My Lords, I begin by wishing my noble friend a very happy 94th birthday, which I know he celebrated a couple of days ago. The Government are taking decisive steps to secure our supplies. We are reforming the electricity market to drive the investment we need to ensure that we have a diverse range of energy supplies, and through the Green Deal and ECO, we are looking to reduce our usage of energy. I am also pleased to announce that we have had investment from Carrington gas, which will come on stream in 2016, and Hitachi’s investment of £700 million in purchasing Horizon demonstrates that the Government’s approach is right, and that the UK remains an attractive place to invest.
My Lords, I thank my noble friend for her kind remarks. In spite of advancing years, I continue to take a keen interest in energy matters. Does the Minister agree that, while in the medium and long term, shale gas, new nuclear and other installations may help to meet increased electricity demands, there is a serious short-term problem, to which she referred? In that connection, will she indicate what steps the Government will take, in addition to those that she mentioned, to avoid a possible shortage of electricity-generating capacity within the next two to three years, bearing in mind the early closure of existing coal and some nuclear plants, and the warning from Ofgem that, as a result, reserve electricity capacity will fall well below normal levels?
My Lords, the Government are taking action to ensure that the UK economy continues to enjoy high levels of electricity supply security in the short, medium and long term. Our proposals for electricity market reform will drive investment, ensuring that we have a diverse mix of energy sources. Those proposals also include legislating for a capacity market to ensure that we have sufficiently reliable capacity on the system in the long term. The legislation, which will come to your Lordships’ House for consideration shortly, will enable a capacity market. With regard to the short term, we expect to see some reduction in margins as we move towards the middle of the decade; we saw similar reductions in the previous decade.
Does the Minister agree that we are falling further and further behind the necessary timetable for getting new nuclear power on stream? Without that new nuclear power, we will see the proportion of our energy that is generated from nuclear rapidly declining as we close the existing stations, and we will become more and more dependent on imported energy. At the same time, we will of course fail to meet our Kyoto targets. In those circumstances of an increase in imported energy, will the Minister answer the question I asked her yesterday, and which she failed to answer: what is the effect on imported energy requirements of the devaluation of sterling, which is further exacerbated by the loss of our AAA status?
My Lords, new nuclear is one of the country’s options. As I have said many times at the Dispatch Box, it is part of an energy mix. However, like all things, it goes through the proper procedures, as the noble Lord would expect. We have a lot of interest in investment in the UK from outside; I just mentioned Hitachi’s purchase of Horizon. The noble Lord needs to be reassured that we are going through processes that need to be properly done through planning and all the other necessary requirements of new nuclear. On yesterday’s question, if the noble Lord had been here, he would have heard my noble friend’s response.
Following the very pertinent Question of the noble Lord, Lord Ezra, will my noble friend assure the House that if the need arises, our coal-fired power stations will be kept open for as long as necessary, regardless of the European large combustion plants directive? Looking further ahead, will she agree that the Government need to give every encouragement they can to the fastest possible development of our indigenous supplies of shale gas, which is clearly the fuel of choice for power stations in the foreseeable future?
My Lords, my noble friend raises a number of important and key points. Of course we are looking at ensuring that we do not have a dip in our secure energy supply. We are also making sure that our new energies will take over when the old gas and coal-powered stations come off stream. We cannot meet our carbon emission reduction targets if we have unabated coal continuing to come out of our power stations. However, we are looking at increasing our gas supplies as well as all our other alternative energy supplies.
My Lords, as the Minister mentioned, the most effective way to combat potential insecurity of supply is to invest in demand management and reduction. I was very pleased to hear mention of the capacity mechanism that we expect to be part of the Energy Bill. I understand that officials have been working on proposals for this. Will the Minister confirm what state of readiness the proposals are in, and when we might expect to see them, since they are the best way of combating security of supply problems?
The noble Baroness is absolutely right. We need to ensure that we reduce our usage of electricity and of other energies. We have had a consultation. We are now looking at the responses to it. I hope to come back to the Dispatch Box with our response later in the year.