Energy and Climate Change and Environment, Food and Rural Affairs

I intended to mention the importance of CCS a little later, but the hon. Gentleman is right to suggest that the injection of CO2 will help with enhanced oil recovery. Elsewhere in the world, CO2 is being used for that purpose. Given current technologies, a lot of oil and gas is left behind during extraction from the North sea, and recently the industry and the Government have been discussing that matter. Solving it would not be without costs or difficulties, but it is an important item on the agenda. To get back to my story, the North sea is in decline, as is nuclear, with perhaps only 15 per cent. of our electricity coming from nuclear—some of that electricity is above the Liberal Democrat Benches, so I give hon. Members a health warning about that one. At its height, some 30 per cent. of our electricity came from nuclear. The reactors are of varying ages, but they are old and need to be decommissioned, and then we will see the development of new nuclear reactors. We know the story of coal, too. I do not want to get too much into the politics of it, but coal was devastated by a previous regime, albeit not for industrial purposes or because the then Government were early converts to climate change—although the new Tories might rewrite the history on that—but largely for political reasons. There is huge potential in renewables, which I think we all support, although we need to support it in actuality, through onshore wind, and not just in rhetoric. However, as a percentage of all energy, renewables account for perhaps only 2 per cent. or so. The 15 per cent. target is the right target, but hitting it will be tremendously challenging. In the meanwhile, in the period before we can build up new nuclear—that will be largely after 2020, with the first one perhaps in 2017—and in which we can bite down on energy demand and develop our renewables, in my judgment we will see significant imports of energy. Let me take the example of gas. I know that some of the estimates about the future—they are only estimates—are contentious. I know, too, that there are different official estimates. There is a perfectly reasonable debate to be had, but the trend is essentially as follows. Only a few years ago we had a sufficiency of gas and we were exporting. Very recently we were self-sufficient, but we are now importing 20 to 25 per cent. of our gas. Some estimates—they are perfectly sensible estimates—suggest that by 2020 some 70 per cent. of our gas could be imported. Indeed, I have even seen the figure of 80 per cent. The more successful we are in reducing demand and bringing forward renewables, the more likely it is that 70 or 80 per cent. might seem an exaggeration. However, for contingency planning it is sensible to look at that issue. Where will the imports come from? I have mentioned the Langeled pipeline from Norway, and there is more potential to build up our relationship with Norway, as I argue in my energy security report. That is important, because the gas from Norway is good democratic, human-rights gas, and that cannot always be said of other gas! What is the agenda for action? Much of it has been touched on. Any sensible agenda, whether for energy security or climate change, starts with reducing energy demand and increasing energy efficiency. I subscribe to that position, but we need to recognise the sophistication and the broad nature of the approach that we need to adopt. Housing is of course important, and we can argue about the pace of change there. The development of zero-carbon housing by 2016 is important. We will see a great revolution in design and materials as we move towards higher standards of thermal efficiency in new build. How we integrate renewables into that will be crucial. Obviously, there is also transport, appliances and other things that we are familiar with. However, there are also things that I do not feel so tutored about, in the range of various industrial and business processes, such as pumps, valves and advanced control engineering, which I was hearing about at a conference the other day. All those things are important and can be developed by industry to reduce demand. Indeed, there is so much that can be said about that. Smart meters are important, but only if we link them to a public education programme, so that when people get their smart meters, they are told about a wider package of things that they can adopt, so that the whole community down that road, in that village or in that town gets behind the project. Energy efficiency is item number one. The second item is cleaning up fossil fuels. Some of the environmental groups might not like it, but we will be using fossil fuels for the foreseeable future. Indeed, the environmental groups will not stop the Chinese using them in future. So we have to become one of the world leaders in clean coal technology and carbon capture and storage. I am very pleased by the Government's position on this. As an energy Minister, I was frustrated by the pace of change, but no one has ever done this around a coal power station. We are moving pretty rapidly in the right direction, but let us become a world leader and help China and others to develop this technology. It is difficult to overstress the importance of CCS. It is not just another thing. Unless we get to grips with the challenge of CCS globally, all will be lost in terms of global warming, given that most of the energy that we use in the years to come is going to be obtained by burning fossil fuels. There will be huge technological challenges, including where to store, the fact that storage is very expensive, and the importance of the carbon price. There are all sorts of issues around financing, and the emissions trading scheme is very important. My next heading is gas. I make various recommendations about gas in the United Kingdom in my report, to which I know that the Government will respond before long. I am not trying to get the Minister to respond to it this evening. I worry about a new dash for gas. It is easier to build gas power stations than nuclear power stations, and it is probably easier to get planning permission for them than for large-scale wind farms. There is a danger of becoming over-dependent on gas, with all the implications that that has for imports. I raise three points about gas for the Government in my report. One is that Britain, compared with many other European countries, does not have in place significant numbers of long-term contracts for gas. We tend to contract with the suppliers and countries involved on a far shorter-term basis, and we often buy gas on the spot market. I can see advantages in that, but I can also see the disadvantages for our security of supply, and the Government need to address that. The second issue relates to the supply obligation. We place on our supply companies a supply obligation: the Centricas, EDFs and Scottish and Southerns of this world have to supply gas to us. What does this mean in practice? When I produced my report—with the help of a very able team from the Department for Energy and Climate Change—I found the gas supply obligation to be a bit like jelly: I could not get to grips with it. When I questioned key institutions on this matter, they recognised that all was not well. Let me spell it out. There is no way in the present regulatory system for National Grid or the regulator to establish whether there is likely to be sufficient availability of gas, in aggregate, in any coming period. That is not to say that the gas will not be there; it will be bought on the spot market or short term, but what would happen if we were to have another situation like Russia versus Ukraine? We had such a situation once, or possibly twice, during my tenure in office. Combined with a very cold winter in Europe, that created real difficulties for European energy supply and for us in the UK. I would therefore like to see greater clarity in the gas supply obligation, and I make that recommendation in my report. The third subject related to this is gas storage. It is quite easy for us to say that we need greater gas storage capacity. It is like motherhood and apple pie: we all want more gas storage. To defend where we are from an historical perspective, I would say that our gas storage area was the North sea. We had plentiful supplies and we were self-sufficient, but that is now in decline. We therefore now need to develop gas storage, and that is not quite so easy as some people make it sound. Are we talking about commercial gas storage, or about strategic gas storage? If we are talking purely about the former, the gas will be sold to the highest bidder. The reality at the moment is that our main store of gas—the Rough storage, which is administered by Centrica—is a store for gas that is owned by the different supply companies in Britain, including the French and German companies. Last winter, things were all right-ish, but if I had still been Minister, I would have been looking at the situation day by day, as I did in earlier winters. I am almost sure I am right in saying that, at that time, German supply companies were taking gas out of Rough storage and returning it to continental Europe. They had contracts to supply gas there, so we cannot blame them, and as I understand it there is nothing to stop that gas—we did not stop it—going to continental Europe at quite a difficult time. I put it to the House that this is quite a difficult issue. I believe either that we need strategic gas storage—gas that will be in the control of a democratic Government, subject to parliamentary accountability—or, if the gas storage is commercial, that we will need to explore the fact that the British Government under European law have a right to say that in extremis or in emergencies, some of that gas has to stay here in the UK. If it can simply go hither and thither in a crisis, it is not the kind of gas storage that many are calling for.