Paul Flynn
Main Page: Paul Flynn (Labour - Newport West)
Mr Davey
My hon. Friend is quite right. SSE’s press release made it clear that its price freeze had come about because of this Government’s actions.
When the energy companies next consider price rises, they will do so in the face of an imminent report by the Competition and Markets Authority, to be published in 2015. We shall then be able to consider, on the basis of proper evidence and tough action and advice from the independent competition experts, how best to reform our energy markets further to help customers. Of course, if there were a huge shift in wholesale prices or network costs between now and that point, we would expect the energy companies to respond, so let us think about what would happen in that circumstance under the Opposition’s plans put forward today. For the sake of debate, let us do a thought experiment.
Paul Flynn
The right hon. Gentleman talked about shifts in the wholesale price. What effect does he think imported and home-produced shale gas will have on prices in the United Kingdom in the next five and 10 years?
Mr Davey
I think it will have hardly any effect, if any effect at all. The case for shale gas is to do with energy security, as I have made clear many times.
Returning to my thought experiment, let us imagine what would happen if there were a legally imposed price freeze—prices frozen by the state, not by individual firms. What would happen if wholesale prices shot up? Let us say Russia invades Ukraine and gas prices in Europe shoot up. Would a Labour Government keep prices frozen then? I do not know if they are sure themselves. The right hon. Member for Don Valley might want to confirm whether they would keep prices frozen then. Their price freeze is not really a price freeze; it is a con. Let us assume, however, that whatever happened to wholesale gas markets and prices, they would freeze prices. The truth is that would hit the small players and play into the hands of the big six. As Ian McCaig, chief executive of First Utility, the largest of the new independents, said:
“Bluntly, it could put me under… How am I going to absorb those costs? I only retail, I don’t generate. The answer is, I can’t.”
Paul Flynn (Newport West) (Lab)
The elephant in the room in this debate is the future of shale gas. The Secretary of State told me that it would make no difference. However, the likelihood is that we will repeat the experience of America when it starts exporting vast quantities of shale gas. We will not see a price freeze; we will see a price collapse. America has been jerked out of its economic crisis by abundant cheap energy becoming available for industry, which has brought prices down and made it far more competitive. That will happen here. There is no purpose in closing our minds and pretending that it will not, because it will affect the whole market.
The Chair of the Select Committee talked about the reluctance of British investors to invest in Hinkley Point, but what is British about Hinkley Point? Did Members read the French newspapers when the deal was announced? They regarded it as the deal of the century. It will create 10,000 jobs—not at Hinckley Point, but in France. It is an extraordinary deal. For Britain, it is the rip-off of the century. We have agreed to buy energy—this is hard to believe—at £92 per megawatt-hour, which is twice the going rate at present, and that is the minimum rate. We have indexed linked that price and guaranteed it for 35 years. We do not know what energy prices will be in 35 months.
The chief executive of Ineos, a man who is a great importer of energy and will be importing shale gas into Grangemouth, said that British companies would not go anywhere near that price. At present he is buying energy from the same company, EDF in France, at £37 per megawatt-hour. That is the going rate. For reasons that are beyond us—inertia, or because they are tied to a nuclear future—we have gone into this terrible deal. People will look back, possibly when you and I are still in the House, Madam Deputy Speaker, at this terrible deal that has been struck. It is irrational.
We are buying a European pressurised water reactor. They have been around for a little while, but they have not yet produced enough electricity to power a bicycle lamp. The first one was in Finland. According to the deal, it was going to start generating electricity in 2009. The original cost was €3 billion—it is now reckoned to be €8.5 billion—and it is not expected to be generating until 2019, 10 years late. The other one is Flamanville. It had a very similar original cost and is now also expected to cost nearly three times that—€8.5 billion. It is not expected to be completed for four years after the year when it was supposed to be generating electricity, which was last year. The right hon. Member for Bermondsey and Old Southwark (Simon Hughes) used to start his speeches by announcing that no nuclear power station in the world has ever been built on time or on budget. Of course, the Liberal Democrats are now singing from a different hymn sheet because they have a Lib Dem Secretary of State.
We are waltzing into a future that is not well informed by science but based on forecasts. In 2007, the Labour Government’s policy was that nuclear power was an economically unattractive proposition. David King went along to Downing street, showed his slide show, and said that there would be a gap in energy in a few years’ time. The Labour Government changed their policy. Then we heard that the lives of the AGRs—advanced gas-cooled reactors—were to be extended, and the fuel gap did not occur.
I suggest to the Government that we do not build on a system that has always proved expensive and has never delivered on its promised targets, but go into the areas of marine power whereby we can have an abundance of electricity from the great cliffs of water that flow around our shores 24 hours a day. An example of that is La Rance in France. It has been there for nearly 50 years, it paid for all its capital costs decades ago, and it is producing the cheapest electricity in the world. Around our coast, particularly in the Severn estuary but also in other places, there is huge potential for using this great, wasted resource that is natural, immensely powerful, freely available to us, and benign to the environment. Sadly, however, we go on thinking along tram lines. I believe we will find that the EU decides that the £17.5 billion subsidy we intend to pay for Hinkley Point—for one power station—is against European rules because such subsidies are not allowed. My nightmare is that if we have a true—
David Mowat
Is the hon. Gentleman aware that under the energy market reforms the contract for difference price for tidal power is four times that paid for nuclear?
Paul Flynn
I am aware of the high costs that are put in for all renewables, but at least renewables provide a power source for the future that is free, and has other benefits. The site at Hinkley Point is based on an estuary where there was a tsunami a while ago.
Tessa Munt (Wells) (LD)
I am sure the hon. Gentleman is aware that the intention is that the price of tidal power will be far lower than nuclear after we have perhaps five or six tidal lagoons in place.
Paul Flynn
As I say, rather than looking into the crystal ball, we can look back at what has happened at La Rance, which produces the cheapest power in the world. It was opened in 1966 but the turbines are still in pristine condition. The dredging on the River Parrett, which the hon. Lady will know about, often increases flooding, but if we created a system whereby we used that water by allowing whatever is fitted there to generate energy, we would have a great improvement in flood defences, as at La Rance.
The Government’s mind seems to be closed to the possibilities of marine power. There are other ways of using it; it is not necessary to build a brick wall across an estuary. Movable turbines can be put in or wave power can be used—there is a whole range of possibilities. Yet there is no kind of push towards that. There is no vested interest saying, “This is what our future should be.” Marine power is the great neglected source that we continue to neglect at our peril. It provides energy that is benign, does not threaten the environment, and will be there eternally.
Dr Lee
Of course. If my hon. Friend will forgive me, many people have already made the case for how simplistic and foolish an energy price freeze would be, and I did not want to add to that, because I thought it would be presumed that I would agree. My hon. Friend smiles. We are about to carry out an investigation into the market, and perhaps we need to start to think about how we might restructure our energy sector in a more profound way.
Before I come to that, I want to mention security. Currently, about 70% of our oil and gas comes from Norway; that relationship is key. Centrica has a long-term contract with the Qataris, worth in excess of £4 billion, which is important. Contrary to the hon. Member for Newport West (Paul Flynn), I am a strong supporter of the nuclear industry, but I have some issues—I have gone on public record about this—because a strategy on the nuclear industry is required.
I am somewhat concerned that we have had to go abroad for the technology. We have had to do so because the Opposition sold all the technology during the previous Parliament. Westinghouse was sold, as was British Energy—we could have made hay about that, but never mind. I am concerned that we have to go abroad for technology that arguably is not the cheapest and that, as the hon. Member for Newport West said, has not been delivered on time anywhere on the face of the earth. We need a strategy as a country. For example, why not have small reactors across the country, built by Rolls-Royce? That is just a suggestion.
Paul Flynn
Does the hon. Gentleman agree that Centrica made a considered and serious decision when it abandoned the £200 million it had already invested in Hinkley Point? That meant that the serious investors had deserted, and so we now have to rely on cheap Chinese money, of which is there is an abundance. What has Hinkley Point got to do with Britain?
Dr Thérèse Coffey (Suffolk Coastal) (Con)
They did not have control of the asset.