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Energy Bill

I am grateful to all noble Lords who have spoken to the amendment. I am particularly grateful for the kind remarks about my noble friend the Minister. I cannot think of a greater stimulus to his recovery than for him to discover that he has been substituted by me and that I am in his place in dealing with these energy matters. The noble Baroness was kind enough to refer to my experience on the previous Energy Bill, an experience which I think that all those who spoke on the Bill regarded as an unalloyed pleasure throughout its long duration. That was a little while back. I am even worse at history than I am at energy and therefore have difficulty recalling that time. Consequently, I apologise for the fact that at fairly short notice I am substituting for what would have been the expert contributions of my noble friend. I, for one, will send him noble Lords' good wishes, and mine in extenso, that he should return as soon as possible. The noble Baroness has raised an interesting issue, as shown by the contributions of all noble Lords who have spoken to the amendment. This is clearly an important matter. The amendment seeks to define the volume of onshore gas storage—and I emphasise onshore, although I heard what the noble Lord, Lord Jenkin, said about the offshore position and will talk about that in a moment. But the amendment is about the report on onshore gas storage that will be needed to secure our long-term energy security and ensuring that Government report annually on progress towards achieving it. The amendment establishes a target. I know that my noble friend Lord O'Neill said it graphically, and I am sure that every Member of the Committee shares with him some doubts about the capacity to establish effective and active targets on this. The Government present an annual report already, which presents the energy markets outlook that gives guidance to the industry. That is rather different from this amendment, which would identify a target. In a sense, it envisages a different principal position from the one that the Government adopt. We believe that the role of government is to establish a regulatory framework and create the right conditions for investment in a fully competitive and transparent market. Well functioning markets are the best way in which to deliver security of energy supplies and to diversify sources, supply routes and import points for energy. That also obtains to gas, which certainly involves the issue of onshore and offshore storage. The amendment, however, concentrates on a target for onshore storage. That would interfere with the developing gas market by specifying the appropriate volume of gas to be stored. Within the UK's energy market, it is not for the Government to specify how much one particular form of gas market flexibility might be appropriate to help secure energy supplies. I hear what the noble Lord, Lord Redesdale, says about anxiety regarding security of supply. We all share that anxiety, particularly in circumstances where our own indigenous sources of energy supply, both gas and oil, are clearly reducing. Of course Governments must be concerned about the issues of security of supply. The question is whether the amendment and the substantial change to the Government's strategy that it envisages in target-setting for one aspect of the gas market would aid the situation. In considering which investments to make companies have to take account of a range of different uncertainties. We all recognise that every provision of energy has a range of expectation to it, some of it very long term as has been indicated. That includes uncertainties about relatively current prices and long-term prices especially for fossil fuels. The whole issue of energy demand is subject to great fluctuations. We also have the additional factor of carbon prices. I believe that this amendment would send the wrong signal to industry that the Government have a clear concept that there is an ideal amount of gas to be stored and that this gas should be stored onshore. That looks like a very partial intrusion into the market without bringing any of the benefits suggested by the noble Baroness in moving the amendment. The noble Lord, Lord Jenkin, concentrated a great deal of his extremely interesting contribution on the problems of gas storage offshore, a very important and costly investment issue. I recognise exactly the points he makes. However, I am not sure whether he was suggesting that the position offshore would be improved by onshore targets in the way suggested by the amendment. There are other ways in which companies can enter into long-term contracts, including contracts for liquefied natural gas. Britain increasingly has contracts for LNG and we are building terminals to provide increased storage for it. I accept that the noble Lord, Lord Jenkin, is worried about aspects of planning as regards LNG. That is a very important reason why the Planning Bill has been drafted as it has. Although the noble Lord indicated that he is a little impatient with the Bill's tardy progress through the other place and arrival here, we expect that it will eventually arrive here for consideration. He is absolutely right that the way in which we facilitate planning consent for energy needs is an important concept behind that Bill. However, I do not think it is for the Government to second-guess the best or most cost-effective approach to gas supplies. Lest it be thought that the Government regard this issue with anything other than the most extreme seriousness, I reassure the Committee that we want to ensure the long-term supply of energy, including sufficient supplies of natural gas. The difference between the Government and the noble Baroness and her amendment is the strategy by which that should be pursued. The market is already responding to the UK's need to import and to store gas. Some 1.2 billion cubic metres of gas storage capacity are under construction, and there are 8 billion cubic metres in various stages of the planning and development process. Some of this could come on stream within four years, doubling the existing gas storage capacity. I do not underestimate the foresight of the noble Lord, Lord Jenkin, and other noble Lords in the Committee. Indeed, the noble Baroness herself is addressing the question of how we guarantee long-term provision. However, I emphasise that there is a market response to what is already clearly defined as necessary changes in the British supply.