Viscount Younger of Leckie
Main Page: Viscount Younger of Leckie (Conservative - Excepted Hereditary)Renewable Energy
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Viscount Younger of Leckie (Con)
My Lords, I thank the noble Baroness, Lady Featherstone, for raising this topic in the House once again. I also thank all noble Lords who have participated in this short debate.
I start by attempting to answer the questions on Europe that have understandably been raised by many noble Lords, starting with the noble Baroness, Lady Featherstone. There were a number of questions about our position in terms of energy and climate change, given the result of the EU referendum and bearing in mind that the nation is still digesting the result and its implications. I hope I can give some reassurance on certain issues.
The first thing to say is that, as we stand at the moment, there will be no immediate changes and the Government will continue to deliver on their agenda in this sector. DECC is committed to making sure that consumers have secure, affordable and clean energy now and in the future. The noble Baroness, Lady Featherstone, asked whether the UK will continue to be in the EU emissions trading scheme. We remain a member of the EU and we will continue to engage with EU business as normal and will be engaged in EU decision-making in the usual way. Once Article 50 is invoked, we will remain bound by EU law until the withdrawal agreement comes into force. The period between invocation of Article 50 and our eventual exit from the EU is two years, unless other member states agree to extend it.
On the same theme, the noble Lord, Lord Grantchester, raised Hinkley Point, and I understand why. The final investment decision is a commercial matter for EDF. However, the British Government and EDF are confident that Hinkley will go ahead. There is no change. The French Government also remain fully committed to the project, and EDF is on record as saying that Hinkley Point C will be on time and on budget. I hope that gives some reassurance. That is the position as we see it at present.
In addressing the main content of this debate, I shall begin by taking the House back to last autumn and the clear direction the Secretary of State set out for the UK’s energy policy. This is based on three core priorities, which are that energy must be secure, affordable and clean. That was followed by the UK’s instrumental role in securing the Paris agreement, which demonstrated the strongest possible ambition and commitment. This debate therefore gives me an opportunity to reiterate our strategy for delivering on these priorities.
First, for a secure supply we need a smooth transition to a diverse mix of low-carbon technologies. The shift from unabated coal to gas is critical: gas produces half the carbon emissions of coal when used for power generation. As we have said, we will shortly launch a consultation on when to close all unabated coal-fired power stations, but we are deliberately not rushing in. We will proceed only if we are confident that the shift to new gas can be achieved in time, so we have announced key changes to the capacity market that will send the right signals to investors and ensure that new gas plants are built. Alongside this, with a strong regulatory framework already in place, we are encouraging investment to explore our shale gas potential so that we can add new sources of home-grown supply to our well-established imports.
The Government are clear that new nuclear will be a critical part of the mix. We are working closely with industry on its proposals to develop 18 gigawatts of new nuclear power. This could deliver around 30% of the electricity we will need in the 2030s and bring an estimated £80 billion of private investment into the UK, employing around 30,000 people across the supply chain at the peak of construction.
Of course, this is not just about electricity. Heat accounts for around 45% of our energy consumption and one-third of all carbon emissions, so it is vital that we change how we produce and consume it. We need to test different approaches to understand which technologies can work at scale and keep costs down for consumers. The Government have already announced £300 million over the next five years to support district heating infrastructure, and we will say more on our wider approach later this year.
That leads on to renewables, the focal point of this debate. We should be rightly proud of the progress made since 2010. The noble Baroness, Lady Featherstone, certainly acknowledged this and the role of the coalition Government in taking us to that point. In 2015, renewables provided nearly one-quarter of the UK’s electricity, outperforming coal for the first time. That puts us within shouting distance of Germany, which reached 27% just two years ago, and is pretty remarkable considering the low base we started from. This is thanks to government support securing significant investment: last year was another record year, with £13 billion invested, bringing the total to £52 billion since 2010.
That said, I turn now to the second pillar of our strategy: the review of subsidies and reducing costs. This was also alluded to by the noble Baroness, Lady Featherstone. Subsidies could not continue as they were. I am sure noble Lords on all sides of the House will agree that we should not overcompensate technologies or pay for renewables at any cost. Costs of established technologies have come down significantly, so it is right that they stand on their own two feet. The cost of domestic solar installations has fallen by two-thirds since 2010 alone. So when the Government identified a significant potential overspend on renewable support, we were right to take the necessary action, but we also took care to protect investor confidence and put the sector back on a sustainable footing.
We are looking to the future and giving industry the certainty it needs. We will hold three competitive CFD rounds this Parliament, including one this year, allocating £730 million of annual support for new renewable projects delivering from 2021-22 onwards. This will deliver value for consumers and target support at less-established technologies, giving us a real opportunity to build on our world-leading position on offshore wind. We have more than five gigawatts already installed, more than any other country, and could support another 10 gigawatts in the 2020s if costs come down.
The final pillar of our strategy is unleashing innovation to develop cost-effective, green technologies. The noble Baroness, Lady Featherstone, spoke passionately about the need to innovate in this sector, and she is correct. Looking at the domestic level, perhaps I might ask a few searching questions of us all? How many of us think about the energy saved by turning the heating down or switching appliances off standby? It is not just homes but offices, too. How many of us wonder why all the lights, not just one, are blazing at night in an empty building? How many of us sit in our homes in shirtsleeves when we could turn the heating down and put a jersey on? I speak as a Scotsman in that respect.
On a serious note, changing the behaviour of individuals and companies is critical to our approach, so the Government are thinking about such questions as improving energy efficiency and reducing demand. It is one of the reasons why all homes will be offered a smart meter by 2020. A recent survey showed around a 3% reduction in gas and electricity consumption on average for those with smart meters. It is why we are allocating at least £50 million for innovation in smart technologies over the next five years, recognising the role that they could play to deliver our priorities cost-effectively.
In his interesting speech the noble Earl, Lord Stair, raised an important point about smart technology and renewables, which is that they benefit the grid. We are aware of the challenges that could face networks as we continue make strong progress on renewables and decarbonisation. The National Infrastructure Commission published a report on smart power earlier this year looking at some of these topics and identifying significant opportunities. The department is continuing to work closely with the National Infrastructure Commission on this point.
At national level, we recognise that solutions to the challenges we face may now be an idea on a drawing board. New technologies do not just appear out of thin air. That is why we are committed to supporting innovation, and it is why Innovate UK has developed a series of 11 world-leading catapult centres to transform the UK’s capability for innovation in specific areas and help to drive future economic growth. The noble Lord, Lord Teverson, raised the importance of the development of electric vehicles and driverless technology. That brings home a point that is quite close to home for me as I live in Milton Keynes. With the driverless pod experiment leading the way, it is going to be incredibly interesting to see how this technology is going to take us forward. I am grateful to him for bringing that up.
To give some reassurance to the noble Lord, I can tell him that the Department for Transport will consult later this year on proposals to do more on transport, while DECC will publish its emissions reduction plans later this year, setting out plans for decarbonisation across different sectors. It is good to see that the Government are working closely on this.
DECC’s innovation budget has more than doubled for 2016-21 to over £500 million. For example, we recognise the potential of small modular reactors to complement large-scale nuclear power, offering possible cost reduction and commercial benefits to the UK. We are investing £250 million over the next five years in an ambitious nuclear research and development programme, including a competition to identify the best-value small modular reactor design for the UK.
There were a number of questions from the noble Baroness, Lady Featherstone, which I shall attempt to answer. She asked whether the UK would undertake its own decarbonisation plan. Our working assumption is that by the end of 2016 we will publish our new emissions reduction plan, which will set out our proposals, and, as mentioned earlier, we are working with colleagues across Government to identify the necessary action to take.
The noble Baroness also raised the point about the delays in Swansea Bay, to put it succinctly. We believe that as it stands the latest proposal from TLP is too expensive for consumers to support, so more thought is going to be given to that. Perhaps it is some reassurance to the noble Baroness that an independent review will help to establish the evidence base with regard to what decisions need to be made there.
The noble Baroness and the noble Lord, Lord Grantchester, asked whether the Government would adopt the Committee on Climate Change’s level for the fifth carbon budget. The committee gave its advice in November 2015, and that was to set the budget at a 57% reduction from our 1990 base. We are looking to make an announcement shortly on the level of the fifth carbon budget, so I hope that is some reassurance.
The noble Lord, Lord Grantchester, also stated that we were not as transparent as we might have been about the levy control framework. Many of the assumptions that underpin the framework forecasts are already in the public domain, but we need to take account of the commercial sensitivity that limits the release of some of the more detailed information. However, we will provide an updated set of healthier projections, as well as the assumptions underpinning the latest forecasts, as part of the consumer-funded policies report, which will be published later this year. The noble Lord also asked about carbon capture and storage. We have not closed the door on this; it has a potentially important role in the long-term decarbonisation of the UK. The costs of CCS need to come down, as the noble Lord will know, and we will continue to work with industry to support the development of the technology.
I hope that the noble Baroness can be reassured that contrary to what has been said in previous debates, though not this one, we have a clear strategy focused on a diverse technology mix, lowering costs and unleashing innovation, which will deliver the secure, affordable and clean energy we need for the future. We have made significant progress delivering on this already, and our new emissions reduction plan later in the year will complete the picture, setting out our proposals for meeting the carbon budgets and decarbonising through the 2020s across different sectors of the economy.