Electricity System Resilience (S&T Committee Report)

Lord Bishop of Oxford Excerpts

Tuesday 3rd November 2015 Lords Chamber

[The Lord Bishop of Sheffield]

My Lords, along with many others, I warmly welcome this report and its principal recommendations. It seems to me to be clear and timely, and the issues it highlights for the United Kingdom in the medium term are very significant indeed. I particularly welcome, along with others, the recognition that the electricity market is now a managed market. I underline the statement in paragraph 37:

“Balancing security of supply, sustainability and affordability (the trilemma) is a first order issue for the Secretary of State”.

I will focus my remarks on two specific areas. The first is to highlight the importance of the needs of industry and manufacturing when looking at our future energy needs. It seems to me that this area is not addressed in sufficient depth in this otherwise excellent report. The future forecasts of energy consumption are largely focused on the demands of domestic consumers. The report focuses on the rise in the use of electric cars and heat pumps, and on the demand for more air conditioning—rightly so. But there is very little if anything about research into the future energy needs of the manufacturing sector, which is so critical to a rebalanced economy, particularly in the north of England.

Your Lordships will be all too familiar with the crisis facing the British steel industry. I made a visit in October, a few weeks ago, to Tata’s Speciality Steels in Stocksbridge, near Sheffield. I saw at first hand the process of rolling the steel made from recycled scrap metal into immense 60 or 80-metre bars for use in parts for the aerospace, energy and car industries. The future supply and price of energy is vital to the future of the steel industry and of engineering in this country. In 1970, the industrial sector was responsible for 40% of final UK energy consumption. By 1990, this had fallen to 24%, and by 2014 to 17%. But manufacturing remains a vital part of our economy. Competitively priced electricity is essential.

Conversations with the senior team in Stocksbridge during my visit focused on future energy pricing and supply. The British steel industry currently pays much more for its energy than its competitors in Germany and the rest of Europe. The playing field is not level. According to Luis Sanz, managing director of Celsa, quoted in the Financial Times on 27 October, his company faces electricity bills of €68 per megawatt hour to run its steel plant in Cardiff. A similar operation in Germany would cost about €24 per megawatt hour.

The Government have promised a full package of measures for energy-intensive industry but only once they receive clearance from the EU on state aid rules. I do not believe we can wait any longer to bring this vital help to our steel industry. We have already seen the closure or reduction of plants in Redcar and Scunthorpe, with the consequent damage to communities and to Britain’s industrial base. I urge the Government to act and bring forward this support in the Chancellor’s Autumn Statement.

The present and future pricing of electricity in the reality of a managed market is very different for domestic consumers and for industry. Our industry is competing month by month for contracts in a global market. It is vital that manufacturing continues to grow again as part of our economy. Our energy pricing must take account of the needs of industry in the leadership offered by the Secretary of State across the sector.

My second area of focus is on the need, for environmental reasons, to decarbonise electricity generation while keeping the lights on at an affordable price—the energy trilemma. The Government have made, and I hope are about to make, clear promises to the international community in the new global goals and in the forthcoming climate change talks in Paris to reduce our carbon emissions significantly. This is vital for the future of our planet and for the poorest people on the earth. The Committee for Climate Change has rightly recommended an ambitious target: that carbon intensity of power generation should be reduced from 500 grams of CO₂ per kilowatt hour to 50 grams of CO₂ per kilowatt hour by 2030. This represents an enormous transformation in our energy market over the next 13 years—a very short time. I warmly support the Government’s strong manifesto commitment to reducing the impact of climate change by reducing greenhouse gas emissions. Much in this report supports that agenda.

The report underlines the importance of honest, straightforward communication about the energy trilemma. It highlights the benefits of better long-range planning and information about the costs of energy shortfalls. It recommends the rapid rollout of smart meters and better information for Parliament and consumers. I particularly highlight, as others have done, the key recommendation at paragraph 244 on page 87 of the report:

“We recommend that the Government publishes a systematic review of the evidence available on the predicted costs of integration to 2030 and beyond, taking into account a wide range of scenarios”.

This seems to me to be a plea for a much more detailed and transparent long-term energy budget. I encourage the Minister to respond to this recommendation in particular in his response to the debate.

Managing the future of our energy supply is vital for our quality of life, our industry and our economy, and for the future ecology of our world. Along with other noble Lords, I warmly welcome this report.