Clean Energy Investment

Adrian Bailey Excerpts

Wednesday 25th November 2015 Westminster Hall

[Several hon. Members rose—]

[Mr Adrian Bailey (in the Chair)]

Given the number of hon. Members who want to speak and the fact that we will want to give the Minister the maximum time possible to respond to the debate, it looks as though four or five minutes would be the appropriate time for speeches in order to get in everyone who wants to speak. I will not impose a time limit at this moment, but I ask Members to bear that in mind.

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[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

A very important point must be put on the record: countries have different climate legislation programmes in place, but this country has never been completely out there on its own and other countries have attempted to do what we have done. There is a huge academic study of climate legislation across the world. Hundreds of countries have attempted to do what we have done—many of them very successfully. Of course we will need to take a higher burden in this country than, for instance, Poland, and that will be reflected across the whole EU target, but we cannot say that other countries have not followed us down this route. That is simply incorrect.

[Mr Adrian Bailey (in the Chair)]

Order. Let me just point out that I did say five minutes. We are already way over that, and long interventions do not help.

[Julie Elliott]

I shall wrap up quickly, Mr Bailey.

The Washington Post noted last week that although Britain had been expected to play a leading role alongside the Obama Administration, the decision to cut support for clean energy at home

“threatens to undermine Britain’s international authority”.

As the United States pushes ahead with an ambitious programme and the rest of Europe pulls ahead of us in meeting renewable energy targets, Britain’s capacity to lead on the world stage is being squeezed.

I am confident that the Minister will deliver a rousing defence of this Government’s record and the importance that she personally places on delivering a low-carbon economy in the UK and securing a binding global deal in Paris. It reminds me of the line that Joe Biden, Vice-President of the United States, is credited with coining. He said:

“Don’t tell me your values. Show me your budget, and I’ll tell you your values.”

Attacks on onshore wind and solar, no extension of the levy control framework, the UK’s position as a world leader dropping like a stone and the fact that we are on course to miss our 2020 target—with such a record, the values are very clear.

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[Several hon. Members rose—]

[Mr Adrian Bailey (in the Chair)]

I will now impose a time limit of four minutes on speakers. Please be disciplined with interventions.

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[Paul Flynn (Newport West) (Lab)]

My speech was made by the splendid hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts), and very much not by the hon. Member for Warrington South (David Mowat), who represents nuclear power in this Parliament. The pied piper of nuclear power has managed to bewitch many people in this country, but the facts are devastating.

We are planning to build a European pressurised reactor, but such reactors have never produced enough electricity to light a bicycle lamp. The reactor in Finland was due to be generating electricity in 2009, and it is now six years late; the one at Flamanville in Normandy, France, which the hon. Gentleman mentioned, is seven years late. Both reactors are billions and billions over-budget and neither has any date for completion. This year, the reactor at Flamanville had a very special problem when the pressure vessel, a vital part, was found to be made of steel that was brittle and liable to crack. That will add years of delay.

The financial deal that we have agreed with the French, of course, is crazy—Alice in Wonderland stuff. The French are in it because otherwise EDF would go bankrupt; it has debts of €33 billion. The Chinese want to come in after all the sensible investment has gone because they want to take control of not just Hinkley Point but all the future nuclear power stations that might be built. That is the deal. We have bequeathed to China the future of our nuclear industry, and to China it is a deal, but it is not a deal financially because nuclear power has been a basket case.

Lapping the walls of Hinkley Point C, or Hinkley Point A and B as it is now, is an immense power source that we have neglected for centuries. Tidal power has already been mentioned. A vast cliff of water flows up and down the Severn twice a day, and it could be tapped with simple technology to produce electricity that is, of course, not only green but entirely predictable. People have attacked other renewables, such as wind and solar, for being uncertain, but we can predict the power of the tide virtually for eternity. The Government appear to be slowing down on schemes for tidal barrages at Swansea, Newport, Cardiff and north Wales, and we know about Strangford lough. When the British-Irish Parliamentary Assembly considered alternatives, we were hugely impressed by what is going on in Scotland, including its real progress on hydroelectricity.

The blind alley—the nightmare—will be if there is another major nuclear accident in the world such as Chernobyl, Three Mile Island or Fukushima. Such accidents would be fairly reported in this country, and we might find ourselves in Germany’s position of turning against nuclear power. We would then have a half-built Hinkley Point, useless, having wasted literally billions of pounds on something that is unable to generate electricity because of public fear of nuclear power. We have these accidents about once every 10 or 15 years, and it is certain that there will be another in the future. Nuclear power is not the way forward; it is a technology whose time has gone.

[Mr Adrian Bailey (in the Chair)]

I call John Mc Nally.

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[Mr Adrian Bailey (in the Chair)]

I have you on my speakers list, but feel free to sit down if you do not wish to speak.

[John Mc Nally]

I am quite happy to speak. I am very good at speaking. I spent 40 years as a hairdresser, so I can talk about any subject on the planet.

I was very interested in the speech made by the hon. Member for Warrington South (David Mowat). I recently had a meeting on this subject with Senator Kevin de León, who is over here. He is the leader of the Senate in California, which is spending vast amounts of money on renewable investment—California is the seventh richest economy in the world—and investment has followed that policy into renewable energy.

We have heard about France and various other countries, but there is a lesson to be learned from California. We are doing well in Scotland on our clean and green image, and we want to keep that image at all costs. We are extremely concerned about where the policy of the green investment bank is going, and we need to keep a hand on the tail of that dog—in fact, the tail is now a stump.

Storing renewable energy is the missing link in this debate. Compressed air energy storage needs to be addressed by this country. I would call this country’s policy a traffic light—we have a green, an amber and a red—and it is more red than amber. We are going nowhere, and the policy uncertainty does not make sense. We were going in the great direction of following green, renewable, clean energy and clean air, and we now seem to be moving in the opposition direction from the way we want to go. I am unhappy with that, and I think most of this country’s taxpayers, who were mentioned earlier, are unhappy with the direction of travel. We need to get back to a firm policy.

Gas is short term; I believe it is all built on the extraction on shale from this country. I can speak for everybody in the country of Scotland: we do not want to go there until it is totally proven to be a safe, efficient method of providing heat. I do not think any of us is convinced. The Minister needs to address compressed air energy storage and the salt caverns underneath this country that run down through England. We need a policy statement if we are to invest money in storage, and then we can start looking at how we produce more investment in the renewables industry.

[Martyn Day (Linlithgow and East Falkirk) (SNP)]

It gives me great pleasure to take part in this debate on clean energy. I start by applauding the right hon. Member for Don Valley (Caroline Flint) for securing this timely debate.

My constituency of Linlithgow and East Falkirk has quite a reputation for energy firms of one sort or another, particularly around Grangemouth, the location of INEOS—perhaps that should be firms with quite a reputation. Today, however, I will comment on perhaps one of the lesser known success stories in the area: a positive, environmentally friendly firm called Verdo Renewables. I first visited the firm about five and a half years ago, accompanying the then First Minister of Scotland on a tour of the plant not long after it opened, and I made a return visit earlier this month.

I have therefore seen for myself the development of the firm’s Grangemouth operation and the success of its business growth, and a significant contributing factor has undoubtedly been the support of the renewable heat incentive. In case people do not know, Verdo produces grade 1 premium wood pellets and briquettes suitable for burning in multi-fuel stoves, log burners and open fireplaces, all made from locally sourced sustainable timber. Verdo has another plant in Andover. The firm has made a £53 million investment in the UK with a turnover of around £25 million. After several years of losses, it is now making a profit, producing 120,000 tonnes of high-quality, sustainable wood fuels. Verdo proposes further investments, but those investments are dependent on UK energy market conditions. RHI tariffs or similar support will be needed to maintain the firm’s current progress.

On my recent visit. I was pleased to see that, with current orders, the Grangemouth plant is at manufacturing capacity, and the firm has a number of plans to expand further by addressing the layout of the factory, developing adjacent land, increasing the number of production lines and storage capacity and, of course, generating vital local jobs. Unfortunately, those expansion plans are subject to uncertainty on whether RHI will come to an end. RHI has been critical in kick-starting the biomass heat market, and further efforts are needed to decarbonise the heat market if we are to meet EU and UK targets. Biomass heat offers a low-cost route to saving CO₂ compared with other sources of energy. Cost reductions in biomass installations are being achieved, and further cost reductions in installations and fuel are now possible but only if sustained RHI support is available, whereas cutting all subsidies would potentially kill the biomass heating market. Industry sources believe that the UK pellet market needs to triple from its current annual 500,000 tonnes to be sustainable and commercially viable—

[Mr Adrian Bailey (in the Chair)]

Order.

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[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I congratulate my right hon. Friend the Member for Don Valley (Caroline Flint) on securing this debate and on her speech. It was a privilege to serve under her in the shadow Energy team in the last Parliament, when we frequently made the case that the Government’s energy policy was ineffective and incoherent. I listened to the Secretary of State’s recent speech—the much-lauded “energy reset” speech—but my assessment of the Government’s energy policy has not changed a great deal.

The Secretary of State said she wanted an energy policy that was affordable, but the Government have banned the cheapest forms of renewables, such as onshore wind, and they have an abysmal record on energy efficiency. She said that she wanted a system that was competition-led, but—I say this as a supporter of nuclear power—Hinkley Point C is at the heart of the Government’s energy policy, and it was certainly not a competitive system that delivered that. She also said that she wanted a system that was “consumer-led”, but the most popular forms of renewables are frequently undermined by the Government while shale gas, which may have a role to play but is frankly unpopular with the British public at the moment, is always lauded as the solution to everything. So the Government’s record is not good.

There are many ways to massage the figures on energy investment; I am sure that we will hear some of them today, or simply a comparison with the past. However, the key question is whether the level of clean energy investment in the UK at the moment is sufficient to meet our needs, and the answer is no.

The situation will almost certainly get much worse today. So much of DECC’s budget has to be devoted to nuclear decommissioning that absorbing the type of departmental cuts that non-protected Government Departments will receive today will require the loss of some very effective programmes. The renewable heat incentive is such a programme, and I can almost guarantee that it will be heavily reduced today.

In addition, no assessment of this country’s clean energy investment needs can be properly made without proper consideration being given to energy efficiency. Energy efficiency is the only way to decarbonise our electricity and heat supply while also making sure that bills are affordable. On that issue in particular, the record of both this Government and the last Government is absolutely appalling.

The coalition Government’s record was very poor because their ambition for the number of measures installed was very poor and, frankly, their policies gave them to the people who were not in the most need. But this Government have managed to surpass the coalition Government by setting an even less ambitious target and, frankly, in some areas they have no policy whatever.

Improving energy efficiency is the urgent priority for UK energy policy. Scotland and Wales have the measures to be able to do a little bit more, but fundamentally the UK Government need to do more on energy efficiency and fuel poverty, or none of their energy policy objectives can be fulfilled.

I will say something specific about heat policy because frequently, and understandably, clean energy investment is devoted to conversations that are simply about electricity generation. However, heat policy is in many ways much more challenging—in fact, it is certainly more challenging— than electricity policy when we consider how we will meet our climate change targets while still giving people the security of supply that they need.

That is because low carbon heat requires us to heat our homes in different ways, and we have to choose from three broad options. First, we can electrify the heat load, but that is very difficult to do because the seasonal demand for heat is so strong. Secondly, we can build heat networks in new-build, but again that is difficult to do because there is less consumer choice with that option and, frankly, to retrofit heat networks is very expensive indeed. Thirdly, we can stick broadly with what we have at the moment, which is the gas grid, but seek to decarbonise some of that gas through green gas, anaerobic digestion and other technologies, and we can also make our boilers even more efficient in the future.

The choice between those three options must be made in this Parliament and at the moment I would say that we are either making no decisions or simply making poor decisions. Cutting carbon capture and storage when this country has the legacy of offshore oil and gas is, frankly, a terrible decision. Cutting the renewable heat incentive when we need to do more, not less, on heat is, frankly, a terrible decision. Banning onshore wind and sabotaging solar are, frankly, terrible decisions. Doing nothing on energy efficiency is abysmal, zero-carbon homes being stopped is appalling, and the green deal being abolished without a replacement being put in place is simply not good enough. I could go on and on, and I tell the Minister that the Government just have to start doing better.

[Mr Adrian Bailey (in the Chair)]

We come now to the Front-Bench spokespersons. I advise 10 minutes for each spokesperson, and for the Minister, which should give us a couple of minutes at the end for Caroline Flint to sum up.

[Callum McCaig (Aberdeen South) (SNP)]

We have had a very good debate this morning and I thank the right hon. Member for Don Valley (Caroline Flint) for bringing this subject before us. Her speech summed up incredibly well the issues facing the renewable energy industry and the green industry as a whole, and what can be done to make things better. A lot of the discussion this morning has been about the problems that we have had. That is right, but we also need to start looking at the ways in which we can go forward.

The potential of clean energy in terms of jobs and investment has been summed up by colleagues from all parties in this Chamber this morning. We have also heard from hon. Members from all four nations of the United Kingdom, which shows how important the green economy can be to the United Kingdom. It can provide jobs in areas where previously it would have been thought incredibly difficult to provide employment. As for the opportunities in the future, we have heard about how we may have missed the boat in some regards in terms of manufacturing. To some degree, that boat may have sailed, but there is still huge potential for the future. A number of hon. Members have mentioned the potential loss of jobs in the solar industry if the cuts to the feed-in tariff go ahead; I very much hope that that will not be the case. We have also heard about the untapped potential of solar in Scotland.

The right hon. Member for Don Valley outlined her five-point plan for support for industry. My party would back all those five targets. Over and above those targets, however, there are a few things that I wish to see added to the mix. Last week in the debate on climate change, I raised with the Secretary of State the possibility of establishing subsidy-free contracts for difference for onshore wind. As we have heard from a number of Members, it is the cheapest form of renewable energy and compares very well with what we are looking at with nuclear. Albeit that there are different pressures on the system that are addressed by the technologies, I would rather see the investment going into onshore wind. As the industry suggests, it can be done without subsidy and to block that would be unpardonable. To block that in planning terms when the matter is devolved to Scotland would be ridiculous.

Over and above those five points, will the Minister consider whether the future CfDs can be brought forward from the dates announced last week? Having those CfDs at the end of next year could be damaging for certain projects. Is it possible to extend the lifetime of the CfD beyond 15 years to reduce costs further? The hon. Member for Stalybridge and Hyde (Jonathan Reynolds)—my pronunciation of such places is better than it would be for the constituencies of some of my Welsh colleagues—mentioned energy efficiency. That is often the Cinderella, and efforts on energy efficiency are even further behind than those on renewable heat. It is one of the easiest things, and a lot could be learned from the decision by the Scottish Government to put energy efficiency measures as a national infrastructure priority in Scotland. If that could be done on a UK-wide level, it would not only provide additional funding for Scotland, which would be welcome, but it would help the UK as a whole meet its climate change targets, reduce fuel poverty and boost the economy.

My hon. Friend the Member for Linlithgow and East Falkirk (Martyn Day) mentioned the renewable heat incentive, which is the area where we struggle most in getting the step change required in investment. The technology is there, if it has the support. To see that support stopped would be foolish and very much a retrograde step.

One thing that we need to do, over and above all that, is look at energy storage. We have heard talk about some of the technologies that are there, but we need a proper strategy and support mechanism for storage to take off as an industry. There is huge potential in the green economy as a whole. Storage provides the balancing support that is required for the grid in terms of intermittent generation. I do not know whether the right thing is battery technology, pumped-storage hydro, compressed gas or whatever, but developing a strategy, providing a mechanism and, dare I say it, allowing the market to decide which solution is best is a sensible way of dealing with things.

We have heard a lot about the damage that has been done. The debate timeously falls on the day of the comprehensive spending review. A number of us who support the green economy have great fears as to what will be announced in a little over two hours’ time. The damage has been bad, but the situation is not irretrievable as yet. That may not be the case once the Chancellor sits down later this afternoon. We have heard suggestions from the right hon. Member for Don Valley about the potential for the support mechanism for carbon capture and storage being withdrawn as part of the comprehensive spending review. Frankly, that would not only be a betrayal of the industry, which has invested hugely, but a betrayal of our requirement to take the challenge of climate change seriously. If we are to do what we are required to do, carbon capture and storage provides perhaps the most straightforward solution in adapting to a new way of life. To pull the rug out from under it yet again would be completely and utterly unforgivable.

I will not use my full time to allow more time for others. That time will ideally go to the Minister, although my colleague on the Labour Front Bench may choose to use it himself. So many points have been raised by Members that it would be fitting to hear less from me and more from the Minister.

[Mr Adrian Bailey (in the Chair)]

I am sure your brevity is much appreciated.

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[Dr Whitehead]

My hon. Friend puts his finger on a very real fear among many people. Future Government cuts will mean that the Department will no longer be able to function as a Department that can marshal investments together. If that is a consequence of the spending review being undertaken at the moment, it is a serious state of affairs not only for the future of energy management, but for the future of our investment in renewables overall.

My right hon. Friend the Member for Delyn (Mr Hanson) pointed out how much investment has gone into offshore wind, with the emergence of the Siemens arrangement in Hull, the Vestas investment on the Isle of Wight and the appearance of Gwynt y Môr, which he was recently able to attend the opening of, unlike some other people.

The hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) pointed out the possible economic value for the future of renewables. Perhaps it is worth reminding the House that, according to a recent report by Cambridge Econometrics, the economic value of offshore wind over the next 20 years could increase UK GDP by £20 billion a year by 2030. It could create 70,000 more jobs and reduce gas imports by £8 billion, and emissions in the power sector could be three times lower than at present. That is the prize ahead of us as far as investment in renewables is concerned. That is the prize being dashed by what has happened recently and by the longer-term uncertainty that the Government have introduced in terms of support for renewable investment.

The Minister will say—has said, I am sure—that this is okay because our targets for the deployment of renewable energy to generate electricity look as though they might be reached. I remind the House—indeed, my right hon. Friend the Member for Don Valley underlined this point—that we are failing miserably to reach our overall EU energy targets in electricity, heat and transport. The recent letter from the Secretary of State, which came to public attention, indicated how badly we were likely to miss the targets over the next period. The EU is quite happy for us to overachieve in certain areas, even if we underachieve in other areas. The idea that because you have achieved in one area, you can then drop the baton in all the other areas and not worry about it seems a further misunderstanding of the task ahead of us.

[Mr Adrian Bailey (in the Chair)]

Order. Will you address the Chair? I would also be grateful if you could wind up as I want to give the Minister an appropriate amount of time to respond.

[Dr Whitehead]

Indeed, Mr Bailey. I was doing exactly that.

Finally, I want to emphasise the importance of the decisions that we take in the near future for our future energy supplies, and how important this debate has been this morning. I look forward to hearing from the Minister what she intends to do to get us back on track as far as these important investments are concerned.

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[Mr Adrian Bailey (in the Chair)]

Order. It is for the Minister to decide whether she gives way. There are obviously time constraints.

[Andrea Leadsom]

Mr Bailey, I am trying to respond to Members’ points. If I give way to each Member on their individual point, I will not be able to respond to them all. I do apologise, but there is no time to give way to lots of Members.

I turn to renewables. We have been very clear that they have an important part to play alongside other technologies in our clean energy mix. I am happy to agree to the request from the right hon. Member for Delyn (Mr Hanson) that I welcome the decarbonisation impact of renewables. We are of course all delighted at the enormous success of the industry, but that does not mean that subsidies can continue as they were. The costs of renewables have come down significantly, and as the technologies mature it is right that they stand on their own two feet. That is why we are taking action on subsidies for onshore wind and solar, technologies that will be cost-competitive through the next decade.

The hon. Members for Sunderland Central (Julie Elliott), for Paisley and Renfrewshire North (Gavin Newlands) and for Stalybridge and Hyde (Jonathan Reynolds) all mentioned the important issue of fuel poverty, on which there was a debate in this Chamber only yesterday. All Members must recognise that the subsidies for renewable technologies are paid for by precisely those people who are struggling with fuel poverty, so excess subsidies simply cannot be afforded.

Take onshore wind, a technology that has deployed very successfully to date—so much so that without action there would be a risk that it would deploy beyond the 11 GW to 13 GW range we set out for 2020, which would have added more to consumer bills. That is what our manifesto commitment set out to address. Even with action, we expect to deliver more than 12 GW by 2020, comfortably within our range and enough to meet our ambition to deliver 30% of the UK’s electricity with renewables by 2020.

Similarly, more than 8 GW of solar is already deployed and even with the cost controls we are proposing, we expect to have around 12 GW in place by 2020. Evidence-gathering on costs and deployment-monitoring suggested that action was needed right across the range in solar, including for below 5 MW. There was a risk of projects being over-compensated and of adding to the overspend that we were already projecting for the levy control framework. We have consulted on proposals to constrain solar further under the renewables obligation and on changes to the feed-in tariff scheme more broadly.

The hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) asked for more liaison with the Welsh Government on how we will meet our EU decarbonisation targets. We speak regularly with the devolved Governments, but I will ensure that those specific points are made. We are looking carefully at the more than 50,000 responses to the feed-in tariff review and will set out our final approach to all schemes by the end of the year.

On the future for renewable electricity, we are continuing to listen to ideas from the renewables sector about how we can best ensure a level playing field for established renewables to compete with other generation technologies. For example, some stakeholders have suggested the concept of a market-stabilising contract for difference. We would certainly welcome further industry views on that. Being tough on subsidies allows us not only to keep downward pressure on consumer bills, but to direct support where it is needed most: among the less established technologies. For example, it is right that we build on our world-leading position on offshore wind, with more than 5 GW already installed and plans for that to double by 2020.

Last week, the Secretary of State gave real certainty to the sector by setting a very clear challenge: continue to reduce costs quickly and we could support up to 10 GW of new offshore wind in the 2020s. If those conditions are met, we will make funding available for three auctions in this Parliament. We will set out more detailed plans in due course, but we plan to hold the first of these auctions, open to less established technologies, by the end of 2016. I acknowledge that the SNP spokesman, the hon. Member for Aberdeen South (Callum McCaig), said that he would like that auction to be sooner rather than later, but I have heard opposing views from industry. Some companies would like the time to get into a position to enter the first auction, so would like it to be delayed. There are always winners and losers.

As well as action on electricity, it is vital that we change how we use heat to warm our homes and buildings, and how it is used for industrial processes. Heat accounts for about 45% of our energy consumption and a third of all carbon emissions, so different approaches need to be tested. There are technologies with great potential—such as district heating, biogas, hydrogen and heat pumps—but it is not yet clear which will work at scale.

We have to develop a long-term plan that will keep down costs for consumers. We will set out our approach next year as part of our strategy to meet our carbon budgets. The hon. Member for Linlithgow and East Falkirk (Martyn Day) mentioned the value of the renewable heat incentive, and I entirely agree that it has been a valuable policy. As he knows, we will be setting out our plans later today in the spending review.

Looking further forward to innovation, we need to keep an eye on the horizon for promising future developments. Some of the solutions to the challenges we face may right now be just an idea on a drawing board or not yet even exist. There are technologies with great potential, such as nuclear, offshore wind, demand response and storage. In some areas, the UK is a world player in the development of technologies; in others, the challenges we face will require technical solutions specific to the UK, so we remain committed to supporting innovation.

Department of Energy and Climate Change funding is already helping to develop exciting new technologies with great potential, in areas such as energy storage, low-carbon transport fuels and more efficient lighting. Those and many more examples point to the creation of new industries and new jobs in the UK, so it is right that we remove the barriers to their development. The hon. Member for Falkirk (John Mc Nally) mentioned the importance of storage, and I completely agree with him that it could transform the intermittency of some renewables.

To conclude, investors need clarity on our strategy for clean energy, and that is what we have now given them. New nuclear, new gas, existing and new renewable technologies will all help us to meet the challenge of decarbonisation in the power sector. We will set out our approach to heat next year as part of our wider strategy on carbon budgets, and we will continue to lead the way on innovation by pioneering the discovery of clean and cheap technologies for the future. We have a plan, and it is to deliver affordable, secure, low carbon energy for today and for generations well into the future.