Oral Answers to Questions

Debate between John Hayes and Tim Yeo

Thursday 14th March 2013 Commons Chamber

[Mr Hayes]

That is an interesting tangential question, given the question on the Order Paper, but the hon. Gentleman is absolutely right that it is vital to our energy security that we have an energy mix. Our Energy Bill underpins exactly that strategy—a mixed economy of generation—purely because only by that means can we be sufficiently flexible and responsive in a highly dynamic set of circumstances.

[Mr Tim Yeo (South Suffolk) (Con)]

Does my hon. Friend agree that it is very important to avoid incurring costs by building infrastructure that is not needed? Is he aware that the National Grid proposal to construct overhead pylons across Suffolk was based on the assumption of early completion of new nuclear power stations at Sizewell and completion of a large number of offshore wind farms, none of which is certain to be built? Does he agree, therefore, that the proposal should now be deferred?

[Mr Hayes]

It is right that the infrastructure we put in place should meet a purpose; infrastructure without a purpose can hardly be legitimised. I am not as familiar with the intimate details of the affairs of Suffolk as my hon. Friend is; he would hardly expect me to be, but I am more than happy to take a look at that. Furthermore, and not for the first time, I would be delighted to meet him to discuss these matters more fully.

Energy Supply

Debate between John Hayes and Tim Yeo

Thursday 6th September 2012 Westminster Hall

[Mr Yeo]

That is an interesting point. France is exposed to the risk of something that derails nuclear technology. Last year’s Japanese accident, which was actually an industrial rather than a nuclear accident, effectively led to the closure of nuclear power in Germany. France has rightly taken a more robust attitude. The factors that led to the Japanese accident would not apply for the most part to French nuclear power stations. None the less, a great reliance on a single technology inherently puts a country in an exposed position, although that is perhaps less the case for nuclear power, given that the supply of uranium is probably reliable for the foreseeable future. Interestingly, France is also quite a big investor in wind power which, again, is not something that depends on imports. I would not say that France is excessively exposed, but would be in the event that something went wrong with its nuclear power stations. It is also struggling to renew its nuclear power stations, and cost overruns and time delays have affected EDF quite badly. None the less, I remain a strong supporter of investment in new nuclear power.

[The Minister of State, Department of Energy and Climate Change (Mr John Hayes)]

I thank my hon. Friend for allowing me to intervene as I may not have a chance to deal with this issue in my summation. He made two interesting points, which I should like to test a little further. The first is about the relationship between gas and competitiveness. After reading the work that his Committee has done on low-carbon growth links with China and listening to his general comments on China, may I ask him to say something about the changing character of demand, especially from the emerging economies, and the effect that it may have on the world price of gas and our competitiveness? I have another point, but I have gone on long enough. I do not want to test your indulgence, Mr Amess, beyond reasonable limits.

[Mr Yeo]

I am always encouraged when a Minister intervenes on my remarks. It suggests that he is listening, not that I expect anything else from the present Minister, and that we are debating something that is of some consequence. It is an interesting question. We are likely to see from China and the other Asian tigers huge demand for imported energy. China has a lot of coal and it may have some more gas that we do not yet know about, but the likelihood is that it will become an importer. Countries such as Korea are already huge importers of fossil fuels. I suspect that the world price of gas will tend to be driven up by the growth in these economies. There will be some interesting consequences. America, which may well be self-sufficient in gas for the time being, will thereby have a competitive advantage because if it wants, it can keep down its gas prices, although if I were a gas producer in America I would wonder about exporting it to a jurisdiction where the price was higher. It would be prudent for Britain to assume that, even if the price of gas remains decoupled from that of oil, we may see a significantly higher gas price by 2030, and that if we were too dependent on gas we might find that we were paying more for our energy than if we had a more diversified mix. A lot will depend on how much investment takes place in nuclear power in some of these countries, because at the moment that seems to be an open question.

[Mr Yeo]

I agree with my hon. Friend: clearly, there is an opportunity for the very low price in the United States to influence prices here. If the US is allowed to do that—and it is converting some of its terminals to export rather than import LNG—the differential is too attractive not to pursue it. However, I doubt whether that by itself would be sufficient to offset the upward pressure from the much faster-growing and larger economies in the east.

Security also depends on a much greater investment in energy efficiency. As we all know, Britain now needs a huge investment in generating capacity. There is no guarantee that that will be forthcoming unless we have clarity and general stability of policy. I urge the Minister to ensure that there is no slippage in the discussions—not just those about the energy Bill but the negotiations on strike prices for contracts for difference—that are under way. The nuclear industry in particular requires as much clarity as possible as it has enormous capital needs and long delays before any return is achieved. I am sure the Minister will find that matter pretty high up his briefing pack.

[Mr Hayes]

I hear what my hon. Friend says about certainty being a pre-requisite for getting the kind of investment necessary over the term about which we are speaking. The Committee has spoken about that before: its report on the emissions trading system talks about a strong and stable carbon price signal being another component that is needed to achieve certainty and predictability, which are the pre-requisites of investment. Will he explain that to me? After all, I am on a sharp learning curve.

[Mr Yeo]

I am sure that the Committee is encouraged by the fact that the Minister keeps quoting from our reports. He could not have a better textbook from which to embark on his learning curve. The signal that we would like to see of a strong and stable carbon price is one that has been conspicuously absent from the EU emissions trading system, for a variety of reasons. First, the cap was originally set much too high in phase one, and phase two was scuppered by the recession. It will probably be the latter part of this decade, at the earliest, before we see that strong, stable carbon price emerging, but we will see it eventually. I would be surprised if, by the 2020s, we do not see a stable carbon price. Moreover, if more countries, including some large ones, adopt emissions trading as one of their instruments to address climate change, I suspect that the prospects for that strong and stable carbon price will be greatly increased.