Martin Horwood
Main Page: Martin Horwood (Liberal Democrat - Cheltenham)
Mr Yeo
That is certainly one of the reasons for the amendment. It would help to create more jobs in the UK if the supply chain companies received reassurance in that regard.
Even among hon. Members there are signs of enthusiasm for my amendment. At the Liberal Democrat party conference last September, the Chief Secretary to the Treasury proposed a motion to establish a
“target range of 50-100g of CO2 per kWh for the decarbonisation of power sector in addition to existing carbon reductions.”
If every Liberal Democrat Member of Parliament who supported the Chief Secretary on that day were to join me in the Aye Lobby at 4 o’clock, the amendment would be carried. I am sure that all my hon. Friends on the Liberal Democrat Benches are keen to take this opportunity to strengthen their well-known reputation for consistency.
Martin Horwood (Cheltenham) (LD)
How did the debate go at the Conservative party conference?
Mr Redwood
I remind the House that I have declared in the register that I offer advice on global economies to an investment business and an industrial business.
I oppose the amendments in the name of my hon. Friend the Member for South Suffolk (Mr Yeo) and others, and I do so primarily because it is high time that this House heard a voice for the consumer of energy. I am extremely worried about energy prices. The Labour Government did some good work, highlighting the serious problem that they called fuel poverty. They rightly identified the fact that at the time of their Government many people in our country found it difficult to pay the energy bills because they were already high. In recent years—the end of the Labour period and now under the coalition—those bills have gone up considerably further.
People facing fuel poverty have also had the great problem that in recent years we have had a succession of particularly cold and bitter winters, with heavy snowfalls and ice, and a series of rather cold and damp summers. Although I will not go into the arguments about how we can measure rising temperatures and how much global warming we are actually experiencing, the cruel fact of life for people facing rising energy bills is that they need to use more energy because it is so cold and they need to keep warm. We even had snow and frost in May this year in England, at the very time that energy prices were being put up, partly by market forces and partly by a deliberate act of policy by the Europeans to try to make energy dearer to put people off using it. We need to take on board the fact that there is a serious problem of people affording the heating bills.
This is doubly damaging in an economy that is experiencing a fragile and modest recovery and needs a faster recovery. Energy is taking too much of the family budget. At the very time when we want people to have more money to spend on other things to create demand and jobs around the economy generally, a large chunk is being taken up by those rising energy bills, both because of price and because of the need to burn more as a result of the climate conditions outside. We also see that there is an additional problem, which my right hon. Friend the Minister referred to at the end of his speech: British business now faces considerably higher costs for the energy it needs to use than competitor businesses in America or throughout much of Asia. It should be a grave worry to everyone in the House who is concerned about jobs and about the creation of more industrial activity in Britain that we are deliberately creating very high priced energy in this country, which is a major impediment to industrial development.
I welcome the Chancellor’s statement some time ago that he wished to see the “march of the makers”. I welcome the idea that we need to build up stronger and bigger industry to go alongside the successful job creation that we have had in financial and professional services and related areas. It would be good for our economy to have a more diverse and flourishing structure. We have some very good industrial businesses, but we do not have enough of them and the sector is not as large as I think any major party in the House would like to see.
So if we are all serious about wishing to have an industrial strategy that works, and if we are serious about wanting to create a climate in which business can flourish and more industrial jobs can be created, surely we must tackle one of the main costs that business faces—the cost of energy. The Government are well aware of the problem and have responded to lobbying by high energy-using industries, such as steel, glass and ceramics, where energy is a massive part of the total cost because extreme heat is applied for the transformation of the materials in the process. The Government are providing some kind of subsidy to those heavy energy users in a desperate attempt to prevent some of those factories and process plants closing, but even with the subsidy the production costs are much higher in Britain than in America, China or other parts of Asia, so we are still at risk of losing more of that business by closure, and we are certainly at risk of not attracting the new investment in those types of industry that we might like as part of our industrial strategy.
The Government also need to understand that it is not just transformational processes such as steel or glass production that have an energy cost problem; it is more or less any kind of industry with an automated plant. If we wish to be competitive in a western country against countries in Asia which have relatively low labour costs, we need to automate. We need to have a very high degree of machine power so that all the mundane jobs can be done by intelligent machinery to keep costs under control. But we lose the advantage of being able to automate and use high technology if the cost of the energy to drive the machinery is so uncompetitive. We will soon lose the advantage as well because a country such as China is industrialising not only very rapidly, but with the application of far more technology and labour-saving equipment going into its factories. So we have a double problem in that such countries are automating and they have much cheaper energy.
I urge the Government to take our problem of energy prices extremely seriously. American energy prices are typically a third lower than United Kingdom energy prices, so if energy is 10% or 20% of the cost of the given process and the given industry, we can see immediately that there is a 3% or 6% cost advantage just from the energy bill, which in very competitive world markets can be an important distinction. When we look at the success that America is now having in building her recovery longer and faster than the European countries, it is clear that part of that success comes from the accent placed on cheap energy. The United States of America has not put through legislation similar to the legislation passed in 2008 by the Labour Government—legislation that I did not feel able to support at the time because I thought it would be damaging to prosperity and would put up our energy bills too much—and we see that America is also reaping the benefit of the shale revolution. I hope that the words of the Prime Minister and the Energy Minister will result in action, because the United Kingdom has an opportunity with shale as well, but America not only has found the shale and is keen on the shale, but is now extracting such large quantities of shale gas that it has much, much cheaper gas prices than the United Kingdom, of benefit to consumers and American industry.
We should be aware of the fact that when countries assembled to try to take on the Kyoto work of carbon targets, it was noticeable that only the European countries were left in the game. Even Japan, which had obviously been the host to the original Kyoto proposals, was no longer willing to sign up to such targets.
Martin Horwood
Is the right hon. Gentleman aware, though, that as part of the United Nations framework convention on climate change process, China has accepted carbon intensity targets for its economy?
Mr Redwood
China is allowed to have a totally different approach to carbon targets because it is a growing economy. I have a great deal of sympathy with its need, but China is not being asked to cut its carbon emissions in the way that the United Kingdom is being asked to cut emissions. When the Kyoto process was last looked at to try to get much tougher targets across the world, the only countries that were still prepared to be in the game were the European countries, so the European economy as a whole on the continent is saddled with dangerously high prices and restricted ability to generate power in different ways, and the United Kingdom has the particularly virulent strain of this disease because of the House’s passion to legislate for dearer energy.
Ian Lavery (Wansbeck) (Lab)
I understand fully the call in the amendment for the decarbonisation of the energy sector, and for a target to be enshrined in the Bill. What the target should be and whether it would be realistic is debateable. There have been wide differences and many suggestions about what an achievable target might be. If the target is too ambitious, it will be impossible to achieve. We need to bring some form of reality into the debate and forget the pipe dreams of what people would love to see. This is about what we can actually achieve between now and 2030, and between now and 2050. Is it achievable to decarbonise the energy sector to the degree of 50 grams of CO2 per kWh? That is one suggestion, and I am sure that plenty of Members believe that that is achievable. I find it difficult to believe, however.
Unlike the hon. Member for Edinburgh West (Mike Crockart), who had a shopping list of issues he wanted to discuss today, I want to focus on carbon capture, coal burn and gas burn—fossil fuels. I want to accentuate the positives in burning fossil fuels with carbon capture. I believe, and the expert advice shows, that it can contribute greatly towards an agreed decarbonisation target. The trick is to transfer the high-carbon electricity generation to low-carbon electricity generation. [Hon. Members: “How?”] Carbon capture and storage is the answer. People seem to forget that fossil fuels provide 70%—not 7%, but 70%—of the UK’s electricity supply, and that is set to continue for the short and medium term. Coal burning is set to increase not just in the UK, but across the world, over the next 20 to 30 years. For whatever reason, however, the role of coal, particularly in the UK, is often pushed aside, swept under the carpet, totally ignored. This is done deliberately in the Commons by many Members of Parliament, despite the fantastic role that the miners of this country have played. They have worked hard for many generations, producing the wealth and fuel to generate this country, so it is unacceptable that they should be ignored.
Only three years ago in 2010, the UK market demand for coal was roughly 54.1 million tonnes. That is what we burned in 2010. During the same period, only 18.4 million tonnes were produced here, with a rough 50:50 split between open-cast and deep-mine sectors. Beyond doubt, then, a lot of imported coal is required to meet the nation’s demands. Coal imports have easily exceeded indigenous coal production since 2003. Coal is not going away. It is here to stay, in the UK and globally. We will not be able to persuade the likes of China, India and America to stop burning coal; they are burning coal unabated right now—that is a fact of life.
Martin Horwood
There have been quite a few references to China, but China has set very ambitious carbon-intensity reduction targets, including a 45% reduction in carbon intensity by 2020, so actually it is stimulating huge investment in renewables and low-carbon technologies, including carbon capture and storage. The hon. Gentleman must see the potential in that strategy as well.
Ian Lavery
Absolutely. I fully agree with the hon. Gentleman. The Energy and Climate Change Committee, of which I am a member, visited China the year before last and saw the potential in China. Much was said in the meetings we had, but I would like to see happening on the ground what they said would happen in the future. It is looking not to decarbonise, but certainly to make huge reductions in emissions, and again I will want to see over perhaps 10 years what achievements can be made. I hope that it happens.
Martin Horwood
On the latest figures, China is ahead of target on those carbon-intensity reductions, so it is happening on the ground as well.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
The Minister raised a number of issues. I wish to focus on his points about demand reduction and community energy, before handing over to other hon. Members who wish to speak on this group of amendments.
Let me begin by saying how wonderful it is finally to hear what the Government propose to do about reducing demand for electricity. When the Bill was first published in May last year, many industry experts rightly observed that there was a gaping hole where the answer to that question should have been. We spent many hours in Committee and on Second Reading discussing and debating how we generate energy, but not how we could use less of it in the first place. A fortnight ago, the Government produced new clauses 11 and 12. I will come to their merits in a moment, but first I must tell the Minister that these proposals should have been brought forward much sooner. I know that the right hon. Gentleman agrees with me about that, because when we debated the need for demand-side measures in Committee at the end of January, he said:
“There can be no proper discussion and scrutiny of electricity strategy or really forward-looking ambitious Government energy policy without the inclusion of our plans for demand reduction.”––[Official Report, Energy Public Bill Committee, 29 January 2013; c. 345.]
He was absolutely right. It was challenging, however, that the Government did not have any demand reduction plans in place at that time.
Martin Horwood
Has the hon. Lady not noticed the launch of the green deal, which is possibly the most significant energy efficiency initiative in British history? I have to say that, for those of us who remember the chaotic system of energy efficiency grants that existed under the last Government, it compares extremely favourably with them. I think she is being a little ungracious about this Government’s energy demand reduction strategy.
Luciana Berger
We wanted properly to scrutinise the Government’s plans in Committee. We have only recently had the opportunity to do so, and we have just heard what the Minister said. I remind the hon. Gentleman that pay-as-you-save efficiency scheme pilots were started under the last Government. We are waiting to see exactly how the green deal is doing. We await the Government’s figures, and we expect to see them at the end of June.
During pre-legislative scrutiny, the Energy and Climate Change Committee concluded that Ministers were failing to give enough priority to demand-side measures. As I have said, we still had no firm proposals on Second Reading. In Committee, the Minister would not confirm whether the Government would definitely seek to include demand reduction amendments in the Bill once his consultation had concluded. Now, at long last, we have the results. We received them two weeks before Third Reading and a year to the day since the Bill was first published.
The Minister has now said that he is minded to pilot measures to reduce electricity demand through the capacity market, and we welcome that step. However, the Government’s own response to their consultation accepted that that course of action still presented a number of uncertainties. A number of questions remain unanswered. I am sorry that the Minister will not have an opportunity to answer them, but I would be happy to give way if he would like to intervene on me. It would be helpful to know, for example, exactly how the pilots will work and by how much the proposals will reduce electricity demand. Those are currently complete unknowns.
The Government’s forecasts from before the new clauses were published showed that current policies would reduce electricity demand by 59 TWh in 2018 and by 68 TWh in 2030. That energy saving would be dwarfed, however, by an additional 92 TWh of untapped potential saving that could be achieved by 2030, according to analysis by McKinsey. That could be the equivalent of a 25% reduction in total electricity demand, representing a colossal saving. It is unfortunate that the Minister could not share with us the Government’s estimate of by how much the capacity market could reduce electricity demand over the same period.
Many people have also raised serious concerns about how effective the capacity markets can be in rewarding energy saving. In the United States, for example, a similar policy in Massachusetts resulted in energy efficiency projects receiving just 3% of total capacity payments. Despite complex design, 70% of capacity payments went to existing fossil fuel generation instead. Were the Government aware of that scheme? If so, what lessons have they learned from it?
The way in which new clauses 11 and 12 are drafted provides the mechanism for pilots to happen, but they do not offer any further detail. I listened carefully to the Minister’s remarks, but there were a lot of gaps. The proposals do not specify what measures will be piloted, or whether more than one measure will be trialled. We are no clearer, following his remarks, as to when the Government are planning to launch the pilot or when they expect the first capacity auction to take place.