Energy Price Freeze
Debate between David Mowat and Charles Hendry
Charles Hendry
That did happen, but it is actually worse than that, because to deliver the £100 billion-plus we need invested in our low-carbon sector, the companies investing need to borrow money, and the greater the political risk, the higher the interest on that borrowing. If the cost of borrowing increases by even 1%, the result will be a dead-weight cost of £1 billion a year on consumers’ energy bills—just to pay for Labour’s political risk.
Charles Hendry
I will not, because we are all on a strict time limit.
Some of the projects that Labour says it cares about most will be hardest hit. Low-carbon projects are lumpier and require more investment upfront and so are most difficult to finance. I am talking about nuclear projects, renewables projects and in due course, I hope, carbon capture and storage. If companies looking to invest in those areas think that the terms under which they might invest could be changed retrospectively to their disadvantage, they will move away from the UK. We have to make this country more attractive to investment than elsewhere. If we do not, companies looking at international opportunities—
Energy Bill
Debate between David Mowat and Charles Hendry(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Charles Hendry (Wealden) (Con)
At the outset, may I put on record my new role as a visiting professor at the university of Edinburgh, which does outstanding work on the energy sector? My mantra as a Minister was that the fundamental building block of energy policy is energy security. My view was that the Minister would probably stay in post if the cost of energy went up by slightly more than anticipated or if we missed a few of our carbon targets, but that he would be sacked if the lights went out. He would probably be sacked by John Humphrys on the “Today” programme and gone by lunchtime, but nobody would know because their radios would not be working. I had not taken account in that thinking of the fact that the Minister could be sacked in any case.
I want to put on the record my thanks to the Prime Minister for the privilege of having the role that I had for seven years in opposition and in government and for the chance to work with two outstanding Secretaries of State and world-class civil servants. It was an immense privilege and the most rewarding part of my political and adult life.
The Bill is an extremely good one—I would say that, because I was deeply involved in many of its elements. It deals with critical issues such as affordability and nuclear regulation, but at its heart is investment. As we have heard, we know pretty clearly when much of our power plant—coal and nuclear—will close down. We now face a race to get the new investment in place. If we do not, at around the second half of this decade, we will face a critical energy challenge. That does not necessarily mean that the lights will go out, but prices will spike, particularly for heavy energy users. Therefore, the package of measures proposed in the Bill is essential to long-term energy security. It will enable us to bring forward new investment, recognising that the companies concerned have a choice about where they invest in the world, and therefore that we need to make this a more attractive place.
With a combination of the Bill, the gas strategy and the autumn statement, I hope that we can begin to get the debate back to a sensible place. It is profoundly damaging to investors to have an absurd debate in which people can be pro-renewables only if they are anti-gas, and pro-gas only if they are anti-renewables. That is damaging to investors, and introduces the new problem of political risk. One of my goals as a Minister was to try to take energy policy out of politics. The investment decisions are expected to last for 30, 40 or 50 years and more, and people want as much long-term clarity as possible. Therefore, cross-party agreement, including agreement within the coalition, and as much agreement as possible with the devolved Governments are integral to delivering that long-term strategy.
Political risk has a cost. It puts up the cost of borrowing. If we need £100 billion-plus of new investment, an increase in the cost of capital of just 1% will cost the consumers of this country an extra £1 billion a year on their bills. Ministers are therefore beholden to find ways in which we can try to ensure that we bring down those costs. The reality is that there is a broad consensus across the House. Most of us, though not everyone, want nuclear as part of the mix. Thanks to the work of Lord Hutton, the current leader of the Labour party, the two Secretaries of State and a broad coalition, this is now one of the most exciting and positive places in the world for new nuclear investment.
It makes sense, of course, for us to harness our own resources and take forward renewable development. If it is right for most of the oil and gas-rich countries in the world—Norway, Kazakhstan and Saudi Arabia—to look at how to harness their own renewables, it has to be right for us. If it is right in China—almost half the onshore wind turbines installed in the world last year were installed in China, and they would not have done so without an economic case—we, too, have to look at the economic benefits.
Carbon capture and storage gives a new opportunity for coal to be a critical part of the mix. Our coal industry has an extraordinary heritage, and I am personally extremely attached to it. I think, however, that we also recognise that much of that investment cannot happen before the end of the decade and that we therefore need to have new gas in the mix and policies that will encourage new investment in that sector.
David Mowat
I agree with my hon. Friend on the need for consensus. Was he therefore as surprised as I was to hear the shadow Secretary of State attack the 450 gram limit for gas, which by implication means that the position of shadow Front Benchers appears to be that we should build no unabated gas stations? If that is their position, it is an extraordinary one.
Charles Hendry
My hon. Friend makes an interesting point. I well remember debating a previous Energy Bill while in opposition and trying to persuade the then Minister of the case for an emissions performance standard, and her saying robustly that it was not part of the process at all. I am glad that we have made some progress, but the key issue is for the emissions performance standard to be a driver of investment, not a barrier. By providing long-term clarity, that is part of what it does in this process.
If we are to build new gas plants, it would, as my hon. Friend the Member for South Suffolk (Mr Yeo), the Chair of the Select Committee on Energy and Climate Change says, be a mistake automatically to assume that they will all be powered by our own shale gas. We have to recognise that more gas may mean more imported gas. I would like further consideration of what that will do for gas storage. What do we need to do to enhance our gas storage? I hope that the Public Bill Committee will address that when it goes into the detail.
There are a couple of other issues. I agree that there needs to be clarity in relation to energy efficiency. That should be at the heart of the Bill. We need finally to address the issue of a long-term decommissioning target. I will not vote for the Labour amendment, but that does not mean that there is not a significant amount of industry support for it. Right across the sector—in nuclear, renewables and even the hydrocarbon sector—people want long-term clarity. It is therefore right that this is debated and we try to find consensus.
It is often said that ministerial careers all end in tears and sadness; mine did not. The Bill is critically important to our long-term energy infrastructure, and I am very proud to have had the chance to be a part of that process.
Oral Answers to Questions
Debate between David Mowat and Charles Hendry
David Mowat (Warrington South) (Con)
Over the past few months, there has been a significant increase in the level of electricity imports, mostly cheap nuclear from France, through the interconnector. Indeed, over the past 24 hours we have imported more electricity by a factor of two than we have produced from offshore and onshore wind. That is a big policy failure and is costing us thousands of jobs. How can we address it?
Charles Hendry
I disagree with my hon. Friend, as the interconnector is an essential part of our energy security. We have seen a new interconnector introduced to Holland and a new connection is coming through to Ireland. We are exploring other aspects of the matter, too. We think that it is a fundamental part of energy security and delivering low-carbon electricity at the cheapest cost to consumers.
Nuclear Power
Debate between David Mowat and Charles Hendry(12 years, 5 months ago)
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Charles Hendry
I am delighted to respond to my hon. Friend’s point. I recently had the chance to be in Anglesey, which is close to his constituency, to see its vision as an energy island. An immense amount of work is going on there by a range of industrial and educational partners, the local authority and others to create a very compelling case for investment in renewables alongside nuclear as part of a balanced mix.
The process of market reform is fundamental to achieving that. We have structured things in a way that we believe delivers the necessary investment at the lowest cost to consumers. The hon. Lady highlighted one part of the contract for difference and said that if the price drops, more will be paid. However, the corollary of that is that if the price is high, we will claw back the contribution. Investors will have continuity, certainty and predictability of income stream, which reduces the cost of capital and of the building programme to consumers.
In answer to the point made by the right hon. Member for Oxford East (Mr Smith) in his intervention, such an approach is necessary because we must secure twice as much investment each and every year of this decade, compared with the previous decade, to keep the lights on. The matter is a national emergency in terms of our energy security and is absolutely critical.
Charles Hendry
I hope that my hon. Friend will understand if I do not give way in the last remaining moments. I think that I have picked up on some of his points. I completely agree with him that market reform is the best way of delivering for consumers and that having a range of policies and technologies is the best way of delivering security of supply.
On new build, as on decommissioning, we are keen to control costs. The progress of construction of the first new nuclear power station in the UK will be watched carefully by potential investors and developers. We know that an inability to deliver to time and on budget will affect the level of interest in nuclear new build in the future, and that would severely limit the potential for a new nuclear programme.
If we are to maintain strong public support—this is one of the few countries where public support for nuclear has grown since the Fukushima accident in Japan—we must continue to demonstrate that we are learning from experiences around the world. Implementing lessons from other nuclear power plant construction projects has the potential to reduce the cost in the United Kingdom, reduce the construction risks, help to validate timings and identify design changes that will allow for more efficient construction practices. Some of those are already being dealt with, and the whole process of the generic design assessment programme has been absolutely at the heart of that. We must ensure that we have identified the exact nature of the new reactors to be built before we start taking that forward.
One of the most important aspects of the whole programme has been the work to take the matter out of politics and carry on Lord Hutton’s work when he was Secretary of State. He did an enormous amount to identify the challenges and give security to investors in enabling them to understand that there is a continuity of Government approach here that will secure the investment.
Finally, I want to deal with the issue of subsidy. Let me make it absolutely clear where we stand on the matter. The coalition agreement set out clearly that nuclear power plants should be taken forward without public subsidy and, in a written statement to Parliament in October 2010, we reconfirmed that policy. There will be no market support to a private sector new nuclear operator for electricity supplied or capacity provided unless similar support is also made available more widely to other types of generation.
Within that, it is implicit that we recognise that nuclear is the lowest-cost large-scale, low-carbon source of generation and that, therefore, additional support will need to be made available to those emerging technologies in the renewable sector. They will be a very important part of the process. Any such change requires state aid approval. We have started to engage with the European Commission on that and we believe that approval will be achieved because the Government are not providing support; they are providing a mechanism whereby investors can get a return on their investment.
We see nuclear as an important part of our energy future, which has the potential to bring an enormous number of jobs to the United Kingdom. We have already seen the university of Oxford, which is represented in part by the right hon. Member for Oxford East, harnessing its own nuclear skills and working in coalition and partnership with the university of Bristol. Many other universities are coming forward, and a tremendous number of companies recognise that they can benefit from the programme.
I assure the hon. Member for South Down that we are looking at the matter very much in the round. We see the benefits of nuclear power, but we will only take that forward when we are completely convinced about the wider issues. Market reform is an important part of that process and will be critical to securing the necessary investment. The wider range of issues—safety and security matters and long-term waste management—are also important. We have a programme in place that comprehensively addresses those and I hope that I have been able to help to reassure her on those points.
National Policy Statements (Energy)
Debate between David Mowat and Charles Hendry
Charles Hendry
We were not limited to eight sites in the process that we went through. We decided that eight of the sites that developers had proposed to us were appropriate and could realistically be developed by 2025. Our concerns about Dungeness related to the special area of conservation, which is protected by law, and we were not persuaded that we could comply in that regard if the site was being developed. We have said that in every other respect Dungeness fulfilled the criteria, so if the special area of conservation issues can be satisfactorily resolved there is no reason why Dungeness could then not come forward separately.
David Mowat
I am enjoying the Minister’s comments about nuclear. He may have seen the recent Parliamentary Office of Science and Technology—POST—note on carbon emissions, which stated that over the life cycle nuclear produced one third as much carbon as solar. Is that properly reflected in the thrust of these statements in their entirety?
Charles Hendry
My hon. Friend raises important issues, but they are not addressed in the national policy statements. The statements are about the planning rules—the background to which decisions on new applications should be considered. There is considerable debate, which he will appreciate is being led inside and outside this Chamber, on the relative low-carbon merits of different technologies.
Following events at Japan’s Fukushima plant in March, we asked Dr Weightman, the UK’s chief nuclear inspector, to produce an independent report on the lessons to be learned from the incident and the implications for our nuclear industry. The interim report was published in May and a full report is due in the autumn. We have now carefully considered the planning policy in the national policy statements in the light of the findings of the interim report. We particularly note Dr Weightman’s conclusion that he sees no reason, in considering the direct causes of the Fukushima accident, for curtailing the operation of nuclear power plants or other nuclear facilities in the UK.
The interim report does not identify any implications for the strategic siting assessment of new reactors and we do not believe that the final report will, either. That does not change the guidance within the nuclear national policy statement, which says that the Infrastructure Planning Commission should consider flood risk, including from storm surge and tsunami, and should consult the nuclear regulators as part of that consideration. We are satisfied, therefore, that the nuclear national policy statement can proceed.
Approval and designation of the national policy statements are vital steps on the path towards our 2050 targets. By setting clear and consistent policies on energy infrastructure, development consent decisions can be made on a firm basis that is transparent to all, but this is true only when national policy statements are designated. While they remain in draft, the Infrastructure Planning Commission and other decision-makers can treat them only as “relevant and important”, not as the primary documents they are intended to be. Although the Infrastructure Planning Commission—or its successor—would consider them, until they were designated developers would not be given the confidence in Government policy that would encourage investment. Approval, followed by designation, will make the national policy statements primary documents. They will therefore provide certainty and stability for developers and investors looking to make new infrastructure proposals.
The national policy statements for energy infrastructure are a vital component of the coalition’s programme for government. They will promote investment in energy infrastructure, delivering growth and jobs. They will help us to achieve our carbon emissions targets and they will secure our supplies of affordable low-carbon energy. I commend the motion to the House.
Oral Answers to Questions
Debate between David Mowat and Charles Hendry
Charles Hendry
I am grateful to the right hon. Gentleman, who was two of the best of the last batch of Energy Ministers. I had a meeting with the executive director of the International Energy Agency this week to talk about its work and about the energy outlook. We broadly share the analysis that we are moving into a period of widely available and relatively affordable gas, but the danger of that is that it could put off investment in gas development internationally, which could create shortages further down the line.
David Mowat (Warrington South) (Con)
T3. Over the past couple of years, work has commenced in countries other than the UK on about 60 nuclear power stations, which will provide cheap, economically sustainable energy across the world. Does the Minister agree that this represents an opportunity for our own office for nuclear development, and will his Department support it in its endeavours to secure exports?
Charles Hendry
One of the advantages that we have is that, because we do not have a national champion, we have an independent regulator who is robust and understood to be very forceful and effective. We can encourage other countries to look at that as well. The work we are doing across the piece on nuclear decommissioning and development is also critical.