Electricity Market Reform

Paul Flynn Excerpts

Thursday 16th December 2010 Commons Chamber

[Chris Huhne]

I thank the hon. Lady for her comments and particularly for the helpful way in which she couched them. Of course we will be open to Opposition comments on the details of this matter through the consultation period and further on into the legislation. We shall need £110 billion of investment in electricity infrastructure and a total of £200 billion in energy, and one of the most valuable things we can tell investors is that there is, although I do not want to overstate it, substantial cross-party consensus between the coalition parties and the Opposition. That is very valuable in attracting big foreign investors in particular because it means that in the period over which there can be a payback of investments, which might be 20 years, foreign investors can be assured that there will be real stability of policy. I very much value that consensus and very much want to work with the hon. Lady to make sure it is there.

Let me deal with the hon. Lady’s concerns about consumers, which are absolutely appropriate. We have to make sure that business consumers and households in Britain get the best possible deal in supplies of energy—in this case, electricity. A fundamental part of the policy proposal that I hope she will welcome is that by providing investors with the certainty of a feed-in tariff, with a contract for difference, we will attract investment from the big six electricity companies and attract into the market other players—new entrants—to make it more competitive. We will also unlock the pools of capital that various Members have been concerned will not be available without this framework. It is very much part of our thinking that in trying to deal with the underlying problem of a more competitive market we should get more players into the market, because that will ultimately give the best assurance to consumers that we will get the best possible deal.

The hon. Lady asked about the shorter-term view. I made it clear in my statement that this package will deliver lower-cost electricity for consumers than would otherwise be the case on a 2030 view. We will redo the estimates for overall energy policy in the annual energy statement. As far as I can see, on the current basis there is no reason to expect that to change. In the summer, we said that with the overall package of policies we had set out, if one takes into account the energy efficiency packages and the likely reduction in bills as a result, consumers would pay about 1% more in 2020 than would otherwise be the case. That figure involves a fundamental assumption that the oil price will be $80 a barrel at that time, with a corresponding gas price, but oil prices might be substantially higher; obviously, spot oil prices are substantially higher today. The break-even point for consumers is $100 a barrel, and if the price goes north of that the policy framework we are setting out will leave British consumers paying less than if they were reliant, over the relevant period, on the volatility of the world oil and gas markets. That is fundamental. We are dealing with conditions of considerable uncertainty about the future, particularly in the oil and gas markets. We have heard today that the US Attorney General is taking a case against BP as a result of what happened in the gulf of Mexico. We know that there are rising risks and costs in extracting fossil fuels and we have to take that into account when we set a policy that can protect British consumers from the vagaries that might come.

The green investment bank is going to be a clear part of our thinking in dealing with the enormous investment challenge, and Ministers are reviewing the exact market failures that we are attempting to address with the bank. It is a long-term project and the most important thing, when we talk about decarbonising the UK economy, is not to get up and running for 1 January next year a green investment bank that might be half-baked, but to get it right. This institution has to be with us for the long term, right through to 2050, providing lending to help decarbonise the economy over the long haul, so I would much rather get it right than do it early and get it wrong.

I take on board the hon. Lady’s point about the need to deliver. I shall not rub salt in the Opposition’s wounds about the 13 years they were in power, but I remind her that we have inherited the position of being 25th out of 27 EU member states on renewable energy. [Interruption.] The hon. Member for West Ham (Lyn Brown) might chunter about that, but these are the facts. I am not making any comments about them, but am merely saying that we are 25th out of 27 EU countries and we need to improve that position.

The hon. Member for Hackney South and Shoreditch (Meg Hillier) also asked us to make available our modelling basis and I am very happy to do that. Indeed, the models that we used for the 2050 pathways study are already available on the Department’s website. Any Member of the House will find that function very user-friendly; it is Professor David Mackay’s favourite executive toy. Users can decide they want more renewables, a little less nuclear, a little more nuclear or a little more clean coal, put the change in and find out what the consequences would be. We aim to be extremely open and transparent in our whole process.

On the European Parliament, the reality is that we will determine these matters in this Parliament, not the European Parliament. I note that we have an overwhelming majority, judging by the recent vote on the regulatory justification for nuclear, for the sort of package that we have set out.

[Paul Flynn (Newport West) (Lab)]

On a point of order, Madam Deputy Speaker. Is it appropriate, given what the Speaker has said about short statements, that the Secretary of State’s answer to a single question has been longer than the original statement?

[Madam Deputy Speaker (Dawn Primarolo)]

Strictly speaking, that is not a point of order, but while I am on my feet let me say what I was going to say when the Secretary of State sat down. I am sure that the House is very grateful for his long and full answer, but I sincerely hope that we will revert to short questions and short answers so that everyone can get in.

--- Later in debate ---

[Chris Huhne]

The hon. Gentleman is right. Some issues can be tackled at national level; one planning issue on onshore wind surrounds aviation impacts and radar, and we should obviously lead that at national level. But I refer him to the answer that I gave previously: local people should be able to determine local planning and, therefore, local impact. If they are on board, and if they are brought into the proposals, renewable projects go ahead. That is our experience throughout the UK, and that will be the right way forward in getting planning approval for renewable projects.

[Paul Flynn (Newport West) (Lab)]

On what day in May was the right hon. Gentleman bewitched by the Pied Piper of nuclear power into learning to love a nuclear stealth tax? He and his party used to know that nuclear has never delivered on time or on budget, and that the only new nuclear power station in the world is already three years late and £4 billion over budget. Is it not irrational optimism for him to believe that it will be different here?

[Chris Huhne]

The hon. Gentleman is a careful student of the economics of nuclear power and is well aware of the track record. When he looks at the consultation document, he will see that we are providing greater revenue certainty for all low-carbon sources of energy. We provide no subsidy to construction for any particular sort of energy, and no subsidy to any particular type of energy on the basis of that energy’s characteristics. That means, for example, that if someone comes forward wanting to build a new nuclear power station, all the risks of construction—all the risks of delivering on time and to budget—fall on the investor, not the UK Government. If, on that basis, investors come forward, and they assure me that they will, I believe we will have new nuclear power stations, but if there is any delay in construction, that cost will fall to the investor, not to the UK Government.

[Paul Flynn]

On a point of order, Madam Deputy Speaker. In view of the unsatisfactory nature of that reply, can I give notice that I wish to raise this issue on the Adjournment of the House?

[Madam Deputy Speaker]

The hon. Gentleman knows full well that that is not a point of order, but he has got his point on the record at least.