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Energy: Renewables (Economic Affairs Committee Report)

My Lords, I join other noble Lords in paying tribute to the noble Lord, Lord Vallance, and to the committee for an extremely readable report full of wisdom. The chairman is to be congratulated, in particular, on producing a unanimous report, notwithstanding that one member of the committee is my noble friend Lord Lawson, whose trenchant views were eloquently put to the House an hour or so ago. The noble Lord, Lord Broers, said that I should talk about skills, a subject in which I am extremely interested. I want to ask why people are not standing up and shouting to young people and those losing their job that there are jobs in the energy industry, with training available, and they will be for life. People could use this opportunity to change their careers and recognise, as the noble Lord, Lord Myners, said the other day, that there should be less financial engineering and more real engineering. I hope that bodies such as the Nuclear Industry Association—the noble Lord, Lord O’Neill, is not in his place—will shout out to the whole population that here are jobs for life and people should be looking at them. My noble friend Lord Macgregor and the noble Lord, Lord Chorley, emphasised the near impossibility of achieving the target of 15 per cent of all energy from renewables by 2020. Indeed, so incredible is this target that the former Chief Scientific Adviser was moved to suggest that possibly the heads of state, late at night towards the end of their deliberations, had muddled energy and electricity. I checked that out, and I was told that the heads of state knew exactly what they were doing. However, even with 15 per cent as opposed to 20 per cent, they have produced a figure that is frankly incredible for this country, except for one thing. From the Dispatch Box about three years ago, the former Minister for science, the noble Lord, Lord Sainsbury of Turville, firmly said that in his view nuclear power should be regarded as a renewable source. Of course, the French are happy to agree the 20 per cent figure because they have already got all that nuclear, and I do not suppose they worry about it. Why cannot the Government take that decision and recognise nuclear power? I asked the noble Lord, Lord Sainsbury, about it afterwards, and he asked why, as there is 1,000 years’ worth of nuclear fuel in the earth, it should not be regarded as a renewable source. This has been an interesting debate. My noble friend Lord Selborne emphasised the figure that comes out of the report. One of its strongest recommendations is that we should look to renewables other than or in addition to wind. The Government seem to have got totally hooked on the proposition that only windmills are an appropriate renewable source. That cannot be right, and I support those who have been arguing that there must be more research into this. At this stage in the debate I shall confine myself to a few specific points. First, we are promised the Government’s response to the consultation on renewables. When are they going to produce their national planning statement on energy? It is provided for under the Planning Act, which we passed at the end of the previous Session. Everything is hanging fire. There are constant complaints about the planning system holding things up, and the new planning system in the Act depends on these national planning statements. Secondly, there is an extraordinary discrepancy between the committee’s estimate of what the policy will cost by 2020 and the Government’s estimate. The committee estimates that the cost will be £6.8 billion by 2020, which is £80 per annum for the average household. In their response, the Government disagree and say that it will be £2 billion to £2.5 billion. That is an astonishing discrepancy. The committee heard a mass of evidence from which it deduced its figures, and the Government produced their own figures. This ought to be cleared up. We cannot go on with that sort of discrepancy. In previous debates, I have drawn attention to the estimate by Ofgem that all the environmental costs borne by the energy industries are passed on to the consumer, including the cost of the Emissions Trading Scheme, renewables obligations certificates and other environmental measures. Last year, Ofgem gave the figure of about £79 for the average household. I shall make a suggestion and hope that the Government will take it up: as Ofgem is already involved in doing this work, could it not be asked to produce a report and try to find out why the committee came to a figure more than three times higher than the Government are prepared to concede? Ofgem should do it. It is qualified and ought to be asked. Thirdly, there are issues about access to the grid. Offshore wind seems to be happening. The other day I was looking at an offshore wind farm being built just off the coast of east Essex. Access and connections to the grid have emerged as being among the most serious obstacles to generation from offshore wind. Paragraph 201 of the report criticises Ofgem’s use of competitive tenders as leading to, "““a piecemeal approach to building the networks of wires and cables required to connect offshore wind farms to the electricity grid””." In their response, the Government broadly agree with that and set out what they are doing to secure a more co-ordinated approach. However, I am told that there is a nearly unanimous view across the industry among licensees, generators and manufacturers that the Ofgem approach, now supported by DECC, is, "““complex, fragmented and likely to lead to inefficient outcomes””." There should be a more strategic approach to planning the offshore grid for round 3 developments. That would enable a more effective way of connecting offshore wind farms to the grid. When are the Government going to recognise that view of industry, respond to it and implement what it wants? At paragraph 242, the report recommends organising the queue for attachment to the grid more successfully. The Government broadly welcome that. However, there is another view. A briefing I have had states that there should be a ““connect and manage”” arrangement, which means, "““obliging the national grid to provide commercially firm grid access within four years of generators making a committed connection application””." In addition to putting the unlikely applications to the back of the queue, which is one suggestion, there would be other advantages to having a firm way of getting this. The briefing continues: "““Commercially firm grid access means that, so long as a physical link to the transmission system can be put in place, generators will have full export rights. Such an arrangement would significantly improve the investability and bankability of generation developments and significantly reduce the uncertainty associated with transmission investment decisions””." There is a lot of sense in that. I hope the Government will be prepared to look at that again and that the Minister will be able to give us an answer. My next point is perhaps more controversial. It is about the committee’s recommendation in paragraph 243: "““We consider that the current system of Transmission Use of System charges sends broadly appropriate signals of the costs of locating generators at different points on the system””." The Government’s response is even shorter: "““The Government welcomes the Committee’s support for the current system of Transmission Use of System charges””." I am told that this statement about sending broadly appropriate signals is significantly challenged by a number of major and minor operators in the system. Transmission charges in Scotland, for instance, remain high, volatile and unpredictable, yet generators in the south of Great Britain receive a payment from the National Grid while those in the north face a large charge. That seems pretty odd to me. We should have a uniform charge for each unit of energy exported on to the grid. Again, I am told that this approach would result in predictable transmission charges providing certainty to developers of new generation projects. Of course, there would be winners and losers, but it should be perfectly possible for the grid eventually to have the same revenue. Total revenue recovered from the generators would not change, but be more evenly distributed. It is completely illogical that it presently costs £22 per kilowatt in transmission charges for generation located in the north of Scotland whereas generators south of London are paid £8 per kilowatt. It means that an 800-megawatt plant in north Scotland pays £17.6 million a year, while one in Southampton would receive £6.4 million a year. I am told that the Government have been getting arguments on this from both sides, and have not yet made up their mind. I hope that is true. There seems considerable merit to me in this scheme of a unified unit charge for attachment to the grid, and I hope that the Government can come to a clear decision in the not too distant future. Is the system to be changed in that direction, or not? I do not necessarily expect an answer from the Minister tonight, but I put the question as something which the Government have to decide.