Energy Supply

Debate between Barry Gardiner and Tom Greatrex

Thursday 6th September 2012 Westminster Hall

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Amess. This is a welcome and timely debate. Debates on Energy and Climate Change Committee reports are, by their nature, wide-ranging and touch on a number of issues. As the hon. Member for Warrington South (David Mowat) said, the report is relatively short, but issues of energy security and energy independence touch on a wide range of Government policies, not all of which are the responsibility of the Minister. I commend the speeches by the Chair, the hon. Member for South Suffolk (Mr Yeo), and other members of the Select Committee for touching on some of those issues. Given the time available, I do not intend to repeat points that have already been made, but I will perhaps come on to some other recommendations in the report.

I congratulate the new Minister on his appointment and welcome him to his post. As other hon. Members have said, he takes up his post at an important time for energy policy. He follows the hon. Member for Wealden (Charles Hendry), who had the respect of hon. Members across the House and the entire industry for the diligent way in which he undertook his duties, and for the accommodating way he would listen to and engage with different views from across the political divide on the areas for which he was responsible. I wish him well in whatever he does next. I wish the Minister well, too. He was well regarded for the seriousness with which he engaged with the skills agenda, his previous portfolio. As my hon. Friend the Member for Brent North (Barry Gardiner) made clear, the skills agenda is perhaps even more important in the energy sector. I look forward to discussing these issues with him in the House in the months, and possibly years, ahead.

Energy security cuts across many areas of Government policy, so there are many challenges for the Government as whole. As the hon. Member for South Thanet (Laura Sandys) said, this is an ongoing issue, not a new challenge that has suddenly arrived. It is to the detriment of government and governance when a difficult challenge gets left and is pushed along a bit on the agenda. There is a danger in the timing of such things. As the hon. Member for Warrington South said in a slightly different context, people keep waiting until it is almost too late, and sometimes the decisions are not necessarily the right ones and the costs associated with fixing them do not necessarily provide the best value for the taxpayer.

On page 43 of the report, the Committee described energy security as

“keeping the lights on, buildings warm, vehicles moving, businesses operating and electrical appliances running”.

That is a good, practical encapsulation of energy security. Although it is not the most glamorous subject and does not always attract attention in the same emotional way as other aspects of this brief, it is important to the economic future of our country. It is difficult to overstate the importance of those factors, because a safe and secure energy supply is vital to our economic recovery, both in creating jobs, which are desperately needed for millions of people throughout the country, and ensuring that businesses can rely on the energy supply.

I want to mention a couple of recommendations in the report. The report is almost a year old and makes points about the Government’s electricity market reform policy proposals. Since it was published, the Committee has undertaken pre-legislative scrutiny on the draft Bill. It is striking, however, that much of the criticism from the first report, even after pre-legislative scrutiny, remains valid. I am sure that EMR issues are high in the Minister’s in-tray and that he looks forward to responding to the Committee’s report on the draft Bill before it is introduced later this year. The EMR process is a key feature in securing the UK’s energy supply for the future, in terms of securing investment and setting out the certainty and predictability, as hon. Members have mentioned, which are important in getting investment in place.

Both reports touched on the capacity mechanism. I am sure that the Minister will be keen to deal with that as soon as possible. In the evidence to the pre-legislative scrutiny report in March, Ian Marchant of SSE commented—I do not agree with everything that he says, but I agree with this—that the

“the biggest issue at the moment is…uncertainty…the Government has created”,

for want of a better phrase,

“a known unknown.”

Knowing that there will be a capacity mechanism but not exactly what it will be, people will wait and see what the mechanism is, so there is a danger of creating a hiatus in investment. It is vital that we deal with that matter as soon as possible.

The Committee considered the relationship between Government and industry, specifically in relation to the oil and gas offshore industry and the impact that that can have on investment in the UK. It concluded, in reference to the measures announced in Budget 2011, that there is a need for a constructive relationship to restore industry confidence and maximise the benefits from the UK continental shelf. That is important.

I appreciate and acknowledge that since then the Department has done work to reinvigorate PILOT, the industry-Government body, and on establishing the fiscal forum, which is important. Although any Government have the right to adjust their fiscal policies to meet circumstances, the way that the changes were announced at the time—almost without any prior warning or degree of consultation—highlights the possibility and danger of an adverse impact on investment and, therefore, on revenues coming in. Various statements were made at the time about the impact of those changes, but because it is such a long-term industry those will not yet be known for certain. However, the report touches on that important point.

My previous point feeds into the wider, broader issue of certainty. Government decisions in the past couple of years serve to underline the degree of uncertainty. Oil and Gas UK claimed at the time that the UK was regarded as one of the

“most unstable…provinces in the world by many investors”.

Thinking about some other environments, that is quite an alarming statement. I hope some of that damage has been or is in the process of being undone. Similarly, in relation to other measures, including the feed-in tariff, renewables obligation and the banding review, about which there was movement backwards and forwards, sometimes such public discussions and squabbles send a signal to the wider investment community that they cannot necessarily rely on what the Government will do. That is a dangerous position to get into. I hope that the Minister, in his early weeks and months in his new role, seeks to provide the appropriate amount of certainty and predictability.

The hon. Member for New Forest East (Dr Lewis) mentioned the refining industry. The Government have committed to undertake a refining strategy, which is timely, and they will publish it later this year. However, that is too late for people employed at Coryton refinery. It is worrying when a fully functioning refinery with high environmental standards—perhaps one of the best in the UK—is closed with the loss of an estimated 850 high-skilled and high-paid local jobs that made a significant contribution to the local economy. The strategic issues in relation to our refining capacity are serious, as is our ending up importing refined product as a result. I hope that the Minister and the Committee will consider those issues. The Committee has a full agenda, but it may wish to consider these issues and keep an eye on them, because Select Committees can bring a degree of vigour and impartiality to such discussions.

During pre-legislative scrutiny the Committee criticised the draft Energy Bill for not including any measures on demand reduction. Hon. Members have mentioned demand reduction. It is hard to disagree with the Committee’s saying,

“It is completely unsatisfactory that DECC's work was not completed in time to be published alongside the draft Bill. This suggests that DECC is still failing to give enough priority to ensuring that demand-side measures contribute to our energy policy goals.”

Over the summer the McKinsey report, published for further comment, highlighted 11 key barriers to capturing the potential of energy reduction. Other hon. Members may have missed the Secretary of State’s saying that he was intending to graft some demand-reduction measures on to the draft Bill—that was at a Liberal Democrat summer school, so the attendance and attention might not have been huge—but I note the Committee’s warning that

“adding last-minute measures to an already pre-determined structure of a Bill may severely limit what can be achieved on demand reduction”.

That is important.

[Barry Gardiner]

The Committee said, in its recent report on climate change, that only 60,000 of the 330,000 solid wall insulations, which the Government indicated were necessary, had been installed. That is an important indication of how serious the situation is.