Energy Bill

Mark Reckless Excerpts

Wednesday 4th December 2013 Commons Chamber

[David Mowat]

I will not take the intervention, as I want to finish as quickly as I can to allow time for the other speaker.

We have a security of supply issue. To be clear, the debate is not about pollution, nitrous oxide or sulphur dioxide control, or even about the long-term plan to phase out coal. We intend to be at 3% by 2030. Our European partners, by contrast, do not have such an ambition. The debate is not about the Kyoto targets, which we have not met, but about the need to replace a vast amount of capacity, and to accelerate such replacement. We are unique in that our nuclear stations and our coal are so old. We also intend to use more electricity as we decarbonise the transport sector. If we are to meet the climate change budget targets, it will be about not just electricity generation but transportation. We are talking about more electric cars, which means yet more electricity. The task is absolutely enormous, and we are currently sitting here with a capacity surplus of around 4% or 5%. To accelerate that further would be folly.

Members have mentioned that we are talking about replacing possibly one of the cheapest methods of energy generation—the relatively old stations that are depreciated, and all that goes with that—with some other technology. In relation to today’s infrastructure plan statement, offshore wind, even with the new CFD numbers, is about three times the cost of those coal stations that are currently burning.

If we are seriously thinking of replacing about 15 GW of capacity with offshore wind and even gas, which is more expensive, it is hard to see how that would not put up energy prices. Of course it would put up energy prices both for our energy-intensive users and our consumers. Those Members who think that fuel poverty matters should give some thought about how they will vote this afternoon.

Finally, let us look at how we are dealing with the issue compared with many other countries. I have one statistic to put to the House. Renewables went up a great deal last year. Across the world, they went up by about 30 million barrels of oil equivalent, which is a high percentage. The use of coal across the world went up by three times as much to 100 million barrels of oil equivalent. Such increases are not just happening in Asia and China. Germany and Holland are moving ahead with brand new unabated coal power stations that will run for 20 or 30 years. In this country, we already have among the lowest carbon emissions per head and per unit of GDP of any EU country. The only major country that performs better is France, which has so much nuclear power, although our green lobby thinks that that is wrong as well.

I have not covered in any detail the havoc that would be wrought on what is left of the UK coal industry. The fact that Members are justifying voting for the amendment because it will bring forward investment in CCS, which is still unproven at the scale that would be needed to work in this country, is, frankly, almost vandalism.

[Mark Reckless (Rochester and Strood) (Con)]

It is a pleasure to follow my hon. Friend the Member for Warrington South (David Mowat). I was very impressed with his speech and with what he said about the growing disconnect on this issue between this country and most other countries in the world. With the exception of him and my right hon. Friend the Member for Wokingham (Mr Redwood), there seems to be an enormous disconnect between what Members of this House think and what our constituents want. Our constituents want cheap, reliable energy.

On Monday, we saw the Government trying to find ways to reduce by £50 the rise in electricity bills. For the Opposition, too, the debate is purportedly about trying to cut or at least to hold down bills. They say that for 20 months, from May 2015, they will fix prices. The reality is that the Opposition are co-operating with the Government Front Bench and the Liberal Democrats to fix prices for 20 or 30 years across vast swathes of our electricity generation capacity, and to fix prices at two or three times the current market price. That will drive costs through the roof for our constituents, who will be forced to pay such prices for decades to come, and yet the coalition and the Opposition purport to be having a debate about holding down prices, when the reality is the reverse. We see that again today in this rather surreal debate about whether we should force some of the cheap generation to close, as the Government support, or even more of it to close, as the Opposition want.

[Mr Redwood]

Has my hon. Friend noticed that the big industrial powers that are serious about industry—Germany and China—are adding coal capacity, and America is going for shale gas? They will take the industry, and we will lose it.

[Mark Reckless]

My right hon. Friend is correct. We have learned that the industry at Grangemouth, which the friends and funders of the Opposition—the unions—almost shut down, might stay open and even possibly make money, but that would only be on the basis of importing shale gas from the United States. We have this preposterous arrangement in which we have put an extraordinarily long moratorium on the development of shale gas because there were a couple of tiny tremors near Blackpool. If we, as a country, are serious about pushing ahead economically, we must generate better energy more cheaply and more quickly. Instead, we were involved in a Dutch auction between the parties and doing completely the reverse.

Lords amendment 105 is a case in point. We have the European Union closing down most of our coal plants, with the parties going along with it. Additionally, we are unilaterally indulging in this self-flagellation, through the emissions performance standard—which we have decided to impose as a unilateral burden on UK business while the Germans allow the construction of new coal—by preventing new coal-fired power stations being constructed. Of course countries outside the European Union produce power more cheaply.

What we see today is an attempt by the Opposition and the other place to make the situation even worse. The EU is shutting many of our existing plants. We are banning the construction of new ones, and the Opposition want to bring in a third deleterious measure to extend that ban on coal to part of the plants that the EU would allow to remain open if people spend vast amounts of money to comply with the industrial emissions directive. Labour and the other place would effectively be saying, “Ah, well, if you spend that money, we will put in place this additional burden after which you will then fit this pie-in-the-sky CCS, which is nowhere near to sensible commercial development in the UK, or, in reality, we will force you to close down, and drive up the price of electricity even further.”

The hon. Member for Rutherglen and Hamilton West (Tom Greatrex) suggested that electricity pricing depended on gas prices. I take that point to a degree. As an economist, I understand that in a competitive market, which I fear that this increasingly is not, marginal cost tends to equal price. There is a difference between the gas that is already there, where the development costs and capital costs are sunk—which, in terms of marginal costs being set to price, should be discounted for a rational person in a competitive market—and new gas, which is not coming on stream. It is partly not coming on stream because the Minister has said, “If you bring it on stream, we will give you a great subsidy as long as you wait for a few years and do not bring it on now.” Even Chris Huhne, who was at least an economist, thought that was madness.

Now, we are pushing that approach forward in the capacity market, stopping capacity coming on stream for that key period of a few years. It is a key period, because we are looking at an increasing crunch. DECC tells us that it has run the scenarios with Ofgem and has considered what will happen if the demand for electricity is a little greater than assumed. DECC assumes that energy demand will fall and so, to cover sensitivity, it has run a scenario in which it does not fall. All that does, however, is keep demand flat. What happens if—due to the success of the policies of this coalition, what the Chancellor is doing and the resurgence of growth in the British economy—energy demand increases? I dread to think, because of the lack of preparations that have been made—or, when preparations are being made, because of their extraordinary expensiveness. At the same time, we are proposing to cut the coal-fired plants, many of which are completely depreciated in capital and are producing electricity reasonably and cheaply. We are banning them either nationally and unilaterally or through our acquiescence in what the European Union is doing.

The hon. Member for Rutherglen and Hamilton West identified three sets of coal plants. If I understood him correctly, he missed out a fourth category—that is, those coal plants where the issue is not the industrial emissions directive but the large combustion plant directive. The power stations might be “hours expired” under that directive, but the plants are still there and could potentially be brought back on stream to generate cheap and reliable electricity for our constituents. However, the Opposition will not let them. Government Members will not let them, either. Not even the European Union will, even though the directive contains article 3(4), which provides for a member state to provide for a derogation, particularly when its plans to arrange for sufficient capacity in the energy market are not working as it had hoped. What better case could there be for doing that?

I am not saying that we should keep the plants open for ever. I go around Kingsnorth in my constituency, and it is a very old plant, but it can still work. This year, E.ON UK has a team of about 20 people in the plant, taking the stored energy out of springs and many other mechanisms throughout, making it safe for demolition by the contractor from early next year. We still have time if we apply for the derogation and tell the European Union, “We have a problem. We are running out of capacity because we have not put the sensible plans in place for electricity that we should have done. We used to have the most competitive electricity in the world, but we have messed the whole thing up on a totally cross-party basis. Can we keep these plants open for just a few more years?”

All I ask is for the parties in the coalition to get together and go cap in hand to the European Commission, to ask whether we can keep the plants open for a few more years. That might just allow our constituents to have slightly cheaper electricity, as old coal can be used rather than new gas, for which the capital costs will have to be paid as well as the marginal costs of the gas supply. That might just help us get through the electricity crunch a bit more safely, particularly if the economy is growing strongly, and it might do something to keep down the cost of electricity—that is preferable to the three parties competing to drive it up while pretending that they are doing the opposite.

The Labour party in the Lords would like us to make things even worse by ensuring that even more coal plants close even earlier. We should make things a bit better by trying to keep a few of the oldest coal plants open for a bit longer, to hold down electricity bills and keep the lights on.

[Michael Fallon]

With the leave of the House, Madam Deputy Speaker, I shall reply briefly as I sense that the House wants to reach a decision on this matter.

We have had a good debate. Let me emphasise again that I think that we have been considering a well-intentioned amendment. Nobody doubts the motivation behind it and the issue is not completely straightforward. It depends in the end on a judgment—when coal stations are already being lost to the system, do we want to accelerate the closure of coal? The hon. Members for Rutherglen and Hamilton West (Tom Greatrex) and for Wansbeck (Ian Lavery) asked a specific question—others have referred to this, too—about our progress with CCS. The CCS competition is progressing very well. Negotiations are proceeding and we expect to make a decision on the award of the front-end engineering design contracts around the turn of the year. As I have said, we have made amendments to the Bill in the other place to ensure that those projects will be exempt from the EPS for a limited period.