Dan Byles
Main Page: Dan Byles (Conservative - North Warwickshire)
Michael Fallon
The amendments we introduced in Committee allow the Government, if they so wish, to set a target. I will come on to deal with that point, but let me turn first to the amendments tabled by my hon. Friend the Member for South Suffolk (Mr Yeo) and the hon. Member for Brent North (Barry Gardiner). I do not believe that these amendments take the right approach for the following reasons.
First, now is not the right time to set a target range. Hon. Members say that doing so will improve investor certainty, but this Government are already giving clear signals about the future of our electricity sector, and I shall address that in a moment. Secondly—this answers the point made by the hon. Member for Rutherglen and Hamilton West (Tom Greatrex)—it would be a mistake to impose a legal obligation now that a target range must be set. Decarbonisation of the electricity sector is inextricably linked to that of the entire economy, so a decision to set a binding target range should be taken in 2016 when we consider the trajectory of the whole economy towards our 2050 target. Thirdly, the Committee on Climate Change is the wrong body to set a legal constraint on what the level of the target range should be.
I wish to expand on each of those three points. Hon. Members say that we must set a target now because investors need greater certainty. The Government agree wholeheartedly that investor certainty is essential to delivering our energy and climate change goals at the least cost. That has been a fundamental part of our policy to date and it will continue to be a high priority. However, it is very important to recognise that we already have legal targets and measures that clarify the long-term future of electricity generation in this country. They include: the 2050 target to cut emissions by at least 80%, which is likely to require the entire electricity sector to be decarbonised; the fourth carbon budget that runs up to 2027, which requires this country to halve its emissions in the whole economy—we have set out in the carbon plan the likely implications of that for the electricity sector; and the 2020 EU renewables directive, which will mean 30% of electricity generation coming from renewables in 2020, compared with around 10% today. We shall also be arguing, as the Secretary of State announced last week, for the most ambitious greenhouse gas emission target ever to be set in the European Union of 50% by 2030.
In addition, we have committed ourselves to providing clarity on the trajectory of the electricity sector up to 2030 by issuing guidance to the National Grid Company on an indicative range of decarbonisation scenarios consistent with the least-cost approach to achieving our overall 2050 carbon target. Of course, we must also not forget that what matters most for investors now is not simply words and aspirations, but funding. That is what we have got through the Government’s decision to increase support for low-carbon electricity year on year to £7.6 billion by 2020, a tripling of support between now and 2020 which provides a clear and durable signal to investors.
Dan Byles (North Warwickshire) (Con)
Was my hon. Friend, like me, struck by the comments made by the chief policy officer of the CBI at the weekend? She said:
“It is clear that investment decisions will stand or fall on the details of the Contracts for Difference, the capacity mechanism, and the levy control framework—not on a carbon intensity target.”
Michael Fallon
My hon. Friend anticipates me; I was certainly due to quote the CBI in support, and I will come to that in a moment.
Finally, in this regard, I should mention this Energy Bill, which puts in place the most significant reform of our electricity market since privatisation, in order to attract the £110 billion of investment we need over the next decade to replace current generating capacity, upgrade the network and cater for rising electricity demand. That will provide further support for investors. For example, the Government’s delivery plan, which is due to be published in draft in July, will provide draft strike prices for renewables projects that wish to take up contracts for difference. They will provide further certainty about potential future revenues to developers of such projects, at an earlier stage than under the renewables obligation. We expect this approach to bring on significant investment in renewable technologies, enabling the Government to meet their objectives on renewable energy, decarbonisation, security of supply and affordable energy for consumers.
This Bill has already been welcomed by investors. John Cridland, director general of the CBI, has said that it sends a
“strong signal to investors that the Government is serious about providing firms with the certainty they need to invest in affordable, secure, low-carbon energy”.
The chairman of ScottishPower has said:
“our investment plans will create 4,500 jobs…along with thousands more jobs in other industries, and a further increase in the £1 billion we spend each year with UK suppliers.
We are able to make that sort of investment because we have confidence in the UK, and in its energy policy and regulatory regime.”
David T. C. Davies
The Minister is right. He did not, however, mention the other reason that is sometimes put forward—that we are about to run out of carbon-based fuels and uranium—and as he did not mention it, I will not knock that argument back. Instead, let us address the point he made: that this may well lead in the longer term to cheaper energy.
I have no objection at all to many of the things the Government are doing: the smart meters, the decentralisation—which the Minister talked about—and the insulation, which was not mentioned, but which I assume is part of the same package. I get slightly more nervous when I hear him talking about negawatts rather than megawatts, however, as that suggests people will be paid for not producing things.
We have already had that situation in farming, where people have been paid not to produce food. I sometimes wonder whether the Minister—or, indeed, the hon. Member for Brighton, Pavilion (Caroline Lucas)—would like to pay me for not making speeches. I see much nodding of heads. I ask myself, however, whether this proposal is economically sensible. I am a keen student of economics, and it is my understanding that there are only two ways to reduce demand for anything. One way is to ration the goods that are in demand, and to some extent the Government are making provision for that, as they know there is a danger that we could run out of electricity over the next 10 to 15 years. My understanding is that there have been discussions as to how, if that were to happen, demand might be rationed in respect of certain high users of energy. The second way to reduce demand for any commodity is to increase prices.
Whatever the Minister says about negawatts and insulation and smart meters, the reality is that prices are going up partly in response to the policies this Government are putting forward. We have a system that now subsidises production of electricity that would otherwise be economic, in order to make it harder for people to get hold of it.
At the moment, the clear and present danger to all of us is the economy. The one thing the coalition was elected to do was sort the economy out.
Dan Byles
I am still digesting what was said about the supply and demand curve. It is, of course, also possible to shift the demand curve, and my understanding is that, in terms of energy efficiency, we are seeking not to reduce demand down the curve through pricing or rationing, but to shift the entire demand curve so there is less need in the first place.
David T. C. Davies
Well, I am going to have to think about that one for a few minutes before coming back with a substantive response. I will say, however, that it is not wise to talk about reducing people’s access to electricity at a time when we want to be saying to businesses across the world, “Come to the United Kingdom and invest.” We are not going to be able to compete with anyone on the basis of labour costs; indeed, we do not want to compete on that basis. We do, however, want to be able to say to business, “If you come here, you’re going to get a large and reliable source of electricity.”
David T. C. Davies
I fear that within 20 or 30 years those who are now talking about the temperature changes we are seeing will find that they are not that out of the ordinary in the context of the past 8,000 years or 4.5 billion years. We may look back and ask, “Why did we suddenly decide to make it more expensive to generate electricity in this country? Why did we suddenly decide to decarbonise at a time when other nations, such as China and other places in south-east Asia, were doing quite the opposite?” We may look back from a point in the future when not only the GDPs of those countries, but their GDPs per head are much larger. Carbon emissions will not have stopped, temperatures will not have risen that much and those rises that do take place will be as much to do with things such as the Pacific decade, oscillation and the natural changes that go on in the Earth, and we will wonder whether we were right to go down this path.
David T. C. Davies
I will not give way any further. I have made my point. I will be supporting the Government, as much as anything else because I look at some of the people who are not supporting them and I realise that being in coalition, even being in the same party as people whom one can respect and admire but not always agree with, is all about a bit of give as well as a bit of take. So I will support the Government tonight, but I hope that the Minister will think about what we say and consider whether these policies might need amending in the light of further evidence about the relevance of temperature rises in the future.
Dan Byles
It is a pleasure finally to be speaking on Third Reading. I am a member of the Select Committee on Energy and Climate Change, which has carried out inquiries into energy market reform and pre-legislative scrutiny of the Bill, and I also sat on the Public Bill Committee, so it has been a labour of love getting here.
Although I support the Bill, I admit that I have some concerns. I am concerned about the level of complexity we are starting to pile on to our energy sector. Perhaps that is inevitable, as this is a highly complex policy area, but I sometimes feel that unintended consequences lead to another sticking plaster being put on, leading to more unintended consequences, so that a highly complex system evolves. I do not necessarily blame the DECC team for that, as this is a difficult and complex area, but I hope that as the Secretary of State introduces the secondary legislation he will bear in mind the need to try to minimise the complexity as much as possible, in keeping with the aims of the Bill.
The energy sector still faces huge challenges. As for the oft-quoted figure of £110 billion a year of infrastructure investment, I have seen a lot of estimates that put the figure much higher. Some people grossly underestimate the scale of change required in our energy sector, particularly in the argument about decarbonisation. The year 2030 is just 17 years away and at 10 minutes to 6 today, in real time, 40% of our electricity was being provided by gas and 35% was being provided by coal. That means that 75% of our electricity was being provided by gas and coal. Gas heats 83% of our homes. We will have a substantial slice of gas on the system for a long time, so we need to get on and start exploratory drilling for shale gas once again, so that we can ensure that the gas is provided from a domestic source. The Institute of Directors has told us that shale gas production could provide up to 74,000 jobs, both directly and indirectly, and up to a third of peak demand—and that is just the central scenario. We need to search for shale gas, and to accept that gas will be on the system for a long time to come.
We also need steadily to increase investment in renewables; I entirely accept that. Sometimes people throw at me that I am anti-decarbonisation—we have heard that from some Opposition Members—but I am not. We need to move to a low-carbon future, not through a rash, uncosted 2030 decarbonisation target set this year, but through the nuts and bolts of the contract for difference and the levy control framework, as the CBI has said.
Andrew Percy
One of the reasons why I was not here earlier is that colleagues from our region and I were with a Treasury Minister, trying to ensure that when the money for renewables comes on stream, British companies benefit from it. Does my hon. Friend not agree that once we get the Bill out of the way, the biggest challenge is to ensure that it is British companies, such as Tata Steel in Scunthorpe, who benefit from the additional money going into renewables?
Dan Byles
I entirely agree. This needs to be seen in a much wider context than energy; this is about jobs and investment, including inward investment.
Gas will be on the system for a long time; we need to bring forward new gas generation. We need to increase renewables on the system, and we desperately need new nuclear. There is hardly a credible scenario for a decarbonised future that does not involve new nuclear on the system. We need to incentivise generation capacity in all three. The Bill is long overdue, and I will support it this evening, because it will achieve that aim.