Energy Bill
Debate between David Mowat and Martin Horwood
Martin Horwood
Perhaps courses in negotiating skills might be recommended for members of the Department of Energy and Climate Change on that front. To be fair, Ministers have made it clear that they do not intend to sign the contract with EDF at any price, but the difficulty is that we in Parliament simply do not know that there has not been adequate scrutiny.
Martin Horwood
I think Madam Deputy Speaker will catch me with her rather steely eye if I give way too many times, so I will move on.
In the UK, the nuclear industry is not very competitive and is overwhelmingly dominated by one nationalised industry supplier—Electricité de France. There are risks that we are in effect organising a massive transfer of funds from British bill payers, if not taxpayers, to a French nationalised industry of dubious profitability. The scale of that possible subsidy has been underlined by former Friends of the Earth directors, including Tom Burke who said:
“At a strike price of £100/MW and a 30-year contract life this would require a subsidy of £1 billion/year above today’s wholesale price for electricity. This would lead to a transfer of £30 billion to EDF from Britain’s householders and businesses. Should the whole of the 16GW of new nuclear anticipated by the Energy Minister be financed on similar terms it would cost householders and businesses £150 billion by 2050.”
That is an enormous commitment that we must scrutinise and ensure that value for money is inserted into the process.
David Mowat
Specifically on that point, the hon. Gentleman says that a strike price of 10 is unacceptable. Would he extend that to offshore wind?
Martin Horwood
I did not say 10, I said 100, and figures as high as 165 have been discussed and contract times as long as 40 years speculated about. The Minister has been unable to reassure us about that in the debate. It is true that high prices are talked about for offshore wind, but that is an emerging and quite competitive technology that deserves support. It is not a 56-year-old technology that has already proved to have a massive record of cost and time overruns. I am happy with supporting offshore wind but unhappy with supporting nuclear.
The effect of new clause 5 and a panel of expert scrutiny would be to ensure that all technologies negotiating contracts for difference were subject to scrutiny, including offshore wind and other renewables. New clause 5 and new schedule 1 are not specifically anti-nuclear, but they are anti-unearned subsidies. The Energy and Climate Change Committee called for that in its report, and Which? addressed it in the drafting of these provisions—I am grateful for that. Such scrutiny and transparency are particularly relevant when, as the Committee pointed out, a mature technology dominated by a single large supplier means there is little competitive pressure and the strike price naturally tends to rise in such a situation—even more so, as the hon. Member for Rochester and Strood (Mark Reckless) pointed out, if one side has almost conceded that it needs to sign the contract at the end of the process.
Alternatives have been discussed, such as scrutiny by the National Audit Office and others, and in a parliamentary debate some months ago it was suggested that the Public Accounts Committee play a role in this kind of scrutiny. The problem with all these suggestions, however, is that they investigate after the event. As I said in my intervention on the Minister, if we are talking about a contract of 20 or 30 years, it is practically useless to investigate whether it is good value after the event because we are locked into it for a whole generation. Right now, negotiations are under way with EDF for this contract.
New clause 5 and new schedule 1 would establish an independent expert panel, which would differ from the expert panel that the Government have already established. As the affordable energy campaign by Which? pointed out:
“A panel of technical experts has been established by the Government to scrutinise the evidence National Grid presents for the setting of CfD strike prices. However this panel does not have a sufficiently broad role. For example, it does not have value for money as part of its remit. The panel must have a clearly defined oversight role set out in the Bill”.
If the Government support the concept of an expert panel, why on earth can they not put it in the Bill, as defined in new clause 5 and new schedule 1? I would have thought they would have absolutely nothing to fear from that.
New clause 5 and new schedule 1 are in the same spirit as amendment 162, although I do not buy everything the hon. Member for Daventry said in support of his proposals. However, energy bills are a major cause for concern among consumers—all hon. Members know that. Whether we are proposing renewables or nuclear, a strong case needs to be made, and transparency and accountability need to be at the forefront. Consumers need a good deal as well as a green deal. The Bill does not guarantee to deliver that, which is why I shall press new clause 5 to a Division.
New Nuclear Power
Debate between David Mowat and Martin Horwood(11 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text
Martin Horwood (Cheltenham) (LD)
I beg to move,
That this House notes that both the Coalition Agreement and numerous ministerial statements have committed the Government to provide no public subsidy to new nuclear; further notes that negotiations are currently ongoing between the Department of Energy and Climate Change and new nuclear suppliers to fix the strike price in advance of the legislation on energy market reform; is concerned by wider issues of subsidy and transparency and in particular that this process pre-empts the legislation; is further concerned that new evidence suggests that this constitutes an unjustifiable subsidy to a mature industry; and therefore calls on the Government to pause the process so that the Public Accounts Committee can examine whether the contract for difference being offered for new nuclear power generation offers genuine value for money.
I thank the Backbench Business Committee for generously allowing time for this debate. This motion is not about whether nuclear power is a good thing in principle; nor is it about whether the Government’s whole energy policy is on the right track. For the record, I think it is. My right hon. Friend the Secretary of State—he has just taken his seat—should be congratulated on the green deal, the world’s first green investment bank, the carbon floor price and most of the energy market reforms contained in the Energy Bill, as should his predecessor. It may be a bit optimistic to say this now, but I hope that Chris Huhne’s time in this House will be remembered for the great work he did in shaping a greener future for the UK.
The Department has chosen a particular method for locking in green investment: the contract for difference. Contracts for difference are normally a kind of bet on future asset prices that might be expected to carry some kind of health warning, to the effect that those participating in them could lose a significant amount of money. In this case, of course, the potential loss is to British energy bill payers, as the contracts for difference will effectively guarantee a certain price for energy generated from particular sources even if the market price falls lower than that price. The difference will not then be paid by us as taxpayers, but as energy consumers through our electricity bills.
I would still say, so far, so good. There are a number of justifications for contracts for difference—for taking that risk on behalf of energy consumers—in the case of renewables and carbon capture and storage, and not just because they are low carbon. First, these are new technologies, at least at scale, that represent a significant risk to investors precisely because they are new and still emerging. Investors in such a market need significant reassurance and reduced risk, and contracts for difference can do just that by promising predictable revenue streams which will in turn make it easier and cheaper for energy generators or CCS developers to secure finance. In the longer run, encouraging renewables will also help consumers, because the cost of renewable generation is on an historic downward trend, unlike fossil fuels or nuclear. Once established, renewables and CCS should provide a cheaper and more diverse range of energy supplies that will make British energy supply much more resilient in the face of fluctuating global energy prices.
The second reason why renewables and CCS need this kind of price-based support is that they include many new and diverse technologies: from good old hydroelectric to onshore and offshore wind; from geothermal to heat exchangers in the air and in the oceans; from photovoltaics to concentrated solar power; from tidal flow turbines to barrages, tidal fences, tidal lagoons and wave power; from biogas and biomass to anaerobic digestion and more exotic forms of energy from waste, such as gas plasma. We might even one day be able to add artificial photosynthesis and who knows what else to that list. Government should not pick winners from among these myriad emerging technologies, let alone the various suppliers and developers. Price-based contracts for difference, properly negotiated, offer a means by which technologies and developers can be supported, but still be incentivised to keep on reducing costs and become more competitive.
David Mowat (Warrington South) (Con)
I am listening very carefully to my hon. Friend’s argument as to why contracts for difference should apply to those technologies and not nuclear. He says that Government should not be choosing winners and losers, and I agree. Does he therefore think that the contract for difference price—the strike price—should be the same for all the technologies he has just listed?
Martin Horwood
Clearly not, because in the case of onshore wind, for example, there are many competitive developers developing different varieties of technology. It is a competitive market still, in a way that nuclear, as I shall explain, is not.
The goal, of course, is to provide clean, sustainable and cheap energy while meeting challenging but critically important greenhouse gas reduction targets. Do these contracts for difference represent a subsidy? Well, as the Treasury has confirmed to me in a written answer, yes, of course they do. Every energy bill payer is a taxpayer in their time off; but subsidy is justified for renewables, for all the reasons I have given. However, would it not be extraordinary if into this exciting, young, diverse and competitive energy market, a 56-year-old freeloader—a tailgater, a leftover from another era—tried to slip unnoticed and pick up all the same kinds of advantages and support? Would it not be even more extraordinary if that old freeloader was not even represented by a diversity of competitive companies, but just one or two; and more extraordinary still if the most significant of those turned out to be the state-nationalised energy supplier of another country, already subsidised by its own taxpayers?
That is precisely what is happening with the nuclear industry, and what is more, the level of support—the precise contract for difference and the strike price for specific energy sources—is being negotiated behind closed doors as we speak, before the relevant legislation has even passed through this House. The details are set to be revealed to us only after the event—after the deal has been sealed.