Dan Byles
Main Page: Dan Byles (Conservative - North Warwickshire)(11 years, 11 months ago)
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Dan Byles (North Warwickshire) (Con)
It is hard to overstate the importance of the Bill, but sometimes we need to pause and get back to basics, and remind ourselves what drives the tensions at the heart of strategic UK energy policy.
Traditionally, DECC has had two priorities: to keep the lights on and to do so at an affordable price. In recent years, a third priority has been shoehorned into the mix—decarbonising the sector. It is fair to say that at times the decarbonisation agenda butts up against the energy security and affordability issue. Much of the current debate is about how we manage that conflict. I am of the view that decarbonisation is vital, but that it cannot be considered in isolation. We cannot say at any point that there will be decarbonisation at any price. Indeed, when the Secretary of State came to the Select Committee last week he conceded that point.
Another problem in the UK is investment, which has already been mentioned by various Members. A fifth of our capacity will be gone by 2020; 12 GW of oil and old coal generation will be offline by 2015, and most of the remaining coal and older gas plant that stays online after 2015 will not be able to run at full capacity for various reasons. Nuclear power plants are coming offline without life extension; all bar one will be gone by 2023. I am pleased to see those life extensions coming forward, but the long and short of it is that we have an oft-quoted £110 billion investment challenge by 2020. That is a huge investment challenge.
Ofgem threw a hand-grenade into the debate in October, when it reported that we face a very real risk of power shortages in just four years’ time, when our capacity—our overhead—goes from 14% to 4%. My hon. Friend the Member for Selby and Ainsty (Nigel Adams) put that in context by saying that 4% is just Eggborough power station coming offline, which I find quite frightening. That is why the Bill is vital, and that is why it needs to be passed, and passed quickly. I am disappointed that the Opposition, who apparently support the Bill, have managed to word their reasoned amendment in such a way that they could end up voting against Second Reading.
Dan Byles
A reasonable amendment, is it?
There are investors out there who want to invest in the UK. Members of the Energy and Climate Change Committee have spoken to them. I have personally spoken to numerous private equity companies and pension funds. There are billions of pounds sitting, burning holes in investors’ pockets, but they are holding back because they need to see the detail in the Bill. There are a number of issues that we kicked around in pre-legislative scrutiny on the Select Committee, around the counterparty and the detail of the contracts for difference. I am very pleased that DECC has moved considerably on the counterparty, and I think has taken on board many of industry’s concerns, but some still remain about exactly how the contracts for difference will work, where in the investment cycle those contracts will be awarded and the route to market for small generators.
Nigel Adams
Does my hon. Friend agree that the contracts for difference must be absolutely defined and clear to allow such investment to go ahead?
Dan Byles
Absolutely. My hon. Friend makes the point very precisely. In fact, most of the arguments about the counterparty were prompted by exactly that. The contracts need to be bankable. They need a robust and clear counterparty who, to be blunt, may be sued if necessary, and has deep enough pockets; and at the end of the day, that really means the Government. We know that the counterparty will be Government-owned. It is still not entirely clear whether it will be underwritten entirely by the Government, but those are some of the details that we shall be teasing out in the Public Bill Committee. These are the issues that investors are looking at.
There has been much discussion of the 2030 target. We discussed it at length in the Select Committee. Some investors out there are calling for it. We also had investors who came before the Committee who—even though some supported it—said, “For God’s sake, do not delay the Energy Bill by arguing about it, because in the short to medium term the 2030 decarbonisation target is not the key issue that investors are looking at as a driver for investment. The key issues are the details of electricity reform, the contract for difference, the counterparty and so on.”
Before I finish, I want to speak briefly about costs. I mentioned at the start that I do not believe that we can decarbonise at any cost, and to be fair I do not think that anyone in the Chamber would argue that we could. It is important that the decarbonisation agenda—a very important agenda, which I support—proceeds at a sustainable pace. I sometimes get concerned when, as a member of the Select Committee, sitting around the table with representatives of Government, industry and academia, I find myself thinking that there is an empty chair at that table—that of the consumer. We are not having enough of a conversation with Mrs Jones in Acacia avenue about what we are doing in this place, and the impact that will have on her electricity bills. Because let us face it: structurally higher energy bills not only have a wider cost to the economy, but every pound that Mrs Jones spends on her electricity bills, she is not spending in Comet—and look what happened to Comet. Higher energy bills have a dynamic impact on the economy, and we need to ensure that the decisions we make here do not unnecessarily add to those bills.
In summary, the Bill is vital. If we want to keep the lights on and attract the huge levels of investments that we need, we cannot be seen to be bickering in a partisan way in this place. We cannot hold up the Energy Bill arguing about a 2030 target. There are other opportunities to talk about that target; it is still a long way off. The Bill has managed to unite the CBI and RenewableUK in its support. That is quite a feat.
I echo the words of my hon. Friend the Member for Wealden (Charles Hendry), who is no longer in his place, by saying that this is not about a choice between renewables and gas. We need a balanced energy policy. We need gas and renewables and nuclear, and we need to decarbonise our electricity sector and, eventually, our entire economy, but at an affordable pace and an affordable rate.
David Mowat (Warrington South) (Con)
The overarching policy statement sets out the context of the problem we are trying to solve, and to which there are three dimensions: cost, decarbonisation and security. We have heard quite a lot about decarbonisation, and something on security, which has two parts to it: the level of imports that we continue to need and keeping the lights on. We have heard less about cost, and I will also talk about that.
On security, the big issue unique to the EU is that we must spend £200 billion on new capacity in the next two decades. The companies that need to spend that money are more or less the same companies that we have heard so much about from the Opposition, who say they are ripping off consumers and so on. I gently say to the Opposition Front Bench, and to other hon. Members, that if that sort of language is heard in the boardrooms of some of those companies—which, due to the previous Labour Government, are now principally foreign-owned—it will not be an incentive to invest in our country. A great deal of work needs to be done on that. The biggest source of the increase in electricity supply in the past three years has come from imports through the interconnectors from France and Holland. That is a failure.
On cost, fuel poverty increased from 6% to 16% in the decade up to 2010. It is not possible to grow an economy with differentially high energy prices, particularly when trying to rebalance it towards manufacturing. We must be cognisant of that.
It is right that we decarbonise, but decarbonisation comes at a cost. Ministers must accept that there is a cost to be paid and not hide behind savings from better energy use and all that goes with it. We need to win that argument, otherwise the whole thing will unwind over the next two decades.
I want to ask Ministers about a particular issue. Hon. Members have talked about the European dimension and globalisation. The hon. Member for Stockton North (Alex Cunningham) rightly said that we are 25th out of 27 when it comes to renewables, although that—I gently tell him—is something we inherited in 2010. Nevertheless, it is true. It is also true, however, that we are one of the best when it comes to carbon per head and carbon per unit of GDP. In particular, Germany uses 30% more carbon per head than we do and 25% more per unit of GDP. It is often set up as an exemplar when it comes to renewables, and it is true that it has a lot of renewables, but the reason it performs so much worse than us is that it burns so much coal.
David Mowat
It is more than remarkable. Germany has also banned carbon capture and storage. That says to me that the people in the heavy industries of the German economy will not put up with differentially high energy prices. Germany is about to build 23 unabated coal-fired power stations. We have heard about how the Opposition Front-Bench team apparently do not want us to build gas-fired power stations, but the amount of carbon coming out of coal-fired stations is huge.
Shale gas will probably not change the world. It has already happened in the US, which now has gas prices one quarter of ours, and it will use that to suck in the chemicals industry and the global chemicals capacity that we need in places such as Teesside and Stockton North. It might well be true that we will never get our gas prices down to the level in the US, but something has happened structurally in the world when an economy the size of the US has energy prices one quarter of what they are in Europe. We need to be cognisant of that and respond. PricewaterhouseCoopers has estimated that the benefit to US heavy industries of differentially low energy prices is $12 billion a year. Our shale gas prices might not deliver that, but shale gas could have a big impact on our economy.
I would like Ministers to consider certain actions. The first relates to honesty. If we must decarbonise, let us say that there is a price to it. Let us not say that it is actually cheaper. It is true that renewables are a hedge against rising fossil fuel prices—I do not hear that argument being deployed often enough—but it is also true that, at least for the foreseeable future, they are more expensive. We need to win that argument and take it head on, otherwise we will lose it incrementally. That is very important. Secondly, we should take on the EU over the confusion between renewables targets and decarbonisation. We are trying to decarbonise, not get higher up on a graph of who has the most renewables. They are not the same thing.
Mr Hayes
As I hope the right hon. Gentleman knows, we are committed to helping low-income and vulnerable households to heat their homes affordably. As part of our work to redefine fuel poverty, we have announced that we will publish a refreshed strategy for tackling it in 2013—he will know, too, that that is the first such strategy since 2001—because we want to ensure that resources are used as effectively as possible. I will be more than happy, following his intervention, to go back to my Department and recommit to that, because I share his passion for the vulnerable. I have little power over food and clothing, although I will continue to do all that I can to make the case for moral and intellectual education. I can certainly say with confidence that the Government, through the Bill, will enable the market to provide the fuel that we need.
My hon. Friend the Member for North Warwickshire (Dan Byles) and the Secretary of State himself said that the Bill has been warmly welcomed. I appreciate the broad welcome that it has been given by hon. Members across the House, including by shadow Front Benchers. It deserves such a welcome because it provides a framework for certainty to bring heat to homes, light to lives and power to the people, as the Secretary of State made clear in his opening remarks. Most importantly, it ensures a future where the needs of the many, not the interests of the few, drive energy policy. Our utmost priority is that consumers get secure energy at the best prices.
Let me say a few words to my old friend, the right hon. Member for Oldham West and Royton (Mr Meacher). It is true that nuclear power is part of our strategy, but not at any price. Some of the things that he suggested are well outside what would be the acceptable range in the interests of taxpayers. I cannot say more, of course, because this is a commercial matter, but I just say again: not at any price.
The Bill will, in the terms that the shadow Secretary of State, the right hon. Member for Don Valley (Caroline Flint) described, bring about unprecedented investment. That is necessary simply to ensure that supply meets demand. As my hon. Friend the Member for Wealden (Charles Hendry) said, the certainty that comes from long-term contracted prices also reduces the cost of capital, which is vital. As the Secretary of State observed, this is a growth Bill. It will bring jobs and investment to every part of the UK, by providing a boost to the energy industries through developing the low-carbon supply chains that my hon. Friend the Member for Cleethorpes (Martin Vickers) said were so important to his area, as to many others.
I ask hon. Members to reflect on this: when we speak of infrastructure investment, we frequently speak of housing, transport, roads and rail, but let us from now on ensure that whenever we speak of infrastructure investment and macro-economic policy, we speak too, largely and loudly, of the importance of energy. That is something that can unite the whole House.
I share the passion of the shadow Secretary of State and the hon. Member for Glasgow North West (John Robertson) for a more plural and more liquid system. I agree that, under the system that will be devised as a result of the Bill, the energy marketplace will need to be more competitive, because it is through that competitiveness that prices can be driven down. It is curious—I will put it no more strongly than that in the interests of creating a consensual approach to the Bill—that the Labour party should say that, given that the number of energy companies fell from 14 to six on its watch.
It is still more curious that Labour Members are advocating a return to the pool. I do not agree with them about that. [Interruption.] The right hon. Member for Don Valley says that it is a different pool, but she will know that the National Audit Office has said that in effect, despite lower input fuel prices and reductions in the capital costs of generating, the pool—which was abandoned by the Labour Government, not ours—meant that consumers paid higher prices than necessary. There are real questions about the gaming that takes place in a pool situation and the effect that that has on consumer interests.
Mr Hayes
My hon. Friend will know that the CCS cost-reduction taskforce reported just a week ago and concluded:
“UK gas and coal power stations equipped with carbon capture, transport and storage have clear potential to be cost competitive with other forms of low-carbon power generation, delivering electricity at a levelised cost approaching £100/MWh by the early 2020s”.
That is not my conclusion, but that of the independent taskforce. By the way, the hon. Member for Wansbeck (Ian Lavery) is right that CCS can and should include coal. It is absolutely right that, in the long term, we should consider gas and coal as low-carbon technologies, alongside renewables and nuclear.
This is a framework for certainty and secure investment, a commitment to rejuvenate our infrastructure and an understanding that, with a mixed economy of generation, we are most likely to build sustainability by building resilience. We grasp that this is a growth Bill that offers a chance to deliver jobs throughout the whole country. Changes have also been made as a result of the scrutiny of the Energy and Climate Change Committee. There has been a proper process whereby the Committee’s considerations on things such as the counterparty body have been taken into account, considered and acted on. The Bill has been framed on the basis that it will not merely be legislation for this Parliament, but an Act that can help us to inform the future and, in the words of the right hon. Member for Don Valley, shape our destiny.
Some will say that the Opposition, in tabling a reasoned amendment, are dancing on the head of a pin, but I want to defend their Front Benchers. It is true that they are dancing—the choreography being more Sid Owen than Cyd Charisse—but they are trying to occupy a space on narrow ground, because they know, in practice, that the Bill will deliver the kinds of reforms that they would also seek in government. They know, too, that they share the Bill’s purpose, which is to deliver safe, secure, sustainable and affordable energy for future generations. I welcome the chance to shape the Bill to that purpose in Committee.
The spirit that the hon. Member for Rutherglen and Hamilton West proposed should enliven all we do is a spirit that I share, and I invite Members to reject the amendment and to support the Bill in that very spirit—the national interest and the common good that drives all we do.
Question put, That the amendment be made.