Energy Prices and Profits

John Redwood Excerpts

Wednesday 4th September 2013 Commons Chamber

[Caroline Flint]

Yes, I do accept that, and in view of the Secretary of State’s comments, let me be absolutely clear about one thing. The opening words of the motion before us today rightly recognise

“the importance of the energy industry to the security and prosperity”

of the British economy. The companies that keep the hospitals warm, factories working and the lights on in 25 million homes are doing a pretty fundamental job for the British economy. They employ hundreds of thousands of people and create skilled apprenticeships right across the country. Over the next 10 years, we need these companies to invest in the UK—in new power stations, pipes and wires.

The idea, however, that the significant uplift in profits is all somehow to do with investment simply does not stack up. For one thing, if we look carefully at the profits and investment trends of the big six energy companies, as Bloomberg did last year, we see a very odd pattern emerge. The companies with the biggest profit margins have the lowest investment profiles, while the companies with the smallest margins are ploughing the most back in.

Moreover, at a time when the industry overall is enjoying unprecedented profits, we are not seeing anything like the investment that we need. Analysis by Bloomberg New Energy Finance shows that investment in clean energy has fallen by more than half since the last general election, and that under this Government just one new gas-fired power station, in Carrington in Manchester, is scheduled to open before the next election. Every other gas-fired power station that is coming on stream was commissioned, received planning permission and began to be constructed under the last Labour Government. In any case, the need for investment cannot mean allowing the energy market to fail consumers.

[Mr John Redwood (Wokingham) (Con)]

Does the right hon. Lady not understand that if she backs the most expensive and least rewarding forms of energy investment, to the tune of £110 billion—which is what she wishes to do—profits of less than £4 billion a year will not pay for all that?

[Caroline Flint]

The choice that we face is between moving to the energy market that is best suited to the future and continuing to incur the additional costs of the past. The Energy and Climate Change Committee has produced information about the cost of decarbonising our power sector, but has also drawn attention to the cost of not doing anything. I believe that the cost of staying stuck in the past would far exceed the cost of investing the amount that we need to invest in renewable and low-carbon energy for the future.