[Mr Graham Brady in the Chair] — Backbench Business — Low Carbon Energy Generation

Part of the debate – in Westminster Hall at 2:47 pm on 26 February 2015.

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Photo of Ben Wallace Ben Wallace Assistant Whip (HM Treasury) 2:47, 26 February 2015

I am delighted to serve under your Chairmanship, Mr Brady. I pay tribute to my hon. Friend Mr Yeo. I am not sure if this will be the last time we debate and listen to his contributions, but I pay tribute to his work for his constituents and for his party in serving the Government over the years, and to his work for the Committee on Energy and Climate Change.

The Committee has done an amazing job, not only in building the consensus that Tom Greatrex mentioned, but in demonstrating to someone like me that people do not have to live in a tepee to be green and do not have to switch off the lights and go backwards. To roll out a proper, successful, renewables-based energy policy, people have not only to understand targets for carbon reduction and the pressure of global warming; they have to understand the real world as it is, including finance, investment, risk and technologies. My hon. Friend has done a tremendous job as Committee Chair in bringing along both sceptic and enthusiast with the policy of renewables, and with an energy policy that has satisfied many of the historical splits across the parties that we have seen over the past 20 or 30 years.

Ministers could do a lot more listening to Select Committees, especially my hon. Friend’s, which has genuinely helped policy makers and has brought together the main parties in reaching a proper, grown-up solution to providing energy security and meeting our carbon reduction targets. My hon. Friend’s Committee marks a refreshing change. Members present will have spent time in other sectors of Government such as the Ministry of Justice, where constant party politicking goes on, or disagreement is often more important than consensus. I pay tribute to my hon. Friend’s work. He will be missed, as will the sensible way the reports have been presented to the Government.

There are only 19 sitting days left in this Parliament. That is a rather scary number for all of us. I noted the kind comments made by the hon. Member for Rutherglen and Hamilton West. I am not sure who will be the Energy Minister in 70 days. He will certainly make a fine Energy Minister—if he is successful. I cannot wish him that success; I would not do that. I would certainly not want Russell Brand or Alex Salmond as Energy Minister. The main parties are all in a good place, engaging in grown-up politics in working towards a proper energy policy. It is important to note that among the most vocal opponents of the Infrastructure Bill was the Scottish National party, whose Members have failed to turn up for today’s debate. They are no doubt posturing on some other subject this week. They are not even here to claim credit for some of the successful CfD contracts that have been offered today. We should not forget that we will only solve Britain’s energy crisis as Britain. We will only keep the lights on as Britain, not as separate countries focusing on what divides us, rather than what unites us.

Today’s debate is timely, because the CfD auction results have just been published. We have offered contracts—they obviously have not been accepted yet—to 27 projects. The good news is that the CfD auction showed that, amongst other things, competition has worked. We have had a good result from our focus on trying to ensure that we provide value for money for the bill payer, and on increasing energy generation. The auction price for solar, for example, was 58% less than the administrative strike price. It was 18% less for offshore wind and 17% less for onshore wind. The value for money that that represents helped lever in £45 billion of investment into the energy market between 2010 and 2013. I am always trying to explain to people in different sectors that there is only so much money in this world chasing only so much investment. We have to make investment attractive to money or it will go elsewhere—not just domestically, but internationally.

Both this Government and the previous Government have done a good job in recognising that we have to create the conditions to get investment into high-risk areas and those with maturing technology. The CfD process has been a real success. Let us remember that the aim is to reduce carbon emissions. The UK will emit 4 million fewer tonnes of CO2 emissions a year as a result of the auction. No one can say that that is a bad result. It puts us on the right path to meeting our aim of reducing carbon emissions. At the same time, we have shown that, if we seek a stable framework, people want to come forward and share the risk. The overall cost of production will reduce over that period, and I hope that by the end of the first 15 years—or whatever the time scale is—the actual production costs of many of these generators will be even lower. I hope the Government of the day will remain attuned to when a technology moves from “maturing” to “mature”, when they need to incentivise newer technologies further down the path, and when they perhaps need to let go of more mature technologies that have run their course over many years.

I again make the point that 11 of the 27 projects are in Scotland. That is a good news story for Scotland. I pay tribute to Scottish Labour Members who have lobbied hard on behalf of the Scottish renewables industry and their constituents. That would not have happened in such an easy way if we were two separate countries. All our bill payers will be sharing the burden of electricity generation. As the shadow Minister said, when there was not much wind blowing in parts of Scotland or when Scotland had to rely on our market in England, it was just a formality; there was no artificial barrier to that happening. People who are attracted by the Scottish nationalists or the agenda of separation should remember that independence would fundamentally undermine and damage Britain’s ability to provide electricity for all its citizens across all the isles. That needs to be fully taken on board.

Given the competitive drive to reduce the cost or strike price, which has been a good thing, we think the CfD auction will result in average annual savings of £41 per family bill. Albert Owen is right: I love Anglesey. When we go on holiday there, I can look out the window and see the red light shining on what used to be the Rio Tinto tower. I am happy, as are the Government, to work to ensure that any barriers to biomass are addressed in the next round of CfDs. That could include help to reduce risks for biomass investment. By working together, we can ensure that biomass has a better showing in the next round. Personally, I would like that project to be successful. I know how important energy is to the island of Anglesey and the pragmatic approach it takes. It would be good news for Holyhead if that project was successful. I am always happy to help ensure that biomass is embraced.

On the subject of the capacity market, securing our energy security is incredibly important. It is all very well encouraging generation, but if the lights go out and we have not worked together to ensure that there is always some capacity, that is almost for nothing. The auction for the capacity market recently completed. We secured 49.3 GW at a clearing price of £19.40 per kW for delivery in 2018-19, which is good news. Consumers and the public can be sure that, alongside our commitment to develop renewables, we have also achieved more security and secured more capacity.

I know that my hon. Friend the Member for South Suffolk is a keen supporter of demand-side response. I asked officials to see an example of DSR, because how we use electricity efficiently and how we reduce demand are as important as how we cater for demand at other times. I urge Members to look at the example of ExCel, the big London exhibition site, which uses Flexitricity and has a genuinely good case model in how it uses diesel generators that switch on and off as demand requires. Flexitricity can control some of the generation remotely, reducing waste on the grid, and I hope to see more of that. The Department and I have certainly heard loud and clear my hon. Friend and his recommendation of and enthusiasm for DSR, which I hope is given a more prominent role in the next few years.

Other Ministers might get home or to their offices to find that the locks have been changed, because this is the second debate I have been at where Members have clearly demanded a future levy control framework and said that it is required. We hear that urgency. It is no comfort, but with only 19 sitting days to go, I anticipate that the Secretary of State will not be revealing that framework any time soon. We will certainly recognise that urgency in the near future. Whoever is in government, we will all be working to ensure that that long-term indication is in place. I hear with open heart and open mind the recommendation for a rolling seven-year framework to ensure that we keep things up to date. In my opinion, that would help to reflect advances in technologies as they develop. If we understand the impact that technologies have as they roll through, we might understand how much influence they will have on levies and everything else.

There is obviously a long list of renewables that we could talk about. The Government have clearly been happy to encourage offshore wind farm developments. We hear the fears about the high strike price and expense of offshore wind, but the CfD auction has shown that the direction is downwards. As the technologies have developed and competition has been brought in, we have started to reduce the offshore price, which I hope in the medium to long term will converge to be not so different from the onshore price, or near enough.

The Government are obviously committed to onshore projects as a way of generating energy. We are at a stage where many of us who see applications in our constituencies should and can say—the Government have shown this with where they have chosen not to support onshore wind farms—that investors should think carefully about whether they bring forward planning applications for a well-sited, well-researched location, or indulge in the speculative, lazy applications that we see in our constituencies. Out of the blue, a speculative application happens, and that is often what upsets and surprises constituents, coming as it does without any indication of logic or anything else. In those cases, the message should be loud and clear: “Do your research and work. Make sure that you are not speculating and trying to garner profit for profit’s sake rather than trying to fit into the community.”