Energy Industry (East Anglia)

Charles Hendry Excerpts

Tuesday 7th December 2010 Westminster Hall

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

It is a pleasure and a privilege to serve under your chairmanship, Mr Gale. I congratulate my hon. Friend the Member for Great Yarmouth (Brandon Lewis) on securing the debate and on the vision, realism and determination that came through in every aspect of his speech. He has already shown himself to be a strong champion for his constituency and his whole community, and today’s speech adds to his track record. I was also delighted to hear the contributions of my hon. Friends the Members for Waveney (Peter Aldous), for Norwich South (Simon Wright) and for Suffolk Coastal (Dr Coffey), which focused so directly on the skills issue and on what more should be done, and is being done, to ensure that people in East Anglia, particularly the young, can take advantage of the huge array of energy opportunities that will be available to them in the future.

I will begin by explaining the national background against which the opportunities in East Anglia need to be seen. I particularly want to pick up on the energy security aspect to which my hon. Friend the Member for Great Yarmouth referred. In the past week, we have had two of the three days of highest gas demand that we have had in our history. All three of them have been this year, and we should be in no doubt about the contribution made by the interconnectors coming into East Anglia, which make a critical contribution to our gas and energy security. I have been pleased to give a licence to Eni, an Italian company, to develop what will be the largest gas storage facility off the East Anglian coast. It still requires final approval, but it will be a significant addition to the contribution that East Anglia makes towards our energy security.

The Government have a key role in ensuring that we can make the transition to a low-carbon economy, but it is not up to the Government alone. The business world also has a critically important contribution to make, and the Government believe that it is our job to try to facilitate that transition and investment. We are introducing a range of measures that we believe will take that forward. First, electricity market reform will totally transform the attractiveness of investing in the low-carbon energy sector in this country, and will be the biggest reform of that market for 30 years. We believe that it is critical if we are to secure the essential investment— £200 billion—that will be required over the next 10 to 15 years. That will include issues such as setting the carbon price and moving on from the climate change levy, as announced in the June Budget, to give people long-term security about the market in which they will be investing.

We have given real meaning to the concept of a green investment bank, as £1 billion has already been committed to that, with a commitment for additional funds to come through from asset sales in due course. In looking at exactly how that should be structured, we can look at other examples, such as the green investment bank in the Netherlands, which has a market capitalisation of €2 billion, but which has brought in capitalisation leveraged from private investors of €100 billion. That can play a critical role in encouraging investment in low-carbon technologies.

We are reforming the planning system for major infrastructure projects. We had a debate in the main Chamber last week on the national policy statements, and we hope that they will go through the parliamentary process by next spring. We are also tackling barriers to investment in energy efficiency by launching the green deal, which will be the centrepiece of the energy Bill that will be introduced in the next few weeks. We will also ensure that we roll out smart meters with greater determination and drive than has previously been the case. We are putting in place the right framework to encourage people to invest in the low-carbon economy and in our energy security.

I want to focus in particular on the unique contributions and benefits that East Anglia can make in that respect. In almost every aspect of the energy equation, East Anglia has a role to play: in nuclear and the role of new nuclear; potentially as part of the process of carbon capture and storage; as a major centre in the roll-out of renewables; and clearly as a key centre for gas security. My hon. Friend opened his speech by discussing the renewables aspect of the debate. That relates both to onshore and to offshore wind energy. We should recognise the contribution that East Anglia is making in relation to onshore wind, as it provides 15% of England’s onshore wind capacity. Growth is expected to continue over the coming years, as there are 10 projects in planning and 10 projects that have come through planning and are awaiting construction. There are 18 projects already operating and we are aware of a further eight projects in the pre-planning stage. We should certainly recognise, therefore, the contribution that East Anglia can make in that area.

We want a different relationship between wind farms and the communities that host them. That is why, in the localism Bill, to be published shortly, we will discuss how local communities can derive much greater direct benefit from the facilities that they host, both financially, for local business rates for a number of years, and through community ownership. Examples throughout the country include Westmill community wind farm in Oxfordshire, which is 100% community owned. The people living near such facilities can truly see the benefits that they get from them.

We also recognise the massive potential offshore. Without doubt, offshore wind technologies will be critical in meeting the challenging renewable targets faced by this country. My hon. Friend mentioned Scroby Sands. I am pleased that he highlighted the effect that that has had on tourism—30,000 visitors a year view the facility there—because that shows that there is great public interest in the opportunities that this technology presents. Public support and interest will be immensely important to us as the technology advances.

The Crown Estate has awarded development rights for the East Anglia offshore wind farm zone, under the third round of offshore wind development. Initial studies have identified a target capacity of more than 7 GW, which would be enough to provide clean, green energy for 5 million homes. I am delighted that the first project in the zone has already been identified with a scoping application recently submitted. Known as the East Anglia ONE Offshore Windfarm, covering an area of about 300 sq km, it could support up to 1.23 GW.

East Anglia is well placed to exploit the opportunities provided by the expansion of offshore wind manufacturing and I want it to demonstrate the positive impacts of this emerging industry, not only on the local economy, but for our country’s energy security, growth and environment. However, we want to do that based on realism rather than grand plans, which is why next spring we will publish a robust delivery plan for renewables to ensure that people are clear about what we want delivered, and understand the role of Government in making that happen and what we believe will be the role of others in delivering that.

My hon. Friend is concerned about the ports competition. I understand that he and my hon. Friend the Member for Waveney are frustrated about the competition focusing on assisted areas, which is necessary because of European funding rules, but I assure my hon. Friend the Member for Great Yarmouth that that will not preclude investment in areas that are not assisted. We are pleased with the work done by the Crown Estate, and we have agreed a statement of intent to work together to support the development of the UK’s offshore wind manufacturing capacity. That is intended to ensure that port infrastructure requirements do not delay offshore wind development. Opportunities around the country will be considered, with the focus not purely on assisted areas, but on the potential in many parts of the country. Through conversations that I have had with both my hon. Friends, I understand their determination and drive to bring investment to their areas, and I commend their personal work to draw attention to the opportunities in that regard, which are some of the greatest in port infrastructure anywhere in the country.

Other issues need to be addressed, to reassure my hon. Friends’ constituents, in relation to the grid connections and how those will be joined to the national grid. There is growing concern about the need to upgrade the national grid, which will have to be substantially rebuilt in the coming years to respond to the way in which our energy supply will change. We have already made changes to the offshore market to try to encourage investment in that sector, with businesses confident that they will be able to get their power to market when it can be generated, but that gives rise to two issues that we must focus on. There is the national interest in trying to ensure that we contain the number of substations that will be required—the junctions where the cables land—and how those tie into the national grid, because they are substantial and will cause local concern.

We are trying to ensure that a strategic overview is taken in considering such matters and that, in looking at the most appropriate place for the power to come on land, we consider the existing onshore grid infrastructure. I understand the concerns of my hon. Friends in East Anglia—as in other parts of the country—about the new pylon infrastructure. We will take a strategic view to see how best that can be taken forward.

My hon. Friend rightly focused on oil and gas decommissioning. The oil and gas industry has been extraordinarily successful for this country; it supports 450,000 jobs and has capital investment worth some £5 billion a year and is still one of our most extraordinary successes. As we know, however, the decommissioning of offshore oil and gas platforms and infrastructure will start to speed up, with some 260 fields in the UK continental shelf having to be wholly or partially removed from UK waters in the next 30 years. It is estimated that there will be around £25 billion of work in the decommissioning market in the UKCS in the next 30 years, which presents a huge business opportunity for the UK supply chain and the East Anglia region in particular, given that roughly one third of the installations are on its doorstep. The work that Perenco, Shell and EDF and others are doing has been important both for the region and in respect of this vital task for our nation.

There is significant engagement with contractor companies, including AF Decom, Aker Solutions and Smulders, the Dutch company. We want to encourage more companies around the world to look at the opportunities here. Equally, we see fantastic opportunities for the companies that are already based here to use that expertise to find international opportunities. As a Government, we will work with them to try to secure such opportunities. My hon. Friend mentioned tax, and we will ensure that the Treasury hears his comments. He will understand why I am not able to make any personal commitment on those matters today, but we understand that our friends in the Treasury will consider these issues carefully.

We have heard about opportunities for new nuclear. We are taking that work forward with great energy. We have taken through the House the process of regulatory justification—a key legal stage—with one of the biggest majorities in this House on a significant issue in recent times. Sizewell B is our most recent power station in the nuclear fleet, generating 3% of the UK’s entire electricity needs, and it is EDF’s favoured site for a new reactor. EDF has identified sites at Hinkley Point, near Bridgwater in Somerset and Sizewell for their new reactors, which would potentially amount to 6.4 GW of new power.

As has been said in this debate, much depends on skills. To take advantage of the opportunities in the power sector, we have been working with Cogent and others to help ensure that young people and others have the relevant skills to take part in this process. Cogent has estimated that in the nuclear sector alone, in the manufacture, construction and operation of a station with twin reactor units, there will be 21,200 person years of work over a six-year period, which equates to 3,400 full-time equivalent personnel per year. That shows the scale of the opportunities for new employment in this area.

There is a massive opportunity in new nuclear for British business and for businesses that are already established in East Anglia. The role of business is to secure the low-carbon economy and the low-carbon future that we want. There is no doubt that business needs Government support and co-operation to make that happen. At the same time as introducing those changes, which will help to transform the attractiveness of the energy sector in this country to international investors, we will work to reduce the regulatory burdens on business.

My colleague, Lord Marland, has been in contact with 250 organisations to explore the scope for reducing and simplifying the burden of red tape imposed by my Department. The ideas generated by his contact with organisations and what the Department of Energy and Climate Change plans to do as a result has already been put on our website. I give an absolute assurance that, if there are barriers to investment that should not be there which Government can remove, we will focus on those.

We have had a valuable debate about an issue that is critical to the whole East Anglian area. I congratulate my hon. Friend and my other hon. Friends for their contributions to this debate, but more importantly for the contributions that they are making to the sustainable energy future of their counties.

Question put and agreed to.