UK Energy Infrastructure (Wales)

Geraint Davies Excerpts

Wednesday 17th July 2013 Westminster Hall

[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a pleasure to serve under your chairpersonship, Mr Bayley, as I know that you are a green Chair in a green chair. In this debate, I will talk about Wales’s contribution to UK energy, and the development thereof.

Wales currently produces about 22,000 GWh of energy a year and consumes about 18,000 GW. We export approximately 4,000 GWh to England, but that figure is due to grow because of the abundant opportunities provided by the sea and the wind, and by solar energy. Essentially, I want to discuss the need to have the right balance between green energy and green tourism, with future tourism and economic opportunities paying due respect to our seascape and landscape.

The global population is growing, from something like 6 billion to 9 billion, and we are therefore not in control of the environment beyond our immediate physical surroundings. The size of the middle class in China, for instance, has grown from 2% to 20% of the population in the past 10 years, and more people from developing nations are travelling. Opportunities for green tourism in places such as Wales, which has a relatively sparse population, are therefore enormous and need to be borne in mind, as do opportunities in the creative industries. “Da Vinci’s Demons” is filmed at the old Fabian way site in my area. Our landscapes lend themselves to extraordinary Hollywood-type productions. We need a balance.

There are opportunities for nuclear development in Anglesey to produce another 34 GWh, which would be an increase of 150% in Wales’s total energy production and should justify further investment in Wales. We do not get our fair share of investment: some 80% of current infrastructure investment plans and 90% of transport plans are for London and the south-east. I know that hon. Members are interested in freight, for instance, and there is a case for investment in that.

[Jessica Morden (Newport East) (Lab)]

Uskmouth power station in my constituency, which is one of the oldest power stations, is having huge problems getting rail freight capacity—it is difficult for rail freight companies to invest in the future—which is causing problems locally and increasing the costs to the power station’s operators. Does my hon. Friend agree that the Government should consider that further?

[Geraint Davies]

I completely agree. The big political debate is the balance between growth and cuts to get down the deficit, and we need to focus on growth, which means investment in infrastructure. We need to get the right gauges for freight—from Milford Haven, Swansea, Cardiff or Newport—and we need to move around universal freight modules, which are ship-carried in many instances, and energy from power stations, as my hon. Friend mentioned. There is a case for investment now, given the expected future income from new energy sources in Wales. There has been some discussion of a barrage that might generate up to 16,500 GWh, which would be 5% of UK energy, but the idea has clearly been kicked into touch, partly by the European habitats directive.

Meanwhile, the Swansea Lagoon is a big issue in the local press. It could generate some 400 GWh, which would be 0.1% of UK consumption and 2% of what the barrage could produce. That is a relatively small level of production, but it is big scheme in that it would take £650 million to build, with its footprint extending from Swansea docks halfway to Mumbles pier. The electricity produced would be enough for about 121,000 households, but it would be for the UK grid and not for Swansea itself, which has about that many households. I am concerned, therefore, that on balance the development is at least neutral in tourism terms. We hope to become the UK city of culture in 2017—we are on the shortlist of four—and next year we celebrate the 100th anniversary of Dylan Thomas’s birth. We have high hopes for prosperity from cultural tourism in the emerging Swansea Bay city region, so preserving our iconic view is enormously important to us locally.

[Glyn Davies (Montgomeryshire) (Con)]

I thank my near namesake for allowing me to intervene. He focuses on tourism, and green tourism is a hugely important part of the economy in my constituency. At the moment, we face six wind farm applications without any knowledge of how the infrastructure will take the power out. If the mad scheme goes ahead, it will be absolutely crucial that the infrastructure is undergrounded, and that will not happen without Government pressure. It is vital that the whole line be undergrounded, because of the damage it would do to the economy.

[Geraint Davies]

The hon. Gentleman makes the point well that there needs to be a balance between the value of the electricity and the prospective value of the tourism. Aerial views show that England is relatively densely populated and Wales relatively sparsely, and that will be a key asset for our environmental tourism. We want to think strategically, therefore, about where our energy production is. With wind, there needs to be access up the Severn estuary to the grid at Hinkley Point or Port Talbot, but there is less of a case for pylons right into the centre of Wales. I respect the fact that some of these issues are devolved, but we need a balance because we are talking about a once-and-for-all change to our views and to the value of our tourism. Once the infrastructure goes up it will not be pulled down, so we need carefully to consider the pros and the cons.

[Nia Griffith (Llanelli) (Lab)]

My hon. Friend makes the point that Wales is not as densely populated as England, but it has a growing number of energy sources, from the energy island of Anglesey in the north right down to the south. There are large projects and smaller community ones, with a growing number of solar panels. Does my hon. Friend share my concern that the grid infrastructure must be of sufficient capacity to cope with that, and to ensure not only that people can feed in the energy from their solar panels but that the energy, which will be generated in Wales, is fed in properly to the national grid system in the most efficient and cost-effective way?

[Geraint Davies]

Yes, I certainly agree. My understanding is that Wales produces about 27,300 GWh of energy, but that nets down to about 22,000 GWh because of inefficiencies in transmission. The issue of energy loss is very important. We need to run a sophisticated and effective network, which pays due regard to environmental impacts and therefore to the economic impacts on tourism. I am not putting to one side the important subjective impacts on people’s everyday quality of life, but there are also quantifiable economic impacts.

Coming back to the Swansea Lagoon, the Minister might want to comment on whether an evaluation of the impacts on tourism has been done. The construction phase would create discontinuity for retail and tourism. If the sea bed was dug up—which it would be—to provide some of the material for the wall, would that generate a lot of contamination from industrial waste brought up with it? Is the visual impact shown on the promotional literature accurate or slightly misleading?

Is the Minister comfortable with the fact that there is an opportunity now for local investors to put down a £800 stake and get £3,800 back if planning permission is granted? That means that local opinion makers, such as me, are under a lot of pressure from people who have put the £800 down. All the risks are taken by local people. There are fears that when the tide went down there would be an unsightly view which would block the iconic view from the town centre, Town Hill and the Uplands. In addition, given that in future years we want to pursue the idea of a Dylan Thomas festival on a scale more akin to that of Hay, there is a question as to whether the perimeter of the construction—its footprint is nearly as big as Cardiff—would impede future cruise-borne tourism in Swansea bay.

There are therefore several questions—I do not know whether the Minister has any preliminary answers—about the environmental and economic impact, and the trajectory of the short-term problems and of where we will end up if we want a more strategic development of the bay front and then have a lagoon. It may work out well, but those are important questions.

I also want to touch on the Atlantic Array, which, as hon. Members may know, is a bold and imaginative opportunity to have wind turbines offshore. They would be about 12 km offshore, but the National Trust has told me that the Germans normally want them 35 km offshore, so that is an issue. This may sound strange, but, importantly, the biggest harbour porpoise population in Britain is in that vicinity; one of a similar size is in Cardigan bay. Apart from not wanting to disturb that habitat, there is a question mark in relation to future environmental tourism over whether that habitat might be so disturbed by the erection of pylons that those breeding grounds move for ever. I want to make it clear that, in principle, I am in favour of such developments offshore.

[Mr Mark Williams (Ceredigion) (LD)]

I apologise for missing the start of the hon. Gentleman’s speech. What consideration has he given to other marine turbine technologies? I spent a very happy morning with the hon. Member for Llanelli (Nia Griffith) in a boat on the Severn estuary off the north Devon coast, and there is an imaginative scheme for marine turbines in the Severn estuary that would alleviate some—not all—of the concerns that he has voiced, particularly the environmental ones.

[Geraint Davies]

I am sorry that I could not be in that very boat. We should of course look imaginatively at all opportunities. I think that the hon. Gentleman was talking about underwater marine turbines, which are certainly enormously important. In the Severn estuary, which is virtually the biggest of its sort in the world—the bore is enormous—the whole idea of a barrage is predicated on such turbines, rather than on ones driven by the tide coming in and out, which is the case in the lagoon. We should certainly look at that in the future.

Solar energy has been mentioned. If the technology was there, I would like public sector buildings across the country to be tiled with solar panels to provide a solar footprint for the future, although the numbers must add up, because people can get such things wrong. The Chinese invested a lot in solar, but suddenly found that their technology had become obsolete.

There are therefore many opportunities, and I think that it would be best to give the Minister time to respond to some of the ideas and possibly to take some interventions as well.

[The Minister of State, Department of Energy and Climate Change (Michael Fallon)]

I welcome you to the Chair, Mr Bayley. I congratulate the hon. Member for Swansea West (Geraint Davies) on raising the issues. Balancing the impacts of energy infrastructure against the benefits is a key consideration for the planning system, so I welcome the opportunity to talk about energy infrastructure in Wales.

Wales has an essential role to play in meeting our energy needs. We are committed to putting frameworks in place to ensure that the much-needed investment in infrastructure takes place, which is key to getting our economy moving in the short term. The energy sector has the biggest infrastructure programme in the UK, and many such projects are ready to start. It has been estimated that replacing and upgrading our electricity infrastructure alone will require about £110 billion of capital investment in the decade to 2020, supporting up to 250,000 jobs up and down the supply chain. That is half the total infrastructure investment pipeline in the UK, and nearly double the amount needed for transport.

Wales already plays a significant part in powering the United Kingdom, and is home to a range of vital energy infrastructure across the different energy sectors. It is a net exporter of energy, which helps to meet energy demand across the UK. The most recent figures—for 2011—show that it exported 13% of electricity generation to the rest of Great Britain, and it has been even higher in recent years. Since July 2012, Wales has also been a net exporter of electricity to the Republic of Ireland, via the east-west interconnector.

Wales also plays a central role in ensuring that our gas needs are met. It is home to one of our main liquefied natural gas import facilities in Milford Haven, and LNG is an increasingly important part of our energy mix. The terminal has the capacity to import nearly 29 billion cubic metres of gas a year, which is nearly a quarter of our total gas import infrastructure. The facilities there cost upwards of £1 billion, so major global energy players—such as Qatargas, Exxon Mobil and BG Group—have clearly recognised the great benefits of investing in Wales. That decades-long relationship will continue to benefit Wales and thus the rest of the UK.

[Geraint Davies]

The Minister is making the case that the net export of energy to the UK from Wales will grow. At a time when austerity measures are hitting Wales more than elsewhere, including because it has more public servants and more people on benefits, is there a case for Wales to have, instead of cuts, a greater proportion of investment in infrastructure to build growth to get down the deficit? As we make a growing contribution towards the UK pot, there is a case to be made for more investment, whether in freight railway lines or other infrastructure, to help give people the tools to provide growth and jobs.

[Michael Fallon]

I was in fact coming to exactly that point. Wales will benefit, and to some extent already benefits, from the steps we are taking to ensure the investment in infrastructure that we need. We are committed to providing the certainty that industry wants and to ensuring that the UK, including Wales, is one of the best places in the world to invest in low-carbon electricity generation. Our electricity market reforms are critical to that. As we know, a large proportion of our existing capacity—the equivalent of about 18 large power stations—has to close by the end of the decade. At the same time, we may need as much as double today’s electricity capacity by 2050 to deal with growing demand from the electrification of transport, heating and industry.

To meet our legally binding carbon targets, significant new electricity generating capacity will be needed by 2030, most of which has to come from low-carbon technologies, such as nuclear, renewables and fossil fuels with carbon capture and storage. By 2050, emissions from the power sector must be close to zero. The reforms that we are delivering through the Energy Bill and electricity market reform will be the biggest change to the market since privatisation and will transform the sector.

I am pleased to say that today, as planned, we have published the draft delivery plan that sets out the detail of how the Government will drive investment in low-carbon technology while securing electricity supplies at lower cost to consumers. Electricity market reform is now at the implementation stage in preparation for its introduction next year.

The challenge now is to unlock the investment, and I believe that Wales is well placed to do so. We have already seen success in Wales. Since 2010, my Department has granted consent to five major energy infrastructure projects there, covering a wide range of types of infrastructure, including onshore wind farms, biomass plants, and tidal and gas generation. In total, the projects already given consent alone can provide a generating capacity of about 1.5 GW, which is enough to power more 1.5 million homes. Many more projects are in the pipeline: developers in Wales have registered an interest with the Planning Inspectorate in relation to bringing forward 17 more major projects that all have the potential to lead to significant jobs and investment there, as well as to increasing our energy security and reducing carbon emissions.

--- Later in debate ---

[Michael Fallon]

That is an important issue, and one that I have been discussing recently with the domestic wood industry, especially the wood panel industry. I am aware that the Scottish Government require of a biomass plant a plan that shows exactly how sustainable the feedstock is likely to be. If I may, I should like to reply to the hon. Lady in writing, after a little more thought.

As I was saying, Wales is now seeing huge investment in its renewable energy infrastructure. Wales already accounts for around 6% of overall UK renewables. Since 2010, £1.3 billion of investment has been announced in renewable generation in Wales, potentially supporting around 2,000 jobs.

Just last week, the Secretary of State visited the site of the Pen-y-Cymoedd wind farm in south Wales, which is set to be the largest onshore wind farm in Wales and England. The announcement from Vattenfall that construction is to commence on the 76 turbines on the site in 2014, with the first power being generated for the National Grid in late 2016, is welcome news. That project alone represents more than £400 million of investment, creating around 300 jobs, and providing power to 140,000 homes. Furthermore, Vattenfall has confirmed that it will also invest £1.8 million every year in community funds for the 25-year life of the wind farm, ensuring wider benefits for local people.

This is also an exciting time for nuclear new build here in the UK. We were delighted to welcome Hitachi to the new nuclear market in Britain last October, with its purchase of Horizon Nuclear Power. Hitachi brings with it significant experience of building reactors and it holds an excellent track record for building on time and to budget. The first site it is planning to develop in the United Kingdom is Wylfa on Anglesey.

Hitachi is keen to develop its long-standing programme of industrial development in Wales. Horizon held successful supply chain events in Llandudno in May and in Gloucester, which I attended, which attracted some 400 business representatives. Hitachi’s entry to the new nuclear market shows just what a highly attractive proposition new nuclear is and reflects the strength of the Horizon project. I want to assure hon. Members that the Government are firmly committed to ensuring that new nuclear goes ahead in the UK and that all parts of the UK will benefit from it.

[Geraint Davies]

Will the Minister comment on shale gas in Wales for the future?

[Michael Fallon]

Yes, I am happy to do so. We are now accelerating the pace of shale gas exploration by putting in place a robust regulatory framework, and ensuring that where shale is hosted by a local community, that local community benefits, just as it benefits from onshore wind farms and as it will do from nuclear stations. The Chancellor has also announced fiscal measures to incentivise the expensive early years of exploration. My right hon. Friend the Secretary of State for Communities and Local Government will be setting out some amended planning guidance so that both developers and local communities that want to consider their applications will be clearer about how the applications are to be handled. We want to make sure that we do not miss out on the potential of shale gas.

Last month, we published the first authoritative estimate of the amount of shale lying underneath the northern basin—the Bowland-Hodder basin covering the northern counties of Lancashire, Cheshire, Yorkshire and so on. We now have a similar study going on in the south of England. Eventually we need to start mapping the resource right across the United Kingdom.

Finally, I can say that I have authorised a new 14th onshore licensing round, which is in preparation at the moment and will commence next year. Again, that should provide opportunities right across the United Kingdom to check and tap the potential of this resource. It is only potential at the moment; we do not yet know whether shale gas is recoverable as cost-effectively and as easily as it is in the United States. We know that the shale here appears to be thicker, so potentially there is a lot of gas that could be extracted and that could make a real difference to our economy. We also know that given the increasing volatility of international oil and gas prices, we have to do more to secure our energy supplies here at home by encouraging a stronger mix of energy from different sources, whether it is wind, other renewables, nuclear, other gas or shale gas.

[Michael Fallon]

I am certainly prepared to look at that.

In conclusion, with the framework for investment in place, the energy legislation in front of the House and the details of electricity and market reform being published in greater detail and in draft, we now need to get investment flowing. That is the challenge over the coming years. If we can get investment in a new efficient, low-carbon and diverse energy mix, the jobs and growth that we all want to see will follow. Based on the evidence to date, and the points I have been making, I am confident that Wales is up to the challenge. It is already seeing deployment on the ground, and it is well placed to take advantage of the new investment that we need.

[Geraint Davies]

Will the Minister say a few words about Swansea Lagoon?

[Michael Fallon]

In further conclusion, let me just say—I am sorry not to be more helpful—that I am aware of the proposal from Tidal Lagoon Power to develop a bay tidal lagoon in Swansea. My officials have met the developers concerned, but because the project is now at the pre-application stage in the consent process of the Planning Act 2008, I am not able to offer from here any particular comment on the merits or otherwise of the proposal, but I look forward to the outcome of the planning process with interest.