Offshore Energy Industry
Debate between Emily Thornberry and Charles HendryWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
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Charles Hendry
As I say, there is much devil in the detail in these matters and the Treasury is taking forward the discussions. I am, however, encouraged by the approach taken in general.
About 45% of all the UK’s oil and gas-related jobs are in Scotland, and many, as we have heard, are in Aberdeen. I know from my own experience how committed that work force is. I was there most recently just a few weeks ago, and went through the helicopter training exercise. They decided that they should not yet dunk me in the water, that perhaps I was too new a Minister. I am not sure that any Minister has gone through the dunking process, and I have made a rather rash commitment to be the first. It is incredibly important that as policy makers we understand how the industry addresses these issues, and, as far as we are concerned, there should be no short cuts on safety. The visit brought home the great measures that have been put in place since the helicopter tragedies, to ensure that we have the toughest safety standards in the helicopter transportation that operates there. I went out to the Beryl platform, which I was particularly keen to see because it is an old platform still operated by its original operators, but drilling again for new reserves. It is a very good example of how, after some decades of operation, there is still much life and activity.
We travelled nearly 200 miles from Aberdeen airport to the rig, passing over two structures that had human life on them, and the very often incredible isolation and the bravery of the people who work there also came home to me very clearly. I travelled out there on a nice June day, when there was a little ripple in the water, and I cannot imagine what it would be like in a cold February gale. The landing spot for the helicopter looked small enough in those conditions. The hon. Member for Aberdeen North talked about making several attempts to land when he went out there some time ago. It really brings home to us the courage, the expertise and the global skill set that we have in the North sea, something to which we should always pay tribute.
I am certainly always willing to talk to the trade unions on these matters. Safety is not an issue for industry versus workers. There is a great recognition that for the industry, it is absolutely critical for everybody, every business and every organisation working with it. I will always be keen to find reasons to talk to the people who represent that work force.
Our approach to North sea regulation is among the most robust in the world, and our record there is strong, but the tragedy in the gulf of Mexico has to give us pause for thought. As we move into deeper waters west of Scotland, there is every reason to increase our vigilance. We have announced that we will double the number of annual inspections and increase by one half the number of inspectors. There is the inevitable time span before they are recruited, but the process is already under way.
Right hon. and hon. Members should be in no doubt that, if there is evidence from the reviews of the gulf of Mexico tragedy that requires us again to improve security and health and safety measures, we will do so. We are determined that the safety regime in the North sea will be the toughest operating anywhere. I am pleased that we will do that in partnership with the industry. The Oil Spill Prevention and Response Advisory Group is an industry-led initiative that does critical work in looking at these issues, just as it looked at the measures necessary to improve safety after the tragedies involving helicopters. We are very much in debt to it for its leadership in ensuring that we introduce measures in this area. Again, I welcome the role that the trade unions play in ensuring that workers’ voices are heard and represented.
There has been discussion about other ways in which the North sea can be a global centre for international excellence in energy infrastructure. Foremost among those will be offshore wind. We recognise that the United Kingdom is now a global leader in offshore wind, but much needs to be done if we are to meet the targets that have been set. The aspirations are high, and a great deal more has to happen if we are to get the right investment and infrastructure in place to achieve them. Some £15 billion of new investment is required in transmission assets to connect offshore wind farms to the onshore grid.
I am determined that we roll out the programme in a more structured way. Again, the Government want an approach that focuses on the problems, so we will look at where there are barriers to investment. We see working constructively and jointly with the industry as the best way to get around those issues.
My right hon. Friend spoke about the need for more ships, which are critical to this work. With the number of ships available in the world at present, we simply cannot put in place the number of turbines necessary to meet the aspirations. Grid infrastructure and connectivity will be fundamental to that.
The hon. Member for Islington South and Finsbury asked why the announcement has been delayed. There was every opportunity for the previous Government to make an announcement. Not only was there a little letter in a drawer which said that there was no money left, but there was a big pile of paper labelled, “Too difficult to think about.” There is a range of complexities, and different views from different sectors of the industry. We have been actively looking at the full range of grid and transmission issues with a view to announcing a decision in the near future. We absolutely understand that these are critical issues for the industry, and we are determined to give early clarity.
Emily Thornberry
I am sure that the Minister is aware that a date at the end of June was set for an announcement on the offshore grid. Why the delay, and when will we get an announcement?
Charles Hendry
We are trying to ensure that we have cohesion across the whole range of issues relating to the grid, including the offshore transmission system, transmission access and transmission charging, which is particularly critical as far as Scotland is concerned. I want to ensure that we have a complete response to all the issues involved as we try to move forward in this area. The hon. Lady will not have to wait much longer. I understand that the industry attaches a great deal of importance to the sector, and this is very much at the top of the list of things that we are seeking to resolve.
Questions were asked about the ports project. It has not been suspended or cancelled, but, within the framework of the comprehensive spending review, we are trying to ensure that all such major projects are handled in the most sensible and constructive way, to deliver the best response and to make the best use of taxpayers’ money. We are committed to taking the work forward, but it will be handled within the network of the comprehensive spending review.
We will also be looking at how we take forward work on carbon capture and storage, which offers many partnership opportunities. Some of the most extraordinary academic work on CCS in the world is being carried out in Scottish universities. People such as Professor Jon Gibbins and Professor Stuart Hazeldine at the university of Edinburgh are doing wonderful work to ensure that we lead the world in that technology. I want to work closely with them in ensuring that we make the best and strongest case for Britain in that respect.
There was a question about the working relationship with the Crown Estate. We believe that the regime is working at present. There is clearly a difference between the role of the Crown Estate as the landlord and the role of the Government who, as the regulator, are able to issue licences. If there is evidence that the regime is not working, we will certainly look at how the matter can be addressed.
The hon. Member for Islington South and Finsbury asked about our continuing commitment to renewables obligation certificates. We have said that we are looking at introducing feed-in tariffs. We indicated prior to the election that there is a strong case for using feed-in tariffs for the third round of offshore wind because investors have told us that that would be more attractive. We have also been told that feed-in tariffs would be more attractive for marine technologies, so we are looking at the most appropriate balance between the renewables obligation and feed-in tariffs to see how we can best stimulate investment. At the core of all that we are doing is a desire to make this the most attractive place to invest in energy infrastructure, and that applies to oil and gas, nuclear, coal with carbon capture and renewables.
The debate has touched on many critical issues, and there is an overwhelming sense on both sides of the House that the industry will continue to make an enormous contribution to the British economy. The North sea sector is sometimes seen as an old industry, but it is, in fact, a ground-breaking industry in the development and application of technology. Probably only space travel has the same level of involvement.
Let us look at what is happening in the gulf of Mexico at present, where BP is drilling down 18,000 feet below the surface of the water, through perhaps 13,000 feet of rock. It intends to intersect a pipe that is just a few inches across in order to stop the flow of oil from the well. We should pay tribute to it for the work that it is doing and the cap that it appears to be putting in place successfully. The technology involved is extraordinary.
In all our debates about the industry, we should see it as an industry of the future which has an extraordinarily important role to play. I can say to right hon. and hon. Members who have spoken this morning that, even though I may be a Conservative Member of Parliament from the south-east of England, I have an absolute commitment to being a champion of the industry. I want to visit Aberdeen regularly and know about all aspects of the industry. I want to know the industry and the trade union sides, and to work with both of them to deliver the best possible outcomes for investment. We have an absolute national interest in ensuring that we secure the best from our indigenous resources.
We have had an outstanding debate this morning, which has raised many critical issues. I look forward to working closely over the coming months and years with right hon. and hon. Members, who have great expertise in the sector, and with the companies and people in their constituencies who work in this sector and deliver so much in terms of our energy security.
Energy Security
Debate between Emily Thornberry and Charles Hendry(13 years, 10 months ago)
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Charles Hendry
I am grateful to the hon. Gentleman. We will have to wait with bated breath for the three bullet points to which he was going to refer. I look forward to hearing them in due course.
Energy security is at the heart of the matter. We must rebuild this country’s energy infrastructure, and a whole raft of technologies exist that we want to bring into play. Part of the problem we face is that, considering the extent to which plant is being decommissioned, more concrete should be being poured and more bricks and mortar put in place now. A lot of work has received consent, but much of it is still on hold pending building. Greater urgency is required to secure construction.
Turning to the specific technologies, we believe that nuclear should be part of the mix as long as it can be built without subsidy; we broadly agree with the former Labour Government in that respect. According to the coalition agreement, if it can be built without subsidy, it will be part of the mix. We are clear that that means the private sector should be responsible for the building, running, decommissioning and long-term waste disposal costs of any new nuclear power stations. The Government must be involved in the effort to remove barriers to investment—the work of the Office for Nuclear Development has been important in that respect—and ensure that the appropriate safety, security and environmental regulations are in place. We see nuclear as part of the mix, but realistically, even if everything goes according to the most optimistic plans, it will be 2017 or 2018 before new plant can be constructed.
Coal has an important part to play as well. We have an abundance of coal; this country has hundreds of years’ supply of coal left. We should be leading the world in coal using carbon capture. We are determined to move from our current position—we are not as far ahead as we should be—and take that global opportunity. In addition to our coal reserves, we need to rebuild our coal-fired power stations. We have unique sequestration facilities at sea where CO2 can be stored, and people with the right skills to carry out that work are working in extremely hazardous conditions in the North sea. We are absolutely committed to taking work forward in that area.
Today we launched a market sounding exercise to encourage the industry to present schemes for consideration for subsequent projects. One pilot project is under discussion, and three others might be considered. We want industry to help us frame the competition in the way that suits it best in order to bring technologies together, share skills and understanding and make it happen.
We also announced today that we are setting up a carbon capture and storage development forum to focus specifically on removing the obstacles to investment in CCS. It will consider the nuts and bolts, just as the nuclear development forum does. We will also make headway on a road map so that people can hold us to account on our ambition. Ambition is important, but without a road map, targets have little benefit or meaning.
We want renewables to be part of the mix too. That is one of the most uncomfortable issues for us in the United Kingdom. Of the 27 members of the European Union, we are second worst regarding the extent to which renewables contribute to our electricity generation. Yet we have resources. We have some of the strongest winds in Europe, the highest tidal flows and some of the strongest potential for wave technology. We have let the rest of Europe move ahead of us in deployment, skills and, critically, the supply chain. We must ensure that we begin to take a lead on renewables. We will need more onshore and offshore wind power, a massive increase in energy from waste and faster development of marine energy such as wave and tidal. We wish to drive all those technologies further forward.
Undoubtedly, the renewables obligation has encouraged significant investment in onshore wind, but that has not been without problems in the communities where it operates. In order to drive further development, we want a different relationship, considering what aspects of council tax and business rates can be kept local to communities and how communities that host facilities of wider regional or national significance can share in the benefits that they bring. That way, we hope to give wind farms greater public legitimacy than has sometimes been the case when investment has been sought in such important systems.
We are now the world leaders in offshore wind power, with 14 operational offshore wind farms generating more than 1 GW of electricity, and a further 1.5 GW worth of construction under way. However, we also need to consider what more can be done to drive work further forward. The round 3 applications are substantial, with billions of pounds of potential investment needed. We know that we have a shortage of skills, ships, cranes and technology. Again, therefore, we must focus on how to provide solutions if companies headquartered overseas seek to invest in Britain. That is one of the challenges we face. In the current market, we are seeking to attract investment not just from British companies, which might be predisposed to invest here, but from companies around the world. That will be a key objective for this new Administration.
Although wind and biomass, as large technologies, will be central to meeting our 2020 targets, we need to see the targets in perspective. Too often, there is a tendency to see them as a finishing post—a line over which we will fall, struggling and gasping, having got there by 2020. In reality, we should see them as a staging post and as part of the process towards even more ambitious and challenging objectives further down the line. If we start to see them in that way, it gives us the ability to drive forward investment in new technologies, such as the marine and tidal sectors. On Friday, I had a meeting in Bristol with some of the key players involved with that technology, who are keen to invest and move Britain forward. However, we do not yet have the structures in place to make that happen.
We are considering how we can make marine energy parks work. A system could be put in place whereby there is not just a grid connection point but, critically, onshore facilities and people with the relevant engineering, academic and business skills. We hope to attract people from around the world to invest in Britain to develop those marine and tidal technologies, so that Britain will be the natural place for them to be deployed. We undoubtedly have the natural resources here to make that happen. However, rather worryingly, some of the key players are looking elsewhere for the best financial support mechanisms—for example, Portugal or the United States. We have to make it absolutely clear to the key players that we are determined to drive this forward in the United Kingdom.
In addition to putting a new generating capacity in place, we face the challenge of rebuilding the grid infrastructure—not just the existing grid, which is rather old, but connecting up the new facilities. Last year, the Electricity Networks Strategy Group published its report, setting out the onshore transmission investments needed to meet the challenges in our generating mix between now and 2020. That group estimates that about £4.7 billion of new investment in the grid is required over the next decade. We will shortly publish our decisions on the best systems for driving forward that absolutely fundamental investment.
We have nuclear, clean coal and renewables in the mix but, realistically, they will not produce huge amounts of electrical energy before the latter part of this decade. We are facing a crisis and a challenge here and now. In the shorter term, we recognise that there will be increased reliance on gas. Although imports are not themselves a problem, our growing dependence on them means that we need to increase the security of our gas supplies.
The Government will set out measures to improve our gas security, as promised in the coalition document. We need more gas storage capacity, more gas import capacity and greater assurances that our market will deliver gas when it is needed. Our gas market arrangements must therefore have a sharper focus on increased flexibility and resilience. We will work internationally to try to address some of those issues and to deal with the physical constraints in the system. The disputes between Russia and Ukraine in the past, and between Russia and Belarus more recently, show that new routes to market for gas must be found. Additional pipeline infrastructures to the north and south of Europe would remove some of those blockages but, again, they will take some time to put in place.
Emily Thornberry (Islington South and Finsbury) (Lab)
I am happy to be corrected if I am wrong but, in Britain, dependence on Russian gas is nothing like as large as it is in any other European country. In fact, is it not right that we have been getting gas from many other European countries over the past few years?
Charles Hendry
The hon. Lady is absolutely right in her assessment. We get virtually no gas—1% or 2%—from Russia. However, during the Russia-Ukraine dispute last year, when there was a huge problem in central Europe, gas was being pumped out of the United Kingdom just as we were coming out of our coldest winter for 18 years, which put our gas storage supplies under pressure. We must recognise that we live in an interdependent world in terms of energy security and we have to put measures in place to ensure that we are protected against those sorts of international issues, which pose unpredictable, international challenges to the resilience of our system. In three of the past four winters, we have come under pressure. Fortunately, we have been on the right side of such problems in the end, but we must recognise that it will not necessarily be a UK challenge that will put us under pressure; there could be pressures from many hundreds of miles away.
Charles Hendry
I think the hon. Gentleman has been reading my speeches from before the election. In two months, we have not completely transformed the availability of gas security and storage in this country. However, we recognise that we have at best about 16 days’ capacity, which compares with about 100 days in Germany and a bit more than that in France. We need to secure more capacity, but we also need to recognise the totality of the picture. The Langeled pipeline from Norway is one of our most important channels, and there are liquefied natural gas facilities in the Thames and in south Wales. Those are areas where we can bring gas into the United Kingdom. That is part of the overall gas security picture. We need more gas storage, but we also need to be absolutely clear—this is what the coalition agreement states—that the people who are supplying gas are certain that they have access to adequate supplies. That could relate to storage, to long-term contracts through pipelines or to more interruptible contracts.
Emily Thornberry
I have heard many of the hon. Gentleman’s speeches about the importance of increasing our gas supply. Given the Conservative preoccupation with the number of days of gas supply we have in storage, perhaps he can tell us, now he is in government, how many days supply he would be comfortable with us having in the winter.
Charles Hendry
We have always said that gas storage is part of the mix. If we have long-term contracts, under which we know gas is not being bought on the stock market, and it cannot simply be delivered and put through the pipeline, gas storage is part of enhancing energy security. We are keen for more of those facilities to be brought to fruition. There have been significant blockages caused by past planning constraints and the changes the previous Government made. We are enhancing arrangements, which will help to address some of those issues. There are continuing problems with the rate at which cushion gas—the gas that goes into the bottom of the storage facilities and is never actually taken out—is taxed. There are non-financial challenges as well. Gas storage is part of the picture, but there is a wider picture, too.
Emily Thornberry (Islington South and Finsbury) (Lab)
It is a pleasure to serve under your chairmanship, Miss Begg. To keep the lights on, the country needs both adequate levels of storage and security of supply, and that cannot be left to the vagaries of the market. The new Government have to give a strong and clear lead. Our concern is that, although they begin from a good place, they are showing early signs of not understanding the enormity of the task and not necessarily being up to it.
In the last few months of the Labour Government, the Conservatives stepped up their criticism of what the Government had been doing to ensure security of supply—the Minister will know this because he was there—including, rather bizarrely, an Opposition day motion on 13 January, just one week after the coldest winter for 30 years. That motion called on the Government to take immediate action to ensure diversity in electricity generating capacity and adequate levels of natural gas storage. That, of course, was exactly what we had done. Labour had ensured diversity in electricity generating capacity. In the past decade the UK has opened up new sources of gas in Norway, the Netherlands, Algeria, Australia, Qatar, Egypt and Trinidad and Tobago. Our country’s gas supplies are not drawn from the likeliest of sources, as has been said. Our gas does not come from Russia and the middle east to the same extent that it does for most countries. We certainly do not need gas from those regions to fulfil two thirds of our needs, as does the rest of the world.
During last year’s winter, when demands on gas supplies were unprecedented, the lights stayed on and homes were kept warm because we had made rapid progress, with almost a third of all supplies coming from sources that did not exist five years ago: the Langeled pipeline from Norway, to which the Minister has already referred; the BBL pipeline from the Netherlands; and the South Hook and Dragon terminals at Milford Haven, which receive liquefied natural gas from Qatar and were opened by my right hon. Friend the Member for Doncaster North (Edward Miliband). So, things had changed, and diversification was happening. We got through this very cold winter—the lights did not go out.
The Tories’ second charge was that we did not have an adequate level of natural gas storage, and that is why I asked questions of the Minister earlier. While the Tories were in opposition they made a great deal of noise about the inadequate levels of gas storage, but perhaps now they are in government there has been a change of heart. As has already been said, the UK has far more of its own gas resources than other countries, and as my hon. Friend the Member for Southampton, Test (Dr Whitehead) has pointed out—and as we all know—we have a great deal of gas storage available to us because, luckily, we have gas in the North sea. Parallels made with countries such as Germany are simply wrong, misleading comparisons. I am glad to see that, now the Minister is in government, he will not be doing that again.
The figures for natural gas supply imported by European countries are: France 96.5%, Germany 80%, Italy 87%, Spain 99% and the Czech Republic 93.7%. The figure for the UK is only 20.3%. Our level of dependence on natural gas imports is far lower than that of comparable countries. Of the 27 EU countries, we are the second least import-dependent. In National Grid’s most recent review of gas supply, “Transporting Britain’s Energy”, which the Minister might have been able to read, it stated that potential supply from UK power stations is 28% above demand, and it forecast that that excess would continue through to 2016 and beyond. Labour expanded our gas import capacity by 500% during the past decade. During last year’s winter, Steve Holliday, chief executive of National Grid, claimed that,
“we’ve seen the benefits of the investment of the last five years where the UK can now import 30 per cent. of its gas internationally that it couldn’t five years ago”.
DECC’s last assessment under Labour of gas supply resilience showed that we could withstand a large number of problems. We could withstand the loss of the UK’s largest gas storage facility, including in a severe winter, and the lights would stay on. We could withstand the loss of the UK’s largest gas import terminal in a severe winter, and the lights would stay on. We could withstand the loss of the UK’s largest source of imports for a whole year, including in a severe winter, and the lights would stay on. In fact, we could withstand a combination of any two of those losses for a year. When the Conservatives were in opposition their criticism of our lack of resilience simply did not meet the facts. For example, we could lose gas supplied by Russia through Ukraine and also lose the Bacton terminal, but still avoid blackouts in a cold winter.
During the 2009-10 winter, when cold weather placed unprecedented demand on supplies and four of our Norwegian fields stopped supplying gas, the lights nevertheless stayed on and homes remained warm. The right hon. Member for Tunbridge Wells (Greg Clark), the Minister’s previous boss, made great play of the fact that the UK had just eight days’ gas storage remaining. The Minister might remember the Conservatives being somewhat alarmist about that. That figure ignored the amount of gas being imported and the fact that half of UK demand is met by the North sea production. At the time, the hon. Member for Bermondsey and Old Southwark (Simon Hughes), who is now a member of a party supporting the coalition, sought an apology from the right hon. Member for Tunbridge Wells and called his claims
“unnecessary, alarmist, inaccurate and misleading”.—[Official Report, 13 January 2010; Vol. 503, c. 756.]
That could not have been better put.
National Grid stated that the eight days of gas storage remaining was a meaningless number, and now that the Conservative party is in power it seems to have changed its tune. Lord Marland, the Under-Secretary of State, had talked about the eight days’ supply but said in a debate in the House of Lords on 29 June:
“we feel confident that we can sustain the supply required.”—[Official Report, House of Lords, 29 June 2010; Vol. 719, c. 1659.]
Does the Minister agree with Lord Marland? If he does, will he take this opportunity to apologise on behalf of the Conservative party for being unnecessarily alarmist, given all the circumstances?
As the Minister said, it is of course not just a matter of what we will do in the short term; we also need a long-term policy. In those circumstances, therefore, the importance of renewables cannot be overstated. We have a very challenging target for the amount of energy demand that we want to fulfil through renewables, and Labour made a good start. Renewable energy has doubled in the past five years and, as the Minister has been kind enough to point out, we introduced the renewables obligation in 2002, which has enabled a huge expansion of onshore wind and made us one of the biggest producers of offshore wind in the world. I welcome the Secretary of State’s decision to confirm the £5 million grant offered by the previous Government to Siemens Wind Power. However, without a robust planning system we will not get enough wind turbines here:
“One of the reasons Britain’s green industrial revolution is yet to take off is the lack of domestic demand for wind turbines, and a key reason for that has been the attitude of many Conservative councils”.
The Minister might recognise that as a quote from John Sauven of Greenpeace, from The Guardian on 27 July 2009.
How, therefore, will the Government meet increased renewables targets, while across the country Conservative MPs and councillors campaign to block onshore wind farms? Some of the sketchy outline the Minister gave us on how he will encourage onshore wind was interesting, but we have yet to see any detail, and that is what will be important. We do not quite understand how it is that local communities will get some benefit from onshore wind projects being built near them. Will it simply be onshore wind? What if, for example, gas storage capacity is built near a village? Would it get some sort of benefit from that? Who will pay for it? Will it be paid for out of the public or the private purse, and how much money are we talking about? It is a very interesting idea in theory, but we need to understand what it means in practice. While it remains sketchy it gives no certainty to the industry, and the industry needs certainty. The public also need certainty, and we need to get a move on with renewables. I agree with the Minister that we need more onshore, but we cannot go on as we are at the moment.
The feed-in tariffs encouraged small-scale renewables, and I am glad that the Government will promote that policy. A revolution is under way in electricity production, but we need one for heat. I therefore again ask the Minister if he will guarantee the introduction of the renewable heat incentive. We have yet to hear clear proposals from the Government, and the industry is holding its breath while waiting for an understanding of where we are going.
I have to say that many of the Government’s proposals, such as the green investment bank and smart meters, look familiar, as does their dependence on what I think my right hon. Friend the Member for Doncaster North called the “triumvirate” of nuclear carbon capture and storage for coal and renewables. We await the implementation of those proposals with care, however.
The Minister has for a long time been a supporter of nuclear power, but the Government are unable to give clear leadership on the issue because they do not have a position—they have a large number of positions. They are notionally in favour of nuclear power, but the Lib Dem representative will speak against it, the Lib Dem party will refuse to vote on it, and I have yet to get my head around what the Secretary of State’s position is. Frankly, the industry needs to know and to have clear leadership.
Charles Hendry
The heads of all the nuclear companies have said that they are entirely comfortable with our position and understand it precisely. Will the hon. Lady not accept their assurance that our position is rational, sensible and realistic, rather than creating scares that do not exist?
Emily Thornberry
As Christine Keeler said, “They would say that, wouldn’t they?” The point is that the nuclear industry needs to know what the Government are doing. The industry will not pick a fight with the Government at such a crucial stage, but it needs to know where they are going. The Government have a number of positions, and it is not easy for the industry in those circumstances. Of course, the industry will not come out publicly and criticise the Government—that is our job in opposition. However, we are confident that it does not help the nuclear industry for the Government to hold four positions at the same time on the future of nuclear power.
Charles Hendry
There is one position, which is that nuclear will be part of the mix if it can be built without subsidy, and that is it—one position, complete clarity.
Emily Thornberry
That sounds simple and understandable, but we then need to look at how these things are implemented. For example, is the cancelled loan to Sheffield Forgemasters the first casualty of the uncertainty over Government policy on nuclear? There are a number of questions relating to that. Did the Lib Dems’ prejudice against nuclear power have a role in the decision to cancel the loan? Was the decision made because of the coalition’s policy of having no public subsidy for nuclear? Did that impact on Sheffield Forgemasters or not? Was it right for the Government to give Nissan a grant to make electric cars—a proposal that we support—but not to provide a commercial loan to help a British company be at the centre of an indigenous nuclear supply chain? How do these things fit in?
What we see are the Government’s confusion and the refusal to grant a commercial loan to a company worth £40 million. The loan would need to be £80 million, and it would be difficult to get that money from a bank. The refusal to grant the loan means that Sheffield Forgemasters is unable to build the sort of kit we need to build nuclear power stations in Britain. We are not necessarily talking about a subsidy from the public purse. We need a Government who are prepared to look to the future and to decide that the triumvirate includes nuclear, that we are serious about these issues and that we will give such assistance as is necessary. The current situation is very unfortunate, and we have a number of questions as a result.
That is one casualty, but there is another. Will the Minister confirm whether there will be cuts to the Nuclear Decommissioning Authority? If there are to be cuts, when will they be and what will they be? More importantly, will they have an impact on the future of Britain’s nuclear power industry? The issue of the public purse paying for cleaning up after nuclear has always been part of the arguments about whether nuclear power is being subsidised, so what will happen? Are we talking about a subsidy or not? Where does that fit with the coalition agreement on nuclear power? We need to know, and the industry definitely needs to know. Publicly, the industry might not be critical, but the Opposition are being critical because a confused picture is being put out.
The expansion of Sheffield Forgemasters represented an opportunity for Britain to make key components for the nuclear industry, which will now have to be sourced from places such as Japan and Taiwan. That is very unfortunate for green jobs and the economy. The Government have tried to defend their position by suggesting that Sheffield Forgemasters should obtain funds from the financial markets. Once again, we see actions motivated by free market ideas that are completely misplaced.
Before the Conservatives made their deal with the Lib Dems, they were highly exercised by the gap between the end of the life of the current fleet of nuclear power stations and the earliest date by which we might get some new nuclear power stations. Why are the Conservatives now so relaxed about that? There seems to have been a change. The Government should be taking up the long-term challenge of decarbonising the economy and the job market, rather than just embracing short-termism, but some of the decisions that have been made are simply short-termist.
The Government share our view that the nuclear industry should not receive a direct subsidy from the public purse, but the industry needs clarity and reassurances, not obstacles. In the words of Richard Nourse, managing partner of renewable energy fund novusmodus,
“Nuclear is a long journey and developers need confidence to keep travelling.”
Can the Minister provide that confidence? What percentage of our electricity does he expect nuclear to contribute in the next 10 years? Without that confidence, we will surely see delays, which will increase our dependence on gas.
The Labour Government made a huge commitment to investment in carbon capture and storage technology for four coal-fired power stations. Through that technology, we intended drastically to decarbonise our energy supply. Can the Minister perhaps give us a little more detail on whether he intends to go ahead with the four coal demonstration projects? Can he give me some information on the Government’s thinking about the locations of those projects and the bidders? Will he confirm that the coalition plan is that CCS will be deployed more widely in 2020, and that any new coal plant constructed after that will be fully fitted with CCS? One hears rumours that the Government are thinking again about whether there will be four coal-fired CCS plants or whether one will be gas. Is there any truth in those rumours? Before the election, the Minister was much exercised by emissions performance standards for CCS. Will he tell us when or whether he is introducing proposals for such standards?
In every debate and every piece of thinking on security of supply, we must not overlook the role of energy efficiency, as the Minister said. I have 14 questions outstanding from our previous debate on energy efficiency, and I certainly hope we will get an answer to them soon; indeed, we might be tabling written questions to get answers to some of them. More importantly, however, there will need to be some huge building projects, involving gas storage facilities, onshore wind or nuclear plant, if we are to move to a low-carbon economy. We will be relying on the markets to do the heavy lifting, but at the very same moment, coalition policies have caused great uncertainty about planning.
Hon. Members should not just take my word for that. On 2 July, the director of policy at the British Chambers of Commerce said that the coalition’s abolition of the Infrastructure Planning Commission
“puts politics back into the planning system at a time when an overwhelming majority of businesses say that they want key infrastructure schemes decided by experts, not politicians”.
There is great concern about that, and it does not come just from the Opposition and the British Chambers of Commerce. Concern is also voiced on page 53 of the second progress report to Parliament from the Committee on Climate Change, which says that key actions for the future include
“Ensuring that the proposed replacement of the Infrastructure Planning Commission does not prevent projects—renewables, or low-carbon infrastructure more generally—progressing in a timely manner through the planning process.”
There is therefore great concern about the fact that politics is being put back into planning, and that planning will be held up at a time when we need to show direction and leadership.
This is a crucial time, when we need to be able to move to a low-carbon economy. We need a Government who are confident and who do the right thing. As I said at the outset, the current Government have the advantage of coming from a good place, because the Labour Government laid the ground well. However, it is of great concern that Ministers are now floundering around, particularly on planning and nuclear. Perhaps the biggest concern, however, is the statement in the coalition agreement that the parties concerned
“share a conviction that the days of big government are over”.
In the Minister’s Department, big government and leadership are necessary. Without them, we will not move to the low-carbon economy that we need.
Charles Hendry
There is no doubt that the situation has become more benign as a result of the discoveries of shale gas. We are still trying to establish how substantial we believe shale gas to be, and at what cost it can be extracted in the United Kingdom and over what time scale. It is a game changer in the United States and, as the hon. Gentleman suggests, it has virtually wiped out its LNG imports. We think that it will be significant in China and may change the dynamics of new pipeline connections within central Asia. We think that it will be large in places such as Poland, but we do not yet have a full grasp of the implications for the United Kingdom. It has undoubtedly meant that more gas is available for our LNG facilities than there would otherwise have been. As a precautionary approach, we must look long-term at our vulnerabilities and our exposure to imports, and ensure that measures to protect security of supply are in place through storage and long-term contracts. Those areas were all set out in our policy paper ahead of the election, and a range of issues will be used to address the existing challenges.
The hon. Member for Islington South and Finsbury spoke about how the last Government had doubled the amount of renewable energy. She managed to get the UK to No. 26 in the European Union, which was undoubtedly an enormous triumph. I think that we are just ahead of Malta, but have slipped behind Luxembourg, which is obviously a desperate blow. Frankly, it is not a good place to be and we need a sevenfold increase over the next decade to get us where we need to be. That is a massive challenge and more must be done across the spectrum.
There is an issue about winning public support. We believe that renewable energy should not be imposed on communities, but should have popular support within communities. The previous Secretary of State, the right hon. Member for Doncaster North (Edward Miliband)—now shadow Energy Minister before he moves on to his new job—has spoken of different techniques. First, he said that people should have wind farms because it would be good for everybody. That did not really win people’s hearts and minds. He then said that people should have a wind farm because it would be bad if they did not—a bit like somebody who drives across a zebra crossing without stopping—but that did not win hearts and minds.
We think that a new approach is necessary that will actively engage communities in ensuring that they see what the benefits will be. They will keep business rates locally. We will find ways of encouraging community ownership. The income stream from one of the turbines perhaps goes directly into the community, so it can see that it is hosting something on behalf of the wider region or the national interest and that a real benefit comes back to it for hosting the facility.
I agree with some of the comments from the hon. Member for Southampton, Test. Because of the inherent flexibilities in the system, one has to consider how one manages that. One has to have back-up systems or use what I hope will become a particularly exciting area of policy—storage technologies. Those can involve compressed air, pumped storage, hydrogen and batteries. The pace at which global technologies are moving forward in that area is very exciting. It offers us eventually the great prize of renewable energy from wind being available when people want it, rather than simply when the wind provides it. I think that that will be an important part of policy.
The hon. Gentleman also talked about the smart grid. That is the great prize of smart metering—the ability to manage demand much more effectively and to try to ensure that we can shave off demand at the top and have a sensible structure for managing the system.
Let me move on to some of the other technologies that were raised. The hon. Member for Islington South and Finsbury rightly spoke about nuclear. We would be further ahead had it not been for the moratorium, but the position of the Government now is absolutely clear. Nuclear will be part of the mix if it can be built without subsidy. There are no ifs or buts; that is an absolutely clear position.
I hope that the hon. Lady will work with us, because in opposition, I was very happy to work with the Government to reassure potential investors, to the extent that I was asked to go to the investors forum a couple of years ago so that investors could be told that the potential new Minister, if there was a change of Government, was attending and could give that continuity of policy. Investors attach enormous importance to that political stability. I hope that, given that the position is absolutely clear, the hon. Lady will decide that she wants to be a serious contributor to the debate, rather than making political comments from the sidelines, because that will do more to undermine the case for new investment than anything happening elsewhere. There are communities up and down the country that want to see parties working together on this issue. We have a clear position, which is essentially the same position as that of the previous Administration, and I urge her to work with us.
An important point about the changes that we are making is that we have said that the national policy statements will be voted on on the Floor of the House. That will send a clear message to investors that there is massive cross-party support for the national policy statements when they are put forward. I hope that that will be the outcome of that process. It is not just a political party saying, “This is our position,” but the House as a whole expressing its view on the national policy statements. That makes the process more robust, reduces the risk of judicial review and enhances the prospect of making progress.
Emily Thornberry
The problem with the changes to the planning system is not just who will make the national policy statements and how they will be decided, but how they will be implemented and the fact that a Minister will be implementing the decisions. That is the reason why many people and organisations are concerned that there will be delay. That is a vital issue in respect of the development of our infrastructure.
Charles Hendry
Let me seek to reassure the hon. Lady. The discussions that we have had with industry have reassured it about the changes that we are making. Our concern about the Infrastructure Planning Commission was that it had no democratic accountability. Decisions on nationally significant issues were being made with no prospect of contributions from Members of Parliament and without the opportunity for parliamentary scrutiny. We believed that that was not just democratically wrong, but enhanced the risk of judicial review, so the change that we have made is that the back-office function—the work of analysing the individual planning applications—will go ahead as originally planned but within the planning inspectorate, and the recommendation will then be made to the Secretary of State, who will have three months to make a decision. That is exactly the same time scale as would have been the case under the IPC, but there will be less chance of judicial review and there will be greater parliamentary accountability. Also, transitional arrangements will be in place so that whichever system an application starts under, it will complete under it. There will be no risk, when the system changes, of an application that was two thirds of the way through having to start again. Whichever jurisdiction it starts under, it will continue under.
The process provides the speed that is necessary and that industry is keen to have. It provides greater scrutiny, greater acceptability and less risk of judicial review, which might delay the whole process by six or 12 months. Those are the reasons why we have made the changes, but we have been extremely conscious throughout of the need to maintain investor confidence, and the work that we have carried out with the investors reassures us that we have got the balance right.
Emily Thornberry
I am very interested to hear what the hon. Gentleman is saying, and it is clarifying a number of issues, but there is the additional residual problem. He talks about the national policy statements being agreed on the Floor of the House and party politics therefore being taken out of it. Nevertheless, if an individual Minister will in the end make the decision, surely party politics comes straight back in again.
Charles Hendry
The hon. Lady is absolutely wrong. The Minister is acting in a quasi-judicial capacity. He is acting not as a party politician, but as someone who has a legal responsibility. A recommendation will be put to him through the planning inspectorate as to whether to accept or decline an application. He will not be able to say, “That’s a little bit close to a Conservative seat”—or a Labour seat—“so I won’t give it the go-ahead.” He must decide on the basis of the argument put to him and must explain why he has either accepted or declined the application. The process is intended to maintain political impartiality.
I can tell the hon. Lady that I do not believe that in any decision I am making, there is a political imperative about where a national grid connection, a nuclear power plant or a new gas-fired plant goes. My job is to look after the national interest and to ensure that applications are made in line with planning law. To me, this is not a party political issue, as I hope the hon. Lady will accept. We are deciding on projects of national significance and trying to get the right outcome as far as the country is concerned.
Emily Thornberry
The hon. Gentleman talks about political impartiality and a quasi-judicial function, but surely a Minister has choice. If a Minister is to act in a judicial fashion, he or she simply has to step out of the arena and make a quasi-judicial decision. I do not understand, if someone is to make a decision in some sort of judicial capacity, how that is democratically accountable. Either they are allowed to use their political brain and make a decision, which is then democratically accountable, or they use a judicial one, which steps outside the arena and outside politics.
Charles Hendry
The fundamental difference is that a Minister sits in Parliament. A Minister can be questioned by Members of Parliament. They can be called before Select Committees much more readily. There can be debates in Westminster Hall or Adjournment debates in the main Chamber. There is a range of areas where the Minister can be subject to scrutiny on the decision made. It is a quasi-judicial role, but we believe that it provides a degree of democratic accountability that is simply missing within the IPC. We may simply have to disagree. We believe that the process maintains the speed and the important elements of the IPC—changes that the previous Government put in place—but it rectifies the democratic deficit.
The hon. Lady raised additional matters relating to the nuclear sector. She asked about the work of the Nuclear Decommissioning Authority. We take very seriously the legacy issues, but we separate out the legacy responsibilities from new build. There is no doubt that clearing up the old legacy issues, which are a combination of civil and military nuclear issues, is something for which the nation, the taxpayer, the Government have to be responsible. The previous Government addressed putting that right with a degree of seriousness that had been missing historically, for which I give them credit, but much is guided by independent legal assessment. The Government are not at liberty to decide which bits they want to do themselves. They are required by law to carry out certain actions now in respect of the clear-up, and that work is central to the work of the Department.
The hon. Lady will be aware that the NDA’s budget is about half the entire departmental budget, so if there are areas that are not absolutely necessary and there are areas where we can gain additional resources and revenue, we will, rightly, consider those as well, but I ask her to be in no doubt whatever about the moral imperative that we attach to addressing the legacy issues.
The hon. Lady also asked about Sheffield Forgemasters. I repeat the assurance given by the Secretary of State in the Chamber last week during oral questions. He said that it was purely about costs, and that the nation could not afford many of the projects that had been approved—it was on those grounds rather than because it was related to the nuclear industry. He also highlighted the fact that had the directors involved been willing to dilute their shareholding it would have been easier to get a commercial loan. Is it the Government’s job to put public money into a private company to enable directors to maintain their shareholdings if commercial arrangements could have enabled them to secure that loan elsewhere? The directors now say that they will seek to carry this forward through other mechanisms, seeking loans and support elsewhere. We believe that that is right. At the end of the day, however, it is not about nuclear; it is money that the Government simply do not have. We have run out of money, as the former Chief Secretary told us.
Emily Thornberry
The problem with the Minister’s explanation is that he was talking of a commercial loan. Given that the company is worth £40 million and the loan was for £80 million, it was not a question of selling shares to raise money; the company was not worth the amount of the loan. That is the problem. That is why we need a forward-thinking Government, that has ambition but which understands the importance of moving to a low-carbon economy. The Secretary of State for Business, Innovation and Skills often criticised the banks for not being forward-looking enough when he was in opposition; now, in government, it would seem that he is falling into exactly the same trap with the banks that he used so readily to criticise.