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Security of Supply

The recent dispute between Russia and Ukraine has given the debate a sense of urgency, and the question of energy has entered the public consciousness in a way that I have not known before. I was surprised by the reaction of some right-wing think tanks and Government spokesmen in the US—the terms may be interchangeable—in criticising Russia’s role in the dispute. The advice when communism collapsed was that Russia needed a big dose of marketisation, so there is a whiff of hypocrisy in the air. The US has never been afraid to use its muscle in the energy sector, the oil embargoes that it has imposed on Cuba being only one example. I understand that the price that Ukraine paid to Russia for gas was about one fifth of the level in western Europe. It could be argued that that was detrimental to the wider environment, and I am sure that the Russians would argue that it was also detrimental to their economy. However, we should not be surprised by what happened in that dispute, as greater marketisation will inevitably lead to more conflicts of that nature. I was glad to hear my right hon. Friend the Secretary of State say that diplomatic channels represented the best way to deal with such problems in the future. The conflict between Russia and Ukraine caused certain people in this country to express their ideas about how to ensure security of supply in the future, but we must put the matter in context. As has been pointed out, we get roughly 70 per cent. of our gas from Norway; we do not get it from Russia. At the head of the queue of people giving us the answers to our energy problems are those in the tremendously powerful nuclear power lobby. I do not want to go into too much detail, but I have several questions for them to answer. First, how will we manage the increased amount of nuclear waste? What about the costs of a new nuclear programme? I have read that six new stations would cost some £26 billion. Interestingly, some Opposition Members have said that the state should play a key role in underwriting the building of new nuclear power stations. I think that that proposal is very dangerous. Another question has to do with wider security matters. If the UK goes nuclear, other countries will follow, and the existence of a broader nuclear skills base clearly increases the possibility that countries will acquire nuclear weapons. North Korea and Iran are obvious examples of that. American intelligence sources are occasionally worth listening to, and I understand that they have learned that al-Qaeda was thinking about attacking nuclear power stations—another factor that must be taken into consideration. However, even if a green light is given to new nuclear construction, decades will pass before such stations will be able to supply power. In contrast, measures can be introduced now to promote energy efficiency and renewable generation. I hope that the Government will not give way on the objective of getting 10 per cent. of electricity from renewable sources by 2010, rising to 20 per cent. by 2020. Promoting energy efficiency is a wise, sensible and practical policy, but we must not forget to look at the efficiency of electricity generation. It has already been pointed out that electricity generators lose all but some 38 per cent. of the energy of their fuel through inefficient technology. On the consumption side, only 18 per cent. of houses in Britain are fully insulated. A detached house built in Britain, even under today’s modern standards, consumes nearly 20 per cent. more energy than the equivalent home built in Denmark. Perhaps we should appoint an energy conservation tsar—we would have to clear it with the Russians first—who could massively raise public consciousness on the issue. If security of supply means looking at what we can promote domestically, I add my voice to the strong case that has already been made for our deep-mined coal industry. Some 33 per cent. of our electricity is generated by coal, and 60 per cent. of that coal is imported. It is reckoned that in Britain we have 200 years of coal reserves, but only 40 years of gas reserves. We have used only 15 to 20 per cent. of our coal reserves in the past 100 years. As has been pointed out, carbon sequestration and underground gasification offer the prospect of clean coal technology, and it is much further advanced than people would have us believe. There is a need for investment in the coal industry and we need to take a long-term view. I welcome the £35 million in grant aid from the Government to demonstrate the possibilities of carbon abatement technology, and I understand that it will come on stream in April this year for some four years. However, more operating and investment aid for coal should be considered. At present, the Government provide 30 per cent. of the cost of development work and the coal producer has to find the other 70 per cent. The current investment aid fund has been used up, but banks will not lend against the short-term contracts that are placed by the generators with the coal suppliers. In the United States, coal suppliers have 25-year contracts. Why cannot we have them in this country? Coal mining is a long-term, capital-intensive business, requiring some form of Government intervention—that might not be popular with some—in the current structure of the market to ensure continued supplies of UK deep-mined coal. Loans, or loan guarantees, secured on future coal sales are a possible answer, and I hope that the Minister will address that point when he winds up. I accept that we need an energy mix, and should not rely on one particular fuel. However, I desperately want the UK deep-mined coal industry to be part of that mix. Action is needed urgently, because we now have only eight collieries and we lack the critical mass that the industry needs to retain the experience and skill and preserve it for the future. It may be an unpopular suggestion, but I believe that there is no future for the coal industry unless it is brought back into public ownership. I question the 2003 energy review which concluded that the Government would not intervene in the market except in extreme circumstances. Markets are not infallible, and indeed they often tend towards short-term thinking. There is a role for Government and I hope that this review will confirm that.