Energy Spending Priorities: Investors and Consumers
Debate between Barry Gardiner and Angus Brendan MacNeil
Barry Gardiner (Brent North) (Lab)
I thank the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) and his Committee for initiating this debate, for giving the House the opportunity to consider the direction of the Government’s energy and climate change policy, and for their excellent reports.
Like the hon. Gentleman but, I suspect, unlike the Secretary of State, I look forward to the publication of the findings of the National Audit Office’s inquiry into whether the Government will have to pay compensation to carbon capture and storage project developers. That could result in a multimillion pound bill for the taxpayer. I hope that the Secretary of State will acknowledge that this might have been an extremely expensive decision indeed. One would be forgiven for imagining that DECC has received instruction from the right hon. Member for Surrey Heath (Michael Gove) when one looks at the way in which it led the industry on until the very last minute, before finally applying the knife to carbon capture and storage. Well, there we are. It is no wonder that the hon. Member for Warrington South (David Mowat) regretted the decline of the CCS projects. He was quite right to do so. He also spoke very powerfully about the green deal, calling its demise nothing short of a disaster.
The hon. Member for Beverley and Holderness (Graham Stuart) quite rightly praised the Government for agreeing with the Committee on Climate Change on the fifth carbon budget. I agree with him. I just wish that they had actually set it by the statutory limit in accordance with the Climate Change Act 2008. It had to be set and voted on under the affirmative resolution procedure of this House by 30 June. That did not happen. I hope that the Secretary of State will clarify the legal status of the budget to the House. It is one thing to accept the recommendation of the Committee on Climate Change, but simply accepting is not good enough. The Climate Change Act is very clear on that point: it has to be set. So far, it has not been.
The judgment of the hon. Member for Eddisbury (Antoinette Sandbach) was absolutely impeccable. She spoke at great length, but it was a great speech. She talked about the investor community being startled, but in a way that, I trust, did not scare the horses or make her open to the accusation of talking Britain down. It was a very fine speech indeed.
My hon. Friend the Member for Stockton North (Alex Cunningham), despite his sore throat, spoke very powerfully about the need to bring forward the UK carbon plan. He is absolutely right. That goes to the point made by the hon. Member for Beverley and Holderness and by the Scottish National party spokesperson, the hon. Member for Aberdeen South (Callum McCaig). It is great to have the ambition of the fifth carbon budget, but, yet again, we look back to 2011, when the fourth carbon budget was set. We know that the statutory obligation is to bring forward, as soon as reasonably practicable, a plan to show how it will be achieved. Five years later, we are still waiting for that. My hon. Friend’s point was a very fair one: it should be brought forward by the end of the year and rolled out immediately, to give confidence to investors.
My hon. Friend the Member for Southampton, Test (Dr Whitehead) speaks with such knowledge and authority on these matters. He made a very powerful point about the LCF after 2020, and I hope the Secretary of State will give some clarity on that in her closing remarks.
In its latest report, “Meeting carbon budgets”, which was published last Thursday, the Committee on Climate Change showed that there is a need for
“urgent action to strengthen policies”
without which progress on emissions will not continue. We are in a post-Brexit situation. Investor confidence has been lost through heightened uncertainty, creating a crisis in investment that in turn creates a crisis in energy costs, as greater uncertainty results in higher costs of capital. National Grid has issued a warning that energy bills would rise and energy security be put at risk if, like Switzerland, the UK is excluded from Europe’s internal energy market. The Secretary of State herself cited analysis by Vivid Economics ahead of the referendum that warned that the potential impact of exclusion from the IEM could be up to £500 million a year by the early 2020s.
Given the Secretary of State’s clear view on this, which I agree with, and bearing in mind that the Chancellor has been forced to announce that his fiscal surplus target is being dispensed with, as we will no longer be able to balance the books by 2020 as he had promised, and that growth has been downgraded from 2% to just 0.4%, we must ask her with what certainty she is asking us to consider the estimates for her Department. Her Cabinet colleagues have been very clear that to meet the deficit, they can raise taxes, or cut departmental spending, or borrow. Which is it going to be? For goodness’ sake, the Government are in the midst of a financial crisis. The Chancellor refuses to tell us how he is going to get out of it—he says it is up to a future Chancellor to decide, because he knows that in a few short weeks he will no longer be the occupant of No. 11—
Barry Gardiner
I cannot, I am afraid, because of the time constraints.
The Chancellor will not have to make that decision. The Secretary of State is asking us to approve estimates that have about as much chance of remaining solid as an ice cube in a Jamie Oliver stir-fry. This motion is not responsible financial management; it is government by magic wand—think of a number, close your eyes, and make a wish. Will the Secretary of State give a clear answer about her level of confidence that these estimates will be reflected in the outcomes at year end?
Ministers insist that Britain is open for business but energy companies have halted major investments in the UK. This week the Secretary of State told business that she is certain that investment will continue to flow, yet Siemens has paused clean energy investments in Hull, and according to the Government’s external adviser, a future for Hinkley Point C nuclear power station project is now “extremely unlikely”. That is not Her Majesty’s Loyal Opposition “talking Britain down”; that is the Government’s own adviser telling it as it is. Vattenfall is reassessing the risk of working in the UK, which could jeopardise its plans for a £5.5 billion wind farm off England’s east coast. Bloomberg New Energy Finance has warned since the referendum that the uncertainty caused by the result and the upcoming negotiations
“is likely to cause project investors and banks to hesitate about committing new capital, and could cause a drop in renewable energy asset values.”
The Institutional Investors Group on Climate Change, which represents more than €30 trillion of assets, said that the aftermath of the vote
“brings considerable uncertainty and market turmoil.”
These are deeply worrying times, but the Government do not seem to recognise the urgency of quashing such uncertainty and instability. Will the Secretary of State’s Department push for access to the internal energy market as a negotiating priority, and how will the Government gain support from EU member states to accept that? SSE has said that collaboration with other European countries on energy matters is important for UK consumers. What calculations or estimates has the Department made of price premiums on loans that will be demanded by investors in UK energy infrastructure to cover the costs of political uncertainty? How much will that add to the cost of building new electricity generating capacity? To reduce that uncertainty, it is imperative that the UK provides a clear direction of travel on domestic policy. Why did the right hon. Lady fail to uphold her statutory obligation under the Climate Change Act 2008, and not take the necessary steps to ensure that the order was set by 30 June?
The European Investment Bank is the UK’s biggest clean energy lender, having invested €31.3 billion into British clean energy projects over the past five years. Will that funding still be available for projects already in progress or agreed, such as the four clean energy projects under assessment by the European Fund for Strategic Investments? What funding sources have been identified to replace the opportunities that we will lose for research and development in clean energy to power the future? Have the Government discussed the future of Hinkley Point with EDF and/or the French Government, as a result of the vote to leave? The Government estimated in 2014 that by 2020 the annual net savings to the UK economy for the European energy standards and labelling ecodesign would be in excess of £850 million per year. Will those potential savings be compromised by the process of leaving the EU? The right hon. Lady must begin to answer those questions.
As the referendum result was causing political and economic chaos, the final results of the two-year Competition and Markets Authority inquiry into why customers are being overcharged by nearly £2 billion a year for their energy were quietly released. The recommendations are nothing to shout about, as they will not deliver the Prime Minister’s promise from four years ago to put all households on the cheaper tariff. How will the Department introduce more transparency over available deals, and provide support to make it easier for customers to switch, thereby putting an end to the big six milking their loyal customers to maintain profits amid falling wholesale prices?
Hundreds of thousands of families cannot afford their energy bills, and in 2014-15 that contributed to 43,900 excess winter deaths. However, Ministers are still letting energy companies off the hook and failing to ensure that the drop in wholesale prices is passed on to people’s bills. Will the Secretary of State ensure that the UK ratifies the Paris agreement before the Prime Minister leaves office?