Martin Horwood
Main Page: Martin Horwood (Liberal Democrat - Cheltenham)
Michael Fallon
The judgment will be one for the Government, and I want to come on to a proposal on that. I also want to assure my hon. Friend the Member for Daventry, in relation to amendment 164, that there will be public consultation on the draft regulations in the autumn. On amendment 170, relative to what is currently required under the renewables obligation, we would remove only redundant information requirements under the fixed price certificate scheme. However, in answer to the hon. Member for Glasgow North West (John Robertson), I am mindful of the points made in Committee on the need to maximise transparency.
There are a number of other improvements we can make to investment contracts. First, following the good points made in Committee by the hon. Member for Brent North (Barry Gardiner) on the distinction between withholding and redacting information, I will make a commitment to publish a description of any information that is withheld and the reason for that. Secondly, I have tabled amendments 71 and 72, which remove the Secretary of State’s discretion to withhold information from a contract after it has been agreed, but before it is laid before Parliament. That means that any confidential information will have to be clearly identified as such during contract negotiations, and there is no further discretion then to withhold information once those are concluded.
Martin Horwood (Cheltenham) (LD)
The Minister is, however, describing a process in which information is published and laid before Parliament after the contracts have been signed. If, as is likely in the case of Electricité de France, we are talking about a 30-year contract, does he agree that it is practically pointless to have scrutiny after the event, when we would in effect be locked in for nearly a generation? What exactly does he expect Parliament to do if it then looks at the published details of the negotiations and does not like them?
Michael Fallon
I will describe in some detail the arrangements for the scrutiny of any deal done or any negotiations concluded at Hinkley, but I would suggest to my hon. Friend that Parliament is pretty good at scrutinising such arrangements, including through its various Committees. Likewise, it is of course also open to the National Audit Office to provide scrutiny.
Michael Fallon
I must be fair to the House and make some progress because I am only halfway through this group of amendments. If I am pressed to give way one more time, I will of course do so.
Martin Horwood
The Minister is very generous in giving way. I would like to ask him about one aspect, which was raised by Dr Paul Dorfman of the Warwick business school, and University College, London. They have speculated that the contract now being discussed with Electricité de France could be as long as for 40 years. In the spirit of parliamentary openness and scrutiny that the Minister has described, will he clarify whether that is an accurate guess?
Michael Fallon
My hon. Friend tempts me, but I am afraid that, much as I would like to do so, I am not able to speculate about the terms currently being negotiated with Electricité de France.
Finally on this group, amendments 28 and 29 seek to stop nuclear and fossil fuel generation from participating in the capacity market, which is designed to ensure the security of future electricity supplies. To ensure the most efficient mix of capacity and to avoid favouring specific technologies, the market needs to be technology neutral and support a range of generation sources, such as from fossil fuels, existing hydroelectric and nuclear plant and the demand-side response. I can confirm, however, that we do not intend to allow plant receiving a contract for difference, including new nuclear plant receiving a CFD, to participate in the capacity market. We do, of course, expect existing nuclear plant to play an important role.
Let me deal with some of the wider issues in this group of amendments, including bill impacts, biomass, liquidity and so forth. Amendments 32 and 33 specifically relate to biomass. I would like to thank my hon. Friend the Member for North Devon (Sir Nick Harvey) for raising this issue. His amendment 32 seeks to define biomass in the Bill. Let me make it clear to him that I see no problem with the definition he has drafted, but I suggest that this would be better left to secondary legislation, which would give us the flexibility to amend the definition over time to reflect changes in technologies or, indeed, in the evidence.
In respect of amendment 33, I would not want to limit the amount of support that an individual biomass generator could receive under a CFD, or to impose a condition that biomass generation greater than 15 megawatts could receive support only if it utilised combined heat and power or carbon capture and storage. That would risk excluding efficient forms of biomass generation or forcing all new generation to include combined heat or power, or carbon capture and storage equipment, which it might not be possible to utilise effectively, and I think that it would have the unintended consequence of increasing costs for consumers.
Tom Greatrex
I expect that EDF would want the Government to be sure that the agreement that they were entering into was safe and sound, and conformed to the best possible degree of scrutiny. An expert panel could bring some of that scrutiny, rigour and analysis. That is, in the end, in the interests of not just the Government and EDF or any other company, but the whole energy sector. That is an important point that we pushed in Committee and will continue to push today.
Martin Horwood
I thank the hon. Gentleman for his support for my new schedule 1. In answer to the point just made, the schedule does not provide for a veto by Parliament on the contract for difference, but it does expect the Secretary of State to lay before Parliament written reasons why he disagreed with the advice of the expert panel, in the event of such a disagreement. It therefore provides greater assurance of scrutiny and transparency.
Tom Greatrex
I am grateful for that clarification. I hope that helps to address the point that the hon. Member for Warrington South sought to make; it also underlines the importance of the measure. It is possible and probable that the Government would come to a conclusion that members of the expert panel did not share, but as long as that was explained, I would not necessarily think that it was a problem. It may well be that the expert panel would come to a conclusion that the hon. Gentleman and others disagreed with and I agreed with, or vice versa. It is important that there is a degree of transparency and rigour in the process. That is why we will support new clause 5 and new schedule 1, if the hon. Member for Cheltenham divides the House on them.
The Minister touched on the capacity market and the amendments in the name of my hon. Friend the Member for Southampton, Test (Dr Whitehead) relating to the strategic reserve. The Minister seemed to use the same defence that we heard in Committee—that introducing a power to have a strategic reserve would send confusing signals. Indeed, his predecessor said:
“The new clause would allow us to have both a strategic reserve and a capacity mechanism. That might be the worst possible option, because it would send a confused signal to investors about the Government’s intentions.”––[Official Report, Energy Public Bill Committee, 24 January 2013; c. 329.]
The Government argued in Committee that it would be wrong to give the Secretary of State the power to introduce a new system or mechanism in future, as it would cause uncertainty. That is very different from the stance taken by the Government in the amendments that we will discuss tomorrow on 2030 decarbonisation, which give the Secretary of State a power to set a target if he so chooses, so the argument does not stand up to scrutiny. There are important points relating to a strategic reserve that I am sure my hon. Friend the Member for Southampton, Test will seek to make. I do not think that having that power in the Bill will necessarily have the impact that the Minister suggests.
A number of amendments relating to biomass have been tabled. It was the Minister’s predecessor who took through Parliament the statutory instrument dealing with the renewables obligation earlier this year. He made a number of commitments in relation to biomass, as I gently remind this Minister, in case they were missed in the comprehensive handover that no doubt took place earlier this year. His predecessor undertook to seek from those using biomass to generate power details about the sourcing of the biomass, and to make that information more widely available.
Martin Horwood
First, let me make it clear, particularly to Ministers, that I support the Bill. The attempt to lock investment in low carbon technologies into British energy markets is vital and demands an interventionist approach. In a sense, I agreed with a lot of what the hon. Member for Daventry (Chris Heaton-Harris) said in describing what are in effect subsidies and quite an interventionist approach in the Bill—something I think is justified for renewables and when bringing forward clean, greener technologies to tackle the urgent question of climate change. I also welcome the important Government amendments that try to ensure that consumers enjoy the lowest possible tariffs.
As is obvious from the debate, there is a growing chorus of scepticism about aspects of the Bill, and particularly subsidies that may be unearned. New clause 5 and new schedule 1 seek to address that issue, which is why I will press new clause 5 to a vote. I have managed to gather support for the new clause, and I acknowledge that of Which?, the Royal Society for the Protection of Birds, the Association for the Conservation of Energy, WWF, Friends of the Earth and Greenpeace, as well as my right hon. Friend the Member for Hazel Grove (Andrew Stunell) and the hon. Members for Stoke-on-Trent North (Joan Walley), for Brighton, Pavilion (Caroline Lucas), for Hove (Mike Weatherley), for Angus (Mr Weir) and for Rutherglen and Hamilton West (Tom Greatrex). I am grateful for support across the House, and for the implied support from Members close to the hon. Member for Daventry who are concerned about subsidies in general but include in that their particular concerns about nuclear power.
My worry is principally about nuclear because the subsidies in the Bill contravene the spirit of the coalition agreement. That agreement distinguished between renewables, where it implicitly accepted there was a case for subsidy, and the nuclear industry, for which it specifically ruled out a subsidy. Only a few years ago, the Labour Government line was also that there should be no subsidy for the new generation of nuclear power.
Amendment 23 and others tabled by the hon. Member for Brighton, Pavilion are specifically anti-nuclear, and there is a case to be made for distinguishing between nuclear and renewables, principally because renewables are emerging technologies. In many cases they are highly competitive, and over time they are generally getting cheaper. Nuclear is an old industry—56 years old—and has generally been getting more and more expensive. The latest new reactors at Olkiluoto—I hope hon. Members will excuse my Finnish pronunciation—and Flamanville in France are both many years behind schedule, and from the original estimates of between €3 billion and €4 billion are now heading towards estimates of more than €8 billion each—more than 100% over budget. I gather that the Finns and the French are now in litigation with each other over some of those costs and time overruns.
Mark Reckless
The hon. Gentleman refers to nuclear energy becoming more expensive, but I am not sure whether, like the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), he caught the Minister’s earlier reference to when the new nuclear contract is signed with EDF. Does he think that reference to when, rather than if, is likely to increase or decrease the price we pay for that electricity?
Martin Horwood
Perhaps courses in negotiating skills might be recommended for members of the Department of Energy and Climate Change on that front. To be fair, Ministers have made it clear that they do not intend to sign the contract with EDF at any price, but the difficulty is that we in Parliament simply do not know that there has not been adequate scrutiny.
Martin Horwood
I think Madam Deputy Speaker will catch me with her rather steely eye if I give way too many times, so I will move on.
In the UK, the nuclear industry is not very competitive and is overwhelmingly dominated by one nationalised industry supplier—Electricité de France. There are risks that we are in effect organising a massive transfer of funds from British bill payers, if not taxpayers, to a French nationalised industry of dubious profitability. The scale of that possible subsidy has been underlined by former Friends of the Earth directors, including Tom Burke who said:
“At a strike price of £100/MW and a 30-year contract life this would require a subsidy of £1 billion/year above today’s wholesale price for electricity. This would lead to a transfer of £30 billion to EDF from Britain’s householders and businesses. Should the whole of the 16GW of new nuclear anticipated by the Energy Minister be financed on similar terms it would cost householders and businesses £150 billion by 2050.”
That is an enormous commitment that we must scrutinise and ensure that value for money is inserted into the process.
David Mowat
Specifically on that point, the hon. Gentleman says that a strike price of 10 is unacceptable. Would he extend that to offshore wind?
Martin Horwood
I did not say 10, I said 100, and figures as high as 165 have been discussed and contract times as long as 40 years speculated about. The Minister has been unable to reassure us about that in the debate. It is true that high prices are talked about for offshore wind, but that is an emerging and quite competitive technology that deserves support. It is not a 56-year-old technology that has already proved to have a massive record of cost and time overruns. I am happy with supporting offshore wind but unhappy with supporting nuclear.
The effect of new clause 5 and a panel of expert scrutiny would be to ensure that all technologies negotiating contracts for difference were subject to scrutiny, including offshore wind and other renewables. New clause 5 and new schedule 1 are not specifically anti-nuclear, but they are anti-unearned subsidies. The Energy and Climate Change Committee called for that in its report, and Which? addressed it in the drafting of these provisions—I am grateful for that. Such scrutiny and transparency are particularly relevant when, as the Committee pointed out, a mature technology dominated by a single large supplier means there is little competitive pressure and the strike price naturally tends to rise in such a situation—even more so, as the hon. Member for Rochester and Strood (Mark Reckless) pointed out, if one side has almost conceded that it needs to sign the contract at the end of the process.
Alternatives have been discussed, such as scrutiny by the National Audit Office and others, and in a parliamentary debate some months ago it was suggested that the Public Accounts Committee play a role in this kind of scrutiny. The problem with all these suggestions, however, is that they investigate after the event. As I said in my intervention on the Minister, if we are talking about a contract of 20 or 30 years, it is practically useless to investigate whether it is good value after the event because we are locked into it for a whole generation. Right now, negotiations are under way with EDF for this contract.
New clause 5 and new schedule 1 would establish an independent expert panel, which would differ from the expert panel that the Government have already established. As the affordable energy campaign by Which? pointed out:
“A panel of technical experts has been established by the Government to scrutinise the evidence National Grid presents for the setting of CfD strike prices. However this panel does not have a sufficiently broad role. For example, it does not have value for money as part of its remit. The panel must have a clearly defined oversight role set out in the Bill”.
If the Government support the concept of an expert panel, why on earth can they not put it in the Bill, as defined in new clause 5 and new schedule 1? I would have thought they would have absolutely nothing to fear from that.
New clause 5 and new schedule 1 are in the same spirit as amendment 162, although I do not buy everything the hon. Member for Daventry said in support of his proposals. However, energy bills are a major cause for concern among consumers—all hon. Members know that. Whether we are proposing renewables or nuclear, a strong case needs to be made, and transparency and accountability need to be at the forefront. Consumers need a good deal as well as a green deal. The Bill does not guarantee to deliver that, which is why I shall press new clause 5 to a Division.
Caroline Lucas
I rise to speak to my proposals and give notice that I will press amendment 24 to a Division.
I am pleased to follow the hon. Member for Cheltenham (Martin Horwood), who made a compelling case, demonstrating that, even if the word “subsidy” does not appear in the document, we are talking about a public subsidy for nuclear, which goes against the coalition agreement. The bulk of my proposals on new nuclear simply seek to return us to the coalition agreement, which said that new nuclear should receive no public subsidy. Many people are hugely disappointed that Ministers are ditching their commitment so shamelessly.
A Government who genuinely want to tackle high electricity bills would not sign taxpayers and bill payers up to a 35 or 40-year contract—we do not know how long the contract will be for, but that is the ballpark figure out there. The contract would also involve paying around twice the current market price for power. As has been said, that money will line the coffers of French nuclear corporations.
If we were serious about tackling fuel poverty, we would not be going down that route, yet that is precisely what the complex mechanisms for providing financial support for nuclear in the Bill do. We should add the liability cap, underwriting, and indirect subsidies such as for decommissioning and for the unsolved waste problem. Essentially, we are writing a blank cheque for an expensive, inflexible old technology that we cannot afford and simply do not need.
A Government who were serious about tackling fuel poverty and high energy costs would instead pursue more effective ways of meeting our energy needs and decarbonising our power sector, namely through renewable energy, energy efficiency, demand reduction, and demand-side measures such as energy storage, genuinely smart grids and interconnectors.
The UK has the potential to be a massive industrial leader in renewables and efficiency—solutions that could deliver huge cost reductions and a substantial boost to the UK economic recovery, manufacturing and jobs, yet the Bill goes in the opposite direction. Moreover, the secrecy of the Department of Energy and Climate Change negotiations with EDF further undermines confidence in the credibility of the Government’s claims that the deal represents value for money for consumers.
Even if hon. Members are happy for the coalition to break its promise of no public subsidy for nuclear, one would hope that they had some interest in the Minister’s claim that any deal reached would be fair, affordable and value for money. Nuclear costs more than the alternatives and does not represent value for money. We have the opportunity to test that via the expert panel, or by giving the National Audit Office a role in ascertaining value for money, which one of my amendments would do, but Ministers do not look favourably on those proposals.
The truth is that nuclear is a mature technology that has enjoyed nearly 60 years of support. Despite that, the price tag keeps going up. The hon. Member for Cheltenham mentioned the price of nuclear in Finland and France. We should compare that with the fact that the costs of renewables are falling across the board. Last month, Citi Investment Research and Analysis highlighted that, in many cases, renewables are at cost parity with established forms of electricity generation. Recent analysis by Bloomberg New Energy Finance found that the levelised cost of onshore wind had fallen dramatically in recent years, that the best onshore wind farms in the world currently produce power as economically as coal, gas and nuclear generators, and that the average onshore wind farm will reach grid parity by 2016.
That is the point of my first three proposals. They are not anti-nuclear; they would simply ensure that Minister’s warm words on cost-effectiveness and value for money for bill payers were kept. They would also introduce transparency to a shockingly opaque process. If nuclear power is as cost-effective as we are told, I can see no reason why hon. Members would not support my proposals to ensure it. Amendment 24, which has cross-party support, would simply ensure that payments under a CFD for nuclear electricity are not greater than payments for any form of renewable generation, in terms of price per megawatt-hour and taking into account the length of the contract provided.
Amendments 26 and 27 deal with transparency and parliamentary scrutiny of investment contracts and CFDs. They are essential if the public and the House are to have any hope of deciding for themselves whether the terms provide anywhere near value for money compared with alternatives. They would require the Secretary of State to ask the NAO and Parliament to examine whether the contracts represent value for money, in line with the motion debated in a Backbench Business Committee debate on 7 February, and a letter sent recently to the NAO by a cross-party group of MPs and academics.