Energy Bill

It is impossible for us to conduct this debate without understanding the background: what is actually going on in the world of energy supply. The debate is long overdue, and, given the position in which we now find ourselves, perhaps too late. Ofgem's recent report "Project Discovery" has been a wake-up call for many—perhaps for Ofgem more than for anyone else. This morning, at a meeting of the Energy and Climate Change Committee, its chief executive, Alistair Buchanan, spoke to us along with some colleagues. He told us that he had been surprised and exposed by events that he had not anticipated. I was quite concerned when he said that. He mentioned six things that identified his concern about the stage we have reached in developing an energy system that is fit for the future. I think that most people who are involved in energy debates would understand five of them. Mr Buchanan spoke of reasonable doubts about security of supply. Those have existed for some time. He also mentioned an overall rise in prices since 1998, climate change and the legislative programme from Europe, the closure of coal plants—which has been dictated by that programme—and the risk posed by gas imports. That risk has been clear for at least five years, given, for instance, the closure of pipelines from Ukraine. A huge element has been the length and depth of the financial crisis. It is clear that Ofgem, along with many other people in the country, could not have been expected to forecast that or work its way around it. The country faces an energy challenge that is probably unique. Much of what we have is not fit for purpose. In particular, we face the huge issue of security of supply, while seeking massive investment from the markets. Ofgem predicts that we will need to raise £200 billion by 2020. That is a huge sum of money, and Ofgem put it into context today when it said that £100 billion was invested in the water industry over 20 years, and we now need £200 billion over 10 years—twice as much over half the length of time, when we have had serious economic problems. We are certainly in straitened times. Alistair Buchanan highlighted that in his report. Project Discovery states that""although investor confidence appears to be recovering…there is still a question as to whether the high levels of investment needed…will be available at a reasonable cost"." I asked the Minister earlier to give us an idea as to what the cost to the consumer would be, but she was unable to do so, because we do not know. We do not know what we will be charged by the private companies going forward. Alistair Buchanan went on to say that""we are entering a phase of substantial new investment in energy markets globally…If the GB market is perceived as a higher risk than those overseas, returns will need to be higher in order to attract sufficient investment. Furthermore, international competition for constrained skills, equipment and other resources could push up costs."" There is a huge difference between that and what he said four years ago. In a speech to the International Energy Agency, he said that the development of gas coming into Teesside""shows that the markets deliver entrepreneurial solutions and that markets deliver."" They are clearly not doing very well going forward. What is the situation in the country now? We are importing 43 million tonnes of coal a year, and we are burning 65 million tonnes of coal a year, and we are running out of UK gas and oil. We are also in limbo between old nuclear build and new nuclear build. We are closing down all the coal-fired power stations, too, and the electricity grid is clearly not fit for purpose for this century and going forward. There is also a huge issue of lack of skills. One point that has been continually repeated in our Select Committee debates is that energy companies have not invested in skills because of the overriding objective of keeping prices down and giving shareholder dividends. Although we need to develop new technologies, we do not have the people with the skills to do so. The industry has not developed these new skills, and we are dependent on coal and gas imports from very unstable states. The right hon. Member for Wokingham (Mr. Redwood) spoke earlier about his concern about where our coal comes from. Let me repeat something that I have said more than once before in this House, especially as the Minister with responsibility for coal is present. There is a moral point to be made about the fact that we import coal. We are importing coal from China, where 6,000 miners a year are dying. Tonight in China, 20 men will not go home because of a lack of safety standards. In Ukraine, for every 1 million tonnes of coal that is got out of the ground, seven people die. That is the reality of getting cheap imported coal. If we are happy with that, we are not the people we should be in this country. Investors in the industry are constantly looking for support from the public purse. From all the debates we have had over the past 25 years about the privatisation of public services, I have understood that the whole idea is to transfer the risk: if we transfer the services out of the public sector, we also transfer out the risk. The truth, however, is that whenever the risk returns, these investors are suddenly standing with their hands out, and with their hands in our pockets, demanding that our customers and electorates pay for their shortfalls. The European energy system works in a different way from ours. In the rest of the European Union, countries base their energy debates and demands first of all on social obligations. We base ours on price-led mechanisms, so it is no wonder that when times are tough gas goes into Europe and out of Britain. Twenty years have passed since we were told to "Tell Sid." Well, the chickens are coming home to roost, because companies here need to find £200 billion and we are on the back foot. The companies will be coming to the Government—regardless of which party is in charge—and saying, "We need you to help us. We need you to help us at a time when money is more expensive than it has probably been for a long time." We are paying the price for being in an ideologically driven situation, and it is the very same ideology that got us into this mess in the first place. This Bill is a small step towards putting some of that right. As has been acknowledged by Members on both sides of the House, there is no doubt that a significant sea change has taken place in the past two years, particularly with the creation of the new Department and the new drive to try to put the British coal industry, in particular, and the British energy system back where they should be. Nobody wanted to talk about energy during the first three years that I was in this House. It took the huge petrol price increases of two years ago to frighten people; the reality was that we were being held to ransom by the oil companies and we needed to start doing things. If that has been a push in the right direction, thank God it has. We have great potential in this country. The coal industry remains massively untapped—we have tapped into only 10 per cent. of the coal supply in this country. In addition to the nuclear power potential, we know about the potential of offshore wind and tidal power. Those sources all provide excellent opportunities, but we must ensure that we have a package of incentives and developments that make them work. We have a massively bureaucratic system at the moment. It is in place to try to drive the market, work with it and make it operate, but the system is confusing, costly and comfortable for business. The Select Committee is to publish a report—I believe that this will happen this week—on the need to develop new networks for the grids. Some 17 acronyms in that report relate to trying to dictate the market, including: BETTA, which stands for the British electricity trading and transmission arrangements; LENS, which stands for the long-term electricity network scenarios; and ENSG, which stands for the electricity networks strategy group. All those things have been put in place to try to make the market work in the way that it should be working in any case. This is a huge challenge for the future, and hon. Members will not be surprised to learn that I do not believe that the market will provide in the way that this country really needs and that I am convinced that the Conservative party will not be able to work with the market in the way that is right for this country. We need to get this Bill through and we need this Government returned to make sure that we put this right.