Electricity (Scotland)

Motion made, and Question proposed, That the sitting be now adjourned.—(Mark Tami.)

09:30:00

Gordon Banks (Ochil and South Perthshire) (Lab)
It is a great pleasure to debate this important issue under your guidance, Mrs. Humble.

Scotland has a proud history of energy production and of extracting the raw materials to make that production possible. Today, however—I say this from, dare I say it, a traditional viewpoint—the deep mines are all closed and we are left with open-cast and North sea oil. However, the challenges that we face have not diminished; indeed, they have grown.

Over recent years, we have all become attuned to the need for clean renewable energy, but I am very concerned that the major political parties have embraced that need too late. For too long, clean renewable energy was on the periphery of the UK’s objectives and, sadly, on the periphery of mainstream politics. As we all know, things are very different today, but we are still running to catch up and to get where we might have been if the concept had been incorporated into mainstream politics 10 or 20 years earlier.

I want to spend a few minutes on each of our generating opportunities, before talking a little about consumption. Scotland must have a diverse energy mix, because that will deliver jobs, investment and energy security, as well as tackling climate change. Never in living memory have jobs and investment been more important, and to deliver on them successfully, we must have diversity.

The current recession has shown us the dangers of a lack of diversity, and that applies not only to the financial sector. Our dependency on oil and gas had a major effect on energy price rises last year and could cause similar problems in the future if we fail to get our act together. The diversity that we need will bring about investment over a range of generating options and bring growth in jobs, which one sector alone cannot deliver in the same volume. With gas and even oil coming from potentially increasingly unstable areas, we must have cross-sector investment. With investment and job growth, we will deliver energy security to the UK economy.

Another lesson that we should learn from the recession is that there is, and will be, a range of pressures on UK businesses. We cannot allow rising energy prices to have a detrimental impact on our businesses, when we could take action to avoid such pressures. If pressures are allowed to develop, they will make our businesses uncompetitive and, as sure as night follows day, result in reduced investment and the loss of jobs.

It is also important for the domestic consumer that we can provide options that result in steady and affordable energy prices. We know only too well the impact of last year’s rising electricity and gas prices, which were caused by escalating oil prices on the international markets. That was outwith the control of our Government and, indeed, of any Government. That in itself tells us that we cannot be dependent on a single source for our energy output and that we must have a balanced mix. To achieve that, we must take positive action. We need to keep the lights on, but we need to do it in a way that delivers economic security, jobs, investment, stable pricing and energy security.

North sea oil will remain an important but, sadly, declining contributor to our energy mix in the coming years. Oil and gas are responsible for 23 per cent. of Scotland’s energy mix, but that will decline as oil plants are closed by 2016 in line with the European large combustion plant directive. Recognising that oil and gas still have a future, however, the Chancellor committed only last week to increasing the incentives to explore and extract from the North sea. He introduced incentives to encourage smaller fields to be brought into production, and those fields could deliver about 2 billion barrels of oil and gas that would otherwise have remained in place. Indeed, this is not the first Budget to offer such incentives. North sea oil has contributed to jobs, investment and energy security in the past, and it can play a role in promoting them in the future. For several reasons, however, it cannot do that alone and, indeed, it probably cannot even be the biggest contributor.

Coal makes up 25 per cent. of our energy mix, and many would argue that too little of that volume is made up of output from Scotland. The country has a long history of coal mining, and many of my relatives, including my father and grandfather, have paid the ultimate price for that tradition. Mining illnesses have claimed many lives, including that of my father, and disasters such as the Valleyfield disaster of 1939, in which my grandfather was killed, are, sadly, a reminder of the dangers of such employment. However, mines in my constituency at Clackmannan, Dollar, Fishcross, Castlebridge and nearby Manor Powis and Solsgirth have fed many a family for many a year. As difficult, challenging and dangerous as deep mining may appear to us, many people in my constituency would willingly resume working in a deep mine tomorrow if they were given the opportunity.

As an honorary Bevin boy, it would be remiss of me, while on the issue of coal mines, not to acknowledge the role played by those conscript miners during world war two. However, to return to the current day and, indeed, to look to the future, recent newspaper reports suggest that there is some possibility of Longannet—the last deep mine in Scotland to close—reopening at some point in the future, despite reports of flooding. Flooding led to closure in 2001, but that is another matter altogether.

The one thing that could provide a real future for coal is carbon capture. The carbon capture and storage project is a real opportunity for traditional fuels to be used as part of the energy mix. CCS will provide an opportunity to extract and burn the millions of tonnes of coal believed to be in Scotland in a clean and modern way, while providing jobs, investment and energy security. We may need to watch this space, but perhaps my hon. Friend the Minister can say a little more about the issue in her reply.

I am a supporter of what we might call renewables—wind and water in their various guises. Renewables account for about 14 per cent. of our energy mix, and that needs to rise. A Europe-wide target of 20 per cent. renewables by 2020 is to be encouraged, and the UK’s legally binding 34 per cent. reduction in carbon emissions by the same date maintains our position as a world leader in the fight against climate change. However, the UK and Scottish Executive emissions targets of an 80 per cent. reduction by 2050 will come about only with the delivery of a mix of generation, technology and continuous political will.

The commitment by the Department of Energy and Climate Change to 33 GW of onshore and offshore renewables by 2020 will grow the renewables sector, but it is also required to replace the 25 to 30 GW of conventional generation capacity that will be phased out by a similar date. Last week’s Budget provided more than £1.4 billion of extra targeted support for the low-carbon sector, on top of the measures announced last autumn. That means that £10.4 billion of additional investment will be pumped into the low-carbon and energy sectors over the next three years.

Mr. Alistair Carmichael (Orkney and Shetland) (LD)
Was the hon. Gentleman able to identify anything in last week’s Budget that would assist the development of tidal stream and wave power generation, as distinct from offshore wind generation?

Gordon Banks
If the hon. Gentleman is a little patient, I will come to that in a moment or two.

However, renewables cannot do it all alone. By 2025, Scotland will need to replace all its non-renewable generation capacity, which currently provides 68 per cent. of our output. If that gap is not plugged, Scotland will become a net importer of energy, in contrast to its current position.

There is also planning. Before everybody jumps to their feet, I should say that I am talking about planning not for nuclear—I will come to that later—but for wind farms. There is a history, in the short existence of wind farm applications, of planning procedures being extended, and many applications ending up with the Scottish Executive on appeal. I do not advocate the blanket approval of such applications, just because they happen to be for wind farms. Some applications will be sound, and others not. However, the trend has been an extension in the time taken for determination. My constituency is situated in one of the major wind corridors in the country, and I fully understand that there must be a balanced approach, but, from the perspective of the renewables sector, the planning system has not delivered renewable options at the pace that many would have wanted. That reduces the likelihood of our having a credible renewables sector as an alternative towards a nuclear generating base.

Mr. Mike Weir (Angus) (SNP)
I accept what the hon. Gentleman has said about the planning system, which has long been a bane in many such matters, but does he accept that the Scottish Government’s new planning framework will go some way towards dealing with some of the problems?

Gordon Banks
There is no doubt that action has been needed, and perhaps is being taken, to quicken things. However, there is still a significant backlog in the pipework that needs to be worked through, not least in my constituency.

Mr. Carmichael
I am not quite clear what the hon. Gentleman is telling the Chamber. Does he think that the planning system itself is flawed and in need of improvement, or merely that there is a backlog that needs clearing but that there is no need for structural change to the system?

Gordon Banks
I am saying that the planning system to date has created a backlog, which has reduced the potential capability of onshore wind production. That has been a significant disappointment to the energy generators. There are steps that have been taken, and can and will be taken, to work those applications through the system, and in time they will go through the system, but because the industry has recognised that the decision-making process is not swift or clear, multiple applications have been made to test certain areas, even when it is likely that there is a favourable location elsewhere. That has happened because the process is so unpredictable and takes so long. We need a quicker and clearer decision-making process, so that the good onshore renewable facilities can be given the go-ahead more quickly than has happened in the past. That is not, I think, difficult to understand—I do not mean to be flippant. We need the people who have the challenge of taking the decisions to take those decisions. It comes down to the individual decision-making process in each of our local authorities.

I am a recent convert to nuclear—perhaps “convert” is too strong a word, but realism has kicked in. I have long had concerns about the safety and storage of nuclear waste, and on that basis I would prefer my electricity to be generated in some other manner that might be classified as safer, but I always said that if I were to become convinced that the lights were in danger of going out, I would see the sense of nuclear. That day has arrived—we do not have much of an option.

A new generation of 11 nuclear power plants is being planned for England and Wales. It will deliver a growing level of energy security and carbon output reductions, and it will involve the investment of £3 billion in every new plant. There are areas of Scotland that have a nuclear history and whose economies have been and are now being supported by that investment. The question is whether Scotland should be deprived of that level of investment and in turn fail to play its full part in future UK energy production. In the past, investment has had multiple benefits, bringing jobs and economic security, reducing carbon output, managing costs and delivering a level of energy security. Perhaps the Minister will comment on whether she feels that Scotland should be deprived of such investment and goals in the future.

I do not doubt there are risks with nuclear generation—there are risks in everything that we do—but there are risks without it, too. It is a balance of those risks that needs to be accepted by everyone today. There is a real worry that the Scottish Executive, using their control over planning laws, will restrict and influence the energy policy of the UK in a way that could damage Scotland, and indeed the UK, on many fronts. Perhaps my hon. Friend the Minister will comment on that.

John Robertson (Glasgow, North-West) (Lab)
Does my hon. Friend agree that it is outrageous that any Government can use an obscure planning rule to stop something in an area that wants to receive billions of pounds of investment in a new power station and which is already a nuclear power station area, when there is a company that wants to spend the money—not Government money, but its money—and increase our contribution to the national grid?

Gordon Banks
It is something that I find difficult to grasp and have significant discomfort with, because a peripheral ability is having an impact on not only investment and jobs in the area but energy policy throughout the UK.

Mr. Weir
Does the hon. Gentleman see a slight contradiction in his argument? He argues that there should be changes for wind farms, but that nuclear is different. The Scottish Government are entitled to exercise their power under the electricity and planning legislation. Does he not see the contradiction?

Gordon Banks
No I do not, because what I have been saying about onshore wind generation is that the process has been too slow. I did not comment on whether the decisions have been right; I just said that the decision-making process has been too slow. My argument about nuclear and its impact on our energy policy is that, as I have said, we do not have an option. The point about the planning system and renewables is the time taken; the point about nuclear is not the time but the fact that a decision can be taken that will affect the energy policy, economic stability and energy security of the UK as a whole.

The 38 per cent. of electricity generation that nuclear is responsible for in Scotland cannot, no matter with what good intentions, be replaced in time by renewables. Indeed, the growing amount of renewables demands a significant amount of responsive back-up. If Scotland is to have a level of energy security in the future, play its full role as an energy provider in the UK and embrace investment and job opportunities, I do not see how current nuclear technology can be ignored.

The more diverse the sources of our energy production, the greater the challenges that will be placed on the grid infrastructure. The transmission access review carried out by Ofgem and the Department for Business, Enterprise and Regulatory Reform will support the more cost-effective and faster connection of renewables to the grid, but the fact that challenges remain can be demonstrated in the process involving the Beauly to Denny transmission line, which may have a negative impact on parts of my constituency. In addition, we must ensure that the distribution networks in our towns and cities are not subject to continued failure and breakdown. In my constituency in Alloa, there is sadly a history of supply breakdown. The last batch of multiple failures took place just days before Christmas, resulting in significant loss to retailers and businesses and disruption to domestic customers. I hope that Ofgem’s review of the compensation process and the interim report due in July will recognise that the current system fails in certain circumstances. Our network maintenance providers must be given the ability to recompense end users in a way commensurate with the frequency and impact of system failures. To do otherwise is grossly unfair.

Of course, generation demands are relevant to our consumption. We all want the lights to work when we turn on the switch, and we want to pay as low a cost as possible for that service. Last year—and even today—I received complaints about energy prices and I want to take every step possible to have those costs reduced for domestic and business users. Our industry has done a lot to reduce energy consumption in respect of the climate change levy, but we must be able to offer competitive prices for the worldwide market. We have learned that lesson in recent months, if indeed we needed to learn it at all.

Where there are built-in options, business can chop and change its consumption from gas to electricity to oil, but domestic consumers do not have that choice. We must try to ensure that energy costs for domestic end users are as low as possible, and that means having modern, efficient generating facilities. Through social policy, the Government can and do deliver targeted help to those most in need, such as the winter fuel allowance for pensioners. We must work hand in hand with that to improve the insulation of our existing housing stock. That will reduce consumption and benefit both individuals and the environment.

The biggest challenge is with our historical stock. New houses are being built to ever increasing energy efficiency demands, but we can and must go further. When I first entered the house building sector in 1974, the insulation requirements were laughable compared with today, and those houses, and others built decades and centuries ago, are our biggest consumption challenge. We must also see falls in energy market prices passed on to consumers, and I call on energy companies to make clear their forward plans for price reductions as a result of falling world demand and a reduction in raw material costs.

The problems identified in the Ofgem probe into energy retail markets must be addressed quickly, and I urge the Government to take action if the industry and Ofgem are unable or too slow to do so. Increased costs for power card users are not acceptable, and we must look beyond the tariffs to see all related charges. If legislation is required to rectify that wrong, I hope that the Government will act sooner rather than later—I am sure that they would have the support of many hon. Members. Social tariffs need expanding and must be made more accessible. I ask the Minister to leave no stone unturned to ensure that such tariffs are available to everyone in Scotland who is entitled to them.

Energy is vital for our existence. In the past, Scotland has played a valuable role in that sector. It does so in the present, and I urge the Minister to take steps to ensure that it continues to do so in the future. Scotland needs a balanced energy policy. This should not be a debate about nuclear power; it should be about a balanced energy policy in which nuclear can be a player.

I support the move towards clean coal and carbon capture technologies. That could see significant investment and job opportunities in Scotland, including in my constituency. Scottish Power, which is near to my constituency and that of the hon. Member for Dunfermline and West Fife (Willie Rennie), hopes to be the first in the UK to produce a large, fully operational carbon capture and storage system to be retrofitted to Longannet by 2014. If that technology delivers the goods, there will be a reduction in fossil fuel emissions of up to 90 per cent and a whole range of new options for Scotland will open up.

There are an estimated 50,000 fossil fuel plants in existence throughout the world. China and the USA are the leaders in that method of generation. That Scotland has an opportunity to be one of the pioneers in carbon capture and storage makes me very proud, and I hope that the Minister will do all that she can to secure the investment at Longannet, which could lead to a growth in exports of that technology to the massive economies of China and the USA.

I have no desire to see powers transferred from Holyrood back to Westminster, but I am concerned that a devolved Government could impact on a vital policy such as energy in an indirect manner, to an extent that could be damaging to energy production and the economic future of the UK.

Investment in renewables has struggled in the current economic downturn, but I applaud the actions of the Government, which could see more than £1 billion invested in turbines and infrastructure around Scotland’s coastline. The Scottish Council for Development and Industry claims that Scotland can generate 50,000 jobs in the energy sector over the next 15 years. I urge the Minister to leave no stone unturned to secure those jobs for Scotland and futures for my constituents and to deliver a cleaner, greener future for our children.

09:55:00

Mr. Mike Weir (Angus) (SNP)
I am tempted to say, “Here we go again.” Looking round the room I see myself, the hon. Member for Orkney and Shetland (Mr. Carmichael), the hon. Member for Glasgow, North-West (John Robertson) and the Minister. We have all been round this course many times, in this Chamber, the House and the Scottish Affairs Committee. The hon. Member for Glasgow, North-West and I continue this debate in the Energy and Climate Change Committee.

When I saw the title of the debate, I hoped that we had moved on from the perennial argument over the construction of new nuclear power stations in Scotland. Alas, that has proved not to be the case. We have debated this subject on numerous occasions, and it will surprise nobody to hear that the Scottish National party and the Scottish Government do not accept the need for new nuclear power stations in Scotland. I have seen no evidence to make me change my mind on that, despite the best efforts of the hon. Member for Glasgow, North-West.

We oppose new nuclear power stations for various reasons, but there are other energy issues in Scotland. I will speak briefly on the nuclear issue before moving on to what I consider to be slightly more important matters. We do not need new nuclear power stations. Scotland has the potential to be the green powerhouse of Europe, and we should concentrate on creating a safer, greener Scotland by developing that full potential. Nuclear power is costly and has never lived up to the claims of its proponents. We all recall being told that it would be too cheap to meter—that has turned out to be a con. The budget of the Nuclear Decommissioning Agency is running away. At last count, it had reached at least £70 billion, and may now be as high as £90 billion. Before the reorganisation of Government Departments, it took up nearly half the budget of the Department for Business, Enterprise and Regulatory Reform. That was before the costs of disposal of waste from new stations were considered.

In Scotland, the decommissioning costs of Chapelcross are estimated to be at least £1.37 billion. The site will not be available for resale until 2018. At Dounreay the cost is almost £3 billion. Total costs in Scotland have reached £5.3 billion at current prices, and that is before the costs of Torness and Hunterston B are known.

When the Labour and Liberal Executive were in power in Scotland, they were opposed to nuclear power stations because they did not believe that the problem of waste disposal had been solved. That is still a problem—it has not been solved. The UK Government have simply decided to treat it as solved without having a disposal site, funding or a clear plan for what to do with existing waste, never mind the new waste.

The economics of nuclear power do not stack up. No stations anywhere in the world have been built without public subsidy; the newest station in Finland is running behind schedule and over cost. We are told that nuclear power could provide jobs in the future, but renewables can provide jobs now. We need those jobs now for a new, green, energy future.

The hon. Member for Ochil and South Perthshire (Gordon Banks) talked about economic security. Where is the economic security when the main builder of new power stations will be a company, the majority of which is owned by the French Government? The main substance needed for nuclear power is uranium. Perhaps we can get that from Australia and Canada now, but there is a limited supply. Some estimates say that there is no more than 40 years’ worth. After that, where do we get it from? We will have to go to Kazakhstan and other such places, which are hardly the most stable parts of the world. If we were worried about gas from Russia, why are we so relaxed about uranium from Kazakhstan?

Mr. Carmichael
If Kazakhstan will not supply it, there is always Uzbekistan. Does the hon. Gentleman think that it is sensible to put our future energy consumption and generation capacity in the hands of someone like Islam Karimov?

Mr. Weir
Certainly not. We need to develop our own energy future. We currently have substantial amounts of North sea oil and gas, and a renewable future on which we should concentrate. Nuclear is a thing of the past and not the future. Moreover, we should consider its moral implications and its connection with weapons. We told Iran and North Korea that they could not have nuclear power because of what they might do with it.

Plainly, renewables, as a share of our energy generation, are increasing while nuclear is decreasing. I was much alarmed by the outrageous call of the hon. Member for Ochil and South Perthshire for the power of the Scottish Government to be removed. This is a matter for the Scottish Parliament, and it is part of the devolved solution and a matter for the Scottish people. A majority in the Scottish Parliament are opposed to nuclear power stations and they were elected by the Scottish people. It is up to the Scottish people to change the situation.

We believe that it would be wiser to invest the billions that would be required for new nuclear power stations in Scotland’s vast renewable potential. I appeal to hon. Members to get over their obsession with new nuclear and let us consider what we can agree on rather than raking over the embers of something that we are highly unlikely ever to agree on. On that basis, I should like to concentrate on some of the more positive aspects of electricity generation and consumption, and to highlight a few areas in which urgent action is needed.

As I indicated, Scotland has a huge potential for many forms of renewable energy. The Scottish Government are on target to exceed their aim of generating 31 per cent. of electricity demand from renewables by 2011, with capacity, which is either installed or consented to, exceeding 5 GW. They are determined to meet, and if possible exceed, the target of 50 per cent. by 2020 through a balanced mix of technologies. They also wish to continue working with European partners to look at better offshore grid connections, which are essential for the large-scale export of renewable energy.

The Scottish renewables obligation will give a much greater incentive to wind and wave technology, which has a huge potential for the future. In the spirit of co-operation that I am trying to engender, I also warmly welcome the recent announcement by the UK Government to extend the renewables obligation until 2037. That is very positive and gives us a potential to expand important energy sources. The Crown estate’s recent announcement of offshore wind licences also has the potential to increase our renewables. Some such licences may cover the firth of Tay in my own constituency. I await with interest the reaction to offshore wind given the problems that there have been with onshore wind. None the less, it is an area that we need to continue to develop.

The £13 million wave and tidal energy support scheme awarded grants to eight marine energy projects, and the Scottish Government have indicated that they intend to introduce, by June, the most generous support in the UK for commercially deployed and marine renewable energy projects on five renewables obligation certificates for wave and three for tidal. That is a real attempt to kick-start renewables and put in place all the renewable generation.

Moreover, we should not forget that we have North sea oil and gas. As the hon. Member for Glasgow, North-West well knows, the Energy and Climate Change Committee is currently considering the oil and gas industry. We have had some very interesting meetings on the subject which included a visit to Aberdeen. There is still an immense amount of oil and gas in the North sea, and potential development west of Shetland. The UK Government must consider that as part of a medium-term energy future. Changes in the Budget will help a little, but more needs to be done to ensure the development west of Shetland, which is a very difficult environment from which to extract oil and gas.

The future of the industry goes beyond that, however. The hon. Member for Ochil and South Perthshire talked about carbon capture and storage, but the North sea has huge potential. We have the undersea aquifers and the old oil and gas fields which have huge storage potential for carbon capture and storage. Moreover, in the North sea we have the skills, through the oil and gas industry, to develop CCS and offshore wind. The other week, I visited Petrofac, which has a facility in my constituency, to look at its offshore safety work. It said that it was getting increasing interest from those who wish to get involved in offshore wind and other offshore renewable projects, thus highlighting that there is the potential to develop our existing North sea industry.

I should also like to talk about carbon capture and storage. Again, in the new spirit of co-operation, I welcome the statement on the subject made by the Secretary of State for Energy and Climate Change. I am tempted to say that it is better late than never, because had the Government not pulled the rug from under the Peterhead project, we could have been well ahead with carbon capture and storage. As it happens, that project is now proceeding in Abu Dhabi. We are now, at last, considering movement with CCS. Obviously, Scotland has huge potential with the possible development at Longannet. At the moment, Longannet is the second largest coal-fired power station in Europe. The project that is being developed there, in a consortium led by Scottish Power, includes Aker Clean Carbon’s technology and Marathon Oil Corporation’s drilling and transportation expertise. It is one of the three bids that is going forward in the bid process and, if it is successful, it could be the world’s largest fully operational system on site by 2014, and that would go a great distance to putting Scotland at the forefront of carbon capture and storage and developing industry for the future.

The hon. Member for Ochil and South Perthshire made an important point about the number of coal-fired power stations throughout the world and the continuing development of them in China and India. Longannet will be a retrofitted carbon capture and storage facility, which is vital because we have to retrofit the existing stations if we are to reduce their emissions. It is no good looking only at carbon capture and storage for new build, it must be developed to retrofit existing stations so that we can move forward and drastically reduce our carbon emissions.

There are problems with CCS, however, which stem from the transmission grid. I have often talked about the need to strengthen the grid, particularly for the north of Scotland, to take the renewables into account. The regime is distance-based and that works against the development of renewable energy resources in Scotland as well as providing a disincentive to thermal-based generation. In effect, it is technology neutral, but any technology in the north of Scotland faces the same problems. It is high time that we moved from that to a charging model based on a flat rate—the so-called postal system. Each generator would pay the same for access into the grid. Such a system would go a long way towards helping the development of renewables and will enable us to meet the challenging targets that we are all signed up to—or that most of us are signed up to. National Grid is consulting the UK industry and generators for their views on the Scottish proposal, which I hope will move forward.

Mr. Carmichael
Will the hon. Gentleman explain his thinking? Why must we have only one transmission regime for every kind of generation? Does he accept that, if traditional fossil fuels are being used, locational charging, whereby there is a loss of energy in the transmission, makes sense, but that it does not make sense for renewable resources?

Mr. Weir
We are trying to get a balanced mix. We want to encourage as many types of renewable as possible. The hon. Gentleman talks about traditional sources, but CCS changes things. I will talk about that in a moment.

The current first-come-first-served access arrangements are indefensible, and I welcome the fact that the transmission access review group is looking at them. Hopefully, there will be changes to avoid the ridiculous situation in which people can be given connection dates many years in the future. We should consider a system that is based on the realistic possibility of access. If a project is tied up in the planning system for many years and is never likely to proceed, it is daft that it is able to have a connection consent when a project that has been through the system cannot. That needs to change.

Scottish Power has identified a problem with the CCS and the transmission system. At the moment, there are constraints on transmission under the British electricity trading and transmission arrangements. Generators in Scotland pay to be connected to, and to use, the Great Britain transmission system. Annually, such payments amount to 40 per cent. of the total transmission charges which, allowing for the fact that Scottish generation represents only 12 per cent. of total generation, means that Scottish generators contribute approximately £100 million per annum more than what would be a fair share. In return for the payments, generators are entitled to access and to use the transmission system to move their generated electricity to market. Consequently, when they cannot have full access to the system because of inadequate grid capacity, they should be entitled to compensation for the resulting loss—those payments are referred to as constraint payments.

Electricity generation in Scotland already exceeds the capacity of the network, and additional renewable generation in Scotland will exacerbate the situation. Neither National Grid nor Ofgem has taken sufficient steps to address the capacity shortfall, even though the problem has been known about since well before 2005. There is an ongoing programme of infrastructure reinforcement works to increase capacity, but it will be several years before the interconnector capacity between Scotland and England is sufficient to eliminate constraints. National Grid and Ofgem have nevertheless come forward with a new proposal that appears to target Scottish generators. They want to change the system of balancing costs so that constraint payments would effectively be charged back to the same generators, which is to say that generators would pay constraint charges for not being able to access the system, which seems bizarre in the extreme.

Setting artificial limits on the level of compensation that Scottish generators would receive, irrespective of the value that they provide to National Grid or of the losses incurred by generators, seems daft, but the problem is that the proposal seriously undermines confidence in investing in Scotland’s thermal and renewable energy sectors, including CCS, which is the point that I wished to make to the hon. Member for Orkney and Shetland. We are placing a great deal of faith in the future of CCS to meet our emission targets and we need to do everything possible to ensure that it happens. We cannot discriminate against existing and future Scottish generators—that calls into question the validity of the BETTA system. I appeal to the Minister to take the matter up with her colleagues at the Department of Energy and Climate Change, as I have with the Energy and Climate Change Minister, the hon. and learned Member for North Warwickshire (Mr. O'Brien), who has promised to meet me to discuss the matter. It is important that we get this right. There are many other problems, but we need to get on with CCS, which is one thing that will ensure energy for the future without the need to go down the nuclear route.

I should like to make one final point in response to what the hon. Member for Ochil and South Perthshire said on energy prices. We all quite rightly get many complaints about energy prices, and all politicians will struggle with the problem in the coming years. However, we need to balance energy prices with the need for investment in the grid and in new generation, and we must be realistic about it. We must ensure that those who have difficulty paying bills—those on low incomes or benefits—are given the maximum help in paying them, but I agree with the hon. Gentleman that we must also take steps to ensure that our housing stock is as energy efficient as possible. We must ensure that new build incorporates the highest standards of energy efficiency—new renewable energy such as photovoltaics or solar panels could help.

We should consider retrofitting our older housing stock, but there is a limit to what we can do. My house is a Victorian semi, and I have done all the easy things to insulate the house, but it has solid walls, so I cannot inject anything into them. I have a very well lagged loft and I have changed all the light bulbs, but there is a limit to what I can do.

As hon. Members who have served on the Business and Enterprise Committee and others will know, the interconnection of the European and UK markets is a serious issue, and it impacts on the price of our energy. It is not balanced. The European Commission is apparently trying to liberalise the market, although there has been little success to date. That needs to happen, because the operation of the Europe-UK interconnector impacts on Scotland.

Many things can be done in Scotland so that we have a clean, green energy future. I suspect that we will never agree on nuclear. I appeal to everyone to concentrate on the things on which we can agree, to push forward generation for the future and to ensure that we have that clean, green energy future for Scotland.

Mrs. Joan Humble (in the Chair)
Order. I wish to call the Front Bench spokesmen at 10.30 am, so we have only 13 minutes of debating time left for the two hon. Members who still wish to speak. I therefore urge them to limit their contributions.

10:17:00

John Robertson (Glasgow, North-West) (Lab)
It is a pleasure to serve under your chairmanship, Mrs. Humble. I congratulate my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) on his excellent speech. He hit all the right buttons and talked about everything, and his contribution was balanced. It was more balanced than that of the hon. Member for Angus (Mr. Weir). He told me earlier that this is like déjà vu all over again. He started off well, saying that we did not want to go into the usual nuclear argument, but then he went into it—for the next seven minutes or so.

The most important thing is how the needs and aspirations of the Scottish people are met. As Scottish politicians, we should do our best to meet those aspirations. I enjoyed the hon. Gentleman’s last comment. He said that we should talk only about things on which we agree but, unfortunately, that is not how life works. We want to talk about everything, which includes nuclear. Nuclear will bring a great deal to the party, and it will do a lot to meet the energy needs of the Scottish people at a time when it is needed.

The usual smoke screens have been produced as a way of arguing against nuclear—we heard that nuclear generators are bad people who produce horrible waste that we do not know what to do with. The Government will say what is happening on waste in the late autumn. I hope that the Scottish National party north of the border will accept what comes forth, and that we have a single repository for waste in this country. I hope that the party does not do anything silly and try to have a separate waste dump for nuclear waste in Scotland. How silly would that be? Then again, sillier things have come from that party in recent times.

It is no surprise that I will speak on nuclear energy. It would be remiss of me not to, as chair of the all-party group on nuclear energy. In May, Doosan Babcock, a business just across the river from me, will show off one of the first carbon capture trials in the country. Science is important. I believe that we have always excelled at it in this country, and that science is the most important thing in considering how we are to survive our future, whether in terms of climate change or of our existence in general.

Scientists tell me that no carbon capture facility anywhere in the world is up and running and supplying energy, and it is unlikely that one will be before 2025 at the very earliest, or more probably 2030. There will be trial sites, and we will try this and that to get a power station fitted, up and running and doing what we hope it will do—we hope that this country will make a lot of money selling energy to countries such as China, as my hon. Friend the Member for Ochil and South Perthshire mentioned—but it will not be part of our energy mix in the short term.

When I say “short term”, I am thinking particularly of the 2015 to 2020 bracket, when we will have a problem with our energy needs. At this moment in time, whether we like it or not, or whether we agree or disagree, we will have to consider gas to fulfil a lot of our needs, and we will have to import it from areas from which we do not particularly want to import it. That is my opinion. Although the Secretary of State for Energy and Climate Change said to me that he did not believe that we would have to go down that road, I believe that we will. The information coming to me from energy companies is that there will be a problem when we reach 2015. If we close our coal-fired and nuclear power stations, we will have a shortfall that cannot be met by renewables.

Core supply is the most important thing. Without it, the country does not run. Core supply is the base of electricity or energy needed to ensure that the country works. During the cold spell last winter, renewables in Scotland produced 0.01 per cent. of energy. That is not good enough. We cannot rely on renewables for our future energy needs. When it gets cold and the wind is not blowing, we will not have enough energy to supply our needs. That is a problem.

That is not to say that we should not invest in renewables. It is important that we do so, and that we consider venture capital and development in general. At the end of the day, as I said, that will be our survival. Where do we go next? How do we go on? If the hon. Member for Angus was right about excavation for uranium, which, unfortunately for him, is very small, then I say to him that we have not considered it in any great detail because what we have more than meets our needs. Like everything else, the more we need and the harder it becomes to find, the more we must consider different ways to do things and the more expensive it becomes. We understand all that, but at this time, the supply of uranium for the present and the foreseeable future, even considering the growth in nuclear energy, will meet everybody’s needs for some time to come. Perhaps my hon. Friend the Minister will comment on this, or at least pass on the message to the Minister of State, Department of Energy and Climate Change. I hope that the Government will consider reprocessing to make the fuel last longer and cut back on waste. I would like to see us go down that road.

I know that the hon. Member for Dunfermline and West Fife (Willie Rennie) is waiting to speak. There was quite a lot that I wanted to say, but I think that I have hit all the buttons that I wanted to hit. The most important is that we want to work with each other. The most important thing at the moment is that we do not argue about what kind of energy supply we want or need. I want to see investment in Scotland. I want the billions of pounds that other areas will receive to come north of the border.

In his speech yesterday, the First Minister discussed the possibility that 9,000 jobs could be lost north of the border as a result of the Budget. Building one nuclear power station would create 9,000 jobs. I can solve that problem for him; he can have those 9,000 jobs. I will even go further: let us have two nuclear power stations and create another 9,000 jobs. I believe that that electricity would be useful for the rest of the country. I believe that jobs north of the border would be very welcome, particularly at this time. I also believe that the people of Scotland deserve the best. We should give it to them.

10:25:00

Willie Rennie (Dunfermline and West Fife) (LD)
I congratulate my neighbour, the hon. Member for Ochil and South Perthshire (Gordon Banks), on his excellent exposition of the case. It is a complicated subject. I am also grateful to the hon. Member for Angus (Mr. Weir) for the update on his housing renovations; it was particularly useful in a time-constrained debate. I will be coming to see his house soon to ensure that we benefit from them. I thank the hon. Member for Glasgow, North-West (John Robertson) for his brevity. Obviously, he believes passionately in nuclear. I do not, but he does, for which I commend him.

Fife has contributed significantly over the centuries with a single energy source: coal. We now have a wide range of sources, including biomass. There is a plant over at Leven, and two more are being developed at Longannet and Markinch. Council waste is being turned into combined heat and power. We have wind energy at Raith, and many other sites are being considered by planners. We also have underground coal gasification and methane extraction. From a single source, we have moved to a huge range of sources, which reflects the journey that the whole UK is making.

However, Fife has a particular contribution to make, which ties in with Longannet. Iberdrola, which owns Scottish Power, has indicated that if carbon capture and storage receives the go-ahead, it will make Longannet a centre of excellence. Iberdrola is a worldwide company with huge weight, resources and expertise. It is a world leader in wind power. If we can get it to contribute significantly to making Longannet a centre of excellence, we can tie that up with the energy park being developed over at Methil, and Fife could make a huge contribution to the UK’s energy future. I am keen to ensure that that happens.

CCS has a particular contribution to make, not only because it is a new technology that needs to be exploited to meet our energy needs but because the location includes the Forth valley, one of the biggest contributors to carbon emissions in the UK, with Grangemouth, Mossmorran, Cockenzie, Longannet and many other industrial sites. If we can make it work at Longannet, we could tap into those carbon emissions as well, so the potential is huge. There is easy access to the North sea and the aquifer that we heard about, which I understand could take almost all of Europe’s CO2 emissions. It is a massive aquifer that Fife has great potential to exploit. I am excited about the opportunities ahead, as well as the potential to exploit markets worldwide; we have heard about China and elsewhere. That is why retrofit is so important. It cannot just involve new build; there must be retrofit as well.

A few years ago, nobody was thinking about the next phase of coal-fired power stations, but there have been some interesting converts, including me, to that new technology. The other day, WWF said that

“if the govt wishes to demonstrate the technology”—

that is, CCS—

“on conventional power plants, then it is only sensible to use an existing station such as Longannet station in Scotland rather than building a new one.”

Who would have imagined that environmental organisations such as WWF would be advocating coal in such a short time, when they had been clear advocates against it in the past? I welcome that as a great opportunity.

We have heard a lot about transmission charging. We often hear that one part of Government has a policy contradicting another part of Government. It is frustrating, but we can understand why it happens. The problem is when the same arm of Government proposes opposite policies. Plants situated north of the border and furthest from the market are being penalised, but at the same time, Ministers are advocating nuclear and renewables north of the border, contrary to the first policy. The Government really need to get their line straight and work out whether they are in favour of increasing energy production and generation in Scotland.

That is why I cannot quite understand the argument that the hon. Members for Glasgow, North-West and for Ochil and South Perthshire were making. If they are in favour of nuclear, why are they not against Ofgem’s generating formula? I am sure that if we were to ask Ofgem, it would never say so publicly but it would say privately, “Why on earth are you even considering building new nuclear power stations in Scotland, because that is not where we want new energy generation? We want it south of the border, where the market is.” So the Government need to sort out whether or not they are in favour of generation in Scotland. Forget about renewables. Do the Government want more generation in Scotland, because Ofgem does not seem to be in favour of that option?

I will conclude with one final plea, which is that I hope that the Government will not allow the carbon capture and storage project to slip. There has been some delay already. We have heard about the plant up in the north-east of Scotland. However, even with the current carbon capture competition there has been some slippage. If we are really to exploit the worldwide potential for this technology, we need to ensure that we take advantage now and that we do not allow any slippage, any bureaucracy or any Administration to get in the way of something that could be hugely important for Scotland and the UK.

10:31:00

Mr. Alistair Carmichael (Orkney and Shetland) (LD)
I welcome you to the Chair, Mrs. Humble. I congratulate the hon. Member for Ochil and South Perthshire (Gordon Banks) on securing this debate and on his contribution to it. I particularly commend him for framing the debate in such a way as to allow us to discuss not just generation but consumption—to discuss one element without the other would be essentially a sterile exercise. That has rather been the hallmark of many of the debates that the hon. Member for Angus (Mr. Weir) referred to and in which the hon. Gentleman, the hon. Member for Glasgow, North-West (John Robertson) and I have taken part since we entered the House.

If there has been a lack of debate on a subject, it has perhaps been on the potential for energy efficiency. The hon. Member for Ochil and South Perthshire touched on that subject during his remarks. None the less, we risk—at our peril—forgetting that energy efficiency is the real potential area for change within the energy market.

On the subject of energy consumption, there is one point that I have found increasingly coming to my desk through constituency surgeries, which is the quite outrageous sums that are charged by electricity supply companies to those constituents who rely on card meters. One woman came to my surgery just last week in Shetland and she told me that she is now paying in the region of £200 a month in electricity costs for a two-bedroom house in Shetland. For somebody who is on benefits, that is an outrageous proportion of her income to pay out. Certainly, it takes her well above the threshold of the 10 per cent. of a person’s income that is supposed to be the marker of fuel poverty. Bear in mind also that, almost without exception, the people who have card meters are the people who are on the lowest and most rigidly fixed incomes. They are the people who have no choice and who often tell me that they end up simply sitting in the dark with no lighting and no heat, just because they cannot afford to meet the costs that are being placed on them by energy companies. I sometimes wish that Ofgem would pursue those features of the market with the same vigour that it appears to apply to pursuing other features.

One of the reasons why we have had the full range of debates that the hon. Member for Angus referred to is the fact that, certainly since 2001 and probably in the four years before that, rarely has a year gone by in this House without there being a Government White Paper, a discussion document, a consultation, a strategy unit investigation, a draft Bill or a Bill on energy. The one thing that we never seem to get out of the Government in general and out of 10 Downing street in particular is a decision. That has been apparent from the way in which the debate has proceeded today.

In relation to the nuclear debate, the hon. Member for Ochil and South Perthshire said two things that caused me particular concern and I want to touch on them. He said that he was concerned about nuclear waste and that historically was why he had decided that he was not in favour of nuclear power. He now tells us that he has changed his mind, but he did not tell us that anything had changed with regard to the handling and management of nuclear waste. The fact of the matter is that, notwithstanding the efforts of the Government through the Committee on Radioactive Waste Management and other bodies, nothing has changed. The legitimate concerns that led him to conclude previously—before the Government changed their policy, of course—that nuclear was not the option to take still remain.

I am not theologically opposed to nuclear power; if I might say so. I am not doctrinally opposed to it. The reason that I am opposed to it is specifically the lack of openness and candour that the nuclear industry demonstrates with regard to the management of nuclear waste. If the hon. Member for Ochil and South Perthshire has had his concerns assuaged with regard to nuclear waste, I would suggest that he has been bought politically, if I can put it in a slightly pejorative way, rather too cheaply.

Gordon Banks
On that point, I want to make it clear that nobody buys and sells Gordon Banks. My decision has been arrived at by me alone, because I see the significant dangers of coming into this room, putting that light switch on and nothing happening.

Mr. Carmichael
None the less, the hon. Gentleman seems to be sold on the idea that one particular avenue should be explored, to the exclusion of everything else. I must also say to him that I said “politically” bought, because I did not want to suggest that there was any element of corruption involved here. However, I must say that he was right to take the concerns about nuclear waste seriously. Nothing has changed with regard to that, so I do not see why his position has changed.

John Robertson
Will the hon. Gentleman give way?

Mr. Carmichael
I will not give way to the hon. Gentleman as I am concerned about making some progress. Unlike other hon. Members, I must limit myself to nine minutes.

The hon. Member for Ochil and South Perthshire suggested that this issue should stimulate a reconsideration of the constitutional position with regard to the Scottish Government having power over the planning considerations under the Electricity Act 1989. I want to say that that view is fundamentally wrong-headed. We decide where powers lie constitutionally in this place and elsewhere on the basis of where they lie most appropriately. It was the decision of this House in 1997, and I think that it was the right decision, that that power over planning considerations should be vested in the Parliament and the Government in Scotland, and people should not start changing that situation simply because they do not like the decisions that have been taken.

The final concern that I have about the remarks of both the hon. Members for Ochil and South Perthshire and for Glasgow, North-West is that the hon. Members seem to confuse policies on job creation with policies on energy. We make our choices on energy according to energy considerations. If we see energy simply as a mechanism for generating more jobs, we risk making decisions that will not be in our own long-term strategic interests.

Other hon. Members have spoken about the distribution and transmission charging regimes, which is a subject that is near and dear to my heart. Again, I would just emphasise one point. To my mind, locational charging makes a substantial measure of sense, when we are talking about transmission losses where electricity has been generated by using fossil fuels. However, completely different considerations should apply when we are talking about electricity that is generated from renewables.

On the subject of gas, of course, not all gas comes into this country from the North sea. The potential now is for gas to come from the west of Shetland. That is the next untapped resource. Both from a constituency and strategic point of view, a substantial concern is that we have still not had the necessary decisions taken in Government to allow the full development of gas west of Shetland. I shall be interested to hear exactly what role the Minister’s Department has taken in that debate. I suspect it will not take her long to talk about that.

10:40:00

Mr. Ben Wallace (Lancaster and Wyre) (Con)
I am delighted to serve under your chairmanship today, Mrs. Humble. As my neighbour, you will, of course, know well the debate about gas storage and some of the other issues we have been discussing today. I congratulate the hon. Member for Ochil and South Perthshire (Gordon Banks) on initiating the debate. He made a measured and logical speech. I agreed with everything he said and cannot fault much of it. It was great that there was a lack of ideology, and a concern to solve the problems and face up to the growing energy crisis that could occur if we do not do anything. That is the type of adult attitude that I believe the major political parties are adopting. There is a consensus growing about what to do about the UK’s energy needs and, indeed, the security of supply.

It was interesting that the hon. Gentleman’s speech was followed by that of the hon. Member for Angus (Mr. Weir), who spoke a lot of sense until he moved on to the pre-prepared part of his speech, which included some of the Scottish National party’s mantras about Scotland being the green powerhouse of Europe. True to form, ideology crept into his comments about nuclear energy. I give credit to the Scottish National party; it has done a lot of work on the alternative to nuclear energy and it certainly knows a lot about the subject of renewables and the other areas of generation. If it could only apply that same level-headedness and competence to the subject of nuclear power and remove the ideology, it would join the consensus that recognises that this matter is about doing something by the time we get to the energy gap.

The issue of planning and its relation to UK energy policy cannot be avoided. Of course, I accept the nature of the devolved settlement. As a former Member of the Scottish Parliament, I understand the nuances that can occur and that one can use clever political games to abuse the system if one wishes to frustrate the will of the United Kingdom. I am a Unionist and I recognise that United Kingdom policy on certain issues belongs to this House. We sometimes have to take the rough with the smooth. I do not agree with a lot of the policy produced, but I am a Unionist and that means I stand for the United Kingdom remaining together.

The Scottish National party should not pretend that the majority of the population of Scotland are against nuclear power: Scottish Government figures show that 53 per cent. of Scots polled were in favour of nuclear energy. A party that received effectively 16 per cent. of the electorate’s vote in the last Scottish Parliament election certainly does not hold a large mandate to overrule the United Kingdom. In the interest of the Union, I ask that this island gets its energy policy right. We should not play petty politics with such policy areas, and that is why I urge the Scottish National party to remove ideology from its energy policy. We should question the issues of storage and safety, and talk about the proper areas of debate, but I do not think that ideology serves us well.

The hon. Member for Glasgow, North-West (John Robertson) gave a strong rallying cry for nuclear energy. Not surprisingly, he correctly raised the spectre of technology and how far carbon capture has gone. I used to work in the technology industry, and know that there is always the temptation to grasp the latest thing that comes along or is on the “Today” programme as if it is a silver bullet or the recipe for turning lead into gold. Time and again, we see that technologies do not always deliver the entire solution—in fact, they rarely do so. Often, such a focus can take the light off a current emerging technology. It is interesting that little is now talked about marine, tidal and wave technology. A few years ago, such technology was going to be the silver bullet to solve this problem.

When we introduce new technologies to the debate, we must be careful to recognise that technologies take years, not days, to develop, that they have to be proven and that they have rivals. If we invent carbon capture today, we think that the rest of the world might buy it. Well, that will not be the case if other countries’ Governments choose to invest in their home-made technologies, which might not be the same as ours. We must recognise that we have to have a mix not only of supply of electricity and generation but of past, present and future technologies. Let us not get too distracted by the future, because the gap is growing and time is running out.

The hon. Member for Dunfermline and West Fife (Willie Rennie) objected to nuclear power from an ideological point of view, but he also made some strong technological and environmental arguments. I respect his views on that. He made a strong, bold play for Fife to be the centre in respect of some of the renewables. As my father is from Leven, I support that in part. However, as a Member of Parliament for the north-west, Heysham nuclear power station is within a few minutes drive of me, so I hope that I will be forgiven for not putting all my eggs in the Fife basket.

The hon. Member for Orkney and Shetland (Mr. Carmichael) rightly made a point about consumption, which had not been mentioned before. The easiest thing that we can do today to help to close the energy gulf that might appear is to use less electricity and to use it more efficiently and wisely. It is a free hit for all of us to do that. The hon. Member for Angus pointed out the steps that he had taken—perhaps it would also help if the SNP spoke with a little less hot air. Consumption is not just a bit of the solution; it is almost half the solution. We need to bring that into the classrooms of our schools to the same extent that we bring in some of the fears surrounding other areas of science.

The Conservative party would like more to be done on decentralised electricity technology, combined heat and power, biomass, small and mid-size wind turbines, energy from waste generation, micro-hydro and solar. Barriers already in place prevent those type of generation from getting on to the grid. We need to adopt the feed-in tariff system that exists across other European countries. That system encourages such microgeneration and, indeed, helps decentralised technology to take advantage of the situation and not be blotted out by the established players in the power game.

Finally, there are the issues of affordability and justice in the system of tariffs. We would make it illegal for power companies to discriminate unfairly against consumers who have prepaid meters. It is thoroughly wrong for utility companies to do that. If we go to renewable or alternative energies, the last part of the equation is that there may be a cost impact on the consumer. We must not forget that people in fuel poverty might find it harder and harder to make the jump to energy that is supplied by technology.

I look forward to hearing what the Minister has to say. I believe that a consensus is building and that technology and the money invested in technology is starting to go in the right direction. However, we must not forget that, in the end, the issue is about having a mix. That means we have to put aside some of our ideology to ensure that the energy gap is closed because, as the hon. Member for Ochil and South Perthshire has correctly said, there is a danger that, one day, we will turn on the light switch and nothing will happen.

10:48:00

The Parliamentary Under-Secretary of State for Scotland (Ann McKechin)
I welcome today’s debate, which was initiated by my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks). I also welcome the contributions of other hon. Members this morning. Although we have been around the track with the issue in the past, I think that we all believe it is essential to consider the matter—for the UK but, particularly, for Scotland.

As a number of hon. Members have pointed out, my hon. Friend advanced a well-balanced argument for the need for a balanced energy mix. The Government strongly believe that we require such a diverse energy mix for Scotland. In doing so, we acknowledge that we face two long-term energy challenges: first, tackling climate change and, secondly, dealing with energy security, both of which are global issues that require global solutions. However, there are also vast opportunities, and that has been mentioned by hon. Members on both sides of the Chamber during the debate.

Investment in energy will drive forward jobs and growth—potential growth that Scotland needs to harness and capitalise on, not only in the UK, but in the global market. Energy supply is an increasingly important part of any nation’s security, and we cannot become over-dependant on one source of energy. That is why we require a balanced energy policy that ensures that we can keep the lights on, maintain economic competitiveness and help to protect the environment. We need energy that is affordable, secure and sustainable, as my hon. Friend rightly pointed out.

My hon. Friend raised several issues that I would like to address briefly. He raised concerns about the need for the planning system to adapt to increasing applications for renewable energy. Those will not only be for wind energy, because we will increasingly see energy generation from combined heat and power, biomass and solar panels, as the hon. Member for Dunfermline and West Fife (Willie Rennie) mentioned. We will see an uptake in applications across a variety of fields, so it is important that planning systems are able to adapt and adjust to that demand to ensure we can increase our capacity rapidly in a short time.

Comments were made on nuclear energy and the planning system, and the Calman commission will look at that. The Marine and Coastal Access Bill represents an important new move forward in how we view policy frameworks and how planning fits within them. The hon. Member for Angus (Mr. Weir) made several interesting comments on his desire to see an expansion of the offshore grid. That is an interesting long-term idea, but it is important that we have the right framework in place. The Marine and Coastal Access Bill, on which we have worked closely with the Scottish Government, provides an interesting test case: the Scottish Government have agreed to work within a UK strategic framework but will have the planning powers that will work within that framework. I mention that as a way of suggesting that we should not regard matters that have already been settled in legislation as remaining in stone. We need to adapt and consider whether new developments in other legislation might point the way forward.

Last week the Chancellor delivered the world’s first carbon Budget, which included measures to address energy consumption, supply and efficiency, and it provided more than £1.4 billion of additional targeted support for the low-carbon sector. I welcome the stress that my hon. Friend the Member for Ochil and South Perthshire put on renewables. That Government investment is in addition to measures announced in autumn 2008, which means that around £10.4 billion of additional investment will be pumped into the low-carbon and energy sectors over the next three years, along with around £375 million to improve energy efficiency, which hon. Members have referred to.

We are still facing tough times in the coming years. Our European-wide target is for renewable energy to account for 20 per cent. of energy generation by 2020, and the UK share of that will be 15 per cent. At the same time, the infrastructure is getting old, as my hon. Friend the Member for Glasgow, North-West (John Robertson) rightly pointed out. All Scotland’s ageing conventional generation capacity will need to be replaced by 2020, and by 2025 Scotland will need to replace all its non-renewable generation capacity, which currently amounts to 68 per cent. Those are considerable challenges, so we should not rule out any forms of energy.

I was interested to note that the hon. Member for Angus said that Scotland does not need nuclear energy and went on to explain how we could export energy from wind power and other renewables to other parts of Europe. That view seems to be on the opposite side of the arguments. Investment will drive technology, which he said was the main reason for investing in offshore wind. I fully accept that, but he then said that the £5.3 billion was not an investment in nuclear power in Scotland, but a cost. Well, it would also be a cost if it were used to expand other forms of renewable energy or carbon capture. There are risks involved, as there are with all types of energy. It is about getting a balance of those risks, a point made by my hon. Friend the Member for Ochil and South Perthshire.

Several questions were asked on pricing, which I would like to touch on briefly. Over the past 10 years the UK has benefited from some of the lowest electricity and gas prices in Europe. The Government certainly want to ensure that we maintain pricing at a competitive level for both industry and consumers. That is why we have called on Ofgem to publish the wholesale and retail prices of energy quarterly so that we have greater transparency in future prices. That is also why we want an early resolution of Ofgem’s initial finding about the energy retail market and why we want energy companies to tackle issues about power cards and pricing. If it does not, we will certainly introduce legislation to tackle that problem, as we have already indicated. We have maintained and increased the winter fuel allowance this year and reached a voluntary agreement with the energy supply companies, which will spend an additional £225 million on reduced tariffs and other social programmes over the next three years.

With regard to transmission charges for the islands, which the hon. Member for Orkney and Shetland (Mr. Carmichael) mentioned, I can confirm that there will be an announcement on that shortly, and I have taken his concerns on board. He and other hon. Members also mentioned development west of Shetland, which we rightly consider to be important for the development of the energy sector in Scotland. The Secretary of State for Scotland is fully supportive of the west of Shetland taskforce and pilot, and has already discussed it with Total, which is running the pipeline from there. We continue to keep in contact on that, but obviously the Department of Energy and Climate Change is the lead Department. Members can be assured that we are fully supportive of that area.

The hon. Member for Dunfermline and West Fife rightly spoke about the potential for carbon capture and storage, which we believe offers exciting opportunities in Scotland and throughout the UK. As he will be aware, the project at Longannet is one of three in the current competition, and we expect an announcement on that later in the year. Significant developments are occurring in Scotland and we welcome the co-operation with the Scottish Government to develop that area further.

Scotland is rich in renewable energy sources. We can rely on our geography in tandem with our geology, and wind and tidal power will play their part. The foundations are firm: we have tripled the amount of renewable electricity generation since 2001 and are now the world’s leading country for offshore wind power. Our policy is geared to provide a stable, long-term climate for investment. However, let me be clear that neither wind energy nor nuclear energy can provide the flexibility needed to handle fluctuating electricity demand, a point to which my hon. Friend the Member for Glasgow, North-West rightly referred. Coal and gas will still play an important back-up role for the foreseeable future. It is interesting to note that in Denmark, which is currently Europe’s most wind-intensive state and has more than 6,000 turbines producing 19 per cent. of the country’s total electricity needs, not a single conventional power plant has been closed since 2002. That back-up power is still needed in our systems.

We certainly want to ensure that carbon capture and storage is successful because it could cut carbon emissions from coal by 90 per cent. The hon. Member for Angus made some comments on the Peterhead project, but we believe that it was important to have an open and transparent competition to choose which project to support. Both the UK and Scottish Governments are working closely on carbon capture and storage. We believe that, although it is scientifically possible, issues remain about its commercial potential, which is why we are not gambling our entire investment on only one energy supply.

In conclusion, as the 2007 White Paper made clear, a key plank of our energy strategy involves not only alternative sources of power, but the adoption of alternative forms of behaviour. Reducing consumption shows that the cheapest and cleanest unit of energy is the one not used, often referred to as the negawatt. Both before and in the Budget, the UK Government have introduced measures to address that, and our work through the Energy Saving Trust and the Carbon Trust has been helping businesses and householders for many years.

The world is moving to a low-carbon economy and we are determined that Scotland and the UK will not be left behind. The Budget underlined the desire for the UK to be in the vanguard of change, leading the way and putting UK business at the forefront to take full advantage of the emerging global opportunities presented by this historic shift. Scotland must now get the benefit of that growth and the jobs that will come from the energy revolution. That revolution is not restricted to renewables, but also includes clean fossil fuels and nuclear energy.