Charles Hendry
Main Page: Charles Hendry (Conservative - Wealden)
Dr Phillip Lee (Bracknell) (Con)
3. What estimate he has made of likely capital costs for new electricity generating capacity under (a) contracts for difference and (b) a premium feed-in tariff.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
The impact assessment published alongside the electricity market reform White Paper provides details of the capital costs of different approaches. The analysis shows that the cost of capital is lower under the contract for difference than under the premium feed-in tariff. The same low-carbon generation mix would cost £2.5 billion less to build under our chosen approach.
Charles Hendry
I assure my hon. Friend that we are always looking for measures that will simplify the structures, although I would draw attention to comments from EDF, a key investor, which says:
“The Contracts for Difference…which sits at the centre of the Bill, will be key to delivering investment that represents value for money, and protects consumers. It is a simple, transparent and proven instrument.”
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Minister accept that the contracts for difference impact study was undertaken when the idea was that the state would be the counterparty to the CFD? Now that is no longer the case, will he provide a new impact assessment that compares the relative costs and advantages of CFDs and premium FITs before the proposal is finalised in the energy Bill?
Charles Hendry
I am grateful to the hon. Gentleman for the work that he and his fellow members of the Select Committee on Energy and Climate Change have done on the proposal and on alternative counterparty models. The Government have made one approach clear in the draft Bill, but we have also made it clear that a single counterparty model could work separately. If we propose different models, we will publish a separate impact assessment.
Andrew George (St Ives) (LD)
4. When he plans to announce the outcome of the renewables obligation banding review.
Mr Peter Lilley (Hitchin and Harpenden) (Con)
8. What comparison he has made of the potential capital cost of meeting the Government’s 2020 renewable target using wind power backed up by open-cycle gas plants and meeting the same level of electricity demand using combined-cycle gas plants.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
The capital costs of gas plant are slightly lower than those of onshore wind, although the operating costs are much higher and more unpredictable. An electricity supply reliant on gas would therefore be cheaper to build at present, but it would not offer the security of supply that the country needs. A responsible energy policy requires a diverse energy mix, combining gas, renewables, nuclear and fossil fuels with carbon capture.
Mr Lilley
I am grateful to my hon. Friend for his answer. Can I take it from the fact that he does not give specific figures that he agrees with the figures in the report by Professor Gordon Hughes, the professor of energy economics at Edinburgh university, “Why Is Wind Power So Expensive?”? The cost of providing a given amount of power by wind plus open-cycle gas turbines is greater than the cost of using efficient combined-cycle gas turbines by a factor of 10. Is that really something that the consumer can afford, if it saves only £500 million a year in operating costs?
Charles Hendry
I do not agree with Professor Hughes, and neither does the Committee on Climate Change or the Centre for Energy Policy and Technology at Imperial college. One of the main differences is the assessment of how much wind might be necessary, and we believe that the professor has overestimated that by a third, which automatically reduces the cost by £30 billion. Furthermore, he has not looked at the range of alternative back-up provisions, including interconnectors, or at the likely price of gas in the future.
Nic Dakin (Scunthorpe) (Lab)
What steps are the Government taking to ensure that capital investment in wind monopiles will result in manufacturing taking place in the UK using UK steel, so that UK energy bill payers and UK taxpayers can fund UK jobs?
Charles Hendry
The hon. Gentleman raises a critical point. We have secured agreement with the offshore wind industry that it will work to ensure that 50% of the supply chain involves UK companies, compared with perhaps 10% in the early projects. We want this to be a real industrial policy that brings help to constituencies, such as his, that have a great industrial heritage. We want this to be a joined-up policy.
Damian Hinds (East Hampshire) (Con)
9. What steps he is taking to ensure that small and medium-sized enterprises can participate in the green deal.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
11. What steps he is taking to encourage biomass-based generation in appropriate and sustainable locations.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
Alongside our bio-energy strategy, we have introduced the renewable heat incentive and are currently reviewing support levels for biomass electricity. We are introducing sustainability controls into financial incentives. We have reformed the planning system in England to promote sustainable development and to encourage local authorities to plan for renewables development in the right places.
Mr Sheerman
But does the Minister agree that there is enormous potential for biomass in this country, particularly because it is capable of being produced at the right size, volume and quantity in a location—and there is less resistance to that sort of biomass? The real problem comes when the biomass raw material is imported from South America and Africa and not grown in our own country.
Charles Hendry
The hon. Gentleman is absolutely right to highlight the benefits of biomass. In our estimate, in the areas of heat and electricity, biomass could account for 40% of the renewable energy that we need to achieve by 2020. We have to strike the right balance, as there are other uses for wood fuel in this country: it can be used in furniture and in panelling, which are important industries for this country. We believe it right to look at imported fuels as well, as long as they are sustainably produced.
Miss Anne McIntosh (Thirsk and Malton) (Con)
Drax power station takes fast-growing crops, grown especially in Thirsk, Malton and Filey, and provides a great source of income to farmers in very difficult times. Will the Government and the Minister do all they can to promote biomass in preference to wind farms as a renewable and sustainable source of energy?
Charles Hendry
We do not have to be either/or; we need a balanced energy portfolio. I think biomass offers a very significant immediate carbon gain when we move from coal-fired generation to biomass generation. Some exciting developments are happening in that sector, but having wind in the right locations is an important part of the mix, too.
Dame Joan Ruddock (Lewisham, Deptford) (Lab)
14. What assessment he has made of the report by the Royal Society and Royal Academy of Engineering on shale gas extraction in the UK.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
In response to calls for an independent and rigorous examination of the evidence on fracking, there could be no more authoritative or independent sources of advice than the UK’s science and engineering academies. Their report is therefore particularly welcome, and we will study it carefully in considering the future of fracking for shale gas in the UK. Its main message is that shale gas fracking could be allowed within strict environmental and safety constraints.
Dame Joan Ruddock
As the Minister will know, the report says that some issues merit further consideration, including climate risks. For the avoidance of doubt, will he carry out a comprehensive assessment of the emissions arising from the extraction of shale gas, and indeed its subsequent use?
Charles Hendry
The right hon. Lady brings tremendous expertise to this debate. We have already commissioned independent advice on some of the fracking issues, which is being subjected to wider analysis and peer review. One of the most thorough assessments has been requested by Sir John Beddington, the Government’s chief scientist. We will look at all the evidence. We believe that the technology has a potential that must be explored, but that will be done only with the most careful analysis of all the environmental and safety considerations.
John Pugh (Southport) (LD)
When can we look forward to the commercial production of shale gas in this country?
Charles Hendry
I think that it will be a while before we see commercial production. The situation here is very different from that in the United States, where, for example, landowners own the mineral rights beneath their homes. That is not the case in this country, so there is not the same economic driver. We are seeing some exciting assessments of the potential, but it will be some time before we see specific licences for development.
Caroline Nokes (Romsey and Southampton North) (Con)
15. What assessment he has made of the effect on security of supply of the Government’s renewable energy policy.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
The Department carries out a range of analyses to assess future security of supply. That includes the impact of all technologies, including renewable energy. Our most recent analysis was published in December 2011, and reinforces our commitment to a balanced energy mix to help to deliver security of supply. Ofgem will provide an assessment of future security of supply by 1 September, in line with its obligations under the Energy Act 2011.
Caroline Nokes
Gas continues to play an essential role as both a transition and a destination fuel for a low-carbon economy. What measures is the Minister considering to ensure that we have a secure and affordable gas supply to underpin electricity generation and support our energy-intensive manufacturing sector?
Charles Hendry
As my hon. Friend may know, we are putting together a gas generation strategy. We will look at the long-term role for gas, including the role that it can play in combination with other technologies. Other work is being done in relation to the implications for security of supply. We shall need to address wider issues as we move towards becoming a net importer of gas, but we are in no doubt whatsoever about the contribution that it can make.
Damian Collins (Folkestone and Hythe) (Con)
16. What progress his Department has made on negotiations to build a new generation of nuclear power stations.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
The Department of Energy and Climate Change regularly meets industry and other parties that are interested in the development of new nuclear power stations in the United Kingdom to discuss progress and the UK policy context. We are working with developers to address all relevant issues, so that they will be in a position to take final investment decisions as early as possible.
Damian Collins
Is the Minister prepared to maintain an open mind about the suitability of sites such as Dungeness in my constituency for new nuclear build, particularly if new evidence suggests that some of the initial concerns about the sites that have been raised by Natural England could be overcome?
Charles Hendry
Let me reassure my hon. Friend that we will always keep an open mind in regard to new evidence. The problem with the Dungeness site was that development there was not compatible with the EC habitats directive. The Government’s major infrastructure environment unit is continuing to investigate, and if there is additional evidence, I shall be pleased to meet my hon. Friend at any time to discuss it.
Mr Dennis Skinner (Bolsover) (Lab)
If the Minister is happy to meet the nuclear generation people, will he also take an interest in coal? We have 100 years’ worth of coal beneath our feet, and it is high time the Government paid some attention to the industry. Not many pits are left, and some of those are in jeopardy. It is high time the Minister met those people, together with the National Union of Mineworkers.
Charles Hendry
I had never seen the hon. Gentleman as an advocate of alternative energy policies.
I had a meeting yesterday with the head of the National Union of Mineworkers and the head of the National Association of Colliery Overmen, Deputies and Shotfirers, but if the hon. Gentleman feels that it is time for another meeting, I will of course consider that.
Neil Carmichael (Stroud) (Con)
17. What assessment he has made of the likely implications for his Department’s energy policy on the green investment bank.
Laura Sandys (South Thanet) (Con)
What assessment he has made of the likely level of future global oil and gas prices.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
DECC publishes low, central and high projections for long-term trends in world oil and gas prices. In 2011 prices, our central scenario is for oil to rise to $130 per barrel by 2030 and for gas to rise to a high of over 80p per therm in the middle of this decade, before falling back to settle at about 70p per therm.
Laura Sandys
Does the Minister see a time coming when we can decouple fossil fuel prices from low-carbon production prices?
Charles Hendry
We are already seeing some decoupling. We have seen a decoupling of the oil price from the gas price. We are expecting to see that gas will be an important source of generation in its own right, but that it will also have a very important future in providing back-up to renewable generation, which will inevitably be intermittent in most areas.
Mr Speaker
We are ahead of time today, and we will move on now to topical questions.
Alun Michael (Cardiff South and Penarth) (Lab/Co-op)
T3. Ministers will be aware that the Welsh landfall for an optimal Severn tidal barrage will be in my constituency. Given the need for a major increase in renewable energy and the potential for creating nearly 40,000 jobs, will Ministers provide us with some clarity on what the Government will do to promote this project?
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
I am sure that the right hon. Gentleman is aware that a year or so ago we published a report, which had been commissioned by the previous Government, to look at the barrage proposals and the lagoon proposals. It showed that the largest of those would cost £30 billion-odd, and we believe that in the current climate that is unaffordable. We know that work is being done on looking at other ways of bringing finance into that. We have said that we will keep an open mind on the proposal, but it needs to be done at a cheaper cost to consumers.
Sarah Newton (Truro and Falmouth) (Con)
The Department has been a really good friend to the emerging deep geothermal energy industry in this country, through regional growth funding and direct support. Can the Government make that last commitment to give the industry the five renewables obligation certificates it needs as part of the review, which would enable the first commercial deep geothermal power station to be opened in my constituency?
Charles Hendry
My hon. Friend will not have to wait very long before we provide the final decisions on the renewables obligation banding review. She might also be interested to learn that I recently went to Iceland to sign a memorandum of understanding with the Icelandic Government about how we can share some of their knowledge as the world’s leading economy in geothermal power and heat, and see how that can be brought to bear to assist developments such as those in her constituency.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
T4. Since this rather miserable Government came to power, pensioners in my constituency have seen their energy bills rise by £200. If the Government insisted that the big energy companies put those pensioners aged over 75 on the cheapest possible tariff, 5,500 pensioners in my constituency would see their bills drop by £200. Is it not time that the Government stood up for senior citizens rather than the big energy companies?
David Mowat (Warrington South) (Con)
Over the past few months, there has been a significant increase in the level of electricity imports, mostly cheap nuclear from France, through the interconnector. Indeed, over the past 24 hours we have imported more electricity by a factor of two than we have produced from offshore and onshore wind. That is a big policy failure and is costing us thousands of jobs. How can we address it?
Charles Hendry
I disagree with my hon. Friend, as the interconnector is an essential part of our energy security. We have seen a new interconnector introduced to Holland and a new connection is coming through to Ireland. We are exploring other aspects of the matter, too. We think that it is a fundamental part of energy security and delivering low-carbon electricity at the cheapest cost to consumers.
Graeme Morrice (Livingston) (Lab)
T5. What steps is the Secretary of State taking to ensure that energy bill standing charges do not unfairly hit the fuel poor and other low-income consumers, especially pensioners?
Graham Stringer (Blackley and Broughton) (Lab)
T7. The Minister failed to answer the question earlier about when shale gas would come on line, yet this source of energy would create real jobs and partially decarbonise the energy industry as well as lowering fuel bills. Why does he not get a move on?
Charles Hendry
This is not a matter purely for the Government. Companies here are exploring for shale gas and seeking to identify how much of the resource there may be. They will then need to apply for a licence, get permission from the Health and Safety Executive and get approval from the Environment Agency. A range of different bodies, in addition to local planning permission, are a vital part of the process. It may well have a role to play, but it has to be done with the strictest environmental and safety protections.
Damian Hinds (East Hampshire) (Con)
Does my hon. Friend agree that the continued growth of UK solar vindicates the approach of this Government, who keep returns attractive and make the money go further, in stark contrast to the limited ambitions and dodgy maths of a previous Secretary of State, now Leader of the Labour party?
Derek Twigg (Halton) (Lab)
The Heath business and technical park in Runcorn in my constituency is one of the most important employment sites in the north-west, but the decision by SP Manweb plc to apply for a wayleave to retain electric lines on the site is putting at risk a multi-million pound investment in jobs and houses, which has been made worse by the fact that the Department will not be able to make a decision on this until well into next year. Will the Secretary of State intervene quickly to ensure that the investment does take place and is not put at more risk?
Charles Hendry
I am interested to hear the hon. Gentleman’s comments. I am not aware that he has written to me on the subject. If he has done so, I will be very keen to talk to him to see if there are things that we can do to speed up the process, because I understand the impact that it could have on employment in his constituency.
Neil Carmichael (Stroud) (Con)
Does the Minister welcome the news that nearly a third of the 900,000 new jobs have come into the green economy, which is obviously underlined by the excellent news that Sharp is moving to this country from Germany?
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
There is real concern, especially among small innovative companies, that the Department’s smart meter programme, which should help reduce energy bills, is behind schedule, disorganised, has no technical standards to help small companies take part and is unco-ordinated with either the smart grid programme or spectrum release. Will the Minister provide some reassurances?
Charles Hendry
Let me provide the hon. Lady with reassurances. We have sped up the programme that we inherited and brought it forward by 12 months, we have been going forward in a very collaborative approach with industry to get its buy-in to all the key decisions, and we have submitted the technical specification for European Commission approval, which is happening in two stages, with one going through now and the second shortly. We see this as a very important aspect of energy efficiency and putting consumers in power, and also for real business opportunities for large and small companies alike.
Andrew George (St Ives) (LD)
Energy bills are still impenetrable to many households. What progress are the Government making to ensure that energy companies improve the transparency and clarity of their domestic bills?
Jessica Morden (Newport East) (Lab)
Like my hon. Friend the Member for Scunthorpe (Nic Dakin), I have concerns about what the Government are doing to maximise the use of UK steel in the low carbon economy and all the opportunities that that brings. I understand that the Minister’s answer was encouraging, but does he appreciate that we must get this right now, because the deteriorating market for steel is impacting on workers in my constituency today?
Charles Hendry
Let me reassure the hon. Lady that that is absolutely at the heart of what we are doing. We are determined that there will be a major industrial gain for this country from building the new low-carbon facilities, as well as some of the older type of facilities. We have strategies for the oil and gas sector, the nuclear sector and the renewable sector. Throughout this area we want to see real industrial gain, often bringing new employment to areas that have been hard hit for a very long time.
Peter Aldous (Waveney) (Con)
Following on from the CBI’s report, the New Anglia local enterprise partnership has just published its manifesto for promoting green growth over the next three years. Will the Secretary of State and his colleagues across Government work with the LEP to discuss how its manifesto can best be implemented?
Dr Alan Whitehead (Southampton, Test) (Lab)
Has the Minister spoken with the developers of large-scale wind farms who have difficulties because their development periods straddle the end of the renewables obligation and the start of—if they come to pass—contracts for difference? Does he consider that the end of the RO, if that is necessary, should be in 2020, rather than 2017, in order to accommodate those problems?
Charles Hendry
We are not persuaded by that argument. We think that there needs to be a clear switchover date and are giving a long lead-in time, to 2017, so that there is certainty. Alongside that, we are giving people the choice of whether they go with the existing renewables obligation mechanism or move to the new contract for difference mechanism so that they have the best opportunity to decide what works for them in the longer term.