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Energy: Renewables (Economic Affairs Committee Report)

Volume 708: debated on Tuesday 24 February 2009

Motion to Take Note

Moved By

That this House takes note of the Report of the Economic Affairs Committee on The Economics of Renewable Energy.

Relevant document: 4th report from the Economic Affairs Committee.

My Lords, I am very pleased to introduce the debate. I should emphasise at the outset that our report was entitled The Economics of Renewable Energy. We stuck to our last. We did not enter the debate about climate change or how to respond to it, a subject that had already been covered in an earlier report. We took as a given the Government's wish to reduce carbon emissions.

By the time we began our inquiry the European Union was committed to a binding target that 20 per cent of its energy consumption should be from renewable sources by 2020. To meet this target the European Commission proposed that 15 per cent of Britain's energy should come from renewables by that date. The Government seemed ready to accept this proposal, which represented a huge increase from the 1.8 per cent of energy that comes from renewables today.

We should bear in mind that about two-fifths of the UK's energy use is in transport, two-fifths in heat and only one-fifth in electricity. But the Government expect much of the increase in renewable energy needed to meet their target to come from the smallest sector, that of power generation. So in order to produce 15 per cent of our energy from renewable sources by 2020, we will need by then to produce around 34 per cent of our electricity from renewables, compared to about 6 per cent today.

Our report does not set out to contest these targets; it aims instead to examine their economic implications. How much would it cost to achieve them and how would the effort affect security of energy supply given that the economic costs of inadequate supply could be formidable? Would focusing on European Union targets divert resources from other, perhaps more promising, means of reducing carbon emissions in energy production? These are the main issues our report addresses.

The committee began to hear evidence in its inquiry in the spring of 2008. Since then the economic background has changed radically. Then global economic growth was strong and the price of oil was rising through $140 a barrel. Now there is recession and the price of oil is scarcely $40 a barrel. The price of carbon, as evidenced by the EU's Emissions Trading Scheme, has collapsed and finance for infrastructure projects is very much harder to come by. These changes reaffirm the committee's concerns. Those centre on the affordability and practicability of the EU target for a near tenfold increase in 10 years in Britain's share of energy from renewable sources and, in particular, on the Government's plans for the vastly increased use of intermittent wind power for electricity generation.

Recent changes strengthen our report's main conclusions. Renewable energy costs significantly more than energy from other sources, conventional or nuclear. The intermittent nature of most renewable power suggests that it should be regarded largely as additional capacity to that which will need to be provided in any event by more reliable means. It does not of itself offer an adequate solution to the urgent need to replace old conventional and nuclear generating plant with sufficient capacity to meet demand. A focus on wind power for electricity risks blinding us to other ways of reducing carbon emissions that might prove more economic and effective—for example, a much greater emphasis on renewable heat.

Let me expand a little on those conclusions. Costs were a prime concern of our inquiry from the outset in view of the scale of investment needed, not least in wind farms, to meet EU targets. There are several elements, not all obvious from the outset. First, there are the capital and running costs of the turbines, higher offshore than onshore. Then there is the cost of integrating the turbines and their intermittent output into the national electricity grid. Then there is the cost of reserve, non-intermittent generating plant to meet demand when the wind turbines are inactive. This reserve plant is indispensable as little electricity can be stored. It will have to be very substantial indeed as the capacity credit of wind turbines—that is, the share of their output capacity which can be relied upon—is very low. Other forms of renewable power generation tend to be even more expensive than wind although less unpredictably intermittent.

We are clear that the full costs of wind generation, though declining over time, remain significantly higher than those of conventional or nuclear generation. We are also clear that no significant investment in wind power would occur without government financial support. Our report includes an estimate of the cost of moving in line with the Government's targets from 6 per cent to 34 per cent in the share of electricity generated from renewable sources. We concluded that the extra annual cost in 2020 would be £6.8 billion, an increase of 38 per cent. In terms of the average household bill, that would mean an extra £80 a year.

As regards security of electricity supply, building, commissioning and integrating by 2020 the large numbers of wind turbines and other renewable sources needed to meet the Government's targets will be a major undertaking, especially for offshore wind and tidal projects. Furthermore, as we have seen, a great deal of reserve conventional plant will be needed to allow for the intermittent nature of renewable power generation. To make matters even more demanding, by 2020 about one-third of the UK’s stock of conventional and nuclear electricity generating capacity falls due for replacement. All this represents a huge financial and engineering challenge for the industry. It is by no means clear that it is achievable in the time available, particularly under current economic conditions. There is no need to spell out the potentially grave economic and other consequences if we fall short and end up with insufficient capacity to meet demand.

Furthermore, in what a number of our witnesses felt was the unlikely event that the Government's target is met, we would then be dependent on intermittent renewables for our electricity supply to a degree quite unprecedented anywhere else in Europe. We would move into uncharted waters.

I now turn from the 20 per cent of energy consumption represented by electricity to the wider picture. We normally prefer our debates to generate more light than heat, but I hope that this debate helps to generate a good deal more heat from renewable sources as an alternative means of reducing carbon emissions. As we have seen, EU targets and the relatively ready availability of wind turbines have concentrated efforts at compliance on electricity generation. But the dash for wind should not pre-empt reductions in carbon emissions across the remaining four-fifths of the United Kingdom’s energy spectrum. Renewable heat sources, in particular, could make a significant contribution more cheaply and our report recommends that the Government should put at least as much emphasis on exploiting renewable heat as on renewable electricity generation. The report also suggests that the Government should keep their eye on the longer term and substantially increase the resources applied to research and development across renewables as a whole.

We also need to bear in mind that renewable energy sources are by no means the only way to reduce carbon emissions while ensuring security of supply. Low-carbon sources of energy can also play an important part, as can energy efficiency. The most reliable and lowest cost low-carbon alternative to renewable electricity is nuclear power and we should not lose sight of conventional fossil-fuel generation with carbon capture and storage as and when it becomes available.

Noble Lords will have seen that the Government’s response to the committee’s report has been published. They express agreement with many of our conclusions, though in most cases in somewhat general terms. Can the Minister tell us specifically when the Government’s renewable energy strategy will emerge? In the mean time, will he update the House on a number of important aspects which have evolved over recent months? First, what is the current position on EU targets and in particular of the 15 per cent renewables target proposed for the UK? Does it still stand? Do the Government still think that it is achievable?

Secondly, what is the impact on targets of the current economic turmoil, including the collapse of the price of carbon in the EU Emissions Trading Scheme? In recent months there have been many press reports of potential investors walking away from wind farm projects or demanding more government subsidy to go ahead. Do the Government plan to commit more resources to meeting their targets or to relax them? Thirdly, what can the Minister tell us about the performance of those wind turbines already in operation during the recent prolonged period of cold weather? Specifically, what proportion of wind turbines’ output capacity does recent experience suggest that we can rely on when we need it at times of peak demand? What does that indicate for security of supply when in 2020 more than a third of our electricity supply is expected to come from intermittent, renewable sources?

Since the Government agree with the committee that we cannot consider renewable energy in isolation from the rest of the UK energy system, can the Minister assure us that commitment to specific renewable energy targets will in no way detract from other, potentially more economic, means of meeting the objective of reducing carbon emissions?

Before I close, I want to thank our specialist adviser to our inquiry, Professor Richard Green of Birmingham University. I commend the committee’s report to the House.

My Lords, as a member of the committee that produced the report, I begin by paying tribute to our wonderful chairman. the noble Lord, Lord Vallance, for the excellent way in which he led us through a minefield. He has just given an outstanding survey of our recommendations.

I shall concentrate on one issue—scientific research and development. Science has produced climate change and ultimately science will have to conquer climate change. Every year the urgency of this task becomes more apparent. Only the other day we learnt how greenhouse gas emissions from China and India had exceeded their forecast levels. There is no way in which we can preserve our way of life unless we rise to this challenge. We are now told that this requires an 80 per cent reduction in carbon emissions, compared with 1990 levels by 2050, which is only 40 years ahead. That cannot be achieved without a major programme of basic scientific advance. It is completely unlikely that that can be done by incremental development and installation of any of the existing renewable technologies that were treated in our report.

When our way of life was threatened by fascism we had the Manhattan project. When we feared Russian domination of space there was the Apollo programme. Both programmes involved many of the best minds of their generation. How can we possibly rise to the present challenge without a similar concerted scientific effort? In 2005, when the Economic Affairs Committee previously considered climate change, we reported that the international energy authority estimated that solar energy, biomass and carbon sequestration could be made competitive with oil and gas at a one-off cost of some 1 per cent of annual world GDP. We recommended consideration of a major international programme along those lines. That was four years ago. So what is the present position in this country? How much are we spending? Paragraph 90 of our report states:

“Research council spending on renewable energy projects has risen … to £30 million”,

which is 1 per cent of the total spend. We are spending 1 per cent of our research effort on what by most consent is the greatest problem facing humanity.

We were given that information by Research Councils UK. In its evidence there was not even a nod to the fact that this is one of the greatest problems facing mankind. This is simply an inadequate response from the scientific community and, ultimately, from the Government who can give that community its priorities. It is certainly not a response that inspires the brightest minds of a generation. Unless something is done it will not attract that kind of effort. We surely need something more serious.

Obviously, the ideal would be an internationally co-ordinated effort of the kind that was discussed in our 2005 report. Following that report, in a speech in this House our current chairman suggested an international programme of research that could be funded by a carbon tax. That is still a very interesting suggestion linking the use of different energy sources to their development. To secure agreement on anything of that sort would take a long time but in the mean time we can surely rethink our own national effort.

One interesting suggestion in our report is an annual international prize awarded by our Government and possibly others for the most important discovery contributing to the development of renewable energy. But the key issue for Britain is the size of our research effort. Here, as elsewhere, money tells. There are a lot of words in the Government’s reply to our urging a reconsideration of research priorities, as we do in our current report. But there are no promises; there is something that amounts almost to complacency.

The single fact—the one that I started with—remains. The Government are spending 1 per cent of their scientific research budget on the world’s most pressing problem. That is simply not coming up to the mark. I urge the Minister to press his colleagues to adopt a new style of leadership in this area and a step-change in funding.

My Lords, I follow the noble Lord, Lord Layard, in paying tribute to our chairman, the noble Lord, Lord Vallance, who conducted this inquiry with great charm and diligence. He has given today an exemplary summary of what was in our report. I say “our report”, but I have to make it clear that I am no longer a member of the committee, having been rotated off. This was the last inquiry to which I was party, and so I thought that I might say a few words today.

It was a great privilege to be a member of the Economic Affairs Committee of this House. During my time, a number of reports were produced. I will name simply three: the one on the economics of climate change, to which both noble Lords have already referred; the one on the economic impact of immigration; and the one before the House today. It is the sort of thing that the House does particularly well, and I hope that everyone here, and others too, will read the report that we are debating.

I will focus my remarks on one section of the Government’s reply that causes me great concern. By way of preamble, I will allude to a remark made by the noble Lord, Lord Layard, who kept referring to climate change as the greatest problem facing mankind. Well, he is entitled to his opinion, but he may like to know that the most thorough survey of climate scientists on this issue—they ought to have some knowledge and understanding of the matter—was published in 2007 and conducted by Hans von Storch, professor of meteorology at Hamburg University. He asked climate scientists to identify the greatest threat facing mankind over the next 100 years. I wonder how many noble Lords can guess how many scientists answered that the greatest threat was climate change or global warming. It was only 8 per cent.

I return to the Government’s reply, and the passage that gives me such concern. In paragraph 6 on page 5, the Government say, after accepting that there are massive costs in trying to decarbonise the economy, in particular through wind power, which is about the most expensive way that anybody could ever devise:

“It is also however important to recognise what these costs are paying for: a reduction in the risk of catastrophic climate change and dangerous energy insecurity. The Stern Review showed that the damage caused by global climate change could cost five times more than the cost of actions to stabilise global emissions by 2050”.

That is what they wrote, and every single thing is demonstrably unfounded. For a policy to be based on assumptions that are clearly incorrect in the view of the majority of people who know something about the subject is irresponsible.

I will take the statement bit by bit, starting with the,

“reduction in the risk of catastrophic climate change”.

There is no scientific basis for the view that there will be catastrophic climate change. Mike Hulme, professor of environmental sciences at the University of East Anglia and director of the Tyndall Centre for Climate Change Research, said a little while back that,

“to state that climate change will be ‘catastrophic’ hides a cascade of value-laden assumptions which do not emerge from empirical or theoretical science”.

Those are the words of Professor Hulme of the Tyndall centre, which believes in the conventional wisdom of global warming, but says there is no scientific basis for talking of catastrophe. Nor, incidentally, does the IPCC believe in that. That is the first thing that the Government have said that is wholly false and misleading, and no basis for public policy.

The second claim is that this policy is needed to remove dangerous energy insecurity. There is only one serious threat to our energy security in this country at present, and that is the Government’s reluctance to allow the building of new coal-fired power stations. Coal is abundant in this country and throughout the world. There will be no energy security while the building of coal-fired power stations is forbidden. This policy is a cause of the insecurity, not an answer to it.

The Government’s reply says:

“The Stern review showed that the damage caused by global climate change could cost five times more than the cost of actions to stabilise global emissions by 2050”.

The Stern review showed nothing of the sort: it merely asserted it. This has now been examined by leading energy economists and environmental economists on both sides of the Atlantic. These are people of considerable eminence: Professor Helm at Oxford, Professor Nordhaus at Yale, Professor Tol, Professor Weitzman of Harvard. Every one has said that the Stern review’s economics is profoundly flawed and utterly mistaken. That is the state of opinion among leading economists who have studied this. It is understandable that the Government like their own man—he was their man at the time—but for them to take this economic analysis, which has been widely discredited and totally shredded, and say, “This is the basis for an extremely expensive policy that is going to do great damage to the people of this country if it is carried through” and ignore completely all the other economic wisdom on this subject from people far more eminent than the noble Lord, Lord Stern, is grotesquely irresponsible.

Of course, the Stern review is somewhat all over the place. The Minister may not be aware that the review says at one point:

“The lesson here is to avoid doing too much, too fast, and to pace the flow of mitigation appropriately. For example, great uncertainty remains as to the costs of very deep reductions. Digging down to emissions reductions of 60-80% or more relative to baseline will require progress in reducing emissions from industrial processes, aviation and a number of areas where it is presently hard to envisage cost-effective approaches”.

That comes from the Stern review. Of course, the noble Lord says different things now, just as when he actually produced the review, he said that the costs would be 1 per cent of GDP. That was completely rubbished by Professor Helm in particular, but also by most of these other economists, so he popped up a little later and said, “Well, maybe it is 2 per cent”. That is a 100 per cent difference in a short time.

It is true that the Stern review has a gift given to few of us—certainly not given to me. The review tells us confidently what is likely to happen 100 years, 200 years, 300 years, and at one point 1,000 years hence. I confess to noble Lords that I do not know what is going to happen 1,000 years hence; I do not know what is going to happen 300 years hence; I do not know what is going to happen 200 years hence; and—do not tell anybody—I do not actually know what is going to happen 100 years hence. What I do know is that the current certainty is based on the same computer models as the financial services industry relied on to tell it with certainty the risks it was taking in the current financial circumstances, and we know where that led. It does great discredit to the Government. They are not taking the issue seriously. They are taking it gravely but, intellectually, they are not taking it seriously at all. They should address themselves to it and it gives me great concern that they are not.

I do not want to detain the House but I do want to mention one other aspect. The noble Lord, Lord Vallance, said that we will have to look at the issue again in the light of the very different circumstances in which we find ourselves. That is especially true in the developing world, particularly in China and India, where, everyone agrees, emissions will rise fastest. They are certainly in no position now, if they ever were, to take on the economic costs of the proposed carbon emissions cuts. The idea of an international agreement is therefore completely useless: it will not happen. A different approach is necessary as this is unreasonable, unworkable, unrealistic.

Another point is causing me considerable concern. We are going through a very serious world recession because of the banking crisis. It is far worse than anything since the 1930s, although in my judgment it is not as bad as the 1930s, nor will it be. However, it will be the worst recession since the war. At a time of world recession there is always a great impulse to protection. That is the great danger now, because it will make things infinitely worse if countries resort to protection. All the normal protectionist impulses are there, but there is also a new one. The leaders of the steel and other big industries in America got together with organised labour—the AFL-CIO—to say that tariffs must be put up against imports from countries not prepared to cut back sharply on their carbon emissions. Let us call them tariffs against China and India. The same song is being sung by President Sarkozy in France and by a number of people in the European Commission in Brussels. It is very dangerous indeed.

In conclusion, I ask the Minister for an undertaking: that the United Kingdom will vote against and if necessary veto any European proposals of this kind for tariff barriers, protectionist measures, border equalisation taxes—whatever you like to call them—against trade with China, India and other parts of the developing world.

My Lords, I add my compliments to the noble Lord, Lord Vallance, and the members and the staff of the Economic Affairs Committee on their report. Like the committee I will not try to tackle the question of the validity of global warming. But I would say, quite apart from that, that I feel that there are very serious matters—economic and environmental—that justify the investigation of alternative forms of energy in any case.

This is a broad-ranging report that is realistic about the costs and difficulties that will be encountered if we are to meet our goals in implementing renewable energy generation. I think that the volume of evidence accompanying the report is in effect an encyclopaedia on energy matters which will be valuable for several years, especially as the committee made the wise decision to tackle the renewable generation of heat and transportation as well as electricity.

As an engineer, it was also not only a pleasure but a relief to find within a report on a matter dominated by engineering that the recommendations were based largely on numbers rather than words and that there was recognition of the uncertainty and risk involved with many of the estimates. Finally, it was gratifying to find that the conclusions were largely in line with conclusions drawn by the majority of engineers with whom I have been in contact for many years.

Five years ago, for example, the Royal Academy of Engineering—I declare my interest as president of the academy at that time—produced a report entitled The Cost of Generating Electricity which drew similar conclusions to this report, pointing out that the low-cost, low-carbon option was nuclear fission and that the cost of wind, wave, marine and biomass and especially offshore wind were high compared with the nuclear or fossil fuel options, and that this would mean that their adoption would be expensive to the consumer. The year before the academy report was published, I said in a Times interview that,

“government plans to generate 20 per cent of electricity from renewable sources by 2020 were unrealistic and investment in nuclear power was critical if shortages were to be avoided”.

My statement and the conclusions of the academy report were strongly contested at the time by advisers to government, and regrettably it took them several years to change their minds and come up with a strategy that will in fact reduce carbon dioxide and at the same time keep the lights on.

That brings me to the major point that I wish to make today—that we have to get on with this task without further delay and stop the endless debate, with one government report and consultation following another, all of which seem merely an excuse for procrastination. It is unfortunate that we have made some foolish decisions, such as the selling of Westinghouse, but we still have residual engineering expertise in most areas of power generation and we should as soon as possible specialise in selected areas and develop world-competitive industrial capabilities in renewable energy generation and of course in nuclear power. I hope that the noble Lord, Lord Jenkin, will address the subject of skills, as he has so constructively pursued this issue for many years.

When it comes to timescales, there are some depressing statements in the report, such as paragraph 176, which says that the earliest a nuclear station could be built is 2017 to 2020. This conclusion was based on evidence given by the then Minister of State for Energy, Mr Malcolm Wicks, who said:

“The most optimistic scenario I have seen is that there possibly could be one”—

nuclear power plant—

“up and running by 2017 and then some others talk about 2018”.

However, he went on to say:

“I guess I am just being a little bit more cautious when I said 2020”.

Why must this take so long? Why is it that we seem to take so much longer to complete projects than other countries? It does not seem to matter whether it is a runway at Heathrow that is going to take us twice as long to build as other countries take to build an entirely new airport or, in this instance, eight to 11 years to build a nuclear power station, when there are nuclear power stations available today. The report correctly emphasises the detrimental role that our planning processes play in achieving our aims on schedule, but falls short of recommending serious revision of these processes. If we are to survive as a vibrant world economy we are going to have to speed up. If the major delays are a result of our planning regulation, then let us be more ambitious in our reform of these regulations. We need dramatically to speed up the process, perhaps by the introduction of parallelism. Processes that again and again deliver too little too late almost guarantee that we will fall behind. Perhaps the Minister will be encouraging in his reply and tell us that the changes that are in the pipeline will in fact greatly reduce the time that it takes to complete the planning process.

Rather than spending the majority of our time—let alone the mind-numbing sums of taxpayers’ money which make every sum mentioned in this report seem trivial—on propping up our ill-managed banks, we should rapidly launch some infrastructure projects that will secure the nation’s future. There are renewable energy projects of all sizes that would be appropriate, and future generations would thank us for pursuing them, rather than wondering with dismay how we stumbled into blackouts and failed to meet our goals for reducing carbon dioxide.

My Lords, I begin by thanking the Government and the Leader of the House for holding this debate so soon after our report was finished and the government response received, and for not having it on a Friday. I hope that this will set a precedent for future debates on Select Committee reports. I congratulate our chairman, the noble Lord, Lord Vallance, not only on the admirable way in which he chaired our committee, but for giving a very good summary of our recommendations today.

As we can see from the government response, there is general agreement between the Government and the committee on several recommendations. I do not intend to focus on those because we are already in agreement. I want to focus on one point, which relates to the 2020 target and the various recommendations that we make about that in paragraphs 236, 238 and 258. This is where the Government’s response is weakest; indeed, it is very weak. Some of our witnesses would say that it simply is not credible. The noble Lord, Lord Vallance, has already referred to this, but I will develop it a little further. In so doing, I declare two interests as chairman of British Energy pension funds and as questioning some small-scale wind farm projects in Norfolk. I do not think that either of these will bear on my argument.

There are, as we know, two targets. The 2050 target is long-term and much technical development will be possible in that time. However, it is unlikely, in practice, to be effective by 2020. Solar power, low-carbon technology, carbon capture and storage, tidal energy and, of course, nuclear power will make a much more significant contribution in that period. We have covered this in the report. There is time to gain the benefits of the R&D, to make investments and to adjust to technological developments between 2020 and 2050. The target of 15 per cent renewable energy by 2020 is much more immediate. It is an arbitrary date, so we have set ourselves an arbitrary target, which most of our witnesses thought, at best, very challenging, and at worst, unachievable. I will first elaborate more fully on why that is so and turn then to the consequences.

I will make five points. First, the Government admit in their response that the 2020 target is “extremely challenging” in paragraph 5 on page 5; involves “difficult trade-offs and costs” on page 6; “challenging” on page 8; and “ambitious” on page 17. The Government’s explanations as to how these challenges will be overcome in each of these different sections of the response falls far short of being reassuring.

Secondly, there is the reliance on wind farms. I quote briefly from our report:

“The technical challenges and costs of backup generation on a scale large enough to balance an electricity system with a high proportion of intermittent renewable generation are still uncertain. Whereas the highest share of intermittent renewable electricity now being generated in Europe is 15% in Denmark, the UK is expected to reach a share of some 30-40 %”—

by 2020. The Government’s response was:

“Not all of this will come from intermittent sources”.

That was all. There was no answer to our main point. I would be grateful if the Minister could respond to these two points. First, can he quantify what “not all of this” means? Does it mean that a very high proportion will still have to come from wind farms? Secondly, will he now deal with the point that the government response did not? How will a share of 30 to 40 per cent—or even 30 per cent—be achieved when no other EU Government, however dedicated, and with better support and planning systems with which to achieve it, is anywhere near that figure, nor intending to be so?

I have recently been reading the Government’s document, Community benefits from wind power. It makes clear that, as regards the achievements of wind power and wind farms on a much greater scale in some European countries, there are really no lessons to be learnt from them about community benefits here because their systems are so different. If I were in the Government, I would harbour serious doubts about the ability of the wind farm industry to deliver targets on this scale. Onshore, how much will a host of often very small-scale wind farms, dotted around the country, be able to contribute to this massive objective? I suspect that by far the largest contribution will have to come from offshore wind farms, where the scale issues and links to the grid are more achievable. Even here, as we have seen from the serious doubts of some major companies about investing in these major projects, the question mark over achievability by 2020 looks very large indeed. There are also problems about the limits on the supply abilities of the industry to meet these targets.

Thirdly, on a separate point about wind farms, in our report—and I think the noble Lord, Lord Vallance, referred to this—we refer to the intermittent nature of wind turbines and some other renewable generators meaning that they can replace only a little of the capacity of fossil fuel and nuclear power plants if security of supply is to be maintained. That is why we drew attention to the point that investment in renewable generation capacity will therefore be in addition to, rather than a replacement for, the massive investment in fossil fuel and nuclear plants required to replace the many power stations scheduled for closure by 2020. The Government’s response was that the scale of investment and the timescale within which it is needed is, of course, “challenging”. The subsequent paragraphs in the report, about how the challenge is to be met, were, frankly, a fudge.

Fourthly, there is the question of affordability, which the noble Lord, Lord Vallance, and my noble friend Lord Lawson have already referred to. I was going to ask how much input the Treasury had into the Government’s response. Then I spotted what I suspect that input is. Twice in the response, the “extremely challenging” references had been added to. In one case,

“particularly in the current global economic conditions”—

was added, and in the other,

“particularly given the current investment climate”—

was added. Much of our discussion took place last year before the full impact of the credit crunch and the global situation was evident, so it was not taken into account at that stage. Looking ahead over the next few years, what are the implications of getting sufficient private capital investment? There are even more implications for the Government in the impact of the public investment required to encourage wind farms. In the current and foreseeable economic situation, these seem simply not to be affordable.

Finally, a considerable proportion of our current electricity generation will have to be replaced from 2017 anyway. New nuclear plants will be the key in the period up to 2020 and for some time thereafter. I agree with the noble Lord, Lord Broers, about this. With the best will in the world, starting late as we are, new nuclear plants will not have contributed much by 2020.

All of these points led us to a conclusion that was, perhaps, not as specific as some of us would have liked, but is nevertheless clear. We should be flexible on the arbitrary 2020 target date, renegotiating it if necessary. Professor Helm pointed out that we should have a credible renewables target, which there is a reasonable prospect of achieving. He was certainly not alone in that. There are consequences to setting, but not achieving, a target of 2020 and depending on wind as the major source. Not only is our credibility is at stake, but the loss of face from failure, because the target was too ambitious, would also be evident. Not only is there a potentially a much higher cost because of the short-term balancing costs to meet intermittency—with the estimates put to us varying between £500 million and £1.4 billion—which will also have an impact, but above all there is the high risk that, as BP put it, because the timescale for the targets is short,

“investment would be skewed to those technologies which work today as opposed to those technologies which might be right for the longer term”.

That is why, in paragraph 258, we are also concerned that determination to meet the target may lead to an over-emphasis on promoting short-term options simply because they are available, rather than because they offer the most effective and economical means of reducing carbon dioxide emissions over the longer term. In their response, the Government did not address that point, related to the 2020 target, which is crucial in our report. I hope that the Minister can address it tonight.

My Lords, although I think this is an extremely valuable report, I am probably the first to say that I am quite disappointed with its contents. If you read it in one respect, it seems to be saying that it is an either/or situation; you either have renewables or you have nuclear. I do not feel that that is the situation at all. The report talks about having a broad base and a mix, but a large number of the conclusions talk about the need for nuclear. Indeed, I was interested that the previous speaker talked about paragraph 258, which states:

“We are also concerned that determination to meet the target may lead to an over-emphasis on promoting short-term options”.

I was not certain what the report was trying to indicate by that, because it does not specify what the short-term options are. If it just means wind, I wish it would have just said that and said that nuclear is a good thing, because that is how I read that section.

The report goes through many of the issues in some depth, and there is great value in it. However, I was quite surprised, given that it is a report by the Economic Affairs Committee, that it suggests that if we go towards our renewables target it will add an extra £80 to every bill in the country by 2020. That is a fantastically accurate prediction, considering that there has been a massive swing in domestic and other energy bills over the past three years, which has gone far beyond £80 one way or the other. I agree that there will be a cost supplement for promoting a renewables strategy. However, I was rather disappointed that the report did not talk about the problems that we are facing with energy security. By 2020, we might be looking at as much as 80 per cent of our gas being imported from abroad. That will have a massive implication for the fluctuation in prices. We only have to go back over the past two or three years to work out what happened when the interconnectors were not supplying gas from the continent in the way that they should have and the spot price of gas was going up and down massively. Therefore, rather than increase bills, there will be a cost, but this might reduce how markets can go up and down, especially if we are so reliant on gas, as it looks like we will be.

Much was made in previous speeches of the fact that prices are changing and the report needs to be rewritten in the light of the recession or the depression. I am not sure whether we are in a recession or depression; it seems to change on a regular basis. This will change the economics of the issues of renewable energy. I went to a seminar on wind turbines, where there was great concern that large numbers of projects would have to be cancelled because the cost of the steel for the wind turbines had shot up so much—because there was such demand for steel—that the turbines were becoming unaffordable. Now, there has been a massive decrease in the cost of steel. Although there has been a lack of credit, which is quite badly affecting the wind turbine industry and the prospects of many wind turbine farms, there is an issue about variations in cost, which could make wind cheaper rather than more expensive.

One of the problems that the recession has brought has been a collapse in the carbon price as companies do not use up their carbon allowance. To raise finance, many of them are selling off the excess credits. The noble Lord, Lord Lawson, has shown that he is a climate sceptic. I am an ETS sceptic of the highest order. I do not believe that the European Emissions Trading Scheme will lead to a regulation of the carbon markets. The recent collapse in the carbon price shows the fragility of that system. I very much hope that, although the Government are putting a great deal of faith in this, it will be a wake-up call to the problems that are affecting carbon.

I go back to the nuclear argument. I do not think that anyone in this House who has listened to me speak on this subject many times before would be surprised that I am sceptical about the arguments being made about nuclear. Obviously, many environmentalists are moving towards the building of nuclear power stations as a low-carbon option. However, my real concern is that it is not a silver bullet that will suddenly solve our needs, because of the timescale. During a Question yesterday, the Minister talked about the first nuclear power station coming on in 2018 and then nuclear power stations coming online in the 2020s and probably into the 2030s. To build up the level of generation that we need from these power stations, we are talking decades, because we start from such a low basis. The noble Lord, Lord Jenkin, will probably mention that even if we had the skills base in this country to manage such a massive expansion of the nuclear fleet, we do not have the companies any more.

I am also sceptical about the prices given for each of the different renewables, which includes some figures on nuclear. I have seen a large number of these figures over the past few years, and they have changed quite considerably year on year. However, some of the figures around nuclear that are given in the report are rather optimistic, considering that we still have not come up with a suitable geological storage area. We have not even decided on the site, and we have certainly not decided when the building is going to happen, which could be 20 years from now. To generate figures concerning how much that will cost would affect those figures quite considerably.

Many noble Lords have talked about wind farms. I always find it amazing that there has been such a shift over the years. A few years ago, nuclear was seen as very dangerous indeed. Now, it seems that nuclear is about as safe as you can get, and you could have your lunch off a nuclear reactor. However, if you happen to be walking across a moor and see a wind turbine, your head will suddenly explode through the affront to your sensibilities about wind turbines. I know that a lot of people do not like wind turbines. However, the surveys that have been done of people who live near wind turbines show that the majority of the population actually like them. I personally enjoy seeing them. I was passing over the border at Tow Law, where there is a wind farm. There was great opposition saying that it was going to spoil the countryside. However, I noticed that they have built a car park so that people can park and watch the wind turbines. It has almost become a tourist attraction in its own right.

Different people have different views. It has become incredibly difficult to build wind turbines. The noble Lord, Lord Broers, mentioned the problem of how long it will take to get nuclear power stations through the planning process. Similarly, wind farm costs have been directly affected by the problems with the planning process. Every single wind turbine that is talked about always attracts attention. I speak from personal experience. I tried to put up a small, 6.8 kilowatt, 30-foot wind turbine tower that you would not be able to see from more than 200 metres away, and I received a letter of complaint from someone in Leeds. I found that quite incredible. This was someone who had no idea what I was doing, but because I wanted to put up a wind turbine in a national park, they objected. That is the problem that wind turbines have.

We should realise that it is much cheaper to locate wind turbines onshore. We are looking offshore because of planning constraints, but there is much greater reliability offshore. This is an area that I am particularly concerned about. It is mentioned in the report as energy storage. We should be looking at large-scale energy storage so that the power from wind turbines can be stored and used in a much more effective way. To find out that only £1.2 million is being invested in energy storage, a technology that we will need in the future if we are to expand into renewables, is a massive disappointment.

Another disappointment in the report was the omission of biomethane and biogas as a form of renewable gas which is going to be a major source of renewables in the future. Germany has 3,500 anaerobic digestion plants. I declare an interest in that I have just become the chairman of the Anaerobic Digestion and Biogas Association. Our stated aim is to try and build 1,000 plants over the next 10 years.

The report states that there will be a massive cost in renewables. Nobody should underestimate the cost but we should not underestimate either the cost that is going to have to be pumped into the energy sector. We have underinvested in plants over the last few years. There is going to be a massive investment in all areas of generation and a massive investment needed in the transmission network, which has not been looked at in this report. It was only mentioned once in the White Paper and was left out of the two White Papers before that. We should not forget that we are now signed up to reducing by 2050 the amount of carbon dioxide we are emitting into the atmosphere by 80 per cent. The cost is going to be massive, as is the behavioural change needed, so we cannot look at the economics as being business as usual. This report highlights that to achieve that we are going to have to make massive changes.

My Lords, I declare an interest as chairman of the publicly funded Living with Environmental Change research programme, which includes research on adaptation to a changing climate and climate mitigation. I think the whole House will wish to thank the noble lord, Lord Vallance, for introducing this authoritative report. The analysis of the economics of renewable energy, particularly the warnings about the cost of generating and transmitting electricity from geographically remote wind turbines, is something which we should take great care to notice.

In paragraph 253 the committee calls on the Government to look afresh at the United Kingdom’s research effort into renewables and to consider,

“what more could be done, in a global context, to promote more, and more focussed, research across a range of technologies leading to new, effective and economical ways to reduce carbon emissions”.

It is this recommendation that I would like to explore further. I agree with evidence from BP, quoted in paragraph 223, which draws attention to the risk that, because the timescale of existing targets for renewable energy is so short, investment will be skewed to technologies that work today as opposed to those which might be right for the longer term.

There are pointers throughout the report on where more, and more focused, research might best be deployed. The figures for the percentage of final energy consumption are fundamental to this discussion: heat accounts for 42 per cent, transport 39 per cent and electricity only 19 per cent. So any technology which delivers competitively priced heat and transport fuels from renewable sources, provided it is not intermittent, ticks a lot of boxes. Biomass has the potential to meet these energy needs, though at present we are short of biomass feedstock. As the report notes in paragraph 40, landfill gas is currently the largest source of biomass generation, but this is already fully exploited. Indeed, it may well be declining; one hopes it is. The report says that any growth in biomass generation will likely come from burning more waste or from energy crops. Quite frankly, using more land for growing energy crops at a time of increasing food insecurity seems unwise. That leaves burning waste as the only option for increased biomass-derived energy.

In so far as waste is derived from crop residues and non-food plant matter, there is no obstacle imposed to using these materials as energy sources. However, when we look at materials which have been labelled as waste in the waste hierarchy, we make great difficulties in this country when a company seeks to convert these waste streams into a fuel. The report mentions—particularly in Appendix 6, where it looks at new technologies—second-generation biofuels, which are manufactured from residues such as straw, wood, mowings, whole plants not suitable for food, and any other biological waste. However, the report notes in paragraph 169 that this technology is still emerging and not yet available on a commercial scale. The report uses the word “emerging” advisedly because emerging it is. Second-generation biofuels are being produced in pilot plants in north America and elsewhere, and without a doubt they will eventually be scaled up. We in this country need to follow this technology closely. I can assure the noble Lord, Lord Layard, that massive sums of money are spent on this in the United States. Let us not try to compete against them but make sure that we benefit from the research which they are investing so heavily in. We need to encourage its application at the right time in the United Kingdom. The city of Chicago has concluded that a significant proportion of its own energy requirements will one day be met from its urban waste using this technology. Let us hope they are right.

Meanwhile we also have to use existing biomass technologies. We have been very slow to develop wood-chip boilers for combined heat and power even though in this country we have extensive woodlands close to centres of population. The management of these woods, of great importance for wildlife, would greatly benefit from a new income stream. I farm and own woods in the south-east of England, which is the most extensively wooded region of England, yet most of the privately owned woodlands can only be described as either derelict or at least no longer productive. As the report notes, we could achieve the same carbon savings from renewable heat for about a third of the cost of the same carbon savings from renewable electricity. The Forestry Commission has advocated the wider use of wood-chip boilers for district heating schemes and the use of domestic wood-burning stoves. I only wish that the Forestry Commission would set a better example by heating all its premises from wood chips and encourage the rest of Government to look more carefully at these district heating schemes.

The Treasury has proved obstinate over many years by discouraging the production of fuels from waste oil, whether cooking oil or hazardous waste oils such as engine oils, metal-working oils, greases and the like, by charging a higher duty on waste oils used for fuel than waste oil which is cleaned up for re-use. The argument the Treasury advances consistently, and in my view wrongly, is that the European Union waste directives require it to give preference to the regeneration of waste oil above combustion. Regeneration is not an economic proposition in most cases, while refining and then burning would be economic were it not for the present prohibitive duties. Nor is the respective carbon footprint of the two processes taken into consideration. Treating and then combustion will certainly have the lesser carbon footprint. The Government have the right under the EU directives to reduce the rate of duty and they should exercise this power.

Used cooking oils, like hazardous oils, can be refined to produce a clean carbon-neutral fuel. When this came before the Court of Appeal in July 2007 it recommended that Defra and the Environment Agency needed to provide guidance as to what recycling had to be done by the producers to ensure that used oil had been converted into a distinct marketable product which could be classified as a fuel. To my knowledge, at least one company at present wants to start mass producing electricity and heat from used cooking oil but cannot do so until Defra and the Environment Agency produce this long awaited guidance. The Environment Agency can then tell them whether their product meets the guidance and can be classified as a fuel. I hope the Minister can tell the House tonight whether this guidance is going to be issued and, if so, when.

Waste oils are only a small potential contributor to renewable feedstock for energy. But the fact that the Treasury has consistently chosen to interpret the EU waste directives in a way which is inconsistent with other member states and which puts a modest but helpful industry at a grave disadvantage demonstrates a failure to understand just how important it is to encourage all such sources of renewable energy. If we are to rely so heavily on intermittent wind, we need all other available sources of renewable energy.

My Lords, I first read this report during the Christmas Recess. I thought then that it was quite admirable. It deals with the whole gamut of renewable energy issues comprehensively, succinctly and objectively. It focuses mainly, and in my view rightly, on wind energy and, with great authority, it deals not only with the perennial issues of back-up and intermittency but also with a point that tends to be ignored: the cost of grid connections and the problems that arise from that. The report also disposes of what I call the Danish canard: the fact that the Danes are applauded by everyone for achieving an admirable 15 per cent of their electricity supply from wind, while ignoring the fact that, for back-up, they rely on being part of the much wider Nordic electricity supply system, which relies on hydro and nuclear.

I re-read the report during the recent break with renewed admiration. I was also able to obtain a copy of the Government’s response, which was published just eight days ago, in the middle of the Recess—that is cutting things fine. Be that as it may, I found that, although it was cautious and defensive, it was more helpful than is often the case with government responses, which so often are rather dismissive.

Like the committee, I shall concentrate mainly on wind energy and economic issues, but I also want to touch on environmental and social aspects. It is clear from the report that few, indeed probably none, of the expert witnesses thought that the target of 15 per cent by 2020 was feasible—in some cases, remotely feasible. The committee’s comments at paragraphs 228 to 231 are notable. One might add that they are also notable for their restraint. I quote paragraph 229:

“We are also concerned that determination to meet the target may lead to an over-emphasis on promoting short-term options, simply because they are available”.

The next paragraph reads:

“We have a particular concern over the prospective role of wind generated … electricity”.

It goes on in the same vein. Wind is unreliable and the true cost remains significantly higher than that of conventional or nuclear generation, even before allowing for the support costs. There are also the environmental costs and impact of wind farms.

The Government’s response is notable. They believe that the measures set out in the consultation document have the potential—the Government’s word—to meet the target. Any department which has to rely on the word “potential” is clearly not very confident of meeting its target, but at least it is frank. I do not mind much whether the target is achieved, but I am concerned about the considerable consequences. I am concerned about the inevitable pressures applied to allow planning permissions against the wishes of local, rural communities. Here I totally disagree with almost everything which the noble Lord, Lord Redesdale, said. I see he is not in his place.

We all know what is going on. In a way, it is an age-old case of town versus country. My concern is not so much with the threat to national parks or to areas of outstanding natural beauty, although goodness knows the wind farm companies, given half a chance, would try to build right up to the edge of national parks. They have very little appreciation of landscape values and the scenery surrounding the parks; the Lake District National Park is already partially ringed by wind farms and there are new threats on the horizon. The more insidious threat is to ordinary, rural England. We need to bear in mind that the new generation of turbines are 350 feet tall, taller than Victoria Tower; moreover, we are told that they are likely to get bigger still. I suggest that most people who think that wind farms look quite nice on the horizon are looking at quite small turbines.

The Select Committee put its finger on the issue. Bearing in mind that it was mainly concerned with the economics, this is pretty strong stuff. Paragraph 254 states:

“We recognise that power companies need a streamlined planning system to approve or reject projects more quickly. But local and national concerns about environmental degradation must also be addressed. It is important to ensure that the planning system adequately assesses the costs to local communities and the balance between national priorities and local decision-making. The Government should also examine how far local communities share in the economic benefits created by wind farm deployment and other renewable projects”.

Since the report was published, we have had the Planning Act and the new processes that go with it. The Government rightly draw attention to that in their lengthy reply. There will be national policy statements, and one presumes that those will be reviewed by this House. We have the Infrastructure Planning Commission, which will then, I presume, take over on a case-by-case basis. Local authorities are statutory consultees, as indeed are the national parks authorities and, I think, Natural England. That is important. It would be very helpful if at some stage the Government set out in detail how they see this process being worked out. What, for example, will be the timetable, or perhaps timetables? Also important is what happens in the mean time. When will we start and what will it all look like? There are many consequential questions; for example, the Government’s response states that it is common in the UK for wind farm developers to provide community payments. Is that to a local authority or to individuals? If to the latter, is the recipient selected according to proximity? Those are all interesting and important questions.

I could go on. For example, I would like to explore offshore wind farms, touched on by a number of speakers. I have the impression that the Government hope that they will be less controversial. They may be right, but will they help to fill the gap? Perhaps they may, but one has the impression that there are serious financing problems and very little real experience.

In the end, one cannot help agreeing with the final paragraph of the report, the gist or underlying sense of which is that the overwhelming concentration on wind is not the right way forward. We seek, at considerable and unnecessary expense, to cure one form of environmental damage by inflicting on ourselves or on one part of the community an alternative form of environmental damage. That is not very sensible.

My Lords, I join other noble Lords in paying tribute to the noble Lord, Lord Vallance, and to the committee for an extremely readable report full of wisdom. The chairman is to be congratulated, in particular, on producing a unanimous report, notwithstanding that one member of the committee is my noble friend Lord Lawson, whose trenchant views were eloquently put to the House an hour or so ago.

The noble Lord, Lord Broers, said that I should talk about skills, a subject in which I am extremely interested. I want to ask why people are not standing up and shouting to young people and those losing their job that there are jobs in the energy industry, with training available, and they will be for life. People could use this opportunity to change their careers and recognise, as the noble Lord, Lord Myners, said the other day, that there should be less financial engineering and more real engineering. I hope that bodies such as the Nuclear Industry Association—the noble Lord, Lord O’Neill, is not in his place—will shout out to the whole population that here are jobs for life and people should be looking at them.

My noble friend Lord Macgregor and the noble Lord, Lord Chorley, emphasised the near impossibility of achieving the target of 15 per cent of all energy from renewables by 2020. Indeed, so incredible is this target that the former Chief Scientific Adviser was moved to suggest that possibly the heads of state, late at night towards the end of their deliberations, had muddled energy and electricity. I checked that out, and I was told that the heads of state knew exactly what they were doing. However, even with 15 per cent as opposed to 20 per cent, they have produced a figure that is frankly incredible for this country, except for one thing. From the Dispatch Box about three years ago, the former Minister for science, the noble Lord, Lord Sainsbury of Turville, firmly said that in his view nuclear power should be regarded as a renewable source. Of course, the French are happy to agree the 20 per cent figure because they have already got all that nuclear, and I do not suppose they worry about it. Why cannot the Government take that decision and recognise nuclear power? I asked the noble Lord, Lord Sainsbury, about it afterwards, and he asked why, as there is 1,000 years’ worth of nuclear fuel in the earth, it should not be regarded as a renewable source.

This has been an interesting debate. My noble friend Lord Selborne emphasised the figure that comes out of the report. One of its strongest recommendations is that we should look to renewables other than or in addition to wind. The Government seem to have got totally hooked on the proposition that only windmills are an appropriate renewable source. That cannot be right, and I support those who have been arguing that there must be more research into this.

At this stage in the debate I shall confine myself to a few specific points. First, we are promised the Government’s response to the consultation on renewables. When are they going to produce their national planning statement on energy? It is provided for under the Planning Act, which we passed at the end of the previous Session. Everything is hanging fire. There are constant complaints about the planning system holding things up, and the new planning system in the Act depends on these national planning statements.

Secondly, there is an extraordinary discrepancy between the committee’s estimate of what the policy will cost by 2020 and the Government’s estimate. The committee estimates that the cost will be £6.8 billion by 2020, which is £80 per annum for the average household. In their response, the Government disagree and say that it will be £2 billion to £2.5 billion. That is an astonishing discrepancy. The committee heard a mass of evidence from which it deduced its figures, and the Government produced their own figures. This ought to be cleared up. We cannot go on with that sort of discrepancy. In previous debates, I have drawn attention to the estimate by Ofgem that all the environmental costs borne by the energy industries are passed on to the consumer, including the cost of the Emissions Trading Scheme, renewables obligations certificates and other environmental measures. Last year, Ofgem gave the figure of about £79 for the average household. I shall make a suggestion and hope that the Government will take it up: as Ofgem is already involved in doing this work, could it not be asked to produce a report and try to find out why the committee came to a figure more than three times higher than the Government are prepared to concede? Ofgem should do it. It is qualified and ought to be asked.

Thirdly, there are issues about access to the grid. Offshore wind seems to be happening. The other day I was looking at an offshore wind farm being built just off the coast of east Essex. Access and connections to the grid have emerged as being among the most serious obstacles to generation from offshore wind. Paragraph 201 of the report criticises Ofgem’s use of competitive tenders as leading to,

“a piecemeal approach to building the networks of wires and cables required to connect offshore wind farms to the electricity grid”.

In their response, the Government broadly agree with that and set out what they are doing to secure a more co-ordinated approach. However, I am told that there is a nearly unanimous view across the industry among licensees, generators and manufacturers that the Ofgem approach, now supported by DECC, is,

“complex, fragmented and likely to lead to inefficient outcomes”.

There should be a more strategic approach to planning the offshore grid for round 3 developments. That would enable a more effective way of connecting offshore wind farms to the grid. When are the Government going to recognise that view of industry, respond to it and implement what it wants?

At paragraph 242, the report recommends organising the queue for attachment to the grid more successfully. The Government broadly welcome that. However, there is another view. A briefing I have had states that there should be a “connect and manage” arrangement, which means,

“obliging the national grid to provide commercially firm grid access within four years of generators making a committed connection application”.

In addition to putting the unlikely applications to the back of the queue, which is one suggestion, there would be other advantages to having a firm way of getting this. The briefing continues:

“Commercially firm grid access means that, so long as a physical link to the transmission system can be put in place, generators will have full export rights. Such an arrangement would significantly improve the investability and bankability of generation developments and significantly reduce the uncertainty associated with transmission investment decisions”.

There is a lot of sense in that. I hope the Government will be prepared to look at that again and that the Minister will be able to give us an answer.

My next point is perhaps more controversial. It is about the committee’s recommendation in paragraph 243:

“We consider that the current system of Transmission Use of System charges sends broadly appropriate signals of the costs of locating generators at different points on the system”.

The Government’s response is even shorter:

“The Government welcomes the Committee’s support for the current system of Transmission Use of System charges”.

I am told that this statement about sending broadly appropriate signals is significantly challenged by a number of major and minor operators in the system. Transmission charges in Scotland, for instance, remain high, volatile and unpredictable, yet generators in the south of Great Britain receive a payment from the National Grid while those in the north face a large charge. That seems pretty odd to me.

We should have a uniform charge for each unit of energy exported on to the grid. Again, I am told that this approach would result in predictable transmission charges providing certainty to developers of new generation projects. Of course, there would be winners and losers, but it should be perfectly possible for the grid eventually to have the same revenue. Total revenue recovered from the generators would not change, but be more evenly distributed. It is completely illogical that it presently costs £22 per kilowatt in transmission charges for generation located in the north of Scotland whereas generators south of London are paid £8 per kilowatt. It means that an 800-megawatt plant in north Scotland pays £17.6 million a year, while one in Southampton would receive £6.4 million a year.

I am told that the Government have been getting arguments on this from both sides, and have not yet made up their mind. I hope that is true. There seems considerable merit to me in this scheme of a unified unit charge for attachment to the grid, and I hope that the Government can come to a clear decision in the not too distant future. Is the system to be changed in that direction, or not? I do not necessarily expect an answer from the Minister tonight, but I put the question as something which the Government have to decide.

My Lords, it is a pleasure to express my gratitude both to the noble Lord, Lord Vallance, for his wonderful summing-up of this report and, indeed, to all the members of the Select Committee on Economic Affairs. I would like to express a slightly different reaction from most others, because I feel great sympathy for everybody involved in this report.

The report is directed largely at the 2020 situation, and inevitably at the electricity generation problem, because that is the one immediately to hand. However, that is essentially a tactical issue; when this report was being written nobody was thinking about our strategic target, which had not been defined. The Government had an aspiration for 2050, but we now have a Climate Change Committee, a Climate Change Act and a target. That target is not particularly directed at the electricity generating industry but at the whole economy, and will undoubtedly have a huge general effect on industry. Of course, it must include road transport—indeed, all transport—and take in the whole heating sector, and so on. That will require a very different approach from the one the committee inevitably had to work towards in this report.

I do not remember much about my military career, but one of the fundamentals of life was that you always had to have a clear strategy before trying to work out what your tactics were, which is the reason for my sympathy. That said, the report contains a great deal of useful information. I have picked up on one immediate figure from page 12 of the report, which illustrates energy flows in the United Kingdom. I have never seen them set out quite as clearly and admirably before, and it enables me to direct one point straight at the Minister. At the bottom of that figure is a wonderful amount of energy:

“Lost in power stations & network, used by the energy industry”.

Most of that is waste heat: I sometimes think that we in this Palace produce a great deal of that, but most of ours is not recoverable while most of that ought to be. I have touched on this subject before, but we are doing absolutely nothing to try to sort out our energy problems if we do not sort that one out.

If we finish up with nuclear power stations surrounded by acres of glass, or something like that, because horticulture is the only use that people can find for that heat—it is not easy to convey heat to conurbations from coastal areas—so be it. However, we need to recognise the implications of what we are about, and we need a totally different public attitude because the problems that we face are, despite what my noble friend Lord Lawson says, very great. It will take a major effort, and I agree very much with the noble Lord, Lord Layard, who was echoed by the noble Lord, Lord Broers, and others. Up until now, the approach has been both inadequate and really unsatisfactory. That said, although this is no excuse for the Government, there has been a reason for prevarication in that there has been no clear strategic ambition, without which it has been extremely difficult to deal with these issues.

I would like to repeat something that was said to me more than a decade ago by the noble Lord, Lord Flowers, who, sadly, nowadays we see rather less in his place than we used to. We served together on the Science and Technology Committee, and one day he remarked to me that mankind only has one source of energy, which is nuclear, but we had a choice. The choice was between having a nuclear power station here and having one 98 million miles away. It was a long time before I had worked out the implications of what he said, but one of them is clearly that all of the fossil fuels we use are in fact a form of solar energy, stored over geological time. The process that produced those fuels locked underground large quantities of carbon dioxide from the atmosphere, producing the atmosphere that enabled mankind eventually to develop.

Today, we are happily pouring that carbon dioxide back into the atmosphere again, and whether we produce conditions where we can continue to survive remains to be seen, yet changes are going on despite what my noble friend Lord Lawson says. The polar ice caps, both Arctic and Antarctic, are retreating. Glaciers in places such as the Alps and the Himalayas are retreating. The salinity of the ocean around the Antarctic is changing, so plankton populations are diminishing. We do not know what effect these changes will have, and my noble friend may well argue that they are random, will have no long-term effect and may be reversed.

My Lords, I am sure that my noble friend wishes the House to have an accurate picture of what is happening, so I have to suggest to him that he is slightly out of date. Sea ice levels are now at their highest since satellite records first began many years ago. The Antarctic’s shelf ice has been increasing substantially, and no increase in the temperature of the planet, which is meant to be at the bottom of all this, has been recorded by the Met Office or anyone else for the whole of this century so far. Indeed, the World Meteorological Organisation has recently reported that 2008 was the coldest year this century. My noble friend might do well to update himself, if I may say so with great respect.

My Lords, my noble friend is probably quite correct to say that 2008 was the coldest year of this century, but I remind him that this century is only nine years old. I am not going to bandy figures about, because there are figures and figures, and people work one way or another. I merely remind the House that for a very long time there was a section of people in a different industry—on a much narrower subject— who believed that there was no linkage between smoking and lung cancer. Regrettably, my noble friend will increasingly find himself in that position as time advances.

It took me some time to realise the exact implications, which I have spelt out, of what my noble friend Lord Flowers said. We have to do things, and we are setting about doing something that has not been achieved before. It is possible to pull off the internet in graphic form the carbon emissions of every major economy in the world. They are most interesting. Except in times of major international conflict or major economic collapse, there have been no reductions in gas emissions in any country except for one, which we should bear in mind. The one country that actually achieved a reduction was France. The reduction occurred in the 1970s and early 1980s, when France moved from coal for electricity generation to nuclear. Every country in the world—we are now dealing with a global problem—now has to set about bringing about that change. It was not going to be easy, and it is still not going to be easy, but, despite what my noble friend says, we must ask whether we can afford to risk not doing it. Given the enormous pool of international science from a very great proportion of all the nations of the world, which have agreed on this programme, the evidence, despite what my noble friend says, is that we cannot afford to take that risk.

We need a much more decisive period now. The Government need to think about the strategy rather than the tactics. Frankly, we will have to tell the European Commission that as far as the United Kingdom is concerned—other countries may also take this view—the 2020 targets are not that significant. However, we can meet them only if we are absolutely clear that we can and will make the effort to meet the 2050 targets.

My Lords, I, too, thank my noble friend Lord Vallance and his committee for this report. I do not want to sound as though I am damning it with faint praise, but I found the appendices particularly useful and will refer to them many times. The one on Denmark is often used out of ignorance for one argument or another, as are the various comparative renewable technologies and where they stand today.

Professor Dieter Helm has been mentioned a couple of times. He is certainly one of my heroes in this area. I have read some of his other papers, and the one that I remember most was the one that said that the cost to the global economy of the measures that we need will be much higher than the Stern report suggested. That is true, and is something that I think we all understand. Stern’s assumptions may have been optimistic. We all realise that the cost will probably be more than that, but we all realise what the cost will be if we do nothing. That is always the comparison.

Professor Helm also pointed out very strongly that none of the policy decisions and actions that have been taken by national Governments has so far had any effect on carbon emissions to date. One of his other very strong messages was that we are looking through the wrong end of the telescope when we look at carbon emissions by nation; we should really look at carbon consumption. This is one of his main arguments in the academic press in other areas.

In an answer to a question asked by the chairman of the committee, Professor Helm says:

“We certainly have a serious responsibility to address climate change, and we are responsible for quite a lot of the past emissions that are up there in the atmosphere, so I would not in any way want to belittle the need for the UK to make its contribution”.

Although Professor Helm has some very important things to say, and although there are some very important lessons to be learnt from what he says, he understands that climate change can be addressed by policy decisions, even if he does not particularly like those decisions. We must remember this area behind the report. We cannot ignore it. The whole raison d’être of renewables is the climate change agenda. We cannot get away from that. We cannot look at renewables without seeing that agenda and, to a lesser degree, the agenda of energy security. Clearly the energy security challenge could be met completely by a coal-based solution rather than a renewables solution, but if we believe that climate change is an issue, renewables can contribute as well. We cannot have a scenario in which renewables are not an essential part of the answer to the climate change challenge. The follow-on from that is that if renewables are part of the solution, some people will see nuclear as also being part of it, and others will see carbon capture and storage.

The big area which the report does not address—quite understandably, as it is not within its remit, which it makes clear—is energy savings. Only through those combinations do we as a nation state, let alone the rest of the world, have a chance of meeting the sort of targets that we are setting. We on these Benches are very sceptical about nuclear, but even if you believe in nuclear it is not the whole answer, if only because it provides a completely baseload solution. You also need a variable input. Renewables can be intermittent. Wind power is certainly intermittent, but the National Grid has told me that intermittency of up to the low 20 per cents is not a great issue in terms of the instability of the national grid and the electricity supply. We are nowhere near that at the moment, although by the time we reach the 2020 targets we could be if the other technologies do not come in. It is certainly not a reason for stopping investment at the moment.

The big tragedy about renewables is that we are left with pretty much only one technology that we can drive forward at present. That is certainly how it appears to be, although that is more and more disputable in certain ways. There could be all sorts of other areas. I particularly congratulate the report and my noble friend Lord Vallance on having stressed the whole area of heat, where there is clearly an important need to increase our renewable technology, and as a proportion of renewable energy as a total.

Earlier today we discussed the possibility of biogas going straight into the national grid. To give National Grid plc its due, it referred to it as the “stretch option” and it is probably about as stretched as elastic could ever get. But it shows, under a regime where we decide that these types of measures are necessary, what could be achieved. There are other technologies. Unfortunately, hydroelectric, which would also give some storage ability in terms of electricity, is somewhere near its capacity, but we also have geothermal, which we have talked about, and heat-pump technology. All these have to be a major part of meeting these targets.

One of the main problems is diversity and a problem that has been mentioned by noble Lords, particularly at the minute, is the cost of carbon. The report specifically goes through the different types of renewable technology and other energy technologies, and states their cost per unit of electricity. Clearly, those costs do not take into account the carbon. Carbon emission is not free. It is a pollutant and it has to be costed into the price of any of those technologies. The one technology that it was not able to cost, quite rightly because it has not been commercially achieved yet, was that of carbon capture and storage with coal generation. So we do not have the complete picture. But looking at these different technologies without a reasonable price of carbon gives only a very limited picture.

I would be interested to hear from the Minister how the Government are thinking about the cost of carbon. As my noble friend Lord Redesdale said, we have an EU ETS sceptic. To a large degree I am much less so, but at the moment it is hard to look at the EU ETS and see how that will help to drive forward investment by commercial businesses in terms of low-carbon technologies. It is taking away that incentive of a stable carbon price. Probably, this is where the Government rightly disagree with a number of their European partners. But we have given away all those carbon permits for free. They have an actual value, so when there is a liquidity crisis in the economy and it looks as though those permits will not be needed for a considerable time, what does any finance director say? He says, “Sell the assets I don’t particularly need or I won’t need for a long time ahead that have got liquidity value. Get those out”. And there will be a fall in the carbon price. The knock-on effect would be that all other boards of directors and people looking forward to investment would not see the right price signals in terms of future low-carbon technology investment.

What lessons come out of this report? I believe it is that renewables are essential and have to be part of the solution, but that we need a number of different renewables than we have at the minute. It will be very tough to meet the 15 per cent target. The whole difficulty has been a lack of research and development, as the noble Lord, Lord Layard, said, in the distant past. We need to continue to ramp up that investment. We are suffering now from a lack of investment in the past because of low energy prices, particularly the low price of oil over the past two decades prior to two or three years ago.

We need to decarbonise our electricity supply because, ultimately, it gives us not just the electricity proportion that we have now, but also much greater flexibility. It could substitute for transport fuels in the future and other forms of energy consumption. It is relatively portable, or it can be. We need to invest much more in heat technologies. I also believe that we should not give up on biofuels, which are increasingly contentious. That will be a part of the future, not just in second or third generation, because biogas gives us an opportunity to move forward in terms of those fuels. The noble Earl, Lord Selborne, spoke about the use of waste oils, which is very important. Biodiesel can be very effectively produced from those waste products. Can we make sure that the fiscal regime works for that?

We need research and development, but we need to increase our multinational collaboration in this area, despite all the difficulties that there might be with intellectual property and so on. We have to find a way to do that. We need to make sure that we have a much better indicator of the price of carbon, maybe through taxation rather than just cap and trade systems. The noble Lord, Lord Broers, summed up the whole matter: we have to get on with this agenda. Stern was absolutely right, although we may have to adjust the figures. But it is clear that the earlier we find effective solutions to the problem of emissions, the easier, or less difficult, it will be. We need to get on with it, which is why we need wind power, an existing technology. We certainly need to bring all those others on board to make sure that we have a full range of instruments to fight this challenge in the future.

My Lords, I, too, thank the noble Lord, Lord Vallance, and members of the Select Committee on Economic Affairs for its report, The Economics of Renewable Energy. The Clerk and Professor Richard Green too should be congratulated on producing such an accessible report on a subject that is still shrouded in mystery for most people. I would commend it to anyone who wants a better understanding of the renewable energy choices we face, particularly as it is written in plain English and was encouraged no doubt by the long number of years that the noble Lord, Lord Vallance, spent in business. His speech was a pleasure to listen to.

We on these Benches agree with the committee’s main recommendations to the Government to give a firm lead in low-carbon alternatives to renewable power generation, to emphasise and promote the opportunities for renewables, and to consider how to promote more focused research into new, effective and economical ways to reduce carbon emissions. We agree to encourage research into energy storage with a view to mitigating the disadvantage of intermittency in the types of renewable generation likely to prevail in the United Kingdom. We also agree with reviewing the UK’s research effort and I agree most strongly with the noble Lord, Lord Layard, on this point.

Overall, my party is more supportive of renewables than this report is, but we are also alive to the risks that are highlighted within it. We recently launched our low-carbon economy green paper, which sets out how we propose to rebuild the British economy on the back of the new high-tech green industries, intelligent energy generation and transport, and energy efficiency in our homes, schools and businesses. This also is a very good read. It is written in plain English and I commend it to your Lordships as an exciting read for the future, although my noble friend Lord Lawson, my distinguished friend, may be uncertain of that for himself.

A lot of interesting questions have been posed from all sides of the House in the wake of this splendid report. My knowledgeable noble friend Lord Jenkin seems to come up with new ideas every time he talks about energy and climate change, which is quite amazing, and even the noble Lord, Lord Teverson, has given me some interesting thoughts, for which I thank him. I look forward to the Minister’s answers to the many questions that have been put to him, and obviously he will write if he cannot answer. However, I should like to add my voice to just a few points.

According to BERR, the cost of meeting the new renewable energy target is estimated at £100 billion. If the current downturn only lasts until 2010, we will have a 10-year period in which to increase renewables from 5 per cent to 35 per cent, so my question is this: will the financing be found by the Government in the current climate? Unlike some sources of electricity generation such as wind, which have intermittency issues, there is no such problem with renewable heat. The report recommends that the Government should place at least as much emphasis on encouraging the use and development of renewable heat as on renewable electricity generation, so again I would be interested in the steps the Government’s department is taking to expand the renewable heat sector.

The technical challenges and costs of back-up generation on a scale large enough to balance an electricity system with a high proportion of intermittent renewable generation are, as we have heard, very high. The committee has recommended that the Government should ensure that further work is carried out to clarify the costs and encourage the development of technical solutions to deal with intermittency. What research is currently being undertaken to look at these problems? The committee also hoped that the work of the Energy Technologies Institute will yield technological advances and lower costs. We join with the noble Lord, Lord Layard, in all of this. What is the Minister’s response to the suggestion that the Government should consider offering a substantial annual prize for the best contribution to renewable energy development? It seems such a fine idea.

The committee was not persuaded that advances in renewables technology would be made in time to assist with the UK’s generating requirements up to 2020. How is the Minister’s department going to respond to the recommendation that the Government, as a matter of urgency, should encourage more research, development and demonstration in energy storage technologies?

As the noble Lord, Lord Vallance, said, the committee’s prime objective in this report was to look at the Government’s wish to reduce carbon emissions, not whether or how far it would be necessary to do so. In this respect, the report has done its job. The Government set out their policy objectives in their 2006 Energy White Paper, which BERR states are to,

“put ourselves on a path to cutting CO2 emissions by some 60% by about 2050”.

That has since been superseded by their commitment to an 80 per cent reduction target by 2050 in the Climate Change Act 2008. The Government have also set out their policy to maintain the reliability of energy suppliers, to promote competitive markets in the UK and beyond, thus helping to raise the rate of sustainable economic growth and improve our productivity. Finally, they seek to ensure that every home is adequately and affordably heated. These are fine targets, but I have to say that they set a high hurdle for the next Government to clear. We welcome the report.

My Lords, it is a great privilege to respond on behalf of the Government to this debate. It has been a fine discussion, and that is because the report itself is excellent. I want to add my tribute to those of other noble Lords to the noble Lord, Lord Vallance, who so brilliantly chaired the committee. I pay tribute also to the other members and, indeed, to their advisers and clerks. The noble Lord, Lord Chorley, wondered whether this debate and the Government’s response were cutting it too fine. All I can say is that normally the Government are chided for taking too long to respond to reports, and I think that there is a real advantage in a quick response and in holding this debate. As a Government, we are still in the process of making decisions on our renewable energy strategy, and this report is an excellent example of where I hope the Government, in giving a robust response, can thus inform the production of the strategy. I should say to the noble Lord, Lord Vallance, that the strategy is due to be published in the spring of this year. I am relatively new to the Department of Energy and Climate Change, which itself is as new as I am to this brief, so I cannot say what the definition of “spring” is. However, we need and we want to get on with this, and again the debate is helpful to that end.

I agree absolutely with my noble friend Lord Layard about the contribution of science and research to these very important matters. The noble Earl, Lord Selborne, was right to press us to engage in the scientific arena and ensure that the money we are able to put into it is as focused as possible. I take his point that given the scale of investment in other countries, along with the comment of the noble Lord, Lord Teverson, about international co-operation, we have to make sure that the precious resources we spend on science and research are well directed. But there has been progress. The latest figure for UK public sector spending on energy technology research, development and demonstration is £151 million. I know that noble Lords will say that we should be spending much more, and I have some sympathy with that view. We should also acknowledge the work of the research councils in supporting a very wide range of areas that have the potential to develop or improve energy technologies.

This is the second time I have debated this matter with the noble Lord, Lord Lawson, whose essential message to us today was to ignore climate change and go for coal. I could trade comments from various international organisations on climate change, but I shall desist doing so today. On the Stern report, he is right—

My Lords, I think that the noble Lord has misinterpreted my position. It is not that we should ignore global warming—if it happens—it is not happening at the moment, but it might, who knows? Unlike the Stern report, I do not know what will happen in the next 100 years. If it does happen, we shall adapt to it, as mankind has always adapted to fluctuations in the temperature of the planet.

My Lords, I knew that I should not have provoked the noble Lord. The difference between us is that the Government believe, along with many distinguished scientists, that we should do everything we can to mitigate the impact of climate change and adapt to it. I do not disagree with him about that. He also made a pretty powerful argument for coal, and I should like to come back to that point in a moment.

I know that the Stern report has come in for criticism, and there is no harm in that. Since decisions have to be taken in the light of work like the Stern report, it is very important that such work is seen to be subject to robust critique and analysis. But I think that the noble Lord, Lord Teverson, is right to say that whether or not the figures are exactly right, what is not in doubt is that the broad direction in which Stern is pushing us is the right one.

We have committed ourselves to tough targets: the 80 per cent reduction in greenhouse gases set out in the Climate Change Act which was passed in your Lordships’ House only a few weeks ago and the target that we have set within the EU target for 2020. I can confirm to the noble Lord, Lord Vallance, that the position is still that our proposed share of the EU target is 15 per cent. The directive implementing these targets was agreed by the Council in December 2008 and is expected to receive formal agreement in February 2009. Strictly speaking, we can still call them proposed or likely targets, but we are pretty convinced that they are the targets we will have to achieve. I understand why there is some scepticism from noble Lords and in the report about whether we will do so. However, I say to the noble Lord, Lord Jenkin, that we were quite clear what we were signing up to as, I think, were other heads of state. The fact is that we will have to go for it.

Of course we are all concerned about the credit crunch and the economic situation. Of course we all know that at the moment investment decisions and access to finance are proving very difficult. And of course I cannot stand at this Dispatch Box and say with absolute clarity what I think the long-term impact on renewable investment in particular will be, given the current financial situation. However, just as the noble Lord, Lord Jenkin, advocated that young people should look at the energy sector as a good place of employment in the future—I share his views on that—evidence suggests that the fundamentals of the UK energy market are good and that there is broad confidence in the package of support we are putting together for renewables and the stable regulatory framework that we have in place.

I thought that the noble Baroness, Lady Wilcox, was right to point out that alongside the undoubted pressures we face, a low-carbon economy does not mean a low-growth economy; it can mean many jobs and investment in this country. It is important to take advantage of that.

The noble Lord, Lord Teverson, must be the world’s greatest living expert on the EU emissions trading system and on carbon price. He put his points very clearly indeed. The EU allowance price has seen a considerable drop over the past year, falling from a high of €29 to a current low of €10. We are all concerned about the impact of reduction in carbon pricing. However, the noble Lord knows that the EU ETS cap has been set and will be reduced from 2012 onwards. We expect firms making long-term decisions to do so on the basis of a rise in carbon price as the EU ETS cap will be reduced. We will have to look at these matters very carefully because we want this system to work, effectively.

Let me come to the question of wind, which excites your Lordships' House. I have discovered that in debates on the various Acts that have gone through the House in the past three or four months. It is true that we are looking to wind to provide an important proportion of the renewable energy that we will need to deliver over the next 10 or so years. We understand that wind power is intermittent and will require back-up generation to smooth the effects of its variable generation. There is no argument about that. Equally, it is a proven, efficient and, I believe, cost-effective way of generating carbon-free power. Although the amount of energy produced by renewables at the moment is very small and has to increase considerably over the next 10 years, even our existing offshore wind farms, where the UK plays a leadership role, generate enough energy to power more than 340,000 homes.

I understand the point of the noble Lord, Lord Vallance, about the output from wind turbines during the recent extended period of low pressure. I accept that wind power is a variable resource, but the chances of having no wind generation across the UK simultaneously are pretty low. In fact, wind turbines work around 80 per cent of the time, although not at full output. The effects of intermittency can be mitigated through a range of options, such as geographic dispersion, increasing use of energy storage and back-up generation. As the noble Lord, Lord Teverson, said, National Grid has concluded that the costs of 20 per cent wind penetration are low.

Wind is important but it is not the only element of renewable energy. I am particularly interested in marine technology. Other technologies have been mentioned today, such as biomass, biogas, solar heat and heat pumps. They all have a contribution to make. Some are nearer to market than others and some need a great deal of support. A range of various government policies and strategies will seek to do that. We are not relying on wind to deliver the whole target. The estimate I have is that biomass for heat and electricity sectors could provide about 30 per cent of the target.

At Questions today we debated the report which looked at the contribution of gasification and biomethane to the National Grid. The noble Lord, Lord Teverson, described it as a stretching target—actually, it is an impossible target. But there is no doubt that the report contains some very important matters that we need to take forward. Incidentally, it is also a way of providing income to the farming community. I shall put on my Defra hat for a moment and say that that is very welcome.

The noble Earl, Lord Selborne, spoke about waste oils. The Environment Agency has consulted on a draft protocol; I understand that it is hoping to publish a post-consultation draft shortly. If I can find out some more information, I shall write to the noble Earl. I understand the issue, but it is not particularly easy to resolve.

My Lords, when the Minister looks into this, perhaps he could impress upon the Environment Agency that as a number of companies will go bankrupt in the short term—in the next few months—some alacrity in coming up with the protocol is necessary.

My Lords, that point is well taken and I will make sure that the agency is informed.

I fully accept the points raised by the noble Lords, Lord Dixon-Smith and Lord Teverson, about heat and its potential, and the transport sector. All this provides challenges to the grid. The noble Lord, Lord Jenkin, raised a number of important points about the transmission access review. There is no doubt that the connection of a significant increase in renewable generation sets an unprecedented challenge for our electricity networks. We put a package of measures together in last year’s transmission access review, which will help inform the renewables energy strategy.

On the question of offshore wind which, again, is a point well taken, the Department of Energy and Climate Change and Ofgem are leading a project to put a new regulatory regime in place.

I understand entirely the points the noble Lord, Lord Jenkin, raised. These are matters of very urgent debate. I am very happy again to feed his views in to that debate. I cannot really say more than that, but I am very well aware of the issues under discussion now.

We had a very good discussion about the potential of nuclear energy. With the noble Lord, Lord Broers, we took part in a debate on these matters only three or four weeks ago. I echo his comments very much. We hope that the passage of the Planning, the Energy and the Climate Change Acts will allow a much more rational and, I hope, speedier path to making the decisions that have to be made. He is surely right about the contribution that engineers in particular and scientists in general can make. We are very committed to doing that. I again echo the point the noble Lord, Lord Jenkin, made about the huge potential for young people, and not just young people, to go into the energy sector. There are an enormous number of jobs with great potential. One of the reasons we have to encourage young people to be interested in physics, chemistry, engineering subjects and maths subjects is because we have to grow people to go into these jobs, and we wish to do that.

As regards the timetable for the national planning statements so that the Infrastructure Planning Commission can get on with its work, I am glad to say that we expect to publish draft national policy statements later this year for consultation. They will be subject to parliamentary scrutiny this autumn. We hope that they will be ready by spring 2010. We know that we need to get on with this.

Coal of course has an important role to play. In relation to that, we believe that carbon capture and storage has great potential. That is why we are one of the first countries committed to supporting commercial scale demonstration and one of the first countries to put in place a national regulatory regime for the storage of carbon dioxide. This is a very important area for UK plc in terms of what we can do in this country, but also in terms of our export potential from what we learn from the pilot demonstration.

This has been a very high-quality debate indeed and will be very helpful to the Government in terms of our renewable energy strategy. Noble Lords have raised a number of very important matters. I finish by saying that I am well aware that the 2020 targets for renewables are very tough. We face some critical decisions about energy in the short, medium and long term. The Department of Energy and Climate Change was created to enable government to do that. We are determined to do that.

I again thank the noble Lord, Lord Vallance, for his marvellous opening speech tonight, for the excellence of the report that he and his committee have produced, and say how much I welcome the opportunity of further debate with noble Lords on matters that are of the utmost importance.

My Lords, the cost, sustainability and security of supply of energy affect us all. In prosperity or recession, energy is vital to the economy, to our standard of living and to our well-being. That is why the Economic Affairs Committee decided to inquire into the far-reaching changes of the nation’s energy mix implied by the Government’s adherence to the European Union targets for renewable energy.

The House has made it quite clear in the debate that it too recognises the importance of getting our energy policy right. I am gratified by the degree of interest shown on all sides and by the impressive combination of experience and wisdom brought to bear by noble Lords in the course of the debate.

I should like to thank the Minister, both for the content and the courtesy of his response. We look forward to the emergence of the Government’s renewable energy strategy in the spring—may it be an early spring. Meanwhile, I take the opportunity once more to commend to the House the report of the Economic Affairs Committee.

Motion agreed.