Security of Supply

Part of the debate – in the House of Commons at 3:30 pm on 12 January 2006.

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Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry) 3:30, 12 January 2006

Of course it was a big fire. It was exactly the kind of security issue that we have to grapple with in any sensible review and in the very debate we are having this afternoon.

Insurgency in Iraq and nuclear fears in Iran contribute to habitual doubts about political stability in the middle east. A spat between Russia and Ukraine has recently caused spikes in the gas price, and fears remain that Russia will again flex its political muscles and disrupt supply.

All that is but part of the global backdrop to the challenges of creating a sustainable energy policy. To that uncertainty, one needs to add all the domestic questions of the financial and economic framework in which investment decisions—necessarily long term—have to be made, some conditions of which are utterly unhelpful to those decisions.

The UK is increasingly vulnerable on energy security. That manifests itself in the higher prices we are paying for energy when compared with our competitors. I shall come to the causes and security issues shortly, but I should like first to examine the scale of the problem. Whereas we cannot, of course, be insulated from the impact of global price shifts, the problem is that we are suffering more than we need to and are paying more than we ought to. Whereas small UK companies paid 12 per cent. less for electricity than those in France in July 2004, by October 2005 they were paying 15 per cent. more.

In respect of gas, the Energy Intensive Users Group has said that

"new contract prices to large industrial consumers are already more than 30 per cent. higher than their equivalents in France, and more than 40 per cent. above those in Germany—a situation that is set to get worse over the coming months."

That is both unnecessary and a serious threat to our economic competitiveness.

In recent months, four European countries have overtaken us and now pay cheaper prices for natural gas. There are also increasing problems for domestic users: the consumer price index shows that end-user fuel bills rose by 14 per cent. in the past year.

Paradoxically, as the Secretary of State was honest enough to admit earlier, Britain is becoming more dependent on gas at a time when elsewhere in the world there is greater optimism about, and progress being made in, alternative and diversified energy sources. The clean coal and carbon capture schemes, among others, offer genuine hope for the conversion of existing technologies. Meanwhile, Denmark and Portugal lead the world in the provision of wind and wave power.