Andrew Percy
Main Page: Andrew Percy (Conservative - Brigg and Goole)Government Levies on Energy Bills
Andrew Percy Excerpts
Mr Yeo
I had a hunch that that was the issue the hon. Lady would raise. For the most part I agree with a great deal of what she says on this and some other subjects. It is perfectly true that, arithmetically, nuclear is very expensive. I think that the decision, which I support, can be justified on only two grounds. The first is that I am uncertain that, even with all the other support, we will be able to generate enough electricity from low-carbon renewables to meet the targets we have set for 2020 and beyond, from 2030 through to 2050. It would need some pretty heroic assumptions about the roll-out of some of the technologies to think that we could replace the whole of the electricity currently generated by nuclear with electricity from other low-carbon sources.
Secondly, I think there is a real prospect—though I do not suppose I will carry the hon. Lady on this point—of the cost of nuclear coming down substantially if we see a big expansion of the industry. Nuclear power stations in China, for example, are going to become almost a commodity given the number that will be rolled out. In the 2020s, we might find that we will be able to buy them off the peg at a much lower price than the admittedly high price currently expected for Hinkley Point.
Andrew Percy (Brigg and Goole) (Con)
I, too, share my hon. Friend’s concern that we will not be able to replace current generation with renewables in the way predicted. Does he, therefore, share my concern that, because of the recent “final investment decision enabling for renewables” process, we are likely to lose Eggborough power station, which currently accounts for between 2% and 4% of the UK’s generating capacity, along with 800 jobs? Given that it was a shovel-ready project, it is frankly bonkers and utterly barking mad that it has not been given the go-ahead for biomass conversion.
Andrew Percy (Brigg and Goole) (Con)
It is a pleasure to follow the hon. Member for Angus (Mr Weir), particularly as he finished by talking about off-grid customers, and I wholly concur with his comments. I represent a number of off-grid communities, and all the problems highlighted by other hon. Members obviously affect my constituency.
We have had two debates in which fossil fuels have, perhaps for understandable reasons, come in for a bit of a bashing, but whenever we debate them, I like to remind the House that many thousands of my constituents work in the coal and gas and the offshore oil and gas industries. This is still an important sector of the economy, and they play a valuable role, whether by working at coal-fired power stations, at Kellingley or Hatfield pits in my constituency, or offshore.
Throughout this debate we have witnessed the flogging of a dead horse: the energy price freeze—an idea that has been roundly rubbished, including by the public. What would happen in such a situation is clear: prices would go up before a freeze, and they would go up again after a freeze. The public have not been conned on that one. Many of my constituents contacted me when that policy was announced, and they had figured it out for themselves; they needed no assistance from me or my party to do so.
It was interesting to hear about ECO. A good project is going on in my constituency, where funding from the Dragonby wind farm has been used to support ECO funding to put energy efficiency measures into the small community of Dragonby, not too far from Scunthorpe. I see my constituency neighbour, the hon. Member for Scunthorpe (Nic Dakin), here. The project is proving effective, and I will be on site next week, as the next phase of construction takes off .
I want to focus most of my comments—this will probably not surprise the Minister—on Eggborough power station, which is in the constituency of my neighbour, my hon. Friend the Member for Selby and Ainsty (Nigel Adams), but is a big employer in my constituency. I can see from my front room Drax and Eggborough power stations. If I go upstairs, I can see Ferrybridge power station. Powers stations are something that we live with locally and something that we love locally, not least because of the large number of local people employed in them.
Obviously, there is a massive black cloud over Eggborough, which is one of the UK’s largest coal power stations, producing between 2% and 4% of the UK’s capacity, depending on whose figures are believed. But whether the figure is 2% or 4%, given that Ofgem predicts an energy margin of as low as 2% by 2015, Eggborough is incredibly important to generation. Sadly, however, EU environmental regulations and the carbon floor price mean that Eggborough will be forced to convert to biomass or face closure. Indeed, I have been concerned about the carbon floor price from the beginning. That is why I voted against it, along with my constituency neighbour, my hon. Friend the Member for Cleethorpes (Martin Vickers) and, indeed, the hon. Member for Scunthorpe. As ever, north Lincolnshire has been united on this issue, because of the large number of important carbon-intensive industries on the south Humber bank.
Eggborough has been working on a £750 million conversion project that would have started on 6 January and been the UK’s largest infrastructure project in quarter 1 of this year. That investment would have secured 800 jobs, many of them in my constituency, and created even more jobs further down the supply chain. That is on hold. For the past couple of years, Eggborough and local MPs have had positive policy signals from the Department of Energy and Climate Change that conversion to biomass would be supported through the final investment decision enabling process. We are pleased as local Members of Parliament that Drax has been secured through that process, but all the signs were that a rapid conversion to biomass at Eggborough would be supported, not least to sustain that important generating capacity on the grid as well as to meet our renewable targets. This was a shovel-ready project, as I have said, with £750 million of inward foreign investment already in place. The final decision was dependent on the FID enabling process. Several drafts of the documentation were produced, and by the third and final draft something seems to have changed in the selection criteria. Just a few weeks before the final announcement applicants were informed of the change and, as a result, Eggborough was excluded.
Michael Fallon
May I make it absolutely clear to my hon. Friend, probably for the nth time, that the selection criteria were not changed? It was always clear, in each of the updates on the FID enabling process from the beginning of last year onwards, that the budget might have to be constrained if there were more applications for biomass conversion than the budget could accommodate. I am delighted that we could accommodate, through immediate selection, the biomass conversion plant to which he has referred at Drax.
Andrew Percy
I thank the Minister for that, but it is not a situation or an explanation that Eggborough, others involved in the debate or I accept. Yes, I grant it to the Minister that it was clear in the initial documentation that there were a range of selection criteria. That was mentioned in passing in the first draft. By the third and final draft it appears to have become an overriding consideration and criterion. That is what we believe has changed. If that was not the case, why were positive messages given to Eggborough throughout the process? It would have been clear at the beginning that Drax and Eggborough could not both have been funded, given the scale and size of the Drax conversion and the budget. Later, the range of technologies seems to have become the overriding criterion, which is why other local Members of Parliament and I have sought to clarify what happened and are concerned for our constituents who work in this important power station.
As for the impact of the change, Members of the other place and I have recently tabled parliamentary questions to demonstrate that the Government have made no assessment of the impact of the change in policy, nor of the impact on bills. When I intervened on my hon. Friend the Member for South Suffolk (Mr Yeo), my hon. Friend the Member for Suffolk Coastal (Dr Coffey) shouted at me that it was all about how cost-effective this was. Well, we do not know the cost of losing this generating capacity. Eggborough has announced that it will be forced to close unit 2, which provides about 1% of generating capacity, in September this year. According to the most recent information available, the management at Eggborough believe that the plant will no longer supply energy to the grid at all beyond 2015.
There is a crunch coming in 2015, perhaps as low as 2% of capacity, and here we are, about to take off 2% to 4% of generating capacity. The appropriate notices have been issued to National Grid, Ofgem and DECC. The Government may not have made an assessment of the impact on bills, but others have. The loss of that capacity could result in a £38 rise in consumer electricity prices, with £25 due to capacity crunch forcing up the wholesale price, and an estimated £13 of additional cost to decarbonise using technologies that are more costly than biomass conversion.
As I said in the meeting with the Minister and one of his officials, we potentially face a situation in which 800 people who are currently gainfully employed will be sitting at home, having been fired, paying increased bills for a form of generation that is 50% more expensive than the form that they were sacked from generating. To me, and to my constituents, that seems completely and utterly barking mad. It must not be allowed to happen.
We know full well that the process was changed—recalibrated perhaps—over a range of technologies, which seems to have become the overriding factor. There are technologies, largely offshore wind, that have come out ahead of Eggborough, even though they have no finance behind them and do not have planning permission in place, compared with a shovel-ready project that was ready to go.
The figure of £38 for the addition to bills might be disputed, but we have received no answers to our parliamentary questions that show what the impact would be. Perhaps it is worth delving into that in more detail. The £38 is based on the fact that annual wholesale consumption in the UK energy market is 360 TWh. If wholesale prices rise by 10% due to the supply crunch, that would add £5 per megawatt to the wholesale market, which equates to about £1.8 billion per annum. About a third of the market is for domestic households, so that is £600 million between 24 million domestic customers, which works out at £25 on domestic bills. Filling the 4% capacity gap, or maybe the 2%—the figures are disputed—with the more costly renewable technology will result in an additional £13, based on a total cost of £3.4 billion over the life of the project.
It is unfortunate that we find ourselves in this position. I implore the Minister and the Government to listen to our pleas on the matter. Eggborough is a major employer. The conversion project would secure 800 jobs, and potentially thousands more. The money is there, it is shovel-ready and the investment is in place. The fact that the project is losing out to others that do not even have finance or planning permission in place simply cannot be right. In fairness to the Department, I understand the desire to have a range of technologies, but we argue that that is what the contracts for difference regime is for. The projects that would replace Eggborough would not be on stream until 2019-20. There is another regime for them, but there is not for Eggborough. The FID enabling regime is it for Eggborough: it is the end. We really need action on this, perhaps through the Secretary of State using his reserve powers. If the regime is not right, as the Minister has consistently told us, let us look at the Secretary of State’s reserve powers, particularly those relating to the impact on generating capacity.
If this project does not go ahead, we have to be clear that we will be replacing it with a much more expensive form of technology. I support the development of our offshore wind sector through a different regime, and locally we have all been united—the Opposition Whip, the hon. Member for Scunthorpe, is nodding in agreement—in wanting to see the Humber develop as an offshore wind centre. We believe that we can do both. We should aim to do both, not only because of the number of jobs at stake, but because of the implications for consumers and how much they would be hit in the pocket. I hope that the Minister will listen again to our pleas on this subject. It is important not only locally, but from a national perspective.