Energy Bill

Viscount Ridley Excerpts

Tuesday 2nd July 2013 Grand Committee

[Lord Dixon-Smith]

My Lords, I hesitate to intervene in a debate between titans but I wish to speak as an innocent customer. I have been paying my fuel bills for my business for three months short of 55 years and have seen the price go up 6,000% in that time. If I have seen the price rise like that, so has the community. The first tribute I must pay is to the community at large for its enormous adaptability over very difficult and rapidly changing times.

I come back to the amendment we are discussing. I was delighted to listen to my noble friend Lord Jenkin, who for once was on the same side of the fence as me, because I do not think that the amendment is appropriate, but perhaps for slightly different reasons than have been mentioned. I wholly support the target in the Climate Change Act. We already have a basket of technologies which, if put in place, would enable us to hit that target. Perhaps the necessary initiative and determination on the part of some of the participants in the debate are not there but the technologies already exist. What I do not know, of course, is what the unknown unknowns are, to borrow a phrase from a rather notable American.

I want to talk about a known unknown which has changed the nature of the game since the Climate Change Act was passed, and that, of course, is shale gas. I am well aware that shale gas emits carbon dioxide if you use it to generate electricity, but one of the things that has been going on in the background in this country for a very long time is consideration of the use of carbon capture and storage with the intention, if possible, of trying to keep the coal business in being. However, the fact of the matter is that the emissions from a coal-fired power station are so appalling that the cost of CCS is extremely high, the energy penalty is also extremely high and it is not going to work. The cost of cleaning up the emissions from a gas-fired turbine, however, is much less because the emissions themselves are cleaner, the cost of emissions per unit of electricity is already that much cheaper and you can get those emissions down virtually to zero. Therefore, if we had those supplies—that is the big question to which we do not know the answer—we would have what I choose to call a very useful potential interim technology. I put it no higher than that. Setting short-term targets now could lead us into a situation whereby we are forced to invest in high-cost technologies in order to meet these short-term targets. I do not think that is wise.

We are not dealing just with investor confidence here. It strikes me that the energy suppliers are playing a very good game of poker with us at the moment, which I think we should resist. We also have to deal with customer confidence. The difficulty we have with the whole question of shale gas is that we do not know yet whether we have it, can extract it and use it. To force a decision on the assumption that it is not there, because that is where we started the debate, would be totally wrong. We should not rule out possibilities. Another reason why I am against short-term targets is that we also have to face the possibility that there may be other game-changers out there that we do not know about. We shall have to be able to take them into account as we go along, so my personal prejudice is for keeping things as uncontrolled as possible for as long as possible, bearing in mind the absolute necessity of meeting the target in the Climate Change Act, which, as I say, is capable of being met if we have the political determination to do it.

I am sorry to say to my good friend Lord Oxburgh, because he is my good friend, that the amendment is one step too far or one step too soon—you can take your choice.

[Viscount Ridley]

My Lords, I, too, rise to oppose the amendment moved by the noble Lord, Lord Oxburgh—although I greatly appreciate some of the points that he has made—and, to some extent, to echo what the noble Lord, Lord Dixon-Smith, said. We have heard a lot about the importance of jobs, prosperity and giving certainty to companies—usually ones with Japanese and Scandinavian names, I notice. In response to the noble Lord, Lord Deben, I would say that we do not build power stations for the people who work in them and run them, we build them for the people who use the electricity that comes from them.

Last week, we heard that the Government have decided on a strike price for offshore wind of £155 per megawatt hour. A few years ago, the Government said they had the ambition of getting this down to £100 per megawatt hour. That now seems to have been abandoned, as the number has come down, with inflation taken into account, to only £135 in 2015, I think it is. These are extremely high numbers—three times the going rate for energy at the moment. What will happen to the people in the chemical, cement, steel, aluminium and heavy engineering industries? We know the answer to that. There is an industrial renaissance going on in the United States—a huge resurgence of manufacturing industry—because of shale gas and the effect it has had on energy prices.

[Lord O'Neill of Clackmannan]

The industries the noble Viscount has cited are wholly dependent on baseload generation. However, he is talking about interruptible generation. He is talking about two different sources. The industries will not be dependent on interruptible generation because they will require continuous baseload generation, 24/7, to conduct their industrial activities.

[Viscount Ridley]

My Lords, in the United States, shale gas has displaced coal. I should, by the way, declare my interest in coal even though, once again, I am speaking against it and in favour of its greatest competitor, gas. There has been a massive displacement of coal by shale gas, which brings me on to the next point. The effect of displacing coal with shale gas in the United States has been to cause the fastest drop in CO₂ emissions of any western country. They are down to the levels they were at 30 years ago and down to the per capita levels they were at 50 years ago. These are extraordinary achievements and suggest that we have, in shale gas, a technology for short-term reduction in carbon dioxide emissions—not all the way down to 50 grams or anything like that but a good chunk of the way—that could be achieved and combined with affordability. The counterfactual to building a huge amount of offshore wind capacity and other industries is to allow the development of gas in this country. We know that the numbers would be much lower in terms of the cost to the consumer—it would be much more feasible and much more affordable. To throw away the flexibility of going for that possibility would be a potential mistake.

[Lord Deben]

I am sure that the noble Viscount knows this, but in the calculations that the climate change committee has made, it fully accepts the need for using that shale gas in the amounts that we generously expect will be used. We are not throwing it away, we are including it as one of the portfolio.

[Viscount Ridley]

Would the noble Lord accept that the figure that came out last week for the amount of shale gas under the UK is far higher than was assumed when his report was written? I went to talk to Cuadrilla at one point last year. I said that the 200 trillion cubic feet that they were talking about under Lancashire was being ridiculed as a very high number and asked whether they stood by it. They said, “Privately, we think it is much higher. It is about 300 trillion cubic feet but we dare not say so because people will not take that seriously”. Then an independent consultant, Nick Grealy, said 700 trillion cubic feet and everybody laughed at it. Now, the British Geological Survey has said there is 1,300 trillion cubic feet. This is the largest find of shale gas ever on the planet. The shale rock we are talking about, the Bowland shale, is in places 10 times as thick as the Marcellus shale in Pennsylvania.

I went to see shale gas extraction in the Marcellus shale in 2011 because I had heard about it and thought it was interesting. You could hardly find these well pads—they are tiny and hidden among the trees. There was a flock of wild turkeys running across the road on the way to one. I asked somebody for a calculation of just how much energy can come out of a small area when you are drilling for shale gas. The answer is that about 25 acres of well pad in Pennsylvania can produce as much energy from shale gas as the entire UK wind industry produces at the moment.

[Baroness Worthington]

I am sure that that is a fascinating discussion and one we will probably return to, but can the noble Viscount point to where in this part of the Bill there is anything that prevents shale gas contributing to the meeting of our decarbonisation targets? I would embrace it and would hope that it came along quickly if it could be done sustainably; there is nothing in this part of the Bill that prevents it.

[Viscount Ridley]

If we embrace within the next couple of years a decarbonisation target that is stricter than shale gas can help us to get to, I think that there will be a problem in the way of shale gas.

Perhaps I may turn briefly to climate change. This is not the time to re-fight the climate change debate, but others have brought it up. Given that shale gas offers the possibility of a slower rate of decarbonisation—not to as low a level of target as we are talking about—we need to retain the flexibility of that and to take into account where the climate change science has shifted to. It is simply not the case that the science has become more alarming in the past few years. There has been a series of studies of climate sensitivity in recent years by Otto et al., Aldrin et al., Ring and Searchinger and many others. The biggest of those, the Otto et al. study, which had 14 leading authors, two of whom are co-ordinating lead authors of the Intergovernmental Panel on Climate Change, concluded that transient climate sensitivity—that is, the number that we are likely to reach in about 50 years—is about half of what we thought it was. It is about 1.3 degrees centigrade, of which we have had nearly half already. It is not true to say that we are seeing damaging effects on weather from climate change. Weather is not climate change. The Intergovernmental Panel on Climate Change SREX report in late 2011 came to the very firm conclusion that you could not see a signal of climate change in current climate events, neither in droughts, floods, storms nor any of those kinds of things. Professor Roger Pielke at the University of Colorado has come to exactly the same conclusion. There is no evidence yet that we are seeing damage. Meanwhile, we are seeing clear damage from climate change policies. The denial of cheap electricity to people in poor countries and the effect of biofuels on food prices are having a demonstrable effect on both hunger and well-being in other parts of the world. We have to take these things into account.

I hasten to add that I accept the science of climate change. By that, I mean I accept that carbon dioxide has its full greenhouse effect. At Second Reading, the noble Lord, Lord Prescott, said that I was denying this, but I accept that it has the full effect. However, the full effect is only 1.2 degrees centigrade warming for a doubling of the quantity of carbon dioxide—it is there in section 8.6.2.3 of the latest report of the Intergovernmental Panel on Climate Change. The danger arises from the potential feedback effects from water vapour in the atmosphere. We can measure whether those are happening and it is clear they are happening more slowly than expected—that is what those papers I cited are all about.

This is not about saying that climate change is or is not happening; it is about saying that potentially the world is changing. We are finding flexibilities in the way in which the world is changing which mean that we should retain flexibility in policy. That is why I oppose the amendment.

[Baroness Browning]

My Lords, I shall speak briefly because I realise that it has been a long debate. I want to make just a couple of points. First, the Government are taking the most important step in putting in place the legislative framework to allow a binding target range to be set at the right time. I understand—perhaps my noble friend the Minister will confirm this—that there is nothing in the Bill to say that if circumstances change in the next two or three years the Government could not go ahead and make that announcement. I believe that that flexibility is in the legislation. When the decision is made—whether it is 2016 or before—the fact that the legislative framework is in place will mean that it can be implemented with more speed than if we had to come back to take this matter through Parliament. That in itself is an advantage. I therefore support what the Government are proposing.

Secondly, I want to press the fact that all Governments have required flexibility in this area of policy, as was mentioned so ably by my noble friend Lord Jenkin of Roding. I just share with the Committee a conversation that I had when I was a member of the Public Accounts Committee in 2005 with the then DTI Permanent Secretary who then had responsibility for energy policy, Sir Robin Young. During an evidence session, I pressed him on whether he would guarantee integrity of supply in the light of the Government’s failure to make an announcement on whether they would renew our nuclear plants, in particular as we were well aware at the time that the Magnox reactors were coming to the end of their life. In response to my question, he confirmed that a minimum lead time would be 15 years, so in 2005 we were getting quite anxious about where the policy was going. I asked him to guarantee integrity of supply. In his reply, he stated:

“The absolute guarantee is in the white paper”—

that was the Government’s 2003 energy White Paper—

“that a reliable competitive and affordable supply of energy is a number one priority for the government, of equal priority to the low carbon objective”.

--- Later in debate ---

[Lord Gardiner of Kimble]

My Lords, that is the estimated rising time and we agreed with the opposition Whip that we would continue with this last group because we are behind schedule in terms of the clause target. This is the last group that the Committee will consider today.

[Viscount Ridley]

My Lords, I support Amendments 18 and 19 from the noble Lord, Lord Turnbull, but I will mainly address my remarks to Amendment 20. I declare my interests as detailed in the register, which include not just coal, but also wood, which I shall criticise. The purpose of Amendment 20 is simple and I hope helpful to the Minister. It is to check that we do not buy the wrong technologies. The only reason for investing in wind is to cut carbon emissions. After last week’s strike price announcement, it cannot be to cut electricity bills. If one were to assume that every megawatt hour from wind displaces one from coal, the cost of carbon reduction from wind will still be exceedingly high—well over £100 a tonne.

However, can we even make this assumption? There is now good evidence from other parts of the world that wind does not achieve anything close to the emissions cuts assumed by the Government. National Grid recently announced that wind power had saved 11 million tonnes of CO₂ emissions here over 18 months and little back-up fossil fuel was burned to compensate for the intermittency of wind. Even if this were true, it is just 1.5% of our emissions, but it is a most misleading calculation. It assumes that the only fossil fuel needed to back up wind was that needed to compensate for the discrepancy between forecast wind speed and actual wind speed. That is only half the story.

For a more realistic result we must take into account studies in Colorado, Texas, Illinois, Holland and Australia, all of which show far smaller CO₂ savings than expected. More recently, I understand that another study soon to be published, from Ireland, finds that the actual savings of CO₂ due to wind turbines are less than half of those assumed by the National Grid, DECC and others. The intermittency of wind results in more start-ups and shutdowns of gas plants, which uses fuel less efficiently and so produces more CO₂. This problem is bound to get worse in the future because, as wind capacity increases, it has to be backed up by plants that are less good at starting up and shutting down.