Energy Bill [HL]

Lord Howell of Guildford Excerpts

Wednesday 22nd July 2015 Lords Chamber

[Lord Howell of Guildford (Con)]

My Lords, I declare an interest as honorary president of the Energy Industries Council, chair of the Windsor Energy Group, adviser to Mitsubishi Electric Europe and, recently, president of the British Institute of Energy Economics. I have four points to put to your Lordships. First, I hope that this Bill, which the Minister has presented so ably, is the harbinger of more changes to come. Our energy policy is one of the less happy legacies of the previous coalition Government and major alterations are badly needed in the light of changed circumstances.

To this day, the trilemma facing our energy policymakers—to combine affordability, reliability and decarbonisation—remains totally unresolved. As we know, energy costs and bills are through the roof, causing much suffering. It is ridiculous in an advanced society that energy and fuel banks have to be opened to help vulnerable people to avoid freezing, or that Tata Steel has to lay off hundreds of workers because of “cripplingly high electricity costs”. This is self-harm on a grand scale.

Meanwhile, the electricity supply system has become precarious, with safety margins still much too narrow—although I believe that National Grid will manage to cope, just—and new gas turbine capacity is not being built nearly fast enough. This is despite heroic attempts, which we in this House are all familiar with, by the Government to induce more investors to come forward and put money into new gas generating plant: for example, by guaranteeing plant revenues and other devices that we have discussed at great length.

As for decarbonisation, emissions from our home production may be down but carbon leakage and imports mean that the actual emissions embedded in our consumption patterns are way up. Even if they were not, one has to ask what all this is doing for climate change, which is our main concern. I know the theory is that it will work by example and, like others, I hope that other countries around the globe will agree at the forthcoming Paris conference to new and binding CO₂ limits, which the Minister mentioned. However, with over 2,000 new coal-burning generators being planned or built around the world, and when one hears the determination of Indian leaders, come what may, to go for massively increased coal to get cheap power for development, one has to wonder to what extent our efforts so far are making an impact on the real issue of combating climate change.

I hope that the Bill is the beginning of something better, with resources going less to endless subsidies to high-cost renewables and more to the research and technology that will get costs down and make green power cheaper and cleaner. I look forward to green power that can make do without subsidies at all. I can easily understand the dismay, which we have heard about, of those who have invested and planned on the assumption that subsidies and support would stay the same for ever and a day. However, once they get too high—too good to be true, as it were, and for some investors that has certainly been the case—common sense ought to warn that Ministers and officials can change, Governments come and go, the mood may change and public money may run out. The wisest guidance there is not “Invest more” but “Put not too much trust in princes”. If the true climate impact of our efforts globally is small, though important; if energy reliability has become less, not more; and if the environmental effect is negative, as it is for many people, the voter and the taxpayer are bound to ask what on earth they are paying the premium for and why. Subsidies and support prices are bound to be capped; the only surprise is why it was not done, and did not start, earlier.

Secondly, I come to the major part of the clauses in the Bill, concerned with the Oil and Gas Authority. I hope that it will be strong enough to cope with the long string of problems that the North Sea now faces. The chief of these will be the weak oil price for a long while to come. We are moving into an area of major oil and gas surplus, not only because of the vast American shale oil and gas expansion but because Iran will shortly be adding a few million barrels a day to the market and Saudi Arabia is pumping more than ever. On the demand side the outlook is flat, with even Chinese oil thirst slowing down. With strong supply and weak demand, it does not take a rocket scientist to see where that points. There may be spikes to come in the oil price from so-called high-impact events in the Middle East but the trend is down, down, down. That is going to place considerable strains on North Sea oil and gas producers and all the ancillary industries surrounding and supporting them. I hope very much that the new authority is going to be able, and will have the powers, to cope with the enormous challenges ahead.

My third point is that in everything to do with renewables, as in this Bill, we are of course governed by EU energy policy. This, as we know, vacillates but is currently dominated by the need to reduce dependence on Russian gas. Like our own policy, EU energy policy has been badly wrong-footed by events and needs constant overhauling. Stupendous errors have been made, and I hope and trust that one of the key points in the negotiations on EU reform being held by my right honourable friend the Prime Minister will be the need for radical changes in the way that energy policy is handled between the EU Commission and member states.

Fourthly, in closing off in Clause 60 the renewables obligation for future new onshore wind—that is, the obligation on energy companies to buy highly expensive wind power electricity—one is bound to ask: who next? How and where will the levy control framework next be applied? The Minister gave some strong hints on that but we read in the papers today that maybe small solar farms will be the next in line.

By far the biggest obligation, or future burden, on consumers and households is the Hinkley Point C nuclear project. I am very pro nuclear and pro its low-carbon contribution but this must be one of the worst deals ever for British households and British industry. Furthermore, the component suppliers to EDF are in trouble, costs keep rising, no reactor of this kind has ever been completed successfully, those that are being built are years behind and workers at the site have been laid off, so personally I would shed no tears at all if the elephantine Hinkley Point C project were abandoned in favour of smaller and possibly cheaper nuclear plants a bit later on. A far better hope lies with the Japanese nuclear plants at Wylfa and Moorside. The Japanese can build quicker with more tested and reliable reactor designs, and, because of cheap gas for years to come, we will not need them so soon anyway. I would very much like to hear the Minister’s assessment of what is happening on this front.

When it comes to decarbonising world energy, what happens in India and China is far more important than anything we do on renewables here. I hope that in all our energy priorities and in our handling of relations with the great Indian nation we will keep this in perspective. It is in the technology and innovation to reduce renewable costs, to make storage commercial and to push up energy efficiency at all stages of the power supply chain, and in the cleaner burning of coal across Asia, in particular, that our salvation lies, not in offering soaring and uncapped subsidies. We need to decarbonise but at an affordable and manageable pace, and that is where our resource priorities should now be directed. I hope that this Bill is a modest start in that direction.