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Energy White Paper

With permission, Mr. Deputy Speaker, I should like to make a statement on the energy White Paper and the consultation on the future of nuclear power, which I am publishing today. Copies of these, together with several accompanying papers, are in the Vote Office. As I said last year, we face two big challenges: first, the need, with other countries, to tackle climate change by cutting greenhouse gas emissions; and secondly, the need to ensure that we have secure and affordable energy supplies. Both are vital for our future prosperity; both are global issues calling for action internationally as well as action here at home. The evidence supporting the need for urgent action on climate change continues to mount. Sir Nicholas Stern’s report last autumn underlined the importance of acting now, and together with other countries. If not tackled, climate change poses catastrophic humanitarian consequences and economic costs. Meanwhile, world energy demand continues to grow. It is expected to be 50 per cent. higher by 2030 than it is today, and it is likely to be met largely by fossil fuels for some time to come. That means rising greenhouse gas emissions and greater competition for energy resources, which has massive implications for both climate change and security of supply. Here in the UK, our reserves of oil and gas are declining. Although significant amounts remain in the North sea, production has hit its peak and is now falling. As we made clear, we will make the most of our reserves, but as our economy grows we will become increasingly dependent on imports in a world where supplies are concentrated often in less stable regions. We need to take action to manage those risks. In the next few years, energy companies will also need to replace ageing power stations and other infrastructure, so we need to create the right conditions for that investment to get timely and increasingly low-carbon energy supplies. The White Paper sets out a long-term framework for action to tackle those challenges at home and abroad. It sets out our international strategy, which acknowledges that we need to tackle climate change and energy security together. Influenced by the UK, the European Council has agreed to a new strategy, including commitments to competitive markets, cuts in greenhouse gas emissions, more renewable energy and a central role for the European Union emissions trading scheme as a potential basis for a global carbon market. We also need to influence the wider international community, notably in getting a consensus on the post-2012 Kyoto framework for reducing greenhouse gas emissions. The White Paper also sets out the measures that we are taking here at home. We have already published a draft Climate Change Bill—which, for the first time, would impose a legally binding duty on Government to reduce the amount of carbon that is produced—as we work towards our target of achieving at least a 60 per cent. reduction in carbon emissions by 2050. We are the first country in the world to do that. Faced with such challenges, more is needed. The first priority must be to save energy. The White Paper sets out a range of measures to help us to become more energy efficient and cut energy use. Consumers need better information about how they can save energy. Next year and the year after, any householder who asks for them can get free, visual real-time displays that show the amount of electricity that they use. In parallel, we will work with the industry to ensure that consumers have visual displays, together with smart meters, in 10 years. In addition, better and clearer energy bills will help. It is estimated that leaving electric appliances on stand-by uses about 7 per cent. of all electricity in UK homes. That is equivalent to the electricity generated from two 600 MW gas-fired power stations or from more than 1,500 2 MW wind turbines. We will work with industry and others to improve the efficiency of domestic appliances to phase out inefficient goods and limit the amount of stand-by energy wasted. If we are to make a genuine difference to reducing energy demand, we need a stronger obligation on energy companies to provide their residential customers with energy-saving measures. The White Paper therefore proposes that from next year they double their current effort, and from 2012 we aim to transform the way in which they see their relationship with their customers, shifting the focus to the provision of energy services, increasing energy efficiency and saving carbon in the home, rather than simply selling them gas and electricity. We will also require big organisations such as supermarkets, banks or hotel chains and large public sector organisations to limit their emissions and set tougher standards for the homes that we build and the products that we buy. We need more low-carbon generation of electricity and heat. We want to encourage the enthusiasm of individuals and communities to generate their energy locally, for example in homes or schools, through solar panels and wind turbines. We are therefore introducing a range of measures to support that approach. As part of that, we will remove the barriers and simplify the licensing regime so that more communities can the follow the example of Woking, including by developing combined heat and power schemes. However, we still need large-scale energy investment. In the next 20 to 30 years, we need new generating capacity equivalent to approximately one third of our existing capacity. Our aim must be to ensure that companies have a wide range of options available so that we can retain a diverse energy mix, which is good both for our security of supply and will help us to move to an increasingly low-carbon economy. Renewables are crucial. We are strengthening support for renewable electricity. The reform of the renewables obligation is essential, and means that by 2015 we expect that around 15 per cent. of our electricity supplies will come from renewables—that is triple the current amount in only eight years. In transport, the road transport fuel obligation will save a million tonnes of carbon a year. We want to double it only if we can be satisfied that it is sustainable to do so. New technologies will also help. We want British-based business to be at the forefront of new green technology. That is why we set up the Energy Technologies Institute, which brings public and private investment together, now with a minimum budget of £600 million. We will launch a competition for the demonstration of carbon capture and storage, which has the potential to reduce carbon dioxide emissions from fossil fuel power stations by as much as 90 per cent., which is important as we will rely on gas and coal power, including coal mined in the UK, for some time to come. Details are set out in the White Paper. We want to save energy, and we want low-carbon sources of energy. That is why we will do everything that we can to encourage renewables such as wind, wave and tidal power. But that alone will not be enough if we are to minimise our costs and risks. Alongside the White Paper, we are publishing a consultation document on nuclear power, so that we can take a decision on whether companies should have that option when making their investment decisions. We have reached the preliminary view that it would be in the public interest to allow energy companies to invest in nuclear power. Before making our decision, however, we are consulting further. The White Paper makes clear the complexities of the challenges that we face in terms of climate change and energy security. There is no single answer to those challenges. As wide a choice of low-carbon options as possible is needed, so that we do not become over-reliant on any one form of electricity generation. Nuclear is an important part of our current energy mix. We get about 18 per cent. of our electricity from nuclear power stations, which are a low-carbon form of generating electricity. That provides a regular and steady supply of electricity, whereas electricity generated from most renewables is, by its very nature, intermittent. Every year, a modern nuclear reactor saves about 2.5 million tonnes of carbon dioxide being pumped into the atmosphere, compared with an equivalent gas-fired station. Most nuclear power stations are set to close over the next 10 to 20 years at a time when we know that demand for electricity is going up because of economic growth. Quite simply, in the public interest we need to make a decision this year on whether we continue to get some of our electricity from nuclear, because new stations take a long time to build. If nuclear is excluded, there is every chance that its place will be taken by gas or coal generation, which emits carbon. Yes, carbon capture and storage, if it can be developed, would help, but at this stage we cannot be certain—there is no commercial- scale operation of carbon capture and storage on power generation anywhere in the world. Although we want more renewable energy as part of the mix, it, too, is controversial. There are more than 170 applications in the planning process at the moment. It will be for the private sector to initiate, fund, construct and operate new nuclear plants and cover the cost of decommissioning and its full share of long-term waste management costs. There are important issues to consider, including waste, and those will be examined in the consultation, which will run until October. Our measures, including those in the White Paper, put us on track to make savings of carbon emissions of between 23 and 33 million tonnes by 2020. If we meet the upper end of that range, it would be the equivalent of removing all the emissions from every car, van and lorry on Britain’s roads today. By saving energy, encouraging new timely investment in gas import and storage infrastructure and maximising recovery of UK reserves of oil, gas and coal, our measures will also help security of supply. We cannot become a low-carbon economy in a single step. Further measures will be needed if we are to achieve our long-term goals in the light of further international agreements in Europe and more widely. The White Paper sets out a framework for action to enable us to make real progress now towards tackling climate change and ensuring secure and affordable energy supplies. I commend this statement to the House.