Energy Supply

Debate between Neil Carmichael and Tim Yeo

Thursday 6th September 2012 Westminster Hall

[Mr Yeo]

I am sure that the Committee is encouraged by the fact that the Minister keeps quoting from our reports. He could not have a better textbook from which to embark on his learning curve. The signal that we would like to see of a strong and stable carbon price is one that has been conspicuously absent from the EU emissions trading system, for a variety of reasons. First, the cap was originally set much too high in phase one, and phase two was scuppered by the recession. It will probably be the latter part of this decade, at the earliest, before we see that strong, stable carbon price emerging, but we will see it eventually. I would be surprised if, by the 2020s, we do not see a stable carbon price. Moreover, if more countries, including some large ones, adopt emissions trading as one of their instruments to address climate change, I suspect that the prospects for that strong and stable carbon price will be greatly increased.

[Neil Carmichael (Stroud) (Con)]

I am listening with great interest to my hon. Friend. My question is about energy storage, to which he has referred a few times. Are the members of the Energy and Climate Change Committee, and indeed the Minister, thinking about energy storage and the technologies involved, including, for example, liquid air? If so, are they considering studying the effect of energy storage on investment and how the impact of energy storage might be calibrated?

[Mr Yeo]

I am hoping that the Minister can enlighten us about that, if not this afternoon then before long. One thing that we as a Committee recognise is that the present system—the market—is not giving enough incentive to companies to invest in energy storage. That is why no investment is taking place. There are a variety of ways in which that could be remedied. However, at the moment the ball is probably in the Department’s court on energy storage, and we look forward to hearing what it has to say in due course.

I will try to make some progress, because I am conscious that my colleagues need to speak in this debate. I will just reiterate the point that I was making before the Minister last intervened. Uncertainty or last-minute unplanned policy changes on which consultation has not taken place—I am happy to point out that such changes might not necessarily come from the Minister’s Department but from the Treasury, as we saw in Budget 2011, which contained changes to the tax regime for oil and gas that had not been consulted upon—are simply killers for investment.

Our Committee’s report urged that there should be diversity in energy supplies. Of course, the size of the role that gas can play in that regard will depend significantly on progress being made on carbon capture and storage. If that facility becomes available, there is a much bigger opportunity for gas. Therefore, we should focus our efforts on CCS as much—possibly more so now—on gas as on oil. Alongside that, however, we also need nuclear. Many of us regard it as a clean and safe technology. We have some anxieties about the progress on new nuclear power stations. EDF appears to be on the brink of making the decision in that regard, but it is not quite over the line yet. The future of the Horizon consortium is still unclear. I say to the Minister that if the only way to get nuclear power stations built in Britain soon is to accept investment from abroad, even from China, with the right safeguards, that is perfectly acceptable. The aim is to get these things under way.

Even if that alternative—investment from abroad—fails, I wonder whether the time is approaching when we should consider another model, in which the Government take the construction risk for nuclear power stations and use their own balance sheet and excellent credit rating, which I pay tribute to the Chancellor of the Exchequer for achieving, to finance the construction stage of a nuclear power station. Then, when it is completed, the power station can be handed over for operation; we can sell it to one of the nuclear power companies. I am just anxious that we may reach next year and find that no one will build under the present policy. I hope that it will not come to that.

Let me turn briefly to renewables. I am encouraged by the price falls that we have seen in technologies such as solar power. I am also encouraged by the further innovation taking place in a range of technologies, including some waste-to-energy technologies, and by the British leadership in non-wind marine technology, such as tidal power and wave power; the Committee has also reported on that technology.

However, I urge the Department to take an evidence-based approach, which the Committee itself has adopted. We must do what we can to protect consumers by rigorously insisting on value for money from renewables. I would love to think that we could get huge amounts of base load power from tidal power, but in practice it is much too expensive at the moment for it to be a big factor.

We must face the facts, however uncomfortable they are to the population. Whenever I mention the subject of onshore wind turbines, I am assailed by hundreds, possibly even thousands, of e-mails, some of which are quite irrational or even offensively pornographic, but never mind. I will not read them out to Members here in Westminster Hall; it would involve using some unparliamentary language. Nevertheless, we cannot avoid the arithmetical fact that at present it is cheaper to generate electricity from an onshore wind turbine than from an offshore wind turbine—or from tidal power or wave power—and it is likely to be so for some years to come. I cannot wish that fact away.

However, I do not suggest that we should impose wind power from wind turbines on any community that does not want them. Any community is perfectly entitled to say that on visual or noise grounds the turbines are too intrusive to be accepted; that view is fine. None the less, we cannot alter the fact that if we ruled out onshore wind turbines completely, the absolutely certain consequence would be to raise the price of electricity for consumers.

Just as we need clarity and stability about policy on generating capacity, we need clarity and stability in the transition process from renewables obligation certificates to feed-in tariffs. We also need clarity about the levy control framework and about what would happen in the event that there is a clash between meeting the requirements of the Treasury, in terms of the framework, and meeting the requirements of the Government as a whole, in meeting the carbon budgets to which they are committed. All of those issues will have to be answered when the House considers the energy Bill in the next few months. We look forward to being given some clues about the Minister’s attitude towards these issues.

I was going to say a bit more about energy efficiency, but I hope that everybody takes it as read that for our Committee that is the first and foremost priority. It is the one area where the needs of security, affordability and reduced emissions all come together; greater energy efficiency achieves all those objectives.

I am keen that the Minister should have plenty of time to give us the first clue about his thinking on these issues, so I will conclude my remarks now and just say that I hope my colleagues will deal with the other parts of the report that I did not have time to deal with myself.