Energy Generation

Barry Gardiner Excerpts

Wednesday 17th April 2013 Westminster Hall

[Barry Gardiner (Brent North) (Lab)]

It is a great pleasure to follow the hon. Member for St Ives (Andrew George). I congratulate him on securing the debate, and even more on being absolutely true to his principles and honouring the pledge that he and a number of his colleagues made more than a year ago. It is absolutely right that he has raised the matter in this forum, where we can take some time to develop the arguments, because, as he suggests, during consideration on Report of the Energy Bill in the main Chamber it will perhaps be more difficult to go into the same detail and depth. I am, therefore, very grateful to him for introducing the debate in this way.

I pay tribute to the Government—and to the Secretary of State for Energy and Climate Change for his interlocutions and iterations with the Treasury—for their commitment of £7.6 billion under the levy control framework up to 2020. That is a significant achievement, which will be important for low-carbon generation in this country. It is £7.6 billion from people’s energy bills to pay for new low-carbon energy generation that will increase energy security, reduce the cost of energy bills in the long term and ensure that we meet our moral and legal obligations to reduce our greenhouse gas emissions. So far, so good; I am with the Minister and with the Government.

Industry has welcomed the commitment, but has also clearly said that it is not enough. The £7.6 billion is security for only seven years. In the words of DONG energy,

“it is a case of having a cliff edge at the moment; 2020 is a big milestone”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 58, Q175.]

Andrew Buglass from the Royal Bank of Scotland told the Energy Bill Committee that the cliff edge is making it very difficult for supply chain investors to invest in the UK. Overcoming the insecurity created by the 2020 cliff edge does not require more public money, or even the promise of more money; it requires coherence, in the form of a 2030 target that proves to industry that the demand for low-carbon energy will continue to rise beyond 2020. The shadow Minister, my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex), quoted Mr Buglass in a sitting of the Energy Bill Committee, saying that

“a 2030 target ‘is absolutely critical from the conversations I have with potential supply-chain investors because they quite rightly point out that it is very difficult for them to take investment to their board if they really only have visibility on three or four years-worth of work.’”––[Official Report, Energy Public Bill Committee, 7 February 2013; c. 570.]

It is clear that what we are facing in 2020 is a cliff edge—a milestone—and the Government, without necessarily committing considerable excess funding at this stage, somehow have to be able to give a signal to industry and investors that this is the direction of travel the Government are taking and that they can confidently lay down their investments in the knowledge that they will get a clear return.

[David Mowat]

I am listening carefully to the logic flow of the hon. Gentleman’s position. What puzzles me a little is that Germany has four times as many renewables as the UK, in spite of its much higher carbon emissions per capita and per unit of GDP. It would be a step in the right direction if we emulated Germany. Germany does not, however, have a target—how did that happen?

[Barry Gardiner]

If the hon. Gentleman reads the record of the written evidence that was given to the Energy Bill Committee, he will see that no less a figure than David Kennedy, chief executive of the Committee on Climate Change, which independently advises the Government, said that the context in Germany is different. A low-carbon trajectory has already been established there, precisely for the reasons the hon. Gentleman suggests—four times as many renewables are already in place. People in Germany are not in doubt about what their Government are going to do or about the direction of travel.

[David Mowat]

We often take Germany as an example of best in class in such matters, so it is right to make absolutely sure that on the record we have the point that Germany’s carbon emissions are 20% higher per head and 23% higher per unit of GDP than the UK’s, principally because of the amount of coal burnt, which makes the renewables activity irrelevant. I thank the hon. Gentleman for his answer.

[Barry Gardiner]

I am happy to allow the hon. Gentleman to get what he wishes on the record. He is at perfect liberty to make his own remarks later, and I trust he will do so, but I point out that Germany, by going away from nuclear generation, will see a significant rise in emissions—not only there, but in neighbouring countries. Germany has been a net exporter of low-carbon electricity to its neighbours, and that also is going and will create substantial problems for Europe as a whole in meeting its emissions reduction targets. It will also present severe problems for Europe’s response to the challenge of global warming. Ultimately, I think Germany will move through that transition, away from coal.

[Ian Swales (Redcar) (LD)]

Does the hon. Gentleman not think that the exchange we are having demonstrates the fallacy of counting carbon on a production basis? Germany is a heavy exporter of manufactured goods—cars, for example. Whose carbon is it? Is it Germany’s, or that of the person who buys the car?

[Barry Gardiner]

The hon. Gentleman makes a very interesting and worthwhile point, which I perfectly understand. I am sure that if I go into consumption emissions versus production emissions, you will call me to order from the Chair, Mr Gray, but we must not pat ourselves on the back for seeing our own production emissions drop if we are still driving the very consumption model that generates the emissions elsewhere around the globe.

The Committee on Climate Change estimates that in the absence of a 2030 target, offshore wind might cost as much as £140 per megawatt-hour. With such a target, the cost, under the committee’s scenario, drops to £100. The difference between the two costs is about the presence of a competitive supply chain in the UK. We do not have one, but what we do have is at risk.

Let us remember that the Government’s proposals are not that we should set a target in 2016, but that we may not set one until at least that date. Those are two very different propositions.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Would my hon. Friend also care to include the provision that not only can the Government not set a target before 2016, but that there is no level at which the target might be set after 2016?

[Barry Gardiner]

My hon. Friend is, as ever, thoroughly astute on these matters. He was a tremendous champion of the decarbonisation target when the Bill was in Committee, and he speaks with great knowledge on the subject. He is absolutely right. Only last night at a dinner, I heard the Secretary of State talking as if this was a great leap forward, that this would be the only Government who had legislated for a decarbonisation target. At that point I almost spluttered into my chicken, because we have not legislated for a decarbonisation target. [Interruption.] And it was beef anyway, says my hon. Friend the Member for Southampton, Test (Dr Whitehead). What we have done is make provision so that, at the appropriate moment, it would not be impossible to legislate.

Let me return to the key point that I wish to address, because I know that other Members want to enter the debate. Although it is good to have a debate and a real exchange of views through interventions, I fear that I must press on if other Members are to be able to speak. Siemens told us that if we wait till 2016 to set a decarbonisation target for 2030, it and many of its competitors are likely to delay or cancel planned investments in the UK.

In March, six of the largest supply chain investors wrote to the Chancellor, the Secretary of State for Business, Innovation and Skills and the Secretary of State for Energy and Climate Change to register their strong support for the decarbonisation amendment tabled by the hon. Member for South Suffolk (Mr Yeo) and me, which to date is supported by 41 Members from—I am pleased to say—all parties in the House. They wrote:

“Projects can take 4-6 years from investment decision to construction and operation. We are already close to the point where lack of a post-2020 market driver will seriously undermine project pipelines. Supply chain investment decisions depend on reasonable assurance for manufacturers that a production facility to be constructed during this decade, costing hundreds of millions of pounds, will have an adequate market for its products well into the 2020s.

Postponing the 2030 target decision until 2016 creates entirely avoidable political risk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R&D and produce fewer new jobs. This is not in keeping with the Government’s aspirations for the UK to be the global leader in low carbon technologies such as offshore wind and marine.”

The amendment would require a 2030 decarbonisation target for the energy sector to be set by the Secretary of State, on the advice of the Committee on Climate Change, by next spring, which would ensure that the Energy Bill sent a coherent signal to investors. By securing investment in a competitive UK supply chain, the amendment would not only reduce the cost of decarbonising our energy infrastructure, but ensure that the investments that we are committed to make produced a significant growth multiplier and contributed to the essential rebalancing of the British economy.

Recent peer-reviewed studies from the London School of Economics and Berkeley have concluded that the fiscal multiplier for productive infrastructure investment in current economic conditions is likely to be about 2.5 in the UK. The amendment would ensure that the £7.6 billion produced secure investable propositions, creating significant numbers of construction jobs and long-term high-value jobs in communities around the UK, where both are scarce.

[Caroline Lucas]

I of course completely support the hon. Gentleman’s amendment, which he is understandably justifying in terms of economics and, no doubt, political expedients. Will he, however, acknowledge that we should set the targets in line with the science, rather than with what we think is politically possible, because the target of decarbonisation by 2030 gives us only a 37% chance of remaining below 2°, and if someone said that we had only a 37% chance of not falling out of the air, I suspect that we would not get on an aeroplane? The odds are very scary.

[Barry Gardiner]

I am not a gambling man, but I understand the position of seeking to look at climate change policy as a balance of risks, and the hon. Lady is absolutely right to make that point. In truth, whatever the UK does will not make a global difference to whether we reach 2°, as I am sure she would acknowledge. The aspiration required of the UK and the global leadership that it possesses, which the hon. Member for St Ives mentioned, mean that we have to drive this if we are to play our part in achieving the global reduction. I understand the percentage figures she gave, but it is perhaps illegitimate to conclude that if we hit the 2030 target we will have only a 36% chance of achieving the 2° target. The UK cannot achieve that on its own; it demands a similar effort across the globe.

Part of the problem is that, in considering electricity market reform, the Government have been like a phlebotomist looking at the body politic. They have been obsessed with the energy flow around the system, as a phlebotomist is obsessed with the blood flow around the body, but they have failed to consider the health of the whole organism. That makes for a very poor doctor; we would not want a GP who was simply a phlebotomist.

The Government’s approach has not taken enough cognisance of how the energy sector fits in with powering our economy as a whole. A good example is the ramping down of funds available for carbon capture and storage. Coal and CCS will be vital for us. There will be significant jobs, and if we invest in and develop CCS, it will become a major part of our exports in skills and technology around the world, from which we can benefit. It is part of our wider economy, and the same is true of the renewables industry the more we invest in it and adopt the position, as the hon. Gentleman said, of being the global leader.

I am afraid that we have already lost that position, because other countries have invested far more, including what we are prepared to do in CCS. Unless we invest, we will not develop the export capacity that we need to drive our economy as a whole. We cannot simply be what Gary Smith of the GMB often refers to as the Meccano men of Europe, who simply fit together a product made elsewhere. We must have supply chains in the UK, create the jobs and invest in companies here.

[Gregory Barker]

I am sorry to intervene, but I will be pressed for time when I am winding up. The hon. Gentleman has forgotten that the Chancellor announced in the Budget the two preferred bidders for the detailed planning and design stage of our CCS competition, including the CCS project in Peterhead that was canned under the Labour Government—two projects, real progress.

[Barry Gardiner]

I do not dispute what the Minister says about the two projects that are on line, but I do not think that he will dispute what I have said about the reduction in funds available for CCS.

If we build a competitive supply chain fast enough, we can expect significant investment in the UK almost immediately, which will mean that British companies are well placed to export to a renewable energy market that the International Energy Agency predicts will be worth at least $6.4 trillion by 2035. If we do not lay the foundations for a competitive supply chain, we will see the cost of decarbonisation rise, along with our trade deficit, as we hand over the growth benefits from public investment to countries that have already taken steps to remove the policy risk from low-carbon infrastructure investment. Businesses are calling for demand security beyond 2020, which the Energy Bill could provide at no cost.

The Committee on Climate Change is the body trusted by the industry to set the right target. The Minister will know only too well the letter written by the newly appointed chair of the CCC to the Secretary of State on 25 February. He described how the Government’s plans entail a

“high degree of uncertainty about sector development beyond 2020. This will adversely impact on supply chain investment decisions and project development, undermining implementation of the Bill and raising costs for consumers.”

He went further, however, and referred to

“the need to resolve uncertainties about the direction of travel for power system development”,

specifically the “dash for gas” and the danger that it presents to low-carbon generation. I trust that the Minister will reconsider the proposals on the decarbonisation target in the Department and that we may yet see some progress.

[Several hon. Members]

rose—