Energy Policy

House of Commons

What is intriguing about the debate so far is how little of it has related directly to the Energy Bill. It has instead been about energy policy. That highlights a problem for the Government. It would have been much better if we had had a proper debate about the energy White Paper published last year. We have not had that debate. One can see that the House is bursting with enthusiasm on this important subject, and rightly so. It is a shame that we have to squeeze a policy debate into a debate on a narrow, technical Bill that is not that interesting or controversial, although the issues on which it touches clearly are.

Next week, I will have the advantage of seeing the Minister for Energy when he comes before the Business, Enterprise and Regulatory Reform Committee to discuss fuel prices and energy security—that is, to discuss keeping the lights on—so I will have the opportunity to go beyond my eight minutes with him then. However, it is a great shame that we are restricted to such a short debate on such a complicated, important subject, and on such a curious Bill.

Fuel poverty is growing as a result of fuel price rises. I am not sure what our response to that should be. It is interesting to explore why prices are rising. The energy gap is bearing down on us. I did not agree with everything—in fact, I agreed with hardly anything—that the right hon. Member for Oldham, West and Royton (Mr. Meacher) said in the early part of his remarks, but towards the end of his speech he said some interesting and important things about how we will fill the looming energy gap. I think that there is a real possibility of life-extension for nuclear power plants, which would help. The Government clearly hope that the Bill will help them massively to expand renewables production, but if it does not, the looming gap would be filled by gas and coal. It may well be that there will be no gap in the market for new nuclear investment, and the right hon. Gentleman might then get his wish, for reasons that he would not endorse—a massive increase in as yet unclean hydrocarbon generation. It is a shame that we cannot debate the issues in more length and that we did not get the chance to discuss them sooner.

I suppose that the big policy change in the Bill—it was heavily signalled, and announced in the White Paper—is on the renewables obligation and its banding. I understand why the Government made that change, but until now, the obligation has been a technology-blind mechanism to encourage renewable power, and I tend to prefer it when Governments are technology-blind. It used to be left to developers to determine the most cost-effective way of building new sources of renewable energy. Given that renewables are quite an expensive way of cutting carbon emissions—we should not forget that; nuclear, however, is a cheap way of doing so—that was the right approach. It turns out that developers chose onshore wind, which is controversial, and biomass co-firing. We are now going for an approach that favours specific technologies, including wave, tidal and solar. That might suggest the direction that the Government’s thinking will take on the Severn barrage and the Severn tidal energy sources.

My concern is that the renewables obligation process is hellishly complicated. It is not at all straightforward; it is a difficult system to work. One leading expert in the field said to me last week, “It’s almost a parody of a piece of regulation now.” When we add the complexity of banding and the grandfathering of existing rights, heaven knows what kind of mess it will be to operate. The renewables obligation certificate process is difficult, and it is made more difficult by the Bill. The Government say that the changes to the process will bring forward more renewable energy and a broader range of technologies. It probably will do the latter, because it will increase the subsidy for expensive technologies, but I do not see how it will bring forward more renewable energy.

One of the virtues of the system is that the cost to consumers is predetermined. The overall amount of subsidy from consumers is known—and it is citizens, not as taxpayers but as consumers, who pay for the renewables obligation process. If we are to shift the way in which the money is spent—if we move the deckchairs around—how will it lead to more rapid development of the total contribution that renewables make to our electricity needs? I just do not think that it can. In fact, it is likely to lead to a slower rate of contribution to our total energy needs for renewables.

I am nervous about Governments picking winners; they often make the wrong decisions. The Mayor of London has made the wrong decision about whether hybrid cars should pay the congestion charge. I do not think that they are the most environmentally friendly way of reducing carbon dioxide emissions. Instead, there are new diesel technologies. When Governments pick winners, we get into difficulties.

Feed-in tariffs have featured extensively in the debate. We all think that they are a good thing, and we all cite examples from around the globe of their contributing to decentralised energy generation. We all think that they are marvellous. However, when my Select Committee undertook its report on decentralized energy last year, it hedged its bets on the issue. I think that the jury is out on feed-in tariffs; I am open-minded on the subject. The issue is really who pays for feed-in tariffs. My real worry is that it is the early, middle-class adopters who will get the benefit of such tariffs. When the price goes up for electricity as a whole—as it will, because someone has to pay for the scheme—the risk is that poorer people will find that the price of their electricity goes up. They cannot afford the generating technologies that allow them to take advantage of feed-in tariffs. We have to be careful about the assumption that feed-in tariffs are a good thing, and I remain open-minded on the subject.

The debate inevitably became passionate on the subject of nuclear, but in fact there is not much in the Bill on the nuclear issue. The Bill forms a narrow, technical but important part of the Government’s progress towards providing a new generation of nuclear reactors. There was a big debate between the Front Benchers on the issues of waste management and costing. I think that the Government’s heart is in the right place, but I hope that they will move towards greater clarity soon, because at present we do not know what the phrase, “full share”, really means. I disagree with the right hon. Member for Oldham, West and Royton about the practicalities of nuclear waste management. However, making sure that the payment process is transparent and that there is no hidden subsidy is a big problem, and the Government must move fast to clarify their position.

On the issue of permitting a new generation of nuclear reactors, there is something else of huge importance that the Bill does not cover—the staffing levels of the nuclear installations inspectorate, which has just six people available for the task. Approval of the Sizewell B design approval took 270 man years of the then regulator’s time, so it would take six people 40 or 50 years each of their entire working life to approve a single reactor design, never mind the three or four proposed for the new generation. I therefore hope that the Minister will repeat the Government’s assurance that the nuclear installations inspectorate will learn from extensive international experience. It is not just one reactor in Finland that is being built worldwide—there are reactors being built around the globe, some of them extremely successfully. I hope that we will learn from that experience, and not reinvent the wheel. I rather hoped for an intervention, so that I would gain an extra minute.

Sir Robert Smith rose—

Peter Luff: I shall give way to my former colleague on the Committee.

Sir Robert Smith: One subject on which the hon. Gentleman has not touched is the welcome introduction of initiatives on gas storage. Does he not think that if we are to sort out the gas price, it is not just the problem of gas storage that we must crack but the problem of having the same regulatory regime throughout Europe?

Peter Luff: I am happy to endorse that observation, as the problems remains a key issue in the future of our energy market. The Committee is shortly going to Brussels, subject to the Whips’ permission, to explore progress on it, because it is the single most important question in the workings of the market.

It is great that the Bill does a lot to create a regime on carbon capture and storage, but we still do not have a workable commercial demonstration or project. The Bill’s provisions therefore do not amount to much, as we need to reassurance that the system is going to work. The big missing thing from the Bill is the smart meter question. I have seen evidence from the industry, including Centrica, in which it says that it would like a mandate in the Bill for smart meters. Centrica has proposed a system for rolling out regional franchises, and I believe that a competitive energy market would deliver smart meters to both the business and private sectors, because meters provide an enhanced service to people whom companies supply with energy. That is not happening, so the Government must make sure that their approach—I accept that an Ofgem study is under way—will deliver smart metering. I do not think that intermediate display technology is a sensible way forward, as it runs the risk of disincentivising investment in smart meters. I have undertaken a rapid rush around the issues. We look forward to the Minister’s winding-up speech and to hearing what he says to the Committee, when he appears before us next week.


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