Energy: White Paper

– in the House of Lords at 12:07 pm on 12th July 2007.

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Photo of Lord Jones of Birmingham Lord Jones of Birmingham Minister of State, Foreign & Commonwealth Office, Minister of State, Department for Business, Enterprise & Regulatory Reform, Minister of State (Foreign and Commonwealth Office) (also in the Department of Business, Enterprise and Regulatory Reform), Minister of State (Department for Business, Enterprise and Regulatory Reform) (Trade Promotion and Investment)

My Lords, I am grateful for the opportunity to make my maiden speech today and for the kindness shown by fellow Peers, the officers and staff of the House, and particularly by my supporters, my noble friends Lady Symons and Lord Leitch. I am deeply thankful for the warmth of the welcome I have received from everyone. I also thank my home town, the city of Birmingham, for the chances that it gave me in the early years of my life.

I congratulate my noble friend Lord West of Spithead. He and I have only one thing in common: we both went to Dartmouth, but only one of us went on to great things in the Navy. I am conscious of the great wealth of expertise and experience concentrated in your Lordships' House and I look forward to benefiting from it. I am fortunate enough to know many noble Lords from other walks of life. I have admired and respected them for their work and the experience they acquired individually before they, too, entered this House. Even more, I respect and admire the wisdom and understanding of the important issues that noble Lords display every day, and from which this great nation of ours can only benefit. It is in equal measure exhilarating and daunting to join the House.

I have so much to learn, not just the "Red Flag", as the gentlemen of the press have been quick to point out, but also the art of brevity, to which I am often informed I am a total stranger. Especially, I really do have to learn the distinction between travelling the world for my country, and eating and drinking for it. It is a particular privilege to make my maiden speech in your Lordships' House on a subject of such national and international importance and which for a long time has been of great personal interest; that is, energy policy.

The energy White Paper, which we published in May, made it clear that we face two big challenges in the arena of energy policy: first, the need, with other countries, to tackle climate change by cutting greenhouse gas emissions; and, secondly, the need to ensure that we have secure and affordable energy supplies. The White Paper also made it clear that, despite some good progress, projections for the future, based on current policies, frankly, do not make for positive reading. Greenhouse gas emissions will keep rising as world energy demand is expected to be 50 per cent higher by 2030 than it is today. That demand is likely to be met largely by fossil fuels for some time to come. Greater competition for energy resources and the UK's increasing reliance on imported energy will also have implications for security of supply and we must act now.

Over the next few years, energy companies will also need to replace ageing power stations and other infrastructure in the UK. The fleet is getting old. So it is vital that we create the right conditions for this investment to ensure that we get timely and increasingly low carbon energy supplies.

Beyond the United Kingdom, we must be an active part of the emerging European Union energy and climate change policy that was agreed at the March Spring Council. This included commitments to competitive markets, cuts in greenhouse gas emissions, more renewable energy and a central role for the EU Emissions Trading Scheme as the potential basis for a global carbon market. We must use our influence as a united EU voice to work with the wider international community, notably in getting a consensus on the post-2012 Kyoto framework for reducing worldwide greenhouse gas emissions.

I am sure that noble Lords will have seen for themselves—the energy White Paper is a significant piece of work—that these issues require a wide range of actions in response. There is no one answer. Anyone who insists that there is just one solution to addressing these challenges has failed to grasp their scale, their complexity and the way they interrelate. The White Paper sets out a long-term framework for international and domestic action to address these challenges, recognising that we need to tackle climate change and energy security as two sides of the same coin. We cannot address one at the expense of the other.

Our first priority is to find ways of using less energy. The cleanest power station is the one that you do not have to build. The White Paper sets out a range of measures to help us to become more energy efficient and to cut energy use; that includes ensuring that any householder who asks for them can get free visual real-time displays of how much electricity they are using. We are also working with industry to provide better and clearer energy bills, to introduce smart meters and, crucially, to improve the efficiency of domestic appliances, phasing out inefficient goods and limiting the amount of standby energy that we all waste.

The White Paper also proposes that from next year, energy suppliers double their current efforts to increase energy efficiency among their customers, and from 2011 we aim to transform their relationship with their customers, shifting the focus to the provision of energy services, increasing energy efficiency and saving carbon in the home.

It is important that we also consider how vulnerable consumers are treated. The measures in the White Paper will help us to reach out to the most vulnerable and will take a further 200,000 households out of fuel poverty by 2010—that is around 10 per cent of the total number of households that we need to reach. This is progress, but it is clear that we have a lot more to do in that area. We will also require big organisations such as supermarkets, banks, hotel chains and large public sector organisations to limit their emissions through a new trading scheme. We are setting tougher energy efficiency standards for the new homes that we build and the products that we all buy.

But we cannot reach our reduction targets through energy saving alone. It is clear that we need more low-carbon generation of electricity; and more low-carbon transport and more low-carbon heat, for example through an increase in the use of biofuels and biomass. We also want to encourage more local energy production. We have brought forward a range of measures to support this approach, including removing barriers for small-scale generators and simplifying some of the processes they need to do in order to participate in the energy market.

In order to meet energy demand, we shall still need investment in large-scale electricity generation over the next 20 to 30 years. We will need new generating capacity equivalent to over a third of our existing capacity. It is vital that companies have a wide range of options available to invest in, so that we can retain a diverse energy mix and move to an increasingly low-carbon economy.

The White Paper made clear our commitment to a central role for renewables such as wind, biomass, wave and tidal power in this energy mix. Through our reforms of the renewables obligation we expect that by 2015 around 15 per cent of our electricity supplies will come from renewables. That is triple the amount that we have today. And biofuels have a key role to play in transport. The road transport fuel obligation will require suppliers to ensure that 5 per cent of total fuel sales are from a renewable source by 2010-11. That represents around 2.5 billion litres of fuel and we estimate that it will save a million tonnes of carbon a year.

It will be important that new low-carbon technologies are developed. We have set up the Energy Technologies Institute, which brings public and private investment together, and now has a minimum budget of £600 million. We are launching a competition for the demonstration of carbon capture and storage, which has the potential to reduce carbon dioxide emissions from fossil-fuel power stations by as much as 90 per cent.

As noble Lords will be aware, alongside the White Paper we published a consultation document on nuclear power. I know that I do not need to stand here today and tell your Lordships that tackling climate change is possibly the greatest challenge of our age. And I am sure you do not need to be reminded how important energy security is to the health of our economy and to the health and well-being of our communities and the people of this island. We all know that these things are important and we all recognise the scale and complexity of the challenge we face.

About a third of the United Kingdom's electricity generation is due to be retired over the next two decades. That includes almost all our nuclear power stations, which currently provide around 18 per cent of our electricity. In addition, the UK's indigenous supplies of gas from the North Sea are running out and we are becoming increasingly dependent upon imports.

In the UK, we are used to being largely self-sufficient in terms of our electricity generation: the people are used to it. But times are changing, and they are changing at a time of rising demand and prices and at a time when energy supplies are becoming increasingly politicised. This is not a position anyone in this country will be comfortable with. So the challenge is not just how to ensure that we can generate the base-load electricity that we need to underpin our renewable electricity generators: it is how we do so in a way that does not contribute towards climate change.

So, what are the available solutions? Clearly, renewable energy will have an increasingly important role to play. Carbon capture and storage also has the potential to play a key role, and we are launching a competition for a full-scale demonstrator. But it is a relatively unproven technology. We can rely on gas, but the big reserves of gas are concentrated in a relatively small number of countries, and I do not need to spell out the challenges that that situation puts us in.

Nuclear has played an important role in providing this country with low-carbon, base-load electricity for half a century. It is a mature technology with a proven track record in providing very low-carbon, baseload power.

I believe that the best way to meet the low-carbon, secure energy challenge is by doing everything we can, from encouraging responsible energy use to making sure that energy companies have access to all the available low-carbon technologies. That is why we have taken a preliminary view that energy companies should have the option of investing in new nuclear power stations. However, we are currently consulting on this view and will fully consider the responses we receive before making any final decision later this year once full consultation has closed. But we do not have the luxury of time. We have been clear that one way or another we need to make a decision on nuclear power stations this year.

We recognise that there are important specific issues to consider in respect of nuclear power, including the question of waste and we are making progress on this. We initiated a review of nuclear waste policy and appointed the Committee on Radioactive Waste Management in 2003 to assess and recommend the best options for dealing with higher activity solid waste. CoRWM concluded that geological disposal was the best available approach, coupled with safe and secure interim storage in the mean time. We accepted its recommendations and have begun the process of developing an implementation framework for providing a geological disposal facility. We are currently consulting on a framework for implementing geological disposal.

If nuclear is not available to the energy market as an option, it is likely that in its place much of the new investment will be in gas or coal generation, which, of course, emits higher levels of carbon and leaves us increasingly dependent upon imports for this nation's electricity generation. Even with nuclear power stations as an option, over the next 10 years or so most new investment will be in renewables and fossil-fuel plant. However, over the longer term we need to ensure that we can provide the low-carbon, baseload electricity that this nation needs.

I know that nuclear power is a controversial issue, but we must not lose sight of the significant challenge that faces this country; a challenge which we must all confront, not avoid, and work together to solve for the benefit of everyone in the United Kingdom.

The measures to address climate change, including those in the White Paper, put us on track to make savings of carbon emissions of between 23 million to 33 million tonnes by 2020—putting us on track to meet our 2050 goal of a 60 per cent reduction from 1990 levels. By saving energy, encouraging new timely investment in gas import and storage infrastructure and by maximising recovery of UK reserves of oil, gas and coal, our measures will also help the security of supply.

The White Paper sets the policies. We now need to get on with delivery. We are in the process now of implementing the measures. Some we can do without the need for further regulation or consultation, such as providing the energy markets outlook, which we will do this autumn. Others rightly require consultation, and some, indeed, will require primary legislation. Yesterday the Prime Minister announced our proposals for legislation in the next Session. These include Bills on planning, energy and climate change. All three are crucial to meeting the energy challenge; not the least planning reform. I speak from personal experience on this one; our businesses, wealth creation and our whole economy and infrastructure are crying out for a streamlined planning system.

Of course, no one document—not even as comprehensive a White Paper as this one—can be the final answer to the long-term challenges that this nation faces. Becoming a low-carbon economy will mean a series of changes and developments over decades to come. Further measures will be needed if we are to achieve our long-term goals, in the light of further international agreements, or as new technologies emerge. While further refining of our policies over the long term is inevitable, the framework for action is set out in the White Paper. It is based on the principles of competitive energy markets, energy efficiency and a diverse energy mix, with more low-carbon sources of energy. That will not change, and it enables us to make real progress now towards tackling climate change and ensuring secure and affordable energy supplies in the most effective and cost-efficient way.

Much has been made of my appointment as a Minister. There is a big job to be done for the country, for the Government and for the Prime Minister in emphasising every day, everywhere, the importance of UK trade and investment for jobs and for the capacity of this great nation of ours to pay its way in the world. It should be clear enough to everyone that this is above the conflicts—understandably so—of party politics. From value-added innovative manufacturing—which I remind the House very much thrives in 21st-century Britain—to the creative industries, from financial services to retail and oil and gas, from our world-class universities to our tourism, I intend to bang the drum for Britain wherever I go in the world. I hope that your Lordships will all be as proud of me as I do this job as I am so very proud to speak to you today. Thank you. I beg to move.

Moved, That this House takes note of the White Paper Meeting the Energy Challenge.—(Lord Jones of Birmingham.)

Photo of Baroness Wilcox Baroness Wilcox Shadow Minister, Business, Enterprise and Regulatory Reform 12:27 pm, 12th July 2007

My Lords, it gives me enormous pleasure to follow the noble Lord, Lord Jones of Birmingham, a city which must be very proud today to have the noble Lord claim it as his own. I congratulate him on his outstanding maiden speech. Some things in this House are done by custom, but I do so with conviction, given the quality of the speech that we have just heard. I have followed the noble Lord's distinguished career over many years, and I have thought it likely that we would see him here one day, although his particular place in the House was not quite so easy to forecast.

The noble Lord's maiden speech was in the line of a long tradition in this House of being uncontroversial, which is quite difficult on this topic. I am sure that his new noble friends will be as relieved about that duty to be non-controversial as I am, given some of his past observations on the policies of Governments. After today, in becoming a Minister, he shares collective responsibility for defending all Labour Government policies, past and present. The House will look forward with great interest to hearing him do that as robustly and controversially as he likes. I congratulate the noble Lord, and we on these Benches all wish him well. The House will eagerly anticipate hearing from him on many occasions in the future.

The noble Lord, Lord Jones, said that this is a subject close to his heart, and I have no doubt that he will enjoy this first exchange. As the Stern review made clear, climate change—and the steps that we can take to protect ourselves from it—is one of the most important issues facing our generation. On these Benches, we are very glad that the Government are starting to listen to the Conservative Party about the critical importance of reducing the environmental impact of our energy industry.

It is unfortunate, however, that the Government are apparently still unable to take the necessary steps to ensure that anything significant will happen. This White Paper was an opportunity for the Government to give a clear indication of their policies and commitments that will be needed to meet the energy challenge. Instead, we again have a list of possibilities and half-hearted or unclear statements. Indeed, the Government have created a great deal of confusion over one of the most controversial aspects of energy policy—whether nuclear power stations that are going to be decommissioned in the near future will be replaced. I wonder whether the noble Lord, Lord Jones, can clarify the position. Do the Government intend to stick to their line in the energy review in 2006, which stated that nuclear power,

"has a role to play", or is the question still open to debate, even given what the noble Lord has said this morning?

The Prime Minister has suggested that his mind is already made up. At Prime Minster's Questions on 4 July, the Prime Minister said:

"We have made a decision to continue with nuclear power".—[Hansard, Commons, 4/7/07; c.955.]

Yet, the noble Lord, Lord Jones, is on record as saying that the debate has just started. The noble Lord's understanding of the necessary process is supported by the findings of a judicial review, which confirmed in February this year that no decision on nuclear power could be taken until a full public consultation had been completed. This White Paper appears to agree. It says nothing more than that the Government believe that,

"new nuclear power stations could make a significant contribution", and consultations will not close until October.

Can the Minister confirm once and for all not only for the benefit of noble Lords but also for the benefit of the many interested lobby groups what is the Government's line on nuclear power? Does he agree that failing to consult fully has already led to a legal challenge, which delayed the Government's White Paper? Further confusion about the status of the consultation will not only make it difficult for those groups who have engaged in the consultation in good faith, but will make it much harder for companies hoping to build and run any eventual power stations, to cost and tender their bids if there is a risk that the consultation process will be undermined. How can the Government expect such a controversial issue, with so many stakeholders, to be resolved effectively if Ministers say different things and no one knows the real situation?

Photo of Lord O'Neill of Clackmannan Lord O'Neill of Clackmannan Labour

My Lords, perhaps the noble Baroness could share the views of the Conservative Party. Unlikely though it may be, that party has the potential to be a successor Government and, in the interests of continuity of policy, it is not unreasonable for us to ask what the policies of the Conservative Party are. In every television studio in the country, there appears to be degrees of division.

Photo of Baroness Wilcox Baroness Wilcox Shadow Minister, Business, Enterprise and Regulatory Reform

My Lords, I am here to respond to the White Paper. If the noble Lord would like to talk to me over coffee later, I shall be only too delighted to tell him our programme.

As it is, any decision that is finally made seems likely to be based on uncertain estimations and unclear risks. How is the industry expected to calculate whether it will be feasible to invest in new power stations if the Government refuse to lay out what would be expected from them? For example, the Government have not yet made it clear how clean-up or waste disposal costs will be calculated, or what steps they will take to ensure that the taxpayer does not end up carrying the cost. Such clarification will not prejudice the consultation that is currently going on, but will inform it, and raise the debate from one of sentiment and prejudice to one of practical concerns and necessary safeguards.

Nuclear power has both benefits, such as a relatively low carbon footprint and the potential to improve UK energy capacity significantly, and risks, such as dangerous waste and expensive decommissioning. Those risks cannot be accurately calculated without more information on the Government's intention.

Turning to the other aspects of the White Paper, I must admit that I am rather disappointed by the lack of clear decision on many issues that we would like to see moved forward. In particular, the Government's proposals on renewable energy are not adequate. It is going to be very hard as it is to reach the EU target of 20 per cent of energy from renewable sources by 2020, especially as we are starting from such a low point compared with other countries in western Europe.

Government delay and confusion have already caused a promising carbon capture scheme to suffer. BP has had to pull out of the Peterhead scheme after the Government decided to delay the competition until November this year. The waste of the resources already invested is a disgrace. I wonder whether the Minister can explain how this was allowed to happen.

We are very glad that the renewables obligation is to be reformed. After criticism by Ofgem earlier this year, it would have been worrying if it was not to be. However, the Government are still pursuing the idea of banding and many of Ofgem's criticism are still applicable. In particular, Ofgem and the National Audit Office have pointed out that the current scheme is still very costly, with customers paying, even if the renewable generator is not built.

Is the Minister not also worried that the Government are continuing the policy that Dr Dieter Helm called, "picking winners"? In October last year he warned of the inability of governments to predict costs and returns from specific technologies. Will the Minister explain why he thinks that the "man in Whitehall" knows best when it comes to choosing between competing renewable technologies? Does he not agree that under a banding scheme the potential is still there for directing funding away from one source to another for reasons that have nothing to do with cost-effectiveness? Why are the Government continuing to interfere at this level? If they were to ensure a level playing field, the market would make the decision on which renewable is supported, and costs and risks would accurately be taken into account, resulting in a more efficient apportionment of subsidy.

The level playing field should also apply to other methods of improving our environmental record. I hope that the Government will eventually accept the Conservative policy of focusing on carbon emissions rather than selecting favoured industries. With a uniform price of carbon, set by a long-term cap and trade regime, the industry will establish the best method to improve its output itself, whether that be by encouraging energy efficiency, low-carbon energy production or renewable energy sources.

There is disappointingly little of substance in this paper about many of those methods. The EU emissions trading scheme has the potential to provide the necessary incentives to encourage their development, but only extends to 2012. The Government must start looking at ways of not only improving the method of assigning credits, but also extending this to the long term as soon as possible. I ask the Minister to explain to the House what the Government are doing to achieve a firm EU-wide commitment to a strong carbon price for the long term.

Climate change is a very real and present danger. The long-term consequences will affect both rich and poor across the world. Decisive action needs to be taken now. The alternative is a future of rising energy bills, increasingly uncertain energy supplies and continuing environmental damage. Yet the Government appear able to talk only about what might be done in the future. The Energy Bill that we have been promised in the next Session must show what will be done. I shall quote my noble friend Lord Howell, who has written a widely acclaimed book, Out of the Energy Labyrinth, in which he says:

"The future needs to be sharply different from the past in energy matters, but those with authority and with the power to give words wings have yet to find the over-arching story with which to inspire".

Our energy policy needs to become both substantial and secure, and the journey towards this end must start immediately. There is no more time to lose.

Photo of Lord Teverson Lord Teverson Spokesperson in the Lords (Climate Change), Environment, Food & Rural Affairs, Whip 12:39 pm, 12th July 2007

My Lords, from the Liberal Democrat Benches, I also welcome the Minister and congratulate him on his first speech. It was much longer than many of us are allowed in our maiden speech but was delivered very well indeed. It was not entirely uncontentious—as he suggested, any speech on nuclear power will divide not only the House but each of the groups here.

Like the noble Baroness, Lady Wilcox, I live in Cornwall. Although the Minister probably will not remember, I met him at a Liberal Democrat conference where he was a guest. I mentioned to him that I come from Cornwall and he efficiently and knowledgeably came out with a number of major economic and business players in Cornwall whom he knew. It was most impressive. I am sure that during his tenure in the Government he will continue to keep that connection with the far south-west which is so important. This morning I was also impressed because it looked like there had been regime change on the government Benches. However, the noble Lord, Lord Evans, quickly came in to make sure that order was restored and the ancien régime was there for a little longer.

It is good to have a little history on subjects of this sort. I went to a school in Essex, although it is now in London as a result of the boundary changes in the 1970s. I remember that during the days of smog I used to come back towards London and that in the winter we were concerned about energy cuts. The big question on energy was how many days out we would have during cold snaps when we would have no energy supply whatever. That changed very soon, and in the 1970s the question was not capacity but the three-day week and the battles between the electricity suppliers and the unions that disrupted our electricity supplies. In the 1980s, during the regime of the noble Baroness, Lady Thatcher, we had privatisation and the depoliticisation of energy. The Department of Energy disappeared into the Department of Trade and Industry—I think the noble Lord, Lord Parkinson, was the last Secretary of State for Energy—and energy was more or less forgotten about by the political class and Parliament. There were no more issues because the private sector dealt with it.

As a result of privatisation we had major decreases in energy prices in the 1990s and a good outcome was that fuel poverty decreased. I give the Government credit for their work in reducing that further. As the statistics show, electricity prices in real terms decreased by 30 per cent from the beginning of 1990 to at least 2004. Although they have risen substantially, electricity prices in real terms are 20 per cent less today than they were in the early 1990s. However, in the past couple of years—indeed, in the past 12 months—energy has returned to the front pages in terms not only of climate change but of energy security as well. Not only are climate change and energy security big news; every time we read scientific papers or have further meetings of the climate change committee, the predictions about the problem get worse. No doubt the same will be true of the Bali conference later this year. The issues are greater than we expected. The International Energy Agency has predicted that there will be an oil crunch in the next five years. As the Minister said, this is not only a live and important issue—it is becoming an increasingly dangerous global issue.

I was pleased that the Minister specifically mentioned energy savings, which is dealt with in the first major chapter of the White Paper. Compared with the marvellous new renewable technologies, nuclear power and the array of things in the White Paper, energy savings is one of the less sexy areas—but it is a key area of energy policy. Far greater savings are possible than we sometimes credit. A number of studies, particularly in Scandinavia, show that energy saving is not only good in itself, it has a negative cost. Energy saving gives a positive payback. As it does not involve major investment or real cost, we have to concentrate on it. However, the White Paper does not say how that is to be delivered.

From my economics background I know that demand for electricity and power generally is very inelastic, partly because of the current abundance of power and its ease of use. Even if we change prices through cap-and-trade systems, carbon taxes or whatever, households will be slow to change how they work. It is therefore very important to change regulation and standards and that whole approach. Many of the product standards which the White Paper talks about are not decided here in Whitehall but are single market issues to be decided by the 27 member states in the European Parliament and the Commission. I shall be interested to hear the Minister's view on what solidarity he expects among business department Ministers regarding how the agenda can be moved forward relatively quickly, in contrast to the sometimes slow decision-making in Brussels.

One area really concerns me. Although one would never want to say that a government document is naïve, one paragraph in it—and in the Minister's Statement—says that energy supply companies will have to become energy services companies and that we must persuade them that, rather than wanting to sell energy, they must want to balance energy sales with energy savings. The White Paper says that we will need an innovative policy for that. I read that as a euphemism for, "We need something but we haven't worked out what the heck it could be. Somehow we need to persuade energy companies to de-sell their products". As energy is important for security, that is rather like putting al-Qaeda in charge of homeland security. It is trying to persuade some of the largest global corporations to do exactly what they are trying not to do.

From my business and industrial experience I know that, during the 1980s and 1990s, we learnt to concentrate on our core products. Energy companies are about delivering energy to consumers as effectively as they can with the least number of interruptions and at the lowest cost. I cannot see how a change in the legislative regime would, as the White Paper suggests, make them become a major part of the solution. We have to make sure that they are efficient and competitive suppliers, but at the household end—the demand side—we need to bridge the gap between initial capital expenditure on energy saving and the downstream benefits once that investment has taken place. It must be far easier to square that circle by financial engineering—loans or whatever—than by trying to persuade big global corporations to be what they are not. Let them concentrate on what they are good at.

The Minister mentioned renewables, as did the noble Baroness, Lady Wilcox. This is clearly a key area for all sides of the House. The latest available figures, from 2006, show that we are now 26th out of 27 EU member states in terms of the proportion of our energy that is renewable—it is 1.7 per cent. The only country which is behind us is Malta, where the proportion of energy generated from renewable sources was zero in 2006. Like the noble Baroness, I ask the Minister how we will practically reach a position where we play our full part in meeting the European Union's objective for 2020, which is a mere 13 years away, of generating 20 per cent not just of electricity but all energy from renewable sources. The UK will clearly have its own allocation as part of meeting that target. While I applaud the target, I fail to see how we are going to do it. The White Paper does not mention it.

One aspect of consumer power in this area is smart meters. The White Paper gives a detailed explanation of its approach to smart meters, but the two-stage approach that it suggests, initially involving making available cheap, clip-on smart meters—which are not really smart meters at all—seems more a gimmick than something that is useful. They will be introduced and they will be expensive, but they measure only electricity; they cannot measure gas, which is more important in households; they will not convert consumption into a monetary value; and their readings are not easy to display on a TV or a computer in the household. I strongly urge the Government, therefore, not to worry about that aspect, but to take the slightly longer-term view and move on to real smart meters, where the technology already exists. We are obliged by the electrical services directive to start to implement real changes in this area by May 2008. I humbly suggest to the Minister that the easiest approach is for the Government to mandate any meter changes from May 2008, thereby tying in with the European legislation, to be proper smart meters that can measure all forms of energy used in the household, show pricing and can be displayed on a screen that people can see and use every day. That would bring power back to households to make sensible decisions about energy.

I again congratulate the Minister on his speech. As I said, he mentioned Cornwall, to which I might perhaps give one plug. We have a renewable technology of our own, hot dry rocks, which is geothermal power. It has not been very popular with the Government, but it could offer that bedrock of electricity generation that we all desire from renewables. I would like at some point to speak to him further about that. I hope that it will be included in the Government's renewables portfolio. His appointment comes at a time when the United Kingdom can be major player in Europe and he can help to save the world from the effects of climate change. We on these Benches offer him every success in that.

Photo of Lord Tanlaw Lord Tanlaw Crossbench 12:54 pm, 12th July 2007

My Lords, I join previous speakers in welcoming the Minister to the Dispatch Box and congratulate him on his excellent maiden speech. His qualifications in the real world of business, rather than in politics, are formidable, and I intend to draw on them during the course of my intervention today.

I hope that his appointment signals a real change in the new Administration's approach to changes in climate and, in particular, to a related subject in which I can declare an interest; namely, daylight saving. I am the founder chairman of LEAP, the Lighter Evenings All-Party Group, which will, incidentally, meet again on Monday 16 July. All noble Lords are of course cordially invited.

I hope also that Her Majesty's Opposition and the Liberal Democrats will take the opportunity provided by the change in administration to look again at their own response to daylight saving as a means of "meeting the energy challenge", which is the title of this debate, as well at the other benefits that it will bring to our society.

However, before I embark on the energy-saving aspect of the debate, it should be worth while my questioning what statistics the Government and the opposition parties have to back up their continued insistence on GMT for the winter months. Where is the data to demonstrate that this policy makes any contribution towards meeting the country's energy challenge?

I have been fortunate enough to have had sight of a detailed study in draft of Dr Elizabeth Garnsey and Brendan Cronin from the University of Cambridge's Centre for Technology Management in the Department of Engineering and Judge Business School. It is entitled, Re-evaluating Daylight Saving in the United Kingdom. Their considered conclusions recognise the differences of opinion on the relative advantages and disadvantages of darker mornings or darker evenings, when the total hours of daylight are constrained. However, no factual evidence in favour of a return to GMT in Scotland or elsewhere in the United Kingdom is to be found anywhere in the study. In fact, research estimates show that a greater loss of life and a greater number of casualties occur as a result of the annual return to GMT on the last Sunday of October throughout the UK, including Scotland. It is clear that since 1971, at least 5,000 deaths have occurred on the road that are directly attributable to switching to GMT during the winter months.

I shall come to saving energy in a moment, but I first want to hear from the Government and the opposition Front Benches statistics which can justify the current situation. I want to hear also statistics showing that maintaining GMT, with darker afternoons and evenings during the winter months, can be of benefit to the tourist industry, with which I believe the Minister is well acquainted. Was he not until a few days ago the chairman of Tourism Alliance, which represents most, if not all, of our tourist businesses? Was he not also a director of VisitBritain? Therefore, how can he justify his Government's apparent continued resistance to changing the time-scale for the winter months, which is seriously damaging all businesses connected with the tourist industry and about which we have received many representations during the past two years? Will he not take advantage of his new position and influence and use his specialised knowledge to change the situation regarding GMT, or has he been given new statistics, unbeknown to us, which can justify the status quo? If so, perhaps he will be good enough to let us have them.

I have referred to the position paper from Cambridge University on electricity generation. Can the Minister show what economies in electricity consumption are brought about by returning to GMT for the winter months? Does he dispute the facts recently given by the National Grid Company, which stated that shifting from GMT+1 in summer to GMT in winter has caused an average increase in electricity consumption of 1.2 per cent during the past six years? This is the equivalent of putting an additional 47,000 cars on the road in terms of carbon emissions. Furthermore, is the Minister aware that the increased peaking of electricity usage during the week after the autumn clock change to GMT on the last Sunday of October increased the cost of electricity generation by an average of £18 million during 2004-06?

I can find no mention of daylight saving in the Stern review, which is 576 pages long, or in the Economics of Climate Change, volumes 1 and 2, which is 393 pages long, or in the draft Climate Change Bill, which is a mere 63 pages long, or in the White Paper before us today, Meeting the Energy Challenge, which is 342 pages long. That is a total of 1,374 pages of printed matter, weighing just over six kilograms on my scales, and there is not a squeak on the subject.

That is strange. If the Government and the opposition parties do not support daylight saving, they must surely have a good reason for maintaining GMT during the winter months. If so, what is it? By their omitting to mention it in the glut of government papers referred to, one is given an uncomfortable impression that something fishy may be going on, such as a political stitch-up between the parties. I hope that I am wrong.

I will therefore, if I am permitted to do so, bring before the House another Lighter Evenings (Experiment) Bill, but with one big difference from the original. Instead of switching to GMT+2 during summer months, under the new Bill the country would remain on GMT+1—summer time—throughout the year. My reason for this is that new evidence has been put before me which has convinced me that the existing switchover from summer time to GMT, quite apart from wasting electricity, puts an unnecessarily large strain on the country's present generating capacity.

The extra load is currently taken up by the ageing peak stand-by generators, and, as the old nuclear power stations are shut down, as noble Lords have mentioned, this problem will be further aggravated in the years ahead. Daylight saving by maintaining GMT+1 throughout the year would greatly reduce this problem and deliver lighter afternoons and evenings throughout the winter month, which should satisfy the interests most critical of the status quo.

The only advantage it would not deliver is to harmonise the United Kingdom's time-scale with Central European Time. However, I wonder if this change of heart might persuade the doubters on the Conservative Benches to look again with more enthusiasm at a new Bill on the subject.

The question I must put to the Minister in the sphere of this debate is: where are his department's statistics to justify the maintenance of GMT during the winter months? None has been forthcoming from his predecessors, or the Opposition Benches to date, in spite of the passage of the Lighter Evenings (Experiment) Bill through this House, which was without their help; while the Energy Saving (Daylight) Bill, introduced by Tim Yeo MP, chairman of the Environmental Audit Committee in the other place was disgracefully filibustered out of time by the Government with the connivance of the opposition parties.

The Minister must surely be aware that the United States, Australia and Canada have recently introduced daylight saving procedures, in spite of the different time zones within their countries, in order to save energy and carbon emission Therefore, can he give any reason why there is a delay in this country in following suit?

The US Department of Transportation claims that energy use across the country has been cut by 1 per cent each day of daylight saving time. Has the Minister's department produced any figures, which could either prove or disprove benefits occurring here if British Summer Time, GMT+1, was maintained throughout the year, thus requiring no clock change on the last Sunday of October?

Hardly a week goes by when members of my All-Party Group do not receive representations on lighter evenings from varying interests, such as the Royal Society for the Prevention of Accidents, the tourism industries, school teachers and sporting and leisure organisations to ask what is happening about daylight saving.

Therefore, I looked with hope, but without success, at the forthcoming Bills in the Queen's Speech, released by the Prime Minister yesterday, to see if the Government have changed their mind on the subject. I have also looked through again before this debate at the plethora of papers which surround the subject of climate change to see if I had overlooked mention of this important subject. Again I had no luck in finding anything.

Will the Minister, with his long experience with the CBI, comment on the desirability of the United Kingdom harmonising its time-scale with Europe, a provision which could be added at some other time? The only surveys I can recall seemed to indicate certain ambivalence by the CBI in this area.

I have no objection to Dr Stern's review, which advocates the alchemy of taxation combined with lucrative carbon set-off procedures to transmute carbon emissions into gold for the government agencies involved with climate change. The plethora of Government agencies and advisers can have a field day with the amount of additional paper they can generate as a result of the Stern review.

The argument I put on daylight saving is entirely based on energy efficiency and a reduction of pollution. The question of atmospheric carbon is another question altogether, which I will come to when I have a few moments.

I want to take noble Lords back 30 years. I tabled an Unstarred Question on atmospheric changes and weather patterns as long ago as 30 November 1978. It is a perfectly respectable speech which is relevant today. Absolutely nothing has happened for the past 30 years in gripping this problem. I said:

"In conclusion, my Question raises the far wider issues of communication between the scientific community, Government agencies and the general public. Scientists work within an entirely different framework from that of us in Parliament. Their statements have to be more restrained and are based on proven scientific fact, and often because of that their conclusions are not necessarily unanimous. That is particularly the case with questions of weather and climate".—[Hansard, 30/11/78; col. 1447.]

I said that 30 years ago. It is absolutely relevant today.

The jury is still out about atmospheric carbon. I am sure that the Minister has stacks of papers on the subject. Will he say that carbon and methane emissions occur after the increase in global temperature? The ice cores clearly show that they do. Therefore, if they come after, how on Earth can we reduce global warming by reducing atmospheric carbon or methane? I am not a scientist; I am reliant on the distinguished scientist Dr Michael Cole for making some of these things simple for me. This situation must be addressed by the scientists. They have not made it clear and are still arguing about it.

There is a further question on methane. There has been a lot of talk of biodiesel. In each of the past 20 years, I have spent two months in the Far East. I have driven from Singapore to Kuala Lumpur on the highway. When I first went there it was wall-to-wall rainforest. I drove along it last year and it was wall-to-wall palm oil. Perfectly good forest areas have been cut down. Forest peoples have been displaced, as in Sarawak and Borneo. Indeed, rice plains are being replaced with palm oil plantations. It is very simple to grow, requires little maintenance and offers high profitability. Indeed, Europe gives grants for it.

I met a man who told me that if he was given six men with six cans of diesel, he could clear 1,000 hectares of rainforest in 30 days. He was paid to do this by the plantation company. The more Europe buys biodiesel from the Far East, the more forests will be destroyed and the more people will be displaced from their houses, and now the greater encroachment will be that people will be tempted to sell their land which at the moment produces rice. This is absolutely crazy and totally unnecessary. I also question the doubt expressed by one speaker that oil reserves will last only five years. I have no doubt that that is completely wrong and that they will last a good 40 years.

I am left with a slight bewilderment. Everyone has been talking about the same thing for 30 years, very little has happened, no nuclear power has come about and we are still doing nothing. That is the problem with a democratic government of which we are all part, one way or the other. No one can make long-term decisions without them being changed. The situation has been set out by a whole number of Peers so far. It has to stop. We all have to get together and come to a considered conclusion with the help of the scientists to do something sensible about meeting the energy challenge.

Photo of Lord O'Neill of Clackmannan Lord O'Neill of Clackmannan Labour 1:08 pm, 12th July 2007

My Lords, noble Lords will forgive me if I do not pursue the last topic. It is not an area in which I have any great expertise or, indeed, experience. Before starting, I would like to declare an interest which I do not think is as yet recorded. I am the chairman of the Nuclear Industry Association, which is the trade association for the civil nuclear industry. It is only reasonable that I make that point at this stage.

First, I pay tribute to my new noble friend's maiden speech. I say "new noble friend" because he is an old personal friend with whom I have had many disagreements. Much has been made of his capacity to disagree with people. I would say to him that on this side of the House, at least, one of the preconditions of membership of the Labour ranks is the ability to get on with people and to agree to disagree on most issues of a political character. It will not be a novel experience for him. I wish him well and his speech this morning was a thoughtful tour d'horizon of the energy area. He obviously took the advice that Lyndon Johnson gave when once asked what you need to do to get elected. Johnson's reply was just as applicable to energy policy as it was to getting elected—you have got to do everything.

The compendium which is the White Paper has pretty well everything in it. Others might disagree—only time will tell. Yet I do not have a great deal of sympathy with the view that by putting and considering all of the options, the Government are not allowing themselves to have a proper sense of priority. At the same time as having a sense of priority, there has also been a degree of caution, particularly on the nuclear situation post the judicial review. Some might say that the Prime Minister evinces less of this, but Ministers are walking on eggs on this issue. Yet many of the remarks that I made in my maiden speech some two years ago on nuclear power are even more valid today. This is not simply because the case remains equally strong, but because over the past two years we have become increasingly aware of the volatility of the international energy market and the fact that prices are far less dependable. In the past, we could anticipate periods of rise, of comparative fall and of stability. Nobody today is putting their faith in the hydro-carbon markets being particularly stable in the months and years that lie ahead, not least because in the past two years we have become properly aware of the impact of the Indian and Chinese economies on the international energy scene. It could be argued that not just oil and gas but coal, too, is increasingly subject to the massive demands being made by these countries.

As a consequence, we have to look at the energy mix, the balance we are going to have to work towards. It is inevitable that in the foreseeable future we will have a sizeable dependency on gas. We still have the advantage of an indigenous supply—on a limited level, but still there. We now have LNG capabilities which will enable us to have storage and transportation facilities within the UK. The point has to be made that we would not wish to be over-dependent on this form of generation. If the lessons of the 1990s were to be anything, they are that we probably were over-dependent. When other countries were investing in renewable technology, we felt there was no need for Britain to do so. You could argue that in some respects the old Nye Bevan quote, of Britain being an island surrounded by fish and built on coal, and the idea of self-sufficiency, has been one of our problems. In the past, it has blinded us to the need to have a wider canvas on which to draw our plans.

We have no coal industry to speak of in the UK now. It is increasingly difficult to get open casting, there are only a small number of collieries and there are virtually just a handful of colliers. There is certainly no longer the cultural tradition of fathers and sons going down the mine as there was in my old constituency until two or three years ago. So the idea that we can be over-dependent on imported coal is a dangerous one. We have to recognise that coal has to have a place because of its flexibility.

We also have to guard against the over-optimism often endowed in carbon capture and storage. This is a nascent technology, and the Government are to be commended for their competition. I am not wholly sympathetic to the view that somehow we could have left it all to BP; that had they had a big wodge of money from the Government, they would have solved all the problems. I am not antagonistic to British Petroleum—it is an outstanding world company led by the most capable people—but to have given that opportunity to one company and one technology alone would have been regrettable. At the same time, we have to persevere with carbon capture and storage, because we are going to require it for some of our gas stations.

It is equally dangerous to place too much faith in the coal industry. Many of us have received a paper from Drax, which quite correctly claimed credit for important work in flue gas desulphurisation. But FGD technology does nothing for CO2 emissions. I am only guessing, but I imagine that the likely lifetime of the Drax power stations will be insufficient to justify the kind of investment that carbon capture and storage would require. There would not be the CAPX payback within a reasonable time. We are talking about virtually brand new stations which will accommodate various kinds of coal and probably take a bio-element as well. They will have super-critical boilers, flue gas desulphurisation and carbon capture and storage when the technology is sufficiently mature. Yet this will be some time and at some considerable expense. It is wrong to place undue emphasis on that kind of option because it is almost beyond the horizon. It is not quite blue skies thinking. Coal in the short term has a place; it is flexible and can generate and fill holes quickly. We may need payments to keep these stations turning over when they are not required. We have gone through that kind of system in the past and it has not worked, but we need a flexible enough market arrangement to enable coal to be accommodated.

For baseload generation, only one other option deserves consideration: nuclear. The concept of a replacement build of 20 per cent of our generating capacity has to be addressed. As you would imagine from my declaration of interest, I have no great anxiety about a number of the fears that some people express. Yet it is a sensitive issue. The previous consultation process which the Government entered into was insufficiently rigorous and did not involve the degree of public participation that it merited. A second chance should be given to it, and the terms of the judicial review should be given clear and careful adherence.

If we can get through this consultation process, and the arguments for and acceptance of the case for nuclear is sufficiently strong, the market should be allowed to deal with it; that is, if the market believes that in the United Kingdom we can get a reasonable choice at an early stage between the varying technologies available. I understand that some four are under consideration. Three of them might be regarded as more likely, and one of the three might even drop out—we might end up with only two. Whatever happens, we have embarked on a programme of pre-licensing which will require the Nuclear Installations Inspectorate to have far more staff to undertake the taxing work that will be required.

It will equally require staff for the clean-up and decommissioning work, so we are talking about a sizeable programme of recruitment. As I understand it, the money is in the Treasury, but there is a dispute with the DTI—sorry, DEBRR, as we now have to call it. There is something of a stand-off. There is a recognition that those people are needed and an amount of money available to pay them, but there is a disagreement between the Treasury and the department concerning how the money should be spent so that it can be kept within the public sector pay guidelines.

Frankly, the money is there, so we do not need creative accounting. We just need some inventive personnel or human resource management techniques to be applied. In another capacity, I am the director of a football club. I know that in the football industry, no shortage of imagination is exercised when it comes to paying people. Usually, it involves paying them too much, but in this instance, there are very strong grounds for encouraging highly skilled, highly qualified people to come into the government service in the NII. Regardless of whether we build another power station, those people are required. They are required for waste clean-up and for decommissioning. People forget the skills needed in that industry. It may not be very sexy or attractive to come to clear up the legacy of an industry that has been notoriously pollutant—although I think that the new technologies will be far less so and the problem will be far easier to manage—but we must make it attractive. One obvious way to do that is by making employment attractive through the rates of pay and conditions offered to very important people.

There is always the danger in these debates that because they are not time-limited, you self-indulge, and I have probably done that already. We have moved, or we are moving, certainly on these Benches, towards a balanced energy policy in which various elements will play their part. The renewables lobby will make strong claims—rightly so, because there are cases for localised generation—but let us not forget that if the renewables industry is to succeed, it will require subsidy. Call it ROCs, renewables obligation certificates, if you like, but it is state subsidy in the first instance, subsidy that is subsequently paid for by consumers. Therefore, we must be rigorous in our examination of the scheme. Someone has to do that. It may well be that we can appoint independent agencies, which means that civil servants do not do the work, but someone has to come to a judgment in the first instance, and then see whether the market will take over. The argument for subsidy is based on the premise that the market is not functioning properly at this stage. We must be careful about spending too much money for too long on some failed renewable technologies.

Lastly, I have laid great stress on the baseload capability of nuclear power. One of the strengths of nuclear power is that it has a very low import dependence. About 10 or 12 per cent of the costs of nuclear generation arise from uranium. It is not open to the vagaries of the international market in the way that other generating technologies are. If we can build up a substantial, but not massive, element of new nuclear generating capability, that baseload should be able to enable us to have a degree of price stability in our market that will go a long way to help the Government's credible work, already referred to, in assisting the fuel poor.

It is sometimes not fashionable to link forms of generation with social objectives. I am not saying that nuclear power is too cheap to meter; that argument was very dangerous as well as being fundamentally wrong, but I think that the Government are beginning to get the emphasis correct. The White Paper is a very encouraging document. I am greatly pleased that my new noble friend has been able to introduce it in such an effective way today. This debate will go on and on. We seem to have had almost as many White Papers and discussion papers as we have had Secretaries of State in recent years, but it is an important debate. I commend the Government on taking another step forward and hope that the consultative process will enable us to move to the next phase for nuclear power as soon as possible, as soon as it is reasonable and as soon as people feel that they have at least had a chance to speak and to make their case.

Photo of Lord Dixon-Smith Lord Dixon-Smith Shadow Minister, Communities and Local Government 1:25 pm, 12th July 2007

My Lords, I hope that the Minister will feel encouraged that I found his remarks a very able review of the paper that we are discussing. They helped to clarify my thinking about the status of the paper. He may be slightly less pleased that my conclusion is that it is more appropriate as a Green Paper than as a White Paper. In any event, its status has been eroded by pre-announcements of aspects of policy in another place—by eminent gentlemen down there—and by the legislative programme that is already announced, such as the Climate Change Bill, the changes in the Planning Bill, and so on.

The paper is a very good review of the situation that we face on the energy front. If I have a conclusion, it is that the Government's strategy is not to have a strategy; it is to work by a series of ad hoc decisions in the light of an evolving situation. I am bound to say that that has a great deal of merit, but a White Paper it is not.

One of the things that I regret in the changes that the Government have brought about in the past couple of weeks—for which the Minister has no responsibility, of course—is that they have failed to resolve the dilemma that we all face in dealing with energy matters and global warming. They are still the responsibility of two separate government departments. Energy is with DBERR—the trouble is that if I use the acronym, I am inclined to use the word "defer", which is perhaps rather less than fortunate—and Defra. Can the Minister indicate whether the Government intend to resolve that dichotomy, where one department is, as you might say, responsible for making a mess and another department is responsible for clearing it up? The technical question is: what mechanism do the Government have in place to deal with matters should there be a disagreement between the two departments?

I intend to speak largely about global warming; in one or two aspects, I may cover points that have already been made. One thing that especially worries me from the perspective of global warming is the immense reliance that is being placed on energy efficiency and economy as a means of reducing carbon dioxide emissions. In July 2005, the Science and Technology Committee published a paper on energy efficiency which contained a very interesting graph revealing the performance of the economy over the previous 30 years. The graph shows gross domestic product rising, which is very welcome. It also shows energy units per unit of GDP falling. The business of energy efficiency is not something thought up recently as a consequence of global warming; increased energy efficiency has been happening for a very long time. However, the really interesting line in the graph showed energy consumption rising slowly over that whole period.

The one thing that we cannot afford to do is to stop the development of the economy. We must keep the economy growing for everybody's sake. In that, we need to ensure that the action we take in the developed world does not prejudice the opportunities for development in the third world. Food miles—distasteful to some—and tourism, which increase aviation, of course represent for us an increase in our carbon footprint, but they are economic drivers in the third world. We must be careful not to take action which might inhibit or stop their possibilities for development.

The Minister mentioned the problem of the growth of energy consumption in the future. I have a graph from the Institute of Economic Affairs, and if I translate the acronym correctly, the present energy demand globally is roughly 12 billion tonnes per annum of oil equivalent. That is predicted to rise to 17 billion tonnes per annum by 2030. This paper is published in the light of all the global warming information. That energy demand will have to be met. While energy economy is going to be important, we should not be relying on it to make a major contribution, partly because of the international aspects and partly because of the sheer reality of a growing economy where things are always changing. Energy demand is likely to increase in this country in any event to some degree.

I was fortunate to get into discussions with people from General Motors a month ago on this subject. Transport is another prominent source of carbon dioxide. Their expectation for the future is that at best the improvements in vehicle efficiency will roughly match the increase in vehicle volume, so there is no easy economy to be achieved there. We need to take these factors seriously into account because the Government's policy of reducing carbon dioxide emissions by 60 per cent from the 1990 figure by 2050 is going to be difficult to achieve. My own party has gone for 80 per cent. However, it is a valid objective because in the end we should be aiming for a society that does not emit carbon dioxide at all.

There are a number of other difficulties. It is quite clear that the Government's policy is to rely very much, particularly for big business and heavy industry, on cap-and-trade systems for reducing carbon emissions. There are a number of problems related to this but the main one has been the abysmal failure of both the European Commission and Europe's national Governments to arrive at a sufficiently robust system of caps. Emissions trading is easy if there are too many certificates. The result is that a tonne of carbon, even in phase 2 of the system, is presently estimated to cost only £17 to £18. There is a difficulty there because for most people the cost of getting rid of a tonne of carbon dioxide emissions is much higher than that.

Another problem that the Government have failed to address is the fact that the renewables obligations certificates referred to by the noble Lord, Lord O'Neill, are charged on the nuclear industry, which does not emit carbon dioxide. As long as we have that situation, we will effectively have not a tax on carbon dioxide emissions but a tax on energy. That is not what we should have, so we clearly need some change there.

We are going to have a policy that we hope will speed up the construction of major infrastructure, but as yet we have no policy on what is to be built. I accept that the Government should not try to pick a winning technology—Governments have an abysmal record in that—but they should make one policy in principle: from now on, if at all possible, they should construct nothing that emits carbon dioxide as a result of fossil fuel consumption. However, I understand that that is not technically possible. The run-down in generating capacity is likely to occur more rapidly than we are able to build new plant, and certainly before we might be able to bring forward new green energy sources.

That has two consequences. The first is that if we are to put in generating capacity which we hope will be only short-term to emit the fewest possible tonnes of carbon dioxide per unit of energy produced, that, as has already been pointed out, would mean gas. The other problem which we have anyway with the electricity-generating industry is that it is being given responsibility for driving the efficient use of energy by its customers with no obligation to become an efficient energy user itself. Because of the price of a tonne of carbon, it does not look as though the market at the moment is likely to be effective. In answer to a Question of mine in 2005, the Government in effect said that for every kilowatt hour of electricity supplied to the customer in this country, more than a kilowatt hour of energy is released to the atmosphere in the form of waste heat. Heat is a saleable commodity and that waste is not acceptable now or in the future. There has to be a use for it. There may be planning implications but something seriously needs to be done. There are three uses for it, three Hs, and they are heat, hydrogen and horticulture—heat for district heating which would predicate smaller power stations built on the urban periphery; hydrogen because we are going to need it in the long term to resolve transport problems related to going green; and horticulture because, if all else fails, you can surround a power station with acres of glass and produce tropical crops on waste heat.

Another important point touched on by the Minister is the question of biofuels. They can make a significant contribution. I am a farmer and I welcome what is happening. The price of wheat, which I grow, has virtually doubled in the last nine months. The price of a tortilla in Mexico has also doubled causing political problems there. This is largely the result not particularly of bad weather and short commodity production, but of the conversion of grains into bioethanol, and that will continue.

There is another problem. We are now burning off natural carbon sinks in addition to the geological carbon sinks that we use as fossil fuel. That has also been touched on this afternoon, and it is not particularly acceptable. The final problem with this is that there is not enough land to enable us to fuel our transport industry from crops. It simply will not be possible to do that; we would need another planet. It is one of the few things on which I agree with WWF. There is plenty of energy. It will—indeed, it must—come from other sources. We will need the land that we have to feed our population.

Photo of Lord Haskel Lord Haskel Labour 1:40 pm, 12th July 2007

My Lords, I, too, congratulate my new noble friend. I hesitate to offer him advice as other noble Lords have done. I think that I will simply wish him well. Like him, I thought that the energy White Paper was really rather good. It faces up to the uncertainties about which he spoke: the uncertainties due to the need to tackle climate change; the uncertainty about energy security, about which my noble friend Lord O'Neill spoke; and the uncertain sources of our future fuel and the growing international competition to acquire it. As the Minister said, the pursuit of new sources of oil and gas is now central to the foreign policies of all the world's major powers. In the face of these uncertainties, the Government are absolutely right to reduce our dependence on imported energy and to encourage the use of a diverse energy mix. It is ridiculous to characterise new nuclear power stations as a last resort as the leader of the Opposition did, only to be contradicted by his own colleagues, which shows, as my noble friend Lord O'Neill implied when he intervened, that there are some uncertainties opposite, too.

The Government must encourage the efficient use of all sources of energy to encourage the saving of energy, to reduce our carbon footprint, and to encourage renewables and, of course, nuclear power. The only sensible course is to encourage this diversity and variety while becoming more economical. The White Paper provides a good framework for addressing the technical challenges and risks in energy. However, I am not sure whether it provides a political framework—a political context—in which all this will be done because, without this, not much will happen. The context is important because, in reality, we cannot go it alone. The Minister himself made this point. The framework within which the action will take place must be the single market. How could it be otherwise? Most agree that we have benefited enormously from our membership of the single market, and our commitment and involvement are so deep that surely much of our energy policy must be framed within its context. The White Paper agrees. On page 20, it says:

"An open European market is an essential part", of an effective and transparent international energy market. It goes on to say that,

"the European Council agreed in March 2007 to a common European strategy for energy security and tackling climate change. This includes further steps to complete the internal market in gas and electricity", and supports "strong action" by the Commission to enforce this internal market. It also says quite a lot about meeting targets in Europe.

The carbon trading scheme in which the noble Baroness, Lady Wilcox, puts so much faith is based on the single market. However, efforts to liberalise the European electricity and gas markets have continued to be made for 10 years. The best way in which to ensure competition is to break up the large companies in France, Germany and Italy that dominate their markets. We are told that this can be done by unbundling, but some member states have strongly opposed these proposals for years. Certainly, people in Europe are free to choose their energy suppliers. In Britain, the percentage of households switching suppliers has been nearly 50 per cent. Elsewhere in the single market, however, the percentage of households switching their energy supplier is only in single figures or in the low teens, because the regulatory barriers in many member states as well as the problems of unbundling hinder the ability to switch suppliers. In some member states, price tariffs are regulated usually below market price, which makes it almost impossible for new suppliers to enter the market. This has gone on for years.

There is a trend towards liberalisation, and there will be movement towards it. The movement will be slow, however, because the single market has become an accepted fact of business life. It may be grumbled about but it is rarely questioned, and its benefits and barriers are taken for granted. Now that its original ideals have become part of our way of life, economic development through the single market is becoming tentative, piecemeal and incremental. This is what happens when ideals become an accepted part of everyday life. If we are to achieve our energy security and energy sustainability in the context of the single market, we must decide between several alternatives. Should we give more power to the Commission? If the Commission already has enough power, can we find more and better ways in which it can use it? Is there a halfway house? Is functional separation the answer? This, after all, is how we liberalised the impact of BT in the telecoms market. Or is the answer to change the focus of the single market—a new vision that will inspire faster and more urgent growth?

I believe that the way forward is through a new vision of what the single market is all about. We now take for granted the free movement of goods and services, people and capital. We accept that there are problems but, when reminded of that, we assume that things are moving in the right direction. With a new vision, progress, instead of tentative and piecemeal, will speed up and become more urgent. I am not alone in thinking this. In February, the Commission issued a communication called A Single Market for Citizens. Its vision is that the single market should be that of the consumer citizen. In January, the Treasury and the then DTI gave us their vision, which looks to business and industry to become more competitive, skilled and innovative in the face of globalisation, and that this more dynamic and competitive single market will promote jobs, growth and prosperity for the citizen. There seems to be a growing view that the vision for the single market should be inspired more by the citizen than by the market. And why not? Europe has an extraordinarily well educated population, and user-driven innovation is being recognised as good for politics and good for economics. It could certainly play a useful role in energy networks. Indeed, our own NESTA is funding research into this.

The White Paper strongly makes the point that we will achieve greater security of supply and sustainability if we operate within the framework of the single market than if we go it alone. I agree. Yet energy is now probably the most important and divisive issue facing the European Union. Perhaps a new way of looking at the single market will help to resolve this paradox. Does the Minister agree? Is he happy to continue as we are in the hope that eventually we will liberalise the single market and so achieve our objectives in this excellent White Paper, or does he think that we should speed the whole thing up by featuring the interests and concerns of the European citizen consumer? The success of the White Paper within a reasonable time depends on this.

Photo of The Earl of Liverpool The Earl of Liverpool Conservative 1:49 pm, 12th July 2007

My Lords, the White Paper provides a rich seam of aims and aspirations for the provision of our future energy needs and is a catalyst for promoting a debate on the vital need for this country to develop a coherent low-carbon future. The Government deserve to be congratulated on that, and I join other noble Lords in congratulating the Minister on his maiden speech from the Dispatch Box. However, there are a number of technologies to which the Government have not given proper consideration; I shall come on to these a little later. I believe that we owe Al Gore a debt of gratitude for his efforts to alert the world to the absolute necessity to reduce our carbon emissions. His film, "An Inconvenient Truth", left me in no doubt that we need to act now. The fact that the public are increasingly coming to this view is encouraging.

To those who say, "It's all very well reducing our carbon footprint, but what about China or India?", I say that we should lead by example. I know that this brings with it issues of competitiveness, but the importance of this issue is such that it transcends even those arguments. As the Minister said, energy saving is where our efforts should begin. That is why I am a little surprised that low-energy light bulbs still seem to cost 400 per cent more than conventional ones. I wonder whether the Government might investigate that. If the manufacturing process dictates such a high price, perhaps they could consider subsidising responsible companies and individuals who wish to make the changeover.

The fact that 8 per cent of all our electricity consumption is used up by machines on standby is appalling. More emphasis needs to be given by manufacturers to cutting that out altogether, and any assistance that the Government can give in that regard will be welcome. The national grid is a wasteful way of distributing electricity, as the White Paper's executive summary acknowledges. Almost 65 per cent of energy is lost through inefficient generation, transmission and distribution. The provision of electricity generating plants, be they CHP, biomass, solar and so on, should be sited near conurbations, as the White Paper again acknowledges. That would greatly reduce wastage.

I turn to three methods of electricity generation that have zero carbon emissions. The first is CSP, which stands for concentrating solar power. This is a mature and proven technology, which has been operating in California since 1985. A new plant went on stream in Spain two months ago and another one is planned for Sicily. CSP is the technique of concentrating sunlight using mirrors to create heat and using that heat to create steam, which then drives turbines and generators, just as a conventional power station does. Solar heat can also be stored in melted salts, enabling electricity to continue to be generated during the hours of darkness.

I hear siren voices asking of what relevance that is to us, particularly given the summer that we are having, but it has great relevance because of the recent development of highly efficient transmission lines, called HVDC, which have transmission losses of only 3 per cent per 1,000 kilometres. That would mean that we could receive electricity from the Sahara Desert with only 10 per cent loss of power. The amazing thing is that, if a CSP farm measuring 80 square miles was established in the desert, it could produce enough electricity to satisfy the entire needs of the whole of Europe. The Germans were sufficiently interested to commission a report, the TRANS-CSP study, which estimated that electricity imported from north Africa and the Middle East could become one of the cheapest sources of electricity for European countries, allowing us to make deep cuts in CO2 emissions and negate the need for nuclear power. My question to the Minister is whether the Government have given proper consideration to this technology and whether there has been any exchange of views with the German Government.

Secondly, I turn to tidal power. I understand that the Sustainable Development Commission is carrying out a study into the various ways of harnessing tidal power and that it will report in September this year. The report is eagerly awaited by those with an interest in this technology. I hope that proper and unbiased consideration will be given to tidal lagoons. These lagoons are offshore and actually encourage marine habitats; they do not cause silting problems, unlike the Severn barrage, which I do not advocate. Since becoming interested in tidal power, I have noticed that the Government are encouraging and indeed subsidising tidal stream technology and are inclined to support the Severn barrage, which will require public funding. However, there remains a distinct lack of support for lagoons.

My second question to the Minister is why this is so. Tidal Electric, the company seeking to construct such a lagoon in Swansea Bay, is not seeking any public funding and the research shows that it would be three times cheaper to produce electricity from lagoons as opposed to tidal streams. This fact was confirmed in Ofgem's report in 2005. Interested investors have been impressed by the detailed analysis and costings carried out on behalf of the company by WS Atkins and AEA Technology plc, but when they approach the DTI they receive a negative response, which seems to be based on an incorrect assumption that construction costs will be as high as those for building the Severn barrage. The potential investors are well known businessmen who understand the risks involved, but the killer punch for them is finding that the DTI does not support the project.

Surely every means of harnessing the power of our tides—we have the second highest tidal range in the world—should be given the chance to prove its capability. I find this negative attitude incomprehensible. I understand that the Minister has hardly had time to get his feet under his desk at DBERR and so an answer today is a big request, but I hope that he will be able to look at the matter and write to me in due course.

Thirdly, and lastly, I would like to touch on matters nuclear. As I said when we debated the energy review report last year, I am against nuclear fusion but strongly support nuclear fusion. As noble Lords will know, this type of nuclear power generation offers the potential to provide a major new source of energy using basic non-toxic fuels that are widely available, with no greenhouse gases or long-lived radioactive waste.

The international fusion research programme, which we support, aims to build and demonstrate full-scale power generation in a prototype power plant within 30 to 35 years. If such a prototype is successful, we will have discovered the Holy Grail for our future energy needs. With this in mind, and given the other carbon-neutral schemes that I have mentioned, is it not a great mistake to embark on building more nuclear power stations remotely sited and therefore grid inefficient, which will be hugely costly to build and will leave a lethal legacy of toxic waste with a life of up to 500,000 years?

We still have 2 million cubic metres of nuclear waste to deal with from our existing nuclear power stations. Although dealing with it in geological shafts may be a solution, I do not believe that we have yet arrived at a conclusion. Would it not be far better to try to speed up the nuclear fission research? Meeting the energy challenge provides us with a once-in-a-lifetime opportunity to think outside the box, which I have tried to do today. I hope that when future generations look back on our efforts and our decisions we will not be found wanting.

Photo of Lord Hunt of Chesterton Lord Hunt of Chesterton Labour 1:59 pm, 12th July 2007

My Lords, I welcome this debate on the future of energy, including nuclear energy. I also welcome the opening speech by the Minister, with whom I have a connection: I declare my interest as a professor at University College, a college that he has been very active in supporting. I began my career in energy physics and technology with the old Central Electricity Generating Board in the 1960s as it installed many of the nuclear and fossil-fuel power stations that are still operating, as the Minister reminded us. I am also on the advisory board of EDF Energy.

I have had various discussions about nuclear energy issues with officials and colleagues in several countries, with very different perspectives. I very much hope that as the Minister travels around the world selling UK products and ideas he will also bring back many of the ideas from other countries, which I feel are rather lacking in both the documents that we have seen today.

It seems to me that our role in this House is to consider, as well as short-term issues, very long-term issues affecting the UK. My first debate in this House was on whether the UK would last at all as the North Sea rose and parts of East Anglia were flooded and disappeared. Today, we have to consider our very long-term energy requirements. For example, in one document, reference is made to the possibility of uranium running out after 85 years. My colleagues in the United States have been talking about energy policy for the next 1,000 years and are considering all the options. I believe that we need this wider and longer-term perspective. I pay tribute to the noble Earl, Lord Liverpool, for thinking over the long term.

The policies that the White Paper advocates on energy conservation, renewable energy and increased efficiency of existing plant are all commendable. We should consider not only energy conservation, but also not increasing our energy use. The Japanese Parliament and its ministries are now allowing the temperature to rise to 27 degrees Celsius in their buildings. They are taking off their ties and are wearing a new style of clothes. If we were having a really hot summer and were sitting in here in our ties with the air conditioning running, that would not be a very good role model. The GLA is extremely concerned about the increasing use of air conditioning in London. In fact, far from saving energy, many buildings in Britain now use more energy than before.

The total energy reduction required—as the Stern report and, earlier, the Royal Commission on Environmental Pollution concluded—is of the order of 60 per cent. In some estimates it is more. This will require a wide range of options, as was emphasised by the Socolow report of Princeton. All over the world, scientists and engineers are increasing and improving new technologies; for example, conventional fossil-fuel power stations, to which we referred, are now running sometimes at 52 per cent, which is a great improvement. Even in China some of the most advanced power stations are being used, as well as, regrettably, large numbers of very inefficient power stations. As the report emphasises, improving fossil-fuel technology is vital.

The Minister remarked on the important role of individuals and local communities. Local communities have been very pioneering in exploring ways of introducing energy saving, using new technologies and galvanising people. I hope that the Minister will talk to his colleagues in Defra, as they steer the Climate Change Bill through this House, to remind them that local authorities have a big role. Currently, local authorities are not mentioned in that Bill. I have heard from little spies in Defra that that was a bit of a mistake, so I hope that he will rectify that.

On long-term energy, it is widely believed that the world will run out of oil and gas in perhaps 30 years. We may run out of coal in 300 years. As I mentioned, US Department of Energy colleagues are thinking on those timescales and longer. India, China and Russia are also thinking on these very long times. They are thinking not only of conventional nuclear, but of more advanced systems using, for example, fusion and fission, reprocessing uranium and using the vast reserves of thorium, which could also be used in more advanced nuclear technologies.

I disagree slightly with my noble friend Lord O'Neill of Clackmannan, who implied that nuclear issues, including safety, may be rather dull and that we need to employ people. I think, far from that, that this is one of the most exciting areas of physics. Advanced physics, on which we have had debates in this House previously, may be able to clean up nuclear waste and to reprocess and transmute the elements. We may end up not having to store material in the ground for 10,000 or 500,000 years; it may be dealt with in 100 years. Study groups in which I have participated at the International Atomic Energy Agency in Vienna have illustrated that. I regret that these have not been explained to politicians in this country. There is a high level of ignorance about the possible technologies that could be available.

As other speakers have commented, nuclear power could well be an important part of the energy security of this country, but it is essential that UK politicians, the public and the scientific community are encouraged to understand and to look into these wider possible technologies and sciences. The White Paper and the nuclear paper are not as broad as they should be, so I very much hope that, as we move forward during this year, more documentation and decisions and a wider international context will be given to us. For example, the American Institute of Physics has much longer and wider-ranging debates than anything we have had in this country.

The Minister mentioned that nuclear power accounts for 18 per cent of our electricity, although the figure is 80 per cent in France. I hope that he and other Ministers will meet groups around the UK to consult on and explain about nuclear power. I addressed a packed meeting on climate change near Hartlepool, where we have a nuclear power station, and many officials and local leaders were in the audience. It was interesting that, in this area familiar with the practical benefits of nuclear power, there was unanimous support for nuclear. The same has been found in France. Wherever there are nuclear power stations, there is great support from the communities in those areas. Provided that the Minister moves out of NW1 or NW3, I am sure that he will find a sensible view.

The Minister may also need to go beyond that and proselytise in the sensible party opposite, the Conservative Party, because the Liberal Democrats, the SNP and Plaid Cymru seem to be completely fixed in their antagonistic view towards nuclear power. By combining forces, we may get some sensible decisions, which are vital for this country.

Photo of Lord Maclennan of Rogart Lord Maclennan of Rogart Spokesperson In the Lords (With Special Responsibility for Civil Service Reform), Spokesperson in the Lords, Scottish Affairs

My Lords, I ask the noble Lord to consider that the issue of nuclear power is subject to frequent debate among Liberal Democrats. There is a wide spectrum of opinion, as one would expect in a broadly intelligent party representative of the country as a whole. Where the majority view lies has fluctuated. The party has certainly been concerned about the downside of nuclear power, but it is not a monolithic party with monolithic views on that subject.

Photo of Lord Hunt of Chesterton Lord Hunt of Chesterton Labour

My Lords, I apologise for not appreciating that diversity of opinion. This is the first time that I have heard it expressed in this House. I have concluded my remarks and I look forward to hearing from the Minister.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative 2:09 pm, 12th July 2007

My Lords, following the exchange that has just taken place, I point out to the noble Lord, Lord Hunt, that the leader of the Liberal Democrats in this House has been a member of the Nuclear Energy All-Party Group for a good many years and, as with others, he has many friends.

At this stage, I am not going to attempt another comprehensive assessment of the White Paper. I want to concentrate on a few points. My noble friend Lady Wilcox said rather firmly that the Government need to become much clearer on how they are going to achieve their objectives. We all welcome to the House the noble Lord, Lord Jones of Birmingham. I should like to add to the congratulations that have already been offered on what was, by any standards, an excellent maiden speech. I would add only one thing. The most encouraging statement that the noble Lord made during the course of his tour d'horizon was that decisions must be made this year. He nods vigorously. That is absolutely crucial and what we need.

A few weeks ago at the Foundation for Science and Technology—I declare an interest as its president—we held a discussion on the energy White Paper. It was attended by a wide range of people from government public bodies, universities and industry. The Minister will be interested to know that we had a presentation from his senior civil servant, Mr. Willy Rickett, the director-general of the Energy Group—in what was then the DTI and is now, I think, the DBERR, which sounds like a sort of French aristocrat. There were also other energy experts.

I will mention one or two of the points that arose during that discussion. Referring to the White Paper, one speaker asked whether the policy is market-oriented or government-oriented. He quoted the Financial Times aphorism, "Is it Gosplan or Greenplan?" The answer is that it is a bit of both. The Government stress that investment decisions—as has been said, over the next two decades billions of pounds will need to be invested in this country to keep the lights on—must be made by the market, by energy companies and by the financial markets from which the investment funds will flow. However, the Government can and do use a variety of fiscal and other instruments to steer markets in the directions which they want. An obvious example, mentioned several times today, is the renewable obligations certificates to subsidise renewable energy.

Ministers often boast about the ROCs and the modest expansion in renewable energy that they imply. There is always the implication that this is financed by a government subsidy. It is not. The subsidy comes directly on to consumers' bills. Ofgem has estimated that cost as £15 per year on every electricity bill.

The other aspect of what I might call the Gosplan features is this huge list of other organisations, bodies, principles and policies which represent the Government's view. If I may, I am just going to take a moment or two to recite what they are. We have had mention of the EU Emissions Trading Scheme and I will come back to that in a moment. We also have the carbon reduction commitment, the energy performance certificate, the carbon emissions reduction target, the carbon capture and storage initiative, the distributed generation package, the biomass strategy, the energy efficiency commitment, the renewable transport fuel obligation—my Lords, I am half way through the list—the low-carbon transport innovation strategy, the environmental transformation fund, the Energy Technologies Institute, the climate change levy, climate change agreements, the Coal Forum, national policy statements, Warm Front, the UK fuel poverty strategy, the Sector Skills Council, et cetera, et cetera.

That is not an exhaustive list. On top of that, there is the new Planning Bill and the Climate Change Bill. If the noble Lord, Lord Jones of Birmingham, could do something to rationalise and bring coherence to this vast tangle of government-sponsored initiatives, he would make a huge contribution to an excellent energy policy.

Many of the contributors to our debate at the FST laid stress on the overriding need for an effective and realistic mechanism for pricing carbon. That is essential if these investment markets are going to work properly. It is an issue which, the noble Lord, Lord Jones, may have been warned, I have raised on several occasions in this House and on which I have had lengthy correspondence with his colleague, the noble Lord, Lord Truscott, notably last February.

The noble Lord, Lord Truscott, acknowledged that the EU ETS, the chosen mechanism for pricing carbon, was not working properly in phase 1. It was hoped that the review, then in progress, would bring about improvements. He promised that the White Paper would set out the Government's view in more detail. Well, my Lords, it does. I draw attention—one has to hunt for it, but it is there—to Annex C, at the back of the White Paper. I am not going to quote it all as that would be inappropriate. However, four perfectly valid bullet points are set out on page 334. First, the EU ETS,

"should ... set safe, predictable and affordable limits on emissions, which tighten over time".

That is quite right. Secondly, it should,

"be improved such that it is more efficient with fewer distortions".

Thirdl, it should,

"cover the right emitters", which it most emphatically does not do at present. The carbon capture and storage is not yet in it. Fourthly, it should,

"form the hub of a global carbon market".

We are a long way from that.

Where does that take us? How are the Government getting on with this? What is being done to make these thoroughly desirable objectives happen?

In the debate on 8 February on the electricity industry, I asked the noble Lord, Lord Truscott, about the so-called carbon hedge proposal advanced by EDF Energy and others. Put briefly, it is a market mechanism for establishing a floor price for carbon. That would be a valuable start. In his letter to me written after the debate, on 19 February, the noble Lord, Lord Truscott, commented generally, but he did add the words, in italics, in the final paragraph, that,

"we committed in the Energy Review to 'keep open the option of further measures to reinforce the operation of the EU ETS in the UK should this be necessary to provide greater certainty to investors'".

EDF Energy briefed me this week to the effect that nothing whatever is being done about the carbon hedge proposals. Can the Minister now tell us what other options, what further measures as promised by the noble Lord, Lord Truscott, are being pursued to attempt to deal with the question of trying to get a clearer price for carbon.

The future of nuclear policy was raised by a number of noble Lords. This had a very bad start from the risible 2003 White Paper. That was followed by what has been described in the courts as "the deeply flawed consultation", following the Greenpeace action. Therefore, Ministers had to start again. In May, they issued The Future of Nuclear Power, a consultation document with the closing date of 10 October. I am quick to give credit where credit is due. I think that is a very splendid consultation document. They have asked all the right questions and learnt the lessons of the court case. It is very well written, but the botched consultation of the previous year has cost us a year.

The new consultation makes it very clear that no decisions have yet been made. This is a consultation paper. I have seen reports of meetings held by some of the noble Lord's officials, including one excellent meeting held in the north-west by his senior man, Mark Higson. It is clear that Mr Higson and others have been bending over backwards to make it absolutely clear that no decisions have been taken: this is a consultation document. If he said "we are consulting" once, he said it 10 times. So I come to the point raised by my noble friend on the Front Bench. What are we to make of the question and response made at Question Time in the other place on 4 July? Sir Menzies Campbell asked:

"Will the Government now abandon their headlong rush towards a new generation of nuclear power stations?".

In a long answer that also covered other things, the Prime Minister said:

"That is why we have made the decision to continue with nuclear power".—[Hansard, Commons, 4/7/07; col. 954.]

It is interesting to note that, absolutely right on cue, a letter has come from Greenpeace addressed to the Prime Minister. It states that this makes the consultation a nonsense, it will need to start all over again, and that although the Government would be prepared to consult widely, they will have to embark on yet a third round of consultation.

We must have an answer from the Minister this afternoon to the question: what do the Government intend to do about that? If we are simply told, "I am sorry. The Prime Minister got it wrong and he shouldn't have said that", we will understand. Although he had been in his job for more than the five days that he said, nevertheless it was clear that he had not been properly briefed on the issue. Many people would accept that, although I doubt whether Greenpeace will. The noble Lord may find that there will be another case and we need to be told this afternoon what the Government are going to do about it.

Finally, I return to the issue I raised at Question Time on 28 June about the siting of new nuclear power stations. I should make it perfectly clear that I am not asking where these should be, and I accept entirely the thrust of the answer given by the noble Lord, Lord Truscott, in which he made it clear that the Jackson Consulting report was one of several policy documents being fed into the system. Rather, I want to ask about the process that the Government have in mind for deciding these issues. Both last year and this year the Government have made some important announcements about the siting process, and I have a few questions based on statements which have been made. The first appeared in the Energy Review Report of July last year at page 124. The Government promised that they would,

"monitor whether an appropriate market in nuclear sites is developing".

I am aware that Ofgem is worried that somehow it is going to be drawn into the process because there will be arguments about whether there is free and fair competition, and whether those who sit on the present sites, such as the Nuclear Decommissioning Authority and British Energy, will give proper access to them. If there is a conflict of interest, what role will the Government play in helping to resolve it?

Then there is the question that arises in the nuclear power consultation document published in May this year, when the Government proposed that they would,

"invite nominations for possible sites for new nuclear power stations", and on,

"restricting build to the vicinity of the existing sites".

Who will be invited to nominate the sites? Would the nominations be limited to the current owners or could another energy company, perhaps a speculative developer, nominate a preferred site? Which other bodies might be able to do that—the local authority or the regional development agency? Again, I think that the Minister could answer that without in any way anticipating where these sites will be.

Thirdly, in the Energy Review Report last year the Government noted that:

"There might be other attractive sites, for example, sites with retiring fossil fuel generators".

Many of those are power stations that are going to have to close because of the EU Large Combustion Plant Directive. Will—or perhaps I should ask, could—retiring coal power station sites be nominated for new nuclear development under the Government's siting consultation process?

All these questions are based on statements that the Government have already made. I hope that I can get some answers. When the noble Lord comes to wind up the debate, he will recognise that I do not expect him to give me detailed answers to my questions, but I would very much welcome a general response and perhaps an undertaking to write to me in greater detail.

The Government have embarked on what seems to me at last to be the right road towards what might become a viable energy policy. As I said at the beginning of my speech, it is very welcome that we can expect decisions before the end of this year. We shall want to hold Ministers firmly to account as the decisions which must be taken, are taken.

Photo of Lord Chorley Lord Chorley Crossbench 2:26 pm, 12th July 2007

My Lords, as is customary, I start by congratulating the noble Lord, Lord Jones of Birmingham, on his maiden speech. He has made it on an important subject: energy policy and the recent White Paper. This is the third White Paper in four years, and I am bound to say that the previous two rated, in my book, as perhaps only beta minors. This one is much better; it is more comprehensive and begins to give us a well argued way forward. But, as many noble Lords have said in the debate, we need to see some action now, and therefore we all welcome what the noble Lord said this morning without any prompting, shall we say. I say this in the main from the rather narrow fronts of, first, electricity supply and, secondly, climate change.

In previous debates I have talked about carbon emissions in transport, particularly aviation. They are important and quite topical subjects, but today I will confine myself solely to electricity supply. I do so for several reasons. First, as the Minister said, it is our biggest single CO2 emissions source, at about one-third. Secondly, it is probably the easiest one to deal with. Thirdly, as the White Paper acknowledges, it so happens that the next dozen years will present a unique opportunity to do something significant and make a major contribution to CO2 reductions, and to do so in a manner which is or could be near economic. The caveat of "near economic" is of great importance. We can do things which are pretty expensive—offshore wind power is the obvious example—but there are limits in terms of security of supply and of cost. The opportunity is derived from the fact that, between now and 2020, about a third of our generating system needs to be renewed. All this is well argued and set out in chapter 5 of the White Paper.

I am not going to speak at length about renewables but will make three brief points. First, they are in my view a red herring, a sop to the "hair shirts and sandals" people. They would be lucky to achieve 20 per cent, which is just as well as they are expensive, which is my second point. A new renewable obligation of 20 per cent is just about affordable in terms of subsidy, but the figures are beginning to get pretty big and it is increasingly worrying. Thirdly, the environmental damage to our countryside is factored in only when the planning aspect is brought into play. In that connection, the thought of a Severn barrage horrifies me. The damage it will do to wildlife and the estuarine countryside—that is, the birdlife—is difficult to contemplate. Whether a tidal flow scheme, as compared with a barrage, is a possibility may be worth examining. Nor do I wish to say anything about nuclear. The Government are still treading gingerly in this area. I can understand why, and I hope that under the new leadership we can move forward. A new consultation document—here I agree very much with the noble Lord, Lord Jenkin of Roding—has much to commend it. There is no question, either on basic economic grounds or on CO2 grounds, that the new generation of nuclear power stations is pretty good. Surely by now we can put to bed the decommissioning issues. We have had countless reports on this, including some from House of Lords Select Committees. Surely we can move on now, following the consultation. I encourage the Government to grasp this nettle. In the interests of diversity of supply—not too many eggs in one basket, that is—I would like to see around 25 or 30 per cent of our supply from nuclear.

I come finally to fossil fuels—about 50 to 60 per cent of future supply. Gas and coal are highly economic, excluding the carbon footprint. There are big question marks, of course, over gas supplies from Russia, but we can thank President Putin for alerting us to that danger. The other big question is surely the economics and the technical question of carbon capture and sequestration—CCS. How well are we—not just Great Britain—progressing with this technology? What is the timescale? When do decisions have to be made? What do the electricity supply companies think? In my notes I wrote, "Where have we got to on the important and imaginative scheme of BP at Peterhead?". I got the answer from the speech of the noble Baroness, Lady Wilcox. BP has had to abandon it because the Government were incapable of coming to a decision. I am appalled by that. Now that we have a businessman in charge, perhaps these sort of disasters will be prevented. I understand that decisions are required from Government, but where have we got to? I go on about this because grinding away at the technology of CCS, carbon capture and storage, seems to be the key to the future of the electricity supply industry. I suspect that CCS, combined with other technical improvements in electricity generation, is not that far off from being economic. Does the Minister agree? What price does his department put on carbon that would equate with the extra cost of CCS? In addition, if he agrees with this line of thought, do we have enough regulatory powers to push the electricity companies in this direction? The White Paper suggests, in rather general terms, that Ofgem has these powers. Can the Minister confirm that Ofgem has the power to ensure that the generating companies make timely and appropriate investments with low carbon footprints? I am referring here to box 5.1.1 of the White Paper.

I conclude with a few observations on the EU Emissions Trading Scheme, which has been referred to by a number of noble Lords. I am sure that the Government are right to seek agreement to strengthen and reinforce the ETS to provide firms with greater long-term carbon market certainty. In particular, we surely need a much higher carbon price—other noble Lords mentioned this—and a much more stable price, if CCS is to become an economic reality. Moreover, ETS is surely the way forward to international carbon trading, with all the benefits of classical economic efficiency. It is a large and hugely complex subject, but the objectives are clear. I leave it at that.

Finally, if there is one conclusion that comes through from this debate, it is that we have had enough talk about White Papers. We now need decisions and actions.

Photo of Lord Brennan Lord Brennan Labour 2:34 pm, 12th July 2007

My Lords, this White Paper is to be welcomed, as is the manner in which it was presented to us by the Minister. He is well equipped, from his experience and abilities, to deal with a very complex problem. He will remember Harold Macmillan giving advice to colleagues, when dealing with something very complex that takes a long time: he said that the balance between delivering a cliché or making a terrible mistake is a state of delicate equipoise. We are confident that he will avoid both.

I want to concentrate on chapter 1 of the White Paper, which deals with energy security, and in particular security of supply. The word "security" in this context is used in its traditional rather than its intelligence sense. So where in this context we speak of "national security", we mean it in a most compendious way—it includes government, business, industry, finance, the people and the way we live economically in this country. Security of supply of energy requirements that will sustain our national security is absolutely vital. All the other parts of this White Paper are equally important. But in the shorter term—the next 10 to 20 years—we cannot afford to neglect our critical dependence on traditional energy supplies. Their security is therefore something we must work for. We should work for it in our national interest, in the expectation that that would usually coincide with the international interest.

What are the essential factors that affect our national interest at the moment? Most of our energy requirements will have to be met by imported supplies for the foreseeable future. We remain a trading nation, right down to energy. Secondly, the chief executive of Shell said recently that by 2050 the world's use of energy will double from its present volume. Thirdly, the International Energy Agency this week predicted a period of five years plus of what it called a supply crunch—an extremely tight market. Higher oil and gas prices will remain. Of course the economist and the financier will tell us that most of the time that can be accommodated. But it cannot readily be accommodated at the personal level. Higher oil and gas prices, persisting over time, mean more expensive petrol, more expensive utilities and more expensive food, so that every citizen is affected economically.

My fourth point involves resource nationalism. It is here to stay in some countries, and, because they have such massive resources, the rest of us will accommodate the nationalisation of their products. But this resource nationalism means that, in a period of higher prices, there will be a restricted supply and little inclination to spend lots of money on discovery and exploration—a circular system that maintains a high price level, if that is possible.

The last point about these external factors concerns resources. Anyone who has been to an energy conference will remember the bar charts for gas and oil that show us, each time, which entities supply the most and have the greatest reserves. For gas, it is Gazprom; for oil, it is Saudi Aramco. Those bars on the chart literally go off the page compared with any other similar entity. In effect, two entities are in seriously important positions of control of world energy supplies.

What do those five factors mean? They mean that we as a country need energy at an expensive price, which is likely to continue, from limited sources, some of which may be unstable, with little prospect in the foreseeable future of big new reserves being found. That state of affairs requires of our Government and our country some really serious thinking about security of supply. I propose some suggestions under three headings.

The first is that we adopt a more aggressive search for energy supplies. One of the least publicised but most important achievements of the last Government towards their end was the agreement with Norway for long-term supplies of energy—an ally, a neighbour and geopolitically secure. What about Qatar? I imagine that our ambassador there is treated as one of the more important people to speak to on the phone occasionally. What about Libya? It is opening up into the market. Algeria presently wants to feed gas into Spain, France and probably beyond.

What of our gas infrastructure, which is designed to meet these new sources? That means going out into the market and getting it. How do we do that? First, I suggest an advisory group; not a talking shop, but one which consists of energy experts, financiers and geopolitical planners, who meet the Government from time to time to talk it through, as would any big business if it had the capacity to deal with such a problem. No civil servant reading the White Paper could enjoy the hubris of thinking that any Government could achieve it all through their own resources.

Next, why do not we appoint "energy ambassadors"? I refer not to diplomats but to people who cross the energy, political, business and government divides, and who spend their time, within reason, looking for our markets, preserving those we have and seeking to make our supplies secure, being on top of the issue. This is geopolitics of a serious kind. May Kaldor's recent book, Oil Wars, makes plain to us that which we should have known historically: that the present panorama in many ways repeats that which existed towards the beginning of the 20th century—the oil wars of that time where Baku was the Riyadh of its epoch. So I suggest a more aggressive policy built on skill, experience and determination.

Next, we must look for a more reliable market. The governance of the countries upon whom we are dependent in this regard is unreliable. It is amazing that we should be conducting the world economy without anyone really knowing how much oil reserves there are or what the future gas capacity will be. For 15 consecutive years, Saudi Arabia has declared that its reserves are 280 billion barrels, even though in the same number of years it has consumed 100 billion barrels. The absurdity of that state of affairs should worry us if, as I pointed out, Saudi Aramco is the key supplier. Where is it all going? So I suggest better governance and more transparency. At 1.29 of chapter 1, the Government say that the UN should work for that transparency in the interests of us all.

Next, under the heading of the more reliable market, we have an energy charter. It exists to preserve a system for energy usage around the world, based in Brussels. As my noble friend Lord Haskel indicated, why do we not have a European energy security charter to which we sign up as allies and supporters of a single market, not to divide the supply of energy into Europe but to unite it in the most productive way? If one looks at a map showing gas and oil supplies into Europe, it is all from the east—not the Middle East. One can see the lines for gas and oil criss-crossing pretty well every European country. Has anyone planned it, negotiated it, or thought it through? Of course not. It has happened coincidentally with one national interest meeting another. So the Russo-German gas pipeline under the Baltic could create the supply alliance between two very powerful countries. What about the remainder of Europe? Again the word "Russian" is not coincidental here. Its proposal for an oil pipeline—Bulgaria, Greece and Italy—completes the circle of supply and potential market control. That requires European action.

Lastly, I refer to a market with security of supply that remembers the developing world. I start with national interest, not charitable sentiment. If by next year, or the year after, we as a nation will be the first in the G8 to reach 0.7 per cent in our commitment to development aid, do we want it wasted because it will go to countries which do not have proper energy supplies or systems which will be necessary to make our development aid more beneficial to them? At 1.50 of chapter 1, the Government have some really serious proposals: an energy research programme for Africa; an infrastructure consortium; and the involvement of the development banks.

I have spent a considerable time on security of supply because it can be forgotten. I am talking about today and the tomorrows of the near future. They are vital to us. This is an extraordinarily complex problem. It will benefit from the following: informed debate; evidence-based decisions; financial prudence; and all of us in Parliament and Government being geopolitically astute, as I am sure our new Minister will be.

Photo of Lord Redesdale Lord Redesdale Spokesperson in the Lords (Agriculture & Energy), Environment, Food & Rural Affairs 2:48 pm, 12th July 2007

My Lords, I congratulate the noble Lord on his most uncontroversial maiden speech. I say that because, when I came to the House 16 years ago, I was given one piece of advice by noble Lords. They said, "On your maiden speech you can say anything you like because everyone will be nice to you. On your second speech the knives are out; you had better watch your back". So basically I am making my speech to his second speech while saying what a wonderful first speech he made.

I remind the noble Lord that we have met on one occasion previously, when we were both in teams on "University Challenge". I represented the House of Lords; the noble Lord represented the CBI. It goes to show the degree of aspiration to which this House is held by those outside that we were put up against the Oxford University Press while the CBI was against the English National Opera. I believe that we had a slightly harder challenge.

I wish immediately to ask one important question, because many noble Lords have raised the issue. What is the noble Lord's department called? As I passed down Victoria Street, I noticed that there was no D before the letters BERR, so does that make it? If you add the D, there is a slightly more interesting connotation, because it sounds like debris. I wondered whether that was a hangover from somebody in the DTI leaving this as a rather amusing aside for the new department. I am sure that the Minister can give us a conclusive analysis of how we should refer to the department in future.

This debate has been held on a number of occasions. As many noble Lords realise, a small but happy band in this House comes back to the issue. As we have had three White Papers, all of which were startlingly similar in the conclusion that they wanted to reach, the arguments have become somewhat calcified. These Benches are obviously of the hair-shirt and open-sandal brigade mentioned by the noble Lord, Lord Chorley, because of our view on nuclear energy. However, as was said from these Benches, that view is not held by everybody in the party and might well change if situations change.

If we moved to thorium reactors, which the noble Lord, Lord Hunt, mentioned, I would be the first to say that nuclear energy would be a very positive step forward. However, our position is based on the cost of nuclear power and the amount of energy that it produces. We should look at the reality and not put ourselves in the position of the French, who get 80 per cent of their energy from nuclear power. We are talking about 14 per cent of our energy being produced by nuclear power in the next few years, going down to under 10 per cent unless new nuclear power comes on stream. The figure will probably go below 10 per cent; the recent results from the Hinckley Point reactors, and the state of the carbon rods in them, give the impression that they might have to come offline far sooner than we thought, given that we were hoping for an extended life.

So in the next 10 or 20 years we are looking at not relying on nuclear to provide a massive proportion of our energy. Obviously, if the planning regime is changed under the White Paper we could bring nuclear power online far quicker than at present. However, we are still looking at between five and 10 years to bring nuclear power stations online. It will depend how many nuclear stations are brought online. If we are looking to meet a significant proportion of our energy needs from nuclear, we are talking about a very large number of reactors being built. It would be interesting to know the cost of that. By going down the nuclear power route, we will lock ourselves into a power system that is 30 years old. We will lock ourselves into the national grid and therefore close the door on distributed energy, which is another policy that the Government are looking at.

Nuclear power is seen by many, especially those involved in the environmental field, as a silver bullet against climate change. I have a separate issue with that, because no carbon audit of the life cycle of a nuclear power station has ever been undertaken. Although we have talked about waste and waste management, there has never been an assessment of the carbon footprint of deep geological storage.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My Lords, I am most grateful to the noble Lord for giving way. Could I suggest that he gets in contact with British Energy, which did exactly that with regard to the life cycle of the nuclear power station at Torness?

Photo of Lord Redesdale Lord Redesdale Spokesperson in the Lords (Agriculture & Energy), Environment, Food & Rural Affairs

My Lords, that is interesting. British Energy might have done that, but I should have thought that the Government, who are meant to be procuring energy, would have done it themselves. In response to the multiple Questions that I have tabled over a couple of years, the Government have said that they have never undertaken a life-cycle carbon footprint assessment, and they have never shown any knowledge of that carbon footprint. Of course, we are also talking about the legacy costs of nuclear power, which will have a long carbon tail in the management of waste. However, if technology moves on and nuclear power is shown to be far more reliable and to have a far lower carbon footprint and an acceptable cost, I am sure that my party will look again at this issue.

I congratulate the Government most wholeheartedly on the recent commitment to 20 per cent renewables by 2020. That is visionary and should be recommended. I believe that it is also achievable. The Severn barrage has been noted. If we are to meet that 20 per cent target, the Severn barrage must be considered, because 5 per cent of the country's renewable energy coming from one source is not something that can be written out of the mix. However, I note that a report is soon to be published on this. The environmental impact has to be looked at. The environmental report considered the impact on the birdlife. We should not forget that global warming has resulted in the temperature in the Severn estuary rising by 1.5 degrees in the past 10 years. Whatever the cause of that—many people attribute it to global warming—it has displaced one of the bird species that was at risk from temperature rises, because it is has made the Severn estuary uncomfortable for that species as a breeding area. This should be taken into account.

If we are looking at global impact, we cannot just say, "We shall not have wind because it would destroy the view". I live in a national park in Northumberland and I am very aware of the view and of the impact that wind energy has. However, I am also very aware that when we had very dry summers there was a massive risk of fire, and many of the native species in the national park were under threat due to lack of water. Global warming will increase periods of drought and will fundamentally change the view in national parks and their flora and fauna.

On the underpinning of the White Paper, there is a slight problem, especially with the 20 per cent renewables target. The White Paper is based on the assumption of a high carbon price of around 30 ecus a tonne under the European trading scheme. If that is not realised, some of the underlying philosophy is at risk. There will also be a slight challenge for renewables, which, as the noble Lord, Lord Jenkin, said, were receiving ROCs. If the 30 ecus a tonne is not achieved, that would fundamentally challenge the concept of whether nuclear makes sense. I refer to the low-carbon generation offset of nuclear. Has any work been undertaken in the department? Is it looking at this problem? Does it believe that the price will remain high? If the carbon price collapsed, it would have a fundamental impact on the underlying precepts of the White Paper.

The White Paper mentions a number of other issues. When I first read it, I thought that it had only one aim in mind—not whether but when we should have nuclear. I am not asking the Minister to say exactly when the first foundation stone is to be laid and whose name will be on it, because Greenpeace will write a letter—I shall happily send it a copy of Hansard to help it to write that letter. The problem with the White Paper is that it focuses on nuclear, whereas there are other extremely important aspects, energy efficiency being one of the main ones. I very much hope that the Minister will consider social tariffs and get Ofgem to look at them. There is an issue of fuel poverty in this country. You cannot just raise fuel prices and expect people not to suffer. However, if you use the Scandinavian model of social tariffs, whereby a set amount of energy is charged at a lower tariff, any higher energy user has to pay far higher charges for the excess energy that they use. That would be a good social indicator of how people could reduce energy use.

This is not an insignificant issue. I recently had a meeting with the Nappy Alliance, which is for reusable nappies. A report came out on whether reusable nappies were better than disposable nappies. In energy terms, if you wash and dry the nappies, reusable nappies are not as good, according to the report. But if you hang out the reusable nappies on a clothes horse, suddenly the figures change around. We must look at social changes, because it is not difficult to use reusable nappies. I speak from the experience of having changed at least two this morning. I have an eight month-old baby, and I had just changed the nappy when I had to change it again, although perhaps that is more information than is worth while on a Thursday afternoon. Such changes can have a massive effect. People do not realise how much energy tumble driers use. Each bill is bolstered by an estimated £100 in those households that use tumble driers as opposed to those that do not. It is not a difficult situation to remedy; I think that you can buy a clothes horse for £12.99 in John Lewis.

Another indicator is smart meters. The Government really must firmly grasp this issue. There is a conflict between those in the industry and those producing the meters over which type of meters should be put in. If you put in a basic meter, which are estimated to cost between £40 and £60, it will show very little information of value to the consumer. It will show quite a lot of information that is valuable to the generator, but not to the consumer. If you put in the meters that cost between £90 and £140, you could have information that is valuable to the consumer. For example, it could direct your washing machine or dishwasher to turn on in the middle of the night when energy is at its cheapest. That has a massive impact on the use of energy. It would also tell you how to switch energy suppliers. However, the nub of the problem is who pays for that. At the moment, the supplier pays for the meter. It is not a great indicator if you are supplying a meter that gives information on how to change to another supplier the minute that its energy is cheaper. The Government need to look at that issue, because an opportunity is being lost to introduce energy information that could save an estimated 10 per cent of domestic users' energy supply.

Another small issue is EPCs, or energy performance certificates. The two things that you can change to raise the energy rating of your house are your insulation and your boiler. If energy efficiency credits were used by companies to offset the cost of a new boiler, using the information from EPCs, that would have a massive impact on the use of gas by domestic suppliers, and it would help gas suppliers, who have an obligation to reduce the amount of gas that they use.

I am fast running out of time, but I end on the cautionary note of carbon storage and capture. I commend the Government for having their competition for the first plant for carbon storage and capture. The unfortunate aspect is that two carbon storage and capture plants that were being built and were ready to operate have now gone offline, and their operation has been suspended because money is no longer available. Earlier, the Minister said that the Government did not want to put all their eggs in one basket, but we are going for one project and we have lost two, which is very unfortunate.

Photo of Lord de Mauley Lord de Mauley Shadow Minister, Cabinet Office 3:04 pm, 12th July 2007

My Lords, I add my voice to those welcoming the noble Lord, Lord Jones of Birmingham, and paying tribute to his maiden speech today in your Lordships' House. Energy is a good example of an area in which long-term consistency of policy is critical and therefore a large measure of cross-party consensus is important. We therefore welcome the Minister, who we believe is someone with whose views we have much in common. He so rightly referred to the need for efforts in the international world, because we are a relatively small part of the overall problem. The noble Lord, Lord O'Neill, referred to China and India. The Minister also mentioned the need to work on our European colleagues towards achieving a common approach and, importantly, liberalised markets. The noble Lord, Lord Haskel, also spoke of his concerns in this area. However, my noble friend Lord Liverpool, speaking on China and India, referred to the need for us none the less to set an example.

I am grateful to all noble Lords for their contributions. The noble Lord, Lord Teverson, spoke about the challenge of incentivising electricity suppliers to reduce power usage and about "hot rocks", a subject on which he has spoken before. The noble Lord, Lord Tanlaw, raised his special subject of daylight saving, and I reassure him that the Official Opposition's position has not changed since we last debated the matter, when we gave very good reasons why we opposed precipitate change. The noble Lord, Lord Tanlaw, also made a good point about the dangers of pursuing biodiesel at all costs and the huge danger of the unintended consequences of that, which already include massive deforestation not only in south-east Asia, especially Malaysia—which he mentioned and is a country I know well—but in South America and elsewhere.

My noble friend Lord Dixon-Smith spoke about the conflict between certain growth in the use of energy, especially in the developing world, and the vital need to reduce the emission of carbon dioxide and other by-products that are so damaging to the environment, and about the huge difficulties which we acknowledge in squaring the circle. He spoke about his three Hs—heat, hydrogen and horticulture—and about the dangers of overemphasis on biofuels. The noble Lord, Lord Hunt of Chesterton, spoke chillingly about his concerns for the very survival of the United Kingdom and of the need to think for the longer term and about lessons that can be learnt from overseas.

My noble friend Lord Jenkin spoke of a continued need for clarity, and he asked the Minister to confirm the Government's commitment to the market. He congratulated the Minister on his acknowledgement of the need for a decision this year on the nuclear question. The noble Lord, Lord Chorley, was of a similar mind to my noble friend on this issue. My noble friend Lord Jenkin mentioned the proliferation of strategies, incentives, levies, agreements, policies and proposed legislation and the pressing need for rationalisation and clarification. He also referred to the potential of the "carbon hedge" mechanism and his frustration that it and other measures are not being progressed to help to achieve a proper and consistent price for carbon. The noble Lord, Lord Redesdale, also referred to his concerns in this area. My noble friend Lord Jenkin went on to raise a number of very important questions for the Government.

The noble Lord, Lord Brennan, reminded us of the vital importance of security of energy supply. He referred to five areas of threat to our country and he made three interesting recommendations. We look forward to the Minister's response to those recommendations. My noble friend Lady Wilcox spoke about the importance of improving the environmental credentials of our energy industry. Like her, I am glad that the White Paper refers to the need for this to be taken into consideration. The White Paper has also mirrored the Opposition's interim findings last year by emphasising the crucial importance of energy security.

The statistics are enough to show how much of a priority this must be. As the Minister said, 30 per cent of Britain's current generating capacity will be retired in the next 20 years, and electricity demand continues to rise. The laws of demand and supply are inexorably leading us, as the noble Lord, Lord Brennan, said, to becoming more dependent on imported energy from a very limited number of reliable sources. In November 2005, the Minister, in a previous role, warned us about an energy crisis that,

"could see factories and offices having to shut down for all but three days a week".

We were all fortunate that his worst fears were not realised, but the underlying problems, especially the longer-term ones, have not gone away.

Significant increases in the price of oil on the international market have also combined with a squeeze on imports from less liberalised European markets to push up prices, so new gas interconnector and LNG facilities have come too late to prevent domestic bills rising by 35 per cent in real terms over the past seven years. Bills for medium-sized businesses have risen by 50 per cent in the past two years. The Department for Business, Enterprise and Regulatory Reform has set a target to eliminate fuel poverty—the Minister referred to that—in vulnerable households. The Government have been forced to admit that, largely due to oil price rises, the total number of vulnerable households in fuel poverty rose by around 1 million between 2003 and 2006. Perhaps the Minister can expand on the Government's plans to tackle that.

While there is scope for conflict in the short term between reducing carbon emissions on the one hand and energy security on the other, in the longer term this could, with skill and a certain amount of luck, be turned to synergy. We cannot leave it to luck. Policies that diversify supply across renewable sources and improve efficiency and the use of energy could reduce our reliance on imported energy from less reliable sources. As the White Paper recognises, improving the energy efficiency of businesses and households is the cheapest and easiest way of reducing carbon emissions, and that would also help to restrain our dependence on imported energy. The subject has been well aired today.

Government guidance is, arguably, rather light, but the noble Lord's arrival in his new post provides an encouraging message that there will be improvement. In their proposals on smart metering to which the Minister referred, the Government appear to fudge the distinction—as the noble Lords, Lord Teverson and Lord Redesdale, rightly said—between proper smart meters which send information between appliances and suppliers and much simpler real-time electricity displays which provide information in real time but do not result in any of the efficiencies associated with smart meters, such as accurate billing, early warnings for vulnerable customers and an end to expensive pre-pay meters. This differentiation may seem trivial, but there is enough doubt among the general public about the dangers of climate change and scepticism about suggested solutions that care must be taken to ensure that government statements are as accurate, clear and consistent as possible. Energywatch research suggests that smart meters, as opposed to real-time displays, can make substantial savings to customers' energy bills. Such positive results must not be undermined by an attempt to gain green credentials on the cheap.

There is much more to energy efficiency than is mentioned in the White Paper. I join several other noble Lords who would be grateful if the Minister could give us more information about what the Government are doing, for example, to achieve an improvement in international manufacturing standards and to ensure that household appliances are made with energy efficiency increasingly in mind. The Government's energy efficiency policy gives the Minister scope to bring his considerable experience to bear. Greenpeace has referred to the inadequacy of the White Paper's focus on combined heat and power technology, which is already being employed effectively elsewhere in Europe. CHP can help reduce carbon emissions by using fuels more efficiently. Why are the Government not fully exploring this process which could drastically improve our energy efficiency?

Of course it would be hard for effective CHP infrastructure to be established without considerable decentralisation of the power grid. In their energy policy statement last July, the Government proposed a range of consultations, reviews, strategies and feasibility studies to help the development of decentralised energy. Yet, as the noble Lord, Lord Hunt of Chesterton, said, the White Paper adds little except for another consultation and some vague promises that barriers will be removed. I am sure that that was not the intention, but can the Minister tell us when the Government will be able to produce a policy that will create the conditions in which decentralisation will happen?

We are unlikely ever to be completely self-sufficient in energy as a country. International trade in energy will always be necessary. Unfortunately, the lack of clarity in the Government's energy policy has delayed the much-needed investment in new plant. These delays are undeniably leading to narrower plant margins and an ever-increasing risk of supply interruptions. Clarity is needed on the future of the carbon pricing mechanism, the support that will be available for renewables and a framework under which nuclear new build will have to operate. Without that, the investment—the importance of which the Minister referred to in some detail—will naturally be focused towards the default option of gas turbine power stations, instead of towards alternative power generation. Our dependence on imported gas will be increased, and high carbon emissions will be locked in for the life of the new plant.

Diversity of supply is important and, again, government delays are not helping to ensure that energy production is grounded in a variety of technologies—which the noble Lord, Lord Chorley, explained in some detail. My noble friend Lady Wilcox has mentioned the danger of the banded renewables obligation focusing excessively on one or two technologies rather than sharing subsidies appropriately among all feasible renewable technologies. It is equally important not needlessly to rule out any non-renewable energy sources, and many different types have been mentioned today from all sides of the House.

Carbon capture technology, desulphurisation plants and other mechanisms for reducing the environmental impact of fossil fuel generators were referred to by my noble friend Lord Jenkin and the noble Lords, Lord Chorley and Lord O'Neill. These are all a necessary part of the future to ensure effective diversification and a continuing ability to exploit resources, such as coal, without undue adverse environmental consequences. The Minister's words on government action here are encouraging.

The importance of energy security is clear and it will only increase as time goes on. I look forward to hearing the Minister's response to the important points raised by noble Lords in this debate. I echo the hope of my noble friend Lady Wilcox that he will reassure us that the Government intend to introduce firmer and clearer guidance very soon.

Photo of Lord Jones of Birmingham Lord Jones of Birmingham Minister of State, Foreign & Commonwealth Office, Minister of State, Department for Business, Enterprise & Regulatory Reform, Minister of State (Foreign and Commonwealth Office) (also in the Department of Business, Enterprise and Regulatory Reform), Minister of State (Department for Business, Enterprise and Regulatory Reform) (Trade Promotion and Investment) 3:17 pm, 12th July 2007

My Lords, I have thoroughly enjoyed my first House of Lords debate. I am learning all the time. I have never before listened to a full debate, and I found it eloquent and informed; and I have learnt so much. Please forgive me if in the next few moments, I forget to do the complete tour d'horizon. If I miss anything out, please contact me, and I shall do my best to give a satisfactory answer.

I shall now attempt what my noble friend Lord Brennan said was a cautionary tale from Macmillan about steering the difficult path between the cliché and the massive mistake. Before dealing with the excellent points raised by your Lordships, I start by saying something that is very dear to my heart. It deals with a couple of the issues raised by the noble Lords, Lord Redesdale and Lord Dixon-Smith. Without wealth creation or making a profit, you get no tax in this country. With that profit, you reward the people who took the risk—the shareholders—and they pay tax on it; or you keep it in the business and you pay tax; or you employ people and they pay tax on it. Some of it goes to good, decent, hard-working people in the public sector, and they pay tax on it. Without the tax, there would be no schools, hospitals, armies, airports, railways, prisons or the rest of it. If it were not for the wealth creation of this nation, there would be no tax.

If it were not for the energy supply produced in as low-carbon a way as possible with as safe and secure a supply as possible, there would be no wealth creation because the lights would go out. Energy drives factories, workshops and offices up and down the country. It is the tool with which jobs are created, hospitals are kept open and schools work. Energy is literally the power behind all economic development. As my noble friend Lord Brennan said in the speech that he devoted to this subject, security of supply is vital. The one sure way of achieving that is by having diverse sources of supply, but we need to bear in mind that the people of this great nation worry every day when they see other nations using energy as a way of flexing diplomatic and political power. We will not keep the lights on in our hospitals or our offices, or help with the insecurities of our people, if we do not keep security of supply at the top of our agenda.

The noble Baroness, Lady Wilcox, and one or two other noble Lords mentioned the consultation on nuclear power. I can do no more than reassure the House that the Government have not made up their mind. The Government's position is clear: we have formed a preliminary view, which can be seen in the White Paper, that energy companies should be given the option of investing in new nuclear power stations, but we are consulting on that view. No decision has been taken, and we will actively consider all the consultation responses. I can do no more than refer noble Lords to the Prime Minister's statement in another place yesterday:

"My honourable friend knows that we put our nuclear proposals out to public consultation on 23 May. The Government's preliminary view is that nuclear has a future role in providing our homes and businesses with the low-carbon energy that we need. Let me emphasise that the Government will make their decision in the autumn, after, and in the light of, the consultation".—[Hansard, Commons, 11/0/07; col. 1444.]

That was the Prime Minister yesterday, and nothing has changed.

When talking about renewables, the noble Baroness, Lady Wilcox, asked whether we are making adequate progress, whether we are going far enough and whether there is adequate investment. Of course we could always do more. It is very important that we get a mix, stimulate investment in renewables and that renewables do not suffer because of investment in other technologies. Our proposals for improving the renewables obligation will help the greater deployment of a wider range of renewables, and that includes marine technology. The changes will incentivise 40 per cent more renewables between 2009 and 2015 than if we had not changed the schemes. However, for it to work, we also need additional research and development. We need further, adequate funding of universities to make sure that they can play their part in that research and development and, probably above all, we need a planning regime fit for purpose in the 21st century to enable these schemes to happen and happen quickly.

The noble Baroness also talked about choosing between technologies and criticised the renewables obligation banding. Renewables is a market-based approach that intervened to enable renewables to compete against established technologies. I assure noble Lords that that will increase support for renewables and will improve efficiency in the system. It will support technologies more in need and increase deployment by about 15 per cent by 2015. That is something of which business should rightly be proud because it will happen due to the investment from it. The noble Baroness then expressed concern about the BP plant at Peterhead and the Government's handling of it. Prior to the publication of the White Paper, there were seven interested companies. Of those seven, only BP indicated that it no longer wishes to participate. Others may come forward; we do not know. The noble Lord, Lord Chorley, also raised this point. We would have preferred BP to have taken part in the competition because it is a fabulous global business, but we cannot design a competition to suite the interests of just one participant. That is not how we should behave. If BP feels that the timetable does not suit its project, that is a commercial matter for it. Welcome to the market.

The noble Baroness, Lady Wilcox, then asked how the Government would ensure that the cost of any nuclear decommissioning would not fall on the taxpayer. The consultation document makes it clear that we would put arrangements in place through legislation to ensure that owners and operators of new nuclear power stations set aside funds in a secure way to cover their full decommissioning costs and their full share of waste management costs. That would be in legislation and would minimise the risk of taxpayers later being called on to cover the costs of decommissioning and waste management. It is important that, in consultation, which is a two-way process, others stated the facts in that regard while not alarming the public.

In response to the noble Lord, Lord Teverson, perhaps I may mention that it was a delight to come down to Cornwall in my former life. I am committed to visiting a region of England or a nation of the United Kingdom at least once a month to understand the issues around inward investment. I look forward to going back to Cornwall as soon as possible.

The noble Lord, too, mentioned BP. It is interesting that one of the advertising slogans it has always used is "beyond petroleum". It would be naïve of us to think that the major corporations in this field would stand still and not form views on where they can invest in tomorrow's returns. One of those areas will be renewables; another may be—I do not know—nuclear power. What I do know is that energy supply companies definitely hedge their bets for a long-term future.

I also assure the noble Lord, Lord Teverson, that the policies in the White Paper will help us to maximise UK energy resources—that is, oil, gas or coal—and to use our energy more efficiently. For example, gas consumption could be 13 per cent lower in 2020 if we implement our demand-reduction measures. The Government are committed also to energy saving. Full implementation of our measures could reduce CO2 by 7 million to 11.7 million tonnes of carbon, which is up to 36 per cent of all savings. We are not standing still.

I hope that the noble Lord was speaking with tongue in cheek when he asked how we can expect energy sellers to take responsibility for our using less energy when they are making money out of selling it. Energy sellers succeed in a voluntary, democratically engaged society because they are seen to be responsible. This House, another place, the general public and the media respond very quickly to companies that abuse that position. However, to make it happen, both the customers of energy suppliers and citizens of the country more generally must feel that they have some skin in the game. Culturally, we need a shift in this nation, so that people approach the use of energy from an understanding of what a diminishing resource it really is. The energy suppliers cannot do that on their own; nor can politicians and media. Perhaps we should all do more to make sure that people feel better engaged.

The noble Lord, Lord Teverson, mentioned also the example that we need to set for other major polluting nations. The noble Earl, Lord Liverpool, mentioned it, too. We rightly talk of China and India, but if we want to take the true moral high ground as we desperately try to ensure that this, our only planet, is saved, let us think also about the United States. It has 5 per cent of the world's population, but is responsible for 25 per cent of the world's pollution. We will not persuade India and China to change if they do not see the biggest economy on Earth changing. To pull that off, the European Union needs to set an example. The critics are correct in saying that Britain alone cannot change the whole of the world's pollution, but we do not have a prayer of getting countries such as India, China, Brazil and the United States to do it unless we do it ourselves. I am proud to belong to a Government who put that very high on their agenda.

I turn to the often reiterated point of the noble Lord, Lord Tanlaw, about daylight saving. There are potential advantages and disadvantages to a change to the summer-time arrangements. It would have an impact in many different ways on different sectors. Financial services, trade and tourism are all major sectors in this, the most successfully reconstructed economy in Europe. The present situation is a satisfactory compromise between those who prefer lighter mornings and those who prefer lighter evenings—those of us who work in both do not care. We are not convinced that a change to the current arrangements would be in the best interests of this country.

I thank the noble Lord, Lord O'Neill, for his kind words. We worked together some years ago when I was at the CBI and he was at the then DTI. He mentioned King Coal—that is my phrase, not his—of many years ago. Coal plays a part in the future without a doubt. Obviously, clean-coal technology and carbon capture is very relevant. I do not apologise for the fact that this nation does not send men underground in very dangerous, dirty conditions, which at the end of the day is not where we should be putting an advanced economy's population.

One of the dangers of losing these industries—in Birmingham we have seen it happen with motor car factories, and it can happen with shipyards and steelworks as well as coalmines—is that those centres of communities had a cohesive effect on our society. It is important that as they go away we bear in mind the debilitating effect it has on the cohesion of a society struggling to deal with a changing world and the frightening aspects and challenges of globalisation.

I can assure my noble friend Lord O'Neill that carbon capture and storage offers the potential to reduce CO2 emissions by up to 90 per cent. Because of its relevance to developing countries, it is estimated to have the potential to contribute up to 28 per cent of CO2 mitigation. That is why we are supporting a competition for a carbon capture and storage demonstration. That has never been done before. It is on an industrial scale with electricity generation. We think that a competition is the best way to encourage innovation both in the design and its operation. We await its results with great interest.

The noble Lords, Lord Dixon-Smith, Lord Redesdale and Lord Chorley, asked whether the department is called BERR, DBERR or anything else? It is not DBERR because the "Lady in Red" who Chris de Burgh wrote about would be mightily dischuffed, and the department does not like being known as "Chris". It is called BERR—Business, Enterprise and Regulatory Reform. I am thrilled that at last we have a department whose name has "business" right at the start. I applaud the Prime Minister in taking the very brave step of bringing in some specialists in various fields. But, I would say that, wouldn't I?—I am one of them. I hope that at last we can raise some of these major issues above factionalisation of party politics, and get on with the job.

The noble Lord, Lord Dixon-Smith, asked where responsibility for energy would lie, and where was the juxtaposition between BERR and Defra. It is not the only one; there are transport, planning and low-carbon buildings. We have to be reminded of the crucial role the Treasury plays in this. The Foreign Office and the Department for International Development have a huge role to play in climate change, energy and, of course, trade negotiations. At what point do we say that the way other countries make things should be a barrier to entry and a barrier to trade, which is a protectionist's last refuge? At what point do we actually acknowledge the issue? Different government departments have energy somewhere on their brief. Putting it in BERR, where business is so key to providing market solutions in so many ways, is, I submit, the best place for it.

The noble Lord mentioned food miles. We have to be very careful when we listen to those in the developed world who tell us that we should not expect fresh fruit to be flown in on Christmas Day, with a huge carbon footprint from aircraft, as we are messing around with the livelihoods of many people in the developing world who need this speedy access to wealthy economies, simply to have clean water, better healthcare and the chance of a better life. A compromise has to be struck on this. It is important that people understand what they are playing with.

The noble Lord spoke about efficiency being achieved at the expense of economic growth. Our economy will continue to grow, while our demand for energy will remain constant and could possibly fall if we get this right. Figures in the White Paper show that we have effectively decoupled economic growth and growth in energy consumption. This Government should be very proud of that because they have shown the rest of western Europe that it can be done. We obviously all need to do more. The chapter in the White Paper entitled "Saving energy" deals comprehensively with that.

On the point concerning tidal power raised by the noble Earl, Lord Liverpool, given my lengthy time in the job, I cannot comment on individual projects—I hope your Lordships would not expect me to. But I can reassure the noble Earl that the Sustainable Development Commission is looking at a broad range of issues and options, as well as the Severn Barrage in isolation. Tidal lagoons are being looked at, as he mentioned. The commission is expected to report by September this year. Linking that to the noble Lord, Lord Jenkin, talking about getting on with it, it is important that, whatever happens, we reach decisions this year. I am pleased that the commission will also be reporting on that particular point in September.

The noble Lord, Lord Jenkin, asked what is actually happening on the European Union's emission trading scheme and the carbon price. As the White Paper says, we are active in shaping the future of this—in many ways, it is a British invention and something of which we should be proud. We are and have always been good traders, and this is just another way we can bring that expertise as a nation to a 21st-century issue. As a nation, we are actively engaged in Brussels and elsewhere across the European Union in making the UK's case, and we are confident that progress is being made. The noble Lord will share with me the absolute frustration at the speed, or lack of it, in which progress seems to be made in various things in Brussels, and this is no exception. All I can assure the House of is that I and my colleagues will do absolutely everything possible to ensure this is given the level of importance and acknowledgement in Brussels that noble Lords clearly give it here.

The noble Lord also raised site selection. It will be for the private sector to propose sites for new nuclear power stations, just like any other. In May, we launched a technical consultation on how to run a strategic siting assessment. The noble Lord raises just the issues that we are considering, and we welcome views from everybody—stakeholders and the public. We do not have a monopoly on wisdom, so enable us to bring up some definitive answers in the future.

In conclusion, the United Kingdom has been fortunate up till now because we have been able to meet most of our energy needs from domestic sources. We started with our coalfields two centuries ago, and more recently used our North Sea oil and our gas. The trouble is that we have got used to the fact, and it is no longer the case. We are soon going to be very dependent on imports. While we can say that that is like other developed countries, it does not sit well with this island nation. As we all know, the big supplies of oil and gas are concentrated in some of the more volatile regions of the world. That does not give anybody in this country the sense of security that enables them to take risks. Business does not like volatile pricing in anything, it does not like unpredictability. If we do not have a secure source of supply, business will face that unpredictability and instability of pricing for a long time to come. The average man and woman in the street will then feel seriously insecure, which does not make for a happy country.

Meanwhile, global demand for energy is increasing massively as economies such as China have boomed. China has now overtaken France and the United Kingdom. She is the fourth-largest economy and has Germany in her sights. China is already the world's second-largest consumer of energy. Her demand for energy is increasing at a rate of 15 per cent every year and new power stations are being built every week. World prices for fossil fuels have increased by more than 50 per cent in the past three years. High prices impact on the vulnerable in this country as well as business and other users. Not only does that make the vulnerable even more so, the whole dimension feeds through to overall inflation, which impacts on the cost of money, which impacts on everybody.

As if that were not enough, on top of that there is the need to decarbonise the world's economies. Not one nation on this, the only planet that we have, can in any way exclude itself from that project. The need to wean ourselves off fossil fuels or find a way of storing the carbon emissions that they cause is of paramount importance. It is vital. Temperatures are rising. Sea levels are rising. Extreme and dangerous weather is becoming more common around the world. The way that we currently produce and use energy is, frankly, largely responsible.

In other words, we have to save the planet. We also have to keep the lights on. I commend the Motion.

On Question, Motion agreed to.