Alan Whitehead
Main Page: Alan Whitehead (Labour - Southampton, Test)(10 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Syms
Absolutely. At the end of the day, we must have the capacity to generate for what people want. We can make savings with insulation and things that we do with electrical equipment. We can do an awful lot to save energy, which will take care of some of the demand. However, with a growing, successful economy—there is every reason to look at the British economy with great optimism—I suspect that we will need more capacity. Not only do we need plans for investment; we need people breaking the ground and building these things, so that they can provide for what we want.
I have reservations about the amendment. I know that people talk about 2021 or 2023, but that will come very quickly, so although the investment and capacity might not come that quickly, my general view is that we should be a little cautious about the Lords adding more constraints, costs and limits on an important source of power at this point.
Dr Alan Whitehead (Southampton, Test) (Lab)
I am a little bemused by some of the talk that we are hearing this afternoon about the capacity crunch and the extent to which the amendment might exacerbate it over the next period, bearing in mind, first, that it would not take effect until after 2023 in any event and, secondly—this has perhaps gone rather unremarked—that the power plants that are not producing and that are offline and either light mothballed or deep mothballed are not coal-fired but gas-fired plants. About six of them are mothballed—even though those operators could operate perfectly efficient gas plants for their own operations—not because they cannot produce on a reasonable basis, but because of the spark spread for gas and electricity prices. Therefore, it is not a capacity crunch because there is no capacity; it is a capacity crunch, potentially, because of the way that plants operate relative to each other.
Nothing in the long-term prognosis has changed, in terms of what we have to do in the longer term or how we have to deploy capacity. Getting the right amount of capacity and the right amount of reserve capacity in the market is a combination of ensuring that capacity is properly utilised and that new capacity comes on stream in the right proportion to support the changing nature of our energy production market. As regards that progress over the next period, up to 2030, one of the remarkable things written in most DECC documents to come out on the matter concerns where we need to go in decarbonising our energy supplies.
DECC’s central target is an overall level of emissions of 100g per kWh by about 2030. Everyone knows what that means. Unless we hear this afternoon that the target has changed, there will no longer be room for large amounts of unabated coal to continue to operate in the system, whether in new, existing or refurbished plant, without carbon capture and storage in the period leading up to 2030.
There is currently a disjunction between what DECC says about its target and what the policy appears to suggest when it comes to whether those coal plants will become able to play a part in our future energy mix with carbon capture and storage, or will no longer play a role as base-load generators but either convert to other forms of supply—as Drax is doing in moving to biomass—or run at much lower levels, as peak and back-up plant, over a period, to keep within the overall targets. The amendment connects what we think that we are doing with what we ought really to be doing over the coming period and starts to dissolve the disjunction between what we think is in policy and what appears to be in policy.
One of the effects of uncertain signals about the direction in which we are going in respect of, for instance, decarbonisation targets is that people do not invest in one thing rather than another; they do not invest in anything. They do not do what they might otherwise have been doing, because they are not sure what the signals are telling them. I believe that the amendment gives a certain rather than an uncertain signal in regard to the long-term future of coal, thus enabling those who are thinking of investing in coal over the coming period to be clear about what to do, rather than unclear, as they are at present.
Ministers seem to be saying today that there will be much more operation of coal, and perhaps some new investment in coal, but they know that it cannot really be unabated, and they know that it cannot really operate for all those hours over the period. How certain can an investor be that what he invests in will not to be stranded in the intervening years? It depends whether we believe what Ministers are saying, or believe what is in the documents that they claim to support in their daily work at the Department.
Ian Lavery
Does my hon. Friend believe that if the amendment is passed, investment in carbon capture and storage will be more rapid?
Dr Whitehead
That is an important question. I think that if the amendment were passed and if it sent that “certain” signal in regard to future investment, it would bring about something that my hon. Friend and I observed recently in a Canadian province. Given the certainty of an EPS that would apply to all plants in the province in the future, the operators of a 150 MW power plant decided that if the plant was to continue to provide coal-fired power, it would need carbon capture and storage. As a result, next year there will be a very impressive plant, which will sequester all its carbon and continue to supply the Saskatchewan power system with coal-fired power. I understand that the operators made their decision in the certain knowledge that they would not be able to continue to supply unabated coal-fired power to the Canadian system for ever.
Angela Smith
Is it not the case that carbon capture and storage technology can be applied to gas-fired as well as coal-fired processes?
Dr Whitehead
Yes, indeed. If the Department is to reach its 2030 decarbonisation target, it is very likely that carbon capture and storage must be applied to gas as well as coal during the intervening period.
Mr Redwood
Given the hon. Gentleman’s knowledge of the industry, can he tell us when he expects to see a decent-sized coal-fired power station with carbon capture and storage up and running in the United Kingdom?
Dr Whitehead
The Saskatchewan power plant that I mentioned is not a new coal-fired power station, but an existing one that has been refurbished to take on carbon capture and storage. The right hon. Gentleman’s question should have been the other way around: he should have asked me when I might expect to see an existing coal-fired power station with carbon capture and storage attached to it in the United Kingdom if the amendment is passed. My answer is that if the amendment is not passed, it will be far less likely that existing coal-fired plants, which are effectively given a derogation by the Bill, will take on carbon capture and storage, although they know that they must do so sooner or later for the sake of future investment. They will do it in the end, but there will be uncertainty for some time before they do.
My answer to the right hon. Gentleman’s question is that I expect an existing coal-fired power station to start to address itself partly or wholly to carbon capture and storage much earlier if the amendment is passed than it would otherwise. That would put that station bang in line with the Department’s long-term decarbonisation aims.
Charles Hendry (Wealden) (Con)
Should we not learn the lesson of the Longannet experience? In that instance, we discovered that the cost of trying to retrofit carbon capture and storage technology to a very old power station that needed many millions of pounds of new investment made it uninvestable. Surely, it is likely that a new plant will be fitted with carbon capture and storage, rather than an old plant’s being retrofitted.
Dr Whitehead
With a relatively small amount of underwriting—far less than is proposed in the UK Government’s competitions—it was possible to undertake the retrofitting of the Saskatchewan plant alongside a refurbishment. The interesting issue was not the progress and, indeed, the completion under budget of the plant’s carbon capture and storage element, but the fact that the retrofitting itself—the upgrading of the coal-fired power station—caused the difficulties. Its operators estimate that future arrangements could cost 20%, 25% or 30% less than the first retrofitting. I do not agree that this is uninvestable; on the contrary, it is an essential part of the process of realigning energy objectives and power output over the coming period.
Dr Whitehead
Indeed. There is the question of what happens to the carbon dioxide subsequently and how it is injected. In Canada, it is injected into additionally drilled wells on land; there is a different process of injection offshore. At the Saskatchewan power station, the process involves the use of carbon dioxide for enhanced oil recovery, although most of it stays on the ground after the process in any event.
David Mowat
I am listening carefully to the hon. Gentleman’s argument about the acceleration of CCS as a consequence of accepting the amendment. Notwithstanding the Saskatchewan case, CCS is still an unproven technology in this country. For clarity, is he saying that the amendment would result in those stations being converted to CCS in time to prevent them from being switched off? It was implied from the Front Bench earlier that they would be replaced by gas power. Which of those two options does the hon. Gentleman consider to be more likely?
Dr Whitehead
Some of those plants could well be replaced by gas, and some could well close down. Indeed, some could well close down whether the amendment were passed or not. The problem for capacity in the market is that the signals being sent out at the moment are so varied and uncertain that a number of people who might otherwise invest in plant are holding back until, for example, the capacity market comes on stream or until there is more certainty about CCS or about coal generation. As we have seen already, there is a possibility that plants will close down by accident rather than by design. They could end up being mothballed because of market circumstances, rather than because of long-term planning based on capacity.
The amendment would improve that certainty tremendously by making it absolutely clear what was expected of coal-fired power in the future. Coal-fired power would not cease to exist; it would be able to run at certain levels per year, and any existing coal-fired power station that wished to run continuously after the early 2020s would have to have CCS attached to it. The amendment would send a simple, straightforward message.
Michael Fallon
The hon. Gentleman seems to have just repeated an assumption that the amendment would take effect only from 2023. On the contrary, it asserts a power to apply EPS to an existing plant, which would involve upgrading under the industrial emissions directive. Nothing in the amendment prevents the power from being used at any time, as soon as the EPS had come into force following Royal Assent.
Dr Whitehead
The question is the extent to which plants can run, and what hours would be attached to them—a process that has already been undertaken under previous directives—during the period up to the early 2020s. The question for those power stations is not the point at which they switch over or at which they stop; it is whether they can continue unabated past the early 2020s. That is the key issue.
I commend the amendment to the House because of its congruity with current departmental policy and the certainty that it would confer. It brings together a number of elements relating to the trajectory for cleaner, lower-carbon energy, and it would send a clear signal to investors. In the medium and long term, that would give us far more certainty of reliable and secure capacity than we have at the moment.
Charles Hendry
I refer hon. Members to my entry in the Register of Members’ Financial Interests.
Like most other Members, I have received many postcards and e-mails from people urging me to support the Lords amendment, but those e-mails seem to have been based on a misunderstanding or a misapprehension, based on misinformation. That has been either wilful or accidental, but it is certainly there. They start by saying that, although the Government said that they would be the greenest ever, we are now burning more coal than we have done for many years. Those two statements need to be examined.
This Government are the greenest ever. We have seen an increase in renewables generation from 5% in 2010 to 16% now. We have seen the biggest investment in nuclear power for a generation, and we hope to see more coming through. We have also seen an added impetus being given to the renewable heat incentive today. All those factors demonstrate our direction of travel.
The suggestion that the Government have somehow been promoting an increased use of coal is fundamentally wrong. We are using more coal than we were just a short time ago. I looked at the figures just before the debate: 39% of the electricity being used in the UK as we sit here today comes from coal. That equates to 18 GW of the 46 GW. That is happening for two reasons. First, the price of coal is historically low compared with that of gas. The shale gas revolution in the United States has meant that the coal that used to go into the US market is now being deposited in the European market at a low price and people are therefore burning it.
Secondly, the owners of the coal-fired plants know that they have only a limited number of operating hours left, and they want to use them while the carbon floor price is lower, rather than as it continues to rise. People should not see this as a fundamental shift to coal; it is a short-term increase in its use and, as we have heard, those plants will be closing down in the near future. Some are closing this year, and more will close throughout the decade. The concern expressed in those e-mails by those who support the amendment has therefore been based on a misunderstanding.
I am concerned about the implications of the amendment for several reasons. The first relates to political risk. This is another measure that would increase the political risk attached to investment in the energy sector. We know that we need many tens of billions of pounds of new investment in the energy sector, right across the electricity spectrum. The people who own the plant that would be closed down by the proposal are the same people who we are asking to build new gas plant, new CCS plant and new renewables plant. If they see the UK becoming more unpredictable, that will make it harder to secure the levels of investment that we need. We must be wary of going down that route and adding further political risk to the issue.
My second concern relates to the coal industry in the United Kingdom. When I was a Minister, I tried hard to increase the proportion in the mix of coal from UK mines. It had been one third, and we got it up to over a half. I suspect that it is now below one third again, and probably falling. If we want to achieve the necessary investment in British mines to enable them to provide coal to the power stations—or indeed to ensure their existence at all—when CCS plant comes on line in due course, the investors will need to know that there is still a reason for them to invest in the sector. The Lords amendment would make it more difficult to secure that investment and therefore more likely that our own deep and shallow coal mining facilities would close down, which is something we would regret. We should not deliberately put ourselves in the position of being more dependent on imports than we need to be.
My final point relates to CCS. We are trying to send a message to people around the world that this country has the aspiration to lead the world into carbon capture and storage, and we have every reason to be positive and confident that we can do that. We have the expertise, and we have the depleted oil and gas reserves in the North sea that can be used for it. We should be going out and saying to all those people around the world who are interested in this technology that the United Kingdom is the place to do it.
However, I disagree with the hon. Member for Southampton, Test (Dr Whitehead) in that I do not think that the amendment would make investment in CCS more likely. I think that it would make it much less likely, because we would be seen as having a general hostility towards coal in the mix and we would therefore struggle to make the case for that investment. Given the challenges that we are facing, do we really want to link ourselves to a policy that would bring forward the closure of plant while doing nothing to speed up the opening of new plant? The amendment would be bound to enhance the energy security challenges facing this country, which would make it more difficult to decarbonise. That, in turn, would push up prices. For those reasons, I hope that the House will reject the Lords amendment.
David Mowat
I, too, oppose the amendment. I will make three points: on cost; on security of supply; and on how this country’s approach to tackling the issue increasingly departs from that of other countries in the world, not just in Asia and the US but in parts of Europe.
First, let us frame the problem. We have 23 GW of coal right now. I think we can all accept that about 8 GW of that will be turned off because of the large combustion plant directive, leaving potentially 15 GW subject to the amendment. I asked the shadow Minister what his figure was and although it may well turn out to be a little lower than that, it is of that order. We are talking about a huge amount of power to be replaced, yet we are doing this at the same time as our nuclear stations are coming off stream. Let us put this into context. Replacing 15 GW with wind power, which I guess is the direction that the hon. Member for Brighton, Pavilion (Caroline Lucas) would take, would require about five times as much wind generation as we currently have commissioned—onshore and offshore—leaving aside the intermittency issue, which I do not think we will be able to address.
David Mowat
I will not take the intervention, as I want to finish as quickly as I can to allow time for the other speaker.
We have a security of supply issue. To be clear, the debate is not about pollution, nitrous oxide or sulphur dioxide control, or even about the long-term plan to phase out coal. We intend to be at 3% by 2030. Our European partners, by contrast, do not have such an ambition. The debate is not about the Kyoto targets, which we have not met, but about the need to replace a vast amount of capacity, and to accelerate such replacement. We are unique in that our nuclear stations and our coal are so old. We also intend to use more electricity as we decarbonise the transport sector. If we are to meet the climate change budget targets, it will be about not just electricity generation but transportation. We are talking about more electric cars, which means yet more electricity. The task is absolutely enormous, and we are currently sitting here with a capacity surplus of around 4% or 5%. To accelerate that further would be folly.
Members have mentioned that we are talking about replacing possibly one of the cheapest methods of energy generation—the relatively old stations that are depreciated, and all that goes with that—with some other technology. In relation to today’s infrastructure plan statement, offshore wind, even with the new CFD numbers, is about three times the cost of those coal stations that are currently burning.
If we are seriously thinking of replacing about 15 GW of capacity with offshore wind and even gas, which is more expensive, it is hard to see how that would not put up energy prices. Of course it would put up energy prices both for our energy-intensive users and our consumers. Those Members who think that fuel poverty matters should give some thought about how they will vote this afternoon.
Finally, let us look at how we are dealing with the issue compared with many other countries. I have one statistic to put to the House. Renewables went up a great deal last year. Across the world, they went up by about 30 million barrels of oil equivalent, which is a high percentage. The use of coal across the world went up by three times as much to 100 million barrels of oil equivalent. Such increases are not just happening in Asia and China. Germany and Holland are moving ahead with brand new unabated coal power stations that will run for 20 or 30 years. In this country, we already have among the lowest carbon emissions per head and per unit of GDP of any EU country. The only major country that performs better is France, which has so much nuclear power, although our green lobby thinks that that is wrong as well.
I have not covered in any detail the havoc that would be wrought on what is left of the UK coal industry. The fact that Members are justifying voting for the amendment because it will bring forward investment in CCS, which is still unproven at the scale that would be needed to work in this country, is, frankly, almost vandalism.
Joan Walley (Stoke-on-Trent North) (Lab)
I want to try to put this matter into context. In my constituency, 6,110 households are in fuel poverty. The Lords amendment would drastically change the definition of fuel poverty. At the moment, about 3.2 million people are classified as being in fuel poverty, but that figure would go down to about 2.7 million under the new definition. There is real concern about the proposed change. I am also concerned about the change in the Government’s ambition, which was previously to eradicate fuel poverty and now appears to be merely to address it. That is no longer a strong commitment. The Minister will have to do an enormous amount if he is to convince the House that fuel poverty is really going to be addressed.
This is a cross-cutting issue. It is not just about what is going on in the Department of Energy and Climate Change; it is also about the cost to the health service and the implications for skills and employment. There are now 7,000 fewer people in the construction industry working on insulation than there were in December 2012 and, in a double whammy, we have had the announcement this week that the energy company obligation is to be cut back. There are households that desperately need investment in their insulation, but that investment is now going to be cut back. To make matters worse, the goalposts have been moved and, instead of having to complete 100,000 measures in one year, that work can now be completed in four years. Connecting all that together, we can see that there will be huge reductions, making it more difficult to address fuel poverty precisely when we should be stepping up the measures to deal with it.
The Environmental Audit Committee examined the whole issue of energy subsidy and one of its conclusions was as follows:
“To aid transparency, if the Government introduces its proposed new measure of fuel poverty, it should also continue to publish statistics on the current metric for the remainder of this Parliament, alongside the new figures. In the Autumn Statement, the Government should make clear how any changes to green levies will change the amount that those in fuel poverty will have to pay, by how much and how soon.”
I would like the Minister to respond on that.
Dr Whitehead
I wish briefly to speak in support of the amendments to Lords amendment 87 tabled by my hon. Friend the Member for Derby North (Chris Williamson) and my Front-Bench colleagues on the issue of fuel poverty.
As someone who has sat through the whole process of this Bill, from the very start to the finish this afternoon, I can tell hon. Members that during its early passage we were promised amendments in another place that would address fuel poverty. Here they are in front of us, but they are very feeble. I say that because central to Lords amendment 87 is the word “addressing”. For all the rest of the material in the Lords amendments about a strategy and so on, the amendment concentrates on the various things that have to be done to bring about a position of
“addressing the situation of persons in England who live in fuel poverty.”
Let us suppose that my wife asked me whether I was going to cook the supper tonight and I said, “I will do rather better than that. I will address the issue of cooking the supper tonight. I will have a number of recipe books at the ready and I will produce a strategy for cooking the supper. I will have some vegetables, which will also be ready to address the strategy of cooking the supper.” She would probably conclude that we would be having a takeaway this evening. That shows the central problem with Lords amendment 87: it would not ensure, whether in relation to the previous definition or the Hills definition of fuel poverty, that there will be a strategy in the future to bring about changes that move towards the eradication of fuel poverty.
The amendments to the Lords amendment 87 would simply replace that lack; they would put in targets to ensure that we can address the eradication of fuel poverty through a requirement on Government to act over the next period, rather than suggesting that they may or may not act, depending on how they wish to proceed. Let us not forget that this Bill, when enacted, will bind not only this Government, whatever their intentions, but future Governments on what they need to do about fuel poverty.
One central point about the amendments to Lords amendment 87 is that they make an explicit link between the imperative of moving forward on energy efficiency and the imperative to eradicate fuel poverty. We know that through radical measures to improve the energy efficiency of our homes, we undertake radical measures to eradicate fuel poverty, because of the congruence between people living in fuel poverty and people living in the least insulated homes in our country. It is a singular fact that the price of energy in this country is by no means the highest in Europe, but the bills we pay are among the highest in Europe, simply because of the overall energy inefficiency of our homes. Setting targets and underpinning them with an explicit assault on fuel poverty over the period is a win-win in terms of the move towards greater energy efficiency in our homes, the investment that that requires and the attack on fuel poverty that results.
If the Government are, as they state, serious about continuing to make an assault on fuel poverty, they have to do better than simply produce amendments that talk about “addressing” a position. The amendments to the Lords amendment seek to do better, and I hope that the House will support them this afternoon.
Michael Fallon
With the leave of the House, let me reply briefly to the points made in the debate. The hon. Member for Brighton, Pavilion (Caroline Lucas) and I disagree about the amount of information that should be put in Bills. She wants corporation tax and more about the fuel mix. Let us see what Ofgem comes up with in its search for greater transparency and then perhaps we can debate the matter again.
The hon. Member for Angus (Mr Weir), who is still in his place, suggested that we were trying to do something against the Scottish Government by the back door. I do not think that taking primary legislation can be characterised as doing something by the back door in whichever House it is introduced; it is right there through the front door.
Let me answer the points that the hon. Gentleman made. First, he seemed to suggest that the Government and the House had no right to close the renewables obligation for Scotland. Yes, we do have that right. The need to close it to new capacity has arisen due to the electricity market reform programme, which is a fundamental change to our policy for supporting renewables electricity generation, and electricity is a reserved matter under the Scotland Act 1998.
The hon. Gentleman asked me specifically about the grace period. We consulted on the grace periods to be offered at the point of RO closure. That consultation closed on 28 November, and our response will be published early next year and we will set out the detailed arrangements.