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Energy Demand

Volume 566: debated on Thursday 11 July 2013

The Government published their energy security strategy in November 2012, and on 27 June, along with Ofgem and National Grid, we announced decisions on the capacity market and the use of National Grid’s existing system-balancing powers to secure the electricity supply in both the short and longer terms.

Westinghouse Nuclear Fuel, based in my constituency, employs more than 1,200 people. Will the Secretary of State do all he can to ensure that those people benefit from the next generation of nuclear reactors built in the UK, and will he visit at the earliest opportunity?

As regards visiting the hon. Gentleman’s constituency and its installations, I shall consult my diary. At a meeting of the Nuclear Industry Council yesterday, we engaged on a range of issues, from skills to finance and future collaboration, and we have put in place the strongest ever supply-chain measures to ensure that the whole country, including people in his constituency, can benefit.

I commend the Government’s effort to strengthen our energy system and bring about a sustainable reduction in electricity demand, but does the Secretary of State agree that we must take action to ensure that sufficient generating capacity is available in the short term?

I strongly agree with my hon. Friend. It is important that we take action on both the demand and the supply side. With Ofgem and National Grid’s proposals, which are out to consultation, we will see measures on the supply and demand side in the short term, and of course our proposal for a capacity market will do that in the medium term. I hope that he realises that we are looking at every single measure in a very structured way.

Given the projected energy gap, the time scales involved and the growth in the economy, does my right hon. Friend agree that the Government should encourage further construction of gas power stations, especially given the potential exploitation of shale gas in the near future?

My hon. Friend will know that we have done an awful lot to ensure clarity in the strategy to encourage private investment. As he will know, it is not for the Government to build gas power stations, but our gas generation strategy set out a long-term framework for gas investment last year, and with the announcement of the capacity market on 27 June, I think we have a process for encouraging that investment.

Is the Secretary of State aware that the Severn barrage will contribute 5% of Britain’s electricity needs? In deciding on the Government’s response to the Energy and Climate Change Committee’s report, will he support the project in principle and treat it exactly the same as other major power station projects, such as Hinkley, round 3 offshore wind and so on, allowing Hafren Power to raise the risk finance for the necessary work on habitats, environmental impact assessment planning, the strike price and other issues? Otherwise, he might as well kill off the project now.

Obviously, I shall not prejudge our response to the Select Committee, which, as the right hon. Gentleman will know, was not very positive about the Severn barrage scheme, not least because of the costs involved, but if he studies our announcements on draft strike prices for contracts for difference for renewables, he will see in there strike prices for tidal projects as well. It is absolutely clear that we will proceed only if we get value for money for the economy, the consumer and business.

Has the Secretary of State made any assessment of the value of extending the National Grid proposals for a short-term strategic reserve on mothballed plants coming back into operation over a much longer term than is currently envisaged? Does he consider that doing that for only two years, rather than adopting a longer-term proposition, represents poor value?

The hon. Gentleman always makes very informed contributions to our debates. He is proposing that we adopt the policy of strategic reserve, which is a long-term approach, using the powers that National Grid already has. We have looked at that and rejected it, because it is not the right approach to get best value for money and it would create perverse incentives for investment in the wholesale market. We believe that a combination of Ofgem and National Grid measures, using those existing powers, and the capacity market is the best way to meet the security supply requirements, not to impact negatively on the wholesale market and to get good value for the consumer.

Surely the best way to meet future energy demand is to reduce it, yet unfortunately the Government have focused on the supply side, not on energy efficiency measures. It will not be possible to meet future energy demand without real energy efficiency and reductions in demand.

I am genuinely surprised at the hon. Gentleman’s question, because he knows that the Government have done a huge amount on energy efficiency for both consumers and industry. When the Energy Bill was before the House, we tabled amendments on Report for electricity demand reduction to be part of the capacity market. We are operating on both the supply and demand sides. That is a new initiative which has not been seen before, because other Governments have not done it.

Next Wednesday I will hold a community energy event in my constituency, with the local council and local housing association among many others. Does my right hon. Friend agree that rather than carping about the green deal and perversely hoping for its failure, every member of the House has a duty to promote it and ensure that their constituents get all the help available?

My hon. Friend makes a good point and we must promote not just the green deal as part of the community energy strategy, but all aspects of community energy. Right hon. and hon. Members may be aware that we published a call for evidence last month for a future community energy strategy, looking at energy efficiency, energy generation and purchasing energy. I urge Members to talk to their constituencies and to contribute to the formation of Britain’s first ever community energy strategy.

Two weeks ago Ofgem published its latest estimates for future electricity demand and capacity, and warned of possible shortfalls in the middle of this decade. Commenting on its report, the Secretary of State said:

“Without timely action there would be risks to security of supply”.

Will the Secretary of State explain why Ofgem states that the likelihood of blackouts is roughly one in 12 years, while analysis by his Department suggests that the true figure is closer to one in 3,000 years. Why is there such a big discrepancy?

I do not recognise the figures that the right hon. Lady has just given to the House; my officials have been working closely with Ofgem and National Grid. I hope she will acknowledge that the Ofgem figures she cites are from before the measures we announced last week, following the announcement by Ofgem and National Grid on the immediate future, and our proposals for a capacity market. I would have thought she would welcome the fact that this Government have taken action where the last Government failed.

I am afraid that the figures are from Ofgem and the Department of Energy and Climate Change, so I suggest the Secretary of State has another look. Such wildly varying forecasts of possible blackouts do nothing to help us plan our energy security for the future, so let us consider what the Government are doing about it.

On the “Sunday Politics” show on 30 June, the Minister of State, Department for Business, Innovation and Skills, the right hon. Member for Sevenoaks (Michael Fallon) claimed that six gas-fired power stations had opened under this Government, and tried to blame the problem on the previous Administration. In an answer given to me yesterday to a written parliamentary question, the Minister confirmed that construction of all those six new power stations began under Labour. In five years of this Government, just one new gas-fired power station in Carrington in Manchester will be built. Will the Secretary of State confirm that that is the case? Would not the country’s energy security be better served if the Government and regulator could produce a coherent and consistent estimate of the likelihood of blackouts?

I am delighted that the right hon. Lady wants to talk about Labour’s record on energy investment. This Government’s record has seen energy investment double, and we want our measures to go even further.

The right hon. Lady says from a sedentary position that it all started under Labour, but I am afraid that the £29 billion of investment in renewables was announced by this Government. I can give the House some good news that the right hon. Lady might want to hear. For the first stage of electricity market reform, as the Energy Bill goes through the House of Lords, and after the deadline for applications for the final investment decision enabling project closed just a few days ago, we have received 57 applications. I am not sure whether they will all go through, but if they do, that would amount to more than 18 GW of power. That is our record on energy investment and we are putting right the appalling record of the previous Government.