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Energy: White Paper

My Lords, noble Lords will forgive me if I do not pursue the last topic. It is not an area in which I have any great expertise or, indeed, experience. Before starting, I would like to declare an interest which I do not think is as yet recorded. I am the chairman of the Nuclear Industry Association, which is the trade association for the civil nuclear industry. It is only reasonable that I make that point at this stage. First, I pay tribute to my new noble friend’s maiden speech. I say ““new noble friend”” because he is an old personal friend with whom I have had many disagreements. Much has been made of his capacity to disagree with people. I would say to him that on this side of the House, at least, one of the preconditions of membership of the Labour ranks is the ability to get on with people and to agree to disagree on most issues of a political character. It will not be a novel experience for him. I wish him well and his speech this morning was a thoughtful tour d’horizon of the energy area. He obviously took the advice that Lyndon Johnson gave when once asked what you need to do to get elected. Johnson’s reply was just as applicable to energy policy as it was to getting elected—you have got to do everything. The compendium which is the White Paper has pretty well everything in it. Others might disagree—only time will tell. Yet I do not have a great deal of sympathy with the view that by putting and considering all of the options, the Government are not allowing themselves to have a proper sense of priority. At the same time as having a sense of priority, there has also been a degree of caution, particularly on the nuclear situation post the judicial review. Some might say that the Prime Minister evinces less of this, but Ministers are walking on eggs on this issue. Yet many of the remarks that I made in my maiden speech some two years ago on nuclear power are even more valid today. This is not simply because the case remains equally strong, but because over the past two years we have become increasingly aware of the volatility of the international energy market and the fact that prices are far less dependable. In the past, we could anticipate periods of rise, of comparative fall and of stability. Nobody today is putting their faith in the hydro-carbon markets being particularly stable in the months and years that lie ahead, not least because in the past two years we have become properly aware of the impact of the Indian and Chinese economies on the international energy scene. It could be argued that not just oil and gas but coal, too, is increasingly subject to the massive demands being made by these countries. As a consequence, we have to look at the energy mix, the balance we are going to have to work towards. It is inevitable that in the foreseeable future we will have a sizeable dependency on gas. We still have the advantage of an indigenous supply—on a limited level, but still there. We now have LNG capabilities which will enable us to have storage and transportation facilities within the UK. The point has to be made that we would not wish to be over-dependent on this form of generation. If the lessons of the 1990s were to be anything, they are that we probably were over-dependent. When other countries were investing in renewable technology, we felt there was no need for Britain to do so. You could argue that in some respects the old Nye Bevan quote, of Britain being an island surrounded by fish and built on coal, and the idea of self-sufficiency, has been one of our problems. In the past, it has blinded us to the need to have a wider canvas on which to draw our plans. We have no coal industry to speak of in the UK now. It is increasingly difficult to get open casting, there are only a small number of collieries and there are virtually just a handful of colliers. There is certainly no longer the cultural tradition of fathers and sons going down the mine as there was in my old constituency until two or three years ago. So the idea that we can be over-dependent on imported coal is a dangerous one. We have to recognise that coal has to have a place because of its flexibility. We also have to guard against the over-optimism often endowed in carbon capture and storage. This is a nascent technology, and the Government are to be commended for their competition. I am not wholly sympathetic to the view that somehow we could have left it all to BP; that had they had a big wodge of money from the Government, they would have solved all the problems. I am not antagonistic to British Petroleum—it is an outstanding world company led by the most capable people—but to have given that opportunity to one company and one technology alone would have been regrettable. At the same time, we have to persevere with carbon capture and storage, because we are going to require it for some of our gas stations. It is equally dangerous to place too much faith in the coal industry. Many of us have received a paper from Drax, which quite correctly claimed credit for important work in flue gas desulphurisation. But FGD technology does nothing for CO2 emissions. I am only guessing, but I imagine that the likely lifetime of the Drax power stations will be insufficient to justify the kind of investment that carbon capture and storage would require. There would not be the CAPX payback within a reasonable time. We are talking about virtually brand new stations which will accommodate various kinds of coal and probably take a bio-element as well. They will have super-critical boilers, flue gas desulphurisation and carbon capture and storage when the technology is sufficiently mature. Yet this will be some time and at some considerable expense. It is wrong to place undue emphasis on that kind of option because it is almost beyond the horizon. It is not quite blue skies thinking. Coal in the short term has a place; it is flexible and can generate and fill holes quickly. We may need payments to keep these stations turning over when they are not required. We have gone through that kind of system in the past and it has not worked, but we need a flexible enough market arrangement to enable coal to be accommodated. For baseload generation, only one other option deserves consideration: nuclear. The concept of a replacement build of 20 per cent of our generating capacity has to be addressed. As you would imagine from my declaration of interest, I have no great anxiety about a number of the fears that some people express. Yet it is a sensitive issue. The previous consultation process which the Government entered into was insufficiently rigorous and did not involve the degree of public participation that it merited. A second chance should be given to it, and the terms of the judicial review should be given clear and careful adherence. If we can get through this consultation process, and the arguments for and acceptance of the case for nuclear is sufficiently strong, the market should be allowed to deal with it; that is, if the market believes that in the United Kingdom we can get a reasonable choice at an early stage between the varying technologies available. I understand that some four are under consideration. Three of them might be regarded as more likely, and one of the three might even drop out—we might end up with only two. Whatever happens, we have embarked on a programme of pre-licensing which will require the Nuclear Installations Inspectorate to have far more staff to undertake the taxing work that will be required. It will equally require staff for the clean-up and decommissioning work, so we are talking about a sizeable programme of recruitment. As I understand it, the money is in the Treasury, but there is a dispute with the DTI—sorry, DEBRR, as we now have to call it. There is something of a stand-off. There is a recognition that those people are needed and an amount of money available to pay them, but there is a disagreement between the Treasury and the department concerning how the money should be spent so that it can be kept within the public sector pay guidelines. Frankly, the money is there, so we do not need creative accounting. We just need some inventive personnel or human resource management techniques to be applied. In another capacity, I am the director of a football club. I know that in the football industry, no shortage of imagination is exercised when it comes to paying people. Usually, it involves paying them too much, but in this instance, there are very strong grounds for encouraging highly skilled, highly qualified people to come into the government service in the NII. Regardless of whether we build another power station, those people are required. They are required for waste clean-up and for decommissioning. People forget the skills needed in that industry. It may not be very sexy or attractive to come to clear up the legacy of an industry that has been notoriously pollutant—although I think that the new technologies will be far less so and the problem will be far easier to manage—but we must make it attractive. One obvious way to do that is by making employment attractive through the rates of pay and conditions offered to very important people. There is always the danger in these debates that because they are not time-limited, you self-indulge, and I have probably done that already. We have moved, or we are moving, certainly on these Benches, towards a balanced energy policy in which various elements will play their part. The renewables lobby will make strong claims—rightly so, because there are cases for localised generation—but let us not forget that if the renewables industry is to succeed, it will require subsidy. Call it ROCs, renewables obligation certificates, if you like, but it is state subsidy in the first instance, subsidy that is subsequently paid for by consumers. Therefore, we must be rigorous in our examination of the scheme. Someone has to do that. It may well be that we can appoint independent agencies, which means that civil servants do not do the work, but someone has to come to a judgment in the first instance, and then see whether the market will take over. The argument for subsidy is based on the premise that the market is not functioning properly at this stage. We must be careful about spending too much money for too long on some failed renewable technologies. Lastly, I have laid great stress on the baseload capability of nuclear power. One of the strengths of nuclear power is that it has a very low import dependence. About 10 or 12 per cent of the costs of nuclear generation arise from uranium. It is not open to the vagaries of the international market in the way that other generating technologies are. If we can build up a substantial, but not massive, element of new nuclear generating capability, that baseload should be able to enable us to have a degree of price stability in our market that will go a long way to help the Government’s credible work, already referred to, in assisting the fuel poor. It is sometimes not fashionable to link forms of generation with social objectives. I am not saying that nuclear power is too cheap to meter; that argument was very dangerous as well as being fundamentally wrong, but I think that the Government are beginning to get the emphasis correct. The White Paper is a very encouraging document. I am greatly pleased that my new noble friend has been able to introduce it in such an effective way today. This debate will go on and on. We seem to have had almost as many White Papers and discussion papers as we have had Secretaries of State in recent years, but it is an important debate. I commend the Government on taking another step forward and hope that the consultative process will enable us to move to the next phase for nuclear power as soon as possible, as soon as it is reasonable and as soon as people feel that they have at least had a chance to speak and to make their case.