UK Decarbonisation and Carbon Capture and Storage — [Mr Clive Betts in the Chair]

Part of Backbench Business – in Westminster Hall at 3:17 pm on 24th January 2017.

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Photo of Alan Brown Alan Brown Scottish National Party, Kilmarnock and Loudoun 3:17 pm, 24th January 2017

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate my hon. Friend Philip Boswell on securing this debate. The Government U-turns he outlined at the beginning, and current Government policy positions, suggest that they do not know their backside from their elbow. That is demonstrated not only by the shambolic handling of the CCS competition, but right across the energy sector. It is clear that there is not a coherent strategy in place that will deliver long-term decarbonisation targets, let alone a cost-efficient strategy.

The NAO report of the CCS competition lays bare that the Treasury and the then Department for Energy and Climate Change were not working together. It also shows that all Government Departments are always at the mercy of a Chancellor who is ideologically driven to cut costs and taxes and look for short-term hits. Spending more than £100 million on design costs and then cancelling the competition beggars belief. It is also astounding that, in the NAO report on the CCS competition, one of the two designs that had been progressed was not even compliant with competition rules, so a lot of money was spent for a non-compliant design. The Peterhead CCS scheme was compliant, but instead of going on and developing that and protecting jobs in the north-east, the UK Government chose to walk away. Unfortunately, to date they have walked away with nothing to show for our expenditure.

I accept that, at the moment, CCS is not a complete silver bullet. It is a developing technology and there are some possible risks associated with the long-term storage of the carbon dioxide. Equally, there are plants up and running in north America, and in terms of the financial risks, that is something I urge the Government to look at. They have already underwritten the Thames tideway tunnel to the value of nearly £5 billion at today’s prices. They also offered to underwrite £2 billion-worth of bonds for the Hinkley Point C project, not to mention the contract for difference guarantees that have been given for Hinkley, which in an NAO report last year had an upper estimate of nearly £30 billion, which is truly astronomical.

The Treasury, which spiked the CCS proposals, had no qualms about Hinkley, yet while CCS is a developing technology, so is the European pressurised reactor system proposed for Hinkley—its track record so far is that it has not been demonstrated to work, and costs continue to rise. The Hinkley strike price agreed in 2012 is the equivalent of £100 per MWh at 2015 prices, so it is pretty much along the lines of what is being talked about for CCS. The only difference is that Hinkley is a 35-year long-term deal, whereas for other low-carbon technologies we are looking at 15-year CfD prices.

If the Government are serious about decarbonisation and compliance with the fifth carbon budget, they need seriously to consider a number of energy sectors. First, they need to revisit the pulling of the renewables obligation funding, which again disproportionately affected Scotland. At the same time, they should look at the need for island-based turbines to be classed as offshore rather than onshore. They should be reviewing the rush for nuclear reactors and mini-reactors, which are also unproven, and should change the regulations that are prohibiting the development of electricity storage. The National Infrastructure Commission has estimated that lithium ion batteries now cost only 7% of their estimated 1990 cost. Pumped hydro storage is a proven technology, but Government regulations are limiting its expansion. I suggest reviewing the dash to frack if we are serious about decarbonisation.

It is a fact that investment in renewables is set to drop by 95% between 2017 and 2020 owing to Government policy, so it is no surprise that, in the Ernst & Young index on renewable energy attractiveness, the UK slipped from a ranking of seventh in 2014 to 14th by October 2016. Together with the possible sale of the UK Green Investment Bank to an overseas asset stripper, it is clear that the wrong message is going out to those who might invest in green energy. Even when it comes to tree planting, England achieved only a tenth of Scotland’s record in 2016; yet it is the Scottish National party Government who have increased their planting target. As to house building, approximately three in four houses built in Scotland are timber framed; that is closer to being carbon neutral and is more energy efficient. Only 9% of homes built in England in 2015 were timber framed, yet the Government White Paper on housing is unlikely to address that.

In conclusion, the Government must rethink their entire decarbonisation strategy, considering it across a number of Departments. The view of the Committee on Climate Change was that CCS has the potential to almost halve the cost of meeting the 2050 target for carbon dioxide reduction. It could support some remaining indigenous coal extraction in places such as my constituency. However, it also needs to be applied to gas electricity generation, given the role that that will play. In the National Needs Assessment report launched at the end of last year, it was estimated that CCS could reduce CO2 emissions by 40% by 2015, but there was a stress on the need for Government support. The Chief Secretary to the Treasury attended the launch of the report, so I hope the Government reflect on the findings. It strikes me that the Government have found £8.5 billion for corporation tax cuts, and £5 billion of capital gains tax and inheritance tax giveaways. It is time to plan for our future and give us all a green inheritance to look forward to.