Angus Brendan MacNeil
Main Page: Angus Brendan MacNeil (Independent - Na h-Eileanan an Iar)Energy Spending Priorities: Investors and Consumers
Angus Brendan MacNeil Excerpts
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I would first like to thank a number of people for this debate, and particularly for its timing. The Chair of the Justice Committee, the hon. Member for Bromley and Chislehurst (Robert Neill)—I see that he is still in the Chamber—was very kind indeed to arrange the schedule so that this was the later of the two debates, which enabled me to get down from Barra in time. Had it been the earlier debate, I am afraid I would not have been on time. I would also like to thank the staff of Loganair, who got me an earlier plane that got me down in time; many thanks before I go too far, taking two planes to get down today. [Interruption.] One of my colleagues says that this is like the Oscars. Well, this is the high point. The tears will be starting shortly.
It is a pleasure to introduce this evening’s debate on energy spending priorities. I will discuss this in relation to three reports from my Energy and Climate Change Committee produced in the past few months on investor confidence, carbon capture and storage and home energy efficiency.
We heard a lot in the run-up to the EU referendum about the impact that a vote to leave would have on investor confidence in the UK, and how businesses craved stability, transparency and certainty to plan for their spending on production, research and jobs. That presupposed that prior to the vote to leave the EU, the policy landscape was somehow calm, tranquil and settled. It is certainly not calm, tranquil or settled now, and we know that the Brexiteers deliberately had no plan in order to avoid scrutiny. That is another debate, which is taking place on television in Scotland tonight, and I will leave that where it is.
In relation to energy policy, the landscape was anything but tranquil, calm and settled. There has been considerable upheaval since the Government assumed office last year. Last June, the Department of Energy and Climate Change announced the early closure of the renewables obligation subsidy for onshore wind, citing manifesto commitments. Although it was only one line, a fact check of three pages was required to work out what it meant, so woolly was the wording. Last July, DECC announced cuts to the renewables obligation for solar PV and biomass, and changes to the feed-in tariff accreditation.
That is just a few of the policy changes that took place last summer, but it is what happened between those announcements that exercised many in the sector and contributed to the decision of the Energy and Climate Change Committee, after extensive consultation with a range of stakeholders, whom I thank for their contribution to our work, to launch our inquiry into investor confidence in the UK energy sector. I thank Jenny Bird, the senior Committee specialist, for the hard work and diligence she put into this report, and I wish her well in her new post at the centre on innovation and energy demand at the University of Sussex.
Early last July, the Office for Budget Responsibility published figures relating to the levy control framework: a notional cap on the renewable energy subsidies that consumers pay through their energy bills which covers the renewables obligation, its successor, the contracts for difference, and feed-in tariffs. Part of the Government’s objective, quite rightly, is to put affordability at the heart of energy policy. The OBR projected in its July assessment that there would be a significant increase in levy control spending compared with its March 2015 assessment. Its March 2015 assessment, the figure was £7.6 billion. By July—in the space of four months—it had increased by £1.5 billion to £9.1 billion. It adds much fuel to the fire of claims and counter-claims about the OBR and the accuracy of its work when it produces such wildly different figures over a four-month period. That clearly influenced the energy policies that were announced over the summer.
Some felt that the increase had not been adequately explained by DECC or the OBR. E.ON told my Committee that
“the evidence around cost overruns…is questionable and not transparent; publication of detailed analysis of the status of the LCF should be a priority.”
ScottishPower said that
“it will be important for the industry to have better visibility of the underlying assumptions and calculations under the LCF so as to enable efficient long-term planning.”
The key word there is “efficient”.
Freedom of information requests have been unsuccessful owing to commercial confidentiality, and questions to Ministers have hit the same buffers. I have therefore raised the matter with the National Audit Office. I am pleased that the NAO has announced a new review of the LCF, which will examine, among other things, the reason for the changes in forecast expenditure. The NAO can jump over the iron curtain that is the commercial confidentiality statement.
Two years ago, the NAO looked at how DECC modelled LCF spend and identified weaknesses that prevented it from having the highest degree of confidence in the model forecasts. Further elements of the LCF forecast need unravelling too, because if spend is set to increase by the amount the OBR has forecast, increased spend under the LCF may not automatically result in increased costs to consumers. A recent FOI request revealed that the Government had forecast that consumers would pay more towards subsidies under the LCF in 2020, but that the average total bill would come down because of lower wholesale prices. In part, that is down to the introduction of wind and solar power, which increase generation capacity at a negligible marginal cost and, therefore, lower the overall cost of wholesale electricity—the well-touted merit order effect.
It was noted by the Committee that increased uncertainty may increase premiums, and we raised that with Ministers recently. The cuts to renewable energy might therefore be counterproductive, as they are reckoned to be by many, because of the added costs of investment due to the Government’s sudden lurches in policy.
During the inquiry, we heard many voices in the industry that were disturbed by the rapid and unforeseen changes to feed-in tariffs and the renewables obligation. Concerns about the lack of detail as to when the second round of auctions for the renewables obligation’s successor, the contracts for difference, would take place have added to the uncertainty. The latest we have heard is that it will be in the last quarter of this year.
Returning to increased bills, Roger Harrabin of the BBC asked DECC to deny that the cuts to energy subsidies would put bills up, but it did not. That shows the merit order effect at work. There was an understanding in the past that money spent was an investment, not a cost. Money spent in the present should also be seen as an investment, not a cost.
We now have more clarity on the timing of the auctions—they will be in the fourth quarter of this year —but we need to know when in the fourth quarter they will be, because companies need to plan and to project. The fourth quarter of the year might be any time between 1 October and 31 December. That is simply not good enough when we are in the seventh month of the year.
We heard that subsidy reductions had created challenges for renewable investors, with new projects in early development suffering the most. Mitsubishi bank told us that it was having 95% fewer conversations with onshore wind developers. Perhaps as damaging could be the risk premium that is now attached to the UK’s green economy as a result not of the changes themselves, but of the way they were made, with little notice of consultation. Indeed, the consultation happened after the announcements. It is no surprise that our witnesses hankered for a clear, longer-term steer from the Government on, for example, what form the LCF would take post-2020.
That is encapsulated in the Ernst & Young renewable energy country attractiveness index, which ranks 40 countries according to the attractiveness of renewable energy investments. The UK slipped from eighth place in June 2015 to 11th in September 2015. That was the first time since the index was established in 2003 that the UK had been placed outside the top 10. Since our report was published, the UK has fallen to 13th—unlucky for some and particularly for the investors. Ernst & Young attributed our fall to the Government’s
“non-committal, if not antagonistic, approach to energy policy”.
I am afraid that the idea of an antagonistic approach to energy policy chimes with the frustrations that I hear from many stakeholders in the energy space when they talk to me. Our report noted the root causes of this crisis of confidence. The first was:
“Sudden and numerous policy announcements”.
The second was:
“A lack of transparency in the decision-making process”.
Thirdly, there was
“insufficient consideration of investor impacts”.
The fourth was policy inconsistency, such as
“claiming to want to decarbonise at lowest cost while simultaneously halting onshore wind”
and choosing more expensive forms of renewable generation. Fifthly, there was:
“The lack of a long-term vision”.
The last was what we called the policy “cliff-edge” in 2020.
My Committee recommended that Ministers clarify the assumptions and methodologies behind their levy control framework calculations. It would be advisable to do that before those assumptions and methodologies come out kicking and screaming from the work of our friends at the NAO. We said that Ministers should set out the post-2020 LCF budget in the context of the fourth and fifth carbon budgets to ensure that the available funding was consistent with meeting our longer-term carbon commitments. We recommended that they develop their carbon plan to achieve the fifth carbon budget in full consultation with investors, using transparent methodology and with clarity about how transitions would be managed as new technologies become established, including the intended “glide path” out of subsidies, rather than their being pushed over a cliff edge.
It is usual practice in these debates to refer to the Government’s response to the Committee’s recommendations, but I am afraid that I am unable to do so. Initially, I thought that would be because the Government had failed to produce a response, despite our report being published four months ago. It is actually because we decided, as a cross-party Committee, to send the response that we did receive last Tuesday straight back to the Government. Our report contained 14 detailed recommendations, based on extensive evidence from stakeholders and experts, including the estimate from one of our witnesses that Government policies could raise the cost of financing projects by £3.14 billion a year. None of that was responded to. Instead, we were afforded only loose replies to themes set out in the report’s summary. Indeed, it was unclear from the response whether anyone at the Department of Energy and Climate Change had read beyond page 4 of the 47-page report in the four months since its publication—a rate of one page a month.
Patrick Grady (Glasgow North) (SNP)
I am a member of the Procedure Committee, and the Government slapped down our report on private Members’ Bills and gave it no detailed consideration whatsoever. Does my hon. Friend share my opinion that the Government appear to be asleep at the wheel on this, as on so many issues?
Mr MacNeil
The evidence might well lead my hon. Friend to take that view. That is happening in tandem with the other trend that is running amok in the southern part of the UK—that of resignations. While resignations are everywhere, the Government’s lack of consideration for Committees and other stakeholders seems to be the order of the day.
No parliamentary Committee should be treated in that way. However, it reinforces the feeling of Stockholm syndrome—or is it Lima syndrome?—when the poor souls in industry come complaining to the members and Chair of the Committee about their difficulties in getting ideas, thoughts and communication straight to the heart of Government. It makes people who are trying to make things better in the energy space wonder just how seriously the Government take them.
We urge the Government to try harder and send us something respectable for a comprehensive assessment before the recess. Investor confidence can then, we hope, begin to be rebuilt.
Carbon capture and storage is another example of the need to rebuild confidence. CCS is a technology in urgent need of development. We often talk about the energy trilemma, but there is a climate change trilemma as well. On current analysis it is difficult to see how we can have fossil fuels but no CCS and still meet our long-term decarbonisation projections at the same time. As the Secretary of State’s reset speech mentioned a dash for gas we know that fossil fuels feature in the Government’s plan. I checked on the GridCarbon app for smartphones—I am sure you have it, Madam Deputy Speaker—for current energy usage in the UK this evening. It is 51.4% gas and 5.3% wind. The key figure is the 295 grams of carbon dioxide produced for every kilowatt-hour. The 2030 target is meant to be 100 grams. It will be interesting to see quite how we are going to get to that, given the current trajectory.
As the Chair of the Committee on Climate Change, Lord Deben—from the Lords, obviously—said, not having CCS would cause the UK an issue. I love the brilliantly understated manner of that fine English gentleman’s statement of high alarm about the targets that the Government might have difficulty in meeting. He was quite right, and his delightfully understated way of putting it had far more effect than anyone shouting, running and screaming about the issue. It certainly made people pause on the morning he said it, which was the day of the launch of the fifth carbon budget.
I hope the Government will have more positive noises to make about CCS. People out there are still hanging on by their fingernails to see what the Government will say. They decided to ditch their £1 billion carbon capture and storage competition, on the day of the autumn statement. It was not in the statement itself, but was slipped out, alas, in a notice to the London stock exchange, which was deemed more important than Parliament at the time; we have certainly seen in recent days that it reacts more rapidly than Parliament when the news is bad. I note that Government promised £250 million to Aberdeen to help with the oil downturn, as part of the UK’s broad shoulders, but that one decision on CCS potentially took away £500 million, double that figure.
It is not just that the move on CCS on the day of the autumn statement was announced to the City without Parliament being told; the worst part of it is that there were serious bids in earnest preparation. People were working in good faith towards the Government’s competition. My Committee and the Procedure Committee may feel badly let down, but we are nothing by comparison with those working on the competition, devoting their working days, months and perhaps even years to it. In fact, I was invited by the Foreign Office to go to Alberta in Canada to see a carbon capture and storage project. One arm of Government thought that the UK would become a leader on CCS, but alas, within a month, it seemed that my trip had been wasted. I hope not; I hope that tonight the Secretary of State will give us some positive words on carbon capture and storage, with dates, timelines and the sort of thing that the industry is looking for.
Subsequently, in our report on CCS we criticised DECC’s decision as short-sighted, given that the costs of later projects are expected to fall rapidly, once primary infrastructure is in place. The Institute of Engineering and Technology set that out in a brilliant briefing paper for our Committee, as well. We also said that the Government should devise a new strategy for CCS in conjunction with a new gas strategy. We advised the Department to assess the financial and other benefits of using our North sea infrastructure. Work has shown that there would be enhanced recovery of up to 12% from the North sea oilfields if we used them as a place to store carbon. The work of the Committee put that forward, and I would like to take this opportunity to thank Dr Marion Ferrat for her work on the report. We did not send the Government’s response to that report back to them. I have it here with me tonight, as proof. However, the response still failed to address our recommendations in detail. There was no clarity on whether DECC envisages that CCS will be needed at all, on whether any CfDs will be available for CCS or on the proportion of new gas-fired plants will be retrofitted with CCS. Since then, the Committee on Climate Change has reiterated the need for carbon capture and storage, calling for a “strategic approach” to the development of CCS, and stating that the technology is of “critical importance” to the UK’s efforts to decarbonise. Alas, it was not critical enough on the day of the autumn statement last year.
David Mowat (Warrington South) (Con)
The hon. Gentleman mentions how critical CCS is to the UK’s decarbonisation, and I for one hope that it makes progress, but other countries burn far more carbon than the UK. Germany burns four times as much coal, but has no interest whatever in CCS. Why does he think that the UK needs, unilaterally, to pursue this so avidly?
Mr MacNeil
It is not simply a unilateral UK issue. CCS is in Canada and Norway. The fact that, unfortunately perhaps, I am not in the German Parliament and so am not scrutinising the German Government possibly explains why I am not talking about the point the hon. Gentleman raises. CCS is certainly not unilateral. Further, we could argue that German Government feel they are off the hook because other Governments feel it is nothing to do with them, either. Someone has to start taking responsibility somewhere. Other countries are. We should play our part. That competition would have helped immensely.
Graham Stuart (Beverley and Holderness) (Con)
One of the report’s recommendations is for clarity over the three CfD auctions. I have not seen the Government’s response, so will the hon. Gentleman enlighten the House about what details there were on timing, technology and the other questions he raised in the report?
Mr MacNeil
I refer the hon. Gentleman to the report. We have had only one response on carbon capture and storage. As for the other reports, I think a response came early today, but we are waiting for the response on the main report on investor confidence.
I will move on to the report on home energy efficiency. All the policies mentioned affect consumers, as they are subsidised through the levy control framework. My Committee also looked at Government changes to spending that affect consumers more directly, namely changes to spending on energy efficiency measures that are levied on consumer bills but sit outside the LCF. As with the report on investor confidence, our energy efficiency inquiry was another piece of work that stakeholders urged us to take on at the roundtable meetings we held early in my time as Chair of the Committee. At this point, I would like to thank Josh Rhodes, the Committee specialist, for his work and help on the report.
We know that improving energy efficiency is a win-win for households and the UK as a whole. It enhances energy security, cuts carbon emissions from housing and reduces costs. For consumers, the benefits include lower energy bills, and, critically, warmer, more comfortable homes—more arguments should be made on that point—and improved health and wellbeing. When we work on the technical energy side, we sometimes forget that these things are for human beings, who have very nuanced and different reasons for wanting to insulate their homes and have warmer homes.
Callum McCaig (Aberdeen South) (SNP)
This comes to the nub of the issue with investment in this area. The Government are completely unwilling to accept that it is investment. Investment in making homes energy efficient is an investment in our society. There are savings to be made. We need to look at things in the round, rather than looking at one part in isolation.
Mr MacNeil
My hon. Friend is absolutely correct—I have to get used to saying “my hon. Friend”, because for the previous 10 years I have been here I have not had many hon. Friends to say it to. It is a pleasure to say it. He is absolutely correct, however, because the Government have got into a way of thinking that any money spent today is a cost rather than an investment for the future. I hope that they will get away from their austerity cult idea. I often criticise them for being a penny wise and a pound foolish Government, because I think it is a mistake.
Mr MacNeil
I would be delighted to give way to my great friend on the Committee—I do have friends across the Chamber.
Antoinette Sandbach
There clearly was a need for review, which we saw last week when the National Farmers Union gave evidence to the Committee. It suggested that organisations such as the National Trust, which has huge numbers of members and vast access to resources, including massive payments under the single farm payment, should receive subsidy for installing biomass boilers in its country houses. Does the hon. Gentleman accept that there is a need to refocus and consider how we best deliver outcomes for fuel efficiency in homes for those who need it the most?
Mr MacNeil
The hon. Lady makes a good point, and if she wants to pull the very wealthy out of those schemes that might be an idea. Often, these things start by aiming at certain groups, but unfortunately the target and those who get hit are very different, and the Government often miss that.
Insulating draughty homes can save vulnerable people from fuel poverty—a problem that remains unacceptably prevalent across the UK. My Committee’s recent report concluded that the Government’s latest efforts to improve household energy efficiency had proved inadequate. Although the energy company obligation delivered many improvements, it did so at much lower rates than previous schemes. The green deal did not significantly increase demand for energy efficiency; it fell far short of original ambitions and was too complex and costly, and it also failed to address the hassle factor that can prevent customers from signing up. If anyone should know and understand the hassle factor, it is MPs after their recent dealings with the Independent Parliamentary Standards Authority, as that is an example of hassle and why people do not do things—there is something to be learned there about behavioural economics and desiring a scheme that will work for people. We in this House should have known better when the green deal was coming.
The Government’s new ideas, which include their plans for the energy company obligation in 2017, gave us cause for serious concern, and the decision to use the new obligation to tackle fuel poverty may well be misguided. The UK is the only country in Europe to take such an approach, and a scheme that charges the households it is designed to help appears inherently regressive. Alongside that, given the huge number of homes yet to benefit from energy efficiency measures, the reduced ambition of the new obligation is a major disappointment to me, to the Committee, and to many who gave evidence to the Committee.
There is now no support to help households that wish to install energy efficiency measures but cannot meet the costs upfront. The Government disagreed with our argument in their response, but we still do not know what the reformed scheme will look like. We have asked Ministers to look again at pay-as-you-save mechanisms, as well as at the infrastructure behind the Green Deal Finance Company, when considering how to assist such households. We also need demand drivers such as stamp duty and council tax reductions for efficient homes. I am pleased that the Government agreed in their response that the Green Deal Finance Company could play a role in the future. If the Government take concerted action now they can help to insulate consumers from future energy price rises. That would be money well spent and an investment, and it would prevent the need for large-scale retrofitting in future.
Graham Stuart
Previous efforts have tended to end up being implemented in more urban areas, but those who are poorest and whose homes are the most difficult to insulate often live in rural areas. Does the Committee have any recommendations for the Government to try to ensure that any future programmes reach those on low incomes in rural areas who are particularly vulnerable?
Mr MacNeil
As a rural MP, I am aware of that issue. The hon. Member for Eddisbury (Antoinette Sandbach) is also assiduously aware of it, and I commend and congratulate her on raising it in Committee on just about every possible occasion. The hon. Gentleman will be delighted to know that on several occasions the Scottish Government were praised for their actions and—perhaps tongue in cheek; perhaps not—maybe I could recommend that energy policy in that area be devolved to the Scottish Government who, according to the evidence, seem to be doing a better job of it for the whole UK than other Governments.
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Chair of the Committee have anything to say about the almost collapse of solid wall insulation in homes that was predicted by the new ECO arrangements, as set against the suggestion by the Committee that by the end of the fourth carbon budget we should have in place 2.2 million solid wall insulation completions? Has the Committee considered that issue?
Mr MacNeil
It is always with certain trepidation that I give way to the hon. Gentleman, because what he does not know about energy, nobody else knows either. He sat on our Committee early on and did a fine job, and he also sat on the Committee in the previous Session, where he was highly regarded. There is some concern about solid wall insulation. If I remember right, the figures expected are far below what is needed and have almost collapsed, which, as he said, would be very worrying.
Let me start approaching a conclusion—that is more often a hope during speeches in the Commons than a statement of full intent. I thank my Committee colleagues for their excellent work on these inquiries, as well as the hundreds of companies and individuals who gave their time and expertise to inform our conclusions. It is appreciated. I Chair the Committee on Energy and Climate Change, but I am not an expert. I can, however, take information from experts, distil it, and hopefully get policy points out of that. Along the way, I will hopefully develop some expertise in those areas.
The Government’s response to our investor confidence report demonstrated disregard for the Select Committee inquiry process, and their response to our CCS report leaves important questions unanswered. Their response to the report on home energy efficiency appeared only this morning—eight weeks late. I hope that when the Secretary of State responds to this debate on the Government’s spending priorities, she will afford the House and my Committee a little more courtesy than her Department has sadly shown so far—I say that with regret because I like the Secretary of State personally. We have raised the issue with Ministers in Committee and several times by letter, and we need more information that businesses and homeowners might use and need to plan their energy futures. That would be an important step.
Finally, it is only right that a Committee should reflect that it is not all about MPs or the Chair, and we are fortunate to have talented people working with us. Last, but by no means least, I thank Dr Farrah Bhatti, the Clerk, Gavin O’Leary, the Second Clerk, Stephen Habberley, the specialist, Jamie Mordue, senior committee assistant, Henry Ayi-Hyde, Committee support assistant, and our ever cheerful Nick Davies, the media officer. For the investor confidence inquiry I thank senior specialist Andrew Buglass, founder of Buglass Energy Advisory, and Kirsty Hamilton, a lady with many jobs—of course she has because, like your good self, Madam Deputy Speaker, she has a Scottish background.
Antoinette Sandbach (Eddisbury) (Con)
I rise to echo the Select Committee Chair’s thanks not only to the Committee staff but to the numerous witnesses who have taken a lot of time and trouble to contribute evidence to the three inquiries we are discussing today.
I want to look briefly at the macro background to those inquiries, which is really one of climate change. We know that climate change is one of the most serious threats the world is facing. We know we need to decarbonise our energy sector and we know that that has to be done in a way whereby UK consumers feel they benefit from the change rather than lose out. All too often, the perception has been that green policies cost them. That is a real danger in the current climate, in particular after the decision last week. I have already received correspondence from constituents who are concerned that the UK may abandon its environmental targets.
The Secretary of State for Energy and Climate Change went to Paris and played a part in negotiating very ambitious climate change targets. That matters in relation to these reports, because the investor confidence report deals with the delivery of those targets, and energy is absolutely key in delivering those targets—not just the electricity that powers our homes, but the heat and transport sectors, too. It was in those circumstances and against that backdrop that the inquiries were conducted.
It is a concern that the Committee report found there has been a drop in investor confidence since May 2015, something to which the Chair alluded. In May this year, the UK had fallen from eighth place to thirteenth place in the investor confidence index. I appreciate that some of the fall may have been around the uncertainty over the referendum and that companies may have been holding back investment decisions to see the result, but it is clear that there now needs to be a real signal sent out to the investor community that deals with some of the issues raised in the report. In particular, what startled—if I can put it that way; one thinks of a horse that has been startled away—the investment community were a number of really sudden and quite unexpected policy announcements by the Secretary of State last summer. I understand—I alluded to this in an intervention—that there was a need to look at, for example, solar feed-in tariffs. Some of them gave very high rates of return. Let us not forget that it is the poorest consumers who are paying for the levy control framework in their bills, so it was right for the Government to look at that and assess how effective it was. Nevertheless, there was a very strong theme coming through the evidence we had about the lack of an overall Government strategy on energy.
The Secretary of State speaks very powerfully about the energy trilemma, but the investor community does not feel that a clear direction has been set to say this is where we are going and why. The Secretary of State explained that she wishes to remain technology-neutral. However, to look ahead and take advantage of some of the very best technologies that may come forward and deliver the best results for climate change and reducing the impacts of carbon emissions, there may well need to be some incentivisation, much as we have seen in the onshore wind sector. The Chair rightly referred to the change in Government policy in relation to the onshore wind sector and the switch to offshore. That has led to a decline in investor confidence in onshore wind farm investment, although we have not seen the same results in the offshore sector.
Mr MacNeil
Allied to that—this might sound like a constituency interest, but it does not just affect my constituency—are island contracts for difference. Having been to the European Commission to get it informally passed, the Government seem reluctant to go back to the European Commission to get it formally passed. Let us remember that island CfDs will enable cheaper generation than fully offshore, because the winds in the islands on the west coast can be stronger than those in the sea on the east coast.
Antoinette Sandbach
I am of course aware that the Scottish Government have a great deal of involvement in energy policy, in particular through their renewables obligation certificates. If they want to, they have the levers to incentivise different energy development in Scotland. It is clear that some of the announcements—on feed-in tariffs, the renewables obligation and the climate change levy—and the quick succession in which they came created uncertainty among investors.
Another theme in the report was the lack of transparency around the decision-making process. What the Chair said about the sudden cancelation of the carbon capture and storage project came through very clearly. The manner in which the decision was taken caused concern among companies that had spent many months and years putting together their bids. I understand that the Government need to look at whether they are getting value for money for the taxpayer and whether they are delivering the necessary outcomes, but it is important that we have a clear policy direction. That came through in the investor confidence report.
I appreciate that there have been several reset speeches, but again we are now in a climate where the Brexit vote has happened, yet, judging by some of the quotes used, there has been a lack of long-term vision and concerns that there will be a policy cliff edge in 2020 unless we have clarity around the future of the levy control framework and carbon price floor beyond that year. In the short term, our dropping down the renewable energy country attractiveness index might in fact mask what is really happening. Pipeline projects are still coming through, so the real impact might only be felt in 10 years, when the successor projects to those part way through the process—the ones that have consent but are not built yet—are not there.
It is all change at the moment. Every Department will be looking at our European targets and at what we might do in the future as a nation, so it is really important that the Secretary of State confirms that her civil servants are looking at the direction of UK energy policy in the context of our leaving the EU and the risks for investment, particularly in renewables.
One other item that came through very strongly in our report was the risk premium for developers. It seems that some developers have very high risk premiums and are looking for returns of over 13% or 14%. They cannot get that anywhere else in the market. It is very hard to find such high returns on other investments. I emphasise, however, that my poorest constituents—those least able to afford it—are paying for the green investment through the levy control framework.
Mr MacNeil
I hear what the hon. Lady is saying, but would she admit that previous spending has led to investment that has reduced wholesale prices and thereby benefitted consumers of the present and that investment today will do the same for consumers in the future?
Antoinette Sandbach
I certainly would, and I will come to that point in touching on the home efficiency section of the report. I am afraid that I have not had a chance to see the Government’s response—the Chair said that it only arrived this morning, but, owing to technical errors and my iPad’s failure to sync, I do not have a copy—so I do not know exactly which recommendations they have adopted. It is absolutely clear, however, that they need to set out a methodology and budget for the levy control framework going beyond 2020.
I very much welcome the fact that the National Audit Office has said that it will look at the levy control framework and “lift the veil”, as the Chair put it, on the funding, on by how much it was exceeded and on the projected spend. It is only by sending out that signal of certainty to the markets that we will encourage the investment to come forward. We need to do that in a way that is responsible to the taxpayer and provides a return to investors, albeit not an excessive one in which the taxpayer or the bill payer loses.
On the macro-level of delivery on the larger scale, I should not forget contracts for difference. We need clear signals on CfD; we need to know when the auctions will happen; we need to look at technologies such as anaerobic digestion, which have been under-adopted in the UK and have huge potential to deliver, particularly in rural areas. As others have highlighted, rural areas face real problems. Many people there have oil-fired boilers and the housing tends to be of older quality. It is vital that CfDs look at how to deliver not just the vast gas projects that are coming forward, although not yet built, but the micro-level projects, which are seen in the section of the report on home efficiency. I shall move swiftly on to that now.
Government policy on home energy efficiency has been stop-start, which has led to policy uncertainty that has damaged consumer confidence with the loss of jobs in the supply chain. I have seen that in my own constituency, where a small business has laid off a number of employees. Over 60 have been lost in this sector as a result of some of the policy changes. That has had a real impact on my constituents. Sixty people out of work is 60 people who have to re-train and learn different skills.
The energy company obligation scheme has not achieved what we wanted it to achieve. I do not praise the Welsh Government very often, but I have to say that the Nest and Arbed schemes in Wales achieved a far greater amount than the ECO did in the UK. Much could be done from the Government looking and learning from over the border. I hear what our Chair says about Scotland, too. It is clear that the ECO will be extended to 2018, but the Select Committee was very concerned that its main policy target was fuel poverty. We have questioned whether it will really deliver on that ambition.
The hon. Member for Southampton, Test (Dr Whitehead) mentioned what was happening in rural areas on solid-wall insulation. Rural areas are a particular concern, and it is quite clear that we need more data at the level of the individual household, so that ECO measures can be targeted more effectively. One major concern is the lack of data at the individual level, and one of the report’s recommendations is to ensure that we set up the sharing of data, so that home efficiency measures can be far more effectively targeted, particularly in rural areas. The evidence relating to ECO suggests that it has gathered the low-hanging fruit and has concentrated on largely urban areas where whole streets can be done at a time. It has failed to deliver in the rural areas where, as I said, housing is older, tends to be of poorer quality and tends to be solid-wall, built pre-1945.
If we are to make the gains that we need to out of home efficiency, it is key that we look at tackling the harder-to-reach homes; to do so, we need the data. For that reason, the Government clearly need to do much more cross-departmental working and they need to set up a proper database. I suspect smart meters can generate the data that will be able to identify which homes are the least efficient and will give the Government and, indeed, the energy companies the information about who is using the most and potentially who is the least efficient.
Mr MacNeil
The hon. Lady is making a characteristically good speech and raising many points on which I support her. She made a good point earlier on solid-wall insulation, and the price of oil in rural areas is at the moment beneficial in comparison to the past. With so many houses being heated like that, now, when the sun is shining—almost literally—is the time for this work to be done, as the oil price may go up again, in which case these houses will be in desperate times. We should act before the pain that could come later.
On the abandoning of the zero-carbon homes target, the hon. Lady will probably recall that that was a disappointment to many in the supply chain, who had geared up for zero-carbon homes only to be deflated on finding out that the Government had for some reason changed their policy.
Dr Alan Whitehead (Southampton, Test) (Lab)
It is a pleasure to follow the hon. Member for Eddisbury (Antoinette Sandbach). She has made a very thoughtful contribution, most of which I agree with. I hope that this will set the tone for the rest of the evening’s debate, because there is now a wide consensus that the storm of changes that were made last summer to a whole range of renewables incentives has created enormous problems for investor confidence and substantial uncertainty over the Government’s direction on energy policy overall. The three excellent reports from the Energy and Climate Change Committee that we are also discussing this evening underline how the problems have arisen and what they consist of. However, we have also seen the acceptance by the Government of the fifth carbon budget in the past couple of days. It is great that they have accepted it. It would have been nice to have included shipping in it, but I understand that they are not going to proceed with that. Nevertheless, they have accepted the fifth carbon budget, which describes the onward march of renewables as absolutely essential for the reduction of our emissions.
The fourth carbon budget dealt with the essential nature of carbon capture and storage and the forward march of energy efficiency in homes. I made the point in an intervention earlier that the fourth carbon budget assumed that there would be 2.2 million solid wall treatments in homes, but the changes that have taken place over the past year have all pointed in the opposite direction to the imperatives that the Committee on Climate Change put forward in the carbon budgets. There are therefore real question marks in relation not only to investors but to future policy overall. How can we be on target with those budgets—as I hope we will be—at the same time as undertaking all the recent changes?
The cancellation of the carbon capture and storage programme was thoroughly deplorable. The justification for the changes to the renewables incentives was that this was all about the levy control framework. The framework came in in 2011 and it was supposed to place limits on the levies that were arranged in relation to certain renewables. This would also have an effect on what customers’ bills would look like, as the levies would be passed down to customers’ bills in the end. However, the levy control framework was almost inevitably going to be a car crash, both in terms of how it was conceived and of what it was going to look like by 2020.
There now seems to be some clarity about future auctions relating to contracts for difference under the framework up to 2020, but it does not look as though there will be much money in those auctions. It does not look as though they will be significant, and the levy control framework itself will come to a sharp cliff edge at the end of 2020. That is partly because when the framework was first designed, it was largely based on the renewables obligation, which involved a fixed amount of payment from the Government to those receiving renewables obligation certificates, whereas the change to contracts for difference has resulted in varying sums coming forward. As energy prices go down, so the cost of the payments goes up, resulting in less and less money in the levy control framework. This is a fundamentally badly designed arrangement for dealing with future renewables deployment if we are serious about getting that deployment in line with our carbon budgets.
We need clarification on whether there will be a levy control framework from 2020 onwards. I was interested to discover this morning that a consultation about changes in the 2014 contracts for difference orders had turned into a consultation about whether there should be a levy control framework at all after 2020—not about what it should consist of, or how it should work. I believe the Secretary of State indicated in her “reset” speech that some offshore wind would be auctioned after 2020, in which case there must be a levy control framework, but that is all the information that we managed to obtain. The consultation consists of one question and nine pages, and it does not tell us a great deal about the framework itself.
Mr MacNeil
I was interested in what the hon. Gentleman said a few moments ago about the effect of the levy control framework in an environment of low energy prices. Such an environment puts greater demands on the framework, which was probably conceptualised when prices were higher, or even heading in that direction. Another question is posed by the fact that the framework is not being revised to take account of the future capacity market.
Dr Whitehead
The hon. Gentleman—the Chair of the Committee—is right to raise those questions. The effect on the levy control framework of the change in prices—and it should be noted that the prices of gas, electricity and oil are now below the lowest conceivable scenario in the Department’s energy projections—was simply not anticipated by the Department when it designed the framework. Moreover, the framework only takes into account the expenses to consumers of power. As the hon. Gentleman said earlier, it is clear that investment in renewable energy is affected. The change in the merit order and the downward pressure on prices has a real effect on wholesale prices. It is estimated that for every pound that is invested, about 60p comes back. That has not been taken into account in the calculation of the costs of the levy control framework, and I think that it is an argument for another fundamental redesign of the framework after 2020.
The hon. Gentleman mentioned another issue that I consider to be as important as the levy control framework itself: the signals that are given out by the parallel arrangements for the capacity auctions, which have exactly the same effect as the framework on customer bills. The energy companies will pay into a levy, which will eventually land on customers’ doormats in the form of a bill. However, although the Department has said that capacity auctions for the continuation of supply of non-renewables for mineral-based power stations will be within the levy control framework, they have kept the sums involved in those auctions outside the headline total for the limit of the levy control framework up to 2020.
That may not be particularly surprising. It is clear that all the billions of pounds that have been thrown up against the wall in relation to capacity auctions—when it comes to trying to get some new gas-fired capacity power stations on stream, or, failing that, to ensure that gas-fired, coal-fired and, indeed, nuclear power stations can continue to supply energy—bear no relation to the limits that have been set for the levy control framework. Not only do they bear no relation, but the Committee on Climate Change estimates that some £70 of a customer’s bill will fund renewables by 2020. It is currently about £35.
On capacity auctions, a new auction was recently announced for a period preceding those of the two T-4 auctions that have already taken place. The estimated cost to consumers for those capacity auctions will be something like £15 on the bill for the first two auctions and as much as £36 for the most recent auction. If we add the figures together, we find that by about 2020 the cost to the customer of capacity auctions will be about the same as all of the costs rolled up for renewables under the levy control framework, yet one is capped and the other is not. If the Government are prepared to put up £5.5 billion on capacity auctions but not to proceed with the levy control framework, which is actually able to deal with renewables investment over the next few years, that must send a message to renewable and low-carbon investors. That is fundamental and needs to be addressed.
I will bring my remarks to a close, but I hope that the Secretary of State will indicate in her response that the levy control framework will be coming forward after 2020 in a decent form and that it will be reviewed to take into account my points about its operation.
David Mowat (Warrington South) (Con)
It is a pleasure to follow the hon. Member for Southampton, Test (Dr Whitehead) who, as ever, spoke in great detail. I will speak in less detail, and I think my remarks will be a bit shorter.
I enjoyed all three of the Energy and Climate Change Committee’s reports, and I congratulate the Committee on them. Before I get to my specific points, I will say that the Chairman’s suggestion that we should devolve energy policy to Scotland does have some merit. It is true that Scotland has the lowest carbon emissions per capita of any of the nations of the UK, which it achieved by having a higher proportion of its electricity come from nuclear power than any other region. To that extent, we can all learn from what Scotland has achieved.
Turning to the thrust of the three reports, I want first to talk about investor confidence, because it is valid to say that if investor confidence disappears, there will be an associated cost. If I am in business and my business model is all about Government subsidies, it is reasonable that there will be some discontinuity and I should expect that.
My hon. Friend the Member for Eddisbury (Antoinette Sandbach) made the point that we have slipped from eighth to 13th in the table for renewables and wondered how that could be compatible with meeting our decarbonisation targets, which are the most challenging of any country. The answer to that is of course that it is not compatible. It would be better if that was improved, but renewables are only one part of how we are going to decarbonise.
In the UK, 9% of our energy comes from renewables. The Chairman of the Select Committee read out some numbers relating to current energy production. In fact, I think he was talking about electricity, because energy includes transport and all that goes with it. It is true that 30% of renewables investment in the EU last year was in the UK, and it is also true that the Government are making a great deal of progress on nuclear power, but they need to do even more on substituting gas for coal, which would make the single biggest difference.
Other people will talk about carbon capture and storage tonight, and I regret that it did not go ahead, but I am uncertain whether there is a clear pathway of how it will work. We talk about Canada and perhaps Norway, but neither of them is yet commercial and there is a lot more work to be done to make that happen. I would defend the Government somewhat on the notice they gave to the stock exchange before Parliament. As others have said, companies such as Shell invested huge sums in this, the announcement was price-sensitive and the stock exchange had to be told before Parliament.
Mr MacNeil
The hon. Gentleman says that CCS is not “commercial”, whatever that means. The point I made was about meeting the climate change targets on grams of carbon dioxide. Nuclear is not commercial either; indeed, a former Energy Minister from his party said a few weeks ago at a breakfast meeting that Hinkley C was not chosen for reasons of economics. The hon. Gentleman cannot therefore make a commercial argument for one thing and then change it for the other.
David Mowat
We can spend a long time talking about the word “commercial” in that context. The former Energy Minister the hon. Gentleman just referred to is the one I am about to talk about in the context of the third report, which was on the green deal, the energy company obligation and some of those things. I am not going to try to defend everything that has happened over the past five or six years in that area, because it has not been good and the Government must do much better. There is a big prize to be gained in energy efficiency, and the one thing we can all agree on, whether or not we agree on nuclear, CCS or anything else, is that we have to do a lot better on energy efficiency. What happened on the green deal was little short of a disaster.
I wish now to discuss market signals, because we have made the biggest market signal over the past week that could be imagined: we have accepted the Committee on Climate Change figure of a 57% reduction in carbon emissions by 2030, although that is merely consistent with the Climate Change Act 2008. I am pleased that we have done that, but I wish to make the point I have made previously, which is that I am worried that others around the world are not following us in the way we might have expected or hoped they would. I am talking not about China or India—these economies that must catch up—but about other countries in Europe.
In these debates, we sometimes gloss over the impact on electricity prices, which means fuel poverty or uncompetitive manufacturing. The Department of Energy and Climate Change website this morning showed that our electricity prices are 60% higher than the mean in the EU, and our industry’s electricity prices 90% higher than the EU mean. When the Government talk about rebalancing the economy and the northern powerhouse, I just say this: if we are serious about manufacturing, we should be aware that it is very hard to do that with differentially higher electricity prices. Some of our debates about energy and the need to decarbonise must be seen in that context, notwithstanding the merit order effect, which we have heard about tonight.
It saddens me that our 57% target is approximately double the European target put into the Paris commitment in the INDCs—intended nationally determined contributions. Europe’s target was a 40% reduction over the same timeframe as our 57% reduction, but that includes the UK, and if our contribution is taken out, we are talking about roughly double the rate. But these countries are not even achieving that. This year, 18 of the 28 countries in the EU increased their carbon emissions, whereas the UK managed a 3% reduction. Why is that happening? It is because they continue to burn coal at a rate that is generally very high, although it is coming down in some cases. The Secretary of State made an announcement last November that we would phase out coal by 2025, yet a week later the Germans commissioned their brand new lignite-burning, unabated coal power station. As I said earlier in this debate, Germany burned four times as much coal as the UK. But it is not just Germany; Holland, Ireland and Austria all burn significant amounts of coal. There is an issue here that has to be resolved as we make our progress towards a 57% reduction. We cannot do it on our own. Part of the UK showing leadership involves making sure that other countries come with us. China is doing a lot more than many others.
Callum McCaig (Aberdeen South) (SNP)
I welcome the fact that we are debating these important Energy and Climate Change Committee reports, but as my hon. Friend the Member for Glasgow North (Patrick Grady) has ably demonstrated, it is a pity that we are doing so tonight when we should be discussing how we spend all the money that the Government spend—it is a whopping figure. There is a tinge of irony in the fact that less than three weeks ago, this country apparently voted to take back control to make this Parliament sovereign once again, and yet we cannot even properly debate how we spend our money.
Of the three reports, the investor confidence report is the critical one. It explodes the myth of the so-called long-term economic plan. The point about rhetoric versus reality is very much borne out. To quote the report, in reference to contracts for difference,
“merely stating that there may be three auctions this Parliament does not constitute a ‘plan’”;
In fairness, the absence of a plan around Brexit makes that look like a detailed, well worked out masterplan, but in reality it is not. All joking aside, the report goes on to say:
“We heard that policy uncertainty was weakening the case for investment in energy in the UK. This could mean that projects become more expensive to deliver—as investors demand a greater return on their investment to compensate for increased risk—or that projects simply do not go ahead. Moreover, any hiatus in energy investment could undermine the UK’s ability to meet climate, energy security and affordability objectives.”
In essence, all three sides of the energy trilemma have been undermined by the Government’s incoherent and ad hoc policy decisions. Throw in a dose of Brexit uncertainty, and there is a real requirement for the Government to provide some certainty if we are to meet the challenges of not just affordability of electricity and reducing carbon, but security of supply. All three of those are questionable. They were questionable before the Brexit vote, and the resulting increase in uncertainty has magnified that substantially. It is clear from the report that that has significantly undermined investor confidence, particularly in Scotland.
The undermining of our renewables industry in Scotland has been damaging. The discussions about carbon capture and storage are hugely undermining the Scottish industry. We had the potential in Peterhead to have both the world’s first floating wind farm commercially deployed, and carbon capture and storage in Peterhead power station. That would have given a relatively small part of Scotland a chance to be right at the global cutting edge of the carbon reduction and climate change technological advances. Unfortunately, one part of that is not going ahead, and that is substantially regrettable.
We have heard discussions about the regrettable fixation on one side of the levy control framework and the fact that there is an opaqueness around the levy control framework. I add to the Select Committee’s call for us to be shown the detailed working behind that. We need an understanding from the Government that if investment in low-carbon technology drives down price, thereby increasing the notional overspend on the levy control framework, it does not necessarily lead to greater cost for the consumer. If we are undermining investment in the low-carbon industries based on a desire to protect the consumer—that would be a reasonable position to start from, although not necessarily one that I agree with wholeheartedly—we need to look at what we are doing in the round. The report says that the increase in the cost of the levy control framework from the fall in the wholesale price of conventional electricity will be half a billion pounds, but that is not an additional cost to the consumer. It is certainly not a reason to cut the support—the long-term investment in the future—that investment in renewable energy will bring.
There is huge uncertainty over how we will deal with our European neighbours following the vote two weeks ago. In her reset speech, the Secretary of State for Energy and Climate Change discussed at length the benefits of energy union and how it needs to be worked upon. We have no idea whether that will carry on or whether it will be part of the emissions trading scheme.
Mr MacNeil
My hon. Friend raises a good point. It would be useful if DECC laid out what the three most likely scenarios would mean for energy policy: European economic area membership, European Free Trade Association membership and the third-country option. Given the words of Commissioner Malmström, it seems that if the UK goes for the third-country option, we will have to leave the EU and then negotiate for however many years before we have a deal. It would not happen concurrently with exit, so we need to know what that might mean for energy policy.
Callum McCaig
I would go further than saying that that would be useful; it is absolutely essential. It behoves a responsible Government to do that. These are not contingency plans any more; they are just the plans. There must be some sense of certainty about what is going on.
The reports from my hon. Friend’s Committee have ably demonstrated that uncertainty builds in additional cost. We have to replace a significant proportion of our electricity capacity in the next decade or so. Perhaps the cost will be greater because the pound will be weaker when we are outwith the EU. These things need to be addressed. It would be unfair to expect the Secretary of State to come out with a detailed plan now, but we need an undertaking that her Department will do the necessary work, and in short order, to deliver some form of certainty, otherwise we will be in a real pickle very soon.
The hon. Member for Beverley and Holderness (Graham Stuart) said that he was delighted and that the only signal we needed to give to the markets was the welcome announcement that the Government accepted the targets of the fifth carbon budget. I share his enthusiasm that the Government have done that, albeit somewhat later than was expected by many, but as the Committee on Climate Change has suggested, we need a little more of the “how”, as well as the “what”. Again, I hope that the Government will soon deliver a bit more on how we will do it. These are fundamental questions and they cannot go unanswered.
To conclude, the Government have created uncertainty in this field and that uncertainty has since been magnified. That stresses the fundamental importance of having a long-term plan that has cross-party buy-in, and that is not subject to the whims and changes of Government. The climate change legislation provides a model for how we can work collaboratively across parties and across Parliaments and Assemblies. Another model is the National Infrastructure Commission. Following the uncertainty that the Government have created themselves and the uncertainty caused by the Brexit vote, we need a plan that we stick to and deliver.
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?
Mr MacNeil
I would have liked to hear some timings on CCS from the Secretary of State. Many in the industry come to me concerned that, despite her warm words, there are no timelines. I am sure her commitment and that of the Government is sincere, but quite what that means for the industry is something else entirely. Perhaps when the capacity market comes up, she could think of a demand-side response.
This has been a wide-ranging, informed and useful debate, although I take the point made by my hon. Friend the Member for Glasgow North (Patrick Grady) that the estimates include more than just energy and justice. The Chair of the Justice Select Committee is a distant cousin; not many will know that his ancestors were from the island of Barra—where I am from myself—and that he is really a MacNeill who dropped the Mac. That being as it is, Madam Deputy Speaker, I thank you for the opportunity to hold this debate, and I look forward perhaps to some changes arising from it.
I seem to have an extra minute—quite unexpectedly, as I thought we had agreed earlier that I would not, Madam Deputy Speaker. Nevertheless, it is always fantastic to have the opportunity to speak in the House of Commons and to detain the House for a moment or two so that we might reach 10 o’clock, whereupon I understand we will be having a Division. [Interruption.] Madam Deputy Speaker, I think you might be indicating that we have reached the point when I can wind up and pass over to you. [Interruption.] I hear the booing, and the viewers at home are hearing the booing. If you want me to carry on, Madam Deputy Speaker, I am more than happy to do so.
I thank you, Madam Deputy Speaker, for the opportunity to contribute to the debate. It is greatly appreciated by me and, more seriously, appreciated by the Committee and especially appreciated by those in the energy community who will be paying great attention to the words uttered here in this Chamber tonight.