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Energy Bill

My Lords, energy policy is a sensitive subject and a difficult one, too, because it is not easy to foresee what the future will bring, although the actual decisions in the policy areas are generally long term in nature. A key plank of government policy for many years now has been to look for market-driven solutions and to seek to direct the market by various degrees of regulation, but keeping these to a necessary minimum. Certain aspects of commercial energy projects can be developed only in direct response to government policy, of course, and that takes us to the heart of this Bill: its provisions to encourage CCS initiatives, an expanding range of renewable technologies and a renewed investment in nuclear energy. I wish to make brief comments on each of those areas and then move on to an issue that was discussed in some detail in the White Paper but which has not featured in the current Bill. One’s view of CCS will be heavily determined by the view that is taken of global warming and, more specifically, the separate question of the contribution that rising CO2 levels are making to global warming. In previous debates in your Lordships’ House the scientifically best-qualified noble Lords among us, including the noble Lord, Lord Oxburgh, who is to speak next, have argued that the case is essentially proven, and the Government seem to have accepted that. In a previous incarnation I was a scientist, and from the very modest foothills of my own scientific judgment—at the end of the day we all have to exercise a judgment that is amateurish in character—I regard the question as in some respects still open. There does seem to be a greater consensus among scientists from other disciplines than among climate scientists themselves that CO2 levels are the key determinant of rising temperatures. But climate science is a notoriously imprecise and poorly understood area of science. That is because the phenomena under investigation are so large: the whole of the earth’s surface, the whole of the earth’s atmosphere, and the sun itself. That makes precision difficult to achieve. The history of science is littered with scientific consensuses that have come to be overturned one way or another. The fact that there has been a degree—somewhat less than one degree—of global warming over the past century does seem to be fairly clearly established. Its correlation with CO2 emissions is less so in my view, although there may be—and we should probably say, ““probably is””—a link. But it is still, I think, in the realms of probability. That means that it is right to test out CCS technology on a commercial scale. This will be a hugely expensive operation. As we heard at Question Time, the cost simply of a demonstration site, much smaller than a commercial power station, will be £1 billion. That is for only one out of a range of possible technologies which could be put into place. Given the rate at which India and China and other countries are building coal-fired power stations, more than one a week, without CCS, we need to be sure that the cost of fitting CCS is going to be realistic in the future and will not be disproportionate. One way or another it seems likely that global warming will continue come what may and for whatever reason. There have been trends over the centuries of the coming and going of global temperatures. There is a movement up and that global warming is going to produce consequences, particularly among some of the poorer in the world. Alongside the proper attention to CCS technology, there needs to be an equal attention to alleviating the consequences by flood defences and so forth. We need a mixed economy in these two areas; otherwise we could end up having very expensive CCS technology, which is something like tilting at the windmills of CO2 increases. Be that as it may; history will tell. Turning briefly to renewable technologies, I welcome the changes to the renewable obligations scheme which are envisaged. It does all seem late in the day as we chase the target of 10 per cent of our energy generation by 2010 and 20 per cent by 2020. It would be good to hear from the Minister whether the 20 per cent target by 2020 is still regarded as realistic. Leaving things mainly to the market has so far discouraged investment in what, at least in the short term, are more expensive forms of electricity generation. The renewables obligation scheme represents a major tweaking of the market to encourage the greater use of renewable sources of electricity. It is arguable that more direct and longer term planning in this area should have been in place years ago. Picking up on noble Lords’ earlier comments on the present arrangements, it seems to me that the renewables obligation process is really targeted at large-scale suppliers of energy. I think that we need a mixed economy of taking that approach while encouraging microgeneration, which needs a feed-in tariff to complement it. Encouraging microgeneration would help to change the culture in this country, which is still shifting towards a properly responsible approach to energy conservation. So there is a case for feed-in tariffs, particularly in relation to small-scale projects. Some churches with photovoltaic and other schemes are finding it difficult to set up connections to the grid for the contribution they may make. There is also the question of whether the encouragement of energy crops, as envisaged in the White Paper, is now slightly out of date. There is quite a bias in the proposed differential renewable obligations tariffs towards encouraging energy crops, but given the recent changes in the area of food production and the rise in food prices, I wonder whether that remains the wisest course. Turning to nuclear energy, I welcome the prospect of a new generation of nuclear power stations. The Bill seeks to set up a framework within which the Government can regulate new nuclear stations, and particularly in relation to the storage of radioactive waste. As I understand it, a company which owns and operates a nuclear power station will need to set aside money to pay for the storage of waste and the eventual cost of decommissioning the station and the site. In his opening speech the Minister said that operators would meet the full costs, but given that the full costs of storage potentially stretch over thousands of years and not just over the lifetime of the nuclear plant, it would be helpful to have some confirmation of what the term ““full costs”” means. Does it extend to the full costs incurred over the long period of storage that is envisaged? My own view is that the present arrangements may end up slightly discouraging investment in nuclear energy, which would be regrettable. Because of the more or less equally beneficial carbon footprints of both renewable technologies and nuclear, I would prefer to have a slightly more level playing field for the two areas. We await the detailed proposals for the permanent underground storage of nuclear waste. It is difficult to see how these costs can be assessed with any confidence until we know about the actual plans—a point also made by the noble Lord, Lord Jenkin, and others. Can the Minister give us any idea of when he expects a permanent underground site to become operational? Given the subsidy which is provided for renewable generation, it would be a pity if delays in agreeing arrangements for storage were to prevent companies entering the market again, not least because if we allow the nuclear component in our electricity generation capacity to fall out of the mix, that will more than represent the whole contribution, prospectively, of renewable energy until 2020. It really is a big factor in the overall balance. The issue which I feel should have been addressed in the Bill is that of fuel poverty. The White Paper, on page 77, gives estimates of households in fuel poverty, and the modelling was based on fuel prices in 2006. Could the Minister provide updated projections in the light of recent and projected rises in the price of oil, gas and electricity? The table showed a prospect of 3 million households in fuel poverty by 2015 on the least optimistic assumptions which were in place in 2006. How do those least optimistic projections in 2006 relate to the reality of intervening price rises for oil, gas and electricity? Fuel poverty, I suspect, will become a very significant factor in the coming years. The White Paper sets out the schemes which the Government have in place to assist households in countering fuel poverty, including targeted improvements in insulation and energy efficiency. Although the White Paper sets out some options that require energy companies to have adequate programmes to support their most vulnerable customers, I feel that the problem will be sufficiently serious to suggest that a more formal regulatory environment should be provided in this area to address the needs of those who are most vulnerable. It has always seemed odd that the winter fuel payment is made indiscriminately to everybody, however wealthy or poor they are. There is much more to be done in targeting those who are in greatest fuel poverty. Finally, I offer a general comment on the direction of government energy policy and, to a degree, on the absence of overall policies in recent years. One of the difficulties is that Governments have an immediate electoral horizon of five years. Within that time they are subjected to ever more intrusive and critical investigation by other political parties, the media and external commentators. That can result in a tendency to take short-term decisions and to put off unpopular ones. That has affected both the development of renewable energy in this country and the question of replacing our nuclear capacity. Energy policy needs a horizon of at least 50 years, not five. The Bill illustrates grappling with delays in developing long-term strategies. For example, the ““dash for gas”” was essentially a short-term provision, which future generations may look back on to see our generation as burning a valuable national resource in a short time, meeting a short-term Kyoto obligation but ending up by importing—probably—at least 80 per cent of our gas by 2020. Other examples of the tendency to look at implications in the shorter term could be given. In relation to climate change, we have the climate change committee, which is deliberately tasked with looking at the longer-term horizons and taking the issue at least partly out of the immediate political agenda. Whether Ofgem can fulfil that remit, if it is given to it, I am not sure, but the need for some agency which advises the public and the Government on long-term issues over the whole range of energy policy is compelling. In its own way, this Bill represents a need for that, as did the rather acerbic comments of Allan Asher, chief executive of Energywatch, before the Commons committee yesterday.