Energy Bill

David Mowat Excerpts

Wednesday 4th December 2013 Commons Chamber

[David Mowat (Warrington South) (Con)]

I like the hon. Gentleman’s point on CCS, but is he aware that Germany is building 11 GW of new, unabated non-CCS coal, with Holland building 4 GW? Those projects have kicked off in the past year or so and those countries do not appear to feel the need for CCS. Why are countries reading this matter so differently?

[Tom Greatrex]

I am grateful for that intervention. I anticipated that the hon. Gentleman would refer to this point, because we had a rehearsal in a Westminster Hall debate this morning. I have also read the report compiled for the Department of Energy and Climate Change on coal-fired power stations in Germany that he had in the Library yesterday. He will know from the report that the plants were sanctioned in 2007-08, which was pre-EU 2020 targets, pre-withdrawal of free allowances and pre-renewables. The trigger for German investment in coal was the first nuclear phase out, and the slow build of the plants commissioned in 2007-08 were the result of a number of plants using defective steel. They are likely to operate at a loss. They are completing commissioning to make less of a loss than if they had been abandoned—that is the reality.

I accept the hon. Gentleman’s general point about Germany. There is a danger that we almost fetishise the German experience. [Interruption.] I think I have made the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker) laugh, but I did not mean fetishisation in any unclean sense. The deployment of renewables in Germany has been significant and has expanded, with more community and diverse ownership of capacity. We can learn a lot from that, but, as a German academic expressed it to me this week, with the amount of coal-fired power currently being generated in Germany, one might think that the people who hold up Germany as the green case for the future cannot read statistics. The German view of CCS has been born of opposition to storing carbon underground, and the UK is more likely to store carbon under the sea. The German decision to accelerate the phase out of nuclear was perhaps not the wisest, given the emissions targets that it too has to meet.

[David Mowat]

We can both agree that Germany’s carbon emissions are one third higher per capita than in the UK. On the report he mentioned—I did not realise he was sitting next to me in the Library yesterday cribbing my report—he is right to say that some of the projects were kicked off a few years ago. The report also states that by 2030 Germany plans still to have 20% to 25% of electricity generated by unabated coal, whereas our target, as I think the Minister said earlier, is 3%.

[Tom Greatrex]

I did not actually read the report over the hon. Gentleman’s shoulder; I looked at it beforehand as part of my preparation. It may be that I have powers of clairvoyancy, as I thought he might raise this point—he has been consistent in doing so. On his substantive point, he is right on Germany’s trajectory in comparison with the UK. Returning to the amendment, the point he rightly makes concerns the Government’s existing and continuing position, unless the Minister intends to change it. I will come on to make some remarks about how the amendment would have an impact on existing policy.

The other point I wanted to make on CCS is that the Minister’s colleague in the other place, Baroness Verma, referred to no more coal without CCS. That is also the position of CoalPro, the Confederation of Coal Producers, which said, in correspondence with the Minister, that coal-fired power had to have CCS in the long term in order to meet our long-term admissions targets, and encouraged him to accelerate the demonstration projects on CCS. So there is unanimity among those with an interest in coal that CCS is the long-term answer.

--- Later in debate ---

[David Mowat]

The hon. Gentleman categorised the three types of power station and pointed out correctly that his amendment would apply only to one of them. We currently have about 23 GW of coal generation. To how much of that would his amendment apply?

[Tom Greatrex]

That depends on the decisions made on the first and second groups. On the third group, so far there has been relatively little investment, but I know that a number of companies are actively considering making it. They are waiting, partly for the completion of this Bill and regulations arising from it and partly for the detailed work on the capacity market, before making those investment decisions. As I said at the outset, that is why it is important we get the Bill though as quickly as possible, after considering these final points.

The Minister gave several reasons why the Government were against the amendment. The first, which he referred to almost in passing, was on technical and drafting grounds. In that regard, several points have been made by those anxious to ensure that existing investment is not disregarded, but I think that those points could be properly reflected in the regulations that would arise were the amendment to be successful. The second was that the amendment was unnecessary, because existing price control policies, notably the carbon price floor, had the same impact in effectively limiting coal plants to about 40% to 45% load factor. If so, perhaps the Minister, whose antipathy to the carbon price floor has been well-rehearsed—he has been reminded of it a couple of times recently, including this morning, so I will not embarrass him by doing it again—could help to persuade the Chancellor that the unilateral, untargeted measure of a carbon price floor is not needed because the Government could use the approach in the amendment instead.

The third argument was that the amendment would present a risk to security of supply. As the Minister is aware, the amendment would not bite until 2023, and if his boast earlier today in Westminster Hall—on investment decisions about to be announced for the enabling process—are accurate, that would give scope for any gap to be filled. I say that not least because we would continue to have that coal capacity operating in winter and at peak times through the capacity mechanism the Government are introducing.

The fourth argument concerned costs. The Minister neglected the point that the price of electricity was pegged to the price of producing energy from gas. However much coal is in the system, coal generators sell at the gas price, so bringing more coal into the system would not necessarily mean lower energy costs for consumers. It is worth restating that the EPS goes no further than the Government’s own prediction for scaling back coal in the energy mix. It is effectively a back-stop or, with some intelligent thinking, possibly an alternative to what they anticipate will happen in response to the EU emissions trading scheme and carbon price floor combined.

This morning, the Minister spoke in a debate, which I thought was a very good debate, about issues of balance in energy policy. He also spoke earlier this week, to a slightly different audience, about the order in which he saw the elements of the balance: security of supply, affordability, climate change, in that order. He is right to talk about balance, investment and impacts, and the very purpose of the Bill is to ensure we strike that balance in the most affordable and sensible way in order to secure a diverse and balanced energy supply for the future, while recognising the realities of climate change and the measures we need to take to address it, and to protect us from the vagaries of the volatility inherent in globally traded commodities. He will have seen this week’s figures from the International Energy Association on global energy demand projections over the next few years. Contrary to the impression he gave, the amendment is in line with the Government’s stated aims. It is proportionate and sensible and is certainly worthy of further consideration for inclusion in the Bill.

--- Later in debate ---

[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.

[David Mowat]

I am listening carefully to the hon. Gentleman’s argument about the acceleration of CCS as a consequence of accepting the amendment. Notwithstanding the Saskatchewan case, CCS is still an unproven technology in this country. For clarity, is he saying that the amendment would result in those stations being converted to CCS in time to prevent them from being switched off? It was implied from the Front Bench earlier that they would be replaced by gas power. Which of those two options does the hon. Gentleman consider to be more likely?

[Dr Whitehead]

Some of those plants could well be replaced by gas, and some could well close down. Indeed, some could well close down whether the amendment were passed or not. The problem for capacity in the market is that the signals being sent out at the moment are so varied and uncertain that a number of people who might otherwise invest in plant are holding back until, for example, the capacity market comes on stream or until there is more certainty about CCS or about coal generation. As we have seen already, there is a possibility that plants will close down by accident rather than by design. They could end up being mothballed because of market circumstances, rather than because of long-term planning based on capacity.

The amendment would improve that certainty tremendously by making it absolutely clear what was expected of coal-fired power in the future. Coal-fired power would not cease to exist; it would be able to run at certain levels per year, and any existing coal-fired power station that wished to run continuously after the early 2020s would have to have CCS attached to it. The amendment would send a simple, straightforward message.

--- Later in debate ---

[Mr Redwood]

I am afraid that I do not have time to do so, as the hon. Lady spoke for some time and the debate is very limited.

We need to deal with both price and capacity. Price is the most immediate issue. Although things can be done on green levies, and I welcome that, the main driver of higher prices, which will continue over the years ahead, particularly if the amendment is passed, is the forced closure of cheaper stations and their substitution with much dearer, interruptible renewable sources of energy, which will be with us for some time to come, whatever policies are now followed.

Even worse is the way in which we are jeopardising capacity. Not only are we closing many stations without building new ones, but we are replacing base load stations with stations that produce interruptible energy only when the wind blows, so we are doubly vulnerable. Our stated capacity often is not genuine capacity because there is no wind, and the margin is far smaller. I do not wish to live in a country like that. I do not want to live in a country where every winter we fear that the lights might go out in places, and where, at times when people most need heating, there is not enough power left. It is a grave folly of the European Union and the former Government—I hope our Government are not going to perpetuate this—that we close the plants before anybody has built replacement plants. What kind of person would sensibly recommend doing that? We have heard from the Minister that six plants are already being closed, and we know that several others are at risk of closure under European directives. Please can we not close plants until we have the replacement capacity?

The investment incentive problem did not lie with the late Baroness Thatcher’s policy, which provided plenty of incentive, cheaper energy and big investment; the problem of incentive lies today with the muddle, confusion, high cost and deliberate obfuscation of the European-driven system, which means that our country, along with many others in the European Union, faces deindustrialisation on a big scale, cold winters without a guarantee that enough power is available and ever higher energy prices, thanks to these ridiculous policies.

[David Mowat]

I, too, oppose the amendment. I will make three points: on cost; on security of supply; and on how this country’s approach to tackling the issue increasingly departs from that of other countries in the world, not just in Asia and the US but in parts of Europe.

First, let us frame the problem. We have 23 GW of coal right now. I think we can all accept that about 8 GW of that will be turned off because of the large combustion plant directive, leaving potentially 15 GW subject to the amendment. I asked the shadow Minister what his figure was and although it may well turn out to be a little lower than that, it is of that order. We are talking about a huge amount of power to be replaced, yet we are doing this at the same time as our nuclear stations are coming off stream. Let us put this into context. Replacing 15 GW with wind power, which I guess is the direction that the hon. Member for Brighton, Pavilion (Caroline Lucas) would take, would require about five times as much wind generation as we currently have commissioned—onshore and offshore—leaving aside the intermittency issue, which I do not think we will be able to address.

[Dr Whitehead]

rose—

[David Mowat]

I will not take the intervention, as I want to finish as quickly as I can to allow time for the other speaker.

We have a security of supply issue. To be clear, the debate is not about pollution, nitrous oxide or sulphur dioxide control, or even about the long-term plan to phase out coal. We intend to be at 3% by 2030. Our European partners, by contrast, do not have such an ambition. The debate is not about the Kyoto targets, which we have not met, but about the need to replace a vast amount of capacity, and to accelerate such replacement. We are unique in that our nuclear stations and our coal are so old. We also intend to use more electricity as we decarbonise the transport sector. If we are to meet the climate change budget targets, it will be about not just electricity generation but transportation. We are talking about more electric cars, which means yet more electricity. The task is absolutely enormous, and we are currently sitting here with a capacity surplus of around 4% or 5%. To accelerate that further would be folly.

Members have mentioned that we are talking about replacing possibly one of the cheapest methods of energy generation—the relatively old stations that are depreciated, and all that goes with that—with some other technology. In relation to today’s infrastructure plan statement, offshore wind, even with the new CFD numbers, is about three times the cost of those coal stations that are currently burning.

If we are seriously thinking of replacing about 15 GW of capacity with offshore wind and even gas, which is more expensive, it is hard to see how that would not put up energy prices. Of course it would put up energy prices both for our energy-intensive users and our consumers. Those Members who think that fuel poverty matters should give some thought about how they will vote this afternoon.

Finally, let us look at how we are dealing with the issue compared with many other countries. I have one statistic to put to the House. Renewables went up a great deal last year. Across the world, they went up by about 30 million barrels of oil equivalent, which is a high percentage. The use of coal across the world went up by three times as much to 100 million barrels of oil equivalent. Such increases are not just happening in Asia and China. Germany and Holland are moving ahead with brand new unabated coal power stations that will run for 20 or 30 years. In this country, we already have among the lowest carbon emissions per head and per unit of GDP of any EU country. The only major country that performs better is France, which has so much nuclear power, although our green lobby thinks that that is wrong as well.

I have not covered in any detail the havoc that would be wrought on what is left of the UK coal industry. The fact that Members are justifying voting for the amendment because it will bring forward investment in CCS, which is still unproven at the scale that would be needed to work in this country, is, frankly, almost vandalism.

[Mark Reckless (Rochester and Strood) (Con)]

It is a pleasure to follow my hon. Friend the Member for Warrington South (David Mowat). I was very impressed with his speech and with what he said about the growing disconnect on this issue between this country and most other countries in the world. With the exception of him and my right hon. Friend the Member for Wokingham (Mr Redwood), there seems to be an enormous disconnect between what Members of this House think and what our constituents want. Our constituents want cheap, reliable energy.

On Monday, we saw the Government trying to find ways to reduce by £50 the rise in electricity bills. For the Opposition, too, the debate is purportedly about trying to cut or at least to hold down bills. They say that for 20 months, from May 2015, they will fix prices. The reality is that the Opposition are co-operating with the Government Front Bench and the Liberal Democrats to fix prices for 20 or 30 years across vast swathes of our electricity generation capacity, and to fix prices at two or three times the current market price. That will drive costs through the roof for our constituents, who will be forced to pay such prices for decades to come, and yet the coalition and the Opposition purport to be having a debate about holding down prices, when the reality is the reverse. We see that again today in this rather surreal debate about whether we should force some of the cheap generation to close, as the Government support, or even more of it to close, as the Opposition want.