Electricity Supply

Part of the debate – in the House of Commons at 2:15 pm on 16th September 2003.

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Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South 2:15 pm, 16th September 2003

The Minister is spot on. The pool arrangements came in after privatisation, and, after moving from a state-owned monolith, liquidity was needed in the sector. The previous Government should not therefore apologise for that. We did not quarrel with the introduction of NETA, however, which seemed to be at the right stage having introduced liquidity into the market. What has gone wrong is that it has overshot, and there is now not enough liquidity in the market. I was comforted that, in the Minister's opening speech, he said that Ofgem's price review will look at ways to encourage investment. I thought that that was probably the most important part of the speech, because without it there will be insufficient funding for investment. Currently, NETA is not producing sufficient liquidity for investment. Building a new power station has a lead-up of three to five years just for implementation, and a payback period of 20 to 30 years. No one in the private sector will invest £1 billion to build a new power station if they do not have some idea of what the price curve will look like during that 10, 20 or 30-year payback period. That is the problem, which is why I welcome the Minister's point about looking at ways to bring in extra investment. That will result in a reform of NETA in a way that I and, I suspect, most people would welcome.

The performance and innovation unit report and the energy White Paper were very important in talking about the trade-offs that had to be made. The bombshell, however, was that there was no commitment whatever in relation to the nuclear industry. How can a White Paper be published that says that it is a blueprint for the next 50 years but leave open the question of the most important part of energy policy? That is beyond me. In truth, the White Paper is already beginning to look dated after just a few months, let alone in the first of its 50 years.

A decision must be made about nuclear energy. If we want to have clean energy in this country, the country may have to be prepared to pay for it. In the long term, looking hundreds of years ahead, we will run out of fossil fuels, gas and oil, and the future will be nuclear energy. The challenge must be how to make it safe so that we do not have another Chernobyl, which I am sure can be done through modern technology and efficient regulation—and we will have to bite the bullet to a degree on cost. Nuclear energy has been a bedrock of the post-war years in this country and I think that it will be the bedrock in the years to come. The White Paper put heavy emphasis on the future of renewable energy. My hon. Friend the Member for South Suffolk spoke about the scepticism as to whether those targets can be achieved. They are dramatic targets and I am sceptical about whether they can be met. Without nuclear energy, the mind boggles as to how the environmental targets that the Government have bravely set will ever be achieved in the long term.

That, of course, brings me to the ugly duckling of the sector—coal-fired generation. The Government have consistently supported coal production because, as the hon. Member for Crewe and Nantwich said, we are sitting on the most tremendous natural resource, which would in one stroke remove the questions that are being posed to the Government about security of supply. There is no question, however, of having coal in its present form. It must be clean coal, and I welcome the clean coal technology papers that the Government have published. I know that they are looking at how to introduce more investment in clean coal technology, but more must be done. Much bigger investment and commitment from the Government to clean coal technology is required if we are to produce the sort of reductions that we need. The Minister will know that the large combustion plant directive starts to bite in 2006, and the present generation of coal-fired generators will have to start shutting down between 2006 and 2015. Unless he has the answers to clean coal technology he will very quickly have a large gap in his diversified energy supplies, which will make the Opposition resolution pertinent, not in the long term but in the medium term.

In my intervention, I raised the diplomatic and political risks involved in making our energy policy totally dependent on imports from Russia, which was described by Churchill as, I think, an enigma wrapped in a riddle. We have no idea of the political future in Russia or of how stable a country it is. President Putin seems to be a solid guy who is building up a coalition around him, and democracy seems to be catching on big time. The Liberal Democrat spokesman said that there was not a problem because Russia needs the money. However, I do not think that we can put our trust in that—we must have alternative, back-up supplies.

We can all remember the pressure and concern in the run-up to the debate on Iraq. Russia and France were being very difficult in the United Nations Security Council and refused to give their support. Tremendous leverage could have been used with the United Kingdom if Russia could say that it was free to turn off our energy supply overnight. We saw that in the oil crisis of the early 1970s. Russia might not cut us off completely, but it might gently reduce supply by 10 per cent., which would push up prices and start to hurt the British economy. It could be a very powerful tool, so it would be folly to be dependent for 70 per cent. of our gas supply on Russia.