Lord Krebs
Main Page: Lord Krebs (Crossbench - Life peer)Energy Bill
Lord Krebs Excerpts
Lord Krebs (CB)
My Lords, the noble Lord, Lord Lawson, cites as his authority the Financial Times. I want to address the question of energy prices by turning to the authority of the statutory committee set up by this Parliament, the Committee on Climate Change. I declare an interest as a member of that committee. Through rigorous detailed economic analysis it has uncovered the facts. Between 2004 and 2012 the average household energy bill for a dual-fuel household that uses electricity and gas increased by £520, from £610 to £1,130. How much of that was caused by green, low-carbon measures? The answer is that £30, or 6%, of the energy price increases over that period was due to investment in low-carbon energy generation. Another £45 was due to investment in energy efficiency to help with the affordability of energy for vulnerable consumers, and the rest was largely due to increases in the price of gas.
Turning to the present, 2013-14, the climate change committee has calculated that the increases due to the renewables obligation, the feed-in tariff, the energy company obligation and the carbon-price underpin between them amount to 1% of household energy bills. Let us look forward to 2020. The climate change committee estimates that household energy bills will be 10% higher due to low-carbon investment but—and this is an important but—that 10%, which is small in relation to the overall increase, could easily be offset by investment in energy efficiency such as the installation of new boilers and energy-efficient lighting, appliances, heating and insulation in homes. It is therefore a complete canard to claim that investment in low-carbon energy is the cause, and will be the cause, of increases in energy prices. It is simply not true. What about the commercial sector? The climate change committee estimates that by 2020 1p in every £10 will be added to consumer prices as a result of investment in low-carbon energy.
We should not get confused in this debate by the arguments about energy prices. We should also remind ourselves, as the noble Lord, Lord Oxburgh, has said, that this country is by no means the only one to be taking serious steps to transition to a low-carbon economy. China, Germany, South Korea, Mexico and many others are taking steps, just as we are. We are not leading alone but should be among the leading nations that are setting an example to the rest of the world.
The latest report of the Intergovernmental Panel on Climate Change says that if we take no action we are likely to see global warming of between 3.2 and 5.4 degrees by the end of this century, which could be disastrous for our descendants, and that we should take action now. In that context, I commend the amendment of the noble Lord, Lord Oxburgh, and hope that this House will support it.
Viscount Hanworth (Lab)
My Lords, the description of the Bill by the noble Lord, Lord Lawson, bears no relationship to what I and many others understand to be its nature. It is a curious document that is suffused with the free-market ideology that accompanied the privatisation of Britain’s energy industry in the latter years of the Thatcher Administration. The Bill contains evidence of the dangers of global warming and the effects of carbon emissions associated with fossil fuels, which have been well understood. However, notwithstanding its pieties in that respect, the Bill does very little to promote the cause of climate protection. It poses some ineffective and non-binding constraints on the rates of emission and, in truth, will not help in reaching the targets set out in the Climate Change Act 2008.
The truth is that the Bill is attempting to appease a powerful faction within the Conservative Party that is strongly opposed to any measures that might be taken to staunch the emissions of greenhouse gases. There is solid and highly disturbing scientific evidence that should alert every one of us to the perils that we face through global warming. However, many in the Conservative Party believe that they are as entitled to their own contrary opinions on such matters as any of the scientists are to theirs. The climate change deniers have a powerful ally in the Chancellor of the Exchequer, George Osborne. He envisages a dash for gas based on fuel that might be conjured up by fracturing the ground on which we stand. This vision has strongly influenced the Bill. Such a dash for gas would utterly negate the purposes of the Climate Change Act 2008, which proposed that the emissions of greenhouse gases in 2050 should be 80% lower than those in 1990.
The Labour Party brought the matter to a head in the Commons by tabling a reasoned amendment declining to give the Bill a Second Reading in the absence of a decarbonisation target. In the absence of full support from the Liberal Democrats, the amendment was defeated by 279 votes to 206. Perhaps now we can trust that the Liberal Democrats are not bound by whatever agreement it was that made them adhere to the Government’s position on the amendment, and that they will support the amendment of the noble Lord, Lord Oxburgh, which surely accords with their natural instincts. There is clamorous support from industry for a binding emissions target. A target somewhere between 100 grams and 50 grams of CO2 per kilowatt hour, to be set in 2014, would indicate that the UK Government are genuinely committed to their climate change obligations, and give much needed confidence to investors.
The privatisation of the power industry, according to the nostrums of free-market economics, has given rise not to a competitive market but to a dysfunctional oligopoly consisting of six big companies. On the sidelines are a few small independent companies specialising in renewable power generation. Given adequate protection, the independent companies could be expected to provide a large proportion of the new investment in renewable power generation. At present, there is a danger of their being squeezed out of the market by the big six, who are intent on fulfilling their renewables obligations with their own power plants. The Government and the Department of Energy and Climate Change have paid scant attention to the plight of the independent generators. They need to act with urgency to protect these players.
The Government’s free-market ideology and aversion to government sponsorship and national ownership have severely prejudiced the prospects for nuclear energy in the UK. It is an outstanding irony that in their pursuit of a free-market ideology they have bequeathed our nuclear future to two foreign state-owned monopolists, Électricité de France and the China General Nuclear Power Company. These suppliers are expecting a rate of return in double figures as a consequence of a high price for their electricity that is guaranteed for a period of 35 years. This return is supposedly justified by the risks inherent in the project and the difficulties of raising the necessary finance on the open market.
However, in their attempt to attract firms to undertake nuclear projects, the Government have provided a so-called infrastructure guarantee that guarantees 65% of the necessary funds. Surely under such circumstances, it would have been appropriate for the Government to raise the necessary funds by selling bonds and to commission the building of the nuclear power stations directly, thereby taking them into national ownership. Such a course of action would have given the Government powers to ensure that native suppliers would be fully exploited and that our nuclear industry would stand a good chance of revival. Instead, foreign suppliers will predominate and Britain’s taxpayers will have the burden of supporting a much troubled French nationalised industry.
Viscount Ridley
My Lords, I shall repeat the statement. Later in my remarks I shall come back and justify it. Climate change is happening more slowly than expected. Far from locking in highly expensive energy, as we are doing, we should be reconsidering the huge cost that we are afflicting the most vulnerable with to comfort the most comfortable. Offshore wind costs about four times as much as gas: £270 per megawatt-hour is the total cost, including connections and system costs, for offshore wind compared with about £66 for gas. We are asking hard-working families to pay over the odds for their electricity in order to provide subsidies to generate power and in order to provide subsidies not to generate power. Last year, £30 million was paid to wind companies not to produce power at a time when it was not needed. Furthermore, we are asking them to pay over the odds to pay for the short-term operating reserve, which is the balancing mechanism by which we make up for the fact that wind is unpredictable. That consists largely of fleets of diesel generators, which are being increased in number by the national grid towards 8 gigawatts, combined with open-cycle gas turbines—both of which are higher carbon than combined-cycle and extremely expensive.
Moreover, we are asking hard-working families to pay over the odds to upgrade the grid and the network costs involved in that, specifically for wind. We are asking them to pay for a carbon floor price, the specific purpose of which is to make fossil fuels look less cheap compared with renewables. Finally, we are asking them to pay over the odds to compensate energy-intensive industries for these costs that we are putting on to them. All of these things end up on people’s bills at the end of the day and they are not paid through general taxation, where the richest could pay more of them: they are paid through people’s electricity bills. Green levies have risen by about tenfold in 10 years, but we ain’t seen nothing yet. By 2020, about £13 billion, if you include system costs and VAT, will be spent every year, compared with about £2.9 billion today, on the support for renewable energy, particularly wind. The biggest part of that will be going to offshore wind. People’s bills will go up as a result of green subsidies by 33% by 2020 and 41% by 2030, according to figures from the Department of Energy and Climate Change.
Lord Krebs
My Lords, I invite the noble Viscount, Lord Ridley, to explain to the House why he disagrees with the climate change committee’s calculations to which I alluded earlier.
Lord Krebs
So does the noble Viscount accept the climate change committee’s calculation that less than 10% of the addition to energy bills for households by 2020 will be attributable to investment in low carbon energy, and that that could easily be offset by greater energy efficiency in the home?
Viscount Ridley
My Lords, why are we to assume that greater energy efficiency in the home will only happen if we invest in renewable energy? We will be able to invest in greater efficiency in the home later anyway. The idea that we will get more efficiency in the home because we invest in renewable energy has never seemed very sensible. As for the cost of renewables towards energy prices, we can agree or disagree about the figures but it depends on your assumptions about what will happen to wholesale gas prices.
What have we achieved with the £2.9 billion we are spending this year on subsidies to renewable energy? We produced about 1% of our total energy from wind and solar this year. If you take total energy—including transport, fuel and everything else—wind provides only about 1% of the energy we use in this country. After accounting for the back-up—wind needs about 80% back-up to make sure that energy is available when it is not blowing—we have cut our carbon emissions through the use of wind and solar by probably less than 0.5%. That is surely a very small return on our investment.
All we are really doing is driving carbon emissions abroad, as has already been mentioned. Professor Dieter Helm, who has also been mentioned, said that carbon production in Britain fell by 15% while consumption rose by 20% between 1990 and 2005. We are consuming the carbon, it is just that somebody else is producing it. As Professor Helm also said, if we follow the leader of the Opposition’s proposal and decarbonise altogether by 2030, “we may actually make global emissions higher than they would otherwise have been” because of this effect. Unilateral decarbonisation is like building a flood bank at the end of your garden when your neighbour does not.
The noble Lord, Lord May, challenged me on the point about climate change. We have heard that the position on climate change has become more certain. Those who have come to that conclusion are obviously reading a different Intergovernmental Panel on Climate Change Summary for Policymakers than I am. The one I saw said that it is now 95% sure that more than half the warming since 1951 is man-made. That is a slightly weaker statement expressed slightly more strongly than six years ago, and a statement about the past not the future.
In what the Intergovernmental Panel on Climate Change says in its latest report about the future, you find more uncertainty than six years ago. Let me give nine separate examples of ways in which the Intergovernmental Panel on Climate Change has retreated to a slightly less alarming and less certain position than six years ago. First, it acknowledges the pause or standstill in temperature for the first time, which has taken place for either 15 or 17 years depending on whether you look at surface or satellite temperatures.
Secondly, it acknowledges for the first time since its report in 1990 that the medieval warm period was at least as warm as today on a global level and therefore that today’s temperatures are not unprecedented in the last thousand years. Thirdly, it acknowledges for the first time that Antarctic sea ice is slowly expanding not retreating, which was not predicted by its models. Fourthly, it acknowledges that 111 of its 114 models overstated warming in the last 15 years.
Fifthly, it acknowledges that the range of equilibrium climate sensitivity is lower than it was six years ago. It says that it cannot now give a central estimate, whereas six years ago it gave a best estimate. Why can it not do that? The average of 16 separate estimates of that quantity made by empirical studies since 2011 is 60% cooler than the ECS that was assumed in the IPCC models. The noble Lord, Lord May, says that it is important to make a calculation of how much carbon we must produce by the middle of the century, but that depends upon your estimate of equilibrium climate sensitivity. If it turns out that it is as low as the range is now suggesting, and as the latest studies suggest, that changes the calculation entirely.
The sixth thing that the IPCC acknowledges is that transient climate response is lower. That is the more immediate policy-relevant number because it tells you how much warming actually happens by a particular point in the future rather than what takes a lot longer later. Seventhly, it acknowledges that sea-level rise, which is definitely happening, is lower than some authorities, such as Professor Rahmstorf, have tried to persuade us that it is. Eighthly, it says, using the words “very unlikely”, which it specifically defines in statistical terms, that a collapse of the Gulf Stream is very unlikely, that a collapse of the west Antarctic or Greenland ice sheet is very unlikely and that an explosion of methane from clathrates on the ocean floor is very unlikely.
Ninthly, it says that it has low confidence in a number of tipping points that were previously thought to be possible concerns: the collapse of tropical forests, of boreal forests and of the monsoon, an explosion of greenhouse gases from the Arctic permafrost and an increase in megadroughts. It says that it has low confidence in these things. These are major retreats. We know that the harm being done by climate change will arrive considerably later in this century. There is the harm being done now by decarbonisation policies: biofuels driving people into poverty, and wind costs driving up people’s energy bills and causing them trouble in heating their homes.
These problems are arising now and we are being dangerously close to callous if with higher energy costs we tighten even more the noose around the necks of needy people in this country. This week the Minister President of North Rhine-Westphalia, Hannelore Kraft of the Social Democratic Party in Germany, has said that she thinks we should slow down this transition to renewables until we are more certain.