John Bercow
Main Page: John Bercow (Speaker - Buckingham)
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I thank the Secretary of State for advance sight of his statement. We are pleased that he agrees with his predecessor, my right hon. Friend the Member for Doncaster North (Edward Miliband), about the need for reform. The Government have already sent some signals about the future shape of the UK energy market.
The Secretary of State should be congratulated on standing up to the fuzzier elements of his party with his U-turn on nuclear, which he no longer happily describes as a “failed technology” but says is an essential part of the UK's getting off the “oil hook”. The Government’s eventual acceptance of the recommendation of the Committee on Climate Change in its fourth carbon budget was largely welcomed by most people, even if his colleague the Business Secretary was described as “squirming in his seat like a schoolboy” at the Cabinet meeting which discussed it.
However, the Government have failed to deliver on many fronts since the Secretary of State for Energy and Climate Change took office. Recent ill-judged Government intervention in the energy market has already led to a hiatus in energy investment and uncertainty across all sectors. The solar feed-in tariffs fiasco destabilised the solar sector and sent shockwaves through other renewable sectors. Companies, including RWE, are considering pulling out of the UK because of the uncertainty caused by the Government in the investment landscape. That was underlined by the Pew Environment Group’s report, which showed that the UK dropped from fifth to 13th in a global ranking of countries for green investment. We have seen a green investment bank failing to deliver the necessary investment now and being criticised by the CBI director general, John Cridland, who warned that the bank
“certainly won’t work if it needs the Treasury’s permission to blow its nose.”
There is a question mark over whether the Secretary of State’s proposals will deliver. The track record is not good. We believe that the Government must meet some key tests if reform is to work. A new market needs to be greener and to create certainty for industry, room for innovation in emerging energy solutions, and crucially, a good deal for consumers both as users of energy and as taxpayers, and it must deliver the necessary investment in the UK energy sector for security of supply.
In the White Paper, we have a mixed bag of measures. There is an emissions performance standard—a policy that the Energy and Climate Change Committee considers, at the level set,
“would have no material impact and is therefore pointless.”
I could say rather uncharitably that that sounds a little like a summary of Government green policy. Certainly, it is not popular, and already industry is puzzled about exactly what it will achieve. If we are to have an emissions performance standard, the Secretary of State needs to explain to us why it is any more than green window dressing. How will the transition to carbon capture and storage be accommodated within this measure, when we are still awaiting not only the sign-off on project 1, but the future Treasury and European funding for projects 2, 3 and 4?
The proposals also include a carbon floor price, although we knew about that because it was announced in the Budget independently of these proposals—a running theme for the Department, which most of the time seems to be run by remote control from 11 Downing street. The Department has only just woken up to the impact that this tax grab on industry and its potential to export businesses and their emissions overseas will have on the UK industrial landscape. Better late than never, but it is catch-up.
Two measures are being consulted on. A contract for difference will pump public money into supporting more expensive energy production—a mechanism which we hear from the Secretary of State will encourage other users into the market, but with such complex administration, we worry, as do many businesses, that small suppliers and new investors will struggle to keep up. We also see proposals for a capacity mechanism and energy auctions, the devil of which will be in the detail. The right hon. Gentleman should expand on which technologies will deliver most benefit, what the costs to the UK will be, how the consumer will afford it, and how we will avoid expensive stranded assets in a new dash for gas.
Investors need confidence, certainty and clarity. The White Paper could help, or it could herald an era of overly complex and overlapping measures, paid for by the taxpayer, that will lead to higher than necessary energy bills. Customers are currently getting a raw deal, so any change must support the consumer. The existing big six energy companies will undoubtedly need to provide in this era of new energy generation, but we need to free up the suffocating oligopoly that stifles real competition from new energy investors. The prize is driving down the cost of new energy generation and prices and increasing real choice for consumers. The Secretary of State, who has been insouciant in the face of rising energy bills, should stop worrying so much about his next meeting with the big six chief executives and start worrying a bit more about the consumer.
Will the Secretary of State please tell us exactly when the legislation will come before Parliament and when he expects the reforms to be implemented? We already have the delayed Energy Bill circling Parliament and a renewables road map announced today: he cannot keep stacking up policies like waiting aircraft. I am pleased that he is convening a group to look at decentralised energy, but can he give us more details on that? So far his Department has been rolled over by the Treasury at every turn, so could he tell us what these changes will cost the taxpayer and what he is doing to protect the public from unreasonable price rises? How will the Government decide when to conduct energy auctions, and how will he ensure that all players will be able to bid in order to reach this new dream world he talks of? Apart from the now delayed green deal, what is his strategy for reducing energy demand?
Mr Speaker
Order. I am sure that the shadow Secretary of State is bringing her remarks to a close, because she has exceeded her time.
Meg Hillier
We cannot afford the dithering, delay and postponement that has characterised Government policy so far. We want to support and work with the Government to achieve these outcomes, but we need answers on those points from the Secretary of State.
Mr Speaker
Order. A great many right hon. and hon. Members are seeking to catch my eye, but there is heavy pressure on time and I must therefore appeal for single, short questions without preamble and for comparably pithy replies from the Secretary of State.
Mr Tim Yeo (South Suffolk) (Con)
As the task of attracting huge amounts of new investment into new low-carbon electricity generating capacity is extremely urgent, can the Secretary of State assure us that the passage of the necessary legislation will be a top priority for the Government in the next Session? Will he ensure that as much clarity as possible about the levels and manner of operation of the feed-in tariffs, with contracts for difference, will be available as soon as possible to reassure investors that it is a new, stable and predictable regime?
Chris Huhne
The right hon. Gentleman makes a very good point; he is expert in this area. The Energy Bill, which we hope will achieve Royal Assent in the autumn when we come back from the recess, contains provisions that ensure that we are able to be informed about these measures and ensure greater security of supply. He will have read in the press about long-term arrangements being contracted, for example, between Centrica and the state of Qatar. We have a number of these longer-term arrangements. Security of supply is important in physical terms, and we also think about it in price terms. The 30% increase in gas prices over the past year has been a significant shock to a number of consumers. One of the reasons we want to get to low carbon is to protect the economy and consumers against that sort of shock.
Mr Speaker
I always enjoy reading the Secretary of State’s book, but on the whole I prefer the abridged to the “War and Peace” version.
Tony Baldry (Banbury) (Con)
As a Minister in the Department of Energy at the time of the privatisation of the electricity industry, I have watched with concern as a market that had 13 participants at that time has shrunk to just six under Labour. How will my right hon. Friend’s proposals drive competition?
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Secretary of State agree that a targeted capacity mechanism almost inevitably becomes untargeted as it chases lagging investment? That inevitably also leads to overcapacity, at a high price. Does he accept that a representation market, coupled with interconnection, storage and demand reduction arrangements, goes with the grain of a low-carbon energy economy and the electricity market reform measures that he is proposing? If he does, why is he holding a further consultation on capacity mechanisms outside the time scale of his main proposals? Does he have no idea what a capacity mechanism might look like, and is someone twisting his arm in the whole process?
Mr Speaker
I was not very good at maths at school, but I counted five questions there. I know that the Secretary of State will provide a pithy reply.
Chris Huhne
There is a clear description in the White Paper of the different models on which we are consulting, and we are clear that there are essentially two families. One is the strategic reserve, which is effectively bought by the Government and released into the market at a clear trigger point, and the other is a wider range of capacity that is bought through a generalised mechanism for the market as a whole. Either of those targets a particular level of spare capacity, because we have to avoid black-outs in future. If the hon. Gentleman reads the detail of the proposals, I think he will find them compelling. We will reach decisions by the end of the year.