Carbon Capture and Storage (Scotland)

Anne Begg Excerpts

Tuesday 17th January 2012 Westminster Hall

[Thomas Docherty]

Yet again, I find myself in full agreement with my hon. Friend, who, as my neighbouring MP, has taken a close interest in Longannet power station. I hope that he will be able to make further points in the debate shortly. As I was saying, security of supply must be the biggest single priority, but as colleagues have just mentioned there are other issues and I will turn to each of them in due course.

Where do we go from here on the issue of security of supply? We have two choices. We can have a balanced energy policy that has clean coal technology, nuclear power, some renewables and, regrettably, a limited proportion of gas, or we can put all the eggs into one basket, as the SNP has said in its manifesto that it will do. As I said earlier, I hope that the hon. Member for Banff and Buchan (Dr Whiteford) will spell out exactly why we should have 100% windmills and hydro, and how she will achieve that goal during the next decade.

As I have mentioned, a very regrettable decision was taken by the Government on 19 October last year that, for obvious reasons, was very disappointing for my constituents and indeed for the whole of Scotland. That decision was that the Longannet scheme was not going to go ahead. However, there is a recognition that that decision was a pragmatic one and that the Government have a duty to the taxpayer. The problem with carbon capture and storage is that it is an unproven technology. No Government or private company have yet come up with a viable, large-scale carbon capture and storage scheme. I must say that successive Governments have been very late to understand that there comes a point when people have to push back from the metaphorical table and say, “We could throw billions of pounds of taxpayers’ money at something and we still have no guarantee that that is going to work”.

Regrettably, successive Labour and Conservative Governments have had a very poor track record of backing winners when it comes to new technologies and there is a genuine debate about whether Governments should try to back winners or whether they have a duty simply to put in place a market for private companies to come up with winners. Perhaps the Minister will be able to say more about the Government’s thinking on that issue.

I make no criticism of Iberdrola or of Ministers for the decision that they ultimately made. Building on the excellent work of the Leader of the Opposition, my right hon. Friend the Member for Doncaster North (Edward Miliband), when he was Secretary of State for Energy and Climate Change, the current UK Government offered a £1 billion fund for carbon capture and storage. The only observation that I would make—as I say, it is not particularly a criticism but more a general observation—is that many colleagues misunderstood the nature of the competition. The competition was not a case of “last man standing wins the prize”; it was a marathon, and to qualify for the funding one had to reach the finish line. Regrettably, but for obvious reasons because Longannet was the last entrant in the competition, there was an assumption that it would receive the £1 billion. The UK Government and Iberdrola, the Spanish energy giant that owns Longannet, were clearly in the region of £500 million apart on the start-up and ongoing costs of Longannet. That is regrettable, particularly for my constituents, but I do not think this was doable for the UK Government.

What was bizarre was the intervention by our blustering First Minister, who outrageously leaked the confidential commercial information to a Scottish newspaper, showing, again, that he really is not a grown-up. Also, while he was pandering to the galleries and attacking the UK Government, I noticed from answers I received from UK Ministers that he did not offer a single penny of Scottish Government money to fill the gap. If the First Minister had been prepared to offer £500 million, we could have taken Longannet forward but, as ever with the SNP, all we get is bluster, grudge and grievance, with no solution. Perhaps when she speaks, the hon. Member for Banff and Buchan will spell out what the SNP Government would have done, because all they have done is their usual trick of having a pop at someone else and not offering any solutions.

As the hon. Member for East Dunbartonshire (Jo Swinson) said, there are some genuine issues here about not just security of supply, but the environment. I firmly believe that carbon capture and storage is a technology worth pursuing, and my preference remains for a coal station for the simple reason I have spelt out already: that I would be reluctant to go down the route of investing in a gas technology over the next 30 years, because gas is not an indigenous supply. I recognise that there is a strong case for Peterhead, which has been championed by my hon. Friends the Members for Aberdeen South (Dame Anne Begg) and Rutherglen and Hamilton West (Tom Greatrex). I hope the Minister will be able to outline in some detail where we are with that.

[Dame Anne Begg (Aberdeen South) (Lab)]

Part of the problem with the Longannet development was that it was coal-fired. It would have had better energy returns, because a large proportion of the UK’s energy still comes from coal-fired stations, but has not experimentation with carbon capture and storage for gas been more successful than the Longannet trial was proving to be?

[Thomas Docherty]

I am most grateful for my hon. Friend’s observations. She is indeed correct. There have been some positive signs. My note of caution, however, is that there is a danger that we will go down the route of that classic British tradition, whereby Europe and the United States pursue one path and the UK does its own thing. One need only look back at the nuclear programme. While the rest of the western world was going down the water reactor route, the British, in our own quaint way, went down the gas reactor route, meaning that we had wonderful technology—what I would call the Betamax technology of nuclear power stations—but technology that was not compatible with anyone else’s.

--- Later in debate ---

[Ian Swales]

I thank the hon. Gentleman for that challenge. I do not necessarily see it as my job to represent the Treasury, but £1 billion for less than a quarter of the Longannet power station was not a good use of money. Having talked to people in the industry, I think that there are better ways. Conglomerates of private sector companies want to get into the sector, and we need to be more imaginative about how we make that happen.

[Dame Anne Begg]

One problem is that at the moment, the private sector cannot see that it is a worthwhile business proposition. One of the difficulties faced by CSS in this country is that the economic arguments do not yet stack up.

[Ian Swales]

The hon. Lady makes a good point, and that is where we must challenge the private sector and be imaginative about the schemes. I will come on to a scheme I am familiar with that is not in Scotland, but for which there is already a conglomerate of companies ready to roll—household names in the gas and pipeline industries and lots of different companies. It can be done.

To those who say that such development is highly expensive, I say that we need to look more at the overall longer-term finances for the Government, industry and energy generation. For example, it has been estimated that the CCS project proposed for Teesside can generate a peak of £1 billion a year in extra petroleum revenue tax for the Government, through oil companies using CO₂ to get more oil from their North sea wells. That possible extra oil recovery from the North sea is estimated at 4 billion barrels. The use of CO₂ for enhanced oil recovery is already widely practised in the United States.

The debate is about Scotland, but a project is ready to go in Teesside, and the necessary list of major players in pipelines, processing and so on are ready to start. More than 30 large CO₂ emitters in the power and industrial sectors can be connected to the system. Interestingly, a few of those are using biomass, which raises the prospect of net carbon-negative power—sequestering CO₂ from the atmosphere. By generating clean power and running clean industry, CCS can make a huge contribution to UK climate change targets. A clear and ambitious UK-wide strategy, action to remove roadblocks to progress and a sense of urgency are needed from DECC, so that the UK can genuinely lead in this exciting new industry.

--- Later in debate ---

[David Mowat]

That is a fair point. In the energy market reform that has been published, the Government are very proud of the fact that they are giving no subsidies to nuclear in going forward—[Interruption.] Well, that is a different argument. The Government have subsidised and continue to subsidise renewables. That takes me to my next point.

[Dame Anne Begg]

Will the hon. Gentleman give way?

[David Mowat]

Certainly. I have clearly aroused some interest.

[Dame Anne Begg]

Does the hon. Gentleman accept that it is not simply about the economic argument because if we leave the market to decide, it will always go for the cheapest option? There is also an environmental argument and the Government need to be involved on that basis because this is still a new technology with demonstrator projects. Until the technology can be proven, the market and the industry will not make the investment. The Government may therefore need to make that investment to pump-prime and ensure that we get the environmental benefits.

[David Mowat]

Just to be clear, I completely buy into the Climate Change Act 2008 and its requirements. However, the way that the Government have chosen to meet their environmental obligation is by setting a price to carbon. That is what makes CCS viable because, obviously, the companies will save the money from burning the carbon at whatever the rate is—£30 or £50 a tonne—and so on. That is my point. The level playing field that the Government are trying to obtain through the energy market reforms is being achieved over the medium term by the price of carbon.

Let me now make my point about CCS from a more positive point of view. What worries me a little about the Government’s position on CCS is a little similar to what worries me about the Government’s position on nuclear. Both CCS and nuclear have one thing in common: they are extremely good at reducing carbon, but they are not renewables. The Government have an issue to work through, and I have said this in other forums. The Climate Change Act 2008 requires us to reduce our carbon emissions by 80%—a huge and difficult target, but it is right that we are trying. My concern is that, in 2009, the EU 20-20-20 directive required us to increase our use of renewables by a factor of five over a decade or so. That objective is not necessarily consistent with the objective of reducing carbon.

It is possible that CCS may lose out, like nuclear, through a little bit more ambivalence on the part of Government. I looked at the Government’s carbon plan. It estimates how much of our electricity will be produced from CCS by 2030 and how much will be produced from renewables. I am not anti-renewable at all, if it can be made to work in a cost-effective way. The Government’s estimate for 2030 is a factor of five difference between renewables and CCS. I do not know whether CCS will be made to work or not. We should try, and it would be great if it did, but I am worried that the emphasis of policy is not on carbon reduction. The emphasis of policy is on renewables, and that might take us to, or down, a sub-optimal path.