Revised Draft Overarching National Policy Statement for Energy (EN-1)

Lord Teverson Excerpts

Tuesday 11th January 2011 Grand Committee

[Lord Teverson]

My Lords, perhaps I may start by giving a personal opinion. When we previously considered these draft policy statements it was done in a Grand Committee-style rather than a Second Reading-style debate. I think that that probably works better for draft statements, although we now have only one more to consider. As the Minister said, a large number of intelligent and profound points came out of that process. That was partly because the session was less formal than today’s session will be—although I am sure that we will be equally productive.

One of the things that are always useful about this type of statement is that it goes through the bare facts of the background of the situation. Immediately when you read the first sections of the overarching statement you realise that, as an economy, a climate, a nation and a continent, we are in big trouble if we do not do something very quickly and decisively. We currently have 85 gigawatts of electricity capacity available to us, but 59 new gigawatts will be required by 2025, which is not that far away in terms of industrial investment cycles. That is a huge challenge, as £250 billion—a quarter of a trillion pounds—in investment is needed. Hence this project is urgent. We need to give investment certainty to large organisations and to smaller organisations in terms of the renewables that will make that possible.

The other thing that really stood out to me—I must have read this before but I did not really realise it—is that, on average, only half of that 85 gigawatts is used. It is a degree of peaking, which we are aware of, but, in terms of capacity, we already have to add on 100 per cent to what we normally need. One of the things that that says to me as a past corporate economist, and as an economist more generally, is that there is a major market failure here. Clearly you cannot take peaking completely out of energy markets—that would be impossible—but it is staggering that it is at that level. In conjunction with Ofgem, DECC is looking at market structures. This huge market failure also should be looked at. In consumer terms, off-peak electricity is clearly too expensive. I have a background in industry. If I saw most of my assets doing nothing for half the time, I would say that it is a very ineffective way to run the infrastructure of a business, let alone of a country. That is one of the major messages that comes out to me. I hope the Minister will take that thought forward very strongly in terms of market-mechanism reviews.

I will concentrate mainly on the overarching statement. In paragraph 2.2.14 the Government express a strong preference and commitment to reach a 30 per cent reduction in emissions at European level by 2020, rather than the current 20 per cent. I know that that is very much one of the Secretary of State’s aims and targets and I hope that he has success in that very important area.

Perhaps I may go through some of the areas that bring up more questions than answers. One of them, as the noble Lord, Lord Giddens, said, is carbon capture and storage. Although carbon capture and storage is an important strategy and a great technology in that, in many ways, it sweeps the pollutants under the carpet—or under the North Sea, or underground, or wherever you want to put them—the statement in fact says that there is uncertainty about that technology. The report actually states that, which I think is very honest, and it is a good thing that it does so. However, there are all sorts of areas around CCS that we need to make sure we do not completely sell our soul on. We need to make sure that it is going to work economically and, necessarily, technically. It can probably work technically, but will it work at a cost in terms of investment that power organisations will be able to absorb?

I have been a Member of this House for four and a half years now and for most of that time we have been talking about demonstration projects, contracts, competitions, getting these things on board, Britain being ahead, and regarding this as not exactly a silver bullet but as an important part of solving the whole problem of energy capacity. Yet, I am very concerned that we never really seem to have a lot of hard evidence on where those competitions have got to, when they are going to happen, and when implementation can take place. I know that all that is happening but it would be very useful for the Minister to clarify it.

Another small thing on CCS: it seems to me that if CCS is going to require anything, it will be pipelines to disperse the carbon dioxide that we take out of energy production. However, the pipeline part of the energy draft statement relates only to oil and gas pipelines. I assume that there will be quite a few carbon dioxide ones in future as well.

I return to one of the broader issues, which is air quality. I shall quote from paragraph 5.5.2. I largely welcome these statements, but this is an area—I am not sure that I have got the reference right; I apologise. The Government specifically exclude carbon dioxide as one of the pollutants in the atmosphere. The NPS goes through the sulphur and nitrous oxides and so on, but it says that carbon dioxide is dealt with through other regulations in other ways. If we look at the American experience with its Environmental Protection Agency, which finally agreed a couple of years ago that CO₂ was a pollutant, we can see that the Government should not be afraid of CO₂ being classified as such, and it should be taken into consideration with regard to these draft statements. There are other mechanisms by which CO₂ is dealt with, but we should accept that it is an atmospheric pollutant and deal with it on that basis. We should not avoid that issue.

There is a small chapter on socioeconomic issues. I come from the south-west, and I know that in terms of new nuclear—I will not expand on this too much because this subject will come back in a future nuclear debate—there are potentially huge disruptions for local communities when construction takes place. To have a power station you have to have a construction process and inevitably you bring in a large number of contractors and workers, but there is certainly a great fear—for example, around Hinkley Point—that all the holiday home accommodation will disappear for three years and kill the holiday industry in the longer term, and that social housing will be filled or the private sector part of social housing will disappear, putting all sorts of pressures on local authorities. Perhaps I could come back to that when we debate the nuclear areas.

On consultation, I do not pretend that I have read every word of these documents but I have read pretty well most of them. There does not seem, and I do not understand this, to be any requirement to consult anyone specifically as part of the planning process. Maybe I misunderstand these documents and that is not supposed to be part of this process, but there is no requirement that the planning authority and the Minister take evidence from local authorities or, for instance, from the devolved Assembly in Wales. I do not understand from these documents who has to be consulted. Surely we have to ensure that someone definitely is consulted; everyone will be aware that a nuclear power station or an offshore wind complex is being built. There perhaps needs to be more rigour in that area, but maybe I misunderstand what these documents are supposed to do.

To come back to EN-3, as an individual document on renewable energy, I welcome the statement that the Government intend to have a test of sustainability against biomass. I am a great supporter of biomass for energy generation, but sustainable credentials of that biomass in order to benefit from renewable obligations or other incentives are very important. I congratulate the Minister on including that, but I would be interested to understand the timescales involved.