Clean Energy Investment

Ian Lavery Excerpts

Wednesday 25th November 2015 Westminster Hall

[Caroline Flint (Don Valley) (Lab)]

I beg to move,

That this House has considered the future of clean energy investment.

It is a pleasure, Mr Bailey, to serve under your chairmanship. I thank the powers that be for accepting my application for an Adjournment debate on this subject.

Last week, I spoke in the debate on climate change, responding to the Pope’s encyclical in which His Holiness said:

“Never have we so hurt and mistreated our common home as we have in the last two hundred years.”

As the Paris talks begin on Monday, it is vital that the world gets a strong deal to ensure the future of our planet for generations to come. We must also speak loudly and clearly about the new economic opportunities within our grasp. The challenge for the 21st century is how quickly we can fully benefit from the clean energy revolution.

As a patriot, I want the United Kingdom to be a global player, leading and innovating in the latest energy technologies and reaping the rewards, jobs and investment that will go to the leaders in this race. This requires an industrial and economic strategy fit for a world kept at less than 2° of warming. If that is the challenge and if that indicates the direction, I am afraid the Government have lost their satnav. The latest Ernst and Young renewable energy country attractiveness index puts the UK out of the top 10 for the first time ever. We now sit at 11th, behind Chile and the Netherlands, and the reason is simple. According to Ernst and Young it is

“death by a thousand cuts…At best it may be a case of misguided short-term politics getting in the way of long-term policy. At worst, however, it’s policymaking in a vacuum, lacking any rationale or clear intent.”

That is a damning verdict on the Government’s record over the past five years, a record with a very real cost from jobs and investment lost.

Investors do not have to choose the UK. If we do not make it attractive for them to invest in clean energy here, we will lose jobs in new technologies and their supply chains for the lifetime of those investments. That is exactly what happened when we lost out in the 1980s to other countries which saw the potential of wind energy.

I would never advocate that new technologies receive never-ending subsidies or that taxpayers and energy bill payers pay a penny more than required, but the Government’s actions cannot be justified only on those terms. The decision to charge renewable generators the climate change levy was a grab by the Treasury, pure and simple. Business plans that relied on that income have had to be ripped up. Drax lost a third of its share value in one day following the announcement, and as a result it and Infinis have launched legal proceedings against the Government. On 25 September, Drax said that policy certainty is no longer there to continue its involvement with the White Rose carbon capture and storage project.

Developing CCS is an important part of our clean energy infrastructure and I thought the Conservatives thought so too. Perhaps the Minister will confirm whether what we hear through the media—that the Government’s allocation of £1 billion to support CCS innovation is to be cut—is true. In October, the report of the Committee on Climate Change, “Power sector scenarios for the 5th Carbon Budget”, said:

“CCS is very important for reducing emissions across the economy and could almost halve the cost of meeting the 2050 target in the Climate Change Act.”

[Ian Lavery (Wansbeck) (Lab)]

I congratulate my right hon. Friend on bringing this timely debate to the Chamber. Does she agree that without carbon capture and storage, there is no likelihood whatever of the UK or Europe meeting the emissions level targets that have been set for 2050?

[Caroline Flint]

I agree with my hon. Friend, and what is so sad is that we have the brains, the skills and the interest from investors, but we do not have the Government’s political will to be a leader in this important area of innovation. Too often, we talk big but end up following, and lose the chances that are opened up to us.

Under the coalition Government, the ambition for CCS stalled. The Government’s favoured projects, Peterhead and White Rose, have suffered from dithering and delay, and they have put a brake on the other part of CCS—the development of industrial CCS, which can protect our energy-intensive industries such as steel from carbon leakage, watching our jobs exported elsewhere in the world. Alongside that, the cheapest forms of renewable energy seem to be constantly under attack.

--- Later in debate ---

[Julie Elliott]

I thank the hon. Gentleman for his intervention. Of course the key to good, stable energy policy is to have a long-term framework. Energy policy needs to last through more than one Government. Governments change every four or five years. Energy policy should be agreed and set out for the long term, to attract investment and so that we can regain our place as the world leader in this industry.

Uncertainty is this Government’s watchword. We have no idea what the size of the levy control framework will be post-2021. If we are relying on offshore projects with lead times of eight years or so, how can we expect people to invest when they do not know the size of the pot beyond 2021?

[Ian Lavery]

Is it not also extremely important, with regard to the levy control framework, that stakeholders should be aware of how this budget is being spent? It is not transparent at the moment, and people do not have a clue about what is being spent, when it is being spent and how it is being spent.

[Julie Elliott]

Absolutely. I thank my hon. Friend for that intervention; I totally agree with him.

The situation in which we find energy policy today can perhaps best be illustrated by the grotesque chaos of clean energy developers, starved of the certainty that they need, being encouraged to install diesel generators on their sites because the Government’s policies have led to the narrowest—frighteningly narrow—margins this winter. Approximately 1,000 diesel generators, second in carbon intensity only to coal, have been installed in the past 18 months, and another thousand are in the pipeline.

The Paris climate change conference starts in just five days’ time. I wish the Secretary of State and the Minister well, and I know that they will work hard to secure a binding agreement. They may, however, find that not everyone is taking them as seriously as they would like. The UK can take on global leadership abroad only if we are seen to be taking bold action at home. The Department of Energy and Climate Change does not exist in isolation. Our policies are noticed not just by investors, but by policy makers around the world. In passing the Climate Change Act 2008, Britain grabbed the baton of global leadership. Others took note and made steps to catch up. Now, we are being overtaken. Today, when we slash support for clean energy, the rest of the world looks on.

--- Later in debate ---

[Dr Whitehead]

I thank the hon. Gentleman for that intervention. That comes under the category of the signals that the Government are giving out, which are almost wholly negative as far as renewable and low carbon investment are concerned.

[Ian Lavery]

My hon. Friend mentioned the fact that the Government’s energy policies are in complete turmoil and are a shambles. Speculation has it that over the next three years, the number of staff in DECC may be reduced by up to 90%. How will that help the situation?

[Dr Whitehead]

My hon. Friend puts his finger on a very real fear among many people. Future Government cuts will mean that the Department will no longer be able to function as a Department that can marshal investments together. If that is a consequence of the spending review being undertaken at the moment, it is a serious state of affairs not only for the future of energy management, but for the future of our investment in renewables overall.

My right hon. Friend the Member for Delyn (Mr Hanson) pointed out how much investment has gone into offshore wind, with the emergence of the Siemens arrangement in Hull, the Vestas investment on the Isle of Wight and the appearance of Gwynt y Môr, which he was recently able to attend the opening of, unlike some other people.

The hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) pointed out the possible economic value for the future of renewables. Perhaps it is worth reminding the House that, according to a recent report by Cambridge Econometrics, the economic value of offshore wind over the next 20 years could increase UK GDP by £20 billion a year by 2030. It could create 70,000 more jobs and reduce gas imports by £8 billion, and emissions in the power sector could be three times lower than at present. That is the prize ahead of us as far as investment in renewables is concerned. That is the prize being dashed by what has happened recently and by the longer-term uncertainty that the Government have introduced in terms of support for renewable investment.

The Minister will say—has said, I am sure—that this is okay because our targets for the deployment of renewable energy to generate electricity look as though they might be reached. I remind the House—indeed, my right hon. Friend the Member for Don Valley underlined this point—that we are failing miserably to reach our overall EU energy targets in electricity, heat and transport. The recent letter from the Secretary of State, which came to public attention, indicated how badly we were likely to miss the targets over the next period. The EU is quite happy for us to overachieve in certain areas, even if we underachieve in other areas. The idea that because you have achieved in one area, you can then drop the baton in all the other areas and not worry about it seems a further misunderstanding of the task ahead of us.

--- Later in debate ---

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

It is a great pleasure to serve under your chairmanship, Mr Bailey. I add my congratulations to the right hon. Member for Don Valley (Caroline Flint), who has done so much. She really does feel passionately about the importance of climate change and a clean energy future. I salute her for that.

Last week the Secretary of State set out a clear new direction for our energy strategy, with security and keeping the lights on at its heart. It recognises the need for investor certainty, but also that security is not possible without action on climate change. The system is not delivering for consumers if energy is unaffordable. So clean energy investment is critical to successfully delivering our strategy.

In the Paris climate change talks, the UK will play a leading role not only in meeting our own ambitions for our decarbonisation targets, which are some of the toughest in the world, but in working to influence other nations in being more ambitious about their need for a clean energy future. It is disappointing that so many Opposition Members are pretending otherwise. I believe we have cross-party agreement on the need for ambitious decarbonisation targets.

A key pillar of our new direction is to consult on a shift from unabated coal to gas. Gas produces half the carbon emissions of coal when used for power generation: it is one of the most cost-effective and significant steps we can take in reducing emissions from our electricity sector and sends a very powerful message to the rest of the world about the level of our commitment.

My hon. Friend the Member for Warrington South (David Mowat) absolutely rightly made the point that in Germany and Austria, in spite of a high level of renewables deployment, emissions are increasing because of their use of coal. One of the biggest decarbonisation efforts we can make is to move from coal to gas.

[Ian Lavery]

Will the Minister give way?

[Andrea Leadsom]

I am sorry; I will give way in a minute, but I want to make some progress first.

From day one of this Government, our new nuclear programme has been fundamental to our approach to energy security and our shift to low carbon. Industry has set out proposals to develop 18 GW of new nuclear power for the UK, which could deliver around 30% of the electricity we will need in the 2030s. If built, the power plants will reduce our carbon emissions by more than 50 million tonnes, bringing an estimated £80 billion of private investment into the UK, with about 30,000 people employed across the new nuclear supply chain at the peak of construction.

The hon. Member for Newport West (Paul Flynn) rightly expressed concerns about the security of nuclear. I assure him that both our existing nuclear fleet, which produces around 19% to 20% of our electricity every day, and our new nuclear fleet will benefit from the most stringent regulation from our independent Office for Nuclear Regulation.