Energy Bill

Tom Greatrex Excerpts

Wednesday 4th December 2013 Commons Chamber

[Michael Fallon]

I absolutely agree with my hon. Friend. When we are dealing with security of supply and keeping costs affordable for our consumers, we must avoid being ideological. Instead, we must be inclusive and welcome new generation from a series of sources.

The Department has looked at a scenario in which all our coal stations close by 2025, the results of which show that average household electricity bills would be about 3% to 4% higher—or about £22 to £28 higher—in the 2020s. That would require more gas plant to be built earlier to fill the gap—at greater cost, ultimately, to consumers. It makes no sense to accept an amendment that unnecessarily creates further risks to our security of supply and further increases costs to our consumers.

The measures in this Bill are about creating the right conditions for attracting the significant investment needed in our electricity sector over the coming decade. Such investment in lower-carbon alternatives will deliver an orderly, cost-effective transition away from high-carbon coal, and that should not be put at further risk.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

It is a pleasure to take part in the debate this afternoon, which may be the long-awaited final part of our deliberations on the Energy Bill—or maybe not. The House will not need reminding that we have had long, and at times detailed, discussions on this Bill. Indeed, I noticed while listening to the Minister’s opening remarks that the hon. Member for Wealden (Charles Hendry) is present, which reminded me that when the Bill was first published and subjected to pre-legislative scrutiny, it was in his hands, and it has since passed through the hands of the right hon. Member for South Holland and The Deepings (Mr Hayes) before his promotion to the heart of the Prime Minister’s office, and then on to the current Minister. We have been addressing this Bill for some time, therefore, and a couple of weeks ago we debated extending its time limit. During that debate, we made it clear that the Opposition do not wish to delay the Bill unduly because it is an important piece of proposed legislation, but although the extended deadline of the end of the year is fast approaching, we think there are some issues before us today that merit further serious consideration.

Indeed, these issues are before us today only because of consideration of the Bill in another place and, as the Secretary of State made clear when asked about his attitude to this particular measure, it is not necessarily as simple as sometimes portrayed by Members on the Government Benches. There have been a number of improvements to the Bill in relation to nuclear transparency, community energy and other areas, and much of that still needs to be done through secondary legislation and regulation, which will undoubtedly follow. In part those improvements have been prompted by amendment and debate instigated from both sides of the House and in both Houses, and it is in that context that I believe we should also give due cognisance to amendment 105 passed in another place.

Many of the Members present have faithfully stuck with this Bill through all its stages, and they will have heard me make the point that it is my personal belief that confession is good for the soul. I therefore wish to begin with a confession: I remain somewhat confused by the attitude of Liberal Democrats Members on this issue. A number of Liberal Democrat Members have taken part in our proceedings on the Bill, and have demonstrated their desire to see an improvement in our energy infrastructure and a commitment to decarbonisation. Indeed, if one refers to the speech made by the mover of this amendment in the other place, those were exactly the concerns expressed. Lord Teverson, the Liberal Democrat’s energy spokesman in the other place, is a conscientious and diligent contributor to discussions on energy policy, but I understand that the distasteful realities of coalition mean that Ministers are constrained.

The attitude displayed by the Minister today suggests that on this matter he has won the battle with his coalition colleagues in recompense for other measures we have heard about in the recent past. I wonder, however, whether this, like the 2030 decarbonisation target, is a Liberal Democrat policy that Liberal Democrat Back Benchers feel unable to vote for, or a Liberal Democrat tactic to keep those in the other place distracted. If they vote with the Government against Lords amendment 105, do they intend to vote for it again in the other place? If that is the case, the rest of us could simply leave it to the Liberal Democrats to decide between themselves, and between both Houses, which way they wish to face, or whether they wish to face both ways.

[Mr Redwood]

Given Labour’s long tradition of strong support of the coal industry, is the hon. Gentleman worried that the Bill will lead to a rapid collapse in coal demand and output in this country?

[Tom Greatrex]

No, I do not accept that and I will go on to explain why during the remainder of my remarks.

We have heard, and I anticipate we will hear more in the time available, about coal generation. Some in this House are hostile to coal-fired power. Indeed, a number of those who are most enthusiastic for unconventional gas cite its ability to use less coal as part of their case for shale. There are others who are supportive of the remaining indigenous coalfields and have strong constituency associations with coal-fired generation. A number have previously worked in that industry and I have a huge amount of respect for their knowledge and expertise. For my part, I think that coal-fired generation remains an important part of our generation mix. We are currently using, as my hon. Friend the Member for Wansbeck (Ian Lavery) pointed out, a significant amount of coal generation, particularly in the winter months. Earlier this week, the UK achieved a new generation record for wind, but coal is currently the predominant part of our generation mix.

My support for coal as part of that mix is not born of any historical romanticism about the industry so much as the positive opportunity presented by carbon capture and storage for a bright future for clean coal. That important point has been recognised by the joint industry and trade union clean coal group, which has expressed many of the concerns I have about the limited and slow progress on CCS in the past three years. That is an important point when we take comparisons into account. If Members have not had the opportunity to do so, I would ask them to consider the significant progress made in Canada on CCS. My hon. Friend, a member of the Select Committee on Energy and Climate Change, has drawn attention to the tantalising and real prospect of a commercially scaled CCS project being up and running in the early part of next year. That shows what can be done with a sense of purpose and real intent.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Is the hon. Gentleman aware of the Carbon Tracker report that shows we need to leave four fifths of known proven fossil fuel reserves in the ground if we are to have any chance of avoiding 2° warming? That being the case, Carbon Tracker analysis found that, even with CCS, fossil fuel carbon budgets would be extended by only a very small amount. If we are serious about staying below 2°, CCS still does not help us—we need to get off coal with or without CCS.

[Tom Greatrex]

I respect the hon. Lady’s opinions, but I disagree with her on that point. CCS provides us with the best opportunity to meet our peaking capacity demands alongside the low carbon base load generation. I know she is against that in relation to nuclear and supports more variable low carbon generation in relation to renewables.

My hon. Friend has been keen, clear and committed to ensuring that CCS is not just about gas, but coal too. He makes a compelling case and I look forward to the Select Committee’s report on this important issue early in the new year.

[David Mowat (Warrington South) (Con)]

I like the hon. Gentleman’s point on CCS, but is he aware that Germany is building 11 GW of new, unabated non-CCS coal, with Holland building 4 GW? Those projects have kicked off in the past year or so and those countries do not appear to feel the need for CCS. Why are countries reading this matter so differently?

[Tom Greatrex]

I am grateful for that intervention. I anticipated that the hon. Gentleman would refer to this point, because we had a rehearsal in a Westminster Hall debate this morning. I have also read the report compiled for the Department of Energy and Climate Change on coal-fired power stations in Germany that he had in the Library yesterday. He will know from the report that the plants were sanctioned in 2007-08, which was pre-EU 2020 targets, pre-withdrawal of free allowances and pre-renewables. The trigger for German investment in coal was the first nuclear phase out, and the slow build of the plants commissioned in 2007-08 were the result of a number of plants using defective steel. They are likely to operate at a loss. They are completing commissioning to make less of a loss than if they had been abandoned—that is the reality.

I accept the hon. Gentleman’s general point about Germany. There is a danger that we almost fetishise the German experience. [Interruption.] I think I have made the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker) laugh, but I did not mean fetishisation in any unclean sense. The deployment of renewables in Germany has been significant and has expanded, with more community and diverse ownership of capacity. We can learn a lot from that, but, as a German academic expressed it to me this week, with the amount of coal-fired power currently being generated in Germany, one might think that the people who hold up Germany as the green case for the future cannot read statistics. The German view of CCS has been born of opposition to storing carbon underground, and the UK is more likely to store carbon under the sea. The German decision to accelerate the phase out of nuclear was perhaps not the wisest, given the emissions targets that it too has to meet.

[David Mowat]

We can both agree that Germany’s carbon emissions are one third higher per capita than in the UK. On the report he mentioned—I did not realise he was sitting next to me in the Library yesterday cribbing my report—he is right to say that some of the projects were kicked off a few years ago. The report also states that by 2030 Germany plans still to have 20% to 25% of electricity generated by unabated coal, whereas our target, as I think the Minister said earlier, is 3%.

[Tom Greatrex]

I did not actually read the report over the hon. Gentleman’s shoulder; I looked at it beforehand as part of my preparation. It may be that I have powers of clairvoyancy, as I thought he might raise this point—he has been consistent in doing so. On his substantive point, he is right on Germany’s trajectory in comparison with the UK. Returning to the amendment, the point he rightly makes concerns the Government’s existing and continuing position, unless the Minister intends to change it. I will come on to make some remarks about how the amendment would have an impact on existing policy.

The other point I wanted to make on CCS is that the Minister’s colleague in the other place, Baroness Verma, referred to no more coal without CCS. That is also the position of CoalPro, the Confederation of Coal Producers, which said, in correspondence with the Minister, that coal-fired power had to have CCS in the long term in order to meet our long-term admissions targets, and encouraged him to accelerate the demonstration projects on CCS. So there is unanimity among those with an interest in coal that CCS is the long-term answer.

[Ian Lavery]

Everybody would agree that coal is not going away, but will be here into the future. We will be burning even more tonnages between now and 2030, yet the Minister said that by 2030 we would probably have zero coal burning. I think that that is an absolute impossibility and that we need to progress with CCS as soon as possible. Where are we with the CCS projects?

[Tom Greatrex]

I agree with my hon. Friend about the need for progress on CCS, which is why I have continued to press the Government on it over the past two years. The Minister might correct me, either at the end of this debate or on the next set of amendments, but my understanding is that there should be some news on the two shortlisted projects, if not towards the end of this year, early next year. I am concerned, however, that with just two demonstration projects, in isolation, without the continuing regime of contracts for difference and other support, CCS will become almost a curiosity, rather than a continuing and integral part of how we reduce and minimise emissions from the peak in capacity we will require for many years to come.

A number of energy companies have made in correspondence much the same point as CoalPro. That was why we proposed an amendment, adopted by the Government, to provide flexibility in the early stages of CCS projects, in the commissioning period, to maximise the chance to achieve what we need to on CCS. That amendment was tabled alongside another one, similar to this amendment, that we discussed in Committee, one part of which the Government accepted.

Let us be clear about what the amendment would do and what it would mean for coal plant. Coal plants operating in 2013 effectively have three choices. The first is to leave the plant as it is, without investment, in which case it would close some time before 2023, depending on how quickly it used the permitted hours of operation to which the Minister referred. The second is to upgrade in order to conform to the industrial emissions directive, as has been done at least once, at Ratcliffe-on-Soar, and as others are considering doing. The third is to upgrade more significantly to extend the lifetime and meet the IED stipulations.

The coal-fired power stations in the first category would be unaffected by the amendment. If they burned through their allowances quickly, operating at 55% load factor, they would still run until 2020, and because of the likely profitability of the capacity market being introduced, I suspect that many would choose to run at slightly lower load levels until 2023. The Government’s emissions performance standards, already in the Bill, will apply to the third category of plant—those that extend their lives through investment. The amendment would impact on the second group and take effect, effectively, from 2023.

The EPS limits on carbon emissions are expressed as the amount of CO₂ per kWh, but they limit the amount produced not per hour but per year. A typical power station, therefore, would be limited to a 40% to 45% load factor without lowering its emissions rate. That means running at a low load factor, to manage peaks in demand or in winter, or becoming serious about CCS. Neither choice is the end of coal generation in the UK.

From the Minister’s remarks, it seems that the Government are not persuaded by the amendment for several reasons.

[David Mowat]

The hon. Gentleman categorised the three types of power station and pointed out correctly that his amendment would apply only to one of them. We currently have about 23 GW of coal generation. To how much of that would his amendment apply?

[Tom Greatrex]

That depends on the decisions made on the first and second groups. On the third group, so far there has been relatively little investment, but I know that a number of companies are actively considering making it. They are waiting, partly for the completion of this Bill and regulations arising from it and partly for the detailed work on the capacity market, before making those investment decisions. As I said at the outset, that is why it is important we get the Bill though as quickly as possible, after considering these final points.

The Minister gave several reasons why the Government were against the amendment. The first, which he referred to almost in passing, was on technical and drafting grounds. In that regard, several points have been made by those anxious to ensure that existing investment is not disregarded, but I think that those points could be properly reflected in the regulations that would arise were the amendment to be successful. The second was that the amendment was unnecessary, because existing price control policies, notably the carbon price floor, had the same impact in effectively limiting coal plants to about 40% to 45% load factor. If so, perhaps the Minister, whose antipathy to the carbon price floor has been well-rehearsed—he has been reminded of it a couple of times recently, including this morning, so I will not embarrass him by doing it again—could help to persuade the Chancellor that the unilateral, untargeted measure of a carbon price floor is not needed because the Government could use the approach in the amendment instead.

The third argument was that the amendment would present a risk to security of supply. As the Minister is aware, the amendment would not bite until 2023, and if his boast earlier today in Westminster Hall—on investment decisions about to be announced for the enabling process—are accurate, that would give scope for any gap to be filled. I say that not least because we would continue to have that coal capacity operating in winter and at peak times through the capacity mechanism the Government are introducing.

The fourth argument concerned costs. The Minister neglected the point that the price of electricity was pegged to the price of producing energy from gas. However much coal is in the system, coal generators sell at the gas price, so bringing more coal into the system would not necessarily mean lower energy costs for consumers. It is worth restating that the EPS goes no further than the Government’s own prediction for scaling back coal in the energy mix. It is effectively a back-stop or, with some intelligent thinking, possibly an alternative to what they anticipate will happen in response to the EU emissions trading scheme and carbon price floor combined.

This morning, the Minister spoke in a debate, which I thought was a very good debate, about issues of balance in energy policy. He also spoke earlier this week, to a slightly different audience, about the order in which he saw the elements of the balance: security of supply, affordability, climate change, in that order. He is right to talk about balance, investment and impacts, and the very purpose of the Bill is to ensure we strike that balance in the most affordable and sensible way in order to secure a diverse and balanced energy supply for the future, while recognising the realities of climate change and the measures we need to take to address it, and to protect us from the vagaries of the volatility inherent in globally traded commodities. He will have seen this week’s figures from the International Energy Association on global energy demand projections over the next few years. Contrary to the impression he gave, the amendment is in line with the Government’s stated aims. It is proportionate and sensible and is certainly worthy of further consideration for inclusion in the Bill.

[Mr Robert Syms (Poole) (Con)]

I rise to support the Minister in his disagreeing with Lords amendment 105. This country has always had a balanced energy policy, with several things feeding into the mix, and I think it important that we continue that. The problem is, however, that we have not built enough capacity over the past 15 or 20 years. The changes under the Thatcher Government to the grid and the electricity market were successful in maintaining relatively low prices, but there has not been the same investment in capacity. That was made substantially worse by the last Government, who managed to produce a White Paper without mentioning nuclear power as part of that important mix.

We now face a difficulty. At some point, we have to close the Magnox stations. In addition, we have policies that are making coal less attractive, so that capacity is going off and needs to be replaced. Although there are plans and many firms are talking about building capacity, it is not being built. If we are not careful, we will have a gap, in that we will lose capacity and then have to either import or face the genuine risk that the lights will go out some time in the next several years. That is a serious thing. We can have all sorts of debates in this Chamber about the economy, quantitative easing, funding for lending and everything else, but if we cannot generate enough electricity to keep the lights on and industry running, that will be a poor indictment of the British economy.