Energy Supply

Orders of the Day – in the House of Commons at 6:00 pm on 30th October 2006.

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Motion made, and Question proposed, That this House do now adjourn.— [Huw Irranca-Davies.]

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry 6:10 pm, 30th October 2006

When I published the energy review in July, I said that I hoped that the House would have an opportunity to discuss not just the conclusions of that review, but the security of gas supplies this winter, following the concerns that there were last year because of the more rapid decline in North sea gas than had previously been anticipated. This Adjournment debate provides the House with that opportunity.

Of course, it just happens that the report by Sir Nicholas Stern was also published today. Sir Nicholas's work is a major contribution to the understanding of the economic issues surrounding climate change. He presents a number of ways in which we can tackle that. In a curious sort of way, the conclusion of his review is essentially optimistic, because there is still time to avoid the worst impacts of climate change if we act now and if we act internationally. The energy review was part of that. If we take the deliberate and necessary policy choices, we can make a difference. As my right hon. Friend the Chancellor said today, we need to have an economy that is both pro-growth and pro-green, and we can have an economic policy that is also an environmental policy.

My right hon. Friend the Secretary of State for Environment, Food and Rural Affairs has also announced that a climate change Bill will be introduced in the coming Session so that we can become a leading low-carbon economy, which is essential for the future. That Bill will help to provide a clear framework so that we can meet our long-term climate change targets to reduce CO2 emissions by 60 per cent. by 2050, with real progress by 2020.

Photo of Charles Walker Charles Walker Conservative, Broxbourne

Will the Secretary of State accept that, as we reduce our carbon emissions, it will be critical to maintain the UK's global competitiveness so that we can still create wealth, which runs the NHS, and jobs, which support families?

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

Yes, but I do not think that the two are competing objectives. We can and should have an economy that is competitive, but that also takes account of the environmental consequences of climate change. One of the central findings of the Stern report was that there is an economic cost to doing nothing. It is far more efficient and effective to take action to tackle climate change, which will, in turn, help us to maintain our competitive position. There is not a polarisation of views there. That is one of the points that I put to members of a high level group in Brussels today—some of whom, coming from other countries in Europe, seemed to think that there was a choice to make. I think that that is a false choice and I am glad that the hon. Gentleman agrees.

The debate supplements the second annual report to Parliament on the security of gas and electricity supplies, which was laid before the House on 12 July. Since May, I have tabled three written statements setting out the position. I want to summarise the position for the record. In relation to gas, the recent tightness in the UK supply-and-demand balance for gas has largely arisen because supplies from the North sea have declined faster than expected, although the North sea remains our largest source of gas and is likely to do so for some considerable time.

The national grid winter consultation report was published by Ofgem in September. It states that the gas supply-and-demand balance for the coming winter could be tight, especially in the first part of the winter. However, there are grounds for some optimism—although we are right to be wary and vigilant—because some of the uncertainties that existed earlier this year in relation to major new infrastructure have been much reduced since I issued my first written statement in May.

The Langeled pipeline between Norway and this country was opened by my right hon. Friend the Prime Minister and the Prime Minister of Norway and it now has gas flowing from Norway. The Balgzand to Bacton pipeline will see gas flowing from the Netherlands. It remains on course to begin operation in December. The Belgian interconnector has been completed ahead of schedule. In addition, work is continuing on the Teesside offshore liquefied natural gas importation project. The storage facilities in Rough in the North sea and at Humbly Grove in Hampshire are now available and are both full up with gas.

Although there are grounds for optimism, we are right to remain vigilant. Although the question last winter might have been whether there was adequacy of gas supply, clearly there is concern about the consequent increase in gas prices, which was partly caused by that uncertainty a year ago. As ever in this country, there is uncertainty about the weather. Although the national grid winter consultation report indicates that, under all likely weather forecasts, we will be able to meet demand, the Met Office is forecasting a near average winter. Clearly, if it was colder than average, that would have consequences too.

Compared with last year, there are grounds for being more optimistic, although we have to face the consequences of higher prices than we have had in the past. The gas supply situation should ease further next year, because we will have access to gas supplies from the new Norwegian Ormen Lange field and the new liquefied natural gas importation facilities at Milford Haven.

Photo of Bob Spink Bob Spink Conservative, Castle Point

Will the Secretary of State allow me a parochial note and accept that we must balance the need for increased security of gas supply with the need to protect local communities—particularly when they include residential homes, schools and businesses—from unacceptable increases in danger as a result of the importation of LNG, such as may be the case if plans go ahead for the importation of LNG from ships to Canvey Island? That is causing great concern. Will he agree to a public inquiry—held on Canvey Island—if that goes forward?

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

The hon. Gentleman is quite right that safety is important. There are procedures and safeguards in place to make sure that safety is very much at the front of the minds of those who consider planning applications. I am sure that he would agree that it is necessary to ensure that we have security of supply, because there are obvious consequences if we do not. The importation facility at Milford Haven, and those in other areas, are important.

On electricity, earlier this year the consultation report showed a generating plant capacity—an excess in capacity—of 22 per cent. in September. The National Grid will monitor that level of generating ability. Obviously, unplanned outages, such as those already announced in relation to British Energy, will have some effect on the margin, although at the time of the announcement, it was clear that there were some nuclear plants that would come back into operation. Indeed, some have come back into operation since that time. There is an operating margin precisely to allow for unplanned outages. We are hopeful that electricity supplies this winter will be more than sufficient.

I said earlier that, clearly, prices have increased. For several years, they were a lot lower than in Europe. Indeed, some of our prices still are lower than those in Europe. However, the gas that is now being sold to consumers—both industrial and domestic—was purchased at a time when the wholesale price was much higher. As a result, prices have gone up. Ofgem will keep a close eye on that to make sure that, when prices start to come down, the gains are passed on to consumers. That is important. It is also important that we see greater transparency and liberalisation in the continental European markets, to drive down costs. That has been a concern of ours. I have made representations to the Commission, as has my hon. Friend the Minister for Energy. There are signs that the Commission is vigorously pursuing those countries where the market is not as transparent as it ought to be.

Photo of Robert Key Robert Key Conservative, Salisbury

That is an extremely important point. I entirely agree with the Secretary of State, but does he really think that the Commission is serious about deregulation of the European market? After all, we see the takeover of British companies by, in particular, French companies, but it is impossible to go the other way. One does not find any British-owned energy companies operating elsewhere. There appears to be absolutely no will, either in Germany or France, to see anything like the positive progress that he suggests.

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

There is evidence that the Commission is pursuing countries and companies to ensure that there is greater transparency. It was responsible for seizing several papers and documents that might throw some light on what happened last winter. The Commission itself is genuinely committed to a more liberal market, although it must be said that there are countries in the European Union that have shown a lack of enthusiasm for liberalising markets over the past few months and years. Any gain that they may get will be in the short term. In the long run, liberalised energy markets will be absolutely essential if Europe is to remain competitive.

The hon. Gentleman is quite right to point out that some action taken by member states has verged on the protectionist. In some cases, it has been downright protectionist. That is regrettable because a single market should be just that. There should be a liberalised market for energy because that is the only way of benefiting both domestic and industrial consumers. We will do our best to ensure that there is such a market and I think that the Commission will enforce it rigorously. I just hope that the Governments of other member states also see the wisdom of liberalised markets so that we can get lower prices in the long term.

For the sake of completeness, I should tell the House that Richard Lambert, the director general of the CBI, and I chair a meeting of industrial users and others so that we can monitor the supply of gas, electricity and energy. Prices are a particular concern, although I hope that they will fall as a result of the actions that we have taken and because the market is beginning to realise that an adequate supply is coming through due to the various measures that I set out. As I said, Ofgem will monitor the market carefully to ensure that reduced costs incurred by suppliers are passed on to consumers at the earliest possible opportunity.

The second part of my speech relates to the energy review. I set out the Government's proposals in July and, as I said in the summer, we will publish a White Paper setting out our concluded views. The White Paper is likely to be published in March 2007.

Photo of Mark Tami Mark Tami Labour, Alyn and Deeside

We have had many reviews, and the last review identified many of the problems that we are facing. The problem in the past was that we did not tend to act on those reviews, or that if we did, we took short-term action. What assurances can my right hon. Friend give us that something will happen and that that will be for the long term, rather than the short term?

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

We certainly have to act because, as I said in the summer, we do not have the option of just letting things drift along. Many of this country's generating plants are reaching the end of their lives, so a decision must be taken on how to replace them. As I said in July, our two overriding imperatives are the need to tackle climate change and the need to ensure that we have a secure supply of energy with affordable prices. That means that we must take action now, which was one of the reasons why I said in the summer that nuclear had to be part of the mix. I was critical of the official Opposition for saying of nuclear, "Let's leave it and come back to it later", because I do not think that we have that option now. Anyone who has any doubt about that should read Sir Nicholas Stern's report and find out the urgency of the situation. We anticipated the energy review in the 2003 energy White Paper. We will publish our concluded views in March, and the document will provide a framework that will enable us to proceed and ensure that we have not only greener energy, but more secure supplies of energy.

Photo of Paddy Tipping Paddy Tipping PPS (Rt Hon Jack Straw, Lord Privy Seal), Leader of the House of Commons

The energy review accepts that indigenous coal is important for the security of supply. Will the Secretary of State and the Minister for Energy examine closely the position of UK Coal and its relationship with generators such as EDF and Drax? At the moment, the contract between the company and the generators is at less than the world price. As a result, UK Coal cannot invest in the future of deep-mined coal and the three pits in Nottinghamshire look very much at risk. Is there anything more that the Secretary of State can do to bring the parties together?

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

We said in the energy review that we wanted to establish a coal forum along the lines of PILOT, which is the forum between the oil industry and the Government. PILOT was set up a few years ago and has been highly successful at allowing the Government and the industry to discuss long-term strategy and changes that we might make to maximise the extraction of oil and gas from the North sea. We have the same model in mind for the coal industry. However, we cannot broker contracts between power and coal suppliers.

I have read the letter from the coal company to which my hon. Friend referred in which it is suggested that the Government might like to intervene. UK Coal and the operators of any power station need to understand that the only people who can sort out the contract are the parties to it. The Government are not going to stand in the shoes of either party to the contract. We can encourage people to talk—I certainly think that they should talk—if problems need to be resolved, because it is in all our interests that we maintain the ability to mine and supply coal in this country. However, alongside that, the power companies must be satisfied that they are getting the right price. I make it clear to the House and the parties concerned that if there are contractual differences or difficulties, the parties must sort them out—the Government cannot do that. The coal forum will operate at a slightly higher level—a strategic level—as does the forum for the oil industry. I expect the first meeting of the coal forum to take place in November.

Photo of David Hamilton David Hamilton Labour, Midlothian

Although my right hon. Friend says that he does not want to interfere, will he be mindful of the fact that if we did not have UK indigenous coal, we would have to look at ways of importing coal? That would bring a different dimension to the situation because we would have to get that coal from the dockyards to the power stations, which would lead to major costs for the Government.

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

I understand my hon. Friend's point, but I am clear that if there is a contract between two parties, they must sort it out. In my experience, if a third party offers to stand between two parties, it is often an impediment to finding an agreement. The two parties in this case are perfectly capable of reaching an agreement. However, they will need to sit down and talk about it. The Government cannot do that, but I hope that the difficulties can be resolved. I agree with my hon. Friend in that it would be a great pity if we lost the ability to mine the coal in this country that is still to be mined.

Photo of David Taylor David Taylor Labour, North West Leicestershire

Will the Secretary of State confirm that the slight majority of UK electricity used last winter was generated by coal-fired power stations? We have existing technology for co-firing biomass and improving thermal efficiency, which will drive down the carbon emissions from coal to the extent that it will be able to play a significant role in the medium and long term, especially given the long-term investment in carbon capture. Some 800 million tonnes of coal are waiting to be mined in north-east Leicestershire, so there is a future for coal and coal miners.

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

I agree with my hon. Friend. There was a substantial switch from gas to coal last winter because of the high price of gas. I have always said that this country's mix of energy supply has served us well. It would be a great pity if we put all our eggs in one basket, or even two or three baskets, because we need to ensure that we have such a mix. There are many examples, such as carbon capture, clean coal and biomass, of how we can still burn coal, yet significantly reduce the amount of carbon going into the atmosphere. Coming back to this business for the last time, however, I am fully aware of the contractual differences, but the only people who are going to resolve them are the parties to the contract. The Government cannot do that.

Photo of Bob Spink Bob Spink Conservative, Castle Point

Will the White Paper deal with the issue of the Government promoting or making investment in the new carbon capture and storage technologies, in which the UK can lead the world? Will the Government lead the change of regulation needed to enable marine storage of carbon so that we can move forward with large scale demonstration plants, which would be very helpful to the environment and may also help the economy?

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

I agree with the hon. Gentleman. That is why we emphasised the importance of carbon capture in the energy review published in the summer, and we undertook to publish further proposals. Since that time, we have also put forward proposals to encourage research into producing greener forms of energy. We will match the money raised by the private sector with Government money to encourage innovations such as carbon capture.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee

The Secretary of State is being remarkably generous in giving way. May I draw him back to the White Paper about which he was speaking? I welcome the return of a Green Paper to the policy making process, which the document effectively is. The most important consultation, on the policy framework for nuclear, ends tomorrow. There are a stack of other consultations in the document. What framework is the right hon. Gentleman putting in place to ensure that all those consultations arising from the report take place, or will the White Paper do that? It is important that the consultations promised are seen through and reported.

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

I agree with the hon. Gentleman. Especially in an area like energy, where we are dealing with 30 to 40 years' development, we need to get it right. We need to move at a fairly fast pace, because we do not have the time to spend years thinking about all the possibilities. I can assure the hon. Gentleman that, as he knows, we are consulting on a number of strands of policy, following the energy review in the summer. Later this week we will publish a document on distributed energy. The strands will all be brought together for the White Paper.

In the summer I said that the White Paper would be published around the turn of the year, which is political-speak for March. It is rather like the political autumn, although this year the real autumn and the political autumn appear to be moving together for the first time in years. I concluded that we should not publish till March because I want to get all the consultations out, properly considered, and to reach a concluded view. That will provide the necessary certainty. Many hon. Members pointed out that more than anything else, the industry wants certainty. We can provide that.

I am conscious of the fact that this is a short debate and I shall not speak for much longer. All Members in the Chamber will no doubt have read the energy review, so I do not need to go through it line by line. It is important that we make progress. When I spoke last summer, I said that if we can implement the review, we believe that it would bring about a reduction of between 19 million and 25 million tonnes of carbon by 2020. By any standard, that would be a significant contribution to tackling climate change. The other proposals that we set out would also make a significant contribution to ensuring that we have secure, affordable supplies of energy.

In the past few years, energy has assumed greater importance than it has had in this country for many years. I am sure that we will have a number of debates such as this in the future. It is important not only that we get it right, but that we take action as quickly as possible to tackle climate change, meet the objectives set out in the Stern report today, and make sure that we have secure supplies of affordable energy.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform) 6:33 pm, 30th October 2006

I start by offering the apologies of my hon. Friend Alan Duncan, the shadow Secretary of State for Trade and Industry, who is away from Westminster today for a long-standing commitment which he was unable to change. That in no way diminishes the importance that he or we attach to the subject.

As the Secretary of State said, there could not be a more appropriate day for us to have the debate, following the publication of the Stern report this morning. I join the right hon. Gentleman in paying tribute to Sir Nicholas for his outstanding work. However, it is disappointing that we have only a half-day debate on energy supply. Had there been a full day's debate, many other colleagues would have been keen to take part and the Secretary of State would have been able to deliver the whole of his speech, rather than the synopsis that he ended up giving us. That would have been beneficial to the whole House.

We can all agree that it is good that energy is right at the top of the political agenda and the news agenda. If one mentioned energy issues a few years ago, people's eyes glazed over and they wondered how to get out of the conversation, whereas now it is the subject that everybody wants to talk about. People are aware that they should be doing more, but they are not sure how to do so. The public are in a state of enthusiasm with confusion. We want to encourage them to do a good deal more than is being done.

There is substantial common ground between the Opposition and the Government on climate change and security of supply, but we have concerns about the urgency with which the Government are addressing some of the issues. As Mark Tami said, we need to know that long-term decisions will be taken. Three years ago we had a White Paper. This year there was the energy review, leading to another White Paper next year, with a few consultations and a forum that has not met in four or five months. A solid agenda for action must emerge from the process.

Photo of Mark Tami Mark Tami Labour, Alyn and Deeside

I accept what the hon. Gentleman says and thank him for his comments about the point that I made, but how does he set that against his party's views on nuclear power? If we are to move forward, we must make choices now, and not just say, "We'll wait and see; something may happen in the future", which as I understand it is Conservative party policy.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I will come to that in much more detail in due course. The Secretary of State misrepresented our position on nuclear power, as he is entitled to do, but he has said that there would be no Government subsidies for nuclear, just as we have said. It is difficult to see how in his scenario people would make investment decisions that they would not be prepared to make in ours. We have said that we do not favour nuclear power as the way of solving the problems, but we do not rule it out. If people wish to make that investment, knowing the risks involved and knowing that there will be no subsidy, they are free to do so.

Photo of Paddy Tipping Paddy Tipping PPS (Rt Hon Jack Straw, Lord Privy Seal), Leader of the House of Commons

Does the hon. Gentleman agree with his leader, who describes nuclear power as a last resort? If it is a last resort, by definition it will never happen.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I disagree with the hon. Gentleman. We wish to put the emphasis on renewables. There are extraordinary opportunities for renewables to play an enormously important part, but the primary responsibility of the Government is to keep the lights on. If that means new nuclear power stations being built, we would accept it, as a last resort. We accept that nuclear energy may have a part to play in delivering the Government's obligations.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee

I have no wish to cause my hon. Friend any embarrassment, but ironically, Conservative party policy for an improved carbon trading mechanism and for a capacity market are more likely to bring forward nuclear power more quickly than the Government's proposals on carbon emissions trading.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

As we have said, it is for industry to make decisions. The industry has told us that it can make decisions to invest in new nuclear power stations without subsidy, taking account of the full long-term cost and dealing with the long-term decommissioning and waste issues. If the industry can do that, it will be entitled to do so. We will not seek to stop it, but we make no secret of the fact that that is not our preferred option. If we can close the energy gap by using sources of renewable power, we believe that that is the better way of doing it. We also believe that that is what the public want.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I shall make progress and return to the matter later.

The scale of the challenges facing us is immense. The International Energy Agency estimates that the world's primary energy demand will rise by 60 per cent. between 2002 and 2030, with two thirds of that increase coming from developing countries. Last year the world's population grew by 74 million—an increase of a little more than 1 per cent. The use of oil grew by 1.3 per cent., of gas by 3.3 per cent. and of coal by6.3 per cent. As a global community we consumed9 billion tonnes of oil equivalent. Most of us cannot envisage 9 billion tonnes of oil equivalent, but we can all agree that it is not sustainable. As demand rises, capacity in the UK will decline. Approximately 30 per cent. of the UK's existing capacity is scheduled to be retired over the next 20 years, including all nuclear power stations except Sizewell B, which will leave a significant energy gap.

Photo of Bob Blizzard Bob Blizzard PPS (Rt Hon Douglas Alexander, Secretary of State), Department for Transport, PPS (Rt Hon Douglas Alexander, Secretary of State), Scotland Office

As the hon. Gentleman has said, about 20 per cent. of our electricity is currently generated from nuclear power, and a good number of nuclear power stations will close. Bearing in mind what the Conservative party has said in the past about not liking wind power, and given that it will take a few years until tidal and solar power are commercially developable, is it realistic for nuclear power to be a last resort?

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

It is entirely realistic to say that we have a preference for renewables and that we want to see what can be achieved through renewables. However, if the lights stayed on at the end of the day because of investment in new nuclear power stations, we would have to accept it. Furthermore, we are not ruling out people making their own investment decisions. If businesses want to invest, as some have indicated, on the understanding that there will be no Government subsidy—they must take account of the full long-term costs—we will not stop them. Our preference is absolutely clear: we want primary growth in renewables, which is the best way forward for this country.

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

In the next 20 years or so, it is likely that the proportion of electricity generated by nuclear will decrease from about 20 to 7 per cent. What proportion of electricity does the hon. Gentleman think can be generated by renewables over that same period, especially given that his party is committed to getting rid of the renewables obligation?

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

The Secretary of State is deliberately provoking me in a way in which he would not allow himself to be provoked. He has always refused to set a target on proportions—the only exception was his target on renewables, but when it became evident that the target of 10 per cent. by 2010 would be missed, he shifted it to 20 per cent. by 2020. We do not believe in setting such targets. We are setting out a framework in which people would invest, the key to which is putting a price on carbon.

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

I did not ask the hon. Gentleman to set a target; I asked him a simple question. Given that the percentage of electricity generated by nuclear will be6 or 7 per cent. in 20 years' time, how much more energy does he think will be generated by renewables, if that is his option of choice? He has pledged to scrap the renewables obligations that is probably the reason why we have our existing renewables.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

The Secretary of State is wrong. We have pledged to reform the renewables obligation to make it fairer for all kinds of renewables. The current system particularly favours onshore wind and methane, and it needs to be restructured with additional banding to bring on stream a range of other renewables. Nobody in this country can answer the Secretary of State's question, because no one knows the potential contribution of a range of technologies. If the Severn barrage is viable, it will provide 7 per cent. of our national energy needs. If carbon capture and storage can be made to work, it will give a new lease of life to coal-fired power stations. Let us see what renewables can achieve, but let us not rule out nuclear power as a last resort.

If I go on for too long, I will prevent other hon. Members from contributing, but I will take more interventions in due course. Many of the new plans worldwide are for gas-fuelled power stations, but just because someone builds a gas-fuelled power station does not mean that there will be gas to power it. Indeed, we face a critical imbalance between demand and supply of gas, and some scenarios suggest that there will be enough gas only for one quarter of planned gas-fuelled power stations.

The global threat of climate change and the imbalance between demand and supply are why Sir Nicholas Stern and Sir David King, the Government's chief scientific adviser, are right to say that doing nothing is not an option and why politicians cannot put off difficult decisions for the next generation to deal with. The next Queen's Speech will include a climate change Bill. I am delighted that the Government have finally decided to introduce such a Bill in the light of Sir Nicholas Stern's report, given that all other parties have been pressing for one for some time. As always, however, the devil will be in the detail, and it remains to be seen whether the Bill includes the measures for which we, and others outside this House, have been pushing.

Although climate change is clearly one of the biggest challenges facing mankind, we must also be concerned about the affordability and security of our energy supplies. That is why in producing our energy reviews our two aims were to reduce carbon emissions and to secure our energy supplies. We have no doubt that we are on the edge of the greatest technological revolution in energy. Three years ago, the White Paper focused on how we can get more out of existing sources of supply. This time, the energy review examines how we can utilise completely new sources of energy supply, which did not seem feasible even three years ago. As a party, we are absolutely committed to renewables achieving their full potential and to a permanent change in energy policy, which will shift from energy sources that produce carbon to those that do not.

Photo of Michael Connarty Michael Connarty Chair, European Scrutiny Committee

I would hate to leave such a contradiction in the Hansard record. A minute ago, the hon. Gentleman praised the idea of a climate change Bill. Last week, the leader of the Conservative party demanded at the Dispatch Box the introduction of a Bill containing a target of a 3 per cent. reduction per annum. Five minutes ago, the hon. Gentleman said that his party does not believe in targets. Is the Conservative party demanding a climate change Bill including a 3 per cent. target, or is it against targets?

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

We want something that can be measured. [Interruption.] It is simple to set a range of targets. The Government have set targets on carbon so far ahead, because they know that a new Minister will be in charge by then to pick up the pieces and explain why the targets must be changed. If the climate change Bill is to have teeth and to be workable, it must be measurable. Unless we say that we want to achieve a3 per cent. reduction in emissions year on year, the outcome will not be measurable. That is not simply a public relations stunt, which sounds good one day but which, as the Minister for Energy has done recently, involves shifting the target a few years later because it cannot be met.

Photo of David Drew David Drew Labour, Stroud

Returning to innovation, all hon. Members support the idea of some form of fusion, because if we are to provide the elixir of affordable energy, it is probably the best bet. Will the hon. Gentleman tell me how we can achieve a fusion-based economy without continuing to invest in the nuclear industry, the most likely route by which to achieve fusion?

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

Fusion is one of many technologies that have an extremely important role to play. There will continue to be an incredible amount of scientific investment in that area, which does not have to be connected to investment in nuclear power, and that investment will occur globally rather than purely domestically. We all hope that fusion will play a part, but it is 40 or 50 years away, whereas the critical energy gap is over the next 20 years.

We would require any sources of electricity generation that produce carbon to purchase carbon certificates. The number of carbon certificates would be reduced every year, so the price of carbon would rise each year, which would increase the attractiveness of investment in renewable sources of energy. Critically, we would set out the number of carbon certificates for 40 years or more to allow people to invest with certainty and confidence.

Of course, much is already happening that is very encouraging indeed. The move to renewables is no longer driven just by the relatively small group of remarkably committed enthusiasts who have driven the debate forward in recent years. The debate is now driven by some of the largest companies on the planet, and not only those that one might expect. Tesco is investing £100 million in environmental technologies in a bid to halve the amount of energy that it uses between 2000 and 2010. At the motor show, energy-efficient cars—hybrids—formed the centrepiece of every stand, which shows how car companies are driving the debate forward. Mr. Blizzard led a delegation to the offshore northern seas conference in Stavanger, where the chairmen and chief executives of every major oil and company were discussing the importance of carbon capture and storage. Business, driven by consumers, is truly beginning to provide joined-up thinking.

The other key goal must be to secure energy supplies for the future. The public would rightly not forgive us if the Government could not keep the lights on, but this Government are not taking that side of energy policy seriously enough. The gas situation last winter was extremely tight. The Government's recent energy review, however, was almost recklessly optimistic. The margin of spare capacity in our electricity system has fallen, and is set to fall further and faster. For some time we have known that our current nuclear power fleet is coming to the end of its life. Sizewell A and Dungeness A plan to close this year, and a further 7,000 MW of plant will be offline within 10 years, with only one existing station, Sizewell B, open by 2020.

Recently, the process has been accelerated. This month, British Energy announced that two of its nuclear power stations, Hunterston B and Hinckley Point B, would be shut down after cracks were discovered in the boiler tubes. The company also said that it was investigating a leak in piping at Hartlepool, that Dungeness B has issues with its fuel route, that Heysham 1 has operating temperature anomalies, that Heysham 2 is having work done on turbine bearings, and that Sizewell B is currently undergoing planned refuelling. British Energy therefore had only one nuclear power station, Torness, running at full output.

Several hon. Members:

rose—

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I will make some progress now, and give way to hon. Gentlemen in due course.

The concern relates not just to nuclear power. The National Grid says that gas consumption has grown by 66 per cent. since 1992, and predicts that it will grow by a further 11 per cent. in the next five years. Some predict that gas will account for 60 per cent. of electricity generation in 20 years, 80 per cent. of which will be imported gas. Half our electricity would therefore depend on imported gas. If we look at some of the countries that will be the main exporters of gas in 20 years, we have every reason to be concerned. While the opening of the Langeled pipeline this autumn will reduce the tightness of gas supplies this winter, the longer-term outlook is much more worrying.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

Is the hon. Gentleman aware that the last time that we debated this issue the shadow Secretary of State expressed a much more robust view on the need for a replacement for our nuclear industry? Is he aware that his figures about the growing preponderance of gas and the decline in nuclear make it necessary to address that now if we are to provide that replacement? What do he and his party propose to do?

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

In that area, our policy and the Government's are not a million miles apart. The Government have also said that they will not give subsidies, and that there will be full cost accounting to take care of decommissioning. Therefore, it is not clear what the Government will do in the event that nuclear power companies say, "Sorry, we cannot invest on that basis." We are saying exactly the same as the Government—that those companies will have to invest without subsidy, and on the basis of taking full account of their long-term costs. If they cannot do so, they will not have a future role in the equation. On my understanding, the Government are saying in similar terms that they will not subsidise those companies. If that is incorrect, perhaps the Secretary of State will correct me now. If it is correct, and if those companies do not wish to invest, it is hard to see how, without breaking that pledge, those companies can be made to play the role discussed.

Photo of Alistair Darling Alistair Darling Secretary of State for Trade and Industry

The hon. Gentleman is missing the point. Let us suppose that a generating company were to say to the Conservatives today, "We would like to build a nuclear power station." Would they say, "Go away and come back when we have decided whenever the last resort arises", or would they say yes to that company? The hon. Gentleman has sown more and more confusion as to what on earth the Conservative party's policy is.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

We have made the position absolutely clear, and I am sorry that the Secretary of State has not understood it. We have said that our clear preference is for renewable sources of energy. However, we will not stop those who wish to invest in new-build nuclear power stations without subsidy. As I shall explain, we will work to make sure that they can operate on a level playing field, because they currently have advantages and disadvantages.

Several hon. Members:

rose—

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

We have covered the matter in detail, and I shall make some progress.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

There is no policy change. We have been absolutely clear throughout. We continue to say that our preference is for other forms of energy. Perhaps I should not be surprised that the comment comes from Mr. Reed, whose constituents largely work in the sector. We have been clear, however, that we would not stop companies investing their funds if they wished to do so.

The Government are not adequately prepared for the fact that, by 2015, the electricity generation gap could be 20 GW or 30 GW, which is potentially a third of current peak UK demand. We have only a limited time to push forward the building of significant numbers of new electricity-generating plants. If we are to meet our national targets and international obligations on climate change, those new generating plants must be low or zero-carbon. We accept that nuclear could have a role to play, and we agree with the Government that nuclear represents a source of low-carbon generation that contributes to our energy diversity. We do not agree with the Prime Minister and the Secretary of State, however, that it should be our first choice.

We accept that if nuclear is to make a contribution, it should not have a particular advantage or disadvantage. That means amending planning procedures to allow for type and site approval for nuclear investment, just as planning procedures should be improved for renewable and decentralised energy sources. A level playing field also means that nuclear electricity generators will have to be totally transparent about their full lifetime costs. There will be no subsidies or special favours for nuclear. Furthermore, clarity will be needed about the methods and costs of disposing of nuclear waste. A level playing field for nuclear is the most responsible approach to meeting the strategic objectives of carbon reduction and affordable energy security. Too much emphasis on nuclear undermines the scope for realising the true potential of renewables—

Photo of Mark Tami Mark Tami Labour, Alyn and Deeside

On that point, will the hon. Gentleman give way?

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I suspect that the hon. Gentleman would intervene on any point, and make the same point as he wanted to make in the first place.

There has never been a more exciting time for new potential sources of energy. We must give each of the new technologies the chance to prove itself. We need a mindset that every aspect of renewables has a role to play, not an approach of divide and rule, setting one type against another. If we are to reduce carbon emissions by 60 per cent. by 2050, we will need more wind power. We will also need carbon capture and storage and coal gasification. We will need to tackle transport fuels. We must also have more combinedheat and power, and a fundamental shift towards decentralised energy and micro-generation. We will need much greater emphasis on energy efficiency—and, yes, perhaps we will need more nuclear in that mix. On top of that, we will need a range of technologies that no one has yet thought of or managed to develop. If we take out any of those elements, a challenging target becomes difficult, if not virtually unachievable.

Decentralised energy—generating energy near to where it will be used, and in ways that will not produce significant amounts of carbon—is perhaps one of the great energy ideas of the 21st century. Without changes to the planning rules, however, it is hard to see how it can ever achieve its full potential if it is left to the good will and altruism of developers and builders.

Thanks to new technology, we might also be on the verge of a new era not just for new sources of energy, but for old sources such as coal. Coal currently accounts for about 28 GW of the UK's generating capacity, making up 37 per cent. of total generating capacity. However, there is no doubt about the environmental threats posed by current coal usage. New methods of exploiting coal, such as co-firing renewable biomass, are a proven and credible renewables technology option. Co-firing could help to make an annual saving of 21.5 million tonnes of CO2. Likewise, carbon capture and storage and coal gasification offer a new opportunity to exploit coal resources while containing CO2 emissions. Even the most serious carbon sources of the past might therefore play a vital role in a carbon-free future.

Photo of David Hamilton David Hamilton Labour, Midlothian

I am not going to raise the nuclear question. With regard to CO2 emissions, many developments are taking place, including carbon capture and piping CO2 emissions back underground. What is the view of the hon. Gentleman's party on assisting the development of those technologies?

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I think that this is one of the most exciting developments in the sector. If it can be made to work, it will transform our energy debate. In the context of our science policy, we need to discuss how to encourage "pull-through". I am not talking just about blue-skies research; I am talking about how projects can be led to the market and made viable. We are keen to work with the industry to establish how we can best achieve that.

Carbon capture and storage can make a fundamental contribution. We must recognise, however, that so far in the development of renewable energy sources, the system has been too one-sided. The key element is the renewables obligation, which needs to be reformed. The Carbon Trust says that it is inefficient and costly, and has failed to bring on new technologies. In its present form—and the Government say that there will be no changes before 2009-10—it provides a significant incentive for methane and onshore wind farms, but it does so at the expense of other renewables technologies. Indeed, the most recent change undermined the use of biomass in co-firing in coal power stations.

The renewables obligation does not do enough to incentivise technologies such as photovoltaics and geothermal and wave and tidal generation, and it does almost nothing to stimulate research into technologies that are still at the experimental or prototype stage. If we are truly to spark a green revolution, we need to reform the renewables obligation.

Even the most enthusiastic supporter accepts that wind power suffers from a problem of intermittency. To compensate for that, we need back-up generation. In addition to a big increase in renewable generation, we shall need to maintain a level of conventional generation, using carbon capture and sequestration, to back up the contribution from wind power at times when demand is high and the wind is not blowing. The Government have no proposals to ensure that such backup generation is built or maintained, and that leaves too much to chance. Instead, we must explore the establishment of a new system of capacity payments to establish the contribution that that would make to ensuring that the lights stay on during times of fluctuating electricity capacity.

The role of Government is not just to help create new opportunities. Government must also remove obstacles that stand in the way of a vibrant renewables sector. We need to change regulation of the energy market, which may mean reform of Ofgem and making it a primary duty for Ofgem to encourage renewable sources of energy. We must sort out the issues of national grid connectivity. It cannot make sense for the National Grid to be obliged to connect facilities that will still be stuck in the planning system for years ahead of those that have already been approved. Some projects have been given connection dates 10 to 12 years ahead.

We need to place much more emphasis on energy conservation, carrying the public with us so that they understand the contribution that they too can make in saving energy; and, of course, we must sort out planning. Planning is at the heart of the problems facing energy. Not only would it drag out the construction of a new nuclear power station for years, but it is holding up onshore wind farms across the country, stopping offshore wind from being connected to the national grid, and preventing new gas storage facilities from being built. We do not have the luxury of time on our side. We will work with the Government to develop a better system that takes account of both the vital importance of local democracy and the wider regional and national interest.

This is a timely but far too brief debate. There has not been a time in over 30 years when energy has been so much at the top of the agenda, or when the opportunities for new sources of supply have been so great. If those opportunities are to be grasped, however, the Government must truly recognise the challenges as well. They must explain how a "cap and trade" system can be established for carbon, and must start a programme to carry the public with us.

Since 1997 the Government's actions on these issues have lagged behind their rhetoric, but the issues are too important to be made into a political football. We will work with the Government to find the best policies and direction for United Kingdom energy and climate change policy. We welcome today's Stern report, and look forward to working with the Government where there is common ground to develop the best policies for the years ahead.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West 7:03 pm, 30th October 2006

As has been observed by many Members on both sides of the House, this is an apposite occasion on which to debate energy policy, given the publication today of Sir Nicholas Stern's report. That too has been well commented on, and—while extending my personal thanks to Sir Nicholas—I shall make only two further comments. First, it was remarkable in terms of the magisterial and authoritative tone that it brought to a difficult and complex problem. Secondly, I hope that the fervent bipartanship with which it has been received throughout the House will last as we anticipate and discuss the difficult measures that the Chancellor will no doubt introduce to give expression to the points that it makes.

The omens are not all that good: already we see the official Opposition backing away from the clear statement about the difficult issue of nuclear policy that represented their position when we last discussed it. Charles Hendry shakes his head, but what I have said is true. The Opposition have no position whatsoever on the issue. I shall return to the nuclear issue towards the end of my speech, and the hon. Gentleman may wish to intervene then.

Photo of Mark Tami Mark Tami Labour, Alyn and Deeside

Will my hon. Friend give way, on that subject?

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

It might be easier for me to do so when I return to it. Other Labour Members might also wish to intervene then.

We understand, of course, why the shadow Secretary of State cannot be present, and we make no comment about that; but he certainly applied an entirely different emphasis from that applied by the hon. Member for Wealden. When the hon. Gentleman talked of replacing targets with something that could be measured, we observed the linguistic contortions. Indeed, the Whips are already descending to try to explain the inexplicable—that is, the absence of Conservative policy on this issue.

I want to pose a few questions to my right hon. Friend the Secretary of State, who has led us so well through the difficulties that we have encountered in facing up to the problems of obtaining competitive, secure energy and diverse supplies while fulfilling our commitments on emissions and meeting climate change requirements. It was good to hear—although I am not sure that I heard my right hon. Friend correctly—that we may still be self-sufficient overall in energy. The figures in the third of the reference tables provided by the Department are for 2003. That is quite a long time ago, given that we are meant to report to the House on these matters annually. Are there any more up-to-date figures? It would be interesting to know whether we already have a significant deficit in our energy requirements.

I should also like the Secretary of State to tell us more about the prospects for gas, as and when he can. I should like to know what is happening in the western approaches, as well as to the north and west of the Shetlands. There has been a huge rise in the prices of oil and gas. Is there a chance that they will become increasingly economical? Are the prospects as good as we might reasonably expect? If so, when might we realistically see some entirely new sources come onstream?

The commitment to maximise renewable sources as far as humanly possible remains in all parts of the House. We are currently extremely well endowed in wind terms in the United Kingdom, in Ireland and off the north coast of Europe. I seem to remember the Secretary of State's predecessor telling us, when he presented the last energy review in 2003 from the Dispatch Box, that we had some 30 per cent. of western Europe's wind resources. That is an enormous potential for us to exploit. It is expensive, of course, and we have a huge task ahead of us in reaching our 20 per cent. target by 2020. As we keep pointing out, that represents a fivefold increase, and we are not achieving such a rate of increase yet.

Photo of Mark Tami Mark Tami Labour, Alyn and Deeside

Will my hon. Friend give way on that point?

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I will give way to my hon. Friend on both points in a second.

Is there anything more that we can do? Can my right hon. Friend tell us whether the present 10 per cent. subsidy—about £1 billion a year—for renewables, presumably mainly for wind, will be geared either up or down as we approach 20 per cent.? Is a £2 billion subsidy projected for that stage? We must clearly pay a price for renewables, and I hope that Opposition Members will make up their minds and say that they are prepared to face that price.

Photo of Mark Tami Mark Tami Labour, Alyn and Deeside

My hon. Friend makes the important point that it is a case not just of building new nuclear power stations but of building them to compensate for the stations that will be lost. If we are not to have nuclear power and renewables are to fill the gap, it will be a very big gap to fill.

What does my hon. Friend think of the Opposition parties? While they talk green, they tend to campaign locally against wind turbines whenever they are proposed—particularly the Tories in north Wales.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

My hon. Friend, characteristically, hits the nail on the head. As those of us who have campaigned in by-elections and other local elections know, that applies particularly to the Liberals, who are extremely good at espousing policies nationally that they then disown locally. What I think about the Opposition in general is better not said in this House, but on this issue the way in which they have chosen to sit so uncomfortably on the fence will be evident to everybody, particularly to those who have come to the difficult conclusion that we have no alternative but to embark on a replacement policy for the nuclear sector.

Before coming to that, I want to mention coal and to recall my experience at the Treasury in that context. Not so very long ago—barely six or seven years ago—the Treasury and most Government Departments were intent on closing every ounce of coal-fired generation. I ask my hon. Friends where we would have been last year without the coal capacity that we had. If, as has been suggested, 38 per cent. of generating capacity is coal-fired, what level is projected for that, and over what period? Linked to that, what level of excess capacity do the Government think it prudent to have in the supply sector? Given that it must be a significant percentage, what figure, albeit in broad terms, do they have in mind?

Those of us who have supported the difficult decision to go forward with the nuclear programme also subscribe to the concept of the level playing field. There should be no subsidy for nuclear, so those in the private sector must come up with programmes that show that this can be done.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

The hon. Member for Wealden says that it cannot be done, so the Conservatives must be against it. Why do not they stand up and say, "We don't believe in the nuclear option"? Why do not they have the courage of their convictions?

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I said, "What if they do not?" In other words, what happens if the private sector does not invest on that basis?

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I understand that it is likely to make proposals that show that it can be done. In any objective and honest assessment, there is no reason why not, given the projections for gas prices and the costs that arise as we get into the more difficult areas of renewable generation. We naturally cherry-pick the best areas for the current situation. The capacity is still there, but as with other areas of supply, as one develops its potential the difficulties of extending it become greater, as, usually, do the costs. The Opposition have not given us a clear statement of their policy, which is what we are aching for. They flunked the issue when they called off their policy review and came out with an interim review, and they have flunked it ever since. It would have been a much happier situation for the whole House if the shadow Secretary of State, who came out as more firmly in favour than we were ahead of the review on nuclear, was here to make their policy clear.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee

I am genuinely interested to know whether the hon. Gentleman thinks that the Government's proposals on carbon trading, as they stand, are sufficient to achieve commercially viable nuclear power stations.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

I do not want to make it difficult for my right hon. Friend the Secretary of State or for my hon. Friend the Minister for Energy, who will wind up the debate, but I do not know whether the private sector will make proposals on the basis of base load. I am out of date on that concept; does it still apply? I was heavily involved in it during the energy review that was undertaken at the time of my leadership in the Treasury. About 20 or 30 per cent. of energy was called up automatically and maintained on base load. I am not sure whether that is still intended to be the case, or, if so, whether a fixed price will be established for it. I do not think that there would be any element of subsidy, but I am not sure how a nuclear power plant could be operated without it. It is not like a coal plant. Coal is the best fuel to call up in an emergency. It can be flamed up—I think that that was the phrase—very quickly for capacity at peak demand periods. Clearly, nuclear is not suited to that. Gas is less suited to it, although we brought on new gas plants with that guarantee. If there is base load, will it be against a fixed price? If so, and it is a competitive price, it seems to me that the private sector has an assurance against which it can quote and make proposals that, contrary to what the hon. Member for Wealden said, can be made commercially realistic.

With the new nuclear programme coming on-stream, and ahead of the decommissioning of the existing plants, is it any part of the Government's review to look again at the superconductor arrangement with the French? When we last debated it—I have brought it up from time to time in the House—we were still paying a very stiff premium to the French to have this standby capacity, which we paid for whether we used it or not. Indeed, if we used more than the prescribed minimum capacity that the French would hold available for us, we would pay a super-price way above the basic price to which we were already committed. I should reassure my hon. Friend the Minister that I do not expect an answer this evening, but at some point the House will need to know on what basis the private sector is being asked to quote for a new nuclear programme and whether, or when, we can disentangle ourselves from the very expensive French superconductor agreement. I say that because table 1 in the papers produced for the debate implies that the units of energy that we import are more expensive than those that we export. That does not seem to be good business and could be a reflection of our superconductor arrangement with the French.

I will be grateful to my hon. Friend the Minister if he can deal with some of those questions when he winds up, or, if not, in the course of future debates.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee

On a point of order, Mr. Deputy Speaker. If papers have been made available to some Members, I am not aware of what they are and I would very much like to see them.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

Further to that point of order, Mr. Deputy Speaker. The table that I mentioned uses figures from the DTI's "Digest of UK energy statistics 2005" and "Energy Trends quarterly table 1.3". They have all been published and are available to the hon. Gentleman if he would care to go to the Library and get them.

Photo of Michael Lord Michael Lord Second Deputy Chairman of Ways and Means

I am grateful to the hon. Gentleman for dealing with that point of order so efficiently.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry 7:18 pm, 30th October 2006

As previous speakers have said, this is an auspicious day to be discussing energy supply, since it is the day on which the Stern review was published, and it has been announced that the Government are to introduce a climate change Bill. Of course, the debate on that Bill will be on its content, not on its mere existence. It is important that we realise what radical changes need to be made in energy policy in order to meet the challenges that Sir Nicholas Stern describes, and any realistic climate change Bill will have to take that into account.

Climate change must be the first priority as regards energy policy. That means fundamentally changing what Ofgem does and how the market works. For example, in the electricity market, power stations currently come on stream simply because of their cost of generating electricity. That ignores carbon and the climate change consequences of generating electricity in different ways.

We need to develop a regulatory framework in which Ofgem brings into the electricity generating system forms of generation according to how cheaply they save carbon, not simply how much they cost. That will radically change the way in which the electricity generating system works. It will bring on renewables quickly. It will also create a position whereby gas clearly has an advantage over coal. Although I have great sympathy with the comments of hon. Members who represent mining seats—my grandfather was a coal miner—the coal industry must face up to the carbon consequences of generating electricity through coal. The introduction of such a radical change to the way in which the system works will provide the boost that the coal and generating industries need to introduce technologies such as carbon capture and storage. Coal can compete with gas and renewables only on that basis.

Photo of Bob Blizzard Bob Blizzard PPS (Rt Hon Douglas Alexander, Secretary of State), Department for Transport, PPS (Rt Hon Douglas Alexander, Secretary of State), Scotland Office

If, under the policy that the hon. Gentleman describes, the nuclear industry stepped up to the plate and could deliver carbon-free energy at a price as competitive as that of offshore wind or solar power, while oil and gas prices spiked or remained extremely high, would he tell it to go away?

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

I shall explain shortly why Liberal Democrats remain fundamentally opposed to nuclear, although nuclear power could not come on stream in the scenario of a gas spike that the hon. Gentleman describes because of the points that Mr. Robinson made about base load. Nuclear power is fundamentally a base-load technology; it cannot operate economically in a flexible or variable way.

Photo of Bob Blizzard Bob Blizzard PPS (Rt Hon Douglas Alexander, Secretary of State), Department for Transport, PPS (Rt Hon Douglas Alexander, Secretary of State), Scotland Office

I did not mean a spike in the sense of a sudden surge, but a position in which gas prices remained permanently high.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

I thank the hon. Gentleman for that clarification and I shall explain Liberal Democrats' fundamental opposition to nuclear power later. However, before I do that, I stress that the cheapest, most effective and efficient way to save carbon is through energy saving rather than any specific mode of generating electricity. For that, we must consider a range of policy options, including product standards and building regulations as well as a review of the operation of the energy efficiency commitment.

In the energy review, the Government were interested in a "cap and trade" system for energy efficiency, whereby the energy supply companies would be under an obligation to reduce the average amount of energy that their customers use. Companies' current incentive is to sell as much energy as possible to their customers. A requirement to reduce average energy use, coupled with the ability to sell any excess to other companies, would constitute an economically efficient way of operating. I am interested to know whether the Government believe that that system will progress from the energy review to the White Paper.

Other speakers mentioned decentralised energy, and we should realise the importance of that to the country's energy generating system. Combined heat and power and microgeneration at household and district levels have vast potential—they could provide up to 30 or 40 per cent. of the country's electricity requirements. Even when microgeneration and combined heat and power are gas based, their method of producing heat as well as electricity means that they are more efficient in their use of gas than a system of separating a housing heating system from an electricity generating system. Combined heat and power and microgeneration also reduce transmission losses that occur between the power station and the user. Even microgeneration and combined heat and power that use gas produce a massive carbon benefit by effectively doubling the efficiency of its usage.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee

Over what time scale does the hon. Gentleman believe that decentralised energy could make the contribution of 30 to 40 per cent. that he mentioned?

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

I believe that it would take 30 years to reach that percentage, but steady progress can be made towards the target. Much of the progress would be front-loaded because many cheap projects can be introduced much earlier, but it would take place over a generation.

However, we must make decisions now—not in a generation—about the way in which the national grid works. Decentralised energy works on a different sort of grid from that of the current centralised energy system. The output of nuclear power, which is a base-load system, cannot be varied economically. Decentralised energy requires a different system, whereby power can move both ways and in which the central generating capacity must be enormously flexible to meet the variations in output of a dencentralised energy system. Without that flexibility, a decentralised energy system cannot work. The nuclear option effectively rules out a decentralised energy system. In engineering terms, it is possible to have both systems at once, but that is enormously expensive and such a system could not work economically. The central element of the decentralised system would continue to exist but central capacity would be different from the current base load.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee

The evidence that the Select Committee has heard so far suggests that the major impact of decentralised generation would be not on the national grid but on local distribution networks, which are perfectly able to deal with the challenge of micro-generation.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

The hon. Gentleman is right when small amounts of decentralised energy are on the grid, but when we reach the sort of percentages that I mentioned, a different sort of engineering is needed. We face a problem when the grid needs to be renewed. It works on a 50-year cycle and we are reaching the end of it. We need to make decisions now about the next 50 years. If it were possible to do as the hon. Gentleman suggests, we would leave the matter for 30 years and then decide. However, we cannot do that because we are in a part of the cycle when we need to decide.

Our objections to nuclear power remain fundamental. In any scenario, nuclear cannot come on stream for approximately 10 or 12 years, even if the Government lifted many of the planning barriers. The planning period for a nuclear power station is now 17 years. During that time, generating capacity from nuclear tends to come out of the existing system, as hon. Members of all parties have said. Whatever we do in the next 10 to 15 years, we will need energy from non-nuclear sources. Arguments that depend on nuclear suddenly appearing as if by magic to fill a gap in the next 10 to 15 years simply do not answer the question.

Nuclear power is also expensive and its subsidies tend to be hidden. The nuclear industry tends to present proposals and say that subsidies are not needed. However, after a time, it says, "Our costs and time scales are overrunning but the project is so big and important for the energy generating system that it can't be allowed to fail so you, the Government, must help us." More and more help is subsequently needed. Nuclear power locks itself into the system. It may start without subsidies but they eventually arise.

When I was first elected, I attended a debate on the Queen's Speech that included a short set of comments on nuclear power. Hon. Members who supported nuclear power pointed to the Finnish experience, where a nuclear power station was being financed purely by the private sector. I was privileged to visit Finland to talk about its nuclear power stations, and I found that, in reality, there were various enormous Government subsidies hidden in its production. It was not really a private sector project at all. In fact, the consortium building that power plant includes among its members the city of Helsinki and a state-owned Finnish electricity company. The project is now way over budget and way over schedule. That, I believe, will be the future of any nuclear programme in this country. It will not be introduced in the optimistic fashion that its proponents contend. Eventually, the nuclear industry will come to the Government and ask for its usual subsidies.

Photo of Robert Key Robert Key Conservative, Salisbury

I, too, have been privileged to go to Finland and talk to the Finnish Government and Finnish politicians, trade unionists, engineers and scientists. I have seen the plants and gone down the waste facility that is being built. What the hon. Gentleman describes is, if I may say so, only half the story. What the partners investing in the project are contributing is a 60-year cycle of investment, ending in no subsidy for waste disposal, and the ownership ofthe means of production by the consumers of the electricity produced. That is an entirely different scenario, which does not match what the hon. Gentleman is trying to tell the House.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

The two accounts are not entirely incompatible, though the interpretation certainly is. The long-term contracts being granted to make the Finnish project work are partly contracts from the state, because the partners include state entities. In my view, that still amounts to state subsidy. On waste, the 60-year period to which the hon. Gentleman referred is correct, but after that period the Finnish state takes responsibility for waste. Admittedly, a lot of the cost will be borne by the industry, but not all of it.

Another reason for opposing nuclear has already been pointed out: it will crowd out investment in other forms of energy production, including the large-scale renewable projects such as the barrage and tidal schemes that are currently envisaged. That has also been the experience in Finland: investment in renewables has not flourished since the Government took the decision to go nuclear. Finland's experience is also that energy saving is going into reverse since that decision was taken.

The next reason for being against nuclear is that it remains a security problem. Nuclear power is the only form of energy that requires its own police force, the only form that is a plausible target for terrorism.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

The hon. Gentleman says, "Nonsense", but how many terrorists have targeted windmills in the past couple of years?

Photo of Robert Key Robert Key Conservative, Salisbury

It would be unwise for the House to discuss security in any depth or detail, but looking globally at the situation, there are numerous examples of terrorism against pipelines, whether oil or gas. It is particularly on account of gas supplies and the vulnerability of the 80 per cent. that needs to be imported that we should opt for a wider, broader base load including nuclear.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

The hon. Gentleman makes a good point about the physical infrastructure, but my point is that it is only nuclear whose very technology requires a basic secrecy. Its historical connection with the military, which goes back to the origins of nuclear power, has meant that over the past 60 years it has been incredibly difficult to get any accurate information about the workings of the industry. It is not because the people involved are somehow ill intentioned; it is the nature of the industry itself, which means that it has to be kept secret. That leads on to a further reason against nuclear: it is the only form of energy production that is inherently a threat to civil liberties, requiring a repressive apparatus of the state to maintain it in place.

The next reason against nuclear is waste disposal. The CoRWM—Committee on Radioactive Waste Management—report does not resolve the problem of nuclear waste at all. Instead, it says that it is a very difficult problem over which it is difficult to gain consent. It argues that we should attempt to get the necessary consent, but whether we will ever reach it, of course, is a very different question.

Photo of Jamie Reed Jamie Reed Labour, Copeland

The framework outlined by the Secretary of State for the Environment, Food and Rural Affairs last week provides a much-needed, long-term policy framework for the management of radioactive waste disposal. Contrary to what the hon. Gentleman has just said, the problems associated with that disposal are not scientific, but entirely political. I believe that a solution and resolution could be found quite speedily.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

There are both scientific and human organisational problems. The scientific problems are connected with geology. In Finland, for example, the only site identified for nuclear waste is a wet granite site and it is not entirely clear whether the geology will work over the envisaged time scales. The organisational problems are connected with the extent to which any depository should be sealed because of the problem of future invasion of the site and removal of the materials. It deals with the very long term, so we have to raise the question whether, in many thousands of years' time, people will be able to find the site and understand what is there. I would argue that those are human problems, not political ones.

Photo of Jamie Reed Jamie Reed Labour, Copeland

On that very point, would not exactly the same apply to long-term carbon storage and capture?

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

The hon. Gentleman makes a good point, but that technology is inherently a short-term fix to buy us time, though other hon. Members see it as a more permanent solution to the problem of producing energy in a carbon-free way. As the technology now exists—we are still in a state of uncertainty about the different forms of carbon capture and storage—it seems sensible to treat it only as a means towards getting a different energy system altogether in about a generation's time. Fusion power was mentioned earlier; the problem is that fusion has seemed to be a generation away ever since I was a boy. It is always a generation away. Some forms of technical innovation never seem to make much practical progress.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee

The hon. Gentleman should visit Culham to see how much progress is being made on fusion. It is no longer a generation away; it is perhaps only half a generation away. There is real optimism that the technical challenge is being met. It may not happen, I agree, but it is looking more likely now than it ever has before. The hon. Gentleman should update himself on the technology.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

I would be delighted to visit that site, but I have to say that optimism has been part of that particular technology for a long time. My view is that the nuclear industry in general—covering both fission and fusion—is fuelled more by optimism than by any other fuel.

I move on to the subject that our debate was originally to be about: the security of energy supply. The Government's problem—it can be seen in the consultative documents—is how to measure security of supply. The Government invited views on how best to measure it in the first place; it is difficult to set a target if it is not clear precisely what is being measured. Security of supply, of course, is not one, but many different problems. In fact, there are at least four different problems, which I should like briefly to mention: resilience, control of resources, diversity and interdependence.

To deal with resilience first, an energy system is resilient to the extent that it can survive shocks and bounce back. We need to ask questions such as how long it takes to recover and at what cost. It is a question of minimising the permanent losses to the economy and production that can occur from a particular event, and assessing how much it will cost to get back to where we were in the first place. What makes for resilience are elements like decentralisation. A decentralised energy system is inherently more resilient—it can bounce back more quickly and is less injured in the first place than a big centralised system. In that case, when large power stations go out of action, it causes a huge problem, requiring a lot of effort and cost to recover.

It is also a question of storage, which has been mentioned in relation to gas. The Secretary of State referred to the improvements that followed the recovery of the Rough storage facility, the new pipelines and the liquefied natural gas port facilities. As he said, capacity is not the same as use, so we need some reassurance that the new facilities are being used to the full extent. It is right that, over the coming years, we will need more gas storage. Whatever one's view on nuclear, in the next 10 to 20 years, a lot of the replacement electricity-generating capacity that we are going to have to use will be gas. Whatever happens, it will be CCGT—combined cycle gas turbine—combined heat and power and microgeneration, so the question of increased gas storage capacity will be with us, regardless of our view on those bigger questions.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

The hon. Gentleman talks about resilience, and rightly so, but does he recognise that the resilience of overseas assets, particularly gas pipelines, will be just as important as the resilience of those assets that he is talking about now?

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

It is true that the resilience of those assets is important. I will come on to another question about overseas assets, which is who controls them. That has been a concern on many sides—who controls the assets and in what circumstances can they be withdrawn from use by the authorities of other countries?

I want to answer the question about what will happen as the nuclear power stations come out of use, a problem that has been raised on several occasions so far. Those nuclear power stations make up just under 12,000 MW. Already planned are 12,000 MW of gas and 13,000 MW of renewables, mainly wind, to which we can add a small amount of planned CHP plants, again mainly using gas. Those facilities will result, I think, in there being no particular problem of electricity supply in the next period. In fact, the Government say as much in their reply to the Environmental Audit Committee report on energy entitled "Keeping the lights on":

"the modelling also indicates that in most scenarios, the risk of having unserved electricity demand is unlikely to become substantively higher than today until around 2015. Even then, the amounts of 'shortfall' between demand and supply are likely to be small and could therefore potentially be resolved by some companies voluntarily shifting their electricity consumption from peak to off-peak times in response to price signals."

Therefore, I do not think that that is particularly a problem.

However, there are a couple of problems in respect of resilience and gas storage. One is the planning system. A number of hon. Members have raised that. I understand that the Government will make announcements in January on how the planning system can be speeded up in favour of gas storage sites. I find it interesting that the Government are prepared to tear up the planning system in favour of nuclear. As has been mentioned, the consultation on how that will work will close tomorrow. It is interesting to compare what the Government are prepared to do for nuclear with what they were prepared to do for gas.

I am not particularly sympathetic myself to tearing up the system for either system of energy production, but I think that improvements are possible. The problem is that attempts to impose top-down command-and-control orders on local planning authorities simply lead to resentment. People who feel ignored or bypassed by the system are likely to want to take up any point. My experience as a local council leader is that one day spent in consultation early is worth a week of recriminations later.

What one sees—there are examples of this going on now—is councils taking up points in rejecting planning applications which are basically cop-out points. The councils themselves are unlikely to believe that the problem really exists. What they are saying is that it is a planning issue; that local residents perceive that there is a problem. That is not a point that it should be possible to use in the law itself, but local authorities are not taking responsibility. They are effectively saying, "Someone has to decide in favour of this but let it not be us. Let someone else take the rap."

It would be better to change the planning system, so that local communities and people got some benefit from accepting strategic projects. It is noticeable that the CoRWM report talked about exactly that. It was saying to local communities, "If you accept radioactive waste, there will be other benefits for you, so we ask for volunteers to take this deal." The question I put to the Government is: why not have the same system for gas storage or indeed for renewables?

Another issue that arises in respect of gas storage is the strategic reserve. The energy review rejected the notion of a strategic reserve. The argument against it was that classic Treasury argument that I used earlier in this speech: it would crowd out private sector investment by dulling incentives to cover contracts. That is a fascinating point. One would have thought that, given all the fuss that the Government have made about the security of gas supply and all the points that were made by Charles Hendry, who speaks for the Conservatives, about the threats from Gazprom, and the uncertainties about where gas will come from, there would have been an entirely different answer from the Government on the question of a strategic reserve—that the Government are much better at spotting political risk than the private sector. But what has happened? Entirely the opposite has happened. The Government have concluded that no strategic reserve is necessary. My conclusion is that one can tell from what the Government decide on the strategic reserve what they really believe about the political risk—that is, the political risk is controllable and the private sector can handle that problem in the normal market way. We have here an example of the Government revealing their preferences by what they do, rather than by what they say.

The second aspect of the problem of security of supply is control—the ability to command resources outside the market and to have ownership of them. This is the concern about imports. There is a fear of imports—a form of mercantilism is going on here. There is a feeling that we are in a new situation of importing energy and we should all be afraid of the feeling of loss of control. In many ways, it is an unfamiliar and unwelcome feeling, but it is not an argument for nuclear, as 100 per cent. of uranium is imported.

The best forms of maintaining control are energy efficiency and renewables. The fuel sources for renewables are again entirely under our own control. Wind, wave and tide cannot be taken away by other people. That is why, from a security point of view, renewables are so important. I suppose that one of these days someone will invent rain power and then we will be completely fine.

Photo of Jamie Reed Jamie Reed Labour, Copeland

The hon. Gentleman will be aware that, if we reprocess spent nuclear fuel, we need never import another gramme of uranium into this country.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

The hon. Gentleman is suggesting reprocessing nuclear fuel in a way that no one now proposes to do. If we have learnt one thing about nuclear in the past generation, it is that the reprocessing method is not viable economically. I do not think anyone is suggesting going back to it.

I suppose that it is true to say that other methods of control may be recommended, although I would not recommend them. US policy seems to be obsessed with the control issue. Dick Cheney said in 2001 that the US should

"make energy security a priority in our ... foreign policy."

Of course, that led to a policy of autarchy and of trying to maintain obsessive control over the range of energy sources. It may not have been the only reason for the war in Iraq, but I am sure that it was not entirely irrelevant. In fact, one aspect of the nuclear debate that worries me—hon. Members appear to find it so interesting—is that it seems that Britain is going nuclear as soon as the US changes its policy and goes nuclear. I might come to the conclusion that the decision to go nuclear is simply another aspect of the vassal-state attitude of some members of the British Government.

It also has to be said that the US interest in nuclear also extends to ensuring that its companies receive nuclear contracts from the third world. The interests of Bechtel are involved, I fear—

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

I really do not wish to delay the hon. Gentleman any longer—[Hon. Members: "Hear, hear."] He seems enthusiastic about two things—I am enthusiastic about them, too—one of which is fuel efficiency. However, to be fuel efficient one needs some fuel to be efficient with. The only fuel he seems to advocate is renewables. We want a five-fold increase in renewables, but where will the rest come from? The hon. Gentleman is telling us what he does not like, but what diversity of energy mix are the Liberal Democrats promoting?

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Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

As I said, whatever one's attitude to nuclear, in the next 15 to 20 years, electricity production will come mainly from gas. I know that some people want a different solution in the short term, but there is not one. That is why gas security is so important, regardless of one's view on nuclear. The proportion of gas used to produce electricity will increase, whether nuclear energy is chosen as a long-term option or not.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

Well, I have explained the mix that will be necessary, and the hon. Gentleman can read for himself the ILEX report produced for the World Wide Fund for Nature on the subject. If one combines an aggressive energy-saving programme with a wider choice of renewables than we are considering at present, together with combined heat and power, a more efficient way of using gas and a change in the way in which the electricity market is regulated—so that it encourages low-carbon, not high carbon between coal and gas—one can achieve a carbon saving equivalent to what the Government have set out, but without using nuclear.

The third aspect of security of supply is diversity, and here I come to an important problem with nuclear power. The Government intend that new nuclear power stations will be procured in a group—or a fleet, as it is called—of 10 or more of exactly the same design. They will be ready much more quickly, because it will be necessary to approve only one design, and they will be built by a combined consortium of the major energy suppliers. The problem is that that reduces the amount of diversity in the system.

Security of supply is achieved by diversifying risk and ensuring that risks are not associated with each other. If the Government have a programme of 10 identical nuclear power stations, they will increase the correlated risk. If anything went wrong with one of those nuclear power stations, they would all be affected. If something were wrong with the design of the plants, they would have to be turned off at once. Nuclear power stations are similar in design, but not identical. Making all the new nuclear power stations identical will lead to the problem the aircraft industry faces—if something goes wrong with a type of aircraft, the whole fleet has to be grounded. That is a fundamental objection to the notion that nuclear power will add to the diversity of supply: in fact, it will detract from diversity.

Finally, the most important aspect of security of supply—and the one that really works—is interdependence. We need security of supply for those who import power, but there also needs to be security of demand for those who sell it. Russia's problem is not that it intends to use energy supply as a political lever. Its real problem is that Europe is its only serious customer. It needs to diversify its customers. At the same time, we are attempting to diversify the sources of our gas. In Britain, the amount of gas imported from Russia last year was exactly zero—we do not use Russian gas, but the rest of Europe does. By diversifying and turning to the rest of the world for gas supplies, other European countries are worrying the Russians.

I am concerned that we are developing a sort of Russia phobia in describing the relationship between us, which should be one of interdependence within international trade. However, there are barriers. The obvious barrier to developing an interdependent and free relationship is that Russia and, indeed, Ukraine, are not even members of the World Trade Organisation. Russia also needs internal liberalisation—Gazprom is a state majority-owned company. However, people who live in glass houses should not throw stones and we can hardly lecture the Russians on liberalisation if Europe's market is not liberalised.

The problem in the European market is not simply a question of the French and the Belgians refusing to liberalise; it is a problem about the relationship between control and interdependence. Regulators and Governments in those other countries are so concerned about the question of control over gas supplies that they think that it is more important than liberalising the market. Last winter, we saw very high prices for gas. British companies were willing to pay those prices, but they could not obtain gas at any price. The reason for that is that the gas was controlled by state-controlled companies in which officials make their careers not by making money for the company, but by ensuring that gas is under the control of their company and Government. We need to negotiate the liberalisation of the European gas market, and the Government are doing so to some extent. However, they need to recognise that the obsession with control—from which we also suffer—is a fundamental problem.

The first essential step is transparency. If we do not know how much gas is held in other countries, there is little else we can do. Therefore, I urge the Government to get on with that aspect of negotiation.

The issue of security of supply is not simple, and I have held the House up for a long time largely in an attempt to demonstrate that it is not simple. The Government have adopted several measures that should be praised. Their attempts to encourage better gas storage and the liberalisation of European gas markets are indeed the right way to go. However, we must understand our own position. If it is fundamentally one of worrying about control, we will undermine our efforts to reach the situation of international free trade and interdependence, which will be safest in the long term.

Photo of Bob Blizzard Bob Blizzard PPS (Rt Hon Douglas Alexander, Secretary of State), Department for Transport, PPS (Rt Hon Douglas Alexander, Secretary of State), Scotland Office 7:59 pm, 30th October 2006

For the past 41 minutes I have listened extremely patiently to David Howarth. If he were magically transported to the Labour Benches and were in government and gave that exposition as Government energy policy to an assembled group of leaders of important industries, to people who run hospitals or even to elderly people in their own homes, and that group looked him at him hard and asked whether his energy policy would keep the lights and heating on and keep production going, he would have great difficulty replying yes with conviction. Even if he said yes, they would not believe him.

Energy debates in the House are usually typified by Members promoting their favourite energy source or one in which they have a long-standing interest. I shall not completely avoid doing that, but I want to begin by saying something with which I hope we all agree: any debate on energy should start with energy saving, where there is so much more that we can do. I very much welcome the commitment and the range of ideas in the recent energy review. An idea that particularly caught my eye was the proposal for real-time information about domestic consumption in people's homes. If people could see how much energy they were using and straight away how much it was costing them, the temptation to save money would be irresistible. I look forward to the development of technology that enables that to happen.

There are even simpler solutions. Last week, a constituent showed me a utility bill and asked why, if we need to save energy, the initial energy units—the earliest part consumed—cost more than the latter part, or the excess. That person has chosen not to pay a standing charge, but payment of such a charge front-loads the initial units of energy used even more. Why cannot we reverse that process? We could make the early units consumed reasonably affordable and then operate a sliding scale so that the price increased the more that was used, rather than trying to sell people as much energy as possible so that it is cheaper the more they buy. That seems a compelling and simple idea.

On a larger scale, the energy review urges planning authorities to set ambitious policies for renewable energy. The regional spatial strategy for the east of England actually contained an important renewable energy target, which was included in the regional plan: on-site generation of 10 per cent. renewable energy for new build. Disappointingly, after public examination, the inspector, in his report, removed that target from the regional plan. Will my hon. Friend the Minister look into that, and explain how we can achieve the laudable policies in the energy review if inspectors take them out of regional plans?

Like me, other Members will have recently received the Energy Saving Trust's 20 per cent. challenge, which I very much welcome. I and many others are happy to sign up to it. I am fortunate enough to have been able to afford to invest in a condensing boiler, but there are many things we can do—changing to energy-saving light bulbs, switching off appliances or not boiling too much water in the kettle. We need to underline that message time and again.

Members of Parliament can set an example, and it is important that local authorities do so, too. In Lowestoft, we have two large multi-storey car parks. Last week, it was reported to me that the council leaves the lights on all night, even after the car parks have been locked and no one can go in. Apparently, the time switches no longer work so the lights are left on. I was also told that there are fans in one of the car parksthat are supposed to come on only when fumes need to be extracted, but they operate all the time. It is encouraging that members of the public notice such things and report them, but do we have the mechanisms to deal with them? Are local authorities required to carry out proper energy efficiency audits?

When I led Waveney district council, we had an energy efficiency officer. He was not the most popular officer, but he saved not only energy but a lot of money. I think my council has rather lost its way by not appointing a replacement.

Photo of Robert Key Robert Key Conservative, Salisbury

I very much applaud what the hon. Gentleman is saying. Does his local authority give any indication in the council tax demand of the amount it spends on electricity for lighting and other purposes? Regrettably, neither my county nor my district council do so. Provision of such information is rare, which is a great mistake. I would love local authorities to provide it—would he?

Photo of Bob Blizzard Bob Blizzard PPS (Rt Hon Douglas Alexander, Secretary of State), Department for Transport, PPS (Rt Hon Douglas Alexander, Secretary of State), Scotland Office

I completely agree. I have never seen such statements in annual reports, although I have seen lots of others, including those blaming the Government for things—but nothing about energy efficiency and costs. On that point, I looked for guidance in the local government White Paper, which includes some encouraging statements, but they need to be developed further to direct local authorities into the way of energy efficiency.

Energy debates are often stories about contending energy sources. We have heard some of them tonight, with pro and anti-nuclear speakers. In the past, there have been pro and anti-wind speeches; I remember an Opposition Member describing wind turbines as something from "The War of the Worlds". My contention is basic: we shall need all those sources. In the long term, the world will need all the energy it can find. Although nothing is running out at the moment, in the sense that it is about to disappear, the big story of the past five years is the realisation of the enormous increase in demand from more and more developing countries, which enables us to comprehend more clearly what we always knew: the number of energy sources is finite. We can now see that even more clearly, even though they are not about to run out tomorrow. That has an enormous impact on the price of oil, which has dragged up the price of gas.

The question we have to address is not which energy source to use—we would be foolish to rule any of them out—but when to use the various sources and what the phasing and the mix should be. The energy review takes a balanced approach to security of supply in those terms. It contains some good instruments for bringing various energy sources to the marketplace, but it is difficult to ensure that those instruments are calibrated exactly so that we achieve the mix we want, although I hope that we have done so.

The renewables obligation gives us a strong incentive and is worth a subsidy of £1 billion a year. The proposal to tweak it and to bring currently more expensive renewable sources such as offshore wind, tidal and solar closer to the market and make them less expensive to develop is welcome, especially in my part of the country where we are putting a lot into the development of offshore wind. Recently, I was able to take my hon. Friend the Minister for an aerial view of Scroby sands—the first truly offshore wind farm. Afterwards, in Lowestoft, we looked at the country's largest onshore wind turbine.

The rise in oil and gas prices, along with the provision of better planning procedures and clear policy decisions on waste, make nuclear energy much more possible and more attractive to investors. Developing the EU emissions trading system, by placing a higher value on carbon and including carbon capture and storage, along with the Government's commitment to secure amendment to international treaties such as the London convention, sends a positive signal about carbon capture and storage technology. However, even with those instruments and policies, if the investment flowed only one way, or only one or two ways, and did not give us the mix that we wanted, what could we do? That question still intrigues me.

The huge problem that underlies all the ways of producing energy in the UK that I have been talking about is our planning system. At present, it is impossible under our planning system to deliver within a reasonable time scale almost any large item of infrastructure, whether for energy or transport, which cannot give investors any confidence at all. Yes, we give everybody a say; yes, we enable interest groups to derail projects; but I am afraid that our current system takes little account of overriding national need, and we are now in a situation of overriding national need in respect of energy generation. Our planning system has dogged wind turbines—both onshore and offshore—grid connection installations, gas power stations and gas storage, and that is before we even address any possible further round of nuclear power stations.

A few years ago we tried to make some changes through the Planning and Compulsory PurchaseAct 2004, but those of us who wanted change were beaten back. I am pleased that in this debate there has been agreement in all parts of the House that we need to make some changes. Those changes will be a major challenge for the next Parliament. If we are serious about meeting our energy supply challenges and addressing climate change, we will have to revise our planning system so that we can generate sufficient capacity in the ways that we need to.

I want to look at this issue in an even wider context, because an even bigger issue is staring us in the face in terms of energy policy across the world, and I think that today, with the Stern report, it strikes us between the eyes. If we read all the reports of all the expert bodies, and all the energy outlooks and other scenarios, we find that they all tell us the same thing: whether we like it or not, we will be using fossil fuels for a very long time to come. Whatever we do on energy saving and renewables, and regardless of whether we go nuclear, it is a fact that we will be using fossil fuels for a long time. We need them to keep the lights on. I cannot believe that countries that own them will leave such valuable commodities in the ground and say, "We are not going to exploit them" and, as we know, they will not run out for quite a long time.

In its report of March this year, our Environmental Audit Committee referred to

"forecasts which show increasing use over the next 30 years of fossil fuels, especially in developing countries."

Those forecasts come from bodies even more eminent than that Committee. Let me quote the intergovernmental panel on climate change:

"Most scenarios project that the supply of primary energy will continue to be dominated by fossil fuels until at least the middle of the century."

The International Energy Agency estimate of what that proportion would be by 2050 varies between 70 and80 per cent. EU Commissioner Piebalgs in Norway—the conference in Norway in the summer has been referred to—gave the following figures for Europe in 2030: oil supply will make up 34 per cent. of our energy, and gas a further 27 per cent.

What we are addressing is major fossil fuel use to 2050 and beyond under all scenarios. Yet by 2050, we want to have—and need to have—cut our carbon dioxide emissions by 60 per cent. If we do not do so, it will be too late. If we want to escape the permanent damage of climate change and the environmental and economic disasters that have become even more stark as a result of today's Stern report, we cannot continue to burn fossil fuels as we are currently. The answer that we have to face up to is carbon capture and storage. That is the only way of squaring the circle between fossil fuel use and addressing climate change. I believe that getting on with carbon capture and storage is the most urgent thing that we need to do.

The Treasury has carried out a recent consultation, and we are looking for a response in the pre-Budget report. In its energy policy, the European Union aims to make fossil fuel plants capable of cost-effectively delivering near-zero emissions of CO2, or to be in a position to include CO2 capture systems by 2020. It set up a fossil fuel power plant technology platform to try to achieve that.

We learned in Norway in the summer—the Norwegian Energy Minister emphasised it—that it is now a political imperative in Norway to have carbon capture and storage up and running by 2014, so that Norway can begin to use gas to generate electricity. It has never done that before, but now finds that it needs to do so.

There are some powerful CCS movements, and we in the UK must not duck away from it. The ability to store CO2 in the depleted oil reservoirs of the North sea—therefore recovering even more oil—thereon storing the carbon in saline aquifers, and capturing all that from one of the greatest concentrations of CO2 production in the world, which is around north-west Europe, are better conditions than we could find anywhere. That view was endorsed by the Science and Technology Committee.

Owing to that situation, the UK has the opportunity to be a world leader in such technology, which could maintain security of supply and tackle climate change. We desperately need to develop and support a commercial demonstration project, and we can do so. For example, BP has been developing its DF1—decarbonised fuels 1 project—linked to its depleted Miller oilfield. It has already invested £20 million. It needs to decide by the end of the year whether to invest £600 million more. It has made it clear that the scheme will require the

"carbon reduction benefits it brings to be remunerated via policy initiatives and incentives."

However, it estimates those incentives

"to be equivalent to or less than those currently available to no-carbon options such as renewables."

I do not expect the Treasury in the pre-Budget report simply to get out its chequebook and sign an open cheque, and I do not expect BP to do so either, but we have genuinely to take carbon capture and storage forward, and there will be a cost to that. I have seen lots of costs bandied about for CCS, offshore wind, and for nuclear and other kinds of technologies and sources. Carbon capture is broadly comparable to other sources that are more expensive than conventional generation. As we have been reminded today, the costs of doing nothing are far greater.

I have spoken at length about CCS, but that does not often get a full airing in the House, although I am pleased to learn tonight that more people are talking about it. All the expert reports tell us that the technology exists—that there are no real technological obstacles in the way. I mentioned the IEA. It sees a very important role for CCS in the future, as well as for renewables and nuclear. Climate change is a challenge, but it also produces some opportunities. CCS is an opportunity for the UK, but what we need is some urgency and some decisiveness.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee 8:18 pm, 30th October 2006

It is a pleasure to follow the wise and good-natured speech of Mr. Blizzard, and I was pleased that he put emphasis on carbon capture and storage. Perhaps I am a little puzzled that the Treasury is conducting a review, and not the Minister for Energy and the Department of Trade and Industry, but we look forward to the publication of the pre-Budget report, when it will appear.

As Members have said, this is an apposite day on which to discuss energy, as the Stern review has been published. I wish to take this opportunity to make a public apology to the witnesses who were due to come to the Trade and Industry Committee this afternoon—the Energy Networks Association and the Energy Savings Trust—to discuss local generation. We postponed their meeting until tomorrow to enable Committee members to participate in this debate. That means that a knock-on apology is required to the council in Woking, where we were due to go tomorrow morning to look at the excellent work that council does on encouraging micro-generation.

I am a bit constrained in what I can say, as I am Chairman of the Committee, as we are in the middle of producing a couple of reports: one on micro-generation, which I hope will reach a conclusion shortly; and another on security of gas and coal supplies, which we will be reporting on shortly. Nevertheless, I am delighted that we are having this debate and that the Secretary of State indicated that there will be more such debates to come. Like my hon. Friend Charles Hendry, I feel that it would have been good to have a full day's debate, because this is one of the most important issues facing our country.

Two policies—competitiveness and energy—lie at the heart of the Department of Trade and Industry's agenda. The current Minister for Energy has had responsibility for both energy and pensions in his time, and both are absolutely key issues. They are both hot potatoes, and I should say in a spirit of consensus that energy is currently in very good hands.

When it eventually appeared in July, the review document—not the precursor consultation document on which it was based—which had the flavour of a Green Paper, was broadly very good. Although it promises a lot more consultation on various issues, it was, on the whole, a very readable and engaging document. I read it through at one sitting, which must make me some kind of sad anorak. However, I should appreciate it if the Minister explained pages 180 to 181, which deal with the consultation and the policy for new nuclear build:

"On some sets of assumptions, the nuclear case is positive; in others, negative, so a judgement has to be made about the relative weight to be given to the various scenarios. In making such a judgement, it is important to note that probabilities associated with many of the various states of the world are endogenous rather than exogenous, and depend on policy decisions."

So there you have it, Mr. Deputy Speaker—as clear as mud.

The flavour of our debate should be one of urgency because there are urgent questions to address—relating not just to climate change, but to keeping the lights on—but there is no need for panic. I am glad that the Secretary of State is taking a little longer to get the White Paper out. March is a good deadline, which probably means June in parliamentary language; let us hope that the Department sticks to March. When the Minister came before my Committee, he was a little reluctant to tie himself down to a date. I was glad that, last week, the Secretary of State did and that he repeated that date today. So we will pencil March into our diaries.

One of my key messages is indeed that we really do not need to panic. Following a seminar two weeks ago on energy and the environment, the director of the Ditchley Foundation, with the help of a group of extremely distinguished experts from around the world and this country—including, I am glad to say, my hon. Friend the shadow Secretary of State—and many others besides, produced a very good summary of the situation. It states:

"Most participants agreed that there was no particular problem about the supply of energy if the world remained reasonably organised."

It proceeded to discuss the individual sources, saying:

"Renewable energy sources would make a contribution, though in the medium term not a huge one".

That is realistic. It continued:

"Nuclear energy, while unlikely to become the environmental answer because of its other downsides"— that is an interesting conclusion—

"would form an increasingly important part of the mix if improved technology on safety and efficiency was taken into account. Demand would rise, but in theory there was no shortage of supply. In other words, it was all about reducing carbon."

There is a lot of sense in that, but in the UK context the challenge is not just to reduce carbon but to ensure investment in new power station capacity in time, as other power stations—not just nuclear, but coal—go off-line.

In addition to not panicking, three other key messages have come through in other speeches this evening. The spreading of risk is always a good maxim and is absolutely central to the debate about energy supply. However, too much of our policy on carbon emission and the contribution of electricity generation to it has focused on industry. Industry has been made to bear an awful lot of the pain associated with carbon reduction in the last few years, which has an effect on UK competitiveness. Not enough has been done on households and transport—two other key areas for carbon reduction. I hope that, as the Government follow through the conclusions of the Stern report, the burden will be shared rather more equitably than it has been in the past.

There are two policy instruments that matter and that have already been highlighted in this debate. Whether we are talking about renewables or nuclear, the two key issues are carbon trading—getting a good, predictable price for carbon in the medium term—and planning. Those are the two big games in town in developing an energy policy that will actually survive.

I had intended to spend some time looking at the gas sector's capacity, but that issue has already been covered quite well in this debate. The bottom line must be that this winter is again challenging, although probably not as challenging as last. After that, the new capacity coming on line—import infrastructure and gas storage—should give us considerable comfort. In the next year or so, such new capacity will include Langeled South, Statfjord Late Life, BBL, South Hook LNG, Dragon LNG, and the expansion of the interconnector and of the Isle of Grain. Also under consideration are Teesside LNG and Canvey Island LNG, which were mentioned earlier, so a lot of import capacity is coming on.

Of course, we in this country are not used tobeing gas importers—it is a new phenomenon for us. Much of the world has become accustomed to that, however. The run-down of the North sea may have happened a little faster than we expected, but we always knew that it was going to happen. My view is that we should be reasonably relaxed about our dependence on imported gas.

I turn to some of the major long-term issues arising from last December's report on the security of gas supply. Unsurprisingly, liberalisation of the gas market in Europe has featured very prominently in this debate. I share the view—expressed, I think, by the Secretary of State—that the Commission is working very hard indeed to liberalise the market, but we should not hold our breath for any short-term gains in that regard. There will be a huge struggle between the Commission and the member states, who will want to hang on to their long-term contracts. To hope for some kind of quick fix is to delude ourselves.

We need to be more honest about the UK market itself, which is not in fact that functional. It is insufficiently liquid because no one is willing to risk selling short. Producers have been scared off by Enron, for example, and professional risk takers such as hedge funds are not interested in a market that is so small. So the UK market is not working very well and will not do so until the European markets have been liberalised.

I want to say a brief word about the consequences of rising energy prices in the UK. Historically, they have been low, and the recent catch-up is perhaps not that surprising, but painful for many people living at the economic margin. The Government have focused their attention on the impact on pensioners through the winter fuel payment, but the Committee has repeatedly drawn the Government's attention to the fact that other, non-elderly vulnerable groups also need help in dealing with rising fuel prices. I hope that they will have more to say about that.

In turning to the main issues arising from the Committee's evidence, I return to my point about the spreading of risk. We are being repeatedly told that diversity is security, and that message is very clear. However, the market just will not deliver such diversity without the two changes to which I have already referred: a predictable planning system and a more predictable long-term market structure for carbon pricing. I do not like to add to the embarrassment that I caused my hon. Friend the Member for Wealden during my earlier intervention on him, but I genuinely believe that my own party's proposals on carbon pricing—I am trying to be objective here, as Chairman of the Select Committee—are rather more robust than the Government's. I am delighted that the Government are holding out the prospect of going further. To rely on the multilateral mechanism of the EU emissions trading scheme is a little over-optimistic.

The Committee recently concluded its work on nuclear power, and the Government responded to its report. I am not sure whether the report has been published, but it is certainly authorised for publication. The Government's response to it is constructive and helpful, even when it disagrees with the Committee. I used to be quite enthusiastic about nuclear, but during our Committee's inquiry I became a little more cautious, although I remain convinced that, broadly speaking, we need to replace our current nuclear capacity.

I caution against a too heavy dependence on nuclear, however. As has been said, it is comparatively inflexible. It provides base load electricity, and therefore is a price-taker, rather than a price-setter, and, because of large plant size, significant reserve capacity and grid reinforcement is required if the temporary loss of a nuclear plant is not to cause major disruption. That is not mere theory; such disruption has happened. For example, a serious outage affected 4 million people in southern Sweden and eastern Denmark, and blacked out Copenhagen, on 23 September 2003. That was precipitated by the failure of a nuclear generating plant because of a cooling system problem, and it caused subsequent problems for another nuclear plant. In addition, a collapse of the transmission system in the north-east of the USA and southern Ontario in August 2003 required the shutdown of all nuclear plants in the system. There are problems to do with over-dependence, particularly on the larger, more powerful new generation of nuclear power stations that might be introduced.

I tend to take issue with my party's Front-Bench spokesmen on the subject of our dependence on imported gas. There has been a lot of talk about Russia and I can understand why, but gas from Russia currently provides a very small percentage of the supply to the UK—it is a maximum of 4 per cent. We should bear in mind the other countries that we take gas from; Norway, for example, is not exactly politically unstable. In addition, the North sea will have lots of gas for a considerable time yet. Although it cannot meet our needs—we cannot export gas—there is a lot there, and the point is that it needs to be sold. The diversity of the current import infrastructure, which involves sources from around the world, gives me considerable confidence, and we can be reasonably sure of a continuing supply of gas. I am pushing my luck a bit, because we have not actually considered our report on the subject yet, although we will do so shortly.

People say, "The pipelines will have to come all the way from Siberia", but it does not work like that. In a particularly interesting evidence session, Gazprom made it clear to our Committee that the gas that it would import to the UK is likely to come in the form of swaps with other gas producers, such as liquefied natural gas cargoes. That is how the system works. For those reasons, I am reasonably optimistic about gas. Norway wants to recoup its investment by sending gas through the Langeled pipeline. The Qatar Government have invested heavily in the facility at Milford Haven, and will want to use it. Gasunie has committed to a 10-year contract supplying gas to Centrica through the Balgzand to Bacton pipeline. All of that does not necessarily mean that there will be no problems this winter, but it does mean that, in the medium term, gas is a reasonably secure source of supply. I would have liked to discuss coal, but in view of the time and the number of colleagues who wish to speak, I will not, except to say that I welcome the steps that the Government are taking to try to explore what is inhibiting the development of the UK deep coal mine industry.

The Committee is currently investigating the issue of microgeneration, or whatever we want to call it. The term "microgeneration" is curiously unhelpful, because it conveys a sense of producing electricity, and that is only part of what local energy production does. In fact, I think that the most low-hanging fruit is to be gained— apart, of course, from improved energy efficiency, which is the single biggest way in which we can improve our security of supply and meet our carbon dioxide targets; but that is a given, so I will not labour the point—by exploring the issue of heat. I made that point to the Minister when he gave evidence to our Committee. The driver is not the fact that people want to behave in a saintly way and save the planet, much as they may want to, but the rising price of gas, which is forcing people to consider how they can use domestic fuel sources more efficiently.

Like Mr. Blizzard, I am having a condensing boiler installed at home, and work began on it today. That is because I need to save a lot of money on my gas bill, and although a condensing boiler is an expensive upfront cost, there are significant long-term paybacks. Solar water heating presents much greater opportunities than people realise, and I think that the Government's documentation of the payback periods for that are rather pessimistic. There are the mysterious-sounding ground source heat pumps, too. For a long time, I thought that they had to do with thermal energy coming up from rocks underground. I now discover that they work by making a garden into one big solar panel, and as long as the garden is at a temperature above absolute zero, heat will be produced for households. Ground source heat pumps have a particular place in new social housing schemes. Where they are used, pensioners would not have any energy bills for large periods of the year, or possibly at all.

Too many of our discussions are either/or debates—one has to be in favour of nuclear or microgeneration, and in favour of distributed or centralised systems. That is nonsense. David Howarth made it clear in his substantial contribution that it will probably be 30 to 40 years before microgeneration can achieve its potential—we will test the Energy Saving Trust on that tomorrow—so we need to replace the current grid and distribute energy from those more conventional power stations. It is not an either/or debate—we want to spread our risk and do everything else that we can.

Finally, I am tempted to enter the debate on fusion, about which the Committee is reasonably optimistic. As has been said, optimism is the fuel of much of this debate, but fusion is a serious prospect, providing almost unlimited supplies of energy that can be used to produce hydrogen for the transport sector and so on. Leaving fusion aside, decentralised energy has been described by hon. Members as the 21st-century energy solution. We often reinvent the wheel because, in fact, it is the 19th-century energy solution. We are simply rediscovering our roots—the Minister will be familiar with the parallel, because I suggested it to him when he appeared before the Committee. I live in Worcester, and in 1894 Worcester city council transformed Powick mills on the Teme, adjacent to the bridge where the first battle of the civil war was fought, into a combined steam and water-driven hydro-electric facility. The experimental design was the first of its kind, and electricity from that source provided about half the city's needs until 1902, when Worcester's coal-fired power station came on-stream. Powick—a micro-hydro scheme—continued to generate energy until the 1950s. If I have one criticism of the Government's micro-generation strategy it is the fact that it plays down the potential of micro-hydro schemes in England.They can work there, just as they can in Scotland and in Wales.

I have spoken for too long. I apologise for detaining the House, as other hon. Members wish to contribute. I welcome our debate, and I hope that there are many more such debates in future on this very important subject.

Photo of Michael Meacher Michael Meacher Labour, Oldham West and Royton 8:35 pm, 30th October 2006

It is always a great pleasure to follow Peter Luff, whose speeches as Chairman of the Select Committee are wide-ranging, extremely well informed, sound, honest and frank. I want to concentrate on a narrower point, and I will not necessarily come to the same conclusions as he did.

On the day on which the Stern report on the colossal economic costs of global economic warming is published, it must be stated at the outset that the subject of our debate—the security of energy supply which, as we all accept, is crucial—is only half the debate. The other half is the need to do absolutely everything in our power to prevent climate change and mitigate its effects. Fortunately, the direction of the policies needed to meet both objectives is the same. Approximately 40 per cent. of the UK's primary energy supplies come from gas; 33 per cent. from oil; 17 per cent. from coal; only 8 per cent. from nuclear; and just 2 per cent. from renewables and other sources. That position is not sustainable in the long term. According to a broad consensus of expert opinion, global oil supply will peak, if it has not already done so, in the next five to 10 years, but demand, driven by frenetic growth in China, India and other major developing countries such as Brazil, will result in rising prices, probably in excess of $100 a barrel within a few years. Sharp price hikes will be caused by international events, whether war or terrorism, and by an increasing shortage of spare refinery capacity.

Furthermore, UK production of North sea oil has long since peaked, and is fast declining at a rate of between 4 and 6 per cent. a year. We are once again in the uncomfortable position of being net importers of oil. We therefore need, as far as possible—I accept that things will not happen quickly—to reduce our dependence on oil, which is a major, if not the major, source of greenhouse gas emissions. Similar considerations apply to gas. Gas prices will certainly remain high, and will steadily rise in the medium to long term. We are net importers, too, of gas which, as has often been said, comes from relatively political unstable countries such as Russia, Algeria, Libya and Iran, so it is not sensible or prudent to allow our dependence on them to increase. Again, we should seek to reduce our dependence on gas wherever possible.

Coal, by contrast, is an indigenous energy source, and significant supplies will be available in the UK for several decades if not centuries. However, of all the fossil fuels, coal produces the most greenhouse gas emissions, because it is virtually pure carbon. There are two ways in which we can address that, which is beginning to happen. One is by equipping coal stations with fuel gas desulphurisation to meet the requirements of the EU large combustion plant directive. My understanding is that some three quarters of coal power stations are now being equipped with such plant. The other technique—my hon. Friend Mr. Blizzard spoke forcefully about this—is the development of new carbon capture and storage. Unquestionably, that technology has promising potential, but it has to be said that, as yet, there is no proven prototype in existence. The essential requirement is that the carbon can be stored indefinitely. That is an exacting and demanding requirement, but we should certainly seek to develop that technology.

Those limitations, in various forms, on the utilisation of fossil fuels have led the Government to conclude that a new round of nuclear build is therefore necessary to fill the gap as the Magnox and AGR reactors are steadily phased out and the nuclear contribution to electricity generation is reduced, as we are repeatedly told, from about 20 per cent. now to, it is alleged, some 7 per cent. in 2020 or shortly after.

That argument is flawed on a number of counts. First, the so-called gap is likely to be far less than is alleged. In September of last year, British Energy reviewed the Dungeness B nuclear power station and I understand that it is now investing to extend the life of the power station by 10 years. British Energy is also reviewing six other nuclear power stations for exactly the same purpose. Undoubtedly, some of those will be closed, but it is a reasonable expectation that a number will be invested in to give them some further extension of their life. Similarly, fitting desulphurisation plants to coal station chimneys will also reduce the gap significantly.

Secondly, nuclear plants—on this point, I disagree with the hon. Member for Mid-Worcestershire; this is a contentious issue—have well recognised disadvantages that are difficult to remedy. In its report at the time of the first energy White Paper three years ago, the performance and innovation unit—the No. 10 strategic unit—calculated that, on its best estimate, by 2020 nuclear would be about twice as expensive as wind power. I am not saying whether that is right or wrong. I am saying that that was its calculation.

There is also the unresolved problem of what to do with the huge and mounting piles of nuclear waste. It is reckoned that, by the end of this century, there will be as much as half a million tonnes of some of the most toxic intermediate and high level waste. In relation to CoRWM, it is true that the problem is more political than technical, but to say that it is political does not get over the problem. The question is, where is the waste going to be stored? Governments from both parties have repeatedly tried to resolve the problem, but it remains, at least at the moment, as insoluble as ever.

The cost of decommissioning and waste management for existing nuclear plants, let alone new ones if we go down that route, is already calculated by the Nuclear Decommissioning Authority to be more than £75 billion. That is a colossal figure. It is about 7 per cent. of our gross national product.

Photo of Michael Meacher Michael Meacher Labour, Oldham West and Royton

I will gladly give way, but I am simply quoting the statement given by Sir Anthony Cleaver, who is the chair of the NDA. If the hon. Gentleman wishes to intervene on that figure, he may.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee

I recognise that figure as the cost for the NDA—my Committee actually thinks that it will rise. Although the Minister will correct me if I am wrong, I understand that that figure includes the cost of addressing all the earlier military experimentation. It is the cost of dealing with the total nuclear waste legacy, not just that from power stations.

Photo of Michael Meacher Michael Meacher Labour, Oldham West and Royton

That is absolutely true. The two figures cannot be readily disentangled. The figure that I cited includes the cost of dealing with the early stages of military nuclear development in the 1950s and 1960s. However, even if we do not know the exact cost of dealing with civil nuclear waste, it is still absolutely enormous, and that is quite apart from any consideration of the associated serious terrorism risk. It is true that gas and oil pipelines are probably an even greater hazard, but one cannot deny that nuclear is a target. Moreover, although it is absolutely true that nuclear plants do not generate CO2 when they are operating, the mining of uranium, the milling of the ore and the enrichment, as well as the 10-year building programme of a £2 billion nuclear plant, generate significant CO2 emissions.

Photo of Michael Meacher Michael Meacher Labour, Oldham West and Royton

The hon. Gentleman shakes his head, but that is widely viewed to be the case.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee

That is the one canard in this whole debate that we should not allow to stand on record. There is a consensus—the view is shared by Sir Jonathon Porritt, for example, who gave evidence to the Select Committee—that nuclear power is definitely a low-carbon source of electricity generation. It might have disadvantages related to security and proliferation, but it is a low-carbon source. The right hon. Gentleman does not do his argument much credit by recycling that rather tired old point.

Photo of Michael Meacher Michael Meacher Labour, Oldham West and Royton

The hon. Gentleman took what I said incorrectly. Nuclear is undoubtedly a low-carbon source compared with oil and coal. However, it is often claimed that it is a carbon-neutral or nil-carbon source, but that is not quite true either. The carbon contribution of nuclear reactors is something like 4 to8 per cent., although I agree that that figure is considerably less than that for other fossil fuels.

There is also a question over the supply of uranium. The UK has no indigenous uranium resources. Due to the enormous demand that is being exerted by China and India, which propose to build 30 or 40 nuclear reactors in the next 20 to 30 years, the supply of uranium might turn out over that time scale to be as insecure and uncertain as that of oil and gas today. One cannot expect that uranium will be readily available indefinitely.

My third critical consideration, which the Government unaccountably seem to ignore, or at least do not give the attention that it is due, is that there are good reasons for believing that renewables can readily fill the gap without the large downsides of nuclear. Let me give what I hope will be powerful support to that view. Research has been carried out by AEA Technology, which is the former research arm of the Atomic Energy Authority, so one might expect it to have a pro-nuclear perspective. It announced three months ago that 40 wind farms sited off East Anglia's coast could provide a quarter of the UK's total electricity requirements. The report said that the offshore turbines could create the same amount of electricity as 30 conventional power stations. From my point of view, AEA Technology is an unbiased source, so I think that it makes a powerful statement.

If the Government are going to be serious about the role of renewables in their response to the Stern report, they should give a much higher priority to developing such proposals. Renewables provide only a pathetic4 per cent. of the electricity generated in the UK, whereas the average figure is in the order of 25 per cent. in nearly all other European countries. It is all very well for the Government to say that they have a target of20 per cent.—hoorah, that is wonderful; all power to their elbow—but as we have made such little progress in the past 10 years, it is difficult to credit that we will reach a target that is five times greater than the current position in the next 15 years. I hope and pray that the Government are right, but they will require much more muscular programmes of support than we have seen up to now.

Photo of Bob Blizzard Bob Blizzard PPS (Rt Hon Douglas Alexander, Secretary of State), Department for Transport, PPS (Rt Hon Douglas Alexander, Secretary of State), Scotland Office

I wonder whether the report to which my right hon. Friend referred was "Sea Wind East". Nobody would be happier than I if such a capacity could be generated off the coast of East Anglia, not least because of the employment prospects for my constituents. We want as big a slice of that as possible, but I do not know many people who believe that we could do that much. We could do a lot and we need to do more, but I am not sure we could do that much.

Photo of Michael Meacher Michael Meacher Labour, Oldham West and Royton

I do not think I was referring to "Sea Wind East", but I will discuss the matter with my hon. Friend afterwards and show him my source. In arguing whether or not such a goal is possible, the key point is what Germany, Denmark and Spain have done. They are the leaders in wind power. Because of our offshore location, we have far greater wind power capacity in the UK than probably the whole of the rest of Europe put together. We are using only a minute amount of it.

Finally, microgeneration is probably the most promising new technology. The Energy Saving Trust estimates that by 2050 it could provide 30 to 40 per cent.—I am quoting the trust's figures—of the UK's electricity needs and help to reduce carbon emissions by some 15 per cent. a year. That will not happen without a major Government programme of incentives. A major and rapid expansion of renewables, including microgeneration, plus, as other hon. Members have said and I endorse, a major targeted programme of energy conservation to counter the prodigious waste of energy in both the industrial and the domestic sector, is the only assured long-term route to energy security on the scale required, and at the same time it can meet the UK's commitment to a 60 per cent. reduction at least in greenhouse gas emissions by 2050, which is a bottom line requirement.

Photo of Robert Key Robert Key Conservative, Salisbury 8:52 pm, 30th October 2006

My constituents in Salisbury and the towns and villages of south Wiltshire derive almost all their energy from the national grid. Virtually no electricity is generated in south Wiltshire. I say virtually because, like my hon. Friend Peter Luff, we had micro-hydrogeneration 100 years ago in Salisbury in the town mill. That scheme was replicated in a number of locations up and down the Avon valley and the Woodford valley. Some enterprising people are considering it again, but it can never be of more than marginal significance as a means of energy production. Some people have tried wind energy—wind turbines—on their houses. Some farmers have looked into the possibility of wind turbines on the top of the downs. Fortunately for the sake of the landscape, the Ministry of Defence has intervened to point out that all the low-flying areas are not compatible with wind energy.

We must ensure that we balance the needs of the fourth largest economy in the world with the global and national objectives and national interests of the United Kingdom. I was delighted when the Secretary of State, opening the debate, spoke of the compatibility of being pro-growth and pro-green. I was delighted that in his speech from the Front Bench, my hon. Friend Charles Hendry spoke ofthe common ground and the fact that energy was top of the agenda. I was less impressed by the contribution from the Liberal Democrats, notwithstanding the fact that they have a distinguished fellow of my college in Cambridge as their energy spokesman. That is an enormous improvement, if I may say so, in spite of his ingenious intellectual contortions in his energy policy—better than previous Liberal Democrat spokesmen, who have always ended up by saying, "We'll rely on wind and renewables and sustainable energy, and if it doesn't work we'll import nuclear electricity from France." There has been some progress.

On the question of energy supply, the Government have dithered over the past nine years. They have dithered on nuclear, by saying no, then maybe and now yes. To some extent, they have reneged on the dash for gas, which they now think is dodgy in terms of energy security. They have tripped up on planning. In the early years of this Labour Government, they introduced excellent planning legislation, but then they encountered difficulties with their proposals on infrastructure and power stations, which they abandoned. Now they are revisiting those proposals—what a waste of time—and they have failed to meet their targets. It is important, sensible and serious if the Government and the Opposition agree on these issues for the right reasons, but it is dangerous if they agree for the wrong reasons. I hope that the Opposition will not let the Government off the hook.

One trend running through today's debate is the implication that the price of energy involves only the bill to consumers and industrialists. However, the price of energy is not only an economic cost, because security of supply has a strategic price and renewables have an environmental and distribution price in terms of countryside spoiled by wind turbines and transmission cables marching across the landscape. Wind turbines are by no means carbon neutral when one considers how they are built and how the electricity they generate is distributed. In the economic jargon, we must internalise the externalities.

The overriding issue, which we must all take as a given regardless of which kind of generation we are considering, is safety. If one examines risk and safety in energy supply, whether one starts with wood, coal, oil, gas, wind, renewables or nuclear, one is left with the conclusion that there is always risk and danger. When advanced countries such as Finland have taken decisions, largely for strategic reasons, on renewing and extending nuclear generation, they have taken as a given the baseline of safety. Safety must be dealt with, acknowledged and ensured, because one can move forward on the basis of such a consensus, which is how we should proceed in this country.

The Government are, of course, responsible for providing security of supply, meeting our environmental objectives, balancing a range of energy sources and maintaining efficiency of transmission. The national grid is based on the 19th-century plans that resulted in a 20th-century distribution system, which is no longer fit for purpose in many cases. We must recognise that point, which is why microgeneration is particularly significant.

In 1970, the average household had seven electrical appliances; today, the average household has 47—in other words, we are very greedy for energy in this country. As we go out on our pre-Christmas binge for white goods and electronic goods, including plasma screens, which use four times as much electricity as anything else, we should bear in mind that we must examine our own navels. We should also remember that a UK citizen uses six times as much energy as an African citizen. We should examine our energy greed, because we can make a difference globally. We must put that argument to those who say, "It does not matter whether I do something good, because it will not make any difference in global terms." It will make a difference.

Most hon. Members who have spoken believe that we need nuclear and renewables. I will not repeat those discussions, except to say that I happen to believe that we should invest much more in tidal flow generation, which is one of the great unknowns. If we run down our nuclear from current levels and replace it with gas, it will cancel out all the economies that we can achieve by being more sensible about our use of electricity, heat and transport as private citizens.

What is the difference between consumers in France, England and Finland when it comes to electricity generation? In France, people do not loathe nuclear electricity. Some 83 per cent. of French electricity is generated by nuclear power, and we know what happens in Finland. We must therefore differentiate base-led generation, embedded generation plans for CHP on a slighter larger industrial scale and the sort of microgeneration through which we can all make a major contribution.

It is really important that we grasp the nuclear issue. Having studied nuclear energy for many years, and having visited French, Finnish and British nuclear plants, I have come to the conclusion that we need another generation of fission capacity. Nuclear fusion is the future. Like my hon. Friend Peter Luff, I have seen what is going on at Culham and examined the international thermo-nuclear experimental reactor project, which could result in zero radioactive waste if we have a fusion revolution that allows us to develop a hydrogen-based fuel economy for our country and the industrialised world.

With regard to waste, it is imperative to distinguish the historical legacy of the defence nuclear industry and the first-time-round, experimental trialling of the early British civil nuclear programme from what might be produced in future. The two are as different as chalk and cheese. Over 50 years, a technological revolution has taken place. To use scare stories to imply that we must not move forward to a new generation of nuclear fission because of the problem that the Government are now tackling—for which I commend them—is to perpetrate a cruel deception on the people of this country. Of course we must decide on sites for deep geological burial and retrievability for at least 100 years. That technology is developing and improving, and is on trial in Finland now.

The question of who pays is crucial. Future nuclear industry should not have a tax subsidy. There is no reason why it should. More than 400 nuclear plants are in operation around the world, and others are being built all the time, not just in China and India but elsewhere. The United States has a well proven system of financing for the treatment of nuclear waste for every kilowatt generated. That system is being adopted in Finland. The decommissioning costs must be met from the generation of funds invested for the future, whether privately or by the state.

All of that is predicated on the continuing availability of the nuclear science, technology and engineering skills base in the United Kingdom. Science education is fundamental, and it is a major lack. I blame the Government for not giving sufficient attention to it over the past nine years. Only this weekend, I saw their television advertisements for science teachers, which are super. What a pity they did not run them nine years ago. What a pity that physics and chemistry departments have closed in our universities. How tragic it will be if we do not even have the skilled engineering manpower to dismantle existing nuclear power stations, let alone build a new generation.

Education, not just in our schools and universities, but public education about energy supply—whether nuclear, renewable or both—will cost money. Spending by the taxpayer or private energy companies must be transparent and accountable. Money will be spent, and in large quantities. I maintain, however, that if that spending is transparent and accountable, it is not bribery. It is often alleged that if British Nuclear Fuels or anyone else spends money on visitors' centres, school packs or CD-ROMs, it is bribery. We must get away from that silly idea.

In energy supply debates, I look for consensus between the political parties. The people of this country deserve that. There is a difference, however, between saying that nuclear energy is back on the agenda with a vengeance, and saying that it is a last resort. I hope that I can persuade those on my Front Bench to be a little more positive than they have been able to be. It is interesting that, whereas the Conservative party has said unequivocally that it supports, and will almost certainly replace, our nuclear deterrent, it cannot be as positive about nuclear energy for civilian use. I think that we shall have to move from that position as the argument develops. I hope that we do it with good grace, saying "Yes, we have listened to the arguments."

The constituents to whom I have talked, especially the younger ones, now take it for granted that we will need a new generation of nuclear facilities. Only two weeks ago, when I addressed nearly 400 sixth-form students in Salisbury, I was asked directly for my view on such a "next generation". I gave my view, and I can only say that it received pretty universal acclaim and agreement.

We have a generational problem here as well. I think that our electors, particularly young electors, see the virtues of trusting in the science, technology and engineering skills that can secure the future energy supply of the United Kingdom.

Photo of John Grogan John Grogan Labour, Selby 9:05 pm, 30th October 2006

It is a great pleasure to follow the lively, ebullient and typically informative contribution of Robert Key. I have an increasing sense of quality rather than quantity as the evening proceeds, so I shall confine my speech to two basic questions. The excellent speech of Peter Luff, who chairs the Select Committee on Trade and Industry, left hanging in the air the question of coal, which he said he would have liked to deal with more comprehensively. I shall say a few words about that, and a few words about gas supply.

It is somewhat ironic that at a time when our major indigenous coal supplier, UK Coal, is down to just five pits in England—two in Yorkshire, Kellingley in my constituency and Maltby, and three in Nottinghamshire, Daw Mill, Thoresby and Welbeck—we should see in the energy review the most positive statement about the future of indigenous coal that any Government have produced for 20 or 25 years. Perhaps it is not surprising, though, because indigenous coal has its attractions for two reasons. One, which has been mentioned a great deal today, is security of supply. According to the Department of Trade and Industry, 75 per cent. of our energy will be imported by 2015. It may not be irrelevant that coal, both deep-mined and open-cast, could provide 8 per cent. of our needs then. If we adopt a wider perspective and look at energy supply across the European Union, we see that a larger proportion of coal than of oil and gas is produced in Organisation for Economic Co-operation and Development countries.

Price, as well as the attractions of indigenouscoal, was mentioned in the energy review. Last year100 million tonnes of extra coal was demanded, largely in the far east and mostly in China. Russian coal, which we currently import, may be diverted to the far east in the coming years. There is an advantage to British industry, and to Britain as a whole, in indigenous coal supplies.

I accept entirely that it must be clean coal. We have heard a good deal about that today, notably from my hon. Friend Mr. Blizzard. He was right to be excited about the potential for carbon capture, but there are other potential technologies. It is important that we provide the right incentives for the development of clean coal. David Howarth mentioned the various plants that would come on-stream over the next five or 10 years. Not many new coal-fired plants are planned. It is important that as we design the next generation of emissions trading schemes, carbon trading and carbon credits, the right incentives are given. In Germany, where there are fuel-specific and technology-specific credits extending over the next 15 years with some certainty, there is increasing investment in clean coal.

If we overcome that hurdle and reach a stage at which we have some clean-coal capacity, the question will be whether there is any potential for British coal. Like others, I think it will be largely a matter of negotiations between the generators and UK Coal, but I also think that the Government have a role to play, for reasons that I shall give shortly.

Representatives of coalfield communities are no longer urging the Government to subsidise the coal industry more. About £160 million was put into operating aid and about £65 million was put into investment aid. Over the past 10 years, that was crucial in keeping up the supply of coal and keeping the lights on. Now, however, the coalfield communities are asking the Government to revert to the role of banging heads together. There is a role for Government in doing that. It was interesting to hear from my hon. Friend Mr. Robinson, who played that role at the Treasury in an earlier phase.

The generators, of which three—E.ON, EDF Energy and Drax Power—count for the purposes of this debate, are all making considerable profits. Drax, in my constituency, makes a return of 40 per cent. on its revenue, largely through the increase in energy prices in recent years. The fact that those three generators are coming to the Government asking for certainty on issues such as emissions trading and carbon credits means that there are levers that the Government can pull. The generators negotiated coal contracts some years ago when the price of imported coal was below that of domestic coal. UK Coal had little choice but to accept those contracts because otherwise domestic coal would have disappeared. Today, the price of coal is much higher internationally. If the generators are serious in their protestations about wanting to maintain some British coal—and it is surely in their interests that domestic coal survives, because otherwise they will be over a barrel in relation to imported supplies of coal and will have much less bargaining power—they must renegotiate those contracts. The Government must recognise, rather more forcefully than the Secretary of State did in his opening remarks, that the energy market is not a perfect market and that they have a role in banging some heads together.

I want to say a few words about imported gas. We are coming up to the first anniversary of the great price hike in November last year, when gas prices reached about £1.70 per therm. I think of Rigid Paper Ltd. in my constituency, which nearly went under last year because of those price rises. I hope the developments that we have heard about, with new capacity coming on-stream through the interconnector and increased storage capacities, will make a difference. In time, the more robust approach by the European Commission in sending dawn raids into some of the integrated energy companies in France and Germany, which has not happened before, should have a result.

Nevertheless, the Government could do one or two things to increase capacity further. The planning system has been mentioned an awful lot, and we await further announcements next year. Several gas storage facilities of considerable capacity—Preesall in Cheshire is one of the biggest—are facing public inquiries. There is a case for the Secretary of State to press his ministerial colleagues in the Department for Communities and Local Government to recover those applications and determine them centrally without going through the public inquiry procedure.

It is interesting to look at the Government's consultation on gas security of supply, which was published in October. It is a radical document that reveals to the gas supply industry the measures that the Government could be prepared to contemplate if the interconnector and the gas storage facilities that are becoming available are not fully used. It contains some radical suggestions—not Government proposals but matters that they are prepared to consult on, such as the regulation of the use of gas storage for security of supply. It states:

"The proposal would be to regulate to ensure that levels of gas in storage were kept at their highest possible levels going into, and during the early part of, winter; and that gas from storage was not used to supply the market in preference to other sources of supply."

There is also the potential for capacity mechanisms in the gas market whereby a body such as the National Grid or Ofgem could be given the job of specifyingthe level of capacity required and put in place arrangements to provide it, tendering for additional storage capacity. Those measures, although probably not directly contemplated by the Government for the time being, are in the background if matters do not improve this winter.

One step that the Government could take is to insist on increased transparency so that the owners of thegas infrastructure, whether storage capacity or the interconnector, should have a responsibility to advertise well in advance—perhaps by some weeks or months—where there is unused capacity. That could create a secondary market and make the "use it or lose it" phrase used by the Chancellor in the pre-Budget report last year a reality. If the owners of the storage and the interconnector do not fully use them, others should have the opportunity to do so.

Photo of Stephen Crabb Stephen Crabb Conservative, Preseli Pembrokeshire 9:15 pm, 30th October 2006

We all agree that energy security will be one of the dominant political themes of the century. The debate is therefore timely. As someone who is fairly new to the subject, it appears to me that much of the way in which the debate is framed and perceived is incomplete, unbalanced and too alarmist and could lead to some dangerous or unhealthy policy outcomes.

First, the debate is too concerned about imports. I was interested by the comments of David Howarth about the fear of fuel imports. They were surprising, given the Liberal Democrats' role in Wales in whipping up alarmist worries about imported liquefied natural gas. Nevertheless, he provided an important insight. In the UK, a less than rational fear exists about becoming dependent on imported fuel. In a simple paradigm, imports are viewed as bad, creating dependency and therefore vulnerability, and subject to supply interruptions; and indigenous suppliers are perceived as good and enhancing energy security. That analysis is flawed and too simplistic.

We should remember that import reliance is the norm for many of our European neighbours. At times, we underestimate the resilience of commercial relationships in overcoming political difficulties. During some frosty periods in the cold war, when millions of men and missiles faced each other across central Europe, gas continued to flow westwards from the Soviet Union to fulfil demand in central and western Europe.

Algeria was mentioned as a potentially unstable source of imported gas for the UK, yet it has proved a reliable trading partner for many countries that buy its gas. Although an industrial accident happened there a few years ago, causing a possible interruption to its liquefied natural gas contracts, it fulfilled all its gas contracts through swaps and using pipeline gas. We should not fear imported fuel too much.

Mr. Robinson asked what would have happened last winter without our indigenous coal industry. It is an important question. I am no enemy of our indigenous coal suppliers, but the upswing in demand last winter was met by imported coal. Suppliers came from Russia, South Africa, Australia, Colombia—literally the four corners of the earth. That does not appear unhealthy to me. Indeed, it enhances security of coal supply. We have a stable and diverse supply base of coal for UK power generation. Surely stability, dependability and diversity of supply are the essence of energy security. I am confident that the same position will emerge in time for imported gas.

The current energy security debate also focuses too much on political risk. Many risks affect the supply chain. We all witnessed the impact of hurricane Katrina on world oil markets. Risks to the supply chain can come from natural disasters, human error or system error, as happened at Buncefield. There is a range of other risks as well as geopolitical risks.

Our debate focuses too much on upstream operations and does not assess the full range of risk throughout the supply chain. It is worth reminding ourselves that the last genuinely serious emergency to do with fuel supplies occurred in September 2000 through fuel protests. That highlighted significant vulnerability in this country. That came at the end-point of the supply chain, but we are still overly focused on political risks in the middle east, in Russia and in other countries.

I have huge faith that the markets will deliver the new capacity to meet the shortfall potentially created by the decline in our indigenous gas, oil and coal supplies. A good example is what is happening with respect to liquefied natural gas, which is bringing a major enhancement to our energy security. There are LNG projects on the eastern coast of Britain at Teesside and the Isle of Grain and also crucially in west Wales with two projects, South Hook and Dragon, which happen to be in my constituency. When fully operational, they have the potential to bring in about 30 per cent. of the UK's gas capacity.

As an island, the UK is particularly well placed to benefit from LNG import terminals. Does LNG create new dependency arrangements? Yes, obviously. Does it create new vulnerabilities? Not necessarily. The hon. Member for Cambridge mentioned international trade and hinted that it is all about creating mutual dependencies, which is surely a good thing. The UK's new LNG infrastructure creates new flexibility in our energy system and new opportunities and options that will be an extremely important part of our emerging energy mix in the decades ahead.

My one area of concern is about storage and the adequacy of our strategic storage capacity. Storage obviously plays a crucial role in helping the nation withstand supply shocks and catastrophic interruptions in supply. It also helps to calm market fears when the markets can see that there is an availability of buffer capacity and a willingness on the part of the Government to use it.

My concerns relate to a number of questions. First, what is an adequate buffer of emergency stocks? Do we have adequate stocks and, if not, why not? Are there any limitations on the market in delivering the spare capacity that we need? The biggest concern is gas. Ample new import terminals and other infrastructure are being built. and there are some new commercial storage projects in the pipeline—for want of a better phrase—but I am not sure what new strategic storage capacity for natural gas there is. As I understand the current position, we have about two weeks of stored gas supply, whereas the European average is nearer two months. I have no idea what the optimum level should be, but I hope that the Minister and his team are looking into those questions and assessing the level of storage capacity that we need as we become increasingly reliant on gas imports. As imports grow, it is increasingly anomalous that there is no mandatory stocking requirement for natural gas as there is for crude oil and petroleum products.

My concern with the stocking regime for oil and crude products is partly similar to my concern over gas. The same basic question applies: as we increasinglyrely on imports, how adequate are the current arrangements for ensuring a necessary buffer? On the face of it, things look reasonably healthy and we seem to have no overall problem in meeting our compulsory stocking-up obligations under the relevant EU directive. However, it is also true that over recent years we have struggled to meet our compulsory stocking obligations for category 2 products—diesel, kerosene and aviation fuel, for which there is increasing demand. In three of the past four years, we really struggled to meet the stocking obligations for those products. Furthermore, we currently benefit from a 25 per cent. derogation under the EU directive, as we have been a net exporter of crude oil and petroleum products over the past 20 years, but as we move away from that position, the derogation will be phased out. What thinking is going into ascertaining the additional storage that we will need as the derogation is phased out?

Then there is the question of the extent to which we rely on other countries overseas to help us meet our stocking obligations. Currently, about 15 per cent. of our compulsory stocks held under the EU directive are actually held in foreign countries—a trend that has been increasing, so I would welcome the Minister's thoughts. Does he envisage a prudent level above which we should not go in relying on other countries to hold our strategic stocks?

Those are some of my concerns. In common with my hon. Friend Peter Luff, I am pretty confident about the emerging gas situation and relaxed about energy imports. I have great faith in the markets to deliver a new infrastructure. There are problems around planning, but it is the particular problems surrounding storage that require attention now.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform) 9:24 pm, 30th October 2006

Today's debate has been timely and, indeed, informed. The Secretary of State opened by quoting his good friend the Chancellor, who apparently said today that the United Kingdom must be both pro-growth and pro-green—sentiments with which we agree. The Secretary of State went on to talk about gas prices and promised that Ofgem would monitor them very closely. We trust that it will do so, and we will hold him to that promise. He mentioned the fact that the White Paper, which was due, as he said, at the turn of the year, will appear in March. Clearly, climate change is delaying not just the seasons but Government publications.

My hon. Friend Charles Hendry gave an excellent commentary on the Stern review. I confess that I have not read every one of the 700 pages of that document, and I trust that it was printed on recycled paper, but what is important is that the summary that we have been able to see in the House is thoughtful and considered. We on the Conservative Benches will wish to look at that with some care. My hon. Friend went on to give a thorough exposition of the emerging technologies for future power generation and how they can help both to reduce carbon emissions and to secure future energy supplies.

Mr. Robinson expressed a number of concerns. He had some serious concerns about the slow pace of the Government on renewables, but he is a loyal member of his party and I do not think that he wished to press his concerns too far.

David Howarth speaks, I believe, for the Liberal Democrats, and I must say that they got their money's worth this evening. He emphasised carbon-free generation and he was rather sceptical about quite a few of the technologies. He seemed to work his way through a number of reasons for various things not working, including fusion and carbon capture and storage.

We heard a wide-ranging and interesting contribution from Mr. Blizzard. He committed himself to reduce his own energy consumption by, I believe, 20 per cent. as part of this week's Energy Saving Trust campaign. Good for him.

I missed the opening remarks of my hon. Friend Peter Luff, which I regret because what I did hear was not only an informed speech but a balanced and excellent contribution, without wishing to embarrass him too much. His contributions show not only that he understands the subject but that he is able to express his points to those of us who are perhaps not as informed. That is one of his great successes. He particularly raised two points, and I hope that the Minister will respond to them: first, the challenge of putting a price on carbon and, secondly, how we sort out the planning system in relation to that.

Mr. Meacher set out his anti-nuclear credentials thoroughly and promoted the case for wind farms. My hon. Friend Robert Key—sadly, he is not in his place at the moment—gave a typically robust and powerful case for making technology help to solve the problems in energy. Of course, as always, he is a powerful advocate of nuclear power.

Mr. Grogan wanted clean-coal technology to be given a chance. I suspect that the Minister listened carefully to his remarks. Last and by no means least, my hon. Friend Mr. Crabb did a rare thing: he sat and listened to the debate and gave an intelligent and carefully reasoned response to the contributions of others. It was an excellent contribution and I am sure that it is one that the authorities have noted with care—that has got him worried now.

Securing our national energy supply is, of course, going to be, as we have heard, one of the most significant challenges for this and future Governments. It is both an international and a domestic challenge. Internationally, the picture is one of growth in global demand outstripping supply, compounded by significant political risks in the energy-rich regions of the world. As my hon. Friend the Member for Wealden said, last year alone the world's population grew by over 74 million people—that is 1 per cent. in 12 months. Meanwhile, the use of fossil fuels grows even faster—up 1.3 per cent. for oil, 3.3 per cent. for gas and 6.3 per cent. for coal. Looking further ahead, oil demand is predicted to reach 120 million barrels a day by 2025. China's demand alone will triple by then, never mind the impact of India or other rapidly advancing countries.

Unfortunately, just as demand for energy is rising, so the levels of political uncertainty have increased. It is, as some have said, a rich irony that the easiest to reach supplies of fuel happen to be located in some of the most difficult areas politically. Geology and politics seem to have conspired against us. For example, today 58 per cent. of China's oil imports come from the middle east, and that is expected to rise to 70 per cent. by 2015. Thus the new engine of global growth is hugely dependent on the stability of the middle east. What happens will affect us all. Nor should we ignore the transit countries through which the gas must flow, or the sea lanes through which the oil must be shipped. Choke points include the straits of Hormuz, the Panama canal and the Bab el Mandeb strait, at the entrance to the Red sea. The security of those transit routes and oil refineries will affect our energy supplies now and in the future. Ironically, it was Osama bin Laden who recently called oil refineries the "hinges" of the world economy. We must ensure that they remain open.

It is that international combination of economic and geopolitical risks that has changed the debate about supplying our future energy needs. The recent surge in demand for gas—and the accompanying soaring gas prices—is a symptom of what we face.

The truth is that in the UK the margin of spare capacity in our system has narrowed in recent years and, as we have heard today, is set to shrink further and faster. We have heard from several hon. Members how the current generation of nuclear power stations is coming to the end of its life, leaving just Sizewell B open by the mid-2020s. The recent news about Hinkley Point B suggests that we may not even have that long. Some experts are predicting that by 2015 up to 30 GW of current generation may be lost—the equivalent of a third of our current demand. Given that, does the Minister still believe that his policies will close that gap? In which year does he expect to see new generation plant first come on stream?

During the debate we have heard about the need for a comprehensive approach to our future energy supply. We need both to diversify our sources of energy and to ensure that we use it more efficiently.

Photo of Michael Connarty Michael Connarty Chair, European Scrutiny Committee

I compliment the hon. Gentleman on his line of thought, which I am following, but I anticipated that he would tell us about the Opposition's policies on the nuclear question. I am the secretary of the all-party group on nuclear energy. I was anti-nuclear when I entered the House, but the desperate plight caused by climate change has changed my mind. However, the Conservatives appear unwilling to take the step necessary to commit us to rebuilding our nuclear capacity at least to what it was before—some 29 per cent.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

The hon. Gentleman must not have been listening at the beginning of the debate. I am sorry for that, because he usually makes a positive contribution. It is clear that nuclear will have its place, but that will not be first place. We have made that clear, and I do not need to rehearse it any further.

The Conservatives believe that in seeking to encourage more electricity generating plant, we must ensure that much of that plant uses low-carbon technology. To do that we need to reform—not remove, as the Secretary of State suggested incorrectly, I am sure, earlier—the renewables obligation. That means not relying simply on wind farms, but trying to incentivise a whole range of emerging technologies, including wave and tidal power, and photovoltaics.

Equally, the Government need to show leadership. They originally set themselves a target of 10 per cent. of UK electricity coming from renewables by 2010. As potential failure on that target loomed, they moved the goalposts to 20 per cent. by 2020. What confidence can we have that they will not repeat that trick? Does the Minister accept that delaying matters by a decade sends the very worst signal about the Government's true intentions? The issue is here and now, and we would therefore urge the Government seriously to consider reforming the renewables obligation actively to encourage the next generation of green technologies. I hope that the Minister will be able to respond positively about that when he replies to the debate.

Renewables are not the only answer. We have an open mind about how conventional fuels can be adapted and used; for example, if clean coal technology can be made to work and meet our environmental objectives, it can and should have a part to play in our future generation. The hon. Member for Waveney said that we must use our energy much more efficiently. He is right. The UK is the worst country in Europe for wasting energy, according to the Energy Saving Trust. It predicts that by 2010, unless we curb our current habits, we shall have wasted £11 billion and about 43 million tonnes of carbon dioxide—equivalent to the annual emissions of more than 7 million homes. Given that fact, it is clear that we have a shared responsibility to change bad habits and reduce the energy we waste.

Greater energy efficiency can benefit us all. Consumers can save their hard-earned money, businesses can reduce their overheads, the environment will benefit from reduced carbon dioxide emissions and, nationally, we can benefit by reducing our overall energy demand and thus our dependency on foreign supplies. That is why in this, energy saving week, and following the lead of the hon. Member for Waveney, I, too, have committed to reducing my energy use by 20 per cent., as have many of my colleagues on the Opposition Benches. When the Minister responds, will he tell us whether he and his Department have also made the same commitment and is it shared across each Whitehall Department and every Government agency?

For much of the last century, this country has been self-sufficient in electricity generation, but as the debate has highlighted, all that is about to change dramatically. By the Government's own estimate, we could be reliant on overseas resources for up to 80 per cent. of our electricity by 2020. If global demands for energy were static, or the middle east were tranquil and stable, that new possible dependency might not be so concerning, but given the economic and political realities we face, ensuring that our electricity generation is secure requires comprehensive and urgent Government action. As I said earlier, we have a shared responsibility, but the current Government must lead the way.

The Government need to lead us in becoming energy efficient in our homes and at work. They need to enable the rapid development of renewable technologies, and to remove the barriers to local generation. If we are to fill the gap left by ageing power plants, they need to act quickly by creating the right market incentives. Overseas, they need to forge strategic partnerships with energy-rich nations to secure supplies for future generations in this country.

The Government should know that if they act promptly and effectively they will have our support and that of the majority of the House. But we need to hear that Ministers understand both the scale and the urgency of the task ahead, and that they have both the strategy and the will to lead the way.

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry 9:38 pm, 30th October 2006

It is important that the House has a clear and accurate picture of energy supply challenges both in the short and the longer term. We have had a useful debate, with significant contributions not only from Front-Bench Members, but from my hon. Friends the Members for Coventry, North-West (Mr. Robinson) and for Waveney (Mr. Blizzard), Peter Luff—the Chair of the Select Committee—my right hon. Friend Mr. Meacher, Robert Key, my hon. Friend Mr. Grogan and Mr. Crabb.

As my right hon. Friend the Secretary of State said earlier, the gas supply and demand balance could be tight this winter. However, there have been positive developments. The market has already delivered two major gas import projects and two more are on the way; there will be gas from Norway and the Netherlands and new and expanded routes for gas to come to the United Kingdom—energy diversity in practice. Indeed, looking forward to the next two years, as more liquefied natural gas import facilities are built, the total additional gas import capacity in the UK compared with last year will be the equivalent of about 70 per cent. of Britain's annual gas consumption. That gives an idea of the scale of the investment.

The Rough storage facility, which I hope to visit on Friday, is back in action and full of gas. Medium-range storage sites are also full. There remains uncertainty about exactly how much gas will flow from the continent. However, I have been working with my continental counterparts to press for action so that more gas flows through the Belgian interconnector during periods of high demand.

We warmly welcome the hard-hitting actions taken by the European Commission, including, as we have heard, the dawn raids. It has the bit between its teeth on market liberalisation. That is good news for all European consumers, domestic and business, and not just for our consumers here in the United Kingdom. I must emphasise, however, that, under all credible scenarios, supply to domestic customers and other small users will be protected. Vulnerable sites such as hospitals and care homes are also protected. The Government are continuing work to ensure that our contingency arrangements are up to date. We are not complacent; we all know that, in reality, things can go wrong for a range of technical and other reasons, so we always need—and we have—good contingency plans.

Looking ahead, we expect the gas supply situation in the UK to ease beyond the coming winter. As we have heard this evening, more significant additional gas import capacity and storage facilities are planned for the years ahead. Those are very positive developments, which should ease pressure on future prices. On electricity, the Government are working with the National Grid Company and Ofgem, and we shall keep a very careful eye on developments as we enter the winter.

I recognise that, although the wholesale gas price for the winter has fallen significantly during the past six months, prices remain uncomfortably high for householders—our constituents—and for many industrial users, not least those who are intensive users of energy. High and volatile energy prices affect the competitiveness of industry. That particularly affects the intensive users. There is a limit to what the UK Government can do on their own. The oil price is a global price. In turn, that drives gas prices. Getting the investment climate right for new import and storage projects is critical to giving UK consumers secure and affordable energy in years to come. The Government have delivered that investment climate; £10 billion-worth of present and planned projects is evidence of that.

We will bring forward proposals to tackle problems with the planning regime—my hon. Friend the Member for Waveney was just one of the Members who talked about the significance of that—to make building new infrastructure for our energy future easier and more predictable. In the domestic market, the Government have targeted action on vulnerable consumers, particularly low-income pensioners who are eligible for pension credit. The Warm Front scheme and similar schemes have made a real difference in terms of energy efficiency; so does £2 billion of winter fuel payments.

Looking to the longer term, we face two major challenges, as a number of Members have stressed: climate change and energy security. They will become among the defining themes of our geopolitics, our European politics and our national life in the 21st century. Many Members have rightly congratulated the author of the Stern review and his team. That review was published today, and it spells out how important it is for all of us that we take action now to tackle climate change. That is why my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs has today announced a commitment to introduce Government legislation to set statutory targets to reduce greenhouse gas emissions. That makes crystal clear to industry, and to all of us, the direction in which we will be travelling in coming decades.

In July, we published the conclusions of the energy review. We set out an ambitious package of measures and further actions, and we are in the middle of a raft of consultations on the policies we need for the long term. They will deliver the low-carbon energy future we need, and deliver secure, and affordable energy supplies, in a world in which we will be less energy self-sufficient.

On tackling climate change, we signalled that we remain committed to working towards international agreement on stabilisation of temperatures. Within the EU, we are committed to taking that forward through the carbon trading scheme. The Government will secure the future of renewable energy through the renewables obligation.

All of us have a part to play in being smarter in using energy to help deliver a low-carbon future. The hon. Member for Mid-Worcestershire, who is Chairman of the Trade and Industry Committee, rightly emphasised the need for action from all of us as householders to make our homes more energy efficient. As we said in the review, the way ahead is to talk to the supply companies and for them to move away from having a financial interest in persuading us to use more and more gas and electricity, and to become instead energy service companies that can enable us to become more efficient and to reduce energy demand in our homes. That is the discussion that we will be having.

There is clearly a whole debate to be had on transport, and an agenda to pursue regarding the role that transport must play in helping us to move into better times in respect of carbon.

Photo of Robert Key Robert Key Conservative, Salisbury

The Minister is absolutely right to talk about the need to improve building regulations and standards and specifications for heat insulation in our houses. Only last month, I opened an extension built by a small family builder in Salisbury. He told me that he built that extension to his own offices to a standard 10 times higher than that required under building regulations, and at virtually no cost to himself. However, there was no pressure for anybody else to do likewise. Is that right?

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

What is right is that we are driving up housing construction standards through the criteria that we are introducing. The homes now being built are far more thermally efficient than those that were built only a few years ago, and that is not the end of the story.

We have also heard about the significance of electrical appliances. Indeed, it was the hon. Member for Salisbury who gave us dazzling statistics on the increase in the number of electrical appliances in our homes, which is why we want to drive up standards in electrical appliances and lighting. Through the power of Government procurement, we can make considerable progress. Mr. Prisk challenged the Government on what we are going to do, and compared that with the saintly actions that he pursues in respect of his own carbon footprint. It is our ambition that central Government's own operations will become carbon neutral.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

The Minister is very generous, but I shall try not to approach sainthood. While he is thinking about what he is going to do, could he examine part L of building regulations? The problem that my hon. Friend Mr. Key just referred to is that these regulations, which are concerned directly with energy saving, were introduced with barely two weeks for companies in the building trade to put them into practice. That left many companies completely incapable of responding. Could the Minister and his departmental colleagues look at this issue, because frankly, the situation is one of chaos?

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

I do not believe that the situation is in chaos. We are making great improvements to housing construction standards, but I will draw the hon. Gentleman's comments to the attention of the relevant Department.

As I was saying, regarding our own estate, the Government can do much to move toward carbon neutrality.

Several colleagues talked about the importance of the coal industry. At one stage last winter, 50 per cent. of our electricity was being generated from coal. We have established the coal forum to test the seemingly sensible hypothesis that there should be a future for British coal, given the supply of indigenous coal, and if only we could get a reasonable and proper dialogue going between the generators and the coal industry—as my right hon. Friend the Secretary of State said, we should not negotiate; we are not negotiators—allied to clean coal technology. All of us are committed to that.

A number of colleagues talked about clean coal technology, and I share the enthusiasm for the development globally of carbon capture and storage, which is absolutely vital. We are ambitious for renewables. Yes, currently renewables constitute only 4 per cent. of our electricity supply, but very significant progress is made every year. We will reform the renewables obligation, as the energy review states, and we are consulting on that. A critic might say that at the moment, it is rather a blunt instrument, in that it promotes one form of technology—onshore wind—and is insufficiently sensitive to those that are at an earlier stage in their development history. That is what reform is about. Because of our commitment to renewables, we will increase the renewables obligation in due course to 20 per cent. That is a very considerable achievement.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West

On the subject of renewables, is my hon. Friend confident that we will even approach the 20 per cent. target if our policies remain unchanged? All Members, of every party, accept the validity of the arguments for the target, and the necessity of meeting it, but we are not making the progress that would reasonably lead us to expect to achieve it.

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

The 4 per cent. figure, which seems small, is misleading because, as I said, considerable progress is being made every year. By obliging the supply companies to source 20 per cent. of their electricity from renewables in due course, we can take things forward. The reforms that we will introduce and publish after the consultation on the renewables obligation will enable us to give proper support to marine technology, tidal power, wave power and so on, so that we can ensure diversity in renewables. May I turn, in the final few moments of my speech, to the policies—

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

Yes, but I am trying to be energy-efficient.

May I turn to the views of Her Majesty's loyal Opposition? Charles Hendry began by saying that when his constituents heard about global warming, they were enthusiastic about doing something, but that their enthusiasm was allied with confusion. The more I heard him attempt to espouse Tory party policy—his party has a new enthusiasm for the subject that was not evident when his party was in power—the greater the confusion of that policy. That was illustrated in two ways. First, his party's "policy"—I use the word generously, but put inverted commas around it—on nuclear includes the curious idea that nuclear is a last resort, and not one of the preferred options.

We hope to speed up the planning process for nuclear reactors, should the market come forward with proposals, but reactors are a long-term prospect. I gently ask the hon. Gentleman what commercial companies and investors considering the subject would think of a Government who, rather reluctantly, said, "Well, perhaps, if other things do not quite work out, we might consider them one day, as a last resort"? I do not think that that attitude is impressive, particularly as he acknowledges that most reactors are ageing. It is not a very credible position, it is not very enthusiastic, and it is certainly confused.

Photo of Peter Luff Peter Luff Chair, Trade & Industry Committee

I am genuinely grateful to the Minister for giving way. I will try to help both sides of the House, impartially, wearing my hat as Chairman of the Select Committee. Does he not think that the Conservative party's much more robust proposals on carbon pricing—to which, disappointingly, he has not referred in his winding-up speech—are more likely to deliver nuclear power stations than the Government's rather limp proposals on carbon pricing, although they hold out the prospect of making those proposals tighter?

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

My officials have never let me down, so I am sure that if the Opposition had robust proposals, the details would have been put on my desk. I simply have not seen them. We, on the other hand, have ambitions for the European Union's emissions trading scheme. We want it to grow, we want to introduce phase 3 and bring in aviation measures, carbon capture and storage, and we want it to lead the argument in Europe. That represents a robust proposal—and not only for Europe. As colleagues have said, it could be the start of an international emissions trading scheme that Norway, California, and, one hopes, many other states could join. The further confusion—

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

I did want to point out a further confusion to the Tory party, but first we shall have some clarification from my hon. Friend.

Photo of Michael Connarty Michael Connarty Chair, European Scrutiny Committee

The concept of carbon pricing has been raised time and again in meetings of the all-party group on nuclear energy by companies that aspire to build in this country. Will the Minister talk to his officials and find out whether a robust system of proper carbon pricing could be put in place, because such a system could lead the market? I hope that we will take that lead in the market by creating the right conditions for the private sector.

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

It is our ambition to develop in due course an international emissions trading scheme. I discussed that with the nuclear industry only this morning. I fully understand the point.

The second and final way in which I want to help the Conservative party is by asking Conservative Members, with all due respect, as they say on these occasions, to try to think through the logic—or the illogic—of the Tory's party's policy on renewables. I read the documents. The interim findings of the Conservative party's energy review, from 6 July this year, state:

"We therefore believe it is now vital to give green energy a chance to demonstrate its potential"— so far so good—

"on a level playing field with other sources of electricity".

It seems to me that that is a non sequitur wrapped up in a misunderstanding. If one really wants to demonstrate the potential, one has to have a mechanism such as the renewables obligation—by all means, a reformed one. If the Conservatives are seriously talking about a level playing field, and they understand the meaning of the term, that must mean, vis-à-vis nuclear for example, abolishing a renewables obligation. I do not know whether that is the policy, but I genuinely think that there is confusion. There is also confusion about nuclear. So, there is more work to be done. Perhaps that work could start in the final minutes of the debate.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I know that the Minister lists as one of his recreations occasional white-water rafting and therefore he is used to ducking and weaving, but the carbon issue will not go away. He needs to bear in mind that we have made where we stand on the issue quite clear. He seems to be unwilling to nail his colours to the mast. What about carbon pricing?

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

I have talked a great deal about the development of the emissions trading scheme, but I am trying to put it gently to the hon. Gentleman—perhaps the drafting is poor—that the Conservatives cannot have it both ways. A level playing field would either mean everything, including nuclear, being subsidised, presumably at the same level—I do not think that that is their policy; it is certainly not ours—or it would mean abolishing the support to the renewables industry. So, the Conservatives should please think again.

We have had a useful debate—a long debate at certain stages from the Liberal Democrat Benches. When it comes to the Liberal Democrat's policy, I will not even go there. One needs some energy to be efficient with in the first place. The policy cannot just be energy efficiency. First, bring us some energy—hopefully diverse energy. Those are two of the great issues facing us. I am not as relaxed about energy security and, in the future, a heavy dependency on imports as some of the colleagues whom I have heard today. In the light of a future in which 80 or 90 per cent. of our gas could come from foreign fields by 2020 compared to just 10 per cent. now, we need to be smart about gas supplies, which is why we are consulting, and certainly about storage, but we also need more home-grown energy.

The useful thing, as a colleague said, is that many of the things that we need to do to save the planet in terms of climate change are the same things that we need to do in terms of energy security: yes, energy efficiency; yes, renewables; yes, clean coal technology, carbon capture and storage; and yes, a green light, if the market can come forward, for a new generation of nuclear reactors. However, there is no one silver bullet or single answer. There is no uranium bullet. Diversity is the name of the game. I am sure that we will return to these issues in the century to come and probably in the weeks to come.

Photo of Tony Cunningham Tony Cunningham Assistant Whip (HM Treasury)

I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.