Energy Bill

Charles Hendry Excerpts

Wednesday 4th December 2013 Commons Chamber

[Dr Whitehead]

The Saskatchewan power plant that I mentioned is not a new coal-fired power station, but an existing one that has been refurbished to take on carbon capture and storage. The right hon. Gentleman’s question should have been the other way around: he should have asked me when I might expect to see an existing coal-fired power station with carbon capture and storage attached to it in the United Kingdom if the amendment is passed. My answer is that if the amendment is not passed, it will be far less likely that existing coal-fired plants, which are effectively given a derogation by the Bill, will take on carbon capture and storage, although they know that they must do so sooner or later for the sake of future investment. They will do it in the end, but there will be uncertainty for some time before they do.

My answer to the right hon. Gentleman’s question is that I expect an existing coal-fired power station to start to address itself partly or wholly to carbon capture and storage much earlier if the amendment is passed than it would otherwise. That would put that station bang in line with the Department’s long-term decarbonisation aims.

[Charles Hendry (Wealden) (Con)]

Should we not learn the lesson of the Longannet experience? In that instance, we discovered that the cost of trying to retrofit carbon capture and storage technology to a very old power station that needed many millions of pounds of new investment made it uninvestable. Surely, it is likely that a new plant will be fitted with carbon capture and storage, rather than an old plant’s being retrofitted.

[Dr Whitehead]

With a relatively small amount of underwriting—far less than is proposed in the UK Government’s competitions—it was possible to undertake the retrofitting of the Saskatchewan plant alongside a refurbishment. The interesting issue was not the progress and, indeed, the completion under budget of the plant’s carbon capture and storage element, but the fact that the retrofitting itself—the upgrading of the coal-fired power station—caused the difficulties. Its operators estimate that future arrangements could cost 20%, 25% or 30% less than the first retrofitting. I do not agree that this is uninvestable; on the contrary, it is an essential part of the process of realigning energy objectives and power output over the coming period.

--- Later in debate ---

[Dr Whitehead]

The question is the extent to which plants can run, and what hours would be attached to them—a process that has already been undertaken under previous directives—during the period up to the early 2020s. The question for those power stations is not the point at which they switch over or at which they stop; it is whether they can continue unabated past the early 2020s. That is the key issue.

I commend the amendment to the House because of its congruity with current departmental policy and the certainty that it would confer. It brings together a number of elements relating to the trajectory for cleaner, lower-carbon energy, and it would send a clear signal to investors. In the medium and long term, that would give us far more certainty of reliable and secure capacity than we have at the moment.

[Charles Hendry]

I refer hon. Members to my entry in the Register of Members’ Financial Interests.

Like most other Members, I have received many postcards and e-mails from people urging me to support the Lords amendment, but those e-mails seem to have been based on a misunderstanding or a misapprehension, based on misinformation. That has been either wilful or accidental, but it is certainly there. They start by saying that, although the Government said that they would be the greenest ever, we are now burning more coal than we have done for many years. Those two statements need to be examined.

This Government are the greenest ever. We have seen an increase in renewables generation from 5% in 2010 to 16% now. We have seen the biggest investment in nuclear power for a generation, and we hope to see more coming through. We have also seen an added impetus being given to the renewable heat incentive today. All those factors demonstrate our direction of travel.

The suggestion that the Government have somehow been promoting an increased use of coal is fundamentally wrong. We are using more coal than we were just a short time ago. I looked at the figures just before the debate: 39% of the electricity being used in the UK as we sit here today comes from coal. That equates to 18 GW of the 46 GW. That is happening for two reasons. First, the price of coal is historically low compared with that of gas. The shale gas revolution in the United States has meant that the coal that used to go into the US market is now being deposited in the European market at a low price and people are therefore burning it.

Secondly, the owners of the coal-fired plants know that they have only a limited number of operating hours left, and they want to use them while the carbon floor price is lower, rather than as it continues to rise. People should not see this as a fundamental shift to coal; it is a short-term increase in its use and, as we have heard, those plants will be closing down in the near future. Some are closing this year, and more will close throughout the decade. The concern expressed in those e-mails by those who support the amendment has therefore been based on a misunderstanding.

I am concerned about the implications of the amendment for several reasons. The first relates to political risk. This is another measure that would increase the political risk attached to investment in the energy sector. We know that we need many tens of billions of pounds of new investment in the energy sector, right across the electricity spectrum. The people who own the plant that would be closed down by the proposal are the same people who we are asking to build new gas plant, new CCS plant and new renewables plant. If they see the UK becoming more unpredictable, that will make it harder to secure the levels of investment that we need. We must be wary of going down that route and adding further political risk to the issue.

My second concern relates to the coal industry in the United Kingdom. When I was a Minister, I tried hard to increase the proportion in the mix of coal from UK mines. It had been one third, and we got it up to over a half. I suspect that it is now below one third again, and probably falling. If we want to achieve the necessary investment in British mines to enable them to provide coal to the power stations—or indeed to ensure their existence at all—when CCS plant comes on line in due course, the investors will need to know that there is still a reason for them to invest in the sector. The Lords amendment would make it more difficult to secure that investment and therefore more likely that our own deep and shallow coal mining facilities would close down, which is something we would regret. We should not deliberately put ourselves in the position of being more dependent on imports than we need to be.

My final point relates to CCS. We are trying to send a message to people around the world that this country has the aspiration to lead the world into carbon capture and storage, and we have every reason to be positive and confident that we can do that. We have the expertise, and we have the depleted oil and gas reserves in the North sea that can be used for it. We should be going out and saying to all those people around the world who are interested in this technology that the United Kingdom is the place to do it.

However, I disagree with the hon. Member for Southampton, Test (Dr Whitehead) in that I do not think that the amendment would make investment in CCS more likely. I think that it would make it much less likely, because we would be seen as having a general hostility towards coal in the mix and we would therefore struggle to make the case for that investment. Given the challenges that we are facing, do we really want to link ourselves to a policy that would bring forward the closure of plant while doing nothing to speed up the opening of new plant? The amendment would be bound to enhance the energy security challenges facing this country, which would make it more difficult to decarbonise. That, in turn, would push up prices. For those reasons, I hope that the House will reject the Lords amendment.

[Caroline Lucas]

I welcome Lords amendment 105, as we need to close the Government’s loophole that would exempt existing coal-fired power stations from the emissions performance standard if they fit equipment to meet air pollution standards.

However, even if we vote today to put common sense and climate science above the special pleading of the coal lobby, the EPS will not be strong enough. The Energy and Climate Change Committee has called the EPS “at best pointless” and the Committee on Climate Change warns that allowing unabated gas-fired generation right through to 2045 carries a huge risk that there will be far too much gas at the expense of low-carbon investment, which would bulldoze the Government’s climate objectives. It is therefore a shame that the Lords amendment does not go further and that the official Opposition are not yet accepting the need to leave existing coal reserves in the ground, unlike their sister parties in places such as Norway, whose Labour party this month proposed banning the country’s $800 billion sovereign wealth fund from coal investments. I have some reservations about the level of the EPS, but none the less I firmly support the amendment as a step in the right direction.