Queen’s Speech — Debate (4th Day)

Part of the debate – in the House of Lords at 5:37 pm on 2nd June 2015.

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Photo of Viscount Ridley Viscount Ridley Conservative 5:37 pm, 2nd June 2015

My Lords, I join others in paying tribute to the magnificent valedictory speech of my noble friend Lord Eden and the fine maiden speech of the right reverend Prelate the Bishop of Salisbury. I want to address my remarks to energy, by echoing some of what my noble friend Lord Wakeham said. In doing so, I declare my interests in energy as listed in the register, including interests in coal mining in Northumberland.

I welcome the fact that the gracious Speech includes a special emphasis on security of energy supplies because that is a crucial question. The Conservative manifesto promised to,

“guarantee clean, affordable and secure energy supplies”,

and in that context the Science and Technology Committee, on which I sit, very recently produced a report, ably chaired by my noble friend Lord Selborne, on the resilience of the electricity supply. It would make good reading for the Minister because it said that the trilemma between security, affordability and decarbonisation is effectively insoluble in the current state of technology. If you want security, you have to pay extra for it whether by spare capacity, demand-side response, storage or emergency reserve. Wind could provide us with all our energy securely if we all had gigantic batteries in our houses, which lasted for several days when the wind did not work, but it would be ludicrously expensive. If you want to decarbonise on top of that then you have to pay even more for it. You cannot have all three at the same time in the current state of technology. Does the Minister, or do his colleagues if he wishes to pass this on to those more directly involved, agree with the conclusions of that report?

I would like to make the case that target-driven decarbonisation has made energy less affordable and less secure, and that the poor have borne the burden of this during the last five years. How else do we explain the deal that was signed for Hinkley Point C nuclear power station? Let me emphasise that, like my noble friend Lord Wakeham, I am very pro-nuclear. It is a wonderful technology but in this case we may have made a mistake. How do we explain that except by admitting that affordability has been sacrificed to decarbonisation? Hinkley C is a poor deal for the British people. The cost has gone from £5 billion to £16 billion to £24 billion. That is 30% more per megawatt of capacity than the cost of the same technology as it is being built in France today. We could have got 10 times as much electricity from gas-fired power stations for that cost.

Areva’s EPR—the European pressurised water reactor—is a flawed technology: not one has been built to time or budget anywhere in the world. The EPR at Flamanville is five years behind schedule, the one at Olkiluoto in Finland is 10 years behind schedule and already delays are setting in with the third one, which is being built in China. The Flamanville one may be abandoned altogether after serious anomalies were recently found in the reactor vessel. Areva is a French, state-owned company that posted losses last year of €4.8 billion—more than its entire market value—and is being sued for €2 billion in Finland.

The French and Chinese Governments will earn between £65 billion and £85 billion of dividends from British consumers during the lifetime of Hinkley C, according to the contract. Hinkley’s electricity will be expensive: roughly twice what people pay today by the time it opens in the 2020s. Under the coalition, Energy Ministers argued that this would be okay because that would be competitive with gas prices by the mid-2020s, because gas prices were bound to rise as gas ran out. However, gas prices have gone down and gas is not running out, so the gap is growing ever larger. Can my noble friend say what financial guarantees are in place if EDF starts the project and then pulls out, and what guarantees are EDF and Areva giving to avoid a repeat of the Flamanville and Olkiluoto problems?

I emphasise again that I am not arguing against nuclear. Far from it, I think it has a huge future in delivering affordable and decarbonised energy eventually, along with other technologies. There are two other nuclear new-build projects making good progress in this country: Hitachi at Wylfa and Oldbury, and Toshiba at Moorside in Cumbria. Then there are small modular reactors, molten salt reactors and all sorts of other technologies coming along for nuclear that will help to make it more affordable, more secure and decarbonised. My case is that, in our rush to decarbonise, we may have backed the wrong horse. As a policy, picking winners is rightly considered to be a mistake, but at the moment in energy policy we are not even picking winners; we are picking losers. Given that the Conservative Party is now the party of working people, can we have an assurance that we will pay more attention to affordability of energy than we have done in the last five years?

To switch to another subject, alarm bells are ringing about security of electricity supply. If nothing else, the imminent closure of Ferrybridge coal-fired power station seven years early should sound a klaxon of alarm. It is closing because of the carbon floor price, which is a unilateral UK tax. Our carbon tax is more than four times as high as in much of Europe: we pay £23 a tonne of CO2 compared with £5 in Europe. The closure of Ferrybridge shows that the capacity market is failing to do what it was intended to do; it is failing to bring forward new capacity.

As recently as 2011-12, the Government were expecting 6 to 8 gigawatts of new gas to come forward as a result of capacity market auctions. Instead the capacity market auction has accelerated the closure of old capacity. Ferrybridge’s failure to win a share of that market is what led to its commercial decision to close early. It was the same for Longannet a few months ago. Between the two of them, that is 6% of our capacity for electricity generation gone. Will other dominos follow them? There has to be a question mark over Eggborough. It is a large coal-fired power station that applied to convert to biomass and had permission refused. Its Czech owners may well at some point reconsider their decision to keep it open. Does my noble friend expect to see more coal-fired power station closures over the next few years? How will we ensure security of supply?

I end by mentioning something that was brought up by the noble Lord, Lord Layard. The global Apollo programme, of which he is one of the seven authors, was published yesterday and calls for an attempt to get renewable energy cheaper than fossil fuel energy. Although I have some disagreements with some of the things in that paper, they are absolutely right about one thing: it is only by making renewable energy competitive that we will solve this problem. They make the point, very ably, that spending $101 billion a year globally on production subsidies for renewable energy and only $6 billion on research and development for renewable energy has it the wrong way round. They make a good point there.