Schedule 4 — Application and modification of emissions limit duty

Recall of Elected Representatives – in the House of Commons at 1:57 pm on 4 December 2013.

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Votes in this debate

  • Division number 151
    A majority of MPs voted against allowing carbon dioxide emissions limits to be set in respect of existing stations which fit pollution abatement equipment.

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills , Minister of State, Department of Energy and Climate Change 1:57, 4 December 2013

I beg to move, That this House
disagrees with Lords amendment 105.

The amendment would give the Secretary of State power to apply the emissions performance standard—EPS—to any existing fossil fuel power station that fits the pollution clean-up equipment that is needed to meet the tighter limits, set by the industrial emissions directive from January 2016, on emissions of oxides of sulphur and nitrogen. Under that directive, plants that do not fit clean-up equipment will from January 2016 be subject to a 17,500 hour limit on their operation, after which they must close, or, from mid-2020 be limited to just 1,500 hours of operation a year. The intention behind the amendment is to use the EPS as a regulatory tool for limiting carbon emissions from any existing coal-fired power station that is not otherwise forced to close and/or have its operation limited under the directive.

First, the Government do not consider that power to be necessary. Secondly, the measure risks deterring any investment in equipment needed to comply with the directive, the consequences of which could be detrimental to consumers. I remind the House that the EPS is intended to support the planning requirement that any new coal-fired power station must be equipped with carbon capture and storage. The EPS is, therefore, about ensuring no new unabated coal, and is a clear and unambiguous regulatory measure that signals our commitment to decarbonisation.

Photo of John Redwood John Redwood Conservative, Wokingham

Will the Minister confirm that eight plants are closing under the EU directive already, and if any more plants had to close the lights would go out?

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills , Minister of State, Department of Energy and Climate Change

I was coming on to the list of stations that have closed. My right hon. Friend is absolutely right that we need urgently to replace the capacity that is coming off the system. Coal, as he will know, currently accounts for around a quarter of our reliable generating capacity, but that is set to decline rapidly over the coming years. Last year, Kingsnorth closed, this year we have seen the closures of Cockenzie, Didcot A and Tilbury, and we expect Ferrybridge C and Ironbridge to follow suit.

Photo of Ian Lavery Ian Lavery Labour, Wansbeck

The Minister mentions that coal is producing up to 25% of the electricity generated. Does he agree that the recent statistics prove that over the last 12 months that has been up to 50% and on average was 41%?

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills , Minister of State, Department of Energy and Climate Change

Coal has been an important part of the mix, and I hope the hon. Gentleman will be with us this afternoon in preventing further coal from being driven off the system.

Coal is being removed from the system due to a number of factors, including the old age of some of the plants, the impacts of environmental legislation, the increasing penalty on high-carbon generation applied under the carbon price floor, and increasing levels of low-carbon generation as we introduce more renewables.

Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change)

If a plant fits carbon capture and storage equipment, as a demonstration plant, could it be caught by this amendment and forced to close or not generate so much energy?

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills , Minister of State, Department of Energy and Climate Change

There is an exemption under the Bill for a plant that fits CCS equipment. I have made that clear to the Carbon Capture & Storage Association and to those working on the various projects.

The coal fleet is old, having mainly been built in the 1960s and ’70s, with only one plant, Drax, under 40 years old. Most of these ageing power stations are now expected to retire completely between now and the mid-2020s. As I have explained, if a station is not to face restrictions and/or closure under the directive, it will need to invest in clean-up equipment. That would require a multi-year programme of investment in the order of several hundred million pounds. Over time, with the carbon price floor and a strengthening emissions trading scheme, the economics of coal generation will deteriorate further compared with gas. Furthermore, as more low-carbon generation comes on to the system through new nuclear and renewables, it will result in higher-carbon coal generation being increasingly displaced. The combined effect is that the economic outlook for coal generation is poor.

Our analysis is consistent with that outlook and shows that unabated coal generation will make up just 7% of total generation by 2020 and 3% by 2025, and probably 0% by 2030. There is no evidence at the moment of a large number of operators planning to upgrade their coal plants, but we should not rule out the possibility that one or two might do so.

We have heard the argument that the amendment would merely make available a tool for future Governments to use, if necessary, to limit the emissions from existing coal stations, but we believe the very existence of such a power would create an additional regulatory risk that could deter the small number of our most efficient stations that might otherwise choose to upgrade. As I have set out, under the directive stations that do not upgrade will be subject to limited hours and/or forced to close. If the amendment were accepted, therefore, we would risk more coal stations closing earlier than might otherwise be the case.

I have also considered the argument that the amendment would provide greater certainty to investors looking to build the new gas plant that we all agree will be needed. However, the amendment would do so in a way which could create risks for our security of supply and increase costs to consumers. We already face a significant investment challenge with an estimated 16 GW of new gas plant, and about 45 GW in total of all forms of generating capacity, needed over the decade from 2015 to 2024. We are acting to facilitate that new investment through other measures in the Bill, notably with regard to the capacity market. However, we cannot be 100% certain about exactly when all that investment will be delivered. We need a managed transition to a lower-carbon future, in which our existing assets are managed prudently to avoid unnecessary costs to consumers.

Photo of Dan Byles Dan Byles Conservative, North Warwickshire

Does my right hon. Friend agree that the transition we are trying to make in our economy, from what we have now to what we seek in 2050, is so complex that we cannot simply approach it in an ideological way and assume low-carbon energy sources will magically appear? Instead, we need a credible, investable and coherent plan for getting from where we are now to where we want to be.

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills , Minister of State, Department of Energy and Climate Change

I absolutely agree with my hon. Friend. When we are dealing with security of supply and keeping costs affordable for our consumers, we must avoid being ideological. Instead, we must be inclusive and welcome new generation from a series of sources.

The Department has looked at a scenario in which all our coal stations close by 2025, the results of which show that average household electricity bills would be about 3% to 4% higher—or about £22 to £28 higher—in the 2020s. That would require more gas plant to be built earlier to fill the gap—at greater cost, ultimately, to consumers. It makes no sense to accept an amendment that unnecessarily creates further risks to our security of supply and further increases costs to our consumers.

The measures in this Bill are about creating the right conditions for attracting the significant investment needed in our electricity sector over the coming decade. Such investment in lower-carbon alternatives will deliver an orderly, cost-effective transition away from high-carbon coal, and that should not be put at further risk.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

It is a pleasure to take part in the debate this afternoon, which may be the long-awaited final part of our deliberations on the Energy Bill—or maybe not. The House will not need reminding that we have had long, and at times detailed, discussions on this Bill. Indeed, I noticed while listening to the Minister’s opening remarks that Charles Hendry is present, which reminded me that when the Bill was first published and subject to pre-legislative scrutiny, it was in his hands, and it has since passed through the hands of Mr Hayes before his promotion to the heart of the Prime Minister’s office, and then on to the current Minister. We have been addressing this Bill for some time, therefore, and a couple of weeks ago we debated extending its time limit. During that debate, we made it clear that the Opposition do not wish to delay the Bill unduly because it is an important piece of proposed legislation, but although the extended deadline of the end of the year is fast approaching, we think there are some issues before us today that merit further serious consideration.

Indeed, these issues are before us today only because of consideration of the Bill in another place and, as the Secretary of State made clear when asked about his attitude to this particular measure, it is not necessarily as simple as sometimes portrayed by Members on the Government Benches. There have been a number of improvements to the Bill in relation to nuclear transparency, community energy and other areas, and much of that still needs to be done through secondary legislation and regulation, which will undoubtedly follow. In part those improvements have been prompted by amendment and debate instigated from both sides of the House and in both Houses, and it is in that context that I believe we should also give due cognisance to amendment 105 passed in another place.

Many of the Members present have faithfully stuck with this Bill through all its stages, and they will have heard me make the point that it is my personal belief that confession is good for the soul. I therefore wish to begin with a confession: I remain somewhat confused by the attitude of Liberal Democrats Members on this issue. A number of Liberal Democrat Members have taken part in our proceedings on the Bill, and have demonstrated their desire to see an improvement in our energy infrastructure and a commitment to decarbonisation. Indeed, if one refers to the speech made by the mover of this amendment in the other place, those were exactly the concerns expressed. Lord Teverson, the Liberal Democrat’s energy spokesman in the other place, is a conscientious and diligent contributor to discussions on energy policy, but I understand that the distasteful realities of coalition mean that Ministers are constrained.

The attitude displayed by the Minister today suggests that on this matter he has won the battle with his coalition colleagues in recompense for other measures we have heard about in the recent past. I wonder, however, whether this, like the 2030 decarbonisation target, is a Liberal Democrat policy that Liberal Democrat Back Benchers feel unable to vote for, or a Liberal Democrat tactic to keep those in the other place distracted. If they vote with the Government against Lords amendment 105, do they intend to vote for it again in the other place? If that is the case, the rest of us could simply leave it to the Liberal Democrats to decide between themselves, and between both Houses, which way they wish to face, or whether they wish to face both ways.

Photo of John Redwood John Redwood Conservative, Wokingham

Given Labour’s long tradition of strong support of the coal industry, is the hon. Gentleman worried that the Bill will lead to a rapid collapse in coal demand and output in this country?

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

No, I do not accept that and I will go on to explain why during the remainder of my remarks.

We have heard, and I anticipate we will hear more in the time available, about coal generation. Some in this House are hostile to coal-fired power. Indeed, a number of those who are most enthusiastic for unconventional gas cite its ability to use less coal as part of their case for shale. There are others who are supportive of the remaining indigenous coalfields and have strong constituency associations with coal-fired generation. A number have previously worked in that industry and I have a huge amount of respect for their knowledge and expertise. For my part, I think that coal-fired generation remains an important part of our generation mix. We are currently using, as my hon. Friend Ian Lavery pointed out, a significant amount of coal generation, particularly in the winter months. Earlier this week, the UK achieved a new generation record for wind, but coal is currently the predominant part of our generation mix.

My support for coal as part of that mix is not born of any historical romanticism about the industry so much as the positive opportunity presented by carbon capture and storage for a bright future for clean coal. That important point has been recognised by the joint industry and trade union clean coal group, which has expressed many of the concerns I have about the limited and slow progress on CCS in the past three years. That is an important point when we take comparisons into account. If Members have not had the opportunity to do so, I would ask them to consider the significant progress made in Canada on CCS. My hon. Friend, a member of the Select Committee on Energy and Climate Change, has drawn attention to the tantalising and real prospect of a commercially scaled CCS project being up and running in the early part of next year. That shows what can be done with a sense of purpose and real intent.

Photo of Caroline Lucas Caroline Lucas Green, Brighton, Pavilion

Is the hon. Gentleman aware of the Carbon Tracker report that shows we need to leave four-fifths of known proven fossil fuel reserves in the ground if we are to have any chance of avoiding 2° warming? That being the case, Carbon Tracker analysis found that, even with CCS, fossil fuel carbon budgets would be extended by only a very small amount. If we are serious about staying below 2°, CCS still does not help us—we need to get off coal with or without CCS.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

I respect the hon. Lady’s opinions, but I disagree with her on that point. CCS provides us with the best opportunity to meet our peaking capacity demands alongside the low carbon base load generation. I know she is against that in relation to nuclear and supports more variable low carbon generation in relation to renewables.

My hon. Friend has been keen, clear and committed to ensuring that CCS is not just about gas, but coal too. He makes a compelling case and I look forward to the Select Committee’s report on this important issue early in the new year.

Photo of David Mowat David Mowat Conservative, Warrington South 2:15, 4 December 2013

I like the hon. Gentleman’s point on CCS, but is he aware that Germany is building 11 GW of new, unabated non-CCS coal, with Holland building 4 GW? Those projects have kicked off in the past year or so and those countries do not appear to feel the need for CCS. Why are countries reading this matter so differently?

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

I am grateful for that intervention. I anticipated that the hon. Gentleman would refer to this point, because we had a rehearsal in a Westminster Hall debate this morning. I have also read the report compiled for the Department of Energy and Climate Change on coal-fired power stations in Germany that he had in the Library yesterday. He will know from the report that the plants were sanctioned in 2007-08, which was pre-EU 2020 targets, pre-withdrawal of free allowances and pre-renewables. The trigger for German investment in coal was the first nuclear phase out, and the slow build of the plants commissioned in 2007-08 were the result of a number of plants using defective steel. They are likely to operate at a loss. They are completing commissioning to make less of a loss than if they had been abandoned—that is the reality.

I accept the hon. Gentleman’s general point about Germany. There is a danger that we almost fetishise the German experience. [Interruption.] I think I have made the Minister of State, Department of Energy and Climate Change, Gregory Barker laugh, but I did not mean fetishisation in any unclean sense. The deployment of renewables in Germany has been significant and has expanded, with more community and diverse ownership of capacity. We can learn a lot from that, but, as a German academic expressed it to me this week, with the amount of coal-fired power currently being generated in Germany, one might think that the people who hold up Germany as the green case for the future cannot read statistics. The German view of CCS has been born of opposition to storing carbon underground, and the UK is more likely to store carbon under the sea. The German decision to accelerate the phase out of nuclear was perhaps not the wisest, given the emissions targets that it too has to meet.

Photo of David Mowat David Mowat Conservative, Warrington South

We can both agree that Germany’s carbon emissions are one third higher per capita than in the UK. On the report he mentioned—I did not realise he was sitting next to me in the Library yesterday cribbing my report—he is right to say that some of the projects were kicked off a few years ago. The report also states that by 2030 Germany plans still to have 20% to 25% of electricity generated by unabated coal, whereas our target, as I think the Minister said earlier, is 3%.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

I did not actually read the report over the hon. Gentleman’s shoulder; I looked at it beforehand as part of my preparation. It may be that I have powers of clairvoyancy, as I thought he might raise this point—he has been consistent in doing so. On his substantive point, he is right on Germany’s trajectory in comparison with the UK. Returning to the amendment, the point he rightly makes concerns the Government’s existing and continuing position, unless the Minister intends to change it. I will come on to make some remarks about how the amendment would have an impact on existing policy.

The other point I wanted to make on CCS is that the Minister’s colleague in the other place, Baroness Verma, referred to no more coal without CCS. That is also the position of CoalPro, the Confederation of Coal Producers, which said, in correspondence with the Minister, that coal-fired power had to have CCS in the long term in order to meet our long-term admissions targets, and encouraged him to accelerate the demonstration projects on CCS. So there is unanimity among those with an interest in coal that CCS is the long-term answer.

Photo of Ian Lavery Ian Lavery Labour, Wansbeck

Everybody would agree that coal is not going away, but will be here into the future. We will be burning even more tonnages between now and 2030, yet the Minister said that by 2030 we would probably have zero coal burning. I think that that is an absolute impossibility and that we need to progress with CCS as soon as possible. Where are we with the CCS projects?

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

I agree with my hon. Friend about the need for progress on CCS, which is why I have continued to press the Government on it over the past two years. The Minister might correct me, either at the end of this debate or on the next set of amendments, but my understanding is that there should be some news on the two shortlisted projects, if not towards the end of this year, early next year. I am concerned, however, that with just two demonstration projects, in isolation, without the continuing regime of contracts for difference and other support, CCS will become almost a curiosity, rather than a continuing and integral part of how we reduce and minimise emissions from the peak in capacity we will require for many years to come.

A number of energy companies have made in correspondence much the same point as CoalPro. That was why we proposed an amendment, adopted by the Government, to provide flexibility in the early stages of CCS projects, in the commissioning period, to maximise the chance to achieve what we need to on CCS. That amendment was tabled alongside another one, similar to this amendment, that we discussed in Committee, one part of which the Government accepted.

Let us be clear about what the amendment would do and what it would mean for coal plant. Coal plants operating in 2013 effectively have three choices. The first is to leave the plant as it is, without investment, in which case it would close some time before 2023, depending on how quickly it used the permitted hours of operation to which the Minister referred. The second is to upgrade in order to conform to the industrial emissions directive, as has been done at least once, at Ratcliffe-on-Soar, and as others are considering doing. The third is to upgrade more significantly to extend the lifetime and meet the IED stipulations.

The coal-fired power stations in the first category would be unaffected by the amendment. If they burned through their allowances quickly, operating at 55% load factor, they would still run until 2020, and because of the likely profitability of the capacity market being introduced, I suspect that many would choose to run at slightly lower load levels until 2023. The Government’s emissions performance standards, already in the Bill, will apply to the third category of plant—those that extend their lives through investment. The amendment would impact on the second group and take effect, effectively, from 2023.

The EPS limits on carbon emissions are expressed as the amount of CO2 per kWh, but they limit the amount produced not per hour but per year. A typical power station, therefore, would be limited to a 40% to 45% load factor without lowering its emissions rate. That means running at a low load factor, to manage peaks in demand or in winter, or becoming serious about CCS. Neither choice is the end of coal generation in the UK.

From the Minister’s remarks, it seems that the Government are not persuaded by the amendment for several reasons.

Photo of David Mowat David Mowat Conservative, Warrington South

The hon. Gentleman categorised the three types of power station and pointed out correctly that his amendment would apply only to one of them. We currently have about 23 GW of coal generation. To how much of that would his amendment apply?

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

That depends on the decisions made on the first and second groups. On the third group, so far there has been relatively little investment, but I know that a number of companies are actively considering making it. They are waiting, partly for the completion of this Bill and regulations arising from it and partly for the detailed work on the capacity market, before making those investment decisions. As I said at the outset, that is why it is important we get the Bill though as quickly as possible, after considering these final points.

The Minister gave several reasons why the Government were against the amendment. The first, which he referred to almost in passing, was on technical and drafting grounds. In that regard, several points have been made by those anxious to ensure that existing investment is not disregarded, but I think that those points could be properly reflected in the regulations that would arise were the amendment to be successful. The second was that the amendment was unnecessary, because existing price control policies, notably the carbon price floor, had the same impact in effectively limiting coal plants to about 40% to 45% load factor. If so, perhaps the Minister, whose antipathy to the carbon price floor has been well-rehearsed—he has been reminded of it a couple of times recently, including this morning, so I will not embarrass him by doing it again—could help to persuade the Chancellor that the unilateral, untargeted measure of a carbon price floor is not needed because the Government could use the approach in the amendment instead.

The third argument was that the amendment would present a risk to security of supply. As the Minister is aware, the amendment would not bite until 2023, and if his boast earlier today in Westminster Hall—on investment decisions about to be announced for the enabling process—are accurate, that would give scope for any gap to be filled. I say that not least because we would continue to have that coal capacity operating in winter and at peak times through the capacity mechanism the Government are introducing.

The fourth argument concerned costs. The Minister neglected the point that the price of electricity was pegged to the price of producing energy from gas. However much coal is in the system, coal generators sell at the gas price, so bringing more coal into the system would not necessarily mean lower energy costs for consumers. It is worth restating that the EPS goes no further than the Government’s own prediction for scaling back coal in the energy mix. It is effectively a back-stop or, with some intelligent thinking, possibly an alternative to what they anticipate will happen in response to the EU emissions trading scheme and carbon price floor combined.

This morning, the Minister spoke in a debate, which I thought was a very good debate, about issues of balance in energy policy. He also spoke earlier this week, to a slightly different audience, about the order in which he saw the elements of the balance: security of supply, affordability, climate change, in that order. He is right to talk about balance, investment and impacts, and the very purpose of the Bill is to ensure we strike that balance in the most affordable and sensible way in order to secure a diverse and balanced energy supply for the future, while recognising the realities of climate change and the measures we need to take to address it, and to protect us from the vagaries of the volatility inherent in globally traded commodities. He will have seen this week’s figures from the International Energy Association on global energy demand projections over the next few years. Contrary to the impression he gave, the amendment is in line with the Government’s stated aims. It is proportionate and sensible and is certainly worthy of further consideration for inclusion in the Bill.

Photo of Robert Syms Robert Syms Conservative, Poole

I rise to support the Minister in his disagreeing with Lords amendment 105. This country has always had a balanced energy policy, with several things feeding into the mix, and I think it important that we continue that. The problem is, however, that we have not built enough capacity over the past 15 or 20 years. The changes under the Thatcher Government to the grid and the electricity market were successful in maintaining relatively low prices, but there has not been the same investment in capacity. That was made substantially worse by the last Government, who managed to produce a White Paper without mentioning nuclear power as part of that important mix.

We now face a difficulty. At some point, we have to close the Magnox stations. In addition, we have policies that are making coal less attractive, so that capacity is going off and needs to be replaced. Although there are plans and many firms are talking about building capacity, it is not being built. If we are not careful, we will have a gap, in that we will lose capacity and then have to either import or face the genuine risk that the lights will go out some time in the next several years. That is a serious thing. We can have all sorts of debates in this Chamber about the economy, quantitative easing, funding for lending and everything else, but if we cannot generate enough electricity to keep the lights on and industry running, that will be a poor indictment of the British economy.

I do not think Members understand how difficult and critical this will be. We really need to get on with investment. I hope that we can start Hinkley C as soon as possible and that we will have other nuclear power stations. I hope, too, that we will build some cleaner coal stations, and there are many proposals for added gas capacity in future. However, making amendments that make our current coal-fired stations less attractive does not seem a sensible thing to do. We need to sweat our assets and keeping them going until we are sure that the cleaner forms of electricity, such as nuclear and others, can provide for the British economy.

I am an optimist when it comes to the British economy. I think that it could grow quite rapidly over the next 10 to 15 years, and if it does, power demand will go up and we will need to provide for that. It seems slightly bonkers that we should be arguing a little bit on the head of a pin about a few stations when, as has come out in this debate, the Germans have decided to abandon nuclear—that is their decision—but are building quite a lot of coal-powered stations. The good news for the Germans is that they can abandon nuclear if they are building an alternative source of electricity. We seem to be talking a lot about providing alternative sources of electricity, but still grinding some of the existing capacity down.

We therefore risk having a generating capacity gap. John F. Kennedy talked about a missile gap, but we will have a generating capacity gap. Unless we take great care to ensure that we maintain as much capacity as we can for the foreseeable future, while encouraging people through our policies and what we are doing in the Bill to invest substantial sums in future capacity, we will have a problem.

Photo of Bob Stewart Bob Stewart Conservative, Beckenham 2:30, 4 December 2013

My hon. Friend obviously knows quite a lot about this subject. How much reserve capacity does he think we should have? Is it 10%, 20% or something else? Is there a figure that he would recommend?

Photo of Robert Syms Robert Syms Conservative, Poole

The grid generally tries to keep a good level of capacity. There have been occasions recently when surplus capacity has been under 5%.

Photo of Robert Syms Robert Syms Conservative, Poole

It is small in capacity terms for the economy. Normally, that is when the grid starts getting a little nervous. In the years ahead, the grid might have to be a lot smarter about managing our assets and resources to ensure that we can provide electricity. Renewables have their role, but they are sometimes less predictable than nuclear or coal-powered stations. That is one reason why, as Ian Lavery mentioned, there have been occasions recently when coal has provided 50% of our electricity, which is rather more than the 25% that it is providing now.

Photo of Angela Smith Angela Smith Shadow Deputy Leader of the House of Commons

The hon. Gentleman is making the case for ensuring spare capacity in the electricity grid. Would he therefore not concede that we need the same capacity in the gas grid as well? Recently, the Government refused to recognise the case for building extra gas storage capacity. Many people in the industry feel that that is a big mistake.

Photo of Robert Syms Robert Syms Conservative, Poole

It is important both that we have generating capacity, preferably domestically based, and that we increase our storage capacity for various forms, including gas. Of course, Ministers are also custodians and have to stand up for the consumer. If a company makes a costly proposal that will be reflected on people’s bills, Ministers have to take a view on whether that is the right or wrong thing to do. I hope that we get back to that debate and provide more storage.

Photo of David Davies David Davies Chair, Welsh Affairs Committee, Chair, Welsh Affairs Committee

I agree with much of what my hon. Friend says. Does he agree that one of the problems is that, unfortunately, Ministers and shadow Ministers have all been too quick to accept the arguments of the powerful green lobby about CO2 causing global warming, which clearly has not been the case for the past 15 years? Does he agree that we should now prioritise cheap, secure energy for our manufacturing industry, whether from coal, gas or any other means?

Photo of Robert Syms Robert Syms Conservative, Poole

Clearly, policy has to have a proper balance. There is a role for renewables and trying to provide the cleanest possible energy, and the Government have policies to ensure that. However, I return to my essential point, which is that we now have policies that are driving out older capacity—it might be less efficient or dirtier capacity—but we are yet to put in place the new, clean, gleaming capacity to produce for the future. If we are not careful, whoever forms the next Government—I hope that we will—will find themselves with a very real problem. I do not want the Chancellor of the Exchequer standing at the Dispatch Box talking not about tax or how the economy will grow, but about the constraints caused by our not investing in providing power for a growing and successful future economy.

I listened carefully to the Opposition spokesman; I just think that Lords amendment 105 is not appropriate. I return to my central point: we need to sweat our assets and keep them going until we are sure that we have the capacity to keep the lights on.

Photo of Dan Byles Dan Byles Conservative, North Warwickshire

On my hon. Friend’s point about investment, we hear about the oft-quoted trilemma in energy policy—the requirements for energy security, affordability and decarbonisation—but does he agree that we should actually be talking about the quad-lemma and that the fourth leg of our energy policy should be investability? If we do not have a credible and investible energy policy, we might as well switch the lights off and go home.

Photo of Robert Syms Robert Syms Conservative, Poole

Absolutely. At the end of the day, we must have the capacity to generate for what people want. We can make savings with insulation and things that we do with electrical equipment. We can do an awful lot to save energy, which will take care of some of the demand. However, with a growing, successful economy—there is every reason to look at the British economy with great optimism—I suspect that we will need more capacity. Not only do we need plans for investment; we need people breaking the ground and building these things, so that they can provide for what we want.

I have reservations about the amendment. I know that people talk about 2021 or 2023, but that will come very quickly, so although the investment and capacity might not come that quickly, my general view is that we should be a little cautious about the Lords adding more constraints, costs and limits on an important source of power at this point.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I am a little bemused by some of the talk that we are hearing this afternoon about the capacity crunch and the extent to which the amendment might exacerbate it over the next period, bearing in mind, first, that it would not take effect until after 2023 in any event and, secondly—this has perhaps gone rather unremarked—that the power plants that are not producing and that are offline and either light mothballed or deep mothballed are not coal-fired but gas-fired plants. About six of them are mothballed—even though those operators could operate perfectly efficient gas plants for their own operations—not because they cannot produce on a reasonable basis, but because of the spark spread for gas and electricity prices. Therefore, it is not a capacity crunch because there is no capacity; it is a capacity crunch, potentially, because of the way that plants operate relative to each other.

Nothing in the long-term prognosis has changed, in terms of what we have to do in the longer term or how we have to deploy capacity. Getting the right amount of capacity and the right amount of reserve capacity in the market is a combination of ensuring that capacity is properly utilised and that new capacity comes on stream in the right proportion to support the changing nature of our energy production market. As regards that progress over the next period, up to 2030, one of the remarkable things written in the most DECC documents to come out on the matter concerns where we need to go in decarbonising our energy supplies.

DECC’s central target is an overall level of emissions of 100g per kWh by about 2030. Everyone knows what that means. Unless we hear this afternoon that the target has changed, there will no longer be room for large amounts of unabated coal to continue to operate in the system, whether in new, existing or refurbished plant, without carbon capture and storage in the period leading up to 2030.

There is currently a disjunction between what DECC says about its target and what the policy appears to suggest when it comes to whether those coal plants will become able to play a part in our future energy mix with carbon capture and storage, or will no longer play a role as base-load generators but either convert to other forms of supply—as Drax is doing in moving to biomass—or run at much lower levels, as peak and back-up plant, over a period, to keep within the overall targets. The amendment connects what we think that we are doing with what we ought really to be doing over the coming period and starts to dissolve the disjunction between what we think is in policy and what appears to be in policy.

One of the effects of uncertain signals about the direction in which we are going in respect of, for instance, decarbonisation targets is that people do not invest in one thing rather than another; they do not invest in anything. They do not do what they might otherwise have been doing, because they are not sure what the signals are telling them. I believe that the amendment gives a certain rather than an uncertain signal in regard to the long-term future of coal, thus enabling those who are thinking of investing in coal over the coming period to be clear about what to do, rather than unclear, as they are at present.

Ministers seem to be saying today that there will be much more operation of coal, and perhaps some new investment in coal, but they know that it cannot really be unabated, and they know that it cannot really operate for all those hours over the period. How certain can an investor be that what he invests in will not to be stranded in the intervening years? It depends whether we believe what Ministers are saying, or believe what is in the documents that they claim to support in their daily work at the Department.

Photo of Ian Lavery Ian Lavery Labour, Wansbeck

Does my hon. Friend believe that if the amendment is passed, investment in carbon capture and storage will be more rapid?

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

That is an important question. I think that if the amendment were passed and if it sent that “certain” signal in regard to future investment, it would bring about something that my hon. Friend and I observed recently in a Canadian province. Given the certainty of an EPS that would apply to all plants in the province in the future, the operators of a 150 MW power plant decided that if the plant was to continue to provide coal-fired power, it would need carbon capture and storage. As a result, next year there will be a very impressive plant, which will sequester all its carbon and continue to supply the Saskatchewan power system with coal-fired power. I understand that the operators made their decision in the certain knowledge that they would not be able to continue to supply unabated coal-fired power to the Canadian system for ever.

Photo of Angela Smith Angela Smith Shadow Deputy Leader of the House of Commons 2:45, 4 December 2013

Is it not the case that carbon capture and storage technology can be applied to gas-fired as well as coal-fired processes?

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Yes, indeed. If the Department is to reach its 2030 decarbonisation target, it is very likely that carbon capture and storage must be applied to gas as well as coal during the intervening period.

Photo of John Redwood John Redwood Conservative, Wokingham

Given the hon. Gentleman’s knowledge of the industry, can he tell us when he expects to see a decent-sized coal-fired power station with carbon capture and storage up and running in the United Kingdom?

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

The Saskatchewan power plant that I mentioned is not a new coal-fired power station, but an existing one that has been refurbished to take on carbon capture and storage. The right hon. Gentleman’s question should have been the other way around: he should have asked me when I might expect to see an existing coal-fired power station with carbon capture and storage attached to it in the United Kingdom if the amendment is passed. My answer is that if the amendment is not passed, it will be far less likely that existing coal-fired plants, which are effectively given a derogation by the Bill, will take on carbon capture and storage, although they know that they must do so sooner or later for the sake of future investment. They will do it in the end, but there will be uncertainty for some time before they do.

My answer to the right hon. Gentleman’s question is that I expect an existing coal-fired power station to start to address itself partly or wholly to carbon capture and storage much earlier if the amendment is passed than it would otherwise. That would put that station bang in line with the Department’s long-term decarbonisation aims.

Photo of Charles Hendry Charles Hendry Conservative, Wealden

Should we not learn the lesson of the Longannet experience? In that instance, we discovered that the cost of trying to retrofit carbon capture and storage technology to a very old power station that needed many millions of pounds of new investment made it uninvestable. Surely, it is likely that a new plant will be fitted with carbon capture and storage, rather than an old plant’s being retrofitted.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

With a relatively small amount of underwriting—far less than is proposed in the UK Government’s competitions—it was possible to undertake the retrofitting of the Saskatchewan plant alongside a refurbishment. The interesting issue was not the progress and, indeed, the completion under budget of the plant’s carbon capture and storage element, but the fact that the retrofitting itself—the upgrading of the coal-fired power station—caused the difficulties. Its operators estimate that future arrangements could cost 20%, 25% or 30% less than the first retrofitting. I do not agree that this is uninvestable; on the contrary, it is an essential part of the process of realigning energy objectives and power output over the coming period.

Photo of Dan Byles Dan Byles Conservative, North Warwickshire

I am grateful to my Select Committee colleague for giving way to me. Does he recall that the operators said that the sale of carbon dioxide for enhanced oil recovery formed an important part of their economic calculation?

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Indeed. There is the question of what happens to the carbon dioxide subsequently and how it is injected. In Canada, it is injected into additionally drilled wells on land; there is a different process of injection offshore. At the Saskatchewan power station, the process involves the use of carbon dioxide for enhanced oil recovery, although most of it stays on the ground after the process in any event.

Photo of David Mowat David Mowat Conservative, Warrington South

I am listening carefully to the hon. Gentleman’s argument about the acceleration of CCS as a consequence of accepting the amendment. Notwithstanding the Saskatchewan case, CCS is still an unproven technology in this country. For clarity, is he saying that the amendment would result in those stations being converted to CCS in time to prevent them from being switched off? It was implied from the Front Bench earlier that they would be replaced by gas power. Which of those two options does the hon. Gentleman consider to be more likely?

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Some of those plants could well be replaced by gas, and some could well close down. Indeed, some could well close down whether the amendment were passed or not. The problem for capacity in the market is that the signals being sent out at the moment are so varied and uncertain that a number of people who might otherwise invest in plant are holding back until, for example, the capacity market comes on stream or until there is more certainty about CCS or about coal generation. As we have seen already, there is a possibility that plants will close down by accident rather than by design. They could end up being mothballed because of market circumstances, rather than because of long-term planning based on capacity.

The amendment would improve that certainty tremendously by making it absolutely clear what was expected of coal-fired power in the future. Coal-fired power would not cease to exist; it would be able to run at certain levels per year, and any existing coal-fired power station that wished to run continuously after the early 2020s would have to have CCS attached to it. The amendment would send a simple, straightforward message.

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills , Minister of State, Department of Energy and Climate Change

The hon. Gentleman seems to have just repeated an assumption that the amendment would take effect only from 2023. On the contrary, it asserts a power to apply EPS to an existing plant, which would involve upgrading under the industrial emissions directive. Nothing in the amendment prevents the power from being used at any time, as soon as the EPS had come into force following Royal Assent.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

The question is the extent to which plants can run, and what hours would be attached to them—a process that has already been undertaken under previous directives—during the period up to the early 2020s. The question for those power stations is not the point at which they switch over or at which they stop; it is whether they can continue unabated past the early 2020s. That is the key issue.

I commend the amendment to the House because of its congruity with current departmental policy and the certainty that it would confer. It brings together a number of elements relating to the trajectory for cleaner, lower-carbon energy, and it would send a clear signal to investors. In the medium and long term, that would give us far more certainty of reliable and secure capacity than we have at the moment.

Photo of Charles Hendry Charles Hendry Conservative, Wealden

I refer hon. Members to my entry in the Register of Members’ Financial Interests.

Like most other Members, I have received many postcards and e-mails from people urging me to support the Lords amendment, but those e-mails seem to have been based on a misunderstanding or a misapprehension, based on misinformation. That has been either wilful or accidental, but it is certainly there. They start by saying that, although the Government said that they would be the greenest ever, we are now burning more coal than we have done for many years. Those two statements need to be examined.

This Government are the greenest ever. We have seen an increase in renewables generation from 5% in 2010 to 16% now. We have seen the biggest investment in nuclear power for a generation, and we hope to see more coming through. We have also seen an added impetus being given to the renewable heat incentive today. All those factors demonstrate our direction of travel.

The suggestion that the Government have somehow been promoting an increased use of coal is fundamentally wrong. We are using more coal than we were just a short time ago. I looked at the figures just before the debate: 39% of the electricity being used in the UK as we sit here today comes from coal. That equates to 18 GW of the 46 GW. That is happening for two reasons. First, the price of coal is historically low compared with that of gas. The shale gas revolution in the United States has meant that the coal that used to go into the US market is now being deposited in the European market at a low price and people are therefore burning it.

Secondly, the owners of the coal-fired plants know that they have only a limited number of operating hours left, and they want to use them while the carbon floor price is lower, rather than as it continues to rise. People should not see this as a fundamental shift to coal; it is a short-term increase in its use and, as we have heard, those plants will be closing down in the near future. Some are closing this year, and more will close throughout the decade. The concern expressed in those e-mails by those who support the amendment has therefore been based on a misunderstanding.

I am concerned about the implications of the amendment for several reasons. The first relates to political risk. This is another measure that would increase the political risk attached to investment in the energy sector. We know that we need many tens of billions of pounds of new investment in the energy sector, right across the electricity spectrum. The people who own the plant that would be closed down by the proposal are the same people who we are asking to build new gas plant, new CCS plant and new renewables plant. If they see the UK becoming more unpredictable, that will make it harder to secure the levels of investment that we need. We must be wary of going down that route and adding further political risk to the issue.

My second concern relates to the coal industry in the United Kingdom. When I was a Minister, I tried hard to increase the proportion in the mix of coal from UK mines. It had been one third, and we got it up to over a half. I suspect that it is now below one third again, and probably falling. If we want to achieve the necessary investment in British mines to enable them to provide coal to the power stations—or indeed to ensure their existence at all—when CCS plant comes on line in due course, the investors will need to know that there is still a reason for them to invest in the sector. The Lords amendment would make it more difficult to secure that investment and therefore more likely that our own deep and shallow coal mining facilities would close down, which is something we would regret. We should not deliberately put ourselves in the position of being more dependent on imports than we need to be.

My final point relates to CCS. We are trying to send a message to people around the world that this country has the aspiration to lead the world into carbon capture and storage, and we have every reason to be positive and confident that we can do that. We have the expertise, and we have the depleted oil and gas reserves in the North sea that can be used for it. We should be going out and saying to all those people around the world who are interested in this technology that the United Kingdom is the place to do it.

However, I disagree with Dr Whitehead in that I do not think that the amendment would make investment in CCS more likely. I think that it would make it much less likely, because we would be seen as having a general hostility towards coal in the mix and we would therefore struggle to make the case for that investment. Given the challenges that we are facing, do we really want to link ourselves to a policy that would bring forward the closure of plant while doing nothing to speed up the opening of new plant? The amendment would be bound to enhance the energy security challenges facing this country, which would make it more difficult to decarbonise. That, in turn, would push up prices. For those reasons, I hope that the House will reject the Lords amendment.

Photo of Caroline Lucas Caroline Lucas Green, Brighton, Pavilion

I welcome Lords amendment 105, as we need to close the Government’s loophole that would exempt existing coal-fired power stations from the emissions performance standard if they fit equipment to meet air pollution standards.

However, even if we vote today to put common sense and climate science above the special pleading of the coal lobby, the EPS will not be strong enough. The Energy and Climate Change Committee has called the EPS “at best pointless” and the Committee on Climate Change warns that allowing unabated gas-fired generation right through to 2045 carries a huge risk that there will be far too much gas at the expense of low-carbon investment, which would bulldoze the Government’s climate objectives. It is therefore a shame that the Lords amendment does not go further and that the official Opposition are not yet accepting the need to leave existing coal reserves in the ground, unlike their sister parties in places such as Norway, whose Labour party this month proposed banning the country’s $800 billion sovereign wealth fund from coal investments. I have some reservations about the level of the EPS, but none the less I firmly support the amendment as a step in the right direction.

The coalition’s rejection of this moderate and common-sense amendment is inconsistent with tackling climate change and with what Ministers have proclaimed in the past. It is little wonder that trust in politicians is so low. As recently as September, the Secretary of State for Energy and Climate Change told his party:

“As the Secretary of State I’m determined to use all of my powers to make sure that Britain leads the way in sourcing the energy we need from low carbon sources.”

He has also said:

“The damage that will be done by global warming is greater than previously feared. So the need for action is greater than ever.”

On his welcome decision last month to end UK support for coal plants abroad, he explained:

“It is completely illogical for countries like the UK and the US to be decarbonising our own energy sectors while paying for coal-fired power plants to be built in other countries.”

The Secretary of State must know that we undermine efforts to prevent dangerous climate change if we allow existing coal-fired power stations here to be exempt from emissions limits. There has been much debate this afternoon about CCS. Crucially, he has said that unless and until we get commercially viable CCS, coal has no future. I do not think an honest and equitable approach to the UK’s climate commitments gives any room for coal in the future, even with CCS, because global emissions are still too high. His position is perverse, because by rejecting the amendment he is rejecting a change that would actually help to encourage CCS. As his Lib Dem colleague Lord Teverson explained in the other place:

“Clearly and quite obviously, if unabated coal can continue exempt from the emissions performance standards, then CCS will go absolutely nowhere.”—[Hansard, House of Lords, 4 November 2013; Vol. 749, c. 33.]

If the Secretary of State’s increasingly desperate green rhetoric meant anything at all, he would have introduced an amendment to tighten the emissions limit and the time scale of the EPS to align it with 2030 power sector decarbonisation. He would be arguing passionately that we need a clear signal that we simply cannot have, and do not need, dirty, centralised, inefficient coal generation in an energy system fit for the future. Yet instead he appears to have taken up the challenge of putting “coal back into Coalition”—that was the mantra of his previous energy Minister, Mr Hayes, who declared that to be his ambition last March.

The Government have access to the world-leading scientists and experts on climate change and on low-carbon alternatives to fossil fuels. They know that the global carbon budget means that the majority of existing coal oil and gas reserves are unburnable. They also know that the UK could have an incredibly successful economy based largely on renewable energy instead—if only they would stop pretending that the dirty power incumbents are part of the solution.

Finally, let us not forget that five years ago this Prime Minister explained the importance of a comprehensive EPS when he announced Tory plans for it before the election. He said:

“All existing coal-fired power stations should be retro-fitted with CCS, and all future coal-fired power stations should be built with CCS. If we don't do this, we will not meet our carbon emissions targets.”

Those were the words of the Prime Minister barely three years ago, so I hope that the Government will remember those wiser remarks, accept this small but positive change to the EPS and withdraw their opposition to this very sensible amendment.

Photo of John Redwood John Redwood Conservative, Wokingham 3:00, 4 December 2013

I agree with my right hon. Friend the Minister that the House would be wise to reject amendment 105. I will not rehearse the arguments that he or my hon. Friend Mr Syms eloquently put, but I would take issue with one thing that my hon. Friend said. He gave the impression that although he thought that the late Baroness Thatcher’s energy reforms, which were very radical, were broadly good, they created a problem in not leading to substantial investment. As the person who advised her on those reforms and worked with the very good energy Ministers at that time, I assure him that that system not only transformed our energy mix in a way that cut CO2 on a scale that even Caroline Lucas might approve of, but it drove prices down by encouraging huge investment in the so-called “dash for gas”. It has been the most successful policy that any party or Government have ever followed both to give us cheaper energy and to drive down CO2. It also gave us a much better capacity margin than we have today.

In the few minutes available to me, I wish to stress that a big crisis is brewing, thanks to the dear energy and scarce energy policies of the European Union, egged on by the Green party. I do not think they care about the difficulty people are already finding with their power bills. The main reason those bills are surging is that we are deliberately changing over from relatively cheap energy generation to dear energy generation—that is the whole point of the policy. The policy is cruelly deciding that it wishes to decarbonise at the expense of the poor and of our industry. The deindustrialisation facing Britain and wider Europe is now intense. We are losing our aluminium industry, our petrochemical industry and many of the high-energy-burning industries, which, of course, are going to the United States of America or to Asia, because those places do not have the same artificial constraints on them that the European Union and the previous Government’s energy policies have imposed on us.

Photo of John Redwood John Redwood Conservative, Wokingham

I am afraid that I do not have time to do so, as the hon. Lady spoke for some time and the debate is very limited.

We need to deal with both price and capacity. Price is the most immediate issue. Although things can be done on green levies, and I welcome that, the main driver of higher prices, which will continue over the years ahead, particularly if the amendment is passed, is the forced closure of cheaper stations and their substitution with much dearer, interruptible renewable sources of energy, which will be with us for some time to come, whatever policies are now followed.

Even worse is the way in which we are jeopardising capacity. Not only are we closing many stations without building new ones, but we are replacing base load stations with stations that produce interruptible energy only when the wind blows, so we are doubly vulnerable. Our stated capacity often is not genuine capacity because there is no wind, and the margin is far smaller. I do not wish to live in a country like that. I do not want to live in a country where every winter we fear that the lights might go out in places, and where, at times when people most need heating, there is not enough power left. It is a grave folly of the European Union and the former Government—I hope our Government are not going to perpetuate this—that we close the plants before anybody has built replacement plants. What kind of person would sensibly recommend doing that? We have heard from the Minister that six plants are already being closed, and we know that several others are at risk of closure under European directives. Please can we not close plants until we have the replacement capacity.

The investment incentive problem did not lie with the late Baroness Thatcher’s policy, which provided plenty of incentive, cheaper energy and big investment; the problem of incentive lies today with the muddle, confusion, high cost and deliberate obfuscation of the European-driven system, which means that our country, along with many others in the European Union, faces deindustrialisation on a big scale, cold winters without a guarantee that enough power is available and ever higher energy prices, thanks to these ridiculous policies.

Photo of David Mowat David Mowat Conservative, Warrington South

I, too, oppose the amendment. I will make three points: on cost; on security of supply; and on how this country’s approach to tackling the issue increasingly departs from that of other countries in the world, not just in Asia and the US but in parts of Europe.

First, let us frame the problem. We have 23 GW of coal right now. I think we can all accept that about 8 GW of that will be turned off because of the large combustion plant directive, leaving potentially 15 GW subject to the amendment. I asked the shadow Minister what his figure was and although it may well turn out to be a little lower than that, it is of that order. We are talking about a huge amount of power to be replaced, yet we are doing this at the same time as our nuclear stations are coming off stream. Let us put this into context. Replacing 15 GW with wind power, which I guess is the direction that Caroline Lucas would take, would require about five times as much wind generation as we currently have commissioned—onshore and offshore—leaving aside the intermittency issue, which I do not think we will be able to address.

Photo of David Mowat David Mowat Conservative, Warrington South

I will not take the intervention, as I want to finish as quickly as I can to allow time for the other speaker.

We have a security of supply issue. To be clear, the debate is not about pollution, nitrous oxide or sulphur dioxide control, or even about the long-term plan to phase out coal. We intend to be at 3% by 2030. Our European partners, by contrast, do not have such an ambition. The debate is not about the Kyoto targets, which we have not met, but about the need to replace a vast amount of capacity, and to accelerate such replacement. We are unique in that our nuclear stations and our coal are so old. We also intend to use more electricity as we decarbonise the transport sector. If we are to meet the climate change budget targets, it will be about not just electricity generation but transportation. We are talking about more electric cars, which means yet more electricity. The task is absolutely enormous, and we are currently sitting here with a capacity surplus of around 4% or 5%. To accelerate that further would be folly.

Members have mentioned that we are talking about replacing possibly one of the cheapest methods of energy generation—the relatively old stations that are depreciated, and all that goes with that—with some other technology. In relation to today’s infrastructure plan statement, offshore wind, even with the new CFD numbers, is about three times the cost of those coal stations that are currently burning.

If we are seriously thinking of replacing about 15 GW of capacity with offshore wind and even gas, which is more expensive, it is hard to see how that would not put up energy prices. Of course it would put up energy prices both for our energy-intensive users and our consumers. Those Members who think that fuel poverty matters should give some thought about how they will vote this afternoon.

Finally, let us look at how we are dealing with the issue compared with many other countries. I have one statistic to put to the House. Renewables went up a great deal last year. Across the world, they went up by about 30 million barrels of oil equivalent, which is a high percentage. The use of coal across the world went up by three times as much to 100 million barrels of oil equivalent. Such increases are not just happening in Asia and China. Germany and Holland are moving ahead with brand new unabated coal power stations that will run for 20 or 30 years. In this country, we already have among the lowest carbon emissions per head and per unit of GDP of any EU country. The only major country that performs better is France, which has so much nuclear power, although our green lobby thinks that that is wrong as well.

I have not covered in any detail the havoc that would be wrought on what is left of the UK coal industry. The fact that Members are justifying voting for the amendment because it will bring forward investment in CCS, which is still unproven at the scale that would be needed to work in this country, is, frankly, almost vandalism.

Photo of Mark Reckless Mark Reckless Conservative, Rochester and Strood

It is a pleasure to follow my hon. Friend David Mowat. I was very impressed with his speech and with what he said about the growing disconnect on this issue between this country and most other countries in the world. With the exception of him and my right hon. Friend Mr Redwood, there seems to be an enormous disconnect between what Members of this House think and what our constituents want. Our constituents want to see cheap, reliable energy.

On Monday, we saw the Government trying to find ways to reduce by £50 the rise in electricity bills. For the Opposition, too, the debate is purportedly about trying to cut or at least to hold down bills. They say that for 20 months, from May 2015, they will fix prices. The reality is that the Opposition are co-operating with the Government Front Bench and the Liberal Democrats to fix prices for 20 or 30 years across vast swathes of our electricity generation capacity, and to fix prices at two or three times the current market price. That will drive costs through the roof for our constituents, who will be forced to pay such prices for decades to come, and yet the coalition and the Opposition purport to be having a debate about holding down prices, when the reality is the reverse. We see that again today in this rather surreal debate about whether we should force some of the cheap generation to close, as the Government support, or even more of it to close, as the Opposition want.

Photo of John Redwood John Redwood Conservative, Wokingham 3:15, 4 December 2013

Has my hon. Friend noticed that the big industrial powers that are serious about industry—Germany and China—are adding coal capacity, and America is going for shale gas? They will take the industry, and we will lose it.

Photo of Mark Reckless Mark Reckless Conservative, Rochester and Strood

My right hon. Friend is correct. We have learned that the industry at Grangemouth, which the friends and funders of the Opposition—the unions—almost shut down, might stay open and even possibly make money, but that would only be on the basis of importing shale gas from the United States. We have this preposterous arrangement in which we have put an extraordinarily long moratorium on the development of shale gas because there were a couple of tiny tremors near Blackpool. If we, as a country, are serious about pushing ahead economically, we must generate better energy more cheaply and more quickly. Instead, we were involved in a Dutch auction between the parties and doing completely the reverse.

Lords amendment 105 is a case in point. We have the European Union closing down most of our coal plants, with the parties going along with it. Additionally, we are unilaterally indulging in this self-flagellation, through the emissions performance standard—which we have decided to impose as a unilateral burden on UK business while the Germans allow the construction of new coal—by preventing new coal-fired power stations being constructed. Of course countries outside the European Union produce power more cheaply.

What we see today is an attempt by the Opposition and the other place to make the situation even worse. The EU is shutting many of our existing plants. We are banning the construction of new ones, and the Opposition want to bring in a third deleterious measure to extend that ban on coal to part of the plants that the EU would allow to remain open if people spend vast amounts of money to comply with the industrial emissions directive. Labour and the other place would effectively be saying, “Ah, well, if you spend that money, we will put in place this additional burden after which you will then fit this pie-in-the-sky CCS, which is nowhere near to sensible commercial development in the UK, or, in reality, we will force you to close down, and drive up the price of electricity even further.”

Tom Greatrex suggested that electricity pricing depended on gas prices. I take that point to a degree. As an economist, I understand that in a competitive market, which I fear that this increasingly is not, marginal cost tends to equal price. There is a difference between the gas that is already there, where the development costs and capital costs are sunk—which, in terms of marginal costs being set to price, should be discounted for a rational person in a competitive market—and new gas, which is not coming on stream. It is partly not coming on stream because the Minister has said, “If you bring it on stream, we will give you a great subsidy as long as you wait for a few years and do not bring it on now.” Even Chris Huhne, who was at least an economist, thought that was madness.

Now, we are pushing that approach forward in the capacity market, stopping capacity coming on-stream for that key period of a few years. It is a key period, because we are looking at an increasing crunch. DECC tells us that it has run the scenarios with Ofgem and has considered what will happen if the demand for electricity is a little greater than assumed. DECC assumes that energy demand will fall and so, to cover sensitivity, it has run a scenario in which it does not fall. All that does, however, is keep demand flat. What happens if—due to the success of the policies of this coalition, what the Chancellor is doing and the resurgence of growth in the British economy—energy demand increases? I dread to think, because of the lack of preparations that have been made—or, when preparations are being made, because of their extraordinary expensiveness. At the same time, we are proposing to cut the coal-fired plants, many of which are completely depreciated in capital and are producing electricity reasonably and cheaply. We are banning them either nationally and unilaterally or through our acquiescence in what the European Union is doing.

The hon. Member for Rutherglen and Hamilton West identified three sets of coal plants. If I understood him correctly, he missed out a fourth category—that is, those coal plants where the issue is not the industrial emissions directive but the large combustion plant directive. The power stations might be “hours expired” under that directive, but the plants are still there and could potentially be brought back on stream to generate cheap and reliable electricity for our constituents. However, the Opposition will not let them. Government Members will not let them, either. Not even the European Union will, even though the directive contains article 3(4), which provides for a member state to provide for a derogation, particularly when its plans to arrange for sufficient capacity in the energy market are not working as it had hoped. What better case could there be for doing that?

I am not saying that we should keep the plants open for ever. I go around Kingsnorth in my constituency, and it is a very old plant, but it can still work. This year, E.ON UK has a team of about 20 people in the plant, taking the stored energy out of springs and many other mechanisms throughout, making it safe for demolition by the contractor from early next year. We still have time if we apply for the derogation and tell the European Union, “We have a problem. We are running out of capacity because we have not put the sensible plans in place for electricity that we should have done. We used to have the most competitive electricity in the world, but we have messed the whole thing up on a totally cross-party basis. Can we keep these plants open for just a few more years?”

All I ask is for the parties in the coalition to get together and go cap in hand to the European Commission, to ask whether we can keep the plants open for a few more years. That might just allow our constituents to have slightly cheaper electricity, as old coal can be used rather than new gas, for which the capital costs will have to be paid as well as the marginal costs of the gas supply. That might just help us get through the electricity crunch a bit more safely, particularly if the economy is growing strongly, and it might do something to keep down the cost of electricity—that is preferable to the three parties competing to drive it up while pretending that they are doing the opposite.

The Labour party in the Lords would like us to make things even worse by ensuring that even more coal plants close even earlier. We should make things a bit better by trying to keep a few of the oldest coal plants open for a bit longer, to hold down electricity bills and keep the lights on.

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills , Minister of State, Department of Energy and Climate Change

With the leave of the House, Madam Deputy Speaker, I shall reply briefly as I sense that the House wants to reach a decision on this matter.

We have had a good debate. Let me emphasise again that I think that we have been considering a well-intentioned amendment. Nobody doubts the motivation behind it and the issue is not completely straightforward. It depends in the end on a judgment—when coal stations are already being lost to the system, do we want to accelerate the closure of coal? The hon. Members for Rutherglen and Hamilton West (Tom Greatrex) and for Wansbeck (Ian Lavery) asked a specific question—others have referred to this, too—about our progress with CCS. The CCS competition is progressing very well. Negotiations are proceeding and we expect to make a decision on the award of the front-end engineering design contracts around the turn of the year. As I have said, we have made amendments to the Bill in the other place to ensure that those projects will be exempt from the EPS for a limited period.

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills , Minister of State, Department of Energy and Climate Change

The hon. Gentleman might also want to know that Coalpro, the Confederation of UK Coal Producers, wrote to me on 8 November and said that the amendment

“has the potential to turn out the lights, send prices even higher and close down this industry.”

Photo of Ian Lavery Ian Lavery Labour, Wansbeck

When does the Minister expect the first CCS generation plant to begin in the UK?

Photo of Michael Fallon Michael Fallon The Minister of State, Department for Business, Innovation and Skills , Minister of State, Department of Energy and Climate Change

As I said, we hope to sign the first FEED contracts by the end of the year. They will involve a couple of years of engineering study. It will take some time for CCS to be scalable across the system, but we are committing a great deal of money to it and a great deal of effort to the two projects at Peterhead and Drax. I am in no doubt that we have technology that we can exploit, but it will take time.

In the end, as I said, this is a judgment. Is it right now to accelerate the closure of coal and to force all coal off the system by 2025? In my view, that will add to the risks to security of supply and—I must say this to my hon. Friends on the Liberal Democrat Benches—will certainly add to the costs for our constituents. We estimate that if coal disappears by 2025, there will be an increase in domestic bills of about 3% to 4%, or about £22 to £28, and an increase in non-domestic bills of between 4% and 6%. A large number of Members from all parties attended the debate in Westminster Hall this morning and complained about the costs being imposed on energy-intensive industries, and we estimate that their costs will increase by between 5% and 7%.

This proposal will increase the risks to our security of supply and add to the expense of our constituents. I think that is too great a risk and too high an additional expense and I urge the House to reject the amendment.

Question put, That this House disagrees with Lords amendment 105.

The House divided:

Ayes 318, Noes 236.

Division number 151 Energy Bill — Enabling Carbon Dioxide Emissions Limits to be Applied to Stations Which Fit Pollution Abatement Equipment

A majority of MPs voted against allowing carbon dioxide emissions limits to be set in respect of existing stations which fit pollution abatement equipment.

Aye: 318 MPs

No: 236 MPs

Aye: A-Z by last name


No: A-Z by last name


Absent: 92 MPs

Absent: A-Z by last name

Question accordingly agreed to.

Lords amendment 105 disagreed to.

Photo of Helen Goodman Helen Goodman Shadow Minister (Culture, Media and Sport)

On a point of order, Madam Deputy Speaker. Earlier today the Chief Secretary to the Treasury made a statement to the House about infrastructure spending. The Government have also been briefing about the sale of significant public sector assets. The list of things that might be sold includes Eurostar, the Royal Mint and Channel 4, and yet the Government have not produced a document. Is that in order? Could you advise us, Madam Deputy Speaker, on how we might get a full list, rather than the think tank report, “Cash in the attic”, which seems wholly inappropriate?

Photo of Eleanor Laing Eleanor Laing Deputy Speaker (First Deputy Chairman of Ways and Means), First Deputy Chairman of Ways and Means

The hon. Lady has made her point and I am sure that those whom she wishes to have heard it have done so, but she will appreciate that it is not a matter with which the Chair can deal at this moment in the Chamber.