Energy Generation

Mike Weir Excerpts

Wednesday 17th April 2013 Westminster Hall

[Andrew George]

It is a pleasure to serve under your chairmanship, Mr Gray. I was reading from a letter that I received from the Secretary of State this week in which he also justifies the option of setting a target in 2016. He refers to the other decisions that the Government need to make. I am sure that the Minister will outline those in a moment, so I shall not take up time describing them. The Secretary of State says that

“a target would not be set in isolation but in the context of considering the pathway of the whole economy towards our 2050 target, and making sure we do that in a way that minimises costs both to the economy as a whole and to bill payers.”

The problem with that is that the bulk of industry interested in energy generation and the bulk of investors interested in the future of the energy generation economy do not take the same view. I, of course, have tremendous respect for my right hon. Friend the Secretary of State; he acknowledges that it is Liberal Democrat policy to set a decarbonisation target now, rather than in 2016. That target has to be the result of a compromise, and as in any coalition Government in the world, between two coalition parties, we sometimes do not get the outcome that we desire. That is why a large number of interested companies have written to the Chancellor, rather than the Secretary of State, to move the agenda forward, which indicates the target at which the debate needs to be directed.

[Mr Mike Weir (Angus) (SNP)]

Does the hon. Gentleman not accept that one reason why companies are doing so is that they are looking now at investments into the 2020s? They want to be sure that past 2016 there will be a target and that their investment will be secure.

[Andrew George]

Absolutely. We are talking about multi-billion-pound investors who, as the hon. Gentleman rightly says, are looking decades ahead.

The UK green economy has continued to grow, even while broader economic activity remains relatively subdued. The CBI has demonstrated that more than one third of UK economic growth last year is likely to have come from green businesses. Renewable and low-carbon energy businesses are the segment of the green economy with the most stake in the 2013 decarbonisation target. Cumulatively, they generate more than £98 billion in sales and employ more than 735,000 people—more jobs than the entire UK automotive and telecoms sectors combined.

Figures from the Department for Business, Innovation and Skills demonstrate an average growth rate of 6% each year for that portion of the economy, which equates to some £7 billion of additional sales for UK plc or 6,000 new jobs each year, based on today’s figures. That growth is now placed at risk by a lack of investor certainty and confidence, which a 2030 decarbonisation target would certainly remedy and remove. Setting the target sooner, rather than later, would provide the certainty and confidence that such investors require.

I have an inkling that I am preaching to the converted, including the Minister, who has to follow the Government’s policies as a whole. The fact is that the decision has to be made across the Government as a whole. People are looking at the challenges as we go forward, and I know that he is seized of the issue. The green economy is a significant source of growth in UK plc and it needs confidence and certainty going forward. The letter of 8 October 2012 to the Chancellor from 52 leading businesses in the sector sets out a strong case. They sought a meeting with Ministers, which they have not yet secured. They say:

“Failure to act at sufficient scale and pace will undermine our prosperity; and cause us to miss out on the huge commercial opportunities associated with the global shift to a low carbon, resource efficient economy.”

Although the Energy Bill makes significant advances, for which the Government should be congratulated, the difficult compromise that they have come to needs to be teased out and debated further than we have been able to so far. I do not know how we will do it, but we should have a debate with the Department of Energy and Climate Change that includes the Department for Business, Innovation and Skills and the Chancellor of the Exchequer and the Treasury. When we debate the Bill in the Commons in the coming weeks, it will be a pity that we will not have the opportunity for a full debate with all the Departments on which it will have an impact. I hope the Minister will address my earlier question on the impact of last night’s vote.

I shall add a couple of words on an exciting source of energy generation in my constituency and plug the west Cornwall wave hub, which I raised with the Minister in questions in the House on 14 March, when he gave me an encouraging response. He went to RenewableUK’s annual wave and tidal conference in February, where he told the industry:

“Now is the time for bold next steps—moving from individual projects to large-scale arrays.”

That is vital. I welcome that the Government are supporting the wave hub. The Department for Business, Innovation and Skills is clearly taking a significant role in the future management of the project, which has been handed on from the South West of England Regional Development Agency. It is difficult to scale up to a commercial level from the prototype machines at the demonstration project in Orkney. The Government need to provide the wave hub project with more certainty and address some of the long-term investment issues, some of which feed and bleed into the decarbonisation agenda. I hope that the Minister will visit the wave hub, talk to those involved and address the funding gap, which still exists, to bring the wave devices on to the site.

--- Later in debate ---

[Mr Mike Weir (Angus) (SNP)]

I am pleased to speak under your chairmanship, Mr Gray, and to make a short contribution to this debate.

In introducing the debate, the hon. Member for St Ives (Andrew George) said that he was concerned that there might not be enough time to discuss this matter when the Energy Bill returns to the House on Report. One of the problems that many of us who served on the Bill Committee faced was the lack of detail in many areas. We were promised the delivery document in May, and that document might contain a great deal of information. I suspect that there will be pressure to debate many issues on Report, which makes it even more important that we discuss decarbonisation now.

As has rightly been said, the Government made late amendments to the Bill on the decarbonisation target. However, they did not require it to be set, or to be set in 2016, which, according to the hon. Member for Brent North (Barry Gardiner), is the earliest date it can be set. They did not even say that it should be available for 2030, which is merely the earliest date to which it should apply. In essence, there is no provision for a decarbonisation target in the Bill. Even more worryingly, when the Bill was published, the Government announced their gas strategy, which clearly envisaged a substantial number of new gas generation stations. It seems to me that the emissions performance standard in the Bill would allow for the building of new unabated gas stations, even though Ofgem has warned that bills could rise substantially until 2016 should we have a heavy reliance on gas. There could also be a reduction in energy security, so we might have to rely increasingly on imported gas.

The current carbon budget might have to be amended—not downwards but upwards—to allow for the greater emissions that are to be created. Certainly, the Committee on Climate Change has been a strong proponent of the need for a decarbonisation target and is concerned about that very issue. As the hon. Member for Brighton, Pavilion (Caroline Lucas) rightly said, the main reason for a decarbonisation target is to reduce carbon emissions; we must do that if we are going to have any chance of keeping within 2°, as she said. The Committee on Climate Change has made it clear that decarbonising power is the cheapest way of meeting our overall carbon budget. It is important that we give a clear and unequivocal message that we must continue with decarbonisation. It is remarkable that those who are calling for the target include not only those who campaign on climate change but a wide range of industries, which wish to maintain progress on climate change not for political reasons but for hard-headed business reasons. They want to be sure of the future before making very substantial investments in new green energy, and they are looking at investments into the 2020s. Long lead-in periods are involved, and decisions taken now are for massive investments that will not come on stream for many years. They need to be sure that those investments are worth while. There are mixed signals from the Government, which makes business nervous that there will not be the same commitment to renewable energy in future.

[Dan Byles]

Will the hon. Gentleman tell us exactly what mixed signals have come from the Government? We have the toughest carbon emission reductions enshrined in law in the world.

[Mr Weir]

I have just explained the mixed signals through the carbon targets, the gas strategy and the failure to set a decarbonisation target. The hon. Gentleman has argued, as Ministers did in Committee, that we have a 2050 target, which no other country has but, as the hon. Member for Brent North rightly pointed out, there is a difference from the past. There is a strong movement towards renewable energy production in Germany and especially in Denmark, which is heavily into wind. In fact, Denmark took over leadership of the wind energy industry from the UK in the 1970s, and has invested heavily in it. It is much more advanced and is clearly going down the renewable route. Professor Mitchell from Exeter university said in our evidence session:

“If you look at what has been going on just in terms of the EMR over the last two years, we have a lobby full of nuclear industry, strong movements for renewables and now a gas strategy coming out of the Treasury. It is an incredibly uncertain world for those who wish to invest, going into the long term.”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 72, Q217.]

That is the message that industry is getting. Siemens appeared before the Committee, as did Gamesa, which has said publicly that it is concerned about the matter and fears that it might affect future investment.

The Government need to make it clear that they intend to proceed with the decarbonisation of energy, as those mixed messages are causing concern. If we are to have green energy for the future, it is crucial that a supply chain is established to help us reap the economic benefits and jobs that come with it. We must not end up, as we have in the past, importing kit—turbines and whatever else—to ensure that we can meet the energy challenges.

[David Mowat]

I have not been in the Chamber from the outset, but the hon. Gentleman was the first to use the word “nuclear” in the debate. France has some of the lowest carbon emissions in Europe. Would he support an expansion of our civil nuclear programme so that we can be like France and have much lower emissions than the average in Europe?

[Mr Weir]

The hon. Gentleman obviously was not here at the beginning of the debate, because we had quite a big discussion about nuclear. He knows perfectly well that I do not support nuclear power, but that is an entirely different argument, which I will not get into at this stage, Mr Gray, as I am sure that you would rule me out of order. I will just say in passing that negotiations with EDF over Hinkley and the costs of nuclear have raised huge concerns about its affordability—never mind the other concerns that have been raised over nuclear. We have been promised details on that matter, which we will hopefully receive before we discuss the Bill on Report. Certainly, some of the things that are being reported at the moment give us huge cause for concern.

I was saying that during our debates on the Energy Bill, Ministers made the point that other countries did not have decarbonisation targets, but those countries are further ahead in creating that supply chain, which is something that we are trying to do almost from scratch. In an evidence session, David Handley of Renewable Energy Systems said:

“The value of a 2030 decarbonisation target, as we heard earlier, is in providing that greater signal to the supply chain, to the entrepreneurs who are looking to invest in new businesses and to the people who are developing projects that there is going to be this long-term market for the products that they are delivering.”—[Official Report, Energy Public Bill Committee, 15 January 2013; c. 57, Q168.]

That point was also made by DONG Energy. As the hon. Member for Brent North said, it saw 2020 as a cliff edge for investment. Given the long-term commitment required, that is a serious drawback.

Offshore wind has, I believe, a strong and vibrant future. There are plans to install up to 10 GW of capacity in Scottish waters over the next decade, including three projects off the coast of Angus in my constituency. They promise not only employment in renewables but a boost for the port of Montrose, which has good prospects for supplying and maintaining wind farms in the future.

Many more sites are being looked at for deployment in the 2020s, alongside commercial wave and tidal generation. We must ensure that we send a clear and unambiguous message that we want those developments and will continue to push the decarbonisation of our energy sector. If we fail to do so, we will not reap the economic benefits that are available in the sector. As the hon. Member for St Ives noted, much of the growth at the moment, although low, is coming from green industry. If we fail in this area, we will limit even further our prospects for growth in future.

--- Later in debate ---

[Gregory Barker]

I am afraid that I will not give way, because I have very little time to cover all the points.

It is interesting that I do not think that I have heard anyone in this debate refer to consumers, to consumer bills or to the ability of the British taxpayer to shoulder the subsidies that are necessary to pay for this agenda. As hon. Members know, I am a great champion of greening our economy. I am one of the few Members present who played a part in the passage of the Climate Change Act 2008, which is one of the proudest moments of my parliamentary life to date. I am absolutely committed to that, but we have to reconcile the difficult challenge of cost and delivery.

The Prime Minister has been emphatic. I am glad that my hon. Friend the Member for St Ives mentioned that we are the greenest Government ever. That was the Prime Minister’s pledge when he visited the Department of Energy and Climate Change on day four of the Government, and he reiterated the pledge only a matter of weeks ago to the Royal Society:

“we are in a global race and the countries that succeed in that race, the economies…that will prosper are those that are the greenest and the most energy-efficient… it is the countries that prioritise green energy that will secure the biggest share of jobs and growth.”

There is no fundamental difference between the two sides of the House in our direction, destination or determination to meet the goals that are embedded in the Climate Change Act. In fact, there is not so much between us on the decarbonisation target, either. We have tabled an amendment to the Energy Bill that will allow us to set a decarbonisation target alongside the fifth carbon budget, and I will go on to address that in detail.

My hon. Friend the Member for St Ives mentioned marine energy in his opening speech. I am extremely proud of the huge leaps forward we have made on that exciting technology over the past three years with the establishment of the UK’s first marine energy parks—first in the south-west and now in Scotland. I am extremely proud of that investment. Our commitment in the last review, despite all the pressure on public finance and energy bills, was to increase substantially the renewable obligations certificates that we are giving marine, to give it the investment punch that it needs.

My hon. Friend kindly invited me to visit Cornwall and see FaBTest. I will be there next week. I must admit that it was already in the pipeline, but he can take back the good news this weekend and tell every Cornishman good and true that the Energy Minister is coming.

[Mr Weir]

What about Cornishwomen?

[Gregory Barker]

Quite right. I stand corrected. Although I am blowing my own trumpet, the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) chided my Department for its turnover in Energy Ministers. Coming from the Labour party, that is a bit bleeding rich. Under the previous Administration, there was a revolving door on the Department. I think I am now the longest-serving Energy Minister since the previous Conservative Administration—