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Baroness Miller of Chilthorne Domer: My Lords, I sense that the whole House would like to join me in congratulating the noble Lord, Lord O'Neill of Clackmannan, on his wonderful maiden speech. It was certainly a tour de force and has given us a taste of what we may expect in the future: a combination of knowledge and passion, delivered with barely a reference to notes. We are perhaps accustomed to maiden speakers using their notes. There was also a touch of controversy, which we are less used to in maiden speeches, but I feel that it was none the worse for that. The noble Lord gave us a great sense of where Scotland leads by example in so many things, certainly not in energy alone. I shall not go into the other examples today, but the noble Lord's reference to the use of biomass was a point that I am sure other noble Lords will want to come back to. As I have said, his speech was a tour de force and I am sure that other speakers will want to refer to it. However, I regret that the noble Lord's contribution was not marked on the list as a maiden speech. Some noble Lords did not realise that and left the Chamber. That being said, we look forward so much to hearing further contributions from the noble Lord.
 
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I am grateful to the noble Baroness, Lady O'Cathain, for giving us the opportunity to debate this critical matter today. The two issues which drive energy policy now must be climate change and security of supply. On the one hand, we must reduce carbon emissions substantially but, while doing so, we must continue to ensure security of supply. We must also ensure, however, that energy policies produce prices that reduce the numbers of people in energy poverty rather than increase them.

Critical choices need to be made urgently. I agree with the noble Baroness, Lady O'Cathain, that these matters are urgent. The political choices will determine in which direction investment will go. I shall therefore concentrate my remarks on the important issue of whether the Government should decide to pursue the new nuclear build policy.

Perhaps I may anticipate the arguments that some speakers will make today, I believe, for nuclear power. They are, first, that since the 2003 energy White Paper nuclear generation has become more economically viable; secondly, that renewable energy sources and energy saving are not an effective alternative; and, thirdly, that nuclear energy is required to safeguard electricity supplies as demand increases and gas supplies move from national to overseas. I shall deal with each of these arguments in turn, but I shall conclude that new nuclear build is not economically, environmentally or socially a good option. It is not, these Benches believe, the sensible way forward.

I recognise that it is possible that market conditions have become slightly more favourable towards nuclear power over the past few years. But, crucially, that improvement is not enough to deliver new nuclear power stations without public funding. The independent Oxera report of June 2005 posits some scenarios in which the nuclear industry could enjoy positive returns, but it firmly suggests that government assurances would be required in order to attract the necessary private investment. First, it suggests that between £1.6 billion and £3.2 billion—which is a fairly wide range—of public money would be required in capital grants or debt guarantees to encourage private investment in the industry. There is then the question of reliability. It is self-evident that aging power stations are not particularly reliable—Thorpe, for example, is currently costing some £1 million per day in lost revenue and has never operated effectively. Nuclear power is still not without its difficulties. I appreciate what the noble Lord, Lord O'Neill, said about the "one model" scenario. It is a matter which should be considered.

Secondly, long-term contracts would have to be agreed with the nuclear industry to make the industry viable, but these contracts would commit us—the public—to agree to continue buying nuclear energy even if other sources of energy become cheaper. This defies the liberal nature of what an energy market should be. It means, quite simply, that if we take up the nuclear option everyone will end up having to pay more for their electricity. Thirdly, there are indirect
 
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costs associated with new build. More waste would accumulate and the current waste bill, as we know, is £50 billion.

Finally, there is the question of insurance against accidents. International liability conventions which cap insurance limits mean that the Government would have to finance the difference in any claims. This is a further hidden subsidy. I do not suppose there is any insurance available against terrorist attacks, but that has to remain a consideration. Such a venture cannot be pursued on a modest scale. If there was to be a new nuclear build, it would need a number of stations to make it viable. That is a substantial risk when one considers the financial situation I have laid out.

I have heard it said in this House on many occasions—and, indeed, repeated today—that renewable energy and energy-saving are not a viable alternative to new nuclear build; that there would still be an energy gap. I remind the House that more than 20 years ago the Energy Committee spoke of,

"the many conservation measures which are so much more cost effective than most energy supply investment".

That has not changed. It is emphasised by recent clear evidence that energy efficiency and renewables are a cheaper means of reducing emissions than nuclear energy. The National Audit Office reports energy savings run by 14 local electricity companies at a cost of 1.8 p per kilowatt, whereas the anticipated costs for nuclear power are 3.9 p. The Performance and Innovation Unit estimates that by 2020 wind power will be cheaper than nuclear energy.

Investment in alternatives is extremely important. When we are thinking about the energy gap, there is a perception that nuclear energy should be thought about as an alternative—that it can provide a much more significant displacement of emissions. That is erroneous, because electricity generation accounts for only a quarter of this country's carbon dioxide emissions, and of that electricity generation only a fifth is nuclear. So we are talking about one-fifth of one-quarter. On the other hand, investment in renewables and energy efficiency provides the potential for a growing portion of emissions-free electricity. It can also reduce emissions associated with transport and the amount of energy wasted by inefficient transmission from centralised supplies to localised supplies. I am referring to the microgeneration issue, which requires much more energy and attention from the Government.

When we run through the list of other renewables—biofuels, biomass and novel crops—they all offer potential that has not begun to be explored. In this House, we have touched on water-based power—wave and tidal power—geothermal power and solar power. They are all technologies that, to some extent, have been proved. Some are up and running. But they could be delivering far more if private investors were able to see that the Government were making policy decisions that supported them. One example would be biofuels receiving a renewable transport fuel obligation.
 
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Finally, I turn to the issue of where the UK needs to position itself as an exporter of technologies. Do we want the developing world to invest heavily in nuclear power, with all the associated risks of terrorism—to which the noble Baroness, Lady O'Cathain, referred—politically unstable countries and natural disasters, such as the earthquake we recently saw in Kashmir? Do we want those countries to have only the option of nuclear power, or do we want them to be able to harness natural resources using the best technology for a sustainable future? I believe that the UK could set a lead by investing in such technologies and then profit from the export of those technologies to countries that could benefit from them.

Security of supply means that it is urgent that the Government set the scene for private sector investment in energy generation. I believe that it is clear where the money should go for the most cost-effective and sustainable solution. Investment in new nuclear build in Britain will be bought only at the expense of investment in energy efficiency, energy savings and renewable energy alternatives.

I have not mentioned the associated problem of public acceptance. According to a recent survey by the Institution of Civil Engineers, a very independent body, 77 per cent of people would prefer the construction of wind farms and only 25 per cent want to see new nuclear power stations. The alternative of joint investment in energy savings and renewable supplies is cost-effective and sustainable. When the Government look to the long term, as the noble Baroness, Lady O'Cathain, urged them to do, I hope that they will truly look to the long term and come to the decision that private investment in sustainable sources of energy must be encouraged.

12.10 pm

Lord Tombs: My Lords, I add my congratulations those already offered to the noble Lord, Lord O'Neill, on his maiden speech. His work on the Select Committee in another place was always an inspiration, and I am sure that he will contribute in a similar vein in your Lordships' House. Perhaps I may remind him in passing that when I was chairman of that now-defunct body the South of Scotland Electricity Board, I had the pleasure of writing to consumers to say that we were not raising our tariffs because of the economic contribution made by the considerable amount of nuclear power then installed. That was not very well received by the environmental lobbyists, but it gave me a great deal of pleasure anyway. Perhaps I may further add that the nuclear industry today is quite capable of competing with fossil fuels when it is not being sabotaged by government and Ofgem, as was the case in NETA.

We are talking today about long-term energy policy. It is the nub of the present vacuum in the Government's energy policy, which, as has been said many times—but I shall repeat it again—seeks to pursue idealised and inconsistent objectives. The energy supplies available to us are, broadly speaking, fossil fuels, nuclear power and renewables. Reliance recently has been on gas and renewables. The
 
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characteristics of renewables are certainly that they produce no CO2 which is very important, but also that they are a very diffuse supply, requiring expensive capital investment and large terrain requirements. They are also variable and have unpredictable availability. They make a substantial contribution to CO2 savings, but at great financial and environmental cost. They do not provide a basis for central electricity supply. They are unsuitable for continuous supply.

The subsidy of wind was estimated by the Government last year to be £30 billion to 2020. I contrast that with the figure quoted by the noble Baroness, Lady Miller of Chilthorne Domer, of £1.3 billion to £1.6 billion which the first nuclear power station will reputedly require. I do not accept that figure, but I contrast it anyway with the £30 billion committed, on a limited-time basis, to wind power.

The greater part of our energy supply system today is based on fossil fuels. Gas was cheap; it is now growing a great deal more expensive as world demand and political factors drive the price upwards. It is also quite a big contributor to CO2 pollution. The subject of CO2 pollution is growing in importance and is becoming increasingly recognised. There is no doubt in my mind that climate change will come to dominate many of our discussions in a way that it has never done in the past.

Government policy is short term, based, I fear, on the electoral cycle and peripatetic Ministers and civil servants. The decisions that are taken affect a long time ahead, perhaps as long as 50 years, given construction times and the life of the plant. In light of that time scale, to continue to rely so heavily on fossil fuels is economically hazardous and will hasten climate change with unpredictable results. Government attempts to square that circle by reliance on renewables is misconceived and stems largely from a failure to face the facts.

Reliance on market forces to secure the future, so heavily prized by government, is an illusion. We do not have a free market; we have a highly manipulated one, and we have seen some disastrous effects of that already. More will certainly follow. No market is able to take a view on investments with the time scale that we are considering—that is, the long term.

As has been said, the new economies of Asia and South America are already challenging industrialised nations and increasing pressure on fossil fuel costs. Their advantage of cheap labour and growing productivity finds us deliberately increasing energy costs at home through reliance on imported gas, oil and coal and subsidies for renewables.

I have touched on the question of regulation and its part in economic viability, particularly of nuclear power but also of coal. Regulation is an important part of what is virtually a monopoly supply industry, but it must not be confused with long-term planning. At present, I believe that Ofgem's ambitions exceed its powers and experience in its attempts, laudable though they may be, to fill the vacuum in government policy on long-term issues. We must develop a reliable energy
 
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supply—reliable in electricity supply terms and in economic terms, based on nuclear power. That will not be easy, given the fragmented nature of the electricity supply industry and the prolonged procrastination by the Government; but it is now urgent. There are some welcome signs of intent but as yet, for me, no grounds for optimism.

The first requirement is government commitment to the long term, notably lacking to date; and in particular—this point may be controversial but I believe that it should be listened to carefully—the often expressed belief that decisions on new nuclear capacity must await a "solution" to long-term radioactive waste storage. That plea has been used as an excuse for evading the issue—a point hinted at by the noble Lord, Lord O'Neill. The need for long-term storage provision is with us now in the shape of the legacy of waste from our weapons programmes and the earlier nuclear stations. It is not avoidable, and it is certainly not intractable. As other nations have shown, the technology exists to tackle it; and we have to tackle it regardless of whether not we build new nuclear capacity. To confuse those two decisions is, quite frankly, opportunist and misleading.

I close my deliberately brief speech by congratulating the noble Baroness on directing the attention of the House to the long term in energy matters. I hope that we may now see the Government address it in a like manner.

12.16 pm

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