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Security of Supply

I declare my entry in the Register of Members’ Interests as a shareholder in Shell. I welcome the chance to debate security of energy supply. In a sense, the point at which the right hon. Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown) finished is the point at which I begin. Like the hon. Member for Rutland and Melton (Mr. Duncan), I think that the crucial first step in achieving security of supply is to ensure the efficient use of existing supply. The better we use what we have, the less we need to worry about imports and finding new sources of generation. Much remains to be done. On Tuesday, European Standing Committee C is to debate Europe-wide energy efficiency measures. It is estimated that efficiency could be improved by at least 20 per cent. across the European Union. Provided that they are applied effectively, it makes sense to work through building regulations for new build and for extensions, but we have to deal with existing buildings as well because our housing stock will not be replaced quickly. Many people who face fuel poverty will not necessarily move into new housing stock, so it is crucial that we tackle the energy efficiency of the existing housing stock. We have relied on low fuel prices and improved incomes to tackle fuel poverty. However, someone’s income can vary according to their circumstances, and if we can tackle the energy efficiency of our housing stock we will reduce people’s dependency on energy so that they are less likely to find themselves in fuel poverty. We still face a major hurdle in improving consumer confidence so that people accept the new technologies, install them and understand what can be done to maximise the energy efficiency of their home. There is a problem, too, with marketing and presentation, as people do not see that the increased investment in their house can be offset against its improved value and long-term savings in energy bills. We need to find innovative ways of enabling people to measure energy conservation in their home and in their energy bills. A complete household energy package will demonstrate the benefits of conservation over time in reduced bills, thus enabling people to see more clearly the equation between conservation and investment. Given the current high prices, it is a good time for the Government to press the case for energy conservation, and to use public information to convey both its importance and the opportunities available for conservation. Energy conservation and increased security of supply are important and do not just affect heating and electricity. Transport is a major contributor to carbon emissions, as well as a major consumer of energy. Replacing crude fuel taxes with road user charges would be a more effective way of ensuring more efficient use of fuel while ensuring that people who live in communities where road transport is the only available form of transport are not penalised. Replacing the climate change levy with a carbon tax will focus the economic signals on the importance of saving and conserving energy. Our debate has touched on the important benefits that can be derived from improvements in the distribution of energy and the way in which we can bring energy generation closer to consumers’ homes. Every year, 1 million or so gas boilers are replaced, and it would be beneficial if people had the confidence to replace them with a mini combined heat and power plant to generate electricity in their home and provide heat at the same time. Again, that would reduce demand and the need for large distribution systems, thus leading to a more efficient market. In many ways, this debate has been triggered by the high prices this winter. The Secretary of State said that there is a problem partly because world energy prices are high. As has been said, the international oil market sets the price of oil around the world. Gas remains a much more regional market, although it is becoming more connected as more liquefied natural gas is processed and gas is shifted from one market to another. We have seen an extreme example of what can happen in an isolated part of the regional market. The UK is in transition from its status as a supplier that meets its own energy needs to one as an importer, and has experienced problems in coming to terms with new gas imports. The transition to the new market arrangement coincided with forecasts of cold weather, which did not improve confidence in a thinly traded market. What guidance is given to the Met Office on the way in which it makes its predictions? Is more caution creeping into its predictions and, to avoid accusations of omitting predictions of bad weather, has it over-predicted bad weather? Do the Government monitor the Met Office’s predictions, which have a major impact on the market. Clearly, for many years, domestic users and energy users with normal contract supplies have benefited from the market. However, as has been said, the transition investment will be made later and, as can be expected simply by relying on the market to send the signal, there are spikes in the market. Both as a nation and as individual energy users, we must decide whether the benefits of the good years, when we do not need investment, are worth the price of uncertainty and upheaval in the transition years. Other markets have probably paid over the odds in past years, but they have not experienced upheaval in times of transition and new investment. There may not be power cuts and loss of energy, as the Secretary of State and the Minister have often assured us, but self-disconnection because of fuel poverty is a serious problem for people on prepayment meters. Self-disconnection by large industry is a major problem for the economy. A large business may be geared up to disconnecting from supply and not operating during high peak times, but the supply chain is affected and that hidden way of balancing energy supply has a knock-on effect on the economy. The Secretary of State said that the pipes are coming and the LNG shipment terminals are being built, connecting us to new supplies. However, as he has also said, the pipes have not always been full and the ships have not always turned up. With winter projection models of the stability and balancing of the UK energy market, more awareness is needed of the interaction with markets beyond our borders. The pipe is not an adequate solution unless there is fuel flowing though it. As the Secretary of State said, we must consider the liberalisation of the market and ensure that both ends of the pipe are operating in the same market. That will bring more stability to supplies and more confidence and predictability to prices.