Cost of Living

Lord Howell of Guildford Excerpts

Thursday 3rd February 2022 Grand Committee

[Lord Howell of Guildford (Con)]

My Lords, I declare an interest in energy price-related issues, as in the register.

My brief contribution to this superbly timed debate—it really is perfectly timed—will be more about preventing the reoccurrence of this problem, which otherwise will hit us again and again, than the immediate amelioration which is certainly needed. No doubt we shall hear from the Government about what is proposed to prevent widespread suffering and address the real fear in many households, and disruption throughout key parts of industry, when energy prices go super-volatile as they are doing now.

There is a simple—perhaps over-simple—one-word answer to the question of what we can do to prevent recurrence: back-up. We are in the midst of a gigantic energy transformation which is the biggest for over 200 or 300 years, since the Industrial Revolution. It is a fundamental reorganisation of our entire energy system into a new pattern. This is huge, and no system—certainly not this one—will work without the full availability of fall-back energy supplies, 24/7, which can kick in when the inevitable disruptions, breakdowns and crises occur. It does not matter whether we talk about green energy or traditional fossil fuels: there will be, as there has been in the past, occasional and sometimes devastating interruptions, and that is why we must have full back-up facilities in place. Do we have them?

Look at the scene. We have ruled out coal. Obviously, that is the right thing to do but frankly, I am afraid that it will not make any difference to rising emissions worldwide or to climate control, because of course the main coal emitters are roaring ahead. There are 8,200 coal-fired stations in the world, all puffing fumes into the air, and several more are being built despite the Glasgow undertakings that they would not be. So, coal will continue to drive emissions upward, but at least we can demonstrate our good intent by closing it down. So that is that—although I note, slightly cynically, that to keep the lights on in Glasgow and the conference going, they had to open up a couple of coal-fired plants.

Investment in more gas is being strongly discouraged. It is an amazing thought that years and years ago, when this country, or the Government, had the misfortune of having me as their Energy Secretary, 1% of our electricity came from gas, and even that was resented by Sir Denis Rooke and others. Now it is running at roughly 43%, although I note that last week 55% of our electricity was coming from gas. That is dangerously high. I remember when Helmut Schmidt told Mrs Thatcher that Germany was going to rely on Russia for a quarter of its gas—just a quarter—she said, “Helmut, you’re crazy: this is going to lead to terrible trouble”. He replied, “No, don’t worry, communism is a reliable business partner and it will all be all right.” It was not all right.

Obviously, we are discouraging pensions from investing in oil and trying to run down our international oil companies, so we are handing the ball back to OPEC there, and we will feel the rough edge of that as petrol and oil prices go whizzing up.

We had high hopes in my time of building a reliable and solid back-up system through modern nuclear power. That was the plan. We aimed for nine PWRs and only got one built, but the world moved on and oil and gas were cheap, so we managed to get by with the one at Sizewell B. Now we are trying to revive our nuclear replacement programme and I am not at all happy about where we are going. It seems that we are at a Y-fork in the road in the development of civil nuclear: between large-scale repeat such as Hinkley or maybe like Sizewell C, and going for SMRs which, according to Rolls-Royce, could be produced at about the same time.

That is a big choice and I hope that the Government get it right because, if they do not, we will end up with a lot of further disappointments and difficulties and a lack of the back-up that we need. In particular, I have to note that getting out of large-scale nuclear building and attracting private capital, which we will never get into the big-scale stuff, even with the proposed reforms in financing systems, is made 10 times more difficult by the fact that, of course, we are deeply involved with the Chinese. Somehow we will have to get out of the Chinese involvement in Sizewell C, Hinkley Point and other projects, and do that smoothly, if we are not to bring the whole house of cards down.

I am afraid that what I have said is slightly gloomy, but if people just hang on to the word “back-up” they will understand that we can save ourselves from the horrible volatility of prices. Behind the volatility, of course, comes the prospect of actual outages. We must have a resilient and diverse system. That is the big lesson, which I am not sure has yet been learned.