Lord Ezra: My Lords, I beg to move that this Bill be now read a second time. I should like to begin my remarks by expressing my appreciation to those noble Lords who have turned out on a Friday morning to speak on this Bill.
This Bill arises out of the consideration of the Fossil Fuel Levy Bill which went through its various stages in the latter part of last year and is now being considered in another place. That Bill deals with the collection of the levy as provided for by Section 33 of the Electricity Act 1989. At the Committee stage of the Bill on 16th October I sought to move an amendment which would have widened the scope of the use of the levy as provided for by Section 32 of the Electricity Act. However, that was ruled out of order by the Public Bill Office because of the limited scope of the Bill, but I was able to raise the issue on a Motion stand part.
In that Motion, in which some noble Lords present today took part, there was support for the purpose of my proposed amendment. I was also glad to note that there was support from the noble Lord, Lord Haskel, speaking from the Government Front Bench, who unfortunately cannot be with us today. He said that, while he naturally respected the decision of the House authorities that the amendment was out of order, he was nevertheless "disappointed by that decision." He went on to say that,
I am well aware that the Government are conducting a wide-ranging review of energy policy in all its aspects. As I understand it, this would cover the use of the non-fossil fuel obligation funds. However, the review is still likely to take some time and I feel that early action on this particular issue is required. This should in no way prejudice other measures which the Government might decide to take in the light of the review. In the Standing Committee on the Fossil Fuel Levy Bill in another place on 24th February, much interest was expressed in the Bill before your Lordships today which has the object of extending the range of uses to which the levy could be put. That was seen as complementary to the Fossil Fuel Levy Bill.
The matter was also raised at a meeting of the Select Committee on Trade and Industry on 3rd December 1997. The Chairman of the Committee then asked Mr. John Battle, Minister for Science, Energy and Industry, whether, if,
It is against that background of very positive responses that I have pleasure in moving the Second Reading of the Electricity Generation Bill. In widening the range of uses of the levy funds, I have in mind in particular further support for combined heat and power (CHP) schemes and for clean coal technology to which I have already made reference. I know that the Government strongly favour both those ways of improving energy efficiency and reducing pollution and I therefore consider that this Bill specifically supports their frequently stated intentions.
I need hardly remind your Lordships of the substantial energy savings and emission reductions brought about by the application of the CHP process. Not only is the conversion of primary to secondary energy increased from something like 50 per cent. to 80 per cent., but the use of the resultant steam or hot water, when distributed, brings further benefits through consumers not having to use other forms of energy which would themselves add to pollution. There is thus a double benefit in the extension of CHP. This Bill would enable levy support to be extended to all forms of CHP which is entirely justified in view of the substantial emission reductions which could thereby be achieved.
In the case of clean coal technology the Government are urgently reviewing the situation of the sadly diminished coal industry. I believe that the Government recognise that coal produced within the United Kingdom must continue to make a noticeable contribution to energy supplies. However, in order for this to be achieved in the long term, the environmental disadvantages of using coal under present technology must be diminished. So a further impetus needs urgently to be given to the development of clean coal technology. I should stress that this is not only important with regard to the United Kingdom market, but the development of an effective technology could bring substantial benefits in the export market, particularly in countries where the economies are developing fast, such as China and India.
The Bill is a simple one. Basically it amends Section 32 of the Electricity Act 1989 with a consequential amendment to Section 33 and in the process amends Section 39 of the Environment Act 1995 which itself amended the Electricity Act. By this mechanism, the Government would be provided with a much wider range of options in making use of the proceeds of the levy to include projects based on fossil as well as non-fossil fuels. This could be one of the means of achieving the Government's objective to reduce carbon
Lord Hardy of Wath: My Lords, I thank the noble Lord, Lord Ezra, both for his speech and for the Bill. He did not take a very long time and I propose to be relatively brief myself. I am sorry that the noble Lord's previous attempt to amend the earlier Bill was not constitutionally proper and I certainly hope that this one will receive a fair wind.
A few weeks ago I attended a meeting of the All-Party Energy Studies Group, of which I was secretary for quite a long time before the last election, and heard a presentation from distinguished people offering their view of the world energy scene. They took the view that in the short term the world and the United Kingdom would depend for their energy resources largely on oil and gas and that, as oil and gas ceased to be available, they would be replaced by nuclear power and renewables. They took a very dismissive view of the contribution which coal could make. They perceived decline as inevitable and continuing and they appeared to convince quite a few of the people present.
I was not convinced, for this reason. Oil will shrink and disappear before gas, but both of them will inevitably become more expensive in real terms as the years pass and we will be burning gas rather recklessly or fecklessly when it ought to be seen as an important source of feedstock. The real concern was about the longer-term view--nuclear power.
I spoke in the House in an energy debate in January and I pointed out that last July I stood beside the sarcophagus at Chernobyl. The person I was with had a device to measure radiation and it was showing very high levels indeed. I was very pleased to leave. I worry about that because I take the view that for mankind at this stage to imagine that we should be spreading nuclear power at the fastest possible speed in areas of the world which do not have the technological resources, the administrative capacity or the political stability to manage that industry is very foolish. It is unwise for us to assume that, in half the world at least, coal-burning can be replaced by nuclear power.
I am as green as the next man, and probably greener than most. But I think we ought to be a little more cautious than some are about the expectation that renewables will provide a huge part of the energy requirement at modest cost. Some years ago I spoke at an energy conference in Europe and heard a Dutch expert proclaim that Britain could meet the whole of its energy requirements from windmills. I am not sure that our environment would be particularly attractive if we developed on that scale. That is not to say that we should not have wind power or solar power--we have to take what opportunities nature can provide--but
I take the view which the noble Lord expressed, and which I have advanced for many years since I was quite young, that we should be burning coal cleanly. I lived and still live in a coal-mining area and I recognise fully that we should be burning it as cleanly as possible. But I think it entirely unwise for Britain to be proclaiming that it is doing far more than anyone else in caring for the global environment by closing down the coal industry, and closing it down at enormous public cost. For that reason, therefore, I entirely endorse the noble Lord's view that we should be using resources to burn coal as cleanly as possible.
I say that because those parts of the world with large coal reserves will continue to mine that coal, will continue to burn that coal, and will burn it in primitive ways without very much regard for Kyoto or anything else. We cannot really blame them because they do not have vast resources. But what we can do is to set an example and at the same time provide the industrial opportunity to which the noble Lord referred by developing in this country, and building on research that has already taken place, methods by which we can burn coal far more cleanly and selling the expertise, technology and equipment which the world should be using.
We may obliterate the mining industry; we may cease to burn coal at all or to any significant extent, but the rest of the world will not follow that pattern. I believe that we can serve not merely the British coal industry, but the engineering industry as well, besides providing opportunities for British industry. At the same time I believe that we could make a magnificent contribution to the cleaning of the world environment, which deserves priority.
Lord Howie of Troon: My Lords, we do not need to say very much this morning because we discussed this matter last October on an amendment of the noble Lord, Lord Ezra, to a previous Bill. I welcome the fact that he has produced his own private Bill today. When we discussed this matter last year, I believe that we received a somewhat sympathetic reception from the Government Front Bench. I sincerely hope that it has not changed its minds.
My support for the noble Lord, Lord Ezra, was based on the fact that to my mind the levy was always far too narrowly conceived. It seemed to me then--and it still does--to be intent on promoting some of the more glamorous renewables. I should say in passing that I am more keen on nuclear power than my noble friend Lord Hardy, but I understand his point of view.
The levy seemed to glamorise some of the non-renewables. In the course of our debate last year the noble Lord, Lord Moynihan, went to some length to demonstrate the desirability of wind energy. That has substantial attractions. The fuel is free, which is a kind of Aberdonian dream come true and we would all like to see that. But there are disadvantages. It is not a very
Perhaps I may illustrate my attitude by giving one simple example. Pembroke power station on the far side of Wales produces 2,000 megawatts of electricity. The biggest windmill today is about 100 metres high and has a wingspan of about 75 metres. It produces about 500 kilowatts, which is half a megawatt. That means that if one were to think in terms of wind power on an industrial scale and thought it wise to replace Pembroke power station and find its 2,000 megawatts from wind energy, one would require 4,000 of these windmills. So there would be 4,000 windmills, 100 metres high with a wingspan of 75 metres. It may be that they would be gathered in what one would call a plantation rather than a windfarm, but it would be five miles square. In fact, it would be rather bigger because if the 4,000 windmills were set in square they would get in each other's way and one would not get 500 kilowatts out of each of them at all, but rather less. So one would need more than 4,000 windmills. One would have a plantation of windmills at least five miles square.
Alternatively, if one did not like that idea--and I do not believe that anyone would--they could be put in a straight line which would stretch from Pembroke to somewhere in the middle of the North Sea. I cannot really see that idea as a runner. I am all in favour of cheap energy and of the research and development which is involved in windmills. But the problem is not that simple. What is really needed is the windmill on a domestic scale, situated at the bottom of the garden, producing one's own two to three kilowatts in remote areas of the country where they are out of sight and probably screened by one of the high hedges that people are getting excited about nowadays.
I believe that the levy is misconceived. It should be widened in the direction in which this Bill is pointed and especially in the direction of combined heat and power. I very strongly support the noble Lord, Lord Ezra, in his attempt to get this Bill on the statute book. I sincerely hope that my noble friend the Government Chief Whip will merely say, "What a good idea: let's do it!"
Baroness Maddock: My Lords, I am delighted to support the Electricity Generation Bill and my noble friend Lord Ezra. We have already heard this morning from the noble Lords, Lord Hardy of Wath and Lord Howie of Troon, about some of the problems that we have had as regards consistency of policy and energy in this country. That is the important matter. It is vital that we have consistency in all our legislation when we consider saving energy, cutting pollution and preserving our precious fossil fuels.
My noble friend has explained very clearly how the Bill will improve on the Fossil Fuel Levy Bill. I intend to spend a few minutes in telling the House of my experiences over 30 years in the field of energy conservation and alternative energy production, not using fossil fuels. I first became aware of energy
We lived in Stockholm for three years in a flat that remained at the same temperature from floor to ceiling all the year round, whether the temperature was plus 25 degrees or minus 25 degrees centigrade. The fuel bills were negligible. The first winter we were there was very cold. There had also been very dry weather. There were problems in producing enough electricity through hydrogeneration at that time. The profligate use of energy was brought home to me by Sweden's very efficient scheme to persuade people to save energy that winter. We were told exactly how much energy we would waste every time we opened the fridge door. There was a competition among the payers of electricity bills in the different areas to discover who could save the most electricity. From that time on I realised how important energy efficiency and conservation would be in future.
We returned to this country at the time of the oil crisis. It is very disappointing, after that experience, that now, so many years on, we have made disappointing progress under all governments in this country. We have heard many warm words from all governments at home and abroad, but the financial assistance to pursue the intention has not been met. There has been inconsistency of policy.
I was a city councillor in Southampton from 1984 until I was elected to the other place. During that time we had a thermal energy bore under the city. The government of the day had given us money, as a local authority, to investigate the matter. But then it was decided that it was not a very good idea and the money supply was cut off. I am pleased to say that there was all-party consensus on the council to ensure that we carried the matter forward despite the setback. We were forced to go out of this country and into partnership with a French company to make the most of the borehole and to combine it with a combined heat and power unit as well. We ended up with the city having in effect a district heating scheme that could make the best of whatever energy we could get in the city and from outside. Supermarkets, educational institutions and hospitals all used that system.
Having had those experiences, when I became a Member of the other place and had the extraordinary good fortune to get first place in the ballot for Private Members' Bills, it is not surprising that the subject of energy conservation was high in my mind. I was successful in helping to pilot the Home Energy Conservation Act through both Houses of Parliament, which was an enabling measure. I believe that in all such measures we must have consistency, and that is why I am happy to support this Bill which tries to ensure consistency in our aims and our legislation.
I hope that my experiences over recent years have shown just how inconsistent we have been as a nation in our attitude to energy efficiency and what we intend to do about it. I believe that that has left our nation some way behind other countries, particularly those in Western Europe in terms of energy-efficient buildings and power stations and in making the best use of the energy available to us.
We have made worldwide commitments to reduce carbon dioxide and other emissions and, so far, we have done reasonably well, we are told. However, we must not be complacent because the first and biggest reduction in recent years has been due mainly to the switch to natural gas. I believe that this Bill will help us to have consistent policies and legislation. I am sure that it will contribute greatly towards achieving the aims which I am sure are shared by all noble Lords present in the Chamber.
Lord Brabazon of Tara: My Lords, I join other noble Lords in thanking the noble Lord, Lord Ezra, for introducing this Bill so clearly. It is undoubtedly a worthy cause. I shall not detain the House for long because the support of these Benches for the principle of the Bill has already been outlined by my noble and learned friend Lord Fraser of Carmyllie when the noble Lord, Lord Ezra, effectively spoke to his Bill in the clause stand part debate on the Fossil Fuel Levy Bill last October.
As the noble Lord, Lord Ezra, explained, the Bill focuses on two main themes--clean coal technology and combined heat and power. I was interested to hear what noble Lords said on both issues. There is no doubt that coal burning, without clean technology, is very polluting and, as the noble Lord, Lord Hardy, said, whether we like it or not countries elsewhere in the world such as China and India will no doubt continue to burn coal, polluting the atmosphere for many years to come. Therefore, if we can encourage clean coal technology not only for the benefit of our own industry, but also for the export opportunities of making that technology available to countries such as China and India, we shall be doing a very good thing.
There is also no doubt that combined heat and power, of which the noble Lord, Lord Ezra, has been a formidable champion for many years, can offer considerable advantages in terms of efficiency. I understand that a number of proposals are currently in the pipeline, but that some have been delayed as a result of the Government's review of energy policy. I join other noble Lords in wondering why that should be. Surely the advantages of CHP stand alone and decisions could be taken now.
I am sure that the Minister will say that we must await the outcome of the review for an answer to the questions that the Bill poses. I hope that today's debate shows that there is all-round support for the principle of the Bill and the type of proposals that it offers us.
Lord Carter: My Lords, I would like to start by congratulating the noble Lord, Lord Ezra, on the enthusiasm he has shown in bringing forward this Bill. It is a short Bill of only two clauses, but it is a Bill which bestows enormous powers. The Government have great sympathy with the intentions underlying this Bill. The aims of the noble Lord, Lord Ezra, and all who have spoken, to encourage new and renewable sources of generation, including combined heat and power (CHP) and clean coal, are ones which we share.
I believe, however, that we must look extremely closely at what is being proposed in this Bill. The resources which are available to us to support new and renewable technologies are limited. We must use them carefully if we are to achieve the testing targets that this Government have set both for new and renewable generation and for the environment.
The Government propose to undertake a new and strong drive to develop new and renewable energy sources in line with their manifesto commitment. To this end, Ministers at the Department of Trade and Industry have commissioned a review of policy, including considerations of what would be necessary and practicable to achieve 10 per cent. of UK electricity needs from renewables by the year 2010 and how renewable energy can make an effective contribution to meeting requirements for future greenhouse gas reduction commitments.
As we all know, one key element of the Government's policy has been the non-fossil fuel obligation, which has the handy acronym NFFO. The NFFO mechanism has been highly successful in creating an initial market for electricity from renewable sources. Noble Lords will be interested to know that at the end of December 1997--the latest date for which figures are available--221 schemes were operating throughout the UK with a capacity of 506MW. Many of these new schemes have been developed by new companies, a number of which are small or medium-sized enterprises. More widely, overall annual turnover for UK renewable energy companies is now estimated to be in excess of £150 million, with exports accounting for between £50 million and £75 million a year.
I turn now to points made by my noble friend Lord Howie of Troon and the noble Lord, Lord Brabazon. The Government are sympathetic to the intention of the noble Lord, Lord Ezra, further to promote combined heat and power using fossil fuels. However, at present we are far from sure that this Bill is the right way to achieve those aims.
I can also assure my noble friend Lord Hardy of Wath, the noble Baroness, Lady Maddock, and the noble Lord, Lord Brabazon, that the Government attach considerable importance to the development of clean coal technologies. We are undertaking a review of policy towards clean coal technologies, for which there is a substantial export market, particularly in developing countries, as has been mentioned. We plan to continue to support clean coal and will publish an energy paper later this year, setting out our new policy. Provision for clean coal research and development in 1998-99 will be £3.7 million.
Over the last few years the way we generate our electricity, and the mix of fuels we use have changed, and are likely to change yet further. This is a reflection of a number of factors: the liberalisation of markets enabling new generators to start up; the favourable economics of gas-fired generation plant, which is relatively cheap and quick to build; and the availability of the gas to fire that plant.
It is also relevant that the previous administration effectively approved power station consents on the nod, without any substantive consideration of whether there was a need for new plant. They approved 44 stations, with a combined capacity of around 23 Gigawatts (equivalent to about a third of total generating capacity in England and Wales); and about 40 per cent. or 9GW of that capacity is still to come on stream or to begin construction. That is why further change will come regardless of anything that this Government may decide to do.
The changing shape of the electricity market has led to concerns about the long-term security of electricity supply. My noble friend Lord Hardy of Wath referred to this matter. In the short term, we must consider the implications for the security of the electricity system if it should rely heavily on gas. Demand for both tends to peak at the same time, and interruption of gas to power stations feeds back to the gas system. There are also technical issues concerned with the flexibility of the system quickly to meet changing demand. In the medium term we must give serious consideration to whether there is a strategic security/diversity case for maintaining the UK deep mining industry, which is threatened with major contraction by the growth in gas generation. Obviously, there are also social implications to this. In the longer term we need to know whether the increasing use of gas for generation will bring forward--and by how much--the time when we will need to start importing gas and whether that, too, is of strategic importance.
We believe it is entirely reasonable that the Government need time to think through these things. That is why we are having a review of energy sources for power generation so that the detail of our energy
The noble Lord's Bill would allow support to be given from the proceeds of the levy to encourage generation from coal. It is far from certain that we would be able to give such support within the obligations of the European Coal and Steel Community Treaty. The problems that face the deep mined coal industry are largely the product of disastrous short-term decisions taken by our predecessors. In contrast, we are determined to give coal a fair chance. The Government are working intensively to establish a level playing field in the UK market and in Europe. Within this framework, and taking into account our important environmental objectives, we are doing everything we can to help the UK coal industry. Our strategy for energy is based on the need for secure, diverse and sustainable energy supplies at competitive prices, not on an ill-considered, short-term dash to get out of coal. We believe that UK coal can make an important contribution to this strategy provided it continues to improve its competitiveness.
We have taken eight key actions, which we believe are more than the warm words to which the noble Baroness, Lady Maddock, referred. We are challenging subsidies paid to German and Spanish coal industries. We are determined to stop German anthracite being dumped in the UK and to get UK power station coal into German and Spanish markets. We are reviewing the operation of the Electricity Pool to ensure that coal is not discriminated against and we want to see the outcome of this work by mid-1998. We are encouraging the electricity regulator to ensure that generators offer coal-fired power stations to other operators, including coal producers, if the generators no longer require them.
We are backing the effort of the regulator to prevent regional electricity companies from passing on excessive costs under early take-or-pay gas contracts to consumers. We are removing, through the Fossil Fuel Levy Bill, the advantage that nuclear energy would enjoy by exemption from the levy. We are seeking ways to support the development and exploitation of clean coal technology. We are asking the gas regulator to examine urgently the resale provisions of the early take-or-pay gas contracts to establish if they are anti-competitive and distort the market against coal. Finally, we are examining how security of supply issues, including fuel diversity, should be taken into account when the Government consider applications for consent for power station developments. This reflects the view, in particular that of the National Grid Company, that increased dependence on gas in power generation raises issues concerning the security of supply of our electricity
These wide-ranging actions take place against the background of arrangements agreed last month between electricity generators and RJB for coal to be delivered to generators up to the end of June 1998.
My noble friend Lord Hardy of Wath said he believed that the expansion of nuclear power was unwise. He was not enthusiastic about nuclear power. Some 25 per cent. of the electricity that we consume in this country comes from nuclear power. There are no plans to build any more nuclear stations but today we depend heavily on nuclear power for our energy.
The noble Baroness, Lady Maddock, said that we should be doing more in the area of energy efficiency. The Government promote the efficiency of energy use through standards of performance set by the electricity regulator. This encouragement of private investment has proved effective.
It is the promotion of CHP and clean coal technologies that has motivated the noble Lord, Lord Ezra, to introduce this Bill. For the reasons I have explained, we believe that it would be premature to proceed with a Bill that seeks to implement any one particular approach to promoting these technologies without having considered fully all the options which may arise from the wider examination of energy policy currently being undertaken. The right approach is to determine what programme of support is needed and then ask Parliament for the authority to undertake that programme. This Bill appears to ask Parliament for enormous powers but without a clear explanation of how they will be used or whether they are the right powers. We need to consider whether the powers in this Bill will be used in support of electricity generation, whether what is proposed is the best approach and, crucially, how much they will cost, as the noble Lord, Lord Brabazon, pointed out. Those are difficult questions which, through our review, we are in the process of answering. Any costs which arise out of the measures outlined in this Bill must be paid for from the fossil fuel levy on electricity supplies. That is not free money; it is a cost which must be borne by electricity consumers, and it is something of which the Government are well aware.
I have explained that the Government are considering ways in which they can support generation from new and renewable sources and clean coal technology and the steps they are taking to ensure that coal is able to continue to play a part in providing for our energy needs. I have explained the work that we have in hand to ensure that we have an energy policy which is well founded and enables us to meet our objective of secure, diverse and sustainable energy at competitive prices. It is on the firm foundations that this work will provide that we should consider what additional powers we may need to meet our objective. We support the underlying intentions of the Bill, but we are not sure that it is the right way forward. However, as a Private Member's Bill we shall not resist it having a Second Reading in this House.
Lord Ezra: My Lords, I thank all noble Lords who have taken part in the debate. I note that the Bill received cross-party support. The noble Lords, Lord Hardy of Wath and Lord Howie of Troon, supported it from the Labour Benches, the noble Lord, Lord Brabazon, supported it from the Conservative Benches, and my noble friend Lady Maddock supported it from the Liberal Democrat Benches. I was a little disappointed by the response of the noble Lord, Lord Carter. In spite of the list of actions that the Government are taking I believe that they have had a change of mind in relation to the intentions of this Bill since it last came before your Lordships when they debated the other related Bill. On that occasion the noble Lord, Lord Haskel, was very positive, and subsequently in December Mr. John Battle, the responsible Minister, also responded positively to a Question about this Bill in another place.
I am surprised that the Government do not want to take this opportunity to secure increased powers to deal with these urgent matters in advance of the wide-ranging review that they are carrying out. That review could take quite a long time. If anything is to be done it requires legislation that would probably have to be introduced in the Queen's Speech. Therefore, we are talking about one or two years ahead. At the same time, the Government have themselves set an enormous target for the diminution in emissions by the year 2010.
I find that a bit of a disappointment. I hope that the Government will be able to reflect on those matters. I do not know whether they are now going to proceed to stimulate the creation of a development project for clean coal technology. Such projects are well under way in France, for example, where they have a 300 megawatt plant near Marseilles, in Spain and in other countries. We are the one country which, despite our substantial reserves of coal--the biggest in Western Europe--nonetheless has lagged behind in this. Are the Government going to think of another way in which such a project could go ahead, or are they going to leave it for several more months or years until we proceed along the path that other countries are already pursuing?
Those are a number of the questions that arise in connection with the deferment of this action. The noble Lord, Lord Brabazon, asked about the cost. I do not agree that the cost will be substantial, as the noble Lord, Lord Carter, appeared to suggest. On the contrary, he referred to standards of performance in the electricity industry. The standard of performance which creates a fairly large sum arises from one pound per consumer of electricity per year. That is the order of which we are talking. Even a few pence per week would not be over much, but the electricity scheme to which he referred is based on one pound per year per consumer. We are not talking about large sums, but they could be used effectively. I hope that on reconsideration, the Government will give this Bill, when it reaches another place, more support than they are at the moment. I commend the Bill to the House.
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