Steve Webb on the Energy Bill: ' . . I notice that the Secretary of State's irritation is in direct proportion to the pertinence of our points.'

11.25.00am GMT Wed 23rd Jan 2008

[Jan 22] Energy Bill Second Reading

'John Hutton (Secretary of State, Department for Business, Enterprise & Regulatory Reform): I beg to move, That the Bill be now read a Second time. I believe that the Energy Bill, with the measures on planning and climate change, has an important role to play in implementing our strategy for tackling climate change and ensuring secure energy supplies. We are all aware of the scale of the energy challenges that the UK and other countries face . .

. . Steve Webb (Northavon, Liberal Democrat) : Let me begin by striking a brief note of consensus in agreeing with the hon. Member for Rutland and Melton (Alan Duncan) that the Bill represents a missed opportunity. It might almost have been called a "Big Energy" Bill.

Tom Clarke (Coatbridge, Chryston & Bellshill, Labour) : I am grateful to the hon. Gentleman for giving way to me, especially as I shall not be able to stay for most of the rest of the debate. He will recall that during a recent debate in Westminster Hall, there was some ambiguity in the official Opposition's approach to Ofgem. Does he accept that the Secretary of State was granted powers under section 4 of the Gas Act 1986 and that subsequently Ofgem was given a duty to speak for consumers, especially low-paid consumers? It has not asked for that responsibility to be changed in any way. Will the hon. Gentleman join me in asking Ofgem to exercise it?

Steve Webb : The right hon. Gentleman has raised two important points with which I hope to deal later. I pay tribute to him for his work on fuel poverty, and I agree with him that the regulator's role needs to be addressed.

The Secretary of State and I have crossed swords a couple of times and he tends not to follow my way of thinking, but in a rare lapse, I agree with one of his comments. We do need a diverse range of energy sources; I do not think there is any dispute about that. As I began to say earlier, this is a "Big Energy" Bill reflecting the spirit of the old Department of Trade and Industry, the utilities, and the business way of looking at things. I am Liberal Democrat spokesman on the environment with responsibility for energy, and I view energy policy very much through the window of the environment. From that point of view, the Bill is profoundly disappointing. It contains very little on matters such as energy efficiency. Surely an Energy Bill should legitimately deal with that, but where is it? There should be so much more about energy conservation-in the home, for example. Where is all of that? Where is the serious material on microgeneration and distributed power? The Bill should have addressed those matters; it had the opportunity to be visionary instead of, essentially, being about big energy and more of the same.

I want to address three main areas: the policy on renewables and its failure to date; the issue of new nuclear; and the omissions from the Bill.

Stephen Ladyman (South Thanet, Labour) : As the hon. Gentleman and his party are so keen on small energy, can he tell us why 75 % of wind farm applications in Liberal Democrat council areas are turned down?

Steve Webb : The hon. Gentleman raises a perfectly fair point about the process by which we determine the suitability of individual applications, but an approach that is supportive in principle of renewables of all sorts does not dictate that any individual application should be guaranteed success-unless the hon. Gentleman's position is that those who support renewables should say yes to every application. That would be nonsense; each application should be judged on its merits.

While I am on the subject of renewables, I am glad that the Secretary of State is still present, because it means that I can give him another chance to answer the question he declined to answer when I intervened on him. Why is the United Kingdom 22nd out of the EU countries on renewables? It is a simple question, but we have no answer. I would be happy to give way; I would be happy for the Secretary of State to interrupt my flow and tell the House why we are so poor. We have had 10 years of a Labour Government, who could have done something about this. What we hear from Ministers is the "jam tomorrow" renewables strategy: "It's going to be great, and there'll be a bright new dawn." We should have seen the evidence of that by now, but we simply have not seen it.

We only have to look to Germany. If we cite places such as Scandinavia people sometimes say, "Well, that's very different," but Germany is comparable to us in many respects, yet it has achieved huge things. For example, it has achieved 200,000 green-collar jobs, as it calls them, in the renewable industry sector. That could have been a huge opportunity for this country. The Secretary of State said that great things can be done when a Government are consistent, give a lead over a long period, and are supportive of renewables-and he is right, so why have we not done that? As well as the 200,000 green-collar jobs that have been created, solar technology investment in Germany has increased from €450 million in 2000 to €4.9 billion in 2006. That is vision; that is achievement. We have not had that from this Government.

We have heard the Government of Germany's interpretation of the reasons why that has happened. They are, to quote in translation,

"support programmes from national and state governments"

and

"a legally fixed payment for electricity fed into the public grid."

That is what has driven what has happened in Germany, and that is what we have lacked.

When we are particularly enthusiastic about renewables, people sometimes say, "You'll never get anything on the scale that's needed." Yet Greenpeace has calculated that if the UK had done what Germany has done-if we had achieved its level of renewable development-18 % of our energy would today be coming from renewables. That is being delivered in comparable countries; why can it not be done here?

As the Secretary of State said, the delay in getting renewables moving is partly caused by the delay in getting grid connections. Interconnection with the grid is an important issue. As the hon. Member for Rutland and Melton said, quoting the Stern review, feed-in mechanisms are a good idea if we can get connection into the grid working. However, the Secretary of State sounded like a passive onlooker-"Oh, there's a bit of a problem with renewables, in getting connection to the grid." Well, who has been in charge for the past 10 years? Who could have done something about that, if there had been the political will and commitment to do it? Yet he stands up today, after 10 years in power, and says, "Oh, we've got a bit of a problem getting connections into the grid." Whose fault is that? Is he not responsible?

Jamie Reed (PPS (Rt Hon Tony McNulty, Minister of State), Home Office, Copeland, Labour) : Would the hon. Gentleman like our nuclear generating capacity to be replaced by renewable generating capacity-and if so, what effect does he think that would have on our CO2 emissions?

Steve Webb : As I have said to the Secretary of State, our strategy is for a breadth of input, including renewables, energy conservation, energy efficiency, and carbon capture and storage for gas and coal. Such a breadth of strategies would be much more effective in reducing CO2 emissions than waiting for new nuclear power to come on stream in 15 years' time. Those are things we could be doing tomorrow, rather than waiting for jam tomorrow, which is the Government's strategy.

I welcome the announcement of a feasibility study on the Severn barrage, as my constituency borders the Severn estuary. I also welcome its scope, because it includes tidal lagoons and the other technologies-but we have been here before: this will not be the first feasibility study. I consulted the most reliable source known to modern politicians-Wikipedia-and found that a Severn barrage was first mentioned in 1849. I do not think that a Labour Minister made that reference, so this is not a re-re-announcement, but this issue has been around for a long time.

The feasibility study was announced at the Labour party conference, but we only learned of its terms of reference four months later. I have read the written statement. It says that the feasibility study will take two years, and if the project is approved a lot more detailed work and analysis will need to be done. How much longer must this process last? We could have started the work 10 years ago but we did not, because the political will was not there. This is a huge missed opportunity, and today's statement represents yet more delay, and the project again being put on the back burner.

Paddy Tipping (Sherwood, Labour) : Does the hon. Gentleman not think it important that we examine seriously the environmental concerns about the Severn barrage? There are good reasons to support the project, but we also need to examine the negatives.

Steve Webb : The hon. Gentleman is right. However, the environmental impact of a barrage has not changed substantially in the 20 years since the previous study was done, yet another study is to be done and there will be a further delay.

John Hutton (Secretary of State, Department for Business, Enterprise & Regulatory Reform) : The hon. Gentleman is coming out with the usual sort of soundbites masquerading as an energy policy. My hon. Friend the Member for Sherwood (Paddy Tipping) asked him a perfectly fair and reasonable question, but he is not answering it properly. He must take into account, as we must, the fact that since the previous feasibility study, significant new European legislation has been introduced. That changes the dynamics of the project, yet he is suggesting that we should just go ahead and build the barrage without doing any feasibility work. That is a totally irresponsible-and therefore an entirely Liberal Democrat-policy.

Steve Webb : I notice that the Secretary of State's irritation is in direct proportion to the pertinence of our points.

On the Severn barrage, evolution in the economics and the environmental legislation will always occur, so is the right hon. Gentleman saying that every time something changes, there will be another delay, a further study will be done and another decade will go by? When will the Government make a decision? We hear about nothing but continued delay. The study could have been started 10 years ago-the Secretary of State could have had his two-year study, the detailed work could have been done, and the thing could have been producing electricity by now-yet they are only just getting round to it. That delay is typical.

Renewables technology is moving on incredibly rapidly and there are huge potential gains to be made as the technology develops. The Department's own website says that

"wind costs have declined by over 80 per cent in the last two decades".

The feasibility and attractiveness of renewables can quickly change dramatically, which is one of the reasons for my concern.

That brings me on to the nuclear section, because if we as a nation lock ourselves in to a technology that we will be lumbered with for a century, and if renewables technology moves on as rapidly as it is doing, we may end up having to bail out uneconomic and undesirable nuclear facilities because we made commitments that we must honour, instead of being creative and encouraging the fast-moving, modern, forward-looking technologies that many renewables and energy efficiencies allow.

John Robertson (PPS (Dr Kim Howells, Minister of State), Foreign & Commonwealth Office, Glasgow North West, Labour) : I understand the point that the hon. Gentleman is trying to make. The Government's point-the whole issue about energy-is that we must have a balanced energy policy so that we do not put ourselves in one little box and end up stuck with what we have done. Should the Government not therefore be commended on what they are trying to do? The hon. Gentleman is not commending us at the moment.

Steve Webb : No, because new nuclear power is a one-way track. We cannot decide in 10 or 15 years' time that it was a bad idea and we do not want it, because the companies that are now being asked to invest expect guarantees. They will not invest their money unless they know for certain that they will get a return, and if in 10 or 15 years' time that is not the right part of the required mix strategy, we will be lumbered-we will be stuck. They will expect a return over 40 or 50 years, so we will be buying into a technology that will give us no flexibility.

Stewart Hosie (Dundee East, Scottish National Party) : Is not the myth that the Government are peddling based on the argument that the new energy policy is balanced? They have back-tracked on the hydrogen economy, and carbon capture and storage, and they have failed miserably to put in place the correct connectivity charge regime to get the electricity from offshore into the grids, so their focus is deliberately in one direction-towards nuclear power. They do not care about balance. All they want is nuclear stations.

Steve Webb : If the other policies-greater energy efficiency, greater energy conservation and more encouragement for renewables a decade ago-had been more effective, nuclear power might not have been needed, even according to the Government's analysis.

There are a number of concerns about new nuclear capacity. It might surprise some hon. Members to hear that in my constituency there is an active operating nuclear power plant. It is not self-evidently politically wise for me to stand up and say that I do not support new nuclear. However, having considered the evidence and the arguments, that is the conclusion that I have reached. We need to set out why.

First, to echo the words of a former Secretary of State for Trade and Industry, new nuclear initiatives risk distracting us from renewables and energy efficiency. The right hon. Member for Leicester, West (Ms Hewitt), when she was Secretary of State, said:

"It would have been foolish to announce"-

that the Government would support new nuclear-

"because that would have guaranteed"-

that is a strong word-

"that we would not make the necessary investment and effort in both energy efficiency and in renewables."-[ Official Report, 24 February 2003; Vol. 400, c. 32.]

She was right then-and that approach is right now. The danger is that if we go down that track and invest time, effort, legislative time and, undoubtedly, public money in new nuclear, that is bound to sidetrack us from the subject of energy efficiency and renewables.

The Secretary of State said in his statement that he was not mandating new nuclear plants, but inviting them. What happens if industry does not come forward? How will the gap be met? If new nuclear investors judge that it is too risky, or that the economics do not add up, for whatever reason, what is plan B?

John Hutton (Secretary of State, Department for Business, Enterprise & Regulatory Reform) : Is this the killer question?

Steve Webb : I am more than happy to give way if the Secretary of State wants me to. He said that he had made the way clear for new nuclear plants. Are the Government assuming that they will go ahead? If not, when will we know? What will the Government do? Surely they need a strategy, rather than assuming that the private sector will do something that it might not.

Geoffrey Robinson (Coventry North West, Labour) : May I help the hon. Gentleman? It seems to me that as the technology stands, if no nuclear technology were forthcoming-given that we are considering base load electricity, which cannot be supplied by renewables in any circumstances, because of their intermittent nature-the alternative would be high-carbon gas or coal. I do not know what the hon. Gentleman would say to that.

Steve Webb : Funnily enough, the hon. Gentleman repeats a common misconception about renewables. Although an individual wind turbine in one place might provide an intermittent supply, in managing energy demand we are interested in the aggregate of all renewables over the economy. First, there are few times of day without wind, sun or waves. Secondly, tidal power is-surprisingly enough-incredibly predictable centuries ahead.

We need to be able to predict the aggregate of renewables. I agree that it will not be level throughout 24 hours, but neither is energy demand. We do not need inflexible sources that are simply on all the time, which and that we are stuck with. We need flexibility to meet the fluctuations of demand through the day. We would be lumbered with the nuclear input and obliged to use it, whereas we need flexible sources such as gas-fired stations with carbon capture or renewables, which can to some extent be stored and used at later points. Let me use the Severn barrage as an example: although the tides are predictable, there are ways in which the water can be pumped when there is excess energy and used when it is needed. There are more flexibilities than are commonly understood.

David Chaytor (Bury North, Labour) : If we are discussing plan B-leaving aside electricity generation and considering total energy use-it is on page 164 of the nuclear White Paper. The analysis from the UK Markal-Macro model shows that without new nuclear, we would need to decrease emissions from car fuel by 13 % I would not have thought that it would take rocket science to achieve that.

Steve Webb : The hon. Gentleman makes a good point. There are many ways in which we could make progress on this agenda without tying ourselves into a large inflexible long-term strategy. It is not as if there will be no cost for the public sector, as the Government claim; clearly there will be such a cost. The Nuclear Decommissioning Authority is already declaring historic costs in excess of £70 billion; it is steadily increasing its estimate of the clean-up costs for historic waste-and we have no idea of future costs.

Peter Luff (Mid Worcestershire, Conservative) : As the Select Committee Chairman, I try to be open-minded and even-handed, but the hon. Gentleman would try the patience of even the most amenable of men. The liabilities that he is talking about stem largely from military use, and the material was stored in an appalling way, with no thought for the future. We now have a much clearer idea of the what the costs actually are, and he should not confuse the House, and the public, by mixing up the legacy issues with the issues in connection with future waste.

Steve Webb : Two questions arise from that intervention. First, if the technological problems of waste disposal have been resolved, why is waste not already in deep storage? Why is it still stored on the surface, which is highly unadvisable-and not ideal in the context of a possible terrorist attack, or in any other context. We have not resolved the problems involved: we do not know where the waste will go, or how it will be dealt with.

Those elements remain uncertain, but my second question is about something referred to earlier by the hon. Member for Rutland and Melton (Alan Duncan). The Bill provides that companies must pay their share of "the cost"-but what share of the total cost will be allocated to the first nuclear entrant to the market? Will it be 100 per cent? Or will the Government say, for example, "We think there'll be three entrants, so we'll charge you a third of what we think the cost will be"? But then, if nobody else comes in, will they then say, "Actually, on second thoughts, you've got to pay the whole cost, because there's no one else incurring it"? How is the Government to know what the future cost will be? That is the point that I would make to the Chairman of the Select Committee. Companies entering the market cannot know what their share of the future cost will be, because they cannot know how many entrants there will be.

Colin Challen (Morley & Rothwell, Labour) : The nuclear lobby seems relatively strong in the Chamber this afternoon, but does the hon. Gentleman agree that its representatives should visit the new nuclear power being built in Finland? It has been under construction for just under two years, but it is already two and half years late. Some 1,700 safety failures have been noted, it is already 25 %-perhaps €1 billion or more-over budget, and work has not even begun on the storage facilities yet.

Steve Webb : The hon. Gentleman makes a good point, and it is one that I plan to come on to.

The Secretary of State said that if a company went to the wall, the money for decommissioning would be ring-fenced. However, I presume that all the money would not have to be put up on day one, and that further contributions to the decommissioning pot would be made as profits came in from the generation of nuclear power. What will happen if a company goes bankrupt before that pot of money has reached the necessary level? Who, I wonder, will make up the shortfall? I think that we all know the answer to that question.

The Committee on Radioactive Waste Management has been mentioned already, and its chairman, Professor Gordon McKerron, has said of the Government's strategy that

"we have an apparent government commitment to the essential role of nuclear",

but that there

"is a real risk we may get the worst of both worlds, where nuclear investment stalls under a risky investment climate while markets hold back from other investment in the expectation that nuclear is just around the corner. Then we really might have a capacity gap and an even bigger risk of the lights going out".

That is one Government adviser describing how investment in nuclear could crowd out other investment, but Sir Jonathan Porritt of the Sustainable Development Commission, who was put in place by the Government to look into these matters, has said: "What is disturbing is that the Government is failing to understand the more urgent that dealing with climate change becomes, the less relevant...nuclear power is."

Nuclear power is presented as the friend of climate change, but the chairman of the SDC has said that it is the opposite. He added:

"Solutions have to be found on waste, cost, and decommissioning. They have not been found on any of those issues. It reveals how poor is the understanding by government of the importance of climate change".

The Bill would have been very different if it had come from the Department for Environment, Food and Rural Affairs. I hope that energy will be handled by that Department one day, rather than by the Department with responsibility for the utilities and heavy industry.

Finally, I want to touch on a few things that should have been included in the Bill. Earlier, I mentioned home energy efficiency and conservation. We are told that in a decade all new homes will be zero carbon, yet three quarters of the houses that we will be living in in 2050 have been built already. The Bill was a chance to do something about energy efficiency, but what real action in that regard does it promote? A quarter of our country's CO2 emissions come from housing. The figure for Sweden is 5 %, yet that country is a lot colder than ours. Why are we in this situation? It is because these things have been neglected time and time again by the energy Department, which is not the environment Department.

A second important omission from the Bill is anything on fuel poverty and social tariffs. One of the most shameful things that the Government have done is not only failing to meet their targets on fuel poverty, but going in the wrong direction, with fuel poverty soaring. The Bill could have made sure that energy companies provided social tariffs to low-income customers.

The energy companies say that tracking down all the poor customers is very expensive, but the Government have a big computer, and they know who they are. Why do the Government not give a certificate of entitlement to the people who receive key benefits so that they can send that to their fuel supplier to qualify for a social tariff? Rather than British Gas trying to guess which of its consumers are on pension credit, why do the Government not simply give benefit recipients an entitlement to social tariffs? Such a system would be a much more efficient way of tackling fuel poverty, so why does the Bill not provide for it? Instead, poor people are presumably supposed to surf the net to compare all the companies' tariffs, which change all the time anyway, and judge the best tariff for them. With the best will in the world, the evidence shows that low-income households, lone parents and unemployed people are much less likely to switch tariffs than anyone else, yet they account for many of the people who are most likely to need social tariffs. Leaving this to be dealt with by the market and, as I said in response to the statement the other day, through quiet chats with the energy companies, is simply not delivering, as the fuel poverty statistics demonstrate.

We have heard from the Conservatives about smart metering. While there is a bit in the Bill about metering, there is practically nothing about smart metering. Given that we will eventually replace every meter in the country, at a cost of billions, we need a framework to get on with that. However, yet again we have missed the opportunity to use the Bill to do that.

There is nothing in the Bill about decentralised energy and combined heat and power, either. There are many aspects to this. We need a diverse strategy, yet the Bill is trapped in an old way of thinking.

There has been mention of Ofgem and its remit. I cannot put it better than the Sustainable Development Commission, which said:

"We would like to see"-

as would the Liberal Democrats-

"Ofgem's primary duty changed so that its central focus is on creating a sustainable system that costs as little as possible, rather than making a low cost system as sustainable as possible."

The opportunity to change the priorities of the regulator has been missed. There can be a forward-looking and diverse energy policy of the sort that I have described, but, regrettably, it is not in the Bill.

. . Question put and agreed to. Bill accordingly read a Second time.' [http://tinyurl.com/2f45k5]