John Redwood’s contributions and interventions on the Energy Bill

Mr. Redwood: The hon. Member for Nottingham, South (Alan Simpson) has made a spirited contribution. I feel equally passionate about a subject that needs more prominence in this debate-how we keep the lights on.

So far, the debate has generated a bit of heat and very little light. The danger of the way that the policy is drifting under this Government is that we may end up with a perfect regulatory system in due course, were they to stay in office, but that we will have no power stations to produce the power that we need and on the scale that we need. That will be because so many will have been retired for one reason or another-nuclear stations for technical reasons, and coal-fired stations for emissions reasons.

When I come to judge this interesting debate, I will have in mind a central question: that is, which amendment would help us to get to an answer more quickly on the provision of more capacity? Surely it is more capacity, above all else, that we need to put in the front of our minds today, so that we do not end up switching off the lights.

Of course, Energy Ministers past, present and future will tell us great things about CCS, new technologies and exciting opportunities. However, I think that any present or prospective Energy Minister will agree with me that the one thing that the Government really must not let happen on their watch-or on the watch of their successor, because we will know whom to blame-is that the lights go out.

My hon. Friend the Member for Wealden (Charles Hendry) rightly said in his opening remarks that he was very exercised by the need to see projects and plans coming forward quite soon, to ensure that replacement power stations are available after 2015 and 2016, when the old coal and nuclear stations retire. He will be worried to hear that, when I came to the debate, I was genuinely open minded about the virtues and wisdom of the amendment that he wishes us to support this evening, should it be pressed to a vote, as it may well be.

However, I have listened carefully to the debate, and am persuaded that new clause 15, proposed by the hon. Member for Nottingham, South (Alan Simpson) and supported by the Conservative and Liberal Democrat Front Benches, does make sense. I believe that it would remove just a little bit of the uncertainty that is gripping the energy market in this country and preventing people from coming forward with the projects for the new gas, coal and nuclear stations-whatever they may be-that we desperately need if elderly people are to be kept warm in the winter.

We need those new stations if this country is to have the reasonably priced power that our industry will need to have a chance to compete, and if we are to keep the lights on in the House of Commons, which we hope in due course will be a place of enlightenment generally, providing the better policies and debate that will enable us to go forward to a better future. New clause 15 could provide the clarity that we need-it has been lacking over the last decade, under successive Energy Ministers-as to what kind of performance standards the Government expect, and how they will reward investors who meet the targets and penalise those who do not.

The Government are trying to suggest to us this afternoon that requiring them to set up targets and standards now will only delay matters more, but I do not see how they can possibly believe that. Given that all CCS projects rest on levy finance, subsidy and grant, any Government seeking value for public money will surely have to say what they expect from those projects.

It would be completely nutty for the Government to say to industry, “Here is a great pot of money. Go away and play, and we will like what you come up with.”

Colin Challen: I thought that the right hon. Gentleman at one point in his career had something to do with deregulation. Now he is arguing for more regulation: is that really a convincing stance, or is it simply politically convenient for him to take it at the present time?

Mr. Redwood: The hon. Gentleman is right that I have consistently wanted far less regulation that the Government have thrust upon us. I have been the co-author of a report that set out large quantities of regulation that I would love to see removed, which I think would make Britain a better place. But I have always believed that where the Government are up to their eyes in something, as they clearly are in carbon management-this is a Government project which only they can lead; the private sector is not going to do it, and it is something that the Government want to do-where the Government are leading such a project, it would be absurd for them not to say what they expect of people who are to receive public money.

I see the Minister nodding wisely in agreement. She will have to tell the industry exactly what she wishes it to deliver for the prospective amounts of grant and money that the Government intend to offer. Similarly, Ministers have had to start to set out, in conjunction with their partner Governments in Europe and on a global scale in environmental agreements, what they expect industry generally to hit by way of targets for their various carbon trading schemes and their penalty and tax schemes.
The Government have already done that for motorists. We know what our cars must deliver by way of various outputs from the exhaust, and different levels of tax are imposed, depending whether the Government disapprove a lot or a little of the particular vehicle that we have chosen to buy and to use. The Government cannot avoid doing something similar in respect of power generation, given that they wish to live in such a highly regulated world, with complicated systems of carbon trading and of levy, finance, grant, subsidy and altering market prices in order to achieve their aims of carbon management.

I do not see why the Minister is so adamant that the one thing that could get in the way at this stage is a requirement that she sets out what she is trying to achieve. My worry about new clause 15, which was supported by my hon. Friend the Member for Wealden and first inspired by the hon. Member for Nottingham, South, is that it delays everything further. I understand that there needs to be time to consider what the targets and objectives should be, but one would have hoped that after five or 10 years of endless debate about all this, the Government might now be able to share some figures with us so that we can inform our judgments. Leaving it another six months is another unwarranted delay.

I can see that the House recognises that the Government have not done their homework and are not yet prepared to come forward with any factual basis for giving us the kind of figures that industry needs for investment, so they need another six months. Most sensible investors would say, “Until we know what the terms of trade are, we can’t respond to such initiatives.” They will say, “We know we are going to live in a very rigged and organised market. We know that the Government are going to intervene massively in this market in all sorts of ways-penalties, subsidies and incentives,” but until they know exactly what it means in pounds and pence for any given investment, they will surely be reluctant to come forward.

On such occasions Labour suddenly becomes an advocate of the free market, in a way. Labour Members look at me and say, “As somebody who supports freer markets, surely you understand that it is up to the market now to settle these issues. The market will decide how many new power stations we want, and which ones it is going to build.” The Government misunderstand that that cannot happen in this case because the market is so managed, organised and regulated. If they wish to regulate a market to such an extent, they make themselves responsible for the results.

If the Government regulate a market as much as they have already regulated it, they need to make clear the missing bits in the jigsaw in order for the private sector to be able to participate and to trade on sensible terms. It is the Government who will decide exactly how much money people make on any of these projects, because it is the Government setting the carbon levels, the emissions levels and so on and having a very bid impact on the cost base, so if the Government wish to speed these things up, they have a duty to come forward now with some figures.

I asked the Minister in an intervention, which she kindly took, whether she could share with us some of the background figures that the Government must have on the relative costs of the different ways of generating power, both before and after all the Government interventions through penalties and subsidies. In order to come to an informed view on clean coal, we need to know how it is likely to compare in terms of costs and carbon output with alternatives, with gas and with the other technologies on offer.

After so many years of Green Papers, White Papers and energy policy debates, surely there must now be some understandable figures that can be shared with intelligent Members who want to discuss the issue seriously in order to establish some idea of the pecking order. I should welcome clean coal technology that worked quickly, based on British coal, because I am worried not just about the security of supply domestically and whether we have enough power stations, but about the security of supply of the raw material.

I do not like Britain being as dependent as it is on imported oil and gas, so any technology that moves us away from that dependency is welcome. I start with a prejudice in favour of coal-based power, but I need to know whether that is realistic. There must have been enough studies now to establish some idea of the subsidy, levy intervention and support that would be needed to make those putative technologies competitive. We could then make a better judgment about whether coal can carry on providing for our existing electricity output, which it does from the older stations; whether we are talking about an expansion, which might be welcome; or whether we are talking about a sharp reduction.

If we are talking about a sharp reduction, we must be precise about our regulatory structure for the gas-fired stations that we will need in order to provide the replacement capacity; and we must get on with the nuclear debate in order to find out whether nuclear power is a safe and economic way of filling the gap after 2020, because it clearly cannot do so in time for the gap that will emerge after 2016.

I am persuaded by my hon. Friend the Member for Wealden to support amendment 15, which he supports. It makes a statement to Ministers, but I, like its mover, the hon. Member for Nottingham, South, do not think that it is the definitive answer. I urge the Government to look again at what they can publish and make available, because if they do not do so I cannot see why people would want to come forward with investment projects. If we do not start investment projects now, we will find it very difficult to provide sufficient power at sensible prices after 2016 in order to keep our economy working.

Mr. John Redwood (Wokingham) (Con): How many new power stations do we need to commence building this year to avoid the risk of the lights going out because of the incoming, much tighter emissions standards and the retirement of old plants? On how many will construction start this year?

Joan Ruddock: I am sure that the right hon. Gentleman understands that we have an energy mix and a privatised energy market. It will be up to the companies to decide what investment they make. What we endeavour to do in the Bill is make it possible and profitable for companies to invest in new coal. We believe that if it were not for the provisions of the Bill, we would not get the new coal-fired stations that we will need, because we will lose a third of existing coal-fired capacity by 2015.

Mr. Redwood: I know the Minister does not have detailed figures, but surely she must have some idea of the relative costs to the consumer and the taxpayer of cleaned-up coal power, compared with wind power, wave power and so forth. We need to know that to inform our judgment.

Joan Ruddock: I am sorry. Perhaps I did not respond sufficiently to my hon. Friend the Member for Blaydon (Mr. Anderson) who asked the question, and I am happy that it has been repeated. I say again that the design of the levy and the consultation have yet to come, but in our discussions we anticipated the cost to the householder being 2 to 3 per cent. on bills by 2020, arising specifically from these provisions. We all have to bear some burden for developing the low carbon economy. The Government will do that in a proportional way and we will try to protect the poorest.

Mr. Redwood: I am grateful to my hon. Friend the shadow Minister, who has, not surprisingly, made a much more convincing case than the Minister, and has taken seriously security of supply. Given that subsidies will be an issue in this new technology, and that penalty payments for excess carbon are also an issue, the Government must set targets for the amount of carbon in order to justify the subsidy or the penalty payments, so why are they denying it?

Charles Hendry: As always in such matters, my right hon. Friend is absolutely correct. What we have is an extremely interwoven web of a range of different issues. Complex decisions will need to be made, but given the Minister’s approach, it is less likely that we will secure investment in new coal.

Mr. Redwood: How serious do the Liberal Democrats think the possible shortage after 2016 will be, given the number of power stations being retired and the absence of new ones? What would he do about that?

Martin Horwood: The right hon. Gentleman makes an important point. That is an issue that might in the end lead to derogations from European directives to keep aged power stations online or to allow more importation of gas, which would not be a satisfactory outcome. We certainly need action now, not only to promote CCS but to promote greater seriousness about renewables. For example, we need a stronger feed-in tariff for renewable energy and many other such actions to address the issue that he is talking about.

Mr. Redwood: Does the right hon. Gentleman agree that the Government must have targets and standards in order to allocate subsidy and penalties?

Dr. Strang: That is an interesting point, but I will not respond directly to the right hon. Gentleman because I do not have time. However, I do not see the logic of the argument that setting a standard will somehow deter investment, because the reality is that companies want a rough idea and framework for the future. He is criticising the new proposals and saying that we should not support them because they do not give figures, but, obviously, their strength lies in the fact that there will be a year’s consultation and discussion, after which the Government can decide on the appropriate EPSs for our various power stations.