people—today it employs 250, all in very highly skilled jobs—and it generated more than 1,000 MW, which is enough to power 1 million homes. In its 50 years of operation, it never breached its environmental licence. That prompts the question, although we implement EU directives with very good intentions, in terms of reducing emissions, when we look at the detail of the impact, are we really hitting the right things when we are looking at tackling climate change and environmentalism? I just put that out there. It is not unusual for the European Union to get things very badly wrong. As I said, the directive had the effect of finishing off Tilbury, despite the fact that Tilbury only ever breached its emissions limits when the A13 was full of traffic, which tells us exactly where the air contamination was coming from.
Faced with the need to close the plant, RWE npower—the owners—decided to be imaginative, and instead of running on coal until they had to close, they decided to make the groundbreaking decision to explore the potential for conversion, so that they could learn by doing and transfer that learning to developing biomass in future. What they did was not only groundbreaking but risky, and they deserve congratulations for their pioneering work on developing the ability to convert coal-fired stations to biomass. As a result of that conversion, Tilbury is now the world’s largest dedicated biomass power station, having burned coal for the last time in March 2011. I lament the departure of coal, but it is still exciting to witness what has been happening at Tilbury.
The station burns wood pellets, and in response to the intervention by the hon. Member for Blackley and Broughton (Graham Stringer), those pellets come by ship from America. That is, as he will probably recognise, a sustainable way of transporting them. As my hon. Friend the Member for Redcar mentioned, where we have power station infrastructure located at portside and the ability to transport by ship, it makes that method of power generation very sustainable.
The remainder of the hours that Tilbury has under the large combustion plant directive means that it can only generate from biomass until next year. It seems crazy that, having converted from coal to biomass, we still have to close the plant. However, RWE has big ambitions and wants to invest in a new facility to replace the existing station, having learned many lessons from the conversion. We are hopeful that the necessary permissions will be achieved and that the project can go forward, so that Tilbury can continue to keep Essex’s lights on.
It is fair to say that the conversion is less efficient than coal, but it is still pretty efficient. As I said, under coal-fired generation, the plant generated more than 1,000 MW, and now it generates 750 MW. That is a significant contribution to the national grid, and much more than the wind turbines that my hon. Friend the Member for Selby and Ainsty referred to. The conversion has, however, had a significant environmental impact, with a 70% reduction in greenhouse gases. That illustrates just how powerful converting existing infrastructure could be in terms of meeting our objectives on climate change.
During the conversion, RWE was faced with many challenges—technical, operational, and health and safety—but much has been learnt and the company would be very happy to share its expertise with the Government and more widely. The operation of Tilbury to run on sustainable biomass has had a big impact on the UK’s ability to meet its targets. That illustrates the potential of biomass generation to give a new lease of life to existing power stations, which, without conversion, would have to be decommissioned, but are sitting on top of connections to the national grid. As we look at further investment in energy capacity, connections to the grid are an important expense to deal with.
With over a third of our existing generating capacity due to close by the end of this decade, clearly, more investment in renewable and low-carbon technology is required—and quickly—so that, in future, we have a secure energy supply, a lower-carbon energy supply and, as my hon. Friend the Member for Selby and Ainsty said most eloquently, an affordable energy supply. That is why we need to unlock the supply challenges quickly, because without increasing supply, the impact will be on price, and our most vulnerable consumers will be hit. We need, therefore, to tackle the problem.
As I mentioned earlier, the beauty of Tilbury as the location for a dedicated biomass station was its suitability for transporting the wood pellets by ship, as that made it particularly sustainable. As my hon. Friend mentioned, there has been a lot of misinformation about the sustainability of biomass generation, with much scaremongering that burning wood pellets will mean the end of our forests. However, nothing could be further from the truth. I have had conversations with representatives of the forestry industry in the United States, and they are very excited and keen to satisfy the demand that this country might have for further biomass generation. It was suggested in some briefings only this week that Government plans would involve the burning of up to six times more wood than the entire UK forestry harvest, but that is totally misleading, because we are looking beyond our tiny island for supply. It can be achieved in a very sustainable way.
The ability to tap into that demand has given sustainable forestry a whole new lease of life. As we have increased the recycling of paper, the demand for forest products has altered, which means that there is a desire to look at new sources of demand. Over time, that will only accelerate, so I really do not believe that the wood panel industry has anything to worry about, in terms of the future of its supply.
Ian Swales
My hon. Friend is making an eloquent case regarding sustainability. Does she agree that it is interesting that even the Royal Society for the Protection of Birds is now saying that properly managed sustainable forests are valuable ecosystems in themselves and should be encouraged?
Jackie Doyle-Price
Yes, the RSPB’s comments are welcome, but it really needs to join things up. As we know, a little knowledge is often a dangerous thing, and it does not take much investigation to realise that some of the fears put out by the so-called environmental lobby, once they are unpicked—
Mr Hayes
I am grateful to my hon. Friend for raising the issue of wood panels, as other Members have. I am determined to do right by the wood panel industry. The Government are engaged with the industry and I shall say a little more about that, but it is right that we listen to the industry, take into account its circumstances and ensure that our policy has no unintended consequences. However, as far as the other people that my hon. Friend mentioned are concerned—I sometimes describe them as bourgeois liberals, do I not?—their malevolent, malign, mischievous opinions will be isolated by this Minister.
Jackie Doyle-Price
I thank the Minister for those comments. I agree that we need to take the wood panel industry with us. I suspect that, with more understanding and dialogue, it will come with us, because the case has been made that we can supply the demand for biomass without impacting the industry’s supply unduly.
Guy Opperman (Hexham) (Con)
I apologise for arriving late for the debate, Mrs Main. I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing it, and thank my hon. Friend the Member for Thurrock (Jackie Doyle-Price) for taking my intervention. I should declare an interest as a member of the all-party group for the wood panel industry, and I have an employer in the industry in my constituency. I absolutely endorse all the points that have been made thus far, but I would make two points to my hon. Friend. The first is that the timber price has gone up by well over half—
Mrs Anne Main (in the Chair)
Order. I remind the hon. Gentleman that interventions must be brief.
Guy Opperman
Will my hon. Friend comment on the fact that the timber price has gone up by at least half since we have had the domestic subsidy?
Jackie Doyle-Price
All I can say is that RWE is planning on making a significant investment, and it has invested in its supply chain. The issue that my hon. Friend raises really will not impact on its ability to run the dedicated biomass facility in Tilbury. I would also point out that timber is not the only commodity that has gone up in price in recent years. I really do not think, therefore, that the issue that my hon. Friend raises will be any impediment to further exploitation of this technology.
I look forward to Tilbury rising again and reopening with new permissions and with a brand-new facility. I hope the Minister will look at coming to visit in due course to see how plans are progressing. I am really pleased that RWE remains committed to Tilbury and that, despite having to close its existing facility, it still wants to invest in power generation on the site.
I know the Minister does not require too much encouragement in this regard, but I would like to highlight how much this issue illustrates what happens when Governments fail to fight our corner in Europe. I can see a situation coming down the track very quickly where we will be forced to buy more and more electricity from France, in particular, because the regulatory system has favoured nuclear over coal. We all want cleaner, greener energy, but we need to keep the lights on, and we need to make sure that people can afford to heat their homes. For our own energy security, therefore, we need to make the most of the potential of biomass as an energy source, given its generating potential, and given how much more of our domestic demand we will be able to supply.
I implore the Minister to make every effort to ensure that rapidly deployable capacity, in the form of biomass conversion, comes on stream as quickly as possible. In that respect, I cannot add much more to what my hon. Friend the Member for Selby and Ainsty said in his opening remarks.
I want to make a final point about investment. As a country we rely heavily on private capital to achieve the investment in power generation that we need to meet our energy needs after 2015. As my hon. Friend the Member for Redcar said, to achieve that, industry needs long-term certainty to encourage investment, particularly in a world where capital is finite and the market environment very competitive. In addition, we are dealing with energy companies that are global in their reach, and they can easily go and invest their capital elsewhere.
It is telling that coal-fired power stations are being built in Germany, when we have made coal completely uneconomic in this country. When we are dealing with private investors and expecting them to invest billions of pounds so that we can keep our lights on, we must recognise that they are not in it for charity, and we must enable them to facilitate that investment in the best way we can. To put it bluntly, the Department has, hitherto, been not enough about energy and rather too much about climate change. I believe that really has to change, and I know that if anybody will facilitate that change, it is my hon. Friend the Minister.
Graham Stringer (Blackley and Broughton) (Lab)
I want to make a few general points. First, I congratulate the hon. Member for Selby and Ainsty (Nigel Adams) on initiating this important debate. If I was in his situation and had in my constituency two major coal plants that would shut if they were not converted to biomass, I would take exactly his position.
I want to take a step back and give a slightly wider perspective on what is happening, in line with what the hon. Member for Thurrock (Jackie Doyle-Price) said about energy and climate change. I can think of no country in history that remained competitive while it had higher energy costs than its competitors. At the base of our present energy policy is a huge gamble that gas prices will increase and that therefore the investment that the Government are making will make alternative energy competitive. At the moment, however, it is not competitive, and we need to bear that in mind, particularly given the worldwide increase in shale gas.
The second point I would make about the conversion to biogas is that it has two drivers: one is bonkers and counter-productive, while the other should not be implemented. One is the 2020 directive from Europe, which is an attempt to achieve a 20% reduction in carbon dioxide emissions by 2020. On one level, that would be fine, but the measure deals with only one side of the equation—emissions. It does not deal with consumption, and the reason why the carbon budget in Europe and this country is going up is that we are importing machines and other products from elsewhere, which is why the amount of carbon dioxide in the atmosphere is increasing generally. The policy is not working and it is counter-productive—it is a deindustrialisation policy disguised as an environmental policy.
The other problem, which the hon. Lady mentioned, is the large combustion plant directive. I do not understand why this country must implement the directive by a particular date. In that respect, the Minister, who I think is excellent—I rather prefer his interpretation of the country’s energy policy to the Secretary of State’s—owes me, unusually, a letter. I asked him why we had not applied to extend the deadline for implementing the directive, which is allowable under its provisions. Perhaps he will tell us in his response.
There is a subsidy and a cost to biomass. The hon. Member for Selby and Ainsty made a good case, and he gave two reasons for using biomass. One was jobs; as I said, I would make the same argument if I was in his situation. However, when we give an industry a subsidy, as is the case for biomass and the rest of the alternative energy industry, there is a cost elsewhere, as the hon. Member for Thurrock said. That subsidy could be costing jobs elsewhere, even though it may not be necessary.
The second reason that was cited related to security of energy supply, which I would always put at the apex of energy policy. One can argue about price and how energy is made, but if we do not have any, we have nothing to argue about. I remind the hon. Member for Selby and Ainsty that, in times of difficulty, whether that is to do with energy or anything else, an energy supply that comes across the north Atlantic is not totally secure.
Nigel Adams
The hon. Gentleman should consider where the fuel comes from now. We buy millions of tonnes of coal to fuel our power stations. It comes across in ships, and I imagine it is extracted through open-cast mining. That has been going on for years, so this is not a new phenomenon. Of course we must get the biomass from somewhere.
Graham Stringer
The hon. Gentleman makes a valid point. The trees and forests of this country certainly could not be a sustainable supply, given the level of burn that there would be.
I am reminded a bit of Aneurin Bevan’s comment that we live on an island made out of coal and surrounded by fish, and it would take fools to damage our food or energy supply. I do not know what has happened in the past 30 or 40 years.
Ian Swales
The hon. Gentleman makes an interesting counter-argument. Previous speakers in the debate have cited north America as an example, but he will be aware that the paper and pulp industry has long imported biomass, mainly from Scandinavia. The power project to which I referred in my speech is in detailed talks with the Finnish industry as one of its main suppliers.
Graham Stringer
In a stable world economy, crossing the Atlantic or the North sea is not a problem, but a secure energy supply really means being able to do things here, and there is a risk to our energy security from moving from fossil fuels, of which we have hundreds of years’ supply, to biofuels. I just want to make that simple point.
Another point that has not come out much in the debate is the problem of toxicity. I have tabled several parliamentary questions on the matter in the past year or so. According to an answer of 23 May 2012, at column 701W, the burn of biomass in 2010 added to the atmosphere 160 tonnes of chromium, 130 tonnes of arsenic and 16 tonnes of hexavalent chromium, all of which are damaging to health and likely to reduce people’s life expectancy, although the figures are not completely available.
Kate Green
My hon. Friend puts his finger on the concerns of people in my constituency. Does he agree that in addition to the emissions and their possible impact on air quality, there is concern about incinerator ash and a sense that that, too, should be treated as hazardous waste?
Graham Stringer
I know from my hon. Friend’s constituents, who have written to me, that there is great concern about these problems in Stretford and Trafford, so I wanted to bring that to hon. Members’ attention, because it has not yet been discussed.
Finally, I think that the carbon debt is slightly greater than the hon. Member for Selby and Ainsty said, partly because some new trees will be used. Interestingly, to hit the European 2020 targets, the carbon must be back in a tree by 2020, so if we are dealing with trees that take 10 or 20 years to grow, biofuels should not count towards the target, because that will not have happened. I think there is a bit of a fiddle going on.
Ian Swales
The hon. Gentleman is repeating one of the great fallacies about the industry, on which I think that the hon. Member for Selby and Ainsty (Nigel Adams) touched. Let us say that there is 20-year cropping of a stand of trees, with a 20th taken out and replanted. All the evidence shows that the overall carbon in that stand of trees at the end of the year will be the same, or will even have increased, despite the cropping, because all the other trees will have become bigger. The idea that when one tree is taken out—
Mrs Anne Main (in the Chair)
Order. I ask for brief interventions because we are short of time.
Graham Stringer
It is a complicated equation, although I accept what the hon. Gentleman says. There is also the question of the carbon that comes out of the earth, however, and the black carbon, which is a product of the combustion and also leads to global warming. It is a very complicated equation, so it is simply wrong to say that the process is carbon-neutral.
Although I have the greatest respect for the case made by the hon. Member for Selby and Ainsty, we are dealing with a subsidised industry that would not have been established without two European directives, one of which is counter-productive, while the other is deindustrialising the country. People’s health is being damaged and, in the round, the policy is not a good one.
Mrs Anne Main (in the Chair)
Order. I remind the two hon. Members who wish to speak that the winding-up speeches will start at 3.40 pm. I hope that that will be taken into account so that they both can be accommodated. I call Glyn Davies.
Glyn Davies (Montgomeryshire) (Con)
I shall try to limit my speech to five minutes, Mrs Main. Will that be within the time limit?
Mrs Anne Main (in the Chair)
I am sure that the hon. Gentleman will be able to say all he wants to say.
Glyn Davies
Perhaps I will take even less time.
Whenever I hear that there is to be a debate about energy, I feel an almost irresistible force within me demanding that I rant about the desecration that onshore wind will cause in my constituency. I am sure that you, Mrs Main, and the Minister will be pleased to hear that I do not really want to do that today, although I will say that that power forces me to take a great interest in all other forms of energy, because one cannot be just against things.
I want to raise two constituency concerns about biomass, but that is in the context of my huge support for it in general. The first matter has a great constituency impact and comes into the category of unintended consequences. There are two anaerobic digestion plants in Shropshire that use maize, and they are devastating Montgomeryshire dairy farmers’ ability to access maize land, so their traditional way of farming will have to change. Those farmers have dairy herds and have either rented land to grow the maize, or have bought the crop wholesale to feed their stock. They can no longer afford that, because they are being driven out of the market by plants that burn maize crops in England. When we consider biomass use, we must be careful about the unintended consequences for other important industries. Of course, the ability to feed the nation is a huge part of what must always be Government policy in Britain—indeed, the same thing would apply throughout the world.
My second point relates to a constituent, Mr Clive Pugh, of Bank farm in Mellington, who is a huge enthusiast for biomass. Twenty years ago, he built an anaerobic digestion plant on his farm. It uses waste, and for 20 years it has been profitable and successful, but now he finds that because he has a payment subsidy through renewables obligation certificates, the support he gets is nothing like what it would be under the feed-in tariff regime. There are competitors all over Shropshire, in brand new plants, who probably get 11p or 12p a kilowatt-hour for the energy that they produce. Many of them are producing that energy from products that can be used for other purposes, but Mr Pugh simply uses waste products—and nothing but waste products. That helps the fertility of his land, which does not need so much fertiliser, and it does not even need so much weed killer because the process kills the weeds. However, he is being driven out of business.
When I wrote to the Minister about that, I received the reply that someone such as Mr Pugh really should have asked for his payment regime to be transferred before 2011. However, small business people such as Mr Pugh do not realise that, and now he finds that he is no longer able to transfer—there was a cut-off date. New plants are going ahead elsewhere, and Mr Pugh will be driven out of business, but he is the pioneer. He was the man who established the examples and showed us how the process could work, yet he is the one who will be driven out of business.
Mr Hayes
I shall deal with this matter through an intervention now, if I may, to save time later. I will ask my Department to look at the particular case of Mr Pugh, which my hon. Friend has done a great service to the House by raising, and that of others like him. Clearly we need to do something that is consistent and coherent. None the less, my hon. Friend has raised an important matter and I will ask for it to be dealt with.
Glyn Davies
I had reached the conclusion of my speech, but I am very glad that I took that helpful intervention.
Guy Opperman (Hexham) (Con)
Everyone here would agree that the fundamental concept of biomass is a good thing. There can be no objection by any Member of Parliament or any constituent to the fundamental principle and support for it. However, as always with Government policy, including in the three years that I have been in the House, the consequences are not always what we would wish to see. I am faced with a situation—this is the third Minister in three years whom I have addressed in relation to biomass subsidy—whereby, on the one hand, the standard person who is buying timber, whether it is a furniture maker, someone doing wood panelling, a caravan maker or any other person using timber in any way, shape or form in this country to run any kind of business whatever, buys at a price that is unsubsidised by the Government. On the other hand, energy companies that wish to purchase timber in this country for use in a biomass energy plant are subsidised to a large and significant degree by the Government.
The consequences are very clear. First, the timber price goes up. Secondly, the energy companies have a competitive price advantage, which allows them to purchase timber at a cheaper rate than all other purchasers in the country. Every single person, save for an energy company, gets a different price. That, from a Conservative coalition, I find illogical and hard to believe, given that we are meant to be a free-market-based organisation. The reality is that the subsidy is distorting the market, raising the price of timber and, I regret to say to my hon. Friend the Minister, posing a severe threat not just to the wood panel industries, but to any utiliser of wood in this country.
Nigel Adams
I have the utmost respect for my hon. Friend. I just wonder whether he can tell me of a significant power generator in the country that is buying its timber to be pelletised from sources within this country.
Guy Opperman
In accordance with the time-honoured traditions of the House, I shall be delighted to write to my hon. Friend and give him chapter and verse. The honest reality is this: I cannot give him chapter and verse right now. However, he will be fully aware that there are only two places where a biomass energy company can purchase its timber product. It can come from this country—we have 12 million tonnes of timber, and a large proportion is going to British-based energy companies—or it can be obtained from overseas. My hon. Friend is making faces from a sedentary position along the lines that he disagrees with me. I manifestly do not accept that. In fact, I will definitely make the case—I would be interested if the Minister could comment, because he is very informed—that if there is in reality no energy company in this country creating biomass that is utilising—
Guy Opperman
I will not give way any more. The situation surely is this. On any interpretation, if there is no energy company in this country that is utilising domestic wood—
Guy Opperman
If there is none or no significant one, why is a subsidy needed? If there is no utilisation, that is all the more reason why the Minister should take the dramatic point of view that we should get rid of the subsidy. With no disrespect, the energy companies cannot have it both ways. They cannot say, “We need a subsidy to buy timber in this country; that subsidy is to help us,” and, alternatively, “We don’t use it, so we don’t need the subsidy.”
Julian Sturdy
Can my hon. Friend say where this Government energy policy or renewable energy policy generally would be without subsidy? I am struggling to understand, because surely all energy policies attract subsidy. The question is whether it is good or bad and how far it goes. Renewable energy policy attracts subsidy across the board.
Guy Opperman
I accept that. We all understand that to kick-start energy policy, there must be subsidy—no one disputes that—and there has been, in a multitude of different energy fields over a long time, under successive Governments, that process. However, just as the Government have reviewed the subsidy that exists in relation to solar or other types of energy production, so the Government have an obligation to review the extent to which they subsidise domestic wood. I shall go further than that and say this. In this context, it is having an impact on jobs. There is no question in my mind about that. It is also having an impact on the consumer, because as with all energy, there is a degree of subsidy, and that subsidy is coming from the consumer. The consumer is paying, through Government subsidy, for the consequences of the energy production. Therefore, to say that it is without any adverse consequences whatever would be simply wrong.
Jackie Doyle-Price
The area that my hon. Friend is opening up now—the impact on consumers—is a very important one across the wider perspective of energy policy. The reality is that we need to invest in generating capacity, and biomass will be an important ingredient of that. If we do not do that, the price of energy for consumers will go up, because we will be having to buy that power on the open market.
Mrs Anne Main (in the Chair)
Order. I remind the hon. Gentleman that the winding-up speeches will start in just under four minutes.
Guy Opperman
Mrs Main, I take everything that you say very seriously and most particularly the fact that I have two minutes and 54 seconds in which to finish. It comes down to this. The Minister is a free-market economics guru. He is a robust embracer of his brief. However, I remain to be convinced of why we subsidise one item for one particular organisation, while we do not subsidise on the other hand. I am told by my hon. Friend the Member for Selby and Ainsty (Nigel Adams), who is both a friend of mine and very eloquent in the way he puts his case, that there is no effectual usage of domestic wood in this country—yet we still subsidise it. With respect, that is totally illogical. Either the subsidy is required to continue for domestic wood, or it is not. Mrs Main, I thank you.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
It is a pleasure to speak under your chairmanship, Mrs Main. I congratulate the hon. Member for Selby and Ainsty (Nigel Adams) not just on securing the debate, but on the comprehensive way in which he dealt with the issues in relation to biomass. To start with, he is right to make the distinction between biomass and biofuels. The Minister, I am sure, will recall that on 6 March we engaged in the discussion on the Renewables Obligation (Amendment) Order 2013. Certainly the hon. Member for Brecon and Radnorshire (Roger Williams) was present as well. I do not know whether anyone else here was. Possibly the hon. Member for Redcar (Ian Swales) was; I am not sure. The debate touched on a range of issues, but it focused particularly on biomass and biofuels, and I did reflect that there was sometimes in that discussion a degree of confusion and overlap between what people were talking about, so the hon. Member for Selby and Ainsty was right to make the distinction between the two at the outset of today’s debate.
This debate is important. I am conscious of the time and I do want to give the Minister time to respond to the wide range of points that have been made during the debate—some specifically on biomass and some slightly more wide-ranging—but I just want to reflect on the point that the hon. Member for Selby and Ainsty made in relation to the perhaps liberated comments made by the soon-to-be former chief executive of Ofgem when he talked about the capacity crunch recently. While not wishing to disrespect that opinion, I am sure that he will be aware that there are a number of different views about what the level of capacity will and will not be. That is one scenario, but it is important to highlight that similarly expert commentators have painted other scenarios. We need to reflect on them all, to see where we are going with our wider energy policy.
The hon. Member for Redcar referred to the decisions announced today on carbon capture and storage. I was interested to hear the Minister’s response, particularly on the two projects that were not included in the announcement in the Budget today. If we are serious about CCS, we need to ensure that we get the long-term support regimes—such as those we are discussing in the Energy Bill, which is awaiting its Report stage—right. That will ensure that those two projects—and the Hatfield project, which was not successful in the New Entrants Reserve 300 funding scheme, because it did not get the go-ahead for match funding from the Treasury—are not completely lost and that we do not lose opportunities in those areas and in the export potential of our technological and academic lead in the industry.
The hon. Member for Thurrock (Jackie Doyle-Price) talked about the power station at Tilbury, the impact it has had and its contribution to the national grid since its very recent conversion. She also made an important point about the cost of grid connections. It is about not only the financial cost, but the time it takes energy sources to be connected to the grid, particularly in the less populous parts of the British isles. There are complications, and concerns about the time some sources take. Her important points add to the case for making biomass part of the balanced mix, particularly because, as is sometimes described, it can be used during a transitional phase, while other sources are developed further. I do not think that biomass is completely ideal, but we do not live in a completely ideal world and we have a significant energy challenge to meet over the next few years.
The hon. Members for Hexham (Guy Opperman) and for Montgomeryshire (Glyn Davies), who do not necessarily have negative perspectives, drew attention to some areas of concern with biomass. They both pointed out that they are not opponents of biomass, but they wanted to draw the House’s attention to some of its consequences. I shall pick up from where the hon. Member for Hexham left off. I do not do so as some sort of “bourgeois liberal”, “chi-chi” commentator or whatever other phraseology the Minister uses to keep those behind him happy in debates, but from the serious perspective of the potential consequences for other industries. I am sure that the Minister will recall that I touched on the specifics when we discussed the topic in Committee.
I discussed some of the consequences with my right hon. Friend the Member for Stirling (Mrs McGuire), who is a colleague of the hon. Member for Hexham on the all-party group on the wood panel industry. The issue is what is, and is not, waste. We hear a different interpretation of waste when we talk to the wood panel industry, as opposed to when we talk to other industries, such as the furniture industry. There needs to be a decent level of engagement between the Government and the industry, because they have different data that show very different things—the impact on price is just one factor that needs to be explored properly. The Minister said earlier this afternoon that he intended to ensure that there was that level of engagement. It is important because anyone’s starting point with biomass is that it needs to be sustainable and focused on genuine waste products—products that cannot be used in any other meaningful way, such as in furniture or in the wood panel industry, which can use lower-grade wood than the furniture industry. I am sure that he is well aware of those points.
Ian Swales
The hon. Gentleman is right to flag up the differences in data. Is he aware that the Renewable Energy Association says that there has been a 15% fall in wood prices in real terms since 1996?
Tom Greatrex
Indeed, and I was about to quote from its figures. The hon. Gentleman is right and he makes the point about the different interpretations. In debates about different aspects of energy policy, sometimes differences of view are over-interpreted and elaborated on by people with an ideological objection, which is regrettable. In this case, if we go into the detail of the different sets of data, to establish exactly what the impact is, it would be good for the industry and good for the energy supply going forward.
The last time we discussed this, in a Committee, I asked the Minister some questions. He gave a commitment, but he did not answer other questions precisely or completely, so I would like to give him the chance to do so, because there is a slightly different audience this afternoon. When he met the all-party group, he agreed to write to generators requesting information on their biomass sourcing intentions for the next five years. I want to press him again on whether the correspondence has begun and whether the information is back from the generators. They are important data, particularly, as he knows, in relation to the differentiation between imported and indigenous supply, which brings us back to the points the hon. Member for Hexham made about the industry.
The Minister said that he will look again at the option of differentiating support for imported and indigenous products. Will he come back to that point? He also said that he would establish a working group with the wood panel industry and that the letters would go out before the end of the month. We are not quite, but almost at the end of the month, and he made the commitment at the beginning of the month. Has he been able to do it yet?
Mr Hayes
I have indeed written to the large-scale users of biomass for information about the kind of product they use. My Department is analysing that information and will follow it up in the way I said I would. In addition, my Department has been in touch with the wood panel industry to arrange a date for the workshop I want to put on, to ensure that we are comparing like with like and that the data we have received are in line with the industry’s data. I take the hon. Gentleman’s point about mismatch and the difficulties of definition.
Tom Greatrex
I thank the Minister for that response. I am sure that those who have expressed concerns will welcome his clarification. I do not have an objection to biomass, but it needs to be employed properly, which is about sustainability and transparency in sourcing.
Roger Williams (Brecon and Radnorshire) (LD)
I have listened carefully to the discussion today, most of which has been about large-scale operations. The BSW Timber sawmill in my constituency uses waste to kiln-dry material for use in gardens and other facilities. With no transport costs, keeping it local adds to the sustainability of biomass and carbon reduction.
Tom Greatrex
I thank the hon. Gentleman for making that important point, which I neglected to make in the time I have available. I shall finish my speech shortly. The use of biomass in combined heat and power and the links with industry are important aspects of it being able to be used.
In conclusion, biomass should be sustainable and focused on waste. If we can get those things right, I do not think there will be any genuine objections to biomass, because it will deal with some of the genuine, as opposed to ideological, concerns. In the energy debate, although people have the right to hold a completely different view, we should always differentiate between addressing genuine, legitimate concerns and accepting an ideological difference for what it is, rather than getting too hung up on it.
The Minister of State, Department of Energy and Climate Change (Mr John Hayes)
It is a great pleasure to serve under your chairmanship, Mrs Main, and I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing this important debate on a topic that, as we move to a large proportion of our energy needs being met by renewables, is vital. John Ruskin said that it was always
“more difficult to be simple than to be complicated”.
An aim of the debate on energy strategy and policy is to make it more straightforward, for when we make it esoteric, we not only confuse most of the public, but I suspect we may confuse ourselves.
My mission is to bring a straightforwardness to energy policy, and at the heart of that straightforwardness, as the hon. Member for Blackley and Broughton (Graham Stringer) said, is that there is no imperative more significant than that of energy security—ensuring that supply meets demand. All the other considerations may have value, and some may have great significance, but unless a Government, though Governments do not do it all themselves, of course, can bring about a set of conditions and establish a framework in which that can be assured, they are failing, which is why biomass, and particularly coal conversion, is so important. It is, as my hon. Friend the Member for Thurrock (Jackie Doyle-Price) argued, a reliable, predictable and secure means of helping to ensure energy security. It is as plain—in Ruskin’s terms—and simple as that, but the debate deserves more than that, and I want to talk a bit more about the detail.
I recognise that there are many pros and cons involved, and to balance them the Department has set out four guiding principles for our biomass energy policy. They are that biomass must be sustainable, that it delivers genuine greenhouse gas savings, that it is cost-effective and that its unintended consequences on other industries are minimised. All those issues have been mentioned during the debate. The hon. Member for Stretford and Urmston (Kate Green) talked about sustainability, the hon. Member for Blackley and Broughton raised the issue of greenhouse gas savings, and my hon. Friend the Member for Brigg and Goole (Andrew Percy) and others mentioned cost-effectiveness. I see my role as ensuring that the principles are applied pragmatically and consistently.
I would like to set out why I believe biomass is an important part of the energy mix.
Kate Green
Does the Minister agree that it is important that there is absolute transparency about whether the principles are being complied with, particularly when there are anxieties about the environmental impact of plants?
Mr Hayes
We should not underestimate that. It is important that it is properly considered. The hon. Lady will know that the Government are committed to sustainability in those terms. If I have time, I will say more about that, but if I do not, I would be more than happy to write to her with the detail.
The hon. Lady is right that it would be wrong to be cavalier about that, just as it would be wrong—and I say this to my hon. Friend the Member for Hexham (Guy Opperman), who is a great champion of the wood panel industry, and rightly so—for us not to take into account unintended consequences. The unintended consequence for farmers, as my hon. Friend the Member for Montgomeryshire (Glyn Davies) mentioned, can also be profound, and it is about straw too. Pigmeat farmers, for example, are concerned about the effect on straw prices of its use in biomass. My hon. Friend raised the issue of dairy farmers. I take that point, and we will consider the matters. It is important that there is no displacement effect. The unintended consequence is as significant as the virtue of what we are trying to achieve.
But the virtue is a profound one. We are talking about a proven source of energy. At the end of the third quarter of 2012, the total electricity generating capacity of biomass electricity generating stations was 3.5 GW, which was an increase of more than 900 MW over the previous year. It may not be known that landfill gas is 1 GW of that capacity. For many years it has been an important source of energy, predating some other technologies that get more airtime, perhaps because they are perceived to have greater glamour.
With the right criteria in place, by 2020 as much as 11% of the UK’s total primary energy demand—for heat, transport and electricity—could be met from sustainably sourced, biologically derived biomass. Most of it would be from wood, and our analysis indicates that that can be done without significant effects on food production or the environment. Biomass can, therefore, play a greater role, but I am mindful of displacement and sustainability. Biomass also offers controllability and predictability, as I suggested earlier, so it can provide both base-load generating resource and peak power energy as required.
It is important to recognise that biomass conversion is a cost-effective and quick means of decarbonising our electricity supply. In July last year we announced our revised levels of support for biomass under the renewables obligation and set out new bands to support the conversion of coal-powered stations, as we have heard. I recognise the challenge of Tilbury and I am happy to work, along with my officials, with my hon. Friend the Member for Thurrock to ensure that we do what we can to facilitate the process. There is, of course, a commercial decision at the heart of that, as my hon. Friend well knows, but the Government will do what they can to ensure that the process is as equitable as possible. I appreciate that my hon. Friend has been a great champion of Tilbury because she knows that the issue is not only about energy; as so many hon. Members have reported, it is about jobs and skills too.
My hon. Friend the Member for Selby and Ainsty made that perfectly clear in respect of his constituency. My goodness, I have met him a number of times to talk about this subject, including about Eggborough and Drax. I am pleased to say that my Department has recently written to Eggborough power station, as he knows, and set out the process by which it can take its ambitions further forward. I hope that that has been helpful; it has certainly added clarity to the circumstances the station is in. There are further steps to be made, and I assure my hon. Friend that they will not be unduly lengthy and that they will be clear to Eggborough. We will advise and support the process that he is so passionate about ensuring comes to a happy outcome. I am grateful to him for giving me the opportunity to put all that on the record.
I am also grateful to other Members, including my hon. Friend the Member for Redcar (Ian Swales), for allowing me to say a brief word about carbon capture and storage. I want to affirm what I said in an intervention, which is that taking forward the CCS projects, with the £1 billion competition, will do so much to change our assumptions about future energy—CCS can give a long-term future to gas, of course, and to coal I hasten to add. I want to make it clear that the projects that have not made the final two are of considerable interest to us and that we will maintain a dialogue. I will speak to my hon. Friend personally about some of the details later today.
Sustainability matters too though, and we have put in place demanding criteria for the supply of fuel. The hon. Member for Stretford and Urmston has emphasised sustainability a number of times and the shadow Minister, the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), was right to draw it to our attention in reference to the renewables obligation statutory instrument that we debated a week or two ago. It is right that we look at the supply of wood and that we take account of the definitions of what waste wood really is. I have already said that that work is ongoing, but I am very happy to share it with the House at all opportunities and to continue to an outcome with which the wood panel industry, in particular, is happy.
The work we are doing on sustainability requires ongoing consultation. The sustainability controls that we have put in place are still the subject of further discussion. Many hon. Members have raised that matter with me when we have debated such things in the House, and I can confirm that we are tightening our thinking in this area. We intend to ensure that we can move ahead with confidence, because we think that biomass is so important.
Biomass must, however, also be cost-effective. We make no apologies for insisting that we must deliver value for money for the energy bill payer, maximising the amount of renewable energy and carbon reduction we receive for our investment. Coal conversions offer, perhaps, the best means of ensuring that value for money, and using waste to generate electricity also provides a cost-effective route, as long as we can accurately define what waste is. Let me just say this on waste: it seems that the location of this kind of biomass plant should be close to the source of supply, and ideally close to the source of demand, too. They are industrial plants with an industrial purpose, and I want to emphasise that.
I thank my hon. Friend the Member for Selby and Ainsty again for drawing this matter to the House’s attention. I confirm that the Government are entirely committed to biomass and to its role in our energy mix. I am glad that we have had the opportunity to talk about this, and while I am the Minister, and while I am driving the policy, Ruskin’s advice, about being straightforward about our objectives, will be not only my view, but the Government’s view.