Low Carbon Energy Generation

Debate between Tom Greatrex and Tim Yeo

Thursday 26th February 2015 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Brady. I congratulate the hon. Member for South Suffolk (Mr Yeo) on securing this debate. As he said, it is a shame that there are not more people here taking part. It is a sharp contrast with the debates that we had in the past few weeks during the closing stages of the Infrastructure Bill. Many people who seemed interested in one particular aspect of the Bill applying to energy policy are not here today, nor are Members from some of the smaller parties represented in the House. It is a shame that they are not here to take part in this debate.

In his wide-ranging contribution, the hon. Member for South Suffolk touched on numerous important and significant issues. Apart from some slightly more partisan points that he made, there was quite a lot with which I agreed. He will probably not be surprised by that, as we have debated many of these issues in the past five years. As he said, there is a degree of consensus on them. It is always important that we do not let consensus slip into complacency, but there are good reasons to seek consensus, because the energy and investment decisions that we are discussing will last a lot longer than any of us are likely to be in this House, and longer than any Government last. They are often long-term decisions, and it is important that we debate, discuss and scrutinise them with that in mind.

I am pleased to see the hon. Member for Wyre and Preston North (Mr Wallace) in his place again. The Minister of State, Department of Energy and Climate Change, the right hon. Member for West Suffolk (Matthew Hancock) is not here. I think I might have upset him; whenever we have a debate in this Chamber or on a statutory instrument, the hon. Member for Wyre and Preston North seems to be here in his place. That is a good thing, as he is more than capable of explaining and discussing the Government’s position, and of course the Energy Minister is a busy and important man who probably has busy and important things to do elsewhere. However, he might benefit from coming to some of these debates, because they help illustrate the wide range of issues that come within his Department’s brief and that we seek to discuss.

The hon. Member for South Suffolk started by talking about climate change and the need to tackle it, mentioning the statement from the leaders of the three larger parties within the last week or so. It is important to remember that the reduction in emissions from energy, as my hon. Friend the Member for Ynys Môn (Albert Owen) said, is only part of the challenge in terms of emissions; there are also challenges in relation to transport, heating and industry. However, in energy supply and electricity, significant progress can be made. The hon. Member for South Suffolk, and my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) in an intervention, mentioned today’s announcement on the contracts for difference auctions.

The hon. Member for South Suffolk said that Britain was in the lead on offshore wind. Actually—it gives me no great pleasure to say this—it is England that is in the lead on offshore wind, because there is 20 times more installed capacity in English waters than in Scottish waters, despite the claims that are sometimes made. However, a number of projects in Scotland have been successful in the auctions, including an offshore wind project, which has been referred to. I hope that that gives us in Scotland an opportunity to make some progress. Of course, that is underpinned by the UK-wide system of support that we enjoy, which benefits Scotland hugely in terms of being able to develop renewable technologies, and which benefits everybody in all parts of the UK in terms of the power that is therefore supplied.

The discussion in the past few days on the potential closure of Longannet coal-fired power station in Scotland illustrates that we have an increasing imbalance in the energy supply in Scotland. We have to be careful to ensure that we do not end up having to import energy from England to Scotland, as is now the case for at least part of one day in six, to keep the lights on, particularly at times of high demand and when the wind is not blowing.

Members may not have been where I was between Christmas and new year, but it was very cold. There was no wind at all, and, without power from other parts of the UK coming to Scotland, the lights may have gone out, which would have been serious. That is why I maintain that we need a balanced energy mix, and that is probably the view of everybody taking part in this debate.

There are a range of low carbon technologies. Sometimes people make the mistake of assuming that low carbon equals renewable. Renewables are a significant part of low carbon technology, but not the full suite. We have had some discussion this afternoon on nuclear, which I will say a little more about shortly. There are other potential technologies, including carbon capture and storage if it can be developed, that can help to meet some of the emissions targets as we renew our generation fleet.

The hon. Member for South Suffolk touched on the attitude of business, and said how refreshing it was that in his time as an advocate of low carbon technology, the attitude of business seemed to have changed, which is to be welcomed. He will recall our debates on what is now the Energy Act 2013. We discussed various issues, particularly around longer-term targets for decarbonisation, which was advocated by non-governmental organisations with a particular interest, but a lot of businesses advocated a 2030 decarbonisation target, too. The cross-party amendment that he supported did not make it into the Act, sadly, but it was supported by people in various parties. There is need for a longer-term signal; that is significant.

Issues around the costs of offshore wind are partly to do with scale, and that is partly to do with opportunities for manufacturing and the supply chain, which require a long-term signal to invest. Although I welcome Siemens’ investment in Hull, there could be much more investment if we had a stronger sense of direction and targets that could give the certainty and predictability that Members talked about to enable investment.

The hon. Gentleman talked about lowest-cost decarbonisation. I tend to prefer best-value decarbonisation. There is value in seeking to ensure that various technologies are developed, and that we do not run the risk of missing out on technologies that can help, particularly in relation to renewables that may be less intermittent than those that are currently commercial viable. It is important that we continue, as my hon. Friend the Member for Ynys Môn said, with the research going on at the university in his constituency. Just in the past few months, at the university of Hull, I have seen software development to help cut the costs of installing offshore wind without compromising safety, for example. I have seen the energy research centre at the university of Strathclyde under the leadership of Professor Sir Jim McDonald, and, in Edinburgh, the facility for testing marine technology. Those are all good examples of the great academic and research expertise that should benefit the UK more widely. Economic benefits can come from the inevitable and desirable need to move to a much lower carbon mix for our generation supply.

The hon. Member for South Suffolk celebrated the broad consensus on new nuclear being part of the mix. He may have been slightly churlish in his comments about party political support, because he will know that Brian Wilson, a former Energy Minister and Member of this House, began the process of identifying sites and agreeing the process. It is important to get that right to give the confidence that the hon. Member for South Suffolk spoke about. It is important to maintain confidence following Fukushima, but the process was established at a time when his party leader said that nuclear was a last resort, and the party of the Secretary of State for Energy and Climate Change was implacably opposed to nuclear. I am glad that we have got to a position where there is support for new nuclear as a low carbon-based technology in the lower carbon mix, and I hope that continues.

The hon. Member for South Suffolk was right to make the points about affordability and cost. The European Commission was able to find significant cost savings in its scrutiny of the agreement between the Government and EDF. That indicates the importance of ensuring that a proper eye is kept on costs in the nuclear sector. We do not want to compromise safety, but we want to make sure that things are done effectively and as affordably as possible. If not, we run the risk of seeking technology that seems very expensive compared with alternatives. Although those alternatives do not provide the same broad range of advantages, on paper nuclear will look much more expensive. It is important that the industry takes a role, as well as regulators and the Government, to ensure that that is done in the most efficient way possible.

The hon. Gentleman spoke about the capacity mechanism. Whoever is in government post-May will have to make important decisions in relation to applicability and how the next capacity market auction happens. I still have a degree of doubt as to why existing nuclear power should be included in the capacity market, but his points about demand-side management are well made. It seems a very small amount in the first round, and that should be addressed. I welcome the fact that the Government have moved in relation to interconnection. That is another important and potentially efficient way of being able to meet some of the objectives.

The hon. Gentleman touched on the amount of gas that we need. Members here today will know that 80% of our heating comes from gas. We will continue to need gas for heating for a significant period. We will also need gas as a source of peaking power capacity, so the debate around the sustainability of our gas supplies and where they come from is an important one. I note that the Committee on Climate Change has published new information, following the debates on the Infrastructure Bill, on how shale gas might be a part of the mix, in line with climate objectives.

On the wider debate on shale, it is important to make sure that regulation is properly robust, and that the monitoring is comprehensive, to ensure public confidence before anything takes place. Also, we need to ensure that any exploration or extraction is done in the context of the wider carbon commitments. The hon. Gentleman probably agrees with that. That is how the debate should be taken forward, although I realise that that is sometimes difficult, particularly as we get closer to the general election.

My hon. Friend the Member for Ynys Môn, who is a member of the Select Committee that the hon. Member for South Suffolk chairs, made several important points. He made a point about consensus—considered consensus, as I say, rather than complacency—which is important when we are dealing with long-term policy. It is right that Government policy be properly scrutinised, but we need to do that with an eye to the long-term objective that we want to meet.

My hon. Friend spoke on a number of issues that the Select Committee has touched on recently, including the debate on the generation of low carbon technology and the importance of stability in policy. As I said, stability is important if we are to attract investment and secure the maximum possible economic benefits. He also talked about issues in his area and mentioned Anglesey energy island. The Minister knows that part of the world well, and I have been there. It is a beautiful part of the world and, from what my hon. Friend said, it is a place where there is a huge amount of creativity, and where people are coming up with some potentially good opportunities in terms of energy. It is not just about the nuclear power station; it is about a number of different things, particularly decentralised energy, which he talked about.

Issues around investment and business certainty are important. My hon. Friend was on the Committee considering the Energy Bill, which became the Energy Act 2013, and he will recall that the head of energy finance at RBS gave oral evidence to the Bill Committee, saying that the 2030 decarbonisation target was

“absolutely critical from the conversations I have with potential supply-chain investors because they…point out that it is very difficult for them to take investment to their board if they really only have visibility on three or four years’ worth of work.”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 51, Q154.]

That is where we are, because we have visibility to 2020 through the levy control framework, but not beyond that. Again, that is an important issue for the next Government to address properly when taking forward the levy control framework and considering both its structure and the amounts. It is also important in respect of the longer-term decarbonisation target.

[Mr Yeo]

I omitted to say something: the hon. Gentleman is right to draw attention to the importance of long-term predictability and support. I and my Committee believe it would help if the next Government committed to an annual rolling update of the levy control framework totals, so that it is always set for seven years ahead. That would facilitate investment decisions, and would therefore tend slightly to reduce the cost of investment and consumer prices.

[Tom Greatrex]

The hon. Gentleman makes an important point about the cost of risk and uncertainty. Whoever is in government in a few weeks needs to look quite early on at how the levy control framework will be taken forward—at both the structure of the mechanism and the amounts. It is not just about the amounts of money; it is about the way the mechanism is calibrated and taken forward. Whoever is Energy Minister in 72 days’ time, they should have the report of the hon. Gentleman’s Committee in their in-tray to consider, among other issues.

I have touched on demand-side response. The Select Committee has done important work on that. The exchange of correspondence between the Committee Chair and the Energy Minister was interesting and indicates, I hope, that there is still some opportunity for the Government to take that matter more seriously, going forward. I hope that that is also the case for the next round of capacity market auctions, which will happen towards the end of this calendar year.

The technology that we have not really touched on is carbon capture and storage. No serious modelling of our energy mix in 2030 does not include a role for fossil fuel plants and industrial processes running carbon capture and storage. CCS is a key tool that we need to meet our decarbonisation agenda. We must use it in a way that helps sustain some industrial processes that are important for our wider manufacturing base; we must not just offshore that activity. We sometimes overlook the potential cost savings of meeting carbon targets. Hon. Members will be aware of the Energy Technologies Institute estimate that states that deploying CCS could reduce the cost of meeting UK carbon targets by between £30 billion and £40 billion, or up to 1% of GDP, by 2050. That is an important piece of work.

We in the UK have a degree of academic and expert knowledge in this area. We know that lots of work is going on in places such as Edinburgh. Two projects are currently undergoing front-end engineering design studies. On taking forward the tools and mechanisms for low carbon investment, it is important that the contracts for difference are tweaked as needed so that they are appropriate for CCS development into the future, because it would be remiss of us to have two exemplar projects funded through the competition, and for nothing else to come after that. The key to that is ensuring that the contract for difference is properly applicable to CCS, which is a differently structured investment to new nuclear or many renewable technologies. It would be good for whoever is in government in a few weeks’ time to be clear about their ambition for CCS, and to seek to unblock issues that have caused some delay in the progress of CCS.

I am conscious that there has been a lot of talk about consensus in this debate, particularly with regard to the policy tools for incentivising low carbon investments. Unfortunately, in other debates in this House over the past five years, the consensus on the need for such investment has become a little bit frayed. Having only been here for five years, my sense is that, among some hon. Members, that consensus has deteriorated. It is right that the costs of decarbonisation be properly scrutinised, and that people carefully consider the potential impact of technologies in different places, but we should all resolve the matter for the future—beyond the election, for those of us who might be here. We need to ensure that consensus again, so that we can renew our generation supply in the lowest carbon way possible, and in a way that benefits the UK’s wider economy. I hope, regardless of party political differences on other issues, that this can be taken forward in the new Parliament, because it is far too important not to be.