Dan Byles
Main Page: Dan Byles (Conservative - North Warwickshire)
Michael Fallon
There is an exemption under the Bill for a plant that fits CCS equipment. I have made that clear to the Carbon Capture & Storage Association and to those working on the various projects.
The coal fleet is old, having mainly been built in the 1960s and ’70s, with only one plant, Drax, under 40 years old. Most of these ageing power stations are now expected to retire completely between now and the mid-2020s. As I have explained, if a station is not to face restrictions and/or closure under the directive, it will need to invest in clean-up equipment. That would require a multi-year programme of investment in the order of several hundred million pounds. Over time, with the carbon price floor and a strengthening emissions trading scheme, the economics of coal generation will deteriorate further compared with gas. Furthermore, as more low-carbon generation comes on to the system through new nuclear and renewables, it will result in higher-carbon coal generation being increasingly displaced. The combined effect is that the economic outlook for coal generation is poor.
Our analysis is consistent with that outlook and shows that unabated coal generation will make up just 7% of total generation by 2020 and 3% by 2025, and probably 0% by 2030. There is no evidence at the moment of a large number of operators planning to upgrade their coal plants, but we should not rule out the possibility that one or two might do so.
We have heard the argument that the amendment would merely make available a tool for future Governments to use, if necessary, to limit the emissions from existing coal stations, but we believe the very existence of such a power would create an additional regulatory risk that could deter the small number of our most efficient stations which might otherwise choose to upgrade. As I have set out, under the directive, stations that do not upgrade will be subject to limited hours and/or forced to close. If the amendment were accepted, therefore, we would risk more coal stations closing earlier than might otherwise be the case.
I have also considered the argument that the amendment would provide greater certainty to investors looking to build the new gas plant that we all agree will be needed. However, the amendment would do so in a way which could create risks for our security of supply and increase costs to consumers. We already face a significant investment challenge with an estimated 16 GW of new gas plant, and about 45 GW in total of all forms of generating capacity, needed over the decade from 2015 to 2024. We are acting to facilitate that new investment through other measures in the Bill, notably with regard to the capacity market. However, we cannot be 100% certain about exactly when all that investment will be delivered. We need a managed transition to a lower-carbon future, in which our existing assets are managed prudently to avoid unnecessary costs to consumers.
Dan Byles (North Warwickshire) (Con)
Does my right hon. Friend agree that the transition we are trying to make in our economy, from what we have now to what we seek in 2050, is so complex that we cannot simply approach it in an ideological way and assume low-carbon energy sources will magically appear? Instead, we need a credible, investable and coherent plan for getting from where we are now to where we want to be.
Michael Fallon
I absolutely agree with my hon. Friend. When we are dealing with security of supply and keeping costs affordable for our consumers, we must avoid being ideological. Instead, we must be inclusive and welcome new generation from a series of sources.
The Department has looked at a scenario in which all our coal stations close by 2025, the results of which show that average household electricity bills would be about 3% to 4% higher—or about £22 to £28 higher—in the 2020s. That would require more gas plant to be built earlier to fill the gap—at greater cost, ultimately, to consumers. It makes no sense to accept an amendment that unnecessarily creates further risks to our security of supply and further increases costs to our consumers.
The measures in this Bill are about creating the right conditions for attracting the significant investment needed in our electricity sector over the coming decade. Such investment in lower-carbon alternatives will deliver an orderly, cost-effective transition away from high-carbon coal, and that should not be put at further risk.
Mr Syms
Clearly, policy has to have a proper balance. There is a role for renewables and trying to provide the cleanest possible energy, and the Government have policies to ensure that. However, I return to my essential point, which is that we now have policies that are driving out older capacity—it might be less efficient or dirtier capacity—but we are yet to put in place the new, clean, gleaming capacity to produce for the future. If we are not careful, whoever forms the next Government—I hope that we will—will find themselves with a very real problem. I do not want the Chancellor of the Exchequer standing at the Dispatch Box talking not about tax or how the economy will grow, but about the constraints caused by our not investing in providing power for a growing and successful future economy.
I listened carefully to the Opposition spokesman; I just think that Lords amendment 105 is not appropriate. I return to my central point: we need to sweat our assets and keep them going until we are sure that we have the capacity to keep the lights on.
Dan Byles
On my hon. Friend’s point about investment, we hear about the oft-quoted trilemma in energy policy—the requirements for energy security, affordability and decarbonisation—but does he agree that we should actually be talking about the quad-lemma and that the fourth leg of our energy policy should be investability? If we do not have a credible and investible energy policy, we might as well switch the lights off and go home.
Mr Syms
Absolutely. At the end of the day, we must have the capacity to generate for what people want. We can make savings with insulation and things that we do with electrical equipment. We can do an awful lot to save energy, which will take care of some of the demand. However, with a growing, successful economy—there is every reason to look at the British economy with great optimism—I suspect that we will need more capacity. Not only do we need plans for investment; we need people breaking the ground and building these things, so that they can provide for what we want.
I have reservations about the amendment. I know that people talk about 2021 or 2023, but that will come very quickly, so although the investment and capacity might not come that quickly, my general view is that we should be a little cautious about the Lords adding more constraints, costs and limits on an important source of power at this point.
Dr Whitehead
Indeed. There is the question of what happens to the carbon dioxide subsequently and how it is injected. In Canada, it is injected into additionally drilled wells on land; there is a different process of injection offshore. At the Saskatchewan power station, the process involves the use of carbon dioxide for enhanced oil recovery, although most of it stays on the ground after the process in any event.