Energy Bill — Second Reading

– in the House of Lords at 6:22 pm on 23rd March 2010.

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Moved By Lord Hunt of Kings Heath

That the Bill be read a second time.

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Deputy Leader of the House of Lords, House of Lords, Minister of State, Department of Energy and Climate Change, Minister of State (Department of Energy and Climate Change), Deputy Leader of the House of Lords

My Lords, of the many challenges that we face, few can be more significant or more urgent than tackling climate change while maintaining secure energy supplies. The warming of the global climate is unequivocal and the role of human activities in the observed changes is now more apparent than ever. There is no doubt that climate change remains the biggest global threat to mankind. That is why the UK introduced a statutory target of an 80 per cent reduction in carbon emissions by 2050 and backed this up with a system of legally binding carbon budgets to help us to achieve that target.

The UK Low Carbon Transition Plan, published in July last year, sets out measures to deliver carbon emission cuts of 18 per cent on 2008 levels by 2020. As we transition to a low-carbon future, we need to ensure secure energy supplies. This means ensuring a supportive climate for the substantial new investment needed to bring forward the new infrastructure required for a low-carbon future. It means maximising the potential of our remaining oil and gas resources while ensuring that we have a variety of options for importing the fossil fuels that we will need during the transition. It means delivering the low-carbon trinity of renewables, nuclear and clean coal, all three of which are needed if we are to achieve our overall emissions reduction targets.

Last year we published our renewable energy strategy, setting out the path for us to meet our legally binding target to ensure that 15 per cent of our energy comes from renewable sources by 2020. The Office for Nuclear Development is taking active steps to establish and cement the right framework and conditions in the UK for investment in new nuclear with the aim of having new nuclear power stations generating electricity from around 2018. To promote the development and deployment of clean coal, we have committed to one of the most ambitious demonstration programmes in the world and have taken the unprecedented step for a coal-dependent country of saying no new coal without CCS.

The energy markets continue to have a critical role to play in delivering this transition to a low-carbon future. However, left to their own devices they would not bring forward the necessary investment that we need. We need a robust framework that will deliver on investment but also deliver a fair deal for consumers.

This Energy Bill sets out measures in three key areas that are central to the task that we face: delivering investment in clean coal technology; delivering a mandatory requirement to provide help with energy bills to more of the most vulnerable; and delivering a more robust framework for consumer protection.

The first part of the Bill mainly relates to the new carbon capture and storage incentive. Coal is the fuel with the highest carbon emissions but it is also a low-cost and reliable fuel for power generation with abundant remaining reserves. Clean coal, as part of the trinity of low-carbon energy, will provide diversity and flexibility in our energy mix. However, for clean coal to take its place in our long-term energy mix, we need to demonstrate at a commercial level the technologies required to capture, transport and store the carbon emissions created by coal-fired power stations.

Clauses 1 to 4 provide the framework, through a new CCS incentive, to deliver financial support for our commitment to deliver four commercial-scale CCS demonstration projects on coal-fired power stations. These projects will encompass both pre-combustion and post-combustion capture technologies. The framework will also allow, should it be needed, support to be provided for the retrofit of CCS to the remaining unabated capacity of these projects. The funding will be raised by a new levy on electricity supplies used solely to support these CCS demonstration projects. The collection of the levy and the payment of the incentive to the projects will be administered by Ofgem. The selection of projects, however, will be carried out by the Government.

The second part of the Bill focuses on tackling fuel poverty through helping more of the most vulnerable with their energy bills. There are three main factors in fuel poverty: household income, energy prices and energy efficiency. We are taking action on all three of them. To help household incomes, winter fuel and cold weather payments are currently at their highest levels since introduction. To help householders to improve their energy efficiency, we have ensured, through policies such as CERT and Warm Front, that 7.5 million homes have received loft or cavity wall insulation since 2002. The Warm Homes, Greener Homes strategy, which was launched on 2 March, announced our intention to ensure that all households are able to benefit from loft and cavity wall insulation by 2015, where practical, and to offer up to 7 million eco-upgrades by 2020.

Clauses 9 to 15 introduce a framework for mandatory social price support to tackle the third factor: energy prices. The current voluntary agreement between the Government and energy companies has provided support to over 1 million customer accounts in the first year alone. The provisions in the Bill will build on this agreement, allowing the Government to require energy suppliers to help more of the most vulnerable consumers with their energy bills.

In last year's Pre-Budget Report, we announced that suppliers would collectively be required to spend £300 million per year on social price support by 2013-14. This is double the amount that they have agreed to spend in the final year of the voluntary agreement. The powers in the Bill will also allow us to give greater direction on the types of household that are eligible for support and ensure that more of the available resources are targeted at those households that are most in need. Ofgem will monitor the operation of the scheme and energy suppliers' compliance with it.

It is fundamental to the policy that suppliers' contributions are proportionate to their market share. This will ensure that no supplier is disadvantaged by having a higher number of households eligible for support and therefore that vulnerable customers do not become unattractive to those suppliers. Clauses 11 and 12 provide the Government with the power to set up a reconciliation mechanism to allow the costs of a mandatory social price scheme to be distributed fairly between energy suppliers.

The third part of the Bill will protect consumers through improved regulation of the energy markets. Although Ofgem's principal objective remains the protection of the interests of existing and future consumers, Clauses 16 and 17 clarify that these interests include the reduction of greenhouse gas emissions and the delivery of secure energy supplies. It is important that Ofgem makes decisions within a framework that protects the interests of consumers in the widest sense.

These clauses also clarify that, while the promotion of competition remains the foundation of consumer protection in the long term, the regulator should also take steps proactively to protect the consumer interest. In essence, the Bill makes it clear that, where consumer interests are threatened, Ofgem must consider measures other than the promotion of competition in order to rectify the situation. Such measures might include more stringent enforcement of existing licence conditions or the introduction of new licence obligations.

Clauses 18 to 23 introduce a market power licence condition. This will allow Ofgem to tackle situations specific to the electricity balancing market, where companies may take advantage of constrained electricity capacity. It is targeted to eliminate those circumstances in which the licence holder might use market power to obtain excessive benefits by unduly exploiting balancing arrangements with National Grid, the system operator. The costs of this exploitation are ultimately passed on to the consumer. This measure is subject to a sunset clause, which means that this licence condition can be in place for a maximum of seven years. We believe that this is sufficient, as the lack of transmission capacity, which is the root cause of this type of market exploitation, should be resolved by ongoing upgrades to the transmission system. We expect these upgrades to be completed by 2018.

Clause 24 extends the time limit within which Ofgem can impose financial penalties on energy suppliers for a breach of licence conditions from 12 months to five years. This will enhance Ofgem's ability to protect consumer interests by ensuring that in future it is able to address more cases where licensees may have breached licence conditions and to take appropriate enforcement action.

Clauses 26 to 29 give the Government the power to adjust charges for gas and electricity in situations where energy suppliers treat certain customers less favourably than others according to the type of energy supplied. An example is where electricity-only customers are paying significantly higher prices than dual-fuel customers for which there is no justification in cost differentials. The Government already have similar powers to tackle such situations in the gas and electricity markets separately, but they cannot currently address situations where consumers are being disadvantaged through cross-subsidies. We have no immediate intention of using these powers, as Ofgem introduced a new licence condition last September to tackle this type of consumer detriment. However, it is important to have the power to tackle all situations where consumers are disadvantaged in case Ofgem cannot take appropriate action.

This Bill was the subject of detailed scrutiny in the other place. Following discussions during its Committee stage, several amendments were proposed and accepted. Through this, the scope of the CCS incentive was extended to allow it to be used to support the demonstration of CCS on gas-fired power should this be required in the future. However, I must make it clear that it remains our intention to deliver four demonstration projects on coal-fired power stations as our first priority. A new requirement was also introduced for the Government to report every three years, starting in 2012, on progress towards the decarbonisation of the electricity sector. These reports will set out progress in the decarbonisation of coal-fired power stations and progress in the development and use of CCS technology.

We have taken powers to allow the Government to set the period within which energy companies must inform customers of changes to their gas and electricity tariffs. This period is currently set at 65 working days, a length of time that is clearly unacceptable. Ofgem has committed to addressing the issue and will publish a consultation before Easter. In the event that Ofgem encounters difficulties, it is important that the Government have the ability to step in and remedy the situation. This power will be in place for only three years, as our intention will be to take action at the earliest possible opportunity and certainly before three years have passed.

Taking the measures in this Energy Bill together, we believe that they will play an important part in achieving our transition to a low-carbon economy. They will help to reduce our carbon emissions, to secure our energy markets and to provide support to the most vulnerable consumers in our society. I commend the Bill to the House and I beg to move.

Photo of Baroness Wilcox Baroness Wilcox - Shadow Minister, Shadow Minister 6:35 pm, 23rd March 2010

My Lords, I thank the Minister for introducing this Bill. As far as it goes, we welcome it. Most of what is in the Bill is long overdue and I do not think that it would have caused us too much trouble even if we were to have had sufficient time to discuss it in detail in Committee. I am naturally pleased to see the two meaningful concessions that were extracted from the Government in another place by my honourable friends Greg Clark and Charles Hendry.

What would have engaged our interest in this Bill is what is not included. This is a common complaint against Labour's energy policy. It took years before Labour faced up to the energy crisis that was developing under it and even now it is proceeding too timidly to address the issue successfully.

It is no surprise that, at Second Reading in another place, the debate barely touched on what was in the Bill and instead involved Labour Back-Benchers quizzing my honourable friends on the Conservative energy policy. I am glad to say to any noble Lords in this House who share that interest that we recently published a strategy paper and a detailed Green Paper setting out the urgent actions that we would implement if we were fortunate enough to win in the imminent election.

Unfortunately, there is a complete lack of any corresponding policy from the Front Bench opposite. As far as I can see, Labour's energy policy has, over the years, moved from lack of interest to outright denial and, finally, in the past couple of years, to the sort of dithering that we have come to expect when major decisions have become unavoidable.

It is clear that our country and our people, especially the disadvantaged, have been failed by Labour over energy, according to its own targets. The most vulnerable people are being expected to wait even longer to hear how Labour would ensure that they will be able to afford to heat their homes. Our businesses, too, which are already suffering from a great recession because of the mismanagement of the economy, are given nothing to indicate under what conditions they are expected to make the necessary long-term investment. The City hesitates because this Bill gives no certainty to anyone.

However, finally we have some measures before us that allow for the subsidy of carbon capture and storage. That is to be welcomed, but there is no detail on how the levy will be imposed and no criteria for how the money will be spent. This Government, who have accepted, at the final hour, that CCS needs some sort of government subsidy, appear determined to leave all questions on the subject to be answered by the next Government. Noble Lords may rest assured that, if the next Government are Conservative, it will not be long before those questions are answered. Within six months, we will set out how the EPS will be introduced. Without such a standard, the money raised by this levy could be frittered away with no result, as the Government have done with the revenue from the EU Emissions Trading Scheme instead of contributing to a secure, sustainable energy supply.

On energy security, the Government, despite the Minister's valiant recent efforts in the still relatively new department of DECC, which brought him and me together, have again failed to come forward with what is needed. There is nothing in the Bill about gas storage, despite Labour's acknowledgment that we have totally inadequate facilities for this country's needs. On fuel poverty, we have the same inadequate provisions. Of course, we welcome what is here, in Part 2 of the Bill. Given that the Government have failed to meet their own targets on fuel poverty, these clauses are now very necessary, but it is disappointing that, despite a few recent indications that Labour is finally starting to listen to us on the importance of energy efficiency, there is nothing to introduce a genuine green deal for households. The Government's plans for a pilot scheme covering 500 households are pitiful in comparison to the promises that we have made in this area in our document, which I hope all noble Lords will read.

Indeed, the Bill says very little about the day-to-day experience of the consumer. The Government conceded a point in another place about information on pricing changes. However, without the necessary detail in Part 1 about whom the levy will be imposed on and without a genuine engagement with households in Part 2 on how to reduce and manage their energy requirements, consumers appear to be left holding all the costs of the necessary investment with no guarantees regarding the benefits that they might expect to receive.

Much of the public's scepticism about green investment could be addressed with proper transparency around energy pricing and subsidy. When newspapers report the record profits made by energy suppliers while households struggle to meet their bills, it is critical that every household can feel confident that it is, at least, on the most appropriate tariff for its needs. With the baffling complexity of Labour's subsidy mechanisms causing problems even for the experts, the consumer must be informed of the amount of money that he or she is paying into this sector.

It is understandable why Labour is so hesitant to introduce such transparency. It has achieved so little in its time in government that there would be a public outcry if it were better appreciated how much taxpayer money has been wasted. Labour refuses to commit to an emissions performance standard, making it uncertain that investment will bear any better results in the future and, unsurprisingly, it refuses to give consumers the necessary means to see the consequences themselves.

As far as the Bill goes, we welcome it, as what is in it is long overdue. However, so little will be achieved through it that it is obvious that it will be the new Government to whom we must look to do the rest for a secure energy future, for our industry and for our national security.

Photo of Lord Wallace of Saltaire Lord Wallace of Saltaire Deputy Leader in the House of Lords, Spokesperson for Foreign and Commonwealth Affairs 6:42 pm, 23rd March 2010

My Lords, I am very pleased to follow the noble Baroness, Lady Wilcox, who made what I thought was a very good, Guardian-style speech, upbraiding the Government for their general conservatism in this area. I noted, from reading the Committee and Report stage debates in the Commons on the Bill, that there was a degree of Conservative backsliding by a number of her colleagues. The revival of climate-change scepticism is there on the Conservative Benches-in both Chambers, indeed-as well as Euroscepticism. I hope that the noble Baroness's excellent speech demonstrates that the Conservative leadership, at least, is standing up to what a number of American writers now call the politics of irrationality in the Republican Party, to which the Conservative Party is sometimes tempted to bend.

This is a modest Bill and we are grateful for small mercies, but we do not see it as being up to the scale of the challenge which we face. Our party has also put out its proposals for sustainable growth and a move towards a sustainable economy, in which we shift the balance away from centralisation and privatisation towards a much more decentralised system with an emphasis on small-scale generation, insulation, local schemes and integrated schemes wherever possible, as against the Government's emphasis on centralised coal and centralised nuclear-coal which is, I note, incidentally, more and more imported coal. Indeed, as I work my allotment in Saltaire, the Settle-Carlisle railway line brings imported coal down to Yorkshire power stations from Cumbrian ports. It is not, any longer, local coal; it is part of our energy dependence. The whole question of carbon capture and storage is not so much a matter of increasing our energy security, but making sure that the South African and Polish coal which we import does not add to the pollution above our land.

I welcome the demonstration project which Yorkshire has now managed to secure from the European Union and notice that the European Union, in awarding that to Hatfield, mentioned that part of the attraction of the demonstration project is, indeed, that it has the potential to be part of a much broader scheme for carbon capture and storage across Yorkshire. I drove with my wife from Lincoln over to Saltaire this summer and I was very struck, as we passed across the south Yorkshire and north Lincolnshire plain, to see, against the skyline, a succession of huge coal power stations and their heating towers. You no longer see anything in the way of wind-power generation. There are the remnants of a large number of windmills, but nimbyism and the absence of long-term planning have inhibited the sort of renewable energy that we should be pursuing across that large chunk of northern England.

We think that the Government should move a great deal further into what we call wind and wave. Indeed, as I walk up and down the Yorkshire Dales, I regularly pass the Grassington weir with its derelict power station, from which Grassington generated all the town's electricity 60 or 70 years ago. I am conscious that we have all this unused potential small-scale water power in Yorkshire, which the Government have made very little effort to encourage. We now have one demonstration project, in Settle, so if we are looking for ways and means to move Britain towards renewable energy-local biomass, local water and so on-there is a great deal more that could be done.

Feed-in tariffs have been very slow to be developed. It is now some 25 years since I was on holiday with my family in Brittany and we stayed on a farm, the water mill of which was already feeding locally-generated power into the French power system. Along with the Conservatives, we strongly support the proposal for an emissions performance standard and, indeed, on Report in the other place, we moved, with cross-party support, an amendment for an emissions performance standard which was to apply to all new electricity generation plant as a clear restriction on the amount of carbon dioxide that any new electricity generation plant can emit. That narrowly failed to pass in the other place. No doubt there will be discussions among the parties in this Chamber as to how far we wish to add that to the Bill. I look forward to those discussions.

My party has larger ambitions on sustainable growth and in moving to a more sustainable economy. We want to see emissions reduced and we want a reduction in energy dependence and thus, incidentally, in our very substantial trade deficit. We look to new employment in new industries and to signals to the market which encourage everyone to invest in the reduction of carbon emissions. I noted with some puzzlement the statement in the analytical annexe to the low carbon paper that an oil price of $150 per barrel would help to reduce the costs of transition. There are a lot of other things that an oil price of $150 per barrel would not help, including the international politics of the Middle East and of Russia. There are lots of other ways of achieving a similar result, including an emissions performance standard, so, from these Benches, we give a lukewarm welcome-a lukewarm front, we might say-for the modest step forward contained in the Bill.

Photo of The Bishop of Durham The Bishop of Durham Bishop 6:50 pm, 23rd March 2010

My Lords, I am sorry that I am not going to be able to keep up the party banter that has so far characterised this debate. I am grateful for the way that the Bill proposes to sort out several issues relating to our future energy sources and needs and the way that they are handled. I am particularly interested in the first part of the Bill, which proposes this financial assistance for constructing up to four UK carbon capture and storage demonstration projects. I wish we could have gone down this road a lot sooner; indeed, some experts have been saying for several years, since the original White Paper, that we already know that CCS works and do not need any more demonstration projects so we should just get on with it.

There is another parallel possibility, though, which we should be aiming at, and I confess that I am a little surprised that it is not contained here. I hope that the Government will be prepared to give it serious consideration, if possible, within the future shaping of this Bill. If not, this is something that we need to put down as a marker for the future.

I refer, as I have done before in your Lordships' House, to the challenging prospect of underground coal gasification, UCG for short. Gasification plants as such were promised as long ago as 2003 but, like their promised contents, they seem to have turned merely into hot air. The challenge of underground gasification, though referred to here several times, seems never to have been seriously considered. It is time that it was. We need clean-coal technology, along with renewables and nuclear, and this could be right at the heart of that.

I stress the context of this proposal. Obviously we need different energy sources such as renewables and nuclear. That has got to be done, but it is probably not enough. Our own existing coal stocks, though, as has been mentioned, are massive and now largely unexploited. Those who know tell me that there is a lot more coal under my county, County Durham, than was ever dug out; indeed, some estimates put it at 75 per cent or even over 90 per cent. According to the British Geological Survey, there could be enough still down there to supply the energy needs of this country for 300 years.

I should declare a belated and second-hand interest: the mineral rights in County Durham used to belong to my predecessors, the Bishops of Durham, but, after the demise of nationalisation, those rights have now reverted to the Church Commissioners, to whom were granted-unwisely, in my view-stewardship of the ancient episcopal assets. We have all this coal and yet, despite that, we are importing nearly 50 million tonnes of coal per annum from, as has been said, Poland, South Africa, Russia-

A noble Lord:

The United States.

Photo of The Bishop of Durham The Bishop of Durham Bishop

From the United States, and elsewhere. It does not take genius to see that there is something wrong with this picture. I thought that this Bill could have been the place where that nettle was grasped. What is to be done? Open-cast digging can be successful on a relatively small scale and in a short timeframe, and can sometimes work for the long-term good of some bits of land, but when practised on the massive scale that we have seen recently in parts of the north-east it causes major environmental damage. In any case, it is impossible for the considerable seams of coal that are under the North Sea-you cannot dig there-and even when you have got it out you are still left with the challenge of clean use. The alternative of deep mining, the old-fashioned sort, even with the technology that would now be available, is still a dangerous business and the disposal of waste remains a problem.

I suspect-this is not a party point; it covers all bases-that we have seen nothing done now for 20 years because the appalling social cost of the miners' strike in the 1980s has meant that successive Governments have not wanted to go anywhere near the use of our own coal resources; it would scare everyone silly. However, quite apart from the long-term social deprivation still suffered by many of the old mining communities-I know that there have been wonderful regeneration projects, but the deprivation levels remain shocking; I was visiting some of the old mining towns the weekend before last and it is still appalling that people are living in those conditions-to ignore our existing energy resources because of the bad social experiences of a previous generation looks like cutting off our noses to spite our faces.

The other wider reason for pursuing better uses of existing resources is the urgent need in other parts of the world, China and India being the obvious examples, to develop the appropriate technologies. If we could develop that technology ourselves and then export it, we would not only profit ourselves but be in a position to help other countries meet their future carbon needs as well.

The particular irony of all this is that two of the universities in my region, Newcastle and Durham, have been working on precisely this UCG technology. They should now be given the chance and, equally importantly, the funding to develop pilot projects to show what can be done. If with this Bill we can set up four CCS demonstration projects, why should we not also set up four or more underground gasification projects?

This proposal is not new. As long ago as April 2003, the noble Lord, Lord McIntosh of Haringey, spoke about possible collaboration with the USA's FutureGen project and advocated gasification projects, but nothing has been done. There have been more recent exchanges as well.

The questions pile up, and perhaps they could be addressed in the present Bill: what has happened to all those projects that have been talked and written about and had initial research done on? Why did they need foreign investment-in one case, Russian money? When the Government pour billions of pounds of taxpayers' money into projects that many taxpayers oppose, why should the future use of our energy resources be dependent on individual entrepreneurs backed by foreign investors? Of course, nobody wants to go back to the spiralling costs of the past when the public purse was treated, so to speak, as a bottomless pit in its own right, but at a time when other Governments, like Germany's, have been heavily subsidising their coal industries, why should our Government not take a lead in investing in the future use of our own resources, for the benefit of our own communities?

Setting up and installing gasification is, obviously, expensive, but it does not put at risk human lives or the countryside and it does not pollute the atmosphere. When the real costs of not doing it are taken into account-continuing to import foreign coal, the CCS technology on the surface, the communities that were dependent on coal and are still now suffering-there is a very strong case for proceeding.

I raised these and similar questions in your Lordships' House in January 2007 and followed them up with a letter to the noble Lord, Lord Davies of Oldham. In his reply to me of 13 March 2007, he spoke at length in his inimitable style of the present energy policy, and agreed that the DTI's old Cleaner Fossil Fuels Programme had carried out an assessment of UCG. This showed, he said, that UCG had advanced to a stage where it was economically comparable with conventional mining. But, he went on, it would need to be deployed in combination with CCS to make any significant contribution to carbon abatement. I am not an expert, but I suspect that those who are would challenge that statement. In any case, the question is how to use our own resources. The UK strategy, said the noble Lord, did not see UCG as a specific technology to pursue but intended to keep a watching brief on it. Well, we have been watching this brief for many years now and nothing has happened. It is time to get on with it.

Without knowing the details, it is hard to comment on the noble Lord's further statement that the joining fee for the FutureGen project was not thought to be a cost-effective use of public funds, but, when the future use of our own resources is at stake, a strong case can and should be made for it. I and many others around the old mining areas would greatly welcome it if the present Bill could eventually include this kind of project.

As may be obvious, I am neither an industrialist nor an economist. However, I live in the midst of a proud but somewhat battered old mining community, which still believes doggedly that the coal under its land ought to be used, and used wisely, not least to provide fresh employment. My predecessor but one, David Jenkins, known to many noble Lords, famously stood by the mining communities in the 1980s. My predecessor of a century of more ago, BF Westcott, actually settled the miners' strike in the mid-1890s, including, in a remarkable exercise of episcopal power, sending a messenger to the railway station late in the negotiations, telling them to hold the London train because his Lordship had not yet finished his work. Sadly, I no longer have that power, nor indeed the mineral rights themselves, but I stand with and speak on behalf of the region that I love and serve when I express the hope that the Bill might include proposals for the future use of our own resources and of all available technologies, and that the UCG option, already being developed in the universities of the region, should now be given a chance to prove itself in action.

Photo of Lord O'Neill of Clackmannan Lord O'Neill of Clackmannan Labour 6:59 pm, 23rd March 2010

My Lords, in some ways I am tempted by what the right reverend Prelate says. For 26 years I represented mining communities of a similar character to those in Durham. In the first instance, it would be difficult now to recruit men to go down the shafts to do the preparatory work for UCG. It is also the case that one of the casualties of the privatisation of the coal industry was the laboratories of old British coal, which probably had centred in them more expertise and inventive researchers than any other body in the world. When we talk, as we will this evening, of carbon capture and storage, as the man asking the way to Cork was told, "We would not start from here".

I welcome this Bill. It has been chastised as being modest. I think it is one of a succession of steps that the Labour Government have taken up a learning curve that some of us wished they had moved up a little more quickly. However, the emphasis in the Bill on carbon capture and storage, the alleviation of fuel poverty in a limited way, and also consideration of the powers of Ofgem are all welcome.

I do not want to say too much on carbon capture and storage. We know that the technologies are limited at present. Operations are around 30 megawatts and they need to be in the order of 400 megawatts to make them comparable to at least one of the turbines of any major power station. The UK is not alone in pursuing this technology. There are companies presently generating electricity in the United Kingdom from gas-fired powers stations; E.ON and RWE in Germany have quite interesting and important research work going on. South Korea, India, China and the United States, and to a lesser extent Japan, are all engaged in research work of this nature.

We have to guard against the presumption that the provision of public funds by the United Kingdom Government will in itself produce a solution; that we will somehow have a bullet painted not silver but red, white and blue and that will somehow solve the problems of carbon capture and storage. It is an industry that we hope will take off and even the Government's modest, but not unrealistic, ambitions say it will be at the earliest 2020 or 2022 for the first stage and perhaps 2025 for a bolt-on development. If that is the case, it will be seven to 10 years beyond the large plant directive which will make coal burning and some aspects of gas burning very expensive if there is an interim period before this new technology comes in.

I am not negative about CCS. I want it to work but I recognise that we have to be careful and not over enthuse about it. On the front page of this morning's Scotsmanspokesmen for the Scottish National Party were saying that they are confident that 500 jobs a month will be created in green technologies in Scotland alone over the next 10 years. God knows how they are going to do that but I leave that to others to work out. There are a number of research laboratories across the United Kingdom and institutions have been mentioned already-the bright ideas bank has many borrowers at the moment. I am not sure how much of it will actually deliver the kind of returns that we would want. I certainly wish the Government well.

I have argued that when we are going to have competition it should be limited. Now we are not really having competition of the same order but we are going to have a bet on CCS; there are a number of other countries that might beat us to the punch. However, it is worth being there not necessarily because it will make a dramatic impact on UK generation but rather because it will give us an opportunity to sell our wares elsewhere in the world where they are of greater significance. One obviously thinks first of India and China, both of which have people of talent equal to our own and probably working twice as hard as we are. I do not mean any disrespect to the people we have in the United Kingdom, but it is a fact that they have so many people whom they can put to it.

I spoke about fuel poverty in the Queen's Speech debate in anticipation of this Bill but I think it bears repetition to a small extent. This Bill formalises the social tariff which will enable a number of poorer people to be given some assistance by clever use of Government data. We will see the alleviation to an extent of fuel poverty for a number of pensioners over 70 who are currently on pension credit. I speak here as the vice-president of the National Energy Action and the president of its Scottish equivalent, Energy Action Scotland. They have provided quite compelling figures which suggest that the £80 that is going to be available for pensioners over 70 on pension credit could be made available to other groups of vulnerable households. The groups have been quite clearly indicated in the winter payment arrangements-households where there is disability, severe disability, a disabled child, higher pensioners, households with children under five and households receiving child tax credit.

In this context, there are some 4.1 million households: 2.7 million of them are covered by pension credit; 1.4 million are affected by disability and the other groupings previously mentioned. It would currently cost in the order of £320 million to pay the individuals. That would account for something like £13 a household. Currently we consumers are paying some £84 per household for environmental ROCs and other forms of assistance and subsidy. For a relatively modest amount of money we could do a lot for other vulnerable groupings. Some noble Lords may well have received letters from Macmillan Cancer Support containing quite disturbing statistics about the number of people who are not in receipt of benefit and are suffering from cancer and deserve support. I was quite shocked- I did not appreciate the extent of such disadvantage.

In the summer consultations which the Government are required to fulfil under the legislation, I would hope that some of these specific cases that I outlined, and in particular the cancer sufferers, will be given some kind of assistance. I am not one of those who will go out of my way to criticise the Government for what they have done about fuel poverty because in a number of respects they have worked very hard to deal with households and with individual circumstance. The problem is that energy prices have oscillated in such a bizarre and unkind way over the past five or six years, in circumstances beyond the control of the British Government. The Government deserves credit but it must be extremely frustrating when we see that so many of these matters are now beyond the control and capability of the national Government. Indeed, it has to be said that the European Union is coming towards some kind of regulatory understanding. I would not use the word "regime". There are efforts being made but, sadly, they are probably not going to be capable of assistance. Therefore more and more will be dependent on the use of the social security system and the inventive use of statistical information now available to the Government following the legislation allowing information on pensions and other social security benefits to be switched from one department to another.

I also welcome the extension and the refining of some of Ofgem's roles. I have often felt that Ofgem as a regulator left a bit to be desired. When we discussed the NPS statement there was a certain degree of impatience, uncharacteristic impatience, in the Minister's views about certain views expressed by the Ofgem.

This Bill is fairly modest and could be handled quickly before an election. However, I would like to think that after the election we would look afresh at the regulation of energy. After 10 to 12 years and have gone from the adventure playground of the free marketers, the Hobart House brigade over at the Institute of Economic Affairs-people whom I, as a student in the 1960s, thought represented the dark side of the moon. They were given virtually complete control of energy pricing and regulation. A number of them, engaging intellectually though they may have been, failed the British consumer and the economy on energy pricing.

If we are to review the role of Ofgem post the general election, the people opposite have to recognise the sort of things we have to look at. We have to consider security of supply and whether it should be the responsibility of the state to have the appropriate places in which to store the gas we need. We do not have enough at the moment; we do not need as much as the French and the Germans because we have rather a large store in the North Sea. Nevertheless, we need an enhanced amount. An example of market failure has been the inability of energy companies to bend their minds to this issue. They have not dealt with it adequately. As chairman of a Select Committee in another place, I banged on for years about having better storage facilities for LNG and the like.

We will have an opportunity to do something post the election, regardless of who wins-and noble Lords know who I want to win. A Government of any complexion must look at energy security, the role of regulation and the role of the state. There is a case, in light of the market failure over the past 20 years, for which I am not castigating only the present Government-the previous ones were just as culpable-for doing that.

This is a relatively modest piece of legislation which goes quite a way to meet concerns a number of us have on specific issues, and I am happy to give it my support. I would like to think that the Government will be concerned about fuel poverty as well as about the poverty of ambition regarding some of the objectives that we could achieve. If there is one reason above all others for having another Labour Government, it is that nothing I have heard from the Benches opposite suggests that they are as ambitious or as capable of dealing with these matters as my noble friend.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative 7:12 pm, 23rd March 2010

My Lords, I am prepared to enter into a bet that the noble Lord, Lord O'Neill, has not in fact read the paper to which my noble friend on the Front Bench referred. If he has, and he still believes what he has just said, then perhaps he can stand up and say so. If he has not read it, he should not criticise my party's policy.

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

I would call the noble Lord a friend personally, although politically I regard him as an enemy. He has this capacity for banging old drums or flogging old horses. This was last week's speech. I have had the opportunity to read this paper and I do not regard it as a Green Paper. I repeat what I said earlier about this idea that somehow a party in opposition can produce White and Green Papers. It should win the election first and then produce them. As far as I am concerned, the policies of the party opposite still have a long way to go. I remember the poverty of the noble Lord's ideas when he was Energy Minister; he has learnt nothing and forgotten nothing.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

I do not propose to take lessons from the noble Lord on how to win elections.

I listened with fascination to the right reverend Prelate the Bishop of Durham. I remember the exchanges we had at Question Time in 2007 to which he referred. I continue to get, through various blogs, all sorts of information about what is going on out there on the underground gasification of coal. Like him, I am astonished that there seems to be so little official interest in this. One of the things I remember from our earlier exchanges is that his miners do not want to go underground again. Underground gasification of coal is the way to exploit those energy resources, without the kind of problems which faced miners going underground.

A Second Reading debate is a temptation to embark on a tour d'horizon of energy policy across the board. After all, we have now had three hard-hitting reports, all of which have claimed, with some justification and much force, that the Government's energy policy is failing. The Institution of Mechanical Engineers, the Royal Academy of Engineering and the Minister's favourite regulator, Ofgem, have all demanded that there has to be a much more structured and clear policy for energy in this country. The House will be relieved to know that I shall resist the temptation, partly because we were engaged in nearly 12 hours of debate in Grand Committee on the national policy statements, but mainly because it would not be appropriate at this hour. All I will say is that the Bill makes precious little progress towards that kind of reform of energy policy which this country so desperately needs.

Unlike most of the other speakers in this debate so far, I am going to talk about the Bill, which contains two issues that need to be examined. The first is carbon capture and storage. Again, we discussed this at some length on 11 March in Grand Committee. The Bill creates the mechanism by which the demonstration projects-I believe that they are still called that-will be financed. However, it is a sad story of dither and delay.

As my noble friend on the Front Bench said, we do not know about these schemes of assistance. Everything will be set out in regulations, of which we have not yet seen any drafts, and there is no estimate of cost. What we have got in the past few days-indeed, since the last time the Minister addressed us in Grand Committee-is an indication of some of the companies that may well be taking part in this competition. From the press release issued by the department on 17 March, we know that Scottish Power, with its project at Longannet, is certainly one of them and that Scottish and Southern at Ferrybridge in Yorkshire may be another. Then there is the E.ON project at Kingsnorth in Kent. Some of these are described as having got to the stage of front end engineering studies. I am not quite sure what that means, but it does not sound very well advanced.

The most alarming statement I have seen recently was in a very well informed article in the Guardian. It said that there was a competition for contenders and that,

"no winner will be announced until next year".

Has the Guardian journalist got it right? Is it true that we will not know anything until next year, 2011? Perhaps the Minister will be able to give us an answer.

Part 2 of the Bill covers schemes for reducing fuel poverty. I, too, agree with every other speaker that this is a very important part of the Bill. However, I have some questions and have given the Minister notice that I wish to raise them. The House will remember the background; under the Carbon Emissions Reduction Target, as the Minister mentioned, 11 million households would be helped with loft and cavity wall insulation. Right from the beginning, it troubled me how the companies were to know who they were supposed to help. I remember an exchange across the Floor of the House with the noble Lord, Lord Rooker, who was quite unable to tell us. The companies had to go on a fishing expedition, knocking at doors, trying to find out who had not had the work done and who was entitled under programmes such as Warm Front. It was extraordinary.

We started with the Pensions Act 2008 and its regulations, which we debated in Grand Committee last January, where there was a tiny first step of data sharing between the Government and the energy companies relating to people who were entitled to the guaranteed element of pension credit. The noble Lord has no doubt studied it: it is a very small part of the 11 million households that are supposed to be benefiting from those programmes.

Of course the problem has always been the data protection legislation and the fact that people do not like to think that somebody will knock on their door saying, "You're poor and we're here to help you". That I can totally understand. However, when I raised this in debate on 26 January, I asked why these new regulations were okay so far as data protection was concerned whereas everything that went before was not okay. What was the difference? It is very relevant to Part 2 of this Bill, because here again we are going to have data sharing. Why is that all right under the data protection legislation, while the earlier, more ambitious schemes clearly fell foul?

Clause 9(5) spells out:

"A support scheme may in particular provide for scheme customers to be determined in any of the following ways- by reference to membership of, or to family or other relationship to a member of, a fuel poverty risk group;

(b) by scheme suppliers;

(c) by, or by reference to evidence provided by, the Secretary of State".

It is that third one where one comes back again to this issue of data sharing.

I have had a couple of letters from the noble Lord, Lord McKenzie of Luton-I will not quote them at this hour of the night-who took those regulations through Grand Committee. He has made the point that, if you are having an automatic benefit such as the rebate provided for under this Bill, then you can perfectly safely exchange the information, or share the data, across. If you are merely asking people whether they want something-whether they want their house fitted with roof insulation, for example-then you cannot. I totally fail to understand why that makes a difference.

The Minister also said that the Information Commissioner was broadly satisfied. I am not sure what that means. I asked to see the correspondence; I should have put in a Freedom of Information request, but I did not. Why? What change has he made? How can it possibly be right to share data freely with energy supplying companies for the purposes of the rebates under this Bill when it clearly was not right to share data for the benefit of the CERT scheme under the previous legislation. I hope that the Minister will be able to answer that question.

Finally, when one turns to Part 3 of the Bill, with the amendments on the duties of Ofgem, my initial reaction was to say that both major parties are now committed to substantial changes in the role and remit of Ofgem. We may hear something about this in the Budget tomorrow-I do not know. We certainly have the statement in the Timesby the Secretary of State for Energy and Climate Change, spelling out very clearly that it needed to be substantially changed. As our policy statement says, the Conservative Party agrees with that. We are arguing for a substantial change there. Therefore my first reaction was to say, "Do we really want to go fiddling around with these details now, when we are going to have legislation in any event, whoever becomes the Government, which is going to make major changes to the remit of Ofgem?"

However, having studied the details of the Bill and talked about it, I think there are things in Part 3 which do seem sensible. It is right to give Ofgem these new powers, even if they may shortly be overtaken by others. In particular, I would mention the new power to modify the market power licence conditions spelled out in Clauses 18 to 23 and, perhaps even more important, the power to adjust charges to help disadvantaged groups of customers. It is quite complicated; explanations can be found on pages 27 to 28 of the Explanatory Memorandum. I certainly will not take up the time of the House reading all that out.

We are not going to have a Committee stage on this Bill other than in the wash-up. That seems to be inevitable, which is why I said to the Minister earlier today that it was going to be a pretty funny Second Reading. I have some amendments to Part 3 that I would have liked to have moved; whether we shall have a chance, I do not know. On balance, I think that Part 3 should go through to the wash-up and that the Bill should eventually become law, albeit in a very short timescale. It has been properly debated in the other place-there is no question about that. They had a good go at it, and if we do not have a go at it, I think there will be opportunities in future energy legislation very soon after the election. I have asked two straightforward questions. First, is it right that we are not going to see a winner to the CCS competitions until next year? Secondly, why is it that the data protection is okay for some purposes and not for others? I simply do not understand it.

Photo of Lord Oxburgh Lord Oxburgh Crossbench 7:27 pm, 23rd March 2010

My Lords, I, too, welcome the Bill. It is a modest Bill. I guess that I differ from a number of others who have spoken only in the greater degree of my disappointment over what it does not do. Before I get on to carbon capture and storage, which I shall be talking about largely, I would like to ask the Minister-arising from his introductory remarks-how it is established that there is value for money for the sums that the supply companies are obliged to spend on alleviating fuel poverty. It is easy for them to spend the money, but is the money being spent sensibly? Do the Government know?

Turning to carbon capture and storage, I must rather fully declare an interest. I am honorary president of the Carbon Capture and Storage Association, a position which I took up when the association was formed several years ago. It is a totally subscription-based organisation and not one-as alleged in today's Times-that could bring in billions in money. The reason I became involved in this association was that carbon capture and storage seemed to me to be a vital bridging technology for as long as we continue to burn fossil fuels, during a transition period to a low-carbon energy economy. That remains my view. It is something that we have to have.

I take it that when one is talking about government policy on carbon capture and storage, one can now discuss the document which the Secretary of State launched last week, Clean Coal, An Industrial Strategy for the Development of Carbon Capture and Storage across the UK. I am afraid that I find this a particularly disappointing document. It is not that good things have not been done, but that there is a real lack, as far as I can see, of both a sense of urgency and a sense of commitment. Speaking of urgency, I refer to paragraph 1.9 in this document, which states that as part of the Government's plans for a long-term transition to clean coal:

"A rolling review process, which is planned to report by 2018, will consider the appropriate regulatory and financial framework to further drive the move to clean coal"-

It says 2018, my Lords.

There is no reference in the document to how one will put in place the infrastructure for carbon capture and storage. It is universally recognised within the industry that this is likely to be the bottleneck. The demonstrators are largely-not exclusively but largely-concerned with the demonstration of capture technology. The whole infrastructure for transferring CO2 from where it is generated, in power stations round the country, really has to be subject to planning now, simply because it will involve pipelines which will involve permitting. We know that even with the best will in the world, that is a very long process. Unless we start it now, we have no chance of implementing carbon capture and storage in a timely way. I need not remind the Department of Energy and Climate Change of the urgency of getting emissions under control.

What about commitment? Page 16 of the document states:

"It is generally agreed that, if proven, CCS will be needed to make a substantial contribution ... to global abatement of CO2".

If proven? I should be grateful if the Minister could produce one chemical engineer who thinks that there is any technical difficulty in achieving carbon capture and storage.

There is uncertainty over the cost. However, the same document includes a very sensible and realistic table of the costs of carbon capture and storage. I think that it represents the upper costs perfectly reasonably, and they will probably be less. In a number of places we find carbon capture recommended if it is "affordable". What is affordable? If it is not affordable, what is plan B? Does the Minister intend that we repeal the Climate Change Act or that the country should stop burning gas and coal for the next 30 to 40 years? That is a pretty tough choice either way. At the moment this is unresolved in the document which the Government have produced. I think that it is the demonstrable lack of commitment that dogs UK industry. The Government cannot expect UK industry to take carbon capture and storage seriously and commit to it before the Government do the same.

I turn briefly to other matters. Whichever hue of Government we have after the election, a serious review of energy will be urgent. The main reason is that, globally, the fossil fuel situation in the past 18 months has changed profoundly, due to a recognition that shale gas is a viable economic proposition. I confess that for quite a long time I was sceptical about shale gas, but now I think that it has been sufficiently demonstrated in the United States that there can be little doubt. It is relatively poorly understood or explored but clearly it will be important. The US is now cancelling orders for imported liquefied natural gas from the Middle East. We see that Canada is now preparing to export liquefied natural gas to China. The natural gas price has become decoupled from the oil price to which it has been tied for so long. Indeed, we see relatively lower gas prices, much more security of gas supply and the UK is in a relatively good position. We were on the end of the pipelines coming from eastern Europe, but this county is pretty well served with LNG terminals. A lot of European LNG will come in and it will be exported by our pipelines to Europe. This time we are on the right end of the pipeline. Clearly that has profound implications for energy policy.

Another point is that the Government should be aware that there is widespread concern in the energy generating community that the Government have not fully grasped the operational and business implications of wind energy targets, which, if implemented, will take wind generation to more than half of the maximum winter demand. It is not that that cannot be done, but it is not necessarily a very sensible way of proceeding. I declare an interest as the chairman of a wind energy company. However, I think that this is probably excessive. An incoming Government must pay much more attention to diversifying the renewables portfolio, as a number of noble Lords have pointed out. Biogas and biomass are becoming more important. Marine tidal stream has just completed a successful demonstration in Northern Ireland. The important thing about these renewables is that they are out of phase with wind. You can get away with a much larger fraction of renewables in your energy portfolio if you have a spread across the field.

The Bill is fine as far as it goes, and I hope that it passes smoothly. I am sorry that we are unlikely to have the opportunity to debate it in much more depth. It disappoints me on its commitment to CCS. A new Government will have to tackle that if they wish to move ahead at the industrial level. Undoubtedly we will need a new energy policy.

Photo of Lord Woolmer of Leeds Lord Woolmer of Leeds Labour 7:38 pm, 23rd March 2010

My Lords, it is always a pleasure to follow the noble Lord, Lord Oxburgh, from whom I learn something new every time he speaks. I am most grateful to him. I, too, want to talk overwhelmingly about carbon capture and storage, initially in the context of the region where I live-Yorkshire-but I shall widen the discussion to the issues raised by the noble Lord, Lord Oxburgh, and others.

The Government seem to have two reasons for their almost experiments with carbon capture and storage. The first is the declared desire for coal to contribute significantly to the mix of the energy security of this country. The second is the recognition that coal-fired generation will be absolutely vast in India, China and other countries for years to come. New technologies have export potential. The IEA in its World Energy Outlook 2008 quoted figures of coal production rising from less than 4,500 million tonnes of coal equivalent to something over 7,000 million tonnes of coal equivalent by 2030. I can well see that the Government may have in mind that that is a very attractive market, even if they do not have their heart and soul in what will happen with coal-fired generation in this country. I shall turn to that in a moment.

In the Yorkshire region, there is a cluster of carbon dioxide emitters. They do not comprise just coal, although mention has been made of the three big coal-fired generators, Ferrybridge, Eggborough and Drax. Incidentally, I think that they are cooling towers rather than heating towers; they might blow up if they were heating towers. In total, the emitters in Yorkshire emit around 60 million tonnes of carbon dioxide a year. That is equivalent to about half the carbon dioxide emissions generated by all UK households, so a very large amount of carbon dioxide emissions are generated in the Yorkshire and Humber region. However, only half of that comes from coal-fired power stations. Fifteen million tonnes come from gas-fired stations; 2.5 million tonnes come from oil-fired stations; between 5 million and 7 million tonnes come from the Corus steelworks at Scunthorpe, depending on its operating capacity; more than 1 million tonnes come from a glassworks; and 1 million tonnes come from a cement works. I say all this because, if carbon capture and storage is to mean something in the long run, it must deal with more than just coal. It is not just a question of coal in the United Kingdom. In the Yorkshire and Humber region, a large amount of carbon dioxide is being pumped into the system from around 12 major sources. Off the coast of Humber, in the southern part of the North Sea gas fields, there is a whole range of potential storage sites.

The Yorkshire region demonstrates exactly that if you put together a carbon capture pipeline transport and storage system, it makes sense to do it in a place that will have a strategic long-term likelihood of success. One thing that bothers me somewhat about the current situation is that this experiment with four carbon capture schemes does not seem to fit into a strategy. Trials may take place in different parts of the country but, in a large region with a substantial number of emitters, the construction of a pipeline system and a storage network that serves all of them would make a great deal of sense. Although the Bill can encompass gas-fired power stations, that is not the Government's intention, as the Minister said. It would be helpful if the Minister could reassure me on my next point. I wonder whether emissions from cement, gas and other things come under BIS or DECC. Are DECC and BIS talking about a strategy that makes sense across the board? My instinct is that DECC is concerned with climate change and has certain ideas about energy generation but other types of emissions may fall under other parts of government.

Looking at the trial scheme in the long term, if you develop a pipeline system that goes out to sea and into a storage system, it will be extremely expensive for a single source of carbon emission-a coal-fired power station-to meet the whole cost of a pipeline going out to the coast and into that storage system. The capacity of such a system would be very small. If, on the other hand, you intended to have a series of these linked together over a period, you would put in a completely different size of pipeline. The diameter of a pipeline to serve a single emitter would be about 12 inches. If you put in a pipeline that over time could link in with a series of emitters, it would be 48 inches. Is this issue being considered? If you are to put in a pipeline that can serve all the coal-fired power stations in the Yorkshire and Humber region, it is no good putting in a 12-inch pipeline because over time you will have to put in another 12-inch pipeline, which would clearly be silly. Has the Minister given any thought to this?

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

I am following the noble Lord with great interest because this is clearly an important subject. People have argued that there needs to be a CO2 grid and that one of the tasks of government is to ensure that as carbon capture and storage is developed-not only for coal but for other emitters, as he said-there is a proper CO2 grid to collect it and pipe it to the place where it is to be stored. Would he support that?

Photo of Lord Woolmer of Leeds Lord Woolmer of Leeds Labour

I entirely agree with the noble Lord. I would not suggest one grid for the whole of the United Kingdom, but certainly in the Yorkshire region, with its 12 major sources of emissions-as I have explained-it would be logical and extremely sensible to have a grid. What is the intention of the Government in this regard? If they really believe in this and intend it to be a strategic investment for the UK-not an export market for technology to India and China-I entirely agree with the noble Lord, Lord Jenkin, that that is the way to go forward and I would be extremely interested in it. The Government should develop a grid for the Yorkshire and Humber region. That would make an awful lot of sense.

My next two points concern strategy. A large amount of British coal-fired electricity generation will cease to operate well before 2020, given the large combustion plant directive. Other EU legislation will mean that other plants will be out of commission by the mid-2020s. Some commentators think that there will be no coal-fired power generation left in the UK by the mid-2020s. If these commercial trials are to lead to coal-fired generation in the UK thereafter, there may be none left on the timescale to which we are working. The coal-fired power stations that face potential closure will be considering the best use of their site. If they feel that there is uncertainty about carbon capture and storage and the Government's commitment, they will build a gas-fired power station on the site of the coal-fired power station given the current regulation and policy. They cannot afford to let a coal-fired station close and then wait another 10 years to see whether the Government have carbon capture and storage in place. That is not what will happen at all. The Minister is very much on top of his brief, but does he agree that there is a real possibility that we may be applying commercial trials to a coal-fired generation scheme that may not exist by the 2020s? Has he considered that?

As regards the financial and other elements of investment decisions, how can the coal-fired generation industry be confident that the long-term financial and regulatory frameworks will be in place that will be necessary to ensure take-up of carbon capture and storage even if these demonstration projects prove technically feasible? I have seen one estimate based on the assumption of an emissions trading carbon price in Europe of €35. Even that would not be enough to make carbon capture and storage commercially viable. The current price is €12 to €13. If this is based on the European Union Emissions Trading Scheme price, with some modest subsidy, how does that square up to the viability of this operation? On the other hand, are the Government considering whether to oblige electricity suppliers to buy a certain capacity from carbon capture and storage generators? In other words, just as there is a renewables obligation, is it the Government's thinking that there will be a carbon capture and storage generation obligation? That would mean that, whatever the price of carbon, there would be an absolute obligation to buy some.

These are important matters. When I talk to coal-fired generators, I am told that the carbon issue that they are thinking about is timing. They think that things are going far too slowly and that these trials will not have borne enough results to convince the Government of the day to influence investment decisions on what they will do when they close the plant down. They are so unclear about the Government's intentions in relation to the price of carbon and commitments and obligations to buy the output from these plants that there is serious doubt about whether these commercial trials will lead to investment by the time we get to the 2020s and 2030s. I look forward with great interest to what the Minister has to say on these matters.

Photo of Lord Reay Lord Reay Conservative 7:51 pm, 23rd March 2010

My Lords, the main purpose of this Bill is to introduce a subsidy mechanism to enable the trial of carbon capture and storage to proceed. The mechanism is to be a levy on electricity suppliers, which they, in turn, are expected to recover from electricity users. The amount to be raised, we are told by Ministers, will be £9.5 billion over 10 years. At the same time, to offset the effect of the levy for those in fuel poverty, the industry will be obliged to make available at least £300 million per annum by 2013-14 to support the most vulnerable consumers-twice the maximum amount that companies will have spent per annum hitherto under a voluntary agreement negotiated with the Government, which will now be superseded. Electricity bills for the remainder of consumers will then, of course, rise further. The levy raised will be spent by the administrator, Ofgem, on promoting four trials, which it is hoped will be completed by 2020 or thereabouts. Then we will know, we hope, whether the technology passes the test of being technically and economically viable on the scale required for mass deployment. By "economically viable" is presumably meant whether the Government decide that they can afford, or the electricity consumer can afford, whatever additional subsidies will be judged necessary to incentivise the rollout of the technology.

Then there is the whole paraphernalia of the transport and storage of liquefied CO2 through a vast network of pipelines to some cavernous spaces under the North Sea, as the noble Lord, Lord Oxburgh, described. That is not cheap and is achievable only with further subsidy, no doubt, or by making any alternative even more expensive by means of a carbon tax, for example. I do not see us being carried very far along the road of installed CCS by means of the £9.5 billion alone.

The moment may come when we have to decide to accept that there is a limit to what we can do to reduce further our carbon emissions and, for the sake of our energy security, accept some coal together with its emissions. This might be plan B for the noble Lord, Lord Oxburgh. After all, it is what we do today in the case of gas, whose emissions are far from zero and whose deployment is proceeding apace.

What happens if the CCS trials do not produce a satisfactory result? Do we really expect that India and China will abandon their use of the abundant cheap coal to which they have access just because we have discovered that clean coal is too expensive? Do we expect that they will have held back while we conducted the trials? The CCS levy is only the latest, and will not be the last, in a series of costs that the Government are imposing on the British electricity consumer in the cause of persuading the rest of the world to reduce carbon emissions because of their supposed effect on global temperatures.

As the noble Lord, Lord Jenkin of Roding, listed in Grand Committee on 11 March 2010, before CCS we had the EU Emissions Trading Scheme, the renewables obligation and the carbon emissions reduction scheme, while still to come are feed-in tariffs, the renewable heat incentive and smart meters, not to mention electric cars, although in that case it may be the taxpayer who is going to be called on in the first instance. How much the consumer will be willing to take is a moot point, especially as he is now learning that for the past 20 years climate science has been corrupted by politics to deliver the warnings that justify all this expense.

I was pleased, therefore, when my honourable friend the shadow Energy Minister declared, during the passage of this Bill in another place, that he wanted energy bills received by customers to list the amounts attributable to environmental legislation. I am even more pleased that this has now been carried over into my party's latest energy consultation paper, which was published last week, as was discussed. Towards the end of that document is this passage:

"The first step ... is to be absolutely transparent about the costs to consumers of existing and future subsidies, so that the public has a clear view of the extra burdens mandated by policymakers. Under a Conservative Government all consumer-paid subsidies will be disclosed on energy bills so that bill payers can be informed about the level of contribution they are making".

The present Government have made no move in that direction. Transparency is the last thing that they have shown any interest in in this field.

The Conservative energy paper goes on to say that the next step is to clarify that no energy subsidy should be permanent and that it should cease when a technology is mature. There is not much danger of that happening to CCS within the lifetime of most of us-the baby is still in the cradle. However, it raises the interesting question of what should happen to wind. Wind is now promised enormous subsidies by the present Government. It is estimated that three quarters of the £200 billion required investment in our energy infrastructure is necessitated by the Government's determination to build 10,000 wind turbines. Is wind power not a mature technology yet? Will it still not be so in 2037? Or does its need for subsidy have nothing to do with its immaturity and everything to do with the fact that its uncontrollability as a power source makes it completely unsuitable for electricity generation in an advanced economy, as has been the case from day one?

All parties seem tempted by the notion that CCS, with these trials for which the Government are organising these subsidies, offers this country a glittering industrial opportunity. Leaving aside the whole question of whether it is desirable for Governments to attempt to pick winners-or losers more likely in the field of renewable energy-there is a danger involved in setting out to build an industry in a sector that would not exist without subsidies. Governments eventually abandon policies that turn out to be uneconomic. They even run out of money-if not here, in other countries. Export markets can disappear for that reason. Moreover, the subsidies are a cost that subtracts from purchasing power in an economy and therefore lowers economic activity generally. The jobs gained for wind turbine blade construction in the north-east, say, can be more than offset by jobs lost throughout the economy as a whole as a result of the steep rise in electricity prices produced by the subsidies.

It is likely that the subsidies will create far more jobs overseas than they create here. That may be a reason why China plays along with wind power and other renewable energy technologies. It sees ahead very profitable export prospects. In Germany, feed-in tariffs have produced an exploding demand for photovoltaic installations-a most unsuitable development, one would have thought, in that country of gloomy skies. It has now been found that, although Germany is a manufacturing and exporting powerhouse, half of the demand in recent years has been met by imports from China and Japan. Here I fear that we are all set to let the same thing happen under present policies.

In conclusion, I shall be interested to hear what the fate of this Bill will be with so little of the Parliament left. I imagine that its fate is largely in the hands of the opposition parties. Perhaps the wind-up speakers can enlighten the rest of us about what parts of the Bill they feel inclined to wave through, as I believe they are entitled to under our strange constitutional procedures.

Photo of Lord Palmer Lord Palmer Crossbench 8:00 pm, 23rd March 2010

My Lords, the noble Lord, Lord Hunt, opened this debate with his usual charm and eloquence, and mentioned climate change. I ought to declare an interest as a member of the European Union Sub-Committee D, which today presented its report on climate change where it affects agriculture and the environment.

The right reverend Prelate the Bishop of Durham made some very pungent points about coal-all of which I completely concur with. At home, before going green, we used to burn coal which came all the way from China. That was an extraordinary situation to be in, although I now have an air source pump which was also made in China. I agree with the noble Lord, Lord O'Neill, on fuel security, which is why in previous energy Bills I have promoted the use of biofuels. Again, I echo the comments of my noble friend Lord Oxburgh about the future of fossil fuels, albeit that I am married to a Texan fossil-fuel explorator.

It is hard to credit that, yet again, we are tackling another Energy Bill, and I cannot help but think what a waste of time-and, indeed, energy-this debate is. However, I wish to limit my comments to Part 2 of the Bill regarding fuel poverty-a subject that I have often raised in your Lordships' House since 1999. I shall always treasure the memory of my dear friend, the late Lord Ewing of Kirkford, pleading with the then Minister, the noble Baroness, Lady Hollis of Heigham, that because I live in a freezing, 109-room "but and ben" in the Scottish Borders, I ought to be eligible for a cold weather payment. Not, unnaturally-albeit that I open my home to the visiting public-the Minister did not think that I would qualify.

Although I am 11 years older and married to a senior citizen, I do not wish to try to persuade the House that I am a deserving case. But I wish to plead the case for those severely disadvantaged people who have to toss a coin to discover whether it is food or fuel that gets their limited budget. My main concern is the geographic differences-a point that I have often raised when fuel poverty has been discussed in your Lordships' House. I accept that it is a very complex issue and that it is expensive to administrate, which is one of the reasons why I have finally, albeit reluctantly, dropped my campaign for payments to be means tested.

I would dearly like to invite the Minister to come to visit me in Scotland on the hottest day of the year. We would take a leisurely stroll around our farm and he would notice smoke coming out of every one of our 54 cottage chimneys. Indeed, I would yet again extend an invitation to the noble Baroness, Lady Wilcox, if it was not for fear of being refused once again.

If I was to accept a similar invitation from the noble Lord, Lord Hunt, to tour the Midlands I would, I am sure, not detect a single whiff of smoke from a residential chimney, and it is a sorry situation that the welfare benefits system in the United Kingdom takes no account whatever of the much higher costs associated with the geographical location of the claimant-even where there may be a considerable disadvantage. For example, it is obvious that the colder the climate, the greater the need for expenditure in order to keep the home warm. Equally, it is clear that where a household lacks access to the most economic source of domestic heating-normally mains gas-and is dependent on more expensive fuels such as LPG, any disadvantage is greatly worsened.

This combination of circumstances is particularly prevalent in rural Scotland and demonstrates a failing of social security policy. There is virtually no recognition that different circumstances call for different levels of support. This is particularly true of energy costs, whereby the local climate can have a major bearing on the required expenditure. The colder the climate, the greater the need for additional heating; and this has clear consequences for household budgets.

If, for example, one takes Bristol as the mean, in Braemar-which is a little further north from me and had a very harsh spell of weather this year-last year the average householder spent 65.2 per cent more on heating costs than a Bristol resident. That is a huge increase. Eligibility for cold weather payments is restricted to the poorest and most disadvantaged households, and rightly so. To qualify for a payment, the household must be on the lowest level of welfare benefit and must be vulnerable as a result of age-they must be over 60 or with a child under five-or disability. A cold weather payment is made only when the average daily temperature over a period of seven consecutive days has been, or is forecast to be, 0 degrees centigrade or less.

The Government have been resistant to the argument that wind chill should be factored in the cold weather payments system. The Government's response can be summarised as: a number of formulae are used to calculate the combined effects of air temperature and wind speed on the human body when in the open air-commonly referred to as wind chill. However, the Building Research Establishment advises us that these formulae are not appropriate when assessing heat loss from buildings, because different heat mechanisms apply. I believe that factoring in wind chill would be of significant benefit to some of the most vulnerable households in the United Kingdom and would cost only £300 million. In relation to running Government quangos, which cost £32 billion per annum-I repeat, £32 billion per annum-that measure would surely be just kindling. I hope that the Minister will take this on board. In this day and age, and in this society in which we live, surely it is an absolute scandal that any resident of the United Kingdom is subject to any degree of fuel poverty.

Photo of Lord Dixon-Smith Lord Dixon-Smith Conservative 8:07 pm, 23rd March 2010

My Lords, I do not intend to follow the road taken by the noble Lord, Lord Palmer, because the strategic interests of this Bill are to be seen more in Part 1 than in Part 2.

I remind the House that the 2050 target for carbon dioxide emissions for this country is 20 per cent of the 1990 emissions figure. This country passed that limit in about 1850, when the population was about 22.5 million. To achieve that target, therefore, we need nothing short of a revolution in our energy systems. I sympathise with the Minister and indeed understand his anxiety that carbon capture and storage should work. The issue is not whether it will work. We have heard the noble Lord, Lord Oxburgh, and we can be absolutely confident that it will work. The question that we cannot answer, and one of the reasons why we need a heavy subsidy to produce experimental plant, is we do not know what the economic cost of this system will be. It is not a question of whether the technology will work that will judge what part it plays in our future energy supplies, it is what its economic competitive position will be. It is not even a question of national energy security, partly because today a lot of the coal consumed in power generation is imported. Disregarding that issue, for me the security of supply position was compromised a little over 100 years ago when the British Navy which of course was fired by coal, switched to oil, which had to come from the Middle East, because it was more efficient and effective, increased the range of our ships and so on. There are measures and assessments which have to be made, and it remains to be seen whether this huge subsidy which will go into carbon capture and storage actually produces a system which will survive economically after we have installed it. I shall be very interested to see this, because there are many other sources of energy coming forward which may well be a better buy, if you like, for the great British consumer.

I have every sympathy with what my noble friend Lord Reay said on the question of what will work. We do not know the answers. I understand the Government's dilemma in this matter; I merely remind the Minister that if he can remember as far back as last Friday morning there were huge headlines in the national papers about a horse that was bound to win a race in the afternoon, and it did not. I wish he had a little less absolute confidence that carbon capture and storage will work, because if it is uneconomic here it is also likely to be uneconomic, or uncompetitive economically, in other countries as well. Even India and China with their huge populations, energy demand and difficulties in modernising their societies will have to face the hard reality that if CCS is not economically competitive it will not provide a solution-and they will be the first to change their systems.

I come back to the Bill. I have a little difficulty with it because this evening we are having to have in effect not just a Second Reading debate but also a Committee stage and a Report stage. Its next stage is going to be this awful thing called a wash-up when what can be agreed is agreed and what cannot be agreed is passed over; it remains to be seen what will happen at that stage. I would welcome some assurances if the Minister is in a position to give them.

I accept the need to subsidise these experimental installations, but I regret it. It seems that one of the reasons we need this subsidy is the complete failure so far of the European Emissions Trading Scheme to have any real effect on energy markets. If that was working properly, perhaps we would not need this degree of subsidy, at least. I wonder if the Minister will give an assurance that after these installations have been made and the levy has been put in place, the levy and indeed the charge on consumers will only last as long as they are required to pay for those installations.

I have an awful memory of what happened to the Dartford Tunnel tolls. When the latest Dartford Tunnel installation was established-under an Act of Parliament -it was agreed that the tolls would pay all the running and construction costs, a reasonable profit to the developer who undertook the latest bridge installation and so on, and then they would cease. Shortly after this Government came to power in 1997, one of their first actions was to have a little slip in one of the Transport Bills to enable the tolls to continue ad infinitum because they rather enjoyed the revenue stream. That is life, and I worry that it might happen in the case of this other subsidy.

The second point is that all the powers under this part of the Bill are dealt with by the Minister under regulation. We always have difficulty with regulations. Many of us have spent happy hours on them, and no doubt the Minister has also spent happy hours answering requests for information about how these regulations are to be made and what will happen. One of the requirements in the Bill is that the Minister will consult the regulator, Ofgem, and such other persons as he may choose. I make a plea, which I hope he will answer, that the consultation will be very widespread: it should go across the broad industrial and commercial sector because there are very particular views. He will also have power under the regulations described in the Bill to choose particular sectors that might be affected by or exempt from the levy. Under those which might be exempt, perhaps emissions-free energy should not have to pay the levy: that seems wholly sensible and would also give a little added incentive for people to produce emissions-free energy if that were possible.

I admit that I had a particular plea from a section of the electronics industry: computer centres-perhaps they might be considered for special treatment. I have no interest in this but I was happy to listen to their plea. They made the point that they supply services which are fundamental to the City and so many other aspects of our modern life. It really does not matter to them whether they are in this country or Timbuktu. Nowadays, computer communication is so simple, fast and universal that these services can be provided from anywhere. The particular concern of these companies is to maintain their competitive position in this country so that they can stay here. Those are considerations that it would be entirely proper for the Minister to take into account. I do not say that he necessarily has to accept the argument or the position, but he should look at those aspects in relation to the powers that appear to be given to him by the Bill. I plead with him to give some assurance that his consultation process on that part of the Bill will be sufficiently wide to take account of that sort of thing.

I hope that the Bill will largely survive. Enough political points have been made already, so I will only make one. My comment on the political situation is this: the Government have done enough to lose the election, but it remains to be seen whether the Conservatives, in the judgment of the electorate, have done enough to win it.

Photo of Lord Judd Lord Judd Labour 8:19 pm, 23rd March 2010

My Lords, without commenting on that last observation, I will simply congratulate the noble Lord on an interesting and reflective speech-the sort of speech we should hear more of in our deliberations in the second Chamber. Perhaps I may tempt him to take his thinking a little further. I frequently find myself considering how far we are prisoners of an assumption that we must have energy at our disposal, and how far we may have to move into an age in which much of our original thinking, policy-making, research and the rest will concentrate far more on how we do not need energy in the way that we have taken for granted in the past. Perhaps, over a beer or a coffee together, the noble Lord and I might have an interesting discussion about these things.

I firmly welcome the Bill. I will not be alone in saying that it is good to see my noble friend at the helm on these matters. Why do I welcome it? I will summarise what seems to be glaringly obvious. The Bill will provide better protection for consumers. It will ensure environmental benefits. It will assist in achieving sustainable economic development. It strengthens the provisions for meeting the social challenges of fuel poverty. It faces up to the challenge of the opportunity given to generators for exploitation and making excessive profits at the expense of the consumer-an opportunity resulting from insufficient transmission arrangements. As my noble friend rightly emphasised in his introduction, it recognises that long-term solutions will not be found by constraints alone: increased transmission capacity will be essential.

I declare an interest-this is not the first time that I have had to do this-as a vice-president for the Campaign for National Parks, president of the Friends of the Lake District and also, happily, a resident of the Lake District National Park. I am deeply impressed by the way in which Ofgem has welcomed its role of social responsibility in protecting both the environment and the interests and well-being of consumers, not least the vulnerable. Evidently, it takes pride in making this a core aspect of its work-one has only to look at the observations that it recently sent us on the Bill. This leads me to ask my noble friend how the Bill will provide for the protection of consumers during the upgrading of the transmission system. What will be Ofgem's responsibility to protect consumers from the adverse impacts that upgrading the infrastructure and lines will inevitably have? This must be seen in the context of the inevitable upheaval involved in the construction of the huge necessary infrastructure, and the power stations themselves, involved in our renewed commitment to nuclear energy.

Does my noble friend not agree that the Bill could be further strengthened by the addition of clauses spelling out that the costs to consumers and society must be viewed in more than just market-orientated financial terms, and that the precious and priceless character and value of our countryside and scenic inheritance should also be central to Ofgem's duties? In the absence of such clauses, what convincing reassurances can my noble friend give in this respect? As I have argued recently in the Moses Room, my anxiety about the society in which we live is-in the words of the old adage-that we know more and more about the price of everything, and less and less about the value of the things that really matter. For a decent society, we need energy, although I temper that by saying that it is high time we started to think more about how we reduce our dependency on energy generation. We live in very stressful, pressured times; life becomes faster and faster and more and more hectic. For our health and well-being as a society, we desperately need contrast, space and beautiful things to make our society worth living in. To have a beautiful society we need energy, but we also need the countryside that will provide opportunities for spiritual uplift.

It would be a major tragedy-I do not apologise for repeating the arguments I used recently in the Moses Room-if in this new commitment to the next generation of energy, we were to commit the mistakes made in the first Industrial Revolution. It is not that we did not need the first Industrial Revolution, but with more thought and care, it could have been done without raping and destroying our countryside, including some of the most beautiful valleys in the nation. If we do that again, we shall never be forgiven. People will say, "How foolish they were; with the evidence of the last Industrial Revolution in front of them and with their preoccupation with how the worst scars should be removed, they did it all again".

From that standpoint, it seems to me that the challenge for all of us, not least for my noble friend, who is always very good when I challenge him-he is a very civilised man and I always think he sympathises with the points I am making-is not to drift into a mindset of either energy or a commitment to our rich inheritance of scenic beauty and so on. The challenge is how we fulfil our obligations to both and how we get our act together. I know that some will say-my noble friend has said to me before in debate-"Hang on a moment, I accept a lot of the strength of that argument, but we also have to consider the economic advantages that come from a new lease of life for energy production and energy provision, which will be advantageous to a lot of people". However, these issues are not simply the preserve of the precious, privileged middle-class or of those who enjoy large estates; they can be much more direct. On the west coast of Cumbria where I live, the paradox is that, against the setting of the unrivalled beauty of the national park, we have some very deprived communities. We have some traditional working-class villages which have nothing to be said for them in aesthetic terms. I have heard people say, "At least we used to have the Solway Firth, the hills of Dumfries beyond and the peninsula out to the far west of Scotland but now we have windmills whirring around, screening the beauty of the view". As the Bill proceeds, we should all face this very big challenge, which I hope we take seriously.

Photo of Lord James of Blackheath Lord James of Blackheath Conservative 8:28 pm, 23rd March 2010

My Lords, coming in to bat at the end of a long batting order, one makes a list of all the points one expects to hear and ticks them off and then waits to see whether there is anything left to speak about when one's innings comes. There are four things worth saying and I hope they are all of a practical nature. First, I declare that I have no interests in this area. It is important to say that in the modern climate so that there can be no misinterpretation that anything I say relates to any company with which I might have a relationship.

On the issue of wind, I was a member of the European Union Sub-Committee B on renewable energy, which recommended that wind power would be the answer to the 2020 target. When the committee made a recommendation some 18 months ago, we assumed that there would be a very positive and swift reaction by the Government to supply the wind answer. We know that there are some five wind farms in which they are engaged at the moment, to a greater or lesser extent, but that will not nearly satisfy the 2020 target for two very good reasons. They have not done anything about setting up a supply chain for the things that they need to stick in the sea.

At the moment it still takes about nine weeks to put up a single turbine and costs about £2 million to do so. We suggested that they needed 3,200 to cover the distance from Lowestoft to just north of Aberdeen, and they are building five farms at the moment. Now we see, as we heard in Grand Committee, that the Prime Minister wants to spend £75 billion on wind. If he wanted to do that, he would have to think in terms of extending the line from Lowestoft all the way round the south coast, up the north coast of Cornwall and Devon, way up beyond Blackpool to the Scottish border, because he would not be able to use the deep water or the cliffs which are shielded from wind, and he would have to leave the harbours and the rivers free and open to allow for the normal passage of shipping, so he would have a very poor return for his money. But he could do an awful lot with a very small fraction of the £75 billion that he has talked of. I do not even know that he has got £75 billion at the moment. I would be extremely surprised to hear that he had. When we produced that report we thought that £19 billion would buy 3,400 turbines on the east coast if they were put up at that time.

It would have been more sensible had the Government at that time looked at their supply chain and realised that they did not have one. For putting up one pylon, you need at least one jack-up boat, which has to have a crane height of 75 metres, a lifting capacity of 72 tonnes, and a hammer capacity of 47,000 pounds a square inch. Just think about that for a moment. That then has to hammer each foundation into the seabed with a tolerance of half a centimetre for the accuracy with which the thing is lined up to be put in the fixing ring which has been put down there first, while it is held by two very brave marine divers. The Royal Marine divers are the best in the world. I remember saying to one of them once, "Aren't you frightened down there when you have to hold these things straight while the hammer hits at 47,000 pounds?" "No, governor, of course not, it is no worse than the effect we have on any girl we stand next to, is it?" Very modest and charming people, the Marines.

As it stands, we have not got one jack-up boat available to or operating for the Government. When we made the report there was one available which they could have had, but they missed their opportunity. Every jack-up boat in Europe is now booked out solidly for nearly four years ahead, at a cost of $160,000 dollars a day. We do not have one. Instead of spending £75 billion on a pipedream, why did the Government not take £1 million, go to Korea and buy four jack-up boats for about $240,000 each, and we would have had four that would at least have given us a chance of doing it? And what about the gearboxes? You cannot buy them. The only gearbox available in Europe comes from Siemens, and very unsportingly it will not supply any because it has presold its entire output for the next four years.

One would have expected that the Department of Trade and Industry, or whatever we call it these days, would have done something about going out into the world and finding somebody who could get a licence to manufacture them and bring some industry to Britain. It would have been a very good macroeconomic thing to do. China and India both have excellent gearboxes for which we could probably have got a licence, but no one has moved to get a licence which could be installed in one of the British companies that could do it. So we have lost out on that too and have no supply chain. Forget wind.

What else is there that we can do? Fortunately, there is a salvation, and your Lordships have tiptoed round it all evening without actually getting to it. The answer is certainly carbon capture and storage, but not on a post-combustion basis. It is on a pre-combustion basis; and that is the promised land. It is three times more effective at carbon capture than post-combustion, and it has another huge benefit, in that you can link it to a cleaning process to clean petrol at the same time, and you can drive all the carbon out of oil, by the same process, by simply flowing the extracted carbon from the coal straight through the oil. You get an enormous amount of carbon capture very cheaply.

The Government would be at a huge advantage if they thought constructively about this. I once put this suggestion to the Minister, who said the Treasury would never wear it. If that is the case, the Treasury is even dafter than we thought, because it could give a tax credit for each tonne of coal that is washed. This would be almost exactly equal to the cost of cleaning a tonne of coal. It would have a zero sum budget to produce a vast amount of clean coal from the whole process, and an enormous amount of clean oil to go with it, that would put back into production an immense amount of the high-carbon-content oil that is left in the North Sea and which people now think is not effective. We have the way to big solutions.

One American operation has set this up in an absolutely brilliant form at Great Plains in North Dakota. The whole thing happens in one continuous sequence. Pre-combustion, the coal is cleaned and the oil is cleaned at the same time. The whole thing comes down to an immensely profitable and cost-effective operation. We are talking about competition at the moment, but the Bill says grudgingly that the competition will be applied to both pre-combustion and post-combustion. Forget post-combustion; just get on with pre-combustion cleaning and you will get to the promised land. It really is the answer.

I saw something recently that came very close to one of those moments in one's life, which do not occur too often, when you think, "God, I've just seen the holy grail". This happened in Dublin. The noble Lord, Lord Oxburgh, mentioned it in passing without actually naming it when he talked about tidal streaming in Ireland. It is very nearly ready to go, and it is fantastic. Ireland's concept is that it has a constant shifting tidal base around the whole island. It is the nearest land mass to us anyway. It can harness the energy with a complete ring of turbines embedded in the seabed to soak up the benefit of the tide as it moves around the whole coast, build a grid around the coastline to capture it, and transmit it by ship to Holyhead for us more cheaply than any other method going.

There are other available options, too. No one has said anything tonight about geothermal energy, yet it was said at the European Community's Renewable Energy Policy Conference at Budapest, which I had the honour to attend on behalf of your Lordships' House last year, that the wonders of geothermal energy are simply there for the world to take if we can get them. You can get geothermal energy anywhere where you can get through the surface of the earth. The easiest place to do this is currently Norway, but there would be a big degradation of it in transmission to us from Norway. On the other hand, Norway could convert it into hydrogen. If we converted some tankers into hydrogen carriers, could we not develop a station that was driven by hydrogen on a very cheap basis out of Norway, because we could do it very cheaply from Norway with its consent? Bit by bit, we would reach our 2020 with 5 per cent here and 5 per cent there on each on these methods, but we are fooling ourselves if we think that we can do it with wind alone, and we will make ourselves look like the stupid boys of 2020 because we will be out of line with everyone.

Let us not despair. Let us take heart from the fact that there are things that we can do. We just need someone to gather together the threads of all these things and get on with it. We are not getting on with it, so let us please do something a little positive.

Photo of Lord Teverson Lord Teverson Spokesperson and team leader for Climate Change and Energy 8:38 pm, 23rd March 2010

What a start, my Lords. One of the things that I was going to note at the beginning of my own remarks was how good this debate has been. Everyone has been relatively concise, and we have had really good ideas and really enjoyed ourselves. The only fly in the ointment for me was that the noble Lord, Lord Palmer, invited the Minister to Scotland because of his attractions as a Minister, and the noble Baroness, Lady Wilcox, clearly because of her attractiveness as the Official Opposition spokesman. I was left out.

Photo of Lord Palmer Lord Palmer Crossbench

My Lords, it crossed my mind this morning over breakfast that I ought to invite the noble Lord, Lord Teverson, to come to Scotland. The invitation is there, and he is very much welcome to come whenever he would like.

Photo of Lord Teverson Lord Teverson Spokesperson and team leader for Climate Change and Energy

I am uplifted by that, and very grateful. I was also particularly impressed by the right reverend Prelate's speech this evening, which I thought was excellent. I hope that after the election-which I believe is to come fairly soon, though I do not think that he will have to elect himself-he will be back and still on the Front Bench, along with the right reverend Prelate the Bishop of Liverpool, who often speaks on climate change issues as well. I was very pleased to hear that the Conservatives have at last given birth to their energy policy. I think that we have been waiting for this for six months but it has now finally arrived. I apologise that, unlike many Members, I have not yet read it, but I will rectify that before we meet again, probably on Monday to discuss national planning issues.

The Bill is part of the big mission of decarbonisation, as the Minister said, and it contains a number of things that noble Lords have generally welcomed. Carbon capture and storage has met with universal approval, though the views perhaps ranged along a spectrum from scepticism to concern about whether it will happen at all. The noble Lord, Lord Oxburgh, who knows well about these issues, fingered the central problem-that this is taking a huge amount of time. It reminds me of the debate that we used to have on nuclear fusion-another area that we did not err on to this evening-which is always held 50 years ahead of time. With CCS, it always seems to be a matter of another four competitions before we can get round to making the technology work. That is a concern.

I also welcome the provisions for social tariffs. It is a good move to say to the six main energy companies that this is now going to be on a much more statutory basis. However, given that we have moved from some 1 million people in fuel poverty in 2003 to at least 4 million now, I would be interested to hear from the Minister what effect he thinks this provision will deliver in bringing down the number. The noble Lord, Lord Palmer, was right to emphasise the importance of the subject, which costs an increasing number of lives each winter. On too many occasions people have to make a genuine choice between buying food and buying energy.

Ofgem has not been discussed at length this evening. We welcome the fact that its remit-though perhaps not its principal objective-very much concerns not just competition but climate change and energy security. Although its prime directive focuses on competition, throughout 2009 we have seen an increasing gap between wholesale energy prices and the prices that we as consumers, even those in fuel poverty, have to pay. We welcome the widened policy but surely this prime directive of competition has not worked at all over the past 12 months. Does the Minister feel that it has not worked? If so, what will be done?

We also talked a great deal about provisions that are missing. One area is increasingly important, but we have not yet talked about it and it is not in the Bill: the issue of smart grids or intelligent networks. The Minister will come back and say that we now have a roll-out of smart meters, which all sides of the House have welcomed. However, that is only one part of getting an intelligent electricity and energy grid in this country. I would like to know how we will move this forward in terms of what are called, sometimes quite alarmingly, "smart appliances". It rather worries me that you might go to your fridge in the evening and discover that it has an intelligence of its own. However, one of the key ways in which we can iron out and flatten energy demand is through intelligent devices.

This will be even more of a challenge because of two other things. First, rightly or wrongly, we in the UK-the noble Lord, Lord O'Neill, talked about this a fair bit-do not have a vertically integrated energy system in terms of corporate ownership. So it is difficult to get a commercially co-ordinated approach with energy companies in relation to these grids. The second area is the Climate Change Committee's report, which we debated earlier this year, and which quite astounded me. It quite abruptly described how the number of electric cars will need to increase in the next decade and beyond to meet our energy and carbon targets. These cars will have a huge effect on the grid, on energy demand and in the need for the quick recharging of batteries. We will therefore have to get our act together very quickly in terms of a smart grid.

The noble Lords, Lord Oxburgh and Lord Jenkin, talked about how CERT has operated. I was sorry to see that the Bill does not revise the scheme. It has operated only since 2008. However, as the noble Lord, Lord Oxburgh, said, there is a great gap between how it works and operates, the financial accountability of how it works, and the way in which the energy companies disperse this obligation. They may send out several million light bulbs, but that seems too random, not sufficiently financially accountable, and the effects have not been measured. I have always been highly sceptical about giving energy companies-whose expertise is in making money from producing energy-one of the main energy saving targets. It goes utterly against their DNA. I believe that we need to find another way to achieve that.

The Minister talked about some of the ways in which competition does not work correctly for consumers and in relation to dual fuels. I agree, but I would also remind him that for those living in rural properties-as I do, and as I am sure the noble Lord, Lord Palmer, does as well-there is no chance even of getting dual fuel; that is, gas through pipelines and electricity. I wonder what the Bill provides for rural users who do not have such opportunities.

On energy savings and fuel poverty, I do not see beyond CERT, which is not dealt with here, or see a real roll-out of energy efficiency across cities, town and even streets. That is essential for us to meet our carbon targets, yet there is still no credible government policy to achieve this. I believe that that is financially possible, but we do not see those proposals here. Again, this comes back to fuel poverty and the whole area of having to save carbon, rather than increasing our energy capacity.

Many other areas have been talked about. I will not prolong my comments any further except to mention emission performance standards. It was a tragedy that that provision was not passed by the other House. My noble friend Lord Wallace went through it to some degree. Given the uncertainty about CCS and this sitting on the fence in relation to carbon capture and storage, we need to give the industry some certainty. In any other area, we do that by laying down standards that we expect to be met in the future. Emission performance standards for power stations seems to me to be an obvious way to start this process of emissions standards-we do it for cars, for trucks and for much smaller items of equipment.

We have what always sounds like a cop show: the LCPD, the large combustion power-

Noble Lords:

Plant directive.

Photo of Lord Teverson Lord Teverson Spokesperson and team leader for Climate Change and Energy

The plant directive. Thank you. That looks after sulphur dioxide, nitrous oxide and particulates, but it does not look after carbon dioxide in any way, yet that is an example of how emission performance standards can work in another area. The Government always talk about having a range of instruments that they can use for energy policy, and this could be an important one. Other nations manage to combine that with carbon capture and storage technologies and research and also with emissions trading schemes, so I do not see why we should not be able to do that in the United Kingdom.

The very last thing I come back to is a point made by the noble Lord, Lord O'Neill, which I was well persuaded by. Will the social tariffs to be introduced cover particular disadvantaged groups? We saw the statistics on the cancer group, a small-not small enough-but important group which is not covered by the schemes at the moment. I think that the whole House would like the Minister's assurance that such disadvantaged groups will also benefit from this legislation.

Photo of Lord Marland Lord Marland Conservative 8:51 pm, 23rd March 2010

My Lords, can your Lordships believe that this is the third Energy Bill in three years, and that it comes on the back of several exhausting debates we have had in the past few weeks? Almost everyone's views have been aired, so I will not take up too much of your time.

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

I am pleased to hear it.

Photo of Lord Marland Lord Marland Conservative

Thank you, but the noble Lord may not like what I am going to say. I praise unreservedly the erudite contributions of everybody here, particularly the Minister-I am slightly regretting saying this now-for his grace and patience through all the energy debates we have had, listening to us for hours on end.

We have also had what my headmaster used to call an end-of-term levity about this debate, which has been very attractive, but the Bill, in real terms, is no more than skirting around the edges and, again, misses the chance to provide long-term structural solutions and a pathway for the future. For what it is worth, as my noble friend Lady Wilcox argues, our party largely agrees with it, so I shall not get into the detail, but I agree with many noble Lords that it is rather disappointing. Therefore, in winding up for our Benches and with the end of Parliament imminent, I want to look at the big picture and the shameful failures of this Government to deliver a pathway in the past 13 years.

The Minister said, on Tuesday 16 March, that the lights will not go out. Why is it, therefore, that his own government statistics show that they will, and that consumer organisations and nearly everybody involved in the energy industry says that they will? Perhaps the Minister was discussing it with his wife and reassuring her about his own home supply.

The reality is that we have had 13 years of wasted opportunity. Targets have not been achieved, and no planning or leadership to deliver a future that is not dependant on the North Sea has been forthcoming. The next Government, as many noble Lords have said, will have to grapple with the big issues and the future of energy. To give an example, Labour has been dithering for 10 years over a decision on nuclear and are only now, in the dying embers, trying to get to grips with the future. Perhaps they have listened too long to the oratory of the noble Lord, Lord Wallace of Saltaire, and the persuasive arguments of his party.

Is it not shameful that we have more people in fuel poverty when the Government's target is to erase it by 2010? To achieve only a 3.6 per cent reduction in emissions when their own Kyoto target was a 20 per cent reduction is an abject failure, surpassed only by their disgraceful example where their own government building emissions have increased. It is not "Do what I say, not what I do", because they have done neither. No wonder Copenhagen was a failure if they cannot take their own emissions targets seriously.

Our own energy security is at risk as our gas reserves are only four days, one-tenth of the Germans'. As one expert asked me the other day, why are the Germans better at planning than we are? It defies belief that the Government's own renewable supply target of 10 per cent has not been achieved, despite littering our green and pleasant land indiscriminately with windmills.

The truth is that the past 13 years have been a vacuum, wasted governance, and it is small wonder that this Government will be known only for spin as they have failed so exaggeratedly to meet any meaningful targets. When the Minister says that the lights will not go out, I, for one, do not believe him.

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Deputy Leader of the House of Lords, House of Lords, Minister of State, Department of Energy and Climate Change, Minister of State (Department of Energy and Climate Change), Deputy Leader of the House of Lords 8:56 pm, 23rd March 2010

My Lords, once again we meet to discuss energy. It is a delight to respond to another lively debate.

I welcome the comments overall from the noble Baroness, Lady Wilcox, in welcoming the Bill, and those of the noble Lords, Lord Teverson and Lord Wallace. If it be that we do not have time to go through all the stages of the Bill, I still appreciate that generally warm welcome. As the noble Lord, Lord Jenkin, has suggested, while the other place is sometimes criticised for its scrutiny of legislation, this Bill has had considerable scrutiny. As I said in my opening remarks, changes were made with amendments brought by the Government in the light of the discussions in Committee.

I say, though, to the noble Baroness, Lady Wilcox, and the noble Lord, Lord Marland, that I wholly reject their criticisms of the Government and our energy policy. There are not going to be these large-scale blackouts that the noble Lord says will occur in the next few years. We have developed a strong and coherent energy policy.

Let us look at the arguments. Yes, plants will close as a result of the large combustion plant directive and the fact that a number of our nuclear power plants are due to go out of commission in the next 10 to 15 years. As I frequently point out to your Lordships, though, we are in the middle of a massive construction programme of new power generation. There is a huge amount- 20 gigawatts-under construction or with planning consent, ready to replace that which goes out of production, with a further 18.5 gigawatts in the consent process. Our modelling shows that for most of this decade, spare capacity, adjusted according to availability, will be around 15 per cent.

I turn to the issue of gas, because the noble Lord mentioned it. There are 22 storage projects in the process of development. When was the system tested? In the first three weeks of this year, in the very cold weather when demand was at its highest and when Norwegian gas production went down. Yes, four gas-balancing alerts were issued; they were signals to the market of the demand being placed in on the system, and the market responded. It showed that we had a very resilient system. I would also point out to the noble Lord and the noble Baroness that import capacity has been increased to 125 per cent of annual usage. As the noble Lord, Lord Oxburgh, suggested we are in a very good position to take advantage of LNG supplies. We do have a robust system. I could not believe that the noble Lord-

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

The Minister mentioned the alerts. Can he also tell us how many firms with interruptible supplies had to be interrupted and production stopped during the period he has just referred to?

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Deputy Leader of the House of Lords, House of Lords, Minister of State, Department of Energy and Climate Change, Minister of State (Department of Energy and Climate Change), Deputy Leader of the House of Lords

My Lords, we do not know all the numbers-I think the numbers were in the small hundreds. I notice that some of my former colleagues in the NHS were whingeing about this. People entered into interruptible contracts because they got a lower price. They can hardly start to whinge if the interruptible contract is actually operated. What seemed to have happened is that some organisations did not know that they had an interruptible contract. I do not think that is the Government's fault.

Regarding this Government being accused of delay in relation to nuclear-we came forward with the White Paper in 2008. We have a decisive policy. We have a very exciting prospect of developing new nuclear power stations. I would point out to the noble Lord that it was his leader Mr David Cameron who said:

"I think my policy, green energy first, nuclear as a last resort, is absolutely right".

Then of course during a leadership hustings he called offshore wind farms "bird blenders" and stated that they were not the answer and it was his right honourable friend Mr Kenneth Clarke who said that Britain was unsuitable for wind farms. What we have had from the party opposite over the past few years is a pandering to prejudice and a lack of cohesion. I have not read the full document that the noble Lord's party published on Friday. I have seen enough of it to suggest that it is not the coherent policy that the noble Baroness suggested it was. I do not usually enter into these political issues but I felt I had to respond to it.

Let me turn to the much less controversial area of wind. I know that not all noble Lords think that we should put all our eggs into the wind basket. Nor indeed do the Government. Wind will have an important role to play as far as future energy is concerned. All the signs are that there is now real momentum in onshore and offshore. The outcome of the third leasing round by the Crown Estate in January showed that companies are prepared to make considerable investment. I well understand the point raised by the noble Lord, Lord James, about whether the supply chain is in place. I understand his point about vessels. We have had discussions. My understanding is that there is considerable and intense discussion taking place at the moment between the developers, the Crown Estate and the Government to make sure we have the supply chain that will supply the necessary infrastructure.

It is not just wind. The noble Lords, Lord Oxburgh and Lord Palmer, were absolutely right to put emphasis on the other technologies. Last week I visited MCT in Strangford Lough which is a tidal technology which looks to be very promising indeed. The noble Lord, Lord James, said that we were missing out on geothermal. I would point out to him that of course there is potential in Cornwall, the county of the noble Lord, Lord Teverson. The Government have made money available to support its development. Of course the noble Lord is right about energy efficiency and about the smart grid. We are not being complacent; we will come out in the summer with much more detail about smart meters, which I see as an essential foundation of a smart grid. We do not underestimate the potential at all.

I was very interested in the comments of the noble Lord, Lord Oxburgh, about unconventional gas, particularly the potential for shale gas. I am sure that he is right. There are two issues here. The noble Lord did not mention the potential of UK exploration of shale gas and oil. We have commissioned the British Geological Survey to carry out that assessment. He is also right about the potential implications of LNG on our facilities for imports, given that the US is now unlikely to be a strong recipient of LNG sources of supply. Again, this Government's foresight in setting a positive context for LNG import facilities to be developed has come to the fore.

I was very glad that the right reverend Prelate the Bishop of Durham took part in our debate. We recognise that coal gasification has potential. The Coal Authority has recently granted six conditional licences for underground coal gasification, including one in the north-east, and is considering a further five applications. The technical and economic viability of this approach has not yet been demonstrated but we want to play our part in creating a regulatory environment that helps rather than hinders those ambitions. Coal power projects that utilise underground coal gasification will be considered for our planned CCS demonstration programme. So I do not accept that we are lacking in enthusiasm for gasification; we understand its potential.

I come now to coal and CCS. The noble Lord, Lord Wallace, and my noble friend Lord Woolmer talked about the importance of coal and of developing CCS technology. The International Energy Agency predicts that demand for coal will increase by some 70 per cent over the period to 2030. That makes it clear that unless CCS technology is developed and deployed, I do not see how we could hope to meet the kind of global emission reduction targets we want to meet. That is the critical importance of carbon capture and storage.

My noble friend Lord O'Neill cautions us about overclaiming what the UK can do in terms of technological lead. I know that other noble Lords think that we are not progressing CCS fast enough. I certainly agree with my noble friend that we cannot afford to be complacent, but the fact is that we are making considerable progress. We have very important coal reserves, which is why CCS is important in this country. But it is also important in terms of what it can contribute to emission reductions globally and the potential for the UK to export technology, skills and the expertise that will be developed as a result of the work that we are undertaking.

We are making progress. No other coal-dependent country has a policy that no new unabated coal-fired power stations will be built. No other country has developed the kind of financial mechanism that is in the Bill. The noble Lord, Lord Jenkin, is right that we have recently awarded funding to E.ON and Scottish Power for detailed engineering and design studies. FEEDS-front-end engineering and design studies-are used by project developers to examine and refine initial outlined project plans and reduce technology risk such that a more detailed solution can be drawn up and more accurately costed. That is very important in terms of value for money, which a number of noble Lords have raised.

These studies will be completed within 12 months, and that is when we will move to the final selection process. It is very much worthwhile for these studies to take place before we make the final decision, but we still hope that the first demonstration project will be operational by 2014. In the mean time, we aim to launch the process of selecting an additional three projects by the end of this year. I can certainly reassure noble Lords that in the light of the lessons learnt in the first competition will ensure that the competition in relation to the three other projects will be accelerated.

Photo of Lord Teverson Lord Teverson Spokesperson and team leader for Climate Change and Energy

I thank the Minister for letting me interrupt. Will he tell us how the European Union Hatfield project, mentioned by my noble friend Lord Wallace, will fit into the jigsaw of these competitions?

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Deputy Leader of the House of Lords, House of Lords, Minister of State, Department of Energy and Climate Change, Minister of State (Department of Energy and Climate Change), Deputy Leader of the House of Lords

My understanding is that it has won the potential of grant support from the European Union, and that the company is in discussions at this moment with the EU about when the funds can be transferred. So I think that the answer is that it should be seen to be in parallel with the competitive process, not in competition with it. Clearly, one hopes that it will be able to take advantage of the money that is being made available.

Photo of Lord Woolmer of Leeds Lord Woolmer of Leeds Labour

I may be wrong about this, but I understood that the European funding will really contribute only modestly to the initial consideration of it, and that the whole question of that then becoming a practical project plant and the transport, the pipeline and storage would certainly not be covered at all. Is the Minister saying that the Hatfield project would not be able to be considered in the competition for initial funding under the scheme that he proposes?

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Deputy Leader of the House of Lords, House of Lords, Minister of State, Department of Energy and Climate Change, Minister of State (Department of Energy and Climate Change), Deputy Leader of the House of Lords

I am not aware that it is in the competitive process, but I will check the details of that to make sure that I have not got that wrong. As I said, I think the money made available from Europe is quite considerable, though I accept that, when we are talking about the development of CSS technology, it is very expensive at the moment. I say to the noble Lord, Lord Dixon-Smith, that I take his point about the exemptions and I will certainly see that they are considered. I understand the point he is making, and, essentially, we have received a number of responses from different sectors about exemption and we will set out the detailed arrangements for the levy in regulations on which we intend to consult in the summer next year.

The noble Lord, Lord Oxburgh, is, of course, right about transportation. I agree with him that we need to think through those issues as soon as we can. On the issue of whether the technology is proven, I well understand the point he is making, which is that all the stages of CCS have been tried and tested. The question is much more scaled up: will it be technically and economically viable? That, it seems to me, is what these demonstration projects are all about. That is why we want to have a very proper and intensive approach to making those judgments. The aim is that by 2018 we will publish a report which considers the case for new regulatory and financial measures to drive the move to clean coal. In the event that CCS is not on track to become technically or economically viable, an appropriate regulatory approach to manning emissions will be needed.

Photo of Lord Wallace of Saltaire Lord Wallace of Saltaire Deputy Leader in the House of Lords, Spokesperson for Foreign and Commonwealth Affairs

I rise to ask the noble Lord to write to me about the announcement on the Hatfield project which says that it will go ahead thanks to a €180 million award from the European Union. Is it correct that the funds announced today will be matched by the UK Government?

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Deputy Leader of the House of Lords, House of Lords, Minister of State, Department of Energy and Climate Change, Minister of State (Department of Energy and Climate Change), Deputy Leader of the House of Lords

I do not know where the noble Lord got that information. That amount of money will potentially be made available to Hatfield from Europe, but I cannot go into the commercial details. The kind of competition on which we are embarking is extremely expensive and EU funding will not be sufficient to cover the cost of developing CCS in full. I will write to the noble Lord about the details on Hatfield, but I am a little reluctant to say any more about it at the Dispatch Box tonight. I hope that noble Lords will understand that there are clearly commercial sensitivities on that, but I wish Hatfield every success. I have had a number of meetings with the chief executive of the plant in the past few weeks to discuss these issues.

Photo of Lord Dixon-Smith Lord Dixon-Smith Conservative

The noble Lord sounds as if he is moving away from the issue of CCS. He has not said anything about the possible finite nature-I hope definitely finite nature-of the financial arrangements that have been put in place to support the CCS experiment.

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Deputy Leader of the House of Lords, House of Lords, Minister of State, Department of Energy and Climate Change, Minister of State (Department of Energy and Climate Change), Deputy Leader of the House of Lords

My Lords, I have not started on CCS yet. I hope the noble Lord will allow me to pick up some of the other points.

My noble friend Lord Woolmer asked whether the Government would set an obligation on supplies to source CCS electricity as they have done for renewables. We have no plans at present, and the technology is at a demonstration phase. We would expect the carbon price to drive widescale deployment of CCS in the medium to longer term. I know that there are issues about the carbon price. We are well aware of that, and I have had representations from other technology sectors about the current price. It is not long to Budget and we are publishing two pieces of work. There is, first, a roadmap to 2050 and secondly, the energy markets assessment, which will look at some of those issues and set out an initial analysis of whether further interventions are necessary. I should not say any more about that until it has been published.

My noble friend asked about oversizing pipes for CO2. We are prepared to consider using the levy to fund investment in pipelines sufficient for full capacity of a coal-powered station using CCS for its entire capacity. The balance that we have to draw is that we need to limit the potential cost to consumers of CCS demonstrations. That is where we are at the moment. On the point raised by the noble Lord, Lord Dixon-Smith, the CCS incentive is specifically designed to support demonstration projects. It is not a deployment mechanism and it would therefore be used only for demonstration projects. We are talking here about the demonstration aspect of CCS. I hope that reassures him. We are not talking just about coal. I agree with my noble friend Lord Woolmer on that matter. I was glad that we made an amendment in the other place to signify that the levy could be used for gas. Given the scale of emissions from coal, we think that it is better to start with coal. However, I have no doubt that if CCS proves to be technically cost-efficient and viable, we shall seriously consider extending it to gas.

I say to the noble Lords, Lord Teverson and Lord Wallace, that I understand why there is considerable interest in emissions performance standards given their direct relationship to emissions reductions. However, we think that there is a problem with taking this step now before the technology needed to reduce emissions has been demonstrated, given the impact that that would have on investment in new fossil fuel power stations. That is why we think that our approach of taking through the clean coal framework is the most effective way to deliver the emissions reductions that we need in the power sector. As I have said, if CCS does not prove to be all that we had hoped, we would have to consider what other interventions had to be made. We shall debate this on Monday in the context of the national policy statements, but it is worth pointing out that the climate change committee did not recommend the introduction of an EPS at this time. Both the CBI and the TUC have told us in no uncertain terms that introducing an EPS now would significantly undermine plans for investment in new fossil fuel generation plant. That is, and has to be, a real concern.

My noble friend Lord O'Neill and the noble Lord, Lord Palmer, made some telling points about price. I would very much like to come up to the noble Lord's modest home in Scotland. Equally, he is very welcome to visit my very draughty Victorian house in Birmingham, where, alas, our efficiency measures have not quite taken hold as they ought. The whole question of fuel poverty is very important. Rising prices have had an impact on the measures that we have taken to pull people out of fuel poverty, but without that package the number of fuel-poor households would have been around 400,000 to 800,000 higher. The agreement that we reached in 2008 with the suppliers has been valuable. The Bill allows us to give greater direction to the types of households that are eligible for support and ensures that more of the available resources are targeted at all those households that are most in need. My noble friend Lord O'Neill made a very important contribution about the people who are ill and not in receipt of benefits. I will certainly take that back and look at it with my departmental colleagues.

The noble Lord, Lord Teverson, asked me what impact the measure would have on fuel poverty numbers. Clearly, it will reduce the number of households in fuel poverty but I cannot estimate the precise number until the exact detail of the policy is finalised. We will be consulting formally on the structure of the scheme in the summer. At that point we will have an estimate of the impact, but it should not be insubstantial.

I say to the noble Lord, Lord Palmer, in relation to the points that he made about rural fuel poverty, that we are, of course, aware of the difficulties of people who live off the gas grid. We intend to look at those issues in the context of the consultation that will take place in the summer.

I was interested in the comments of the noble Lord, Lord Jenkin, about data protection issues. My understanding is that, in order to comply with data protection principles, the sharing of data has to be proportionate and it must result in a benefit for those whose data are shared. That principle means that data matching was not considered a suitable method to find consumers eligible for assistance under, say, the CERT scheme. The primary benefit available through CERT is energy efficiency measures, and as these measures may not be taken up by those who have had their data shared, data sharing in those circumstances is less likely to be proportionate. However, the energy rebate scheme is a pilot data matching programme designed to give eligible customers an automatic benefit in the form of a rebate on their electricity bills. So the result of sharing consumers' data in this instance is that they will receive an automatic benefit and, therefore, it is considered proportionate to share these data. I hope that is clear to noble Lords. I suggest that I write to the noble Lord, Lord Jenkin, and perhaps offer him a meeting to talk this through further because I thought he raised a very substantive issue.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

I am grateful to the noble Lord and I have listened very carefully. As I said to his noble friend Lord McKenzie, I should like to see the correspondence between the department and the Information Commissioner to see why he describes himself as "broadly" satisfied.

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Deputy Leader of the House of Lords, House of Lords, Minister of State, Department of Energy and Climate Change, Minister of State (Department of Energy and Climate Change), Deputy Leader of the House of Lords

It is an interesting question whether correspondence between a department and the Information Commissioner is releasable, but I will certainly do everything I can. One can always appeal to the Information Commissioner, I suppose. I will certainly get as much information as I can to the noble Lord. I assume that when someone is broadly content it means that they are happy with the principle but probably want reassurance on some of the detail, but I will confirm that with him.

Moving on to the joyous question of Ofgem, I hope my remarks about Ofgem are always considered to be uncontroversial. I thought the noble Lord, Lord Jenkin, put it right. Clearly, there is a major debate to be had about where we need to go in terms of regulation and the kind of market that we need to see in operation over the next two or three decades. It is clear that the political parties have views on this and I suspect that whoever is in the Department of Energy and Climate Change post-election will possibly be seeking a first-session Energy Bill in which these issues may well be discussed. I appreciated the comments of my noble friend Lord O'Neill about the regulatory mechanism and I should like to make two points. First, the Bill, as the noble Lord, Lord Jenkin, said, has some sensible measures in relation to Ofgem which I believe we should accept. Secondly, the work that we are doing with the energy market assessment, looking at future market arrangements, will provide the basis for coming to a view about the regulatory arrangements we need to have in future. I will make one point to the party opposite in view of its own paper. There is always going to be a price to intervention. We have to be careful not to inhibit investment by the companies in this sector because, one way or another, we need billions of pounds of investment to take place now and to increase steadily over the next few years.

We come to the two final areas. First, my noble friend Lord Judd has persuasively put the case for environmental issues to be considered alongside energy issues. I do not disagree with him at all. In essence my department, in accepting the responsibility for climate change and energy, understands those goals and the tensions that sometimes arise between them. However, as for protecting consumers as the grid infrastructure is developed-the noble Lord mentioned the national parks and so on-what I would say to him goes back to our debates on the national policy statements. It is clear that many of these proposals will go for consent to the Infrastructure Planning Commission, which will have to take local impacts into consideration. I am sure that the commission will pay close attention to my noble friend.

Photo of Lord Judd Lord Judd Labour

I am grateful for that reply and my noble friend is right to make that point regarding the IPC, but will he spell out that this will apply also to the transition arrangements, because a lot of people will be affected over a long period by them? Just to get words of reassurance from the Government on this would be very helpful.

Photo of Lord Judd Lord Judd Labour

I am talking about construction.

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Deputy Leader of the House of Lords, House of Lords, Minister of State, Department of Energy and Climate Change, Minister of State (Department of Energy and Climate Change), Deputy Leader of the House of Lords

I can reassure him that that indeed is one of the points that the Infrastructure Planning Commission has to take into account. Very often the major local impacts are during construction. That point is very well taken. The IPC will also have to take account of the cumulative impact. In Cumbria, for example, if three sites are potentially suitable for nuclear power development, the cumulative impact will have to be taken into account alongside all the advantages that such a development might bring.

The points made by the noble Lord, Lord Reay, if I may summarise them, come back to the issue of cost. I do not think that we will agree on this, although I accept the point that he raised about transparency. Every intervention in the energy sector by government through these kinds of mechanisms of course has a cost which is met by energy consumers. I agree with him that it is right that consumers should understand that; I do not think that we can go ahead with all these mechanisms without the public understanding it. It is up to Governments to be open and to communicate why this is happening. I should also say-the noble Lord, Lord Lawson, is not here to dispute this tonight-that the noble Lord, Lord Stern, is absolutely persuasive on the issue that it is much better that we make these interventions now, because the longer we leave it, the more expensive it will become in the end. Anyone who thinks that sticking to hydrocarbons is a low-cost option in the long term is surely mistaken.

I had the privilege of attending briefly the end of a seminar on peak oil chaired by the noble Lord, Lord Oxburgh. Not everyone has a uniform view on peak oil, but one thing that is for sure is that the trends in oil prices are likely to increase. That is why there is a persuasive case for investing in the kind of energy policy that we have, even though it has an impact on energy prices for consumers, in the short term at least. That is why we need to ensure that we have value for money, it is why we need a good regulatory system and it is why, above all, the contents of the Bill, although it is short, will make a modest contribution to those ends.

Bill read a second time and committed to a Grand Committee.