Energy and Climate Change
The Secretary of State was asked—
Analysis undertaken by the Department for Energy and Climate Change in February 2010 estimated that the feed-in tariff scheme would lead to the deployment of about 700,000 domestic solar photovoltaic installations by 2020. In the light of the reforms to the schemes and the falling costs, I believe that we can do significantly better than that.
The investors who were looking to invest in larger schemes are disappointed; that is coming through as part of the consultation. This was a difficult decision, and I can assure my hon. Friend that it was not taken lightly. We are, however, absolutely convinced that it was the right thing to do. We inherited from the previous Government a complete mess of a scheme with no proper financial controls or economic modelling, but we have now taken measures that mean we will avoid the boom and bust that we have seen in other countries across Europe. We are providing a platform for long-term growth.
The decision on the feed-in tariff regime has caused great consternation in north Wales—so much so that the managing director of Kingspan, a company in my constituency, has written to me to say:
“DECC has potentially destroyed a renewables sector that is only some 11 months old and taken with it the jobs and growth opportunity that it would have provided for the UK economy in general and North Wales in particular.”
In the light of that comment from the managing director of a manufacturing company, will the Minister meet me, my hon. Friend the Member for Wrexham (Ian Lucas) and others to discuss this bad decision?
I profoundly disagree with the right hon. Gentleman. We have not cut the budget for the feed-in tariff scheme. We have put in place proper financial controls to ensure that there is money in the system through to 2014. I would be happy to meet him to discuss this matter further, but he must remember that the tariff changes apply only to systems larger than 50 kW, which is equivalent to the size of two tennis courts, and not to domestic housing.
Will my hon. Friend consider the letter has been sent to the Secretary of State from the Wadebridge Renewable Energy Network—the WREN group—in my constituency about community-based projects that might be bigger than the new threshold?
Community-based projects that are larger than 50 kW—about the size of two tennis courts—and up to 150 kW, which is significantly larger, will still get a tariff comparable to that paid in Germany. We should be competitive with Europe, and the pressure should be on manufacturers to reduce the cost of their products rather than to provide bonuses. We hope that many community projects, particularly those around the 100 kW size, will still be able to go ahead, but the pressure must be on manufacturers to bring down their prices.
The Minister has single-handedly destroyed the confidence of the solar sector and the wider renewables sector at a stroke, and personally shredded the Government’s green credentials. The Renewable Energy Association says that the industry has been “strangled at birth”. Sharp’s in Wrexham states that this was
“terrible news—effectively destroying the solar sector”.
The Solar Trade Association calls the decision “a total disaster”, and the Micro-Power Council says:
“The 50 kW plus sector may well wither on the vine: many jobs will go and businesses will see demand dry up.”
Is it not just sheer blind arrogance for the Minister to suggest that all those bodies are wrong and that only he is right?
The fact is that we inherited a complete pig’s ear of a scheme from the previous Government. The hon. Gentleman and the hon. Member for Hackney South and Shoreditch (Meg Hillier) voted against the scheme in 2008, yet they are now the heroes of the feed-in tariff. We have put in proper financial controls and the investment that will guarantee the system for the long term. I would have thought that, having driven the country into the ground, Opposition Members would be more financially prudent, but behold, on the Opposition Front Bench—
Thank you, Mr Speaker. I can understand why the Minister is getting so agitated. I have only one more thing to add. Does he at least agree with this eminent expert on the importance of projects of up to 5 GW, who says:
“The idea behind it is to allow the inclusion of non-commercial scale projects, such as those that will be installed by homeowners, small businesses, local authorities, community groups, farmers and others. That would help out hospitals and schools that want to facilitate greater use of renewables and ensure low emissions as part of our 2020 targets.”—[Official Report, 18 November 2008; Vol. 483, c. 144.]
Those are the words of the Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry), then the shadow Minister. Why is he wrong on this as well, and why is the Minister of State the fount of all knowledge?
Not for the first time, the hon. Gentleman has his numbers wrong: it is not 5 GW, but 5 MW—and 5 MW is still the equivalent of heating 1,500 homes. The fact of the matter is that the scheme we inherited from the previous Government—[Interruption] If the hon. Gentleman calms down, he will have the answer. Given the scheme we inherited, we had some choices to make: we supported either people in their homes, small businesses and communities or very large-scale schemes. We decided to support home owners and consumers; the hon. Gentleman can support big single investors. As I say, it is a clear choice.
Carbon Capture and Storage
We remain committed to providing public investment for four carbon capture and storage projects and last year announced up to £1 billion for the capital costs of the first project. Decisions on the provision of funding for further projects will be subject to receiving suitable proposals from industry and considerations on value for money and affordability. As the Chancellor announced yesterday, the funding will be provided from general taxation.
I thank the Minister for that response. Last week, I met young research scientists from the university of Nottingham who were undertaking exciting research into carbon capture and storage. Without detail and clarity on future projects, however, the UK could lose the opportunity to be a world leader in this vital technology, so what is the timetable and the guaranteed funding for demonstration projects 2, 3 and 4?
I would be delighted to meet the students the hon. Lady mentions because the skills in our universities form a very important part of the UK’s ambition to lead in this technology. We have made it clear up front that there is public funding for projects, with capital up front, and real progress was announced yesterday.
Does my hon. Friend agree that, in contrast to the Opposition’s array of red tape on funding, the coalition Government need to ensure that the funding for large, important projects such as CCS is as simple and straightforward as possible?
My hon. Friend is absolutely right, which is why the Chancellor made his announcement yesterday. This is a simpler way of getting the funding in; it provides the funding up front rather than it being based on output, and it is a significant step forward.
Given the abandonment of the levy and a reliance on Government money from general taxation, the words “blood out of a stone” come to mind, in view of my own experience with the Treasury. Will the Minister assure us that public spending will be made available in addition to what has already been announced to ensure the future of this technology, which is absolutely vital to our fight against global warming?
The right hon. Gentleman has tremendous knowledge in these areas, so he will also be aware of the European scheme NER300, to which the United Kingdom has submitted nine projects out of a total of 22 across Europe. That provides capital up-front funding. What the Chancellor announced yesterday removes the tremendous complexity from the levy and provides a much more straightforward scheme to drive this technology forward.
3. What recent steps he has taken to ensure security of energy supplies in response to the political situation in the middle east. (48540)
The UK has diverse sources of oil and gas, including our own substantial North sea production. Political unrest in the middle east has not led to any oil or gas shortages so far. My Department has been in close contact with the International Energy Agency and International Energy Forum partners, and Organisation of Petroleum Exporting Countries members. Saudi Arabia has said it will make up any shortfall through increased oil production. The IEA has confirmed its readiness to use emergency stocks, if required.
I thank the Secretary of State for his reply. Microgeneration is a key part of our future energy security. What impact does my right hon. Friend expect his Department’s decisions on feed-in tariffs to have on the number of home owners able to generate their own electricity?
I expect the decisions we are taking on feed-in tariffs to ensure a steady and sustained growth in the industry, which will protect householders, who are completely unaffected by the review, in respect of any amount below 50 kW. As the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Bexhill and Battle (Gregory Barker) pointed out, that amounts to two tennis courts and it is absolutely unaffected. We therefore expect that the number of households generating their own electricity will rise.
The Secretary of State surely knows that solar is a very important part of future energy security in our country. The recent decision to backtrack on solar means that community groups that were going to make a real contribution now feel deserted. Their banks have deserted them, so this sort of solar initiative will no longer go ahead.
I am glad that the hon. Gentleman has taken up this issue. Let me be clear that the decisions we took were designed to ensure sustainable and strong growth in the solar industry. That is absolutely key. We are precisely trying to avoid boom and bust in this sector. If it had gone on growing, the large-scale plants would have gobbled up all the money available for small-scale plants. That would have meant slamming on the brakes, after which there would have been a much greater threat to the industry. We are going to have sustainable growth, which is as it should be.
May I put it to the Minister that in the current dangerous and complex circumstances the most important key to the preservation of oil supplies is that Bahrain should remain in friendly hands, and that from the British point of view it is strategically far more important than Libya?
The hon. Gentleman has made an interesting and important point. Bahrain is a long-standing friend of this country. We have watched with interest over the years as it has increasingly experimented with becoming a more open society, and it is very regrettable that that process is where it is. I note what my hon. Friend has said, and we are watching the situation closely.
I have received a number of representations on the effect of high oil prices on consumers. The Government are aware of the significant impacts that they are having. That is why the Chancellor has announced a £1.9 billion package to ease the burden on motorists, and why I have asked the Office of Fair Trading to investigate the domestic oil market.
My hon. Friend has raised an extremely important point. One of the purposes of our world-leading renewable heat incentive is to encourage businesses and, subsequently, homes to install renewable energy equipment. That is an important way of helping people who currently rely on off-grid mechanisms such as oil and gas.
I hope that my hon. Friend was as pleased as I was when the Chancellor announced in his Budget statement the scrapping of the fuel duty escalator and the introduction of a fuel duty stabiliser. Does he agree that that will go at least some way towards helping my hard-pressed constituents and fellow drivers in Lincoln and throughout the country, who before the general election were faced with an escalator that involved seven fuel duty increases?
I am delighted to join my hon. Friend in his pleasure at yesterday’s announcement, and the relief that it will bring his constituents and many others throughout the country. Scrapping the escalator imposed by the previous Administration was a significant change of policy, and all our constituents will be grateful for the steps the Chancellor has taken.
That is another important point. I have asked the OFT to complete the work quickly. I want to have its report by the autumn, so that we can learn any necessary lessons and make any necessary changes before next winter in order to protect customers who are off the grid.
I join my hon. Friends in commending the Chancellor of the Exchequer’s announcement yesterday. Many of my constituents will be very, very pleased about it. However, will the Department, during its investigation of the market, look into the discrepancies between pump prices across the country? I do not understand why the prices in my constituency are among the highest, and I am not sure that my constituents do either.
The investigation relates chiefly to the domestic oil and gas market, but if there is evidence of unfair and anti-competitive practices in relation to fuel prices on forecourts, I hope that my hon. Friend will write to the OFT, and I should be grateful if she copied me into the correspondence so that I can see the evidence for myself.
Seventy per cent. of households in Northern Ireland depend on domestic heating oil. What discussions has the Minister had with the Northern Ireland Minister of Enterprise, Trade and Investment about possible regulation of the home heating oil industry and the exorbitant prices that households are now being charged?
That too is an important point. The fact that Northern Ireland is significantly more exposed than other parts of the United Kingdom in this regard was one of the driving forces behind our request for the OFT investigation. We will work with the devolved Administrations in any way we can to ensure that any particular examples of difficulties in different parts of the country are taken into account.
About a year ago, the then Secretary of State and I were fortunate enough to be taken up on to the roof of Redland Park united reformed church in Bristol by Rev. Douglas Burnett to look at the solar panels installed there, which had made a huge difference to the church’s fuel bills—it was not having to pay for fuel at all, and was making money selling electricity back to the grid. Is it not therefore ridiculous that under the new feed-in tariffs other churches in Bristol will not be able to follow suit?
As my fellow Minister of State has made clear, the previous Government got their estimates wrong. They assumed there would be no large-scale solar developments in this country by 2013, but there have been a significant number of large-scale applications. That would have blown the budget and made it more difficult to deliver for domestic installations, and we are therefore right to review this process.
There is varying evidence on the effect. There is certainly some evidence that it has pushed up prices, but there is also evidence that hedging can help consumers. We have had discussions with countries, including Saudi Arabia, and it is willing to increase oil production to deal with any market shortages that might arise. I am satisfied from those discussions that demand can be met by increased supply, so shortages should not be a factor in pushing up prices.
The International Atomic Energy Agency integrated regulatory review service—IRRS—recently noted that the UK has a mature and transparent regulatory system, an advanced review process, and highly trained, expert and experienced nuclear inspectors. Nevertheless, we take the recent unprecedented events in Japan extremely seriously, and I have asked the chief nuclear inspector, Dr Mike Weightman, to provide a report to the Government on the implications and the lessons to be learned for the UK nuclear industry.
I thank the Secretary of State for that answer, but I must tell him that a number of residents of Hastings and Rye have written to me, and although they share heartfelt sympathy for the people of Japan, as they live next to Dungeness they now have additional concerns. They want to know what action can be taken to ensure that our country’s nuclear facilities are made even more safe.
Let me reassure the hon. Lady first and foremost that there are very substantial differences between our situation and that in Japan. We refused to authorise the boiling-water reactor type used in Japan when that was proposed for use in the UK. Secondly, we do not, of course, live in an earthquake zone. The strength of the most severe earthquake in the UK was a mere fraction of the strength of that in Japan—the recent Japan earthquake was stronger than the 1931 Dogger Bank earthquake by, I think, a factor of 60,000—and nor do we have the associated tsunamis. We are not complacent, however, and we are looking into this. We do have extreme weather events, and Dr Weightman has asked all our existing nuclear sites to check that they can withstand the extreme weather events that we experience.
With the advent of the electric car, there will clearly be a requirement for much more baseload overnight so that people can recharge their electric cars, which means the case for nuclear power advances quite rapidly. What we need in this country is safe nuclear power. What consideration has the Secretary of State given to ensuring it is produced quickly and safely?
As my hon. Friend knows, the coalition Government’s plans clearly envisage an important role for nuclear. We aim to bring the first new nuclear on stream for 2018. It is our view that new nuclear can play an important part, and unless Dr Weightman’s report gives us any particular reason to reassess that, I see no reason why that should not remain our view.
There are undoubtedly lessons to learn from the tragedy unfolding in Japan, and I am pleased that my right hon. Friend says we will learn them. Nevertheless, does he agree that the only realistic way we can meet the expected huge increase in domestic demand for energy is through the domestic production of nuclear power?
As I have just said, our plans clearly envisage an important role for new nuclear. When people visit the departmental website, they can access an interesting pathways model called “My2050”, which allows them to see the effort that would have to be made if we did not have nuclear. We would have to make enormously greater efforts on both renewables and carbon capture and storage. That is physically possible, but the costs would be very substantial.
The nuclear industry is in serious trouble as a result of what has happened in Japan, we are running out of supplies of North sea oil and fighting all over the place in the middle east is massively increasing the price of oil, so is it not time for king coal again?
The hon. Gentleman makes a good point. The entire departmental strategy on energy is to have diverse supplies; it is not to put all our eggs in one basket, be it coal, nuclear or renewables. The reality is that coal will have a role to play in a low-carbon future, as will other diverse supplies.
It is right to review the implications of UK civil nuclear power in the light of what happened in Japan. Does the Secretary of State agree that it is also right to explain that strategic site assessments and generic nuclear installation designs have been approved by this House and by the Government, and that we need not only to make it clear to the public that safety is paramount, but to make it clear to business that it is right to invest in nuclear?
I assure the hon. Gentleman that I have made it clear in every statement I have been asked to make on this issue that safety is absolutely paramount. That is precisely why I want Dr Mike Weightman to examine all the lessons from Japan, and for us to base any debate on the facts and the evidence, and not on knee-jerk reactions. There have been knee-jerk reactions in other countries, but that is not the right basis for British policy.
It is fascinating hearing the Secretary of State dance around on this issue. I welcome his remarks as far as they go—clearly safety is paramount in nuclear power—but he has made some comments over the past few days and has today failed to be emphatic about the Government’s position on nuclear. Will he make it clear? He has used words—[Interruption.] I can hear chuntering from those on the Government Front Bench. He has used words such as “we envisage a role”; he has pointed again to a study of a future without nuclear on his departmental website; and he has talked in The Observer about an
“80% reduction in emissions…without new nuclear”
if we invest more in renewables. Those are red herring statements. Will he be emphatic and make it clear to investors what the Government’s position is on new nuclear? Will he tell us clearly: is he backing new nuclear?
I do not think investors are under any illusions about the position. At the Nuclear Development Forum, I said very clearly that we continue with the plans as set out in the coalition agreement, and that we envisage a role for new nuclear and want to see new nuclear come on, but that we have to put an emphasis on safety. That is why we commissioned Dr Mike Weightman’s report. I do not anticipate that it will lead to enormous changes, but we will have to wait to see its results and base the debate on the facts.
I have had numerous discussions with my EU colleagues in recent months on the importance of the EU low-carbon transition, including the role of an EU-wide 30% target. In response to the publication of the Commission’s 2050 low-carbon road map on 8 March, I wrote an open letter jointly with my ministerial colleagues from Denmark, Greece, Germany, Portugal, Spain and Sweden urging an open debate on a 30% target. I continue to use opportunities such as the discussion of the road map at the forthcoming informal Environment Council meeting to make the case for an early move to a 30% target.
I thank the Secretary of State for his reply. Does he agree that the Chancellor’s Budget statement yesterday confirming the capitalisation, timing and role of the green investment bank will do much to inspire confidence in Britain’s ability to achieve its own emissions targets by 2020?
I entirely agree with my hon. Friend. One of the most important announcements made yesterday was the one on the green investment bank and the fact that we have trebled the amount of capital found for its capitalisation during this spending round. We will try to do our bit on asset sales, but if they cannot be found, they will be guaranteed by the Treasury. In addition, the fact that the bank can begin to borrow and lend before the large amount of energy investment in offshore wind is crucial.
I welcome the Secretary of State’s comments about working with other European countries to seek a reduction in carbon emissions. Will he explain, then, why his Government have just announced a unilateral carbon floor that is making steel companies, such as Tata in my constituency, extremely jittery and is making them consider pulling out from investing here to invest in other countries in Europe? We will simply be uncompetitive, even with our European partners.
The reasons for the carbon price floor were set out clearly by the Chancellor. We need to send out clear signals to investors about the transition to the low-carbon economy. This measure will do that, and it will also, operating within the power sector, ensure that we use low-carbon sources of electricity through the whole process and the transition rather than merely using high-carbon ones. It is an important part of our transition to a low-carbon economy.
The green deal will be a real game changer, but the Government fully recognise that the deal might need to provide additional drivers if we are to achieve the full scale of our ambitions to retrofit more than 14 million homes by 2020. We are working closely with a range of stakeholders to identify additional triggers that will steer customers towards the green deal and in the Energy Bill we are seeking powers to require changes to poorly insulated private rented accommodation.
The green deal is one of a number of tools, but clearly its effectiveness will be tested by the number of homes we manage to insulate and bring up to a decent standard. We have said that our ambition is 14 million homes by 2020. Clearly, that is the huge target that we must meet if we are to meet our carbon budgets.
Many of the materials that will feature in the green deal to improve the heat efficiency of homes attract VAT at a rate of 5% but some, such as double glazing, still attract it at a rate of 20%. Does the Minister agree that it would encourage people into the green deal if all the materials were taxed at 5%? Will the Minister investigate to find out whether that can be achieved?
I was very interested to hear the Minister’s response on the green deal. As yet, we have seen no targets in the Energy Bill and nothing to link it to the Climate Change Act 2008 so that it can create a tangible emission reduction. Yesterday, we heard the Chancellor talk up the green deal in the Budget, but not so loud was his announcement on page 117 of the plan for growth that the Government have scrapped the requirement for new homes to be truly zero carbon. Does the Minister agree with WWF, which said that this announcement of the destruction of the policy sweeps away
“years of work and ambition”?
What representations did he make to his colleagues in the Department for Communities and Local Government and the Treasury before the decision was made?
This is a DCLG lead, but there should be no doubt about our commitment to the transformation of the housing stock. We know that the Opposition are still addicted to targets, but the difference is that the Government are addicted to real progress and to transformational change. They can carry on creating new targets and we will get on with making real changes in real life.
Nuclear Power Stations
I have had discussions with Cabinet and other colleagues in government on energy policy including new nuclear build. We take the recent unprecedented events in Japan extremely seriously and I am having continuing discussions on the subject of new nuclear power stations in the light of the ongoing situation.
Given that analysis released by Redpoint Energy shows that yesterday’s carbon price floor announcement will lead to a windfall profit for existing nuclear stations of £1.33 billion—let alone what it will mean for new stations—how does that sit with Ministers’ repeated pronouncements that there will be no public subsidy for nuclear?
The carbon price floor is designed to encourage low-carbon sources of energy and it is not in any way designed to attract particular support for one low-carbon source or another. One could equally argue that it is benefiting renewables. That is why it will lead to the switching effect that we find desirable, so that we rely more on low carbon than on high carbon. In addition, the hon. Gentleman will note that the Treasury is considering the impact on existing operators and will keep that under review.
This week, the former UK chief scientific adviser Sir David King has said that the real lesson from Japan was that
“nuclear power is even safer than we thought…by far the safest method of power generation”.
Will the Secretary of State be mindful of that advice and does he agree with that assessment?
I am mindful of it. That is an interesting argument which has been made in many quarters. It is absolutely crucial, comparing the debate in this country with those in other countries such as Germany, that we should base it on the facts and the evidence. That is precisely why I asked Dr Mike Weightman to produce a report—so that we can have a sensible and measured debate based on the facts and the evidence.
Could the Secretary of State say a little more about the assessment he has made of the potential rise in costs of the fleet of new nuclear following the Fukushima disaster? Will he comment in particular on the likelihood that the Japan accident will make it more difficult for private investors to raise capital to build the eight new reactors that are planned by the Government?
On the first point, it is too early to answer the hon. Lady until we have had the report from Dr Weightman and we can understand whether we need improvements in our regulatory regime and whether there are lessons to be learned. There are substantial differences between the Japanese situation and ours but I am determined that we should learn any lessons we can. On the second point, although I spent many years in financial markets I do not claim to know how they will react to particular events as they can often react in a rather faddish and fashionable manner. I think we will just have to wait and see.
Reliable advice will form an important part of the new green deal framework to be introduced in 2012. Having a comprehensive assessment setting out energy efficiency measures that are likely to be suitable for each individual property along with the potential opportunities for microgeneration and renewable heat will be a crucial step in every green deal journey.
I have been doing energy surgeries with E.ON in Bolton West, where it has a large base, to advise constituents on ways in which they can cut energy, reduce bills and stay warm. Considerable concern has been raised about the complexity of tariffs and the difficulty, especially for the elderly, of finding the cheapest supply. What can the Government do to help?
This is something we are looking at. We have engaged with all the major energy suppliers to create far simpler tariffs. The hon. Lady is absolutely right and if she has something to add—it sounds as though she has—I would be very happy to meet her to harvest her ideas and make sure they are included in the new, improved tariff arrangements that we are bringing forward later this year.
There are no such current plans that I am aware of, but my hon. Friend is absolutely right. We would certainly be happy to consider whether there is a way of incorporating those proposals into our existing plans, because we need to do a great deal more.
12. Whether he has made an assessment of the potential effects of the outcome of the 2011 Budget on the development of low-carbon technologies. (48549)
The Budget announced several new policies which will support the development of low-carbon technologies including £2 billion of additional capital for the green investment bank, a carbon floor price to provide a stronger, more stable signal to investment in low-carbon generation, and preferential company car tax treatment for low-carbon vehicles. All that is in addition to the creation of 21 enterprise zones and a £100-million boost for science that will further drive green growth.
The north-east has led the way with the development of low-carbon electric vehicles, as the Minister will know, and with the network of charging points. He will be aware that if those vehicles are to have mass-market appeal there needs to be a comprehensive network of charging points. What further action will the Government take to support a nationwide roll-out of such charging points?
We are working closely with our colleagues in the Department for Transport because—the hon. Lady is absolutely right—there needs to be a concerted, joined-up strategy if we are to realise the potential of electric vehicles. There will be more details on that, but I assure her that a lot of work is going on in Government and that the Departments are working effectively together.
The Treasury has resisted the establishment of a public investment bank since the 1930s, so I congratulate my hon. Friends on having achieved that, but it will not be effective until 2015. What can be done to speed up the implementation of the green investment bank?
The Chancellor announced yesterday that the green investment bank will be up and ready for business in 2012 and will have £2 billion of additional capital. The key is that it will be able to raise funds from 2015 at scale, in the bond market for example, that will allow it to make a meaningful contribution to the billions of pounds that we will need to raise in the second half of the decade to finance the vital renewable energy infrastructure projects.
Is the Minister really happy that the green investment bank will deliver the necessary investment in green industries as quickly as possible?
Yes, I am. I would point out to the hon. Lady that Bob Wigley, who chaired the green investment bank commission, said yesterday:
“The Chancellor has found a pragmatic way of getting the bank up and running with a significant level of seed equity, allowing it to develop its activities without risk to fiscal prudence.”
That is absolutely spot on. We think that it will make a substantial difference not only in the next few years, but in the next couple of decades and beyond. This is a key time in the development of financial services.
The Opposition welcome the green investment bank, which is something we supported, but we have concerns. The other week we had Government green growth week—I forgive you, Mr Speaker, if you missed it—with a series of rehashed announcements. Yesterday’s announcement about the green investment bank worried me because there will be no real investment opportunity for four years. The Minister might be insulated from business, but I meet businesses all the time that need that investment now, so can he tell them when they can approach the bank to borrow money?
From 2012, when it opens for business. It is pretty clear. That is why the chairman of the green investment bank, who knows a lot more about business than Members on the Labour Front Bench, was very pleased with the announcement. The £3 billion is an awful lot more than Labour pledged in its manifesto.
Carbon Budget Report
The Climate Change Act 2008 requires the Government to set the fourth carbon budget level in law no later than 30 June 2011. I anticipate that a statutory instrument will be laid before the House after the Easer recess.
The carbon budget plan is still back-ended, calling for reductions of 4.7% compound after 2030 but only 3.2% before. That is credible so long as investment in research and development is strong at the front end. What more can the Minister do, working with colleagues in Government, to stimulate the development of low-carbon vans and heavy goods vehicles as well as power?
My hon. Friend is right: there is a whole range of measures, but transport is also key. The recent spending review announced that the Government have provided up to £400 million for measures to promote the uptake of ultra-low carbon vehicle technologies, including support for consumer incentives, the development of recharging infrastructure and a programme of research and development work, which we continue to add to.
The Committee on Climate Change recommended a tightening of the second and third carbon budgets in the light of the impact of the recession. Does the Minister agree that we must deliver on that recommendation and use the Committee’s report as a means of strengthening the UK’s global leadership in encouraging our international partners to tighten their emissions targets?
My hon. Friend is absolutely right. We must maintain our global leadership position, not only because it is important for tackling dangerous climate change, but because we want to grab market share in the new clean technology markets around the world, which are growing fast. We need to assert our leadership in the low-carbon markets, and to do so we need an ambitious policy to drive it at home.
When my hon. Friend heard Lord Adair Turner spell out his fourth five-year plan, was he, like me, reminded of the old Soviet planning system? I am sure that if anyone could have made the Soviet Gosplan system work it would have been him. Will my hon. Friend treat with great caution forecasts 15 years ahead for the costs to which we are committed, given that the Barclays and Accenture plan reckons that meeting current targets for 2020 will cost €3 trillion?
Clearly there is a huge investment agenda, and my right hon. Friend is right, but we see that as an opportunity as well as a cost. He will also know that the cost of doing nothing and standing by while climate change hits the world progressively through this century will be considerably greater than prudent early action.
The Secretary of State regularly meets ministerial colleagues, and attracting private sector investment is one of many topics considered in their discussions on promoting a low-carbon economy and long-term green growth.
As the Secretary of State knows, many innovative clean-tech start-ups throughout the north-east are crying out for funding. Given that the green investment bank cannot borrow and £3 billion is not going to build us our green future, what will he do to ensure that more funding is available?
I think the hon. Lady misunderstands the role of the green investment bank. It is there to spur private sector growth and investment, which is ultimately going to deliver the green investment and green growth that we need. The bank, with £3 billion, which is considerably more than the Labour party proposed, is going to be a real engine for growth, but it is not the only show in town; there is a whole range of other policies that we need to promote a green enterprise recovery.
Following the Chancellor’s commitment to rebalance our economy, does my hon. Friend agree that Plymouth, with a very fine reputation for marine science and research, has a significant part to play in developing a green and low-carbon economy? Is he willing to come to Plymouth to see the very real work that the university and other authorities are doing within the city?
I gladly accept the invitation from my hon. Friend, who is a great champion of Plymouth. With its long maritime history, port facilities and engineering expertise, it is extremely well placed to benefit from that type of green growth, particularly in the marine area, and I look forward to seeing it at first hand.
Electricity Market Reform
Concerted efforts are made by all Ministers and officials in the Department to engage stakeholders with an interest in electricity market reform, including representatives of energy-intensive industries.
It does not make much sense, either economically or environmentally, when the steel that will be used in the rush to a low-carbon economy is imported from Russia and Ukraine because of electricity market reform and regulatory differences. Tata Steel has a world-class pipe mill in my constituency, and it really wants to play a leading role in the supply chain for the national infrastructure. Will the Secretary of State listen to Tata’s concerns, level the playing field for UK firms and ensure that the competitiveness of firms in this country is not hindered?
We are very keen to listen to Tata’s concerns, and both myself and the Secretary of State for Business have been very aware of energy-intensive industries. It is important to recognise that the costs of a move to the low-carbon economy depend on what we think the costs of staying with the fossil fuel economy are, and judging by recent moves in the oil market we may find that that is a volatile source of supply—and a rather costly one.
In addition to my normal departmental responsibilities, we have commissioned a report from the chief nuclear inspector on the implications of the situation in Japan and the lessons to be learned. We have launched the renewable heat incentive to provide long-term guaranteed financial support for renewable heat technologies, and the Energy Bill has now been introduced to the Commons from the Lords.
Can the Secretary of State clarify whether the carbon floor price that starts in 2013 will be £16 per tonne, as the Chancellor suggested yesterday, or £4.94 per tonne plus the European Union emissions trading scheme amount, as the accompanying Treasury document sets out? If the latter is the case, does the Secretary of State think that it will produce a considerable differential between electricity imported through interconnectors and electricity produced domestically, and what are his plans to deal with that?
The Chancellor is absolutely correct, because there is a carbon floor price, and it is designed to ensure that the price, which is composed of the emissions trading scheme and the carbon floor price, is as applied to electricity generators. He is very well aware, I know, of the potential implications of the carbon floor price for interconnection, and that has been taken into account in the Treasury’s decision.
T2. The Government’s report, “The Plan for Growth”, published yesterday, states that the Secretary of State for Energy “will also place significant weight on the need to support the economic recovery in related”—planning—“consent regimes”. Can he confirm that the Government will now consider the benefits to the local economy of building a new power station at Dungeness as part of their consultation on new nuclear sites? (48564)
I am aware that my hon. Friend has an important constituency interest in this. He has been a great champion of the interests of his constituents in securing another new plant at Dungeness. I am reluctant completely to redraw the national planning statements, which have already been going out for consultation, but the interests of the national economy certainly need to be taken into account, and they will be.
T7. Yesterday’s announcement from the Chancellor about a supplementary charge for oil and gas producers places a question mark over investment decisions and the possible supply chain, and it might increase still further our reliance on imported oil and gas. Teesside is a major hub for offshore engineering, with many jobs reliant on it. Will the Minister guarantee that no jobs will be lost in Teesside, which is an unemployment hotspot, as a result of the Chancellor’s decision? (48569)
The Chancellor is keen to see new jobs in Teesside; that is precisely why he announced that one of the enterprise zones will be coming to the Tees valley. We have a great commitment to new jobs in Teesside and, indeed, the whole of the north-east. On the hon. Gentleman’s specific point, I anticipate, because of the rise in the oil price, that we will have a lot of resources available to operators in the North sea, and I would be surprised if there was not a continued increase in investment.
T3. In the past, park home residents in Winchester and Chandler’s Ford have expressed to me their grave disappointment that they have not been eligible for the Warm Front scheme. Like the omission of a specific park home option on the 2011 census form, this rather feeds the view of many park home residents that they are treated differently. Does the green deal offer them cause for hope, or at least some excitement? (48565)
Yes, it certainly does. I can confirm to my hon. Friend that in relation to funding energy efficiency improvements, the green deal should apply to park homes if they have an appropriate energy meter and qualify under the normal rules. Later this year, we will consult on the size and scope of the energy obligation, including the types of property and householders qualifying for support, and that will include park homes.
T8. With around 30,000 people dying of cold each winter, the introduction of smart meters and ever-increasing fuel bills, will the Minister meet me to discuss the promotion of cold meters, which sound the alarm when the temperature dips below safe levels? That is particularly important for elderly people. (48571)
Yes, I will certainly meet the hon. Lady to discuss that. It is not an idea that I have heard a lot about, but it sounds very sensible. The great thing about the green deal is that we want to encourage the introduction of new technologies that will help the consumer.
T4. Enfield has a welcome commitment to increase the supply of decentralised renewable and low-carbon energy. May I invite the Minister to come to Enfield to see for himself these innovative plans, particularly on capturing energy from waste, and to see that when it comes to supporting renewables, instead of chasing mega-business deals, small and local is often beautiful? (48566)
Earlier we heard the Secretary of State boasting about his experience of financial markets. The rules of the Office for National Statistics about how to classify things are absolutely clear. It is more than 20 years since private finance initiatives were set up, so why has he been so incompetent in the way that he has structured the green investment bank, which has been classified in the public sector, giving the Treasury the excuse to delay its borrowing powers for four years?
The hon. Lady, as a former Treasury official, knows about this from the inside. I can assure her, however, that I was not boasting of my expertise in financial markets, but drawing attention to the fact that, although I had been in those markets for a considerable period, I was completely incapable of forecasting how they would react in these particular circumstances. I do not believe that we are going to have the problems with the green investment bank that she anticipates. It is clear that this is a historic moment. For the first time, the Treasury and the whole Government are agreeing to set up an institution that will be able to borrow, in its own right, just before the point at which it will need those resources. It will be able to borrow because the offshore wind investments will be there in the second half of the decade. As an ex-Treasury official, the hon. Lady well knows that given all those years in the 1930s when we became the only industrialised country not to set up a public development bank, this is an extraordinary achievement, and I hope that Labour Members recognise it as such.
T5. Does the Minister agree that offshore wind farms, such as the one that has been proposed for off the coast of Brighton, will not only help energy supplies and counter the effects of climate change, but boost the local economy? (48567)
My hon. Friend is absolutely right. Wind farms bring significant job opportunities. I have been to the port at Newhaven to talk about those opportunities. This will be an important part of our energy infrastructure going forward. Britain already leads the world in the deployment of offshore wind, and we intend to build on that and to secure supply chain jobs in Britain.
My question relates to the renewable heat initiative. I am sure that the Minister remembers the productive meeting that we had with Geothermal International, a small company in Coventry. Although the outcome on the commercial applications side has been very good, the continuing delays on the domestic side are holding back the industry. It is a very important industry in the small and medium-sized enterprises sector, which is being targeted by the Government. If he could hurry up with that, we would be able to make more progress.
I assure the hon. Gentleman that the domestic launch is not being delayed at all. The only difference is that at the same time as we launch the industrial scheme this year, we will launch the renewable heat premium. The premium will reach more consumers in the first year than the ordinary tariff under the original model was anticipated to reach. I assure him that the premium will add to the scheme, not detract from it.
T6. Recent announcements, including that on the premium, have been welcomed warmly by Worcester, Bosch Group, which employs more than 1,000 people in Worcester. It wants the domestic roll-out of the scheme to succeed, and feels that the key to that is winning over installers. Will the Minister update the House on his plans to engage with installers, and will he visit the training centre with me, where more than 10,000 installers are trained each year? (48568)
My hon. Friend is absolutely right that installation is key, particularly for such new, innovative technologies, which are not all as tried and tested as we would like. We are working closely with installers. My officials meet regularly with firms and liaise closely with the industry. I would be delighted to accept my hon. Friend’s invitation and see it for myself.
I have a range of energy-intensive industries in my constituency, including steel, glass, paper and the entire clay pipe manufacturing capacity of the UK. How can south Yorkshire develop its manufacturing capacity and encourage economic growth if the international competitiveness of its current engineering capacity is being undermined by the Government’s energy market reforms?
In answer to a previous question, I made it clear that we are listening to energy-intensive industries carefully, and using all the means that we can to ensure that we can offset any demonstrable effects. We have had those discussions in the context not just of the carbon floor price, but of the European Union’s emissions trading scheme. We will continue to watch this situation carefully because I want to see many new jobs in south Yorkshire and everywhere else in the country.
T9. Earlier, the Secretary of State said that in the long term, the costs of unrestrained climate change will exceed the costs of doing something about it. Surely he is aware that the Stern report states that over the whole of this century, the costs of the programme that he is advocating exceed any benefits from reducing climate change, so that—[Interruption.] That is in the Stern report on page 167. Surely the Minister is aware of it. (48572)
Let me answer my right hon. Friend. This is not just a question of assessing the costs to the world in the long run if unrestrained climate change is allowed to proceed; it is also a question of energy security in this country and of the costs of the alternative. Given that the oil markets have gone from $60 a barrel two years ago to $80 a barrel last year, and are now at $115 a barrel, my right hon. Friend should be well aware that relying on fossil fuel markets could be extremely damaging to our economic health.
The Committee on Climate Change has recommended that the carbon intensity of electricity should be reduced from today’s 500 grams of CO2 per kWh to the highly challenging figure of 50 grams of CO2 per kWh by 2030. The Energy and Climate Change Committee suggests that the target should be about 100 grams of CO2 per kWh. Will the Minister or the Secretary of State explain how difficult it would be to achieve the recommendation of the Committee on Climate Change?
We are both keen to answer that because it is such a good question and we have such a good answer. We see a whole range of opportunities, and carbon capture and storage will be a fundamental one. It brings a real opportunity for coal to be part of the mix. We can look at the number of bids that we have had in—nine bids have come to Britain for the European scheme, out of 22 across the whole of Europe. Seven of those are for coal and two are for gas, which shows that there is a real opportunity for clean coal in the UK mix, which will be a world-beating achievement.
Given the Government’s commitment to both a low-carbon future and localism, do Ministers agree that everything should be done to encourage local carbon budgets, which can clearly play an important part in achieving our national targets?
I agree that local carbon budgets are important, which is one reason why we have continued with the pilots of databases that allow local authorities to know what their carbon emissions are and to continue to set targets. I do not want to impose those on local authorities, because they are a matter for localism, but it is right that they should have the information on which they can base informed decisions.
The vital ring-fenced support for the marine renewables deployment fund ends next week. With the green investment bank some way off, no news on the low-carbon innovation fund until the summer and nothing in the Budget, will the Minister clarify what backing the industry can expect, or does he prefer the jobs to go abroad?
Absolutely not. We have gripped this agenda, as the enthusiasm of the new marine programme energy board made clear when we met in Exeter. I can tell the hon. Lady that we will announce the allocation from the Department of Energy and Climate Change’s budget for supporting low-carbon technologies very shortly, and the results of the review of the renewables obligation that the Minister of State, my hon. Friend the Member for Wealden (Charles Hendry), brought forward will also be announced in due course.
On the idea that there is no public subsidy for new nuclear, the Government will of course effectively have to underwrite new nuclear in respect of events that we all hope will never happen. How is the carbon floor price not effectively a back-door subsidy for new nuclear?
My hon. Friend should be aware that we are not providing underwriting funds or soft loans. In the United States, for example, the Obama Administration are proceeding with $35 billion of soft loans for the nuclear industry, but we have explicitly said that new nuclear will be built here without public subsidy. We have also said that, as Lord Stern pointed out, climate change is the greatest market failure of all time. We have to offset that market failure with a clear signal to the markets, whether through the emissions trading scheme or the carbon floor price, that low carbon is here to stay and we must accelerate it.
Yesterday, in response to the Budget, Karl-Ulrich Köhler, chief executive officer of Tata Steel Europe, said that
“the introduction of the Carbon Floor Price…represents a potentially severe blow to the sustainability of UK steelmaking.”
Does the Secretary of State believe that the CFP announced yesterday is the type of state intervention that is good for British steel making on Teesside?
I have said in answer to previous questions that we will engage in ongoing discussions with energy-intensive users. We want them to use low-carbon electricity, and a number of them are doing that, including by moving to biomass. There are alternatives, and there is flexibility in, for example, the EU emissions trading scheme, which allows us to help.
What assessment has the Secretary of State made of the damage done to business confidence by his extraordinary U-turn on support for mid-sized solar installations, and of the 14,000 new jobs that were in the UK solar industry precisely because of that? How many of those jobs will be lost as a result of that extraordinary decision?
The hon. Lady has to be aware that sadly, in the world in which Ministers operate, we have to assess the alternatives. Had we not acted, the alternative would have been a much greater boom and bust and a much greater destruction of confidence. I am absolutely unhesitating in assuring her that solar industry confidence is substantially higher than it would have been if we had taken the action that she suggests.