Energy Prices, Profits and Poverty

Graham Stringer Excerpts

Thursday 7th November 2013 Westminster Hall

[Graham Stringer (Blackley and Broughton) (Lab)]

The BBC news on Radio 4 at 1 o’clock today said—I did not hear the whole story, because I had to be in the Chamber—that there was one wind turbine in Wales that had cost £48,000 to put up, but was producing £5 of electricity a month. That is beautifully symbolic of some of the things that are wrong with the existing energy policy.

I was not a member of the Committee when the report was written, but I have read it and it is a good one. It calls for greater transparency and more competition and its conclusions rely on the presumption that fossil fuel prices will carry on rising, therefore making renewables worth using and more financially efficient. The next report by the Committee, as the hon. Member for North Warwickshire (Dan Byles) said, should look at some of the fundamentals. The reason why electricity prices are going up is simple: the cost of production and the levels of demand. Looking at that, as the hon. Gentleman indicated in parts of his speech, is worth doing.

The example I gave at the beginning of my speech is an extreme one, but it is a strange policy that decides to invest in energy sources that provide guaranteed income for the generators at three times the current market rate for energy, as is the case with offshore wind farms. As has been said, the reason is fear of climate change and induced global warming because of the increased production of carbon dioxide. We could have a long debate about that, but I do not intend to go into it now.

What is rarely said is that the current policies are having a perverse impact. How many times do we hear Government spokespeople say that the carbon footprint of the United Kingdom and Europe is increasing as emissions go down? The reason is simple. We have exported our production to China, India and elsewhere, where production processes are less efficient and we have to pay the carbon price of bringing goods here.

The cost of electricity production from offshore wind farms is three times the market price for an intermittent supply, and at the same time we are increasing our carbon footprint. That is not sensible, and the policy is not working. It will work only if everyone signs up to an international agreement on carbon, and it is highly unlikely that the United States, India and China—the major carbon producers—will do that.

The fact that our carbon footprint is increasing is not often mentioned, and some Ministers do not seem to understand anything about the issue. When the Minister, the right hon. Member for Bexhill and Battle (Gregory Barker), was asked to define climate change, he gave the useless definition that climate change was climate change. He repeated that twice. When a Minister of State has that level of understanding, it is not surprising that we do not have useful policies.

The other basis of the policy is that the people in the Department of Energy and Climate Change know that the price of fossil fuels will rise over the next 10 or 15 years. If they could predict the market, I suspect they would not be working in the Department because they would all be rich. The fact is that there is a super-abundance of fossil fuels in the world; there are trillions of cubic metres of shale gas in this country and sufficient coal to supply the world for hundreds of years. That is not the problem, although there are constraints on supply at particular times.

The price of oil and gas now is about the same as in 1974, when exactly the same predictions—that the price of gas and oil would continue to rise—were being made. It may, or it may not. It cannot be predicted, and we must focus on reducing the price of energy production instead of increasing it, as we are doing at present. We need huge investment in research to find more efficient forms of energy, probably renewables.

After our previous debate, I sent the Minister, the right hon. Member for Bexhill and Battle, an analysis of the market showing that the extra cost—not the cost—of replacing our power production facilities was about £226 billion, and that was for renewables: wind farms and other forms of alternative energy. If 20% of that went into research into fusion processes, incremental improvements in the current technologies and improvements in batteries and storage instead of wind farms, that would probably affect prices more, whatever the international price of fossil fuels. That would be better than putting all our eggs in one basket, as we seem to be doing.

The other side of the equation is demand. There are some complicated schemes. The green deal is not working and has a very low take-up among people who are not well off and want a better energy deal to insulate their homes. I referred to the extra £226 billion needed to replace energy kit in this country. If my arithmetic is correct, if we gave £1,000 to households—it could be done on a needs basis and would not necessarily involve every household—that would cost £30 billion, which is about 15% of the extra cost. That would dramatically improve the position of people living in fuel poverty and it would reduce demand, although probably not on a one-to-one basis because when demand is reduced people tend to use the money to buy extra electrical goods and so on. However, it would have a significant impact on what is going on.

I am glad that the Labour party decided to introduce a freeze on prices after the next general election. That will not be a solution to the problem of energy prices in the long term, but it will give us a chance to take a much closer look, as the hon. Member for North Warwickshire said, at what we are doing about energy.

Many people with good motives have said that the world is going to fry and that we had better build windmills. Most of that policy is not working. It is expensive and it is putting people into fuel poverty. I am not on the side of people who want to destroy the planet—quite the reverse: I am on the side of people who cannot afford to pay their fuel bills. We must take a serious, long-term look at how we can produce energy at lower cost and provide a secure supply, which we do not have at present.