I will happily answer to pretty much anything, Mr Walker.
I want—unsurprisingly, I guess—to agree once again with the distinguished Chairman of the Select Committee on Energy and Climate Change, the hon. Member for South Suffolk (Mr Yeo), about how important carbon capture and storage will be in future to any form of mineral energy burning at all. I also want to draw attention, as the report does, to related issues: the development of carbon capture, the competition, what happens after the competition, and how CCS may sit in our energy economy in the years to come.
Unlike the Chairman, my hon. Friend the Member for Wansbeck (Ian Lavery) and I visited the first operational CCS plant in the world. It was not quite operational then, but it has been since spring, and is working well and effectively capturing the plant’s whole production. That is significant, because it demonstrates, contrary to one strand of the debate in recent years, that CCS really works. The question of how well it works economically is a second-order issue, but is nevertheless important.
Clearly, CCS in itself will not make anyone a load of money. Indeed, in terms of traditional energy economics it clearly does the opposite, but interestingly on our visit to Canada we learned that some clever circular loops have been built into the CCS process at the plant at Boundary dam in Saskatchewan. That makes the process much more economically interesting than was suggested by early studies on how it would work.
In the UK, where mercifully the first two plants—the competition plants—are, I hope, going ahead on the basis of a substantial degree of underwriting, the question to ask about CCS’s importance to the wider energy economy in future is what happens about plants three to eight. How will the UK get them under way, and make sure that the elements of CCS in which we already have a substantial lead will be part of its worldwide benefits, which the Committee Chairman described?
To roll one stage back, it is instructive to consider where we stand now with our energy strategies, and the role that mineral fuel may play in them. The recent DECC gas strategy included a series of potential scenarios for the role of gas in our future energy economy. They are predicated on a relatively high carbon figure, given as parts per kWh of energy produced—200 grams; or a lower-level scenario, with a figure of 100 grams; and, indeed, a very much lower one of 50 grams. I cannot remember exactly what page of the DECC gas strategy that is on, but an instructive chart shows what the scenario might consist of.
That shows simply that if we want, overall, a reasonably decarbonised energy supply by 2030, then probably—since it is not just likely but pretty essential that there will be an element of gas in the energy mix, balancing other forms of energy that will come forward—there will be room for perhaps 26 GW of new gas-fired plant to come on to the system, but running at a very low level, to back up and balance the working of the rest of the low-carbon energy economy. Perhaps it might run at about 18% to 20% capacity.
If, on the other hand, we want to overshoot that and double the level to 200 grams—and, to allude to the previous debate, we now know from the IPCC assessment reports that that outcome would be intolerable for our climate change goals—we might have room for 43GW of new gas-fired power stations running pretty much at full tilt. In neither scenario, incidentally, would we have room for coal-fired power plant.
The problem with the lower-level scenario is that it would mean suggesting, now, that a number of companies should invest over the coming period in gas-fired power stations that would run for hardly any of the time. That will probably not happen. At the moment a capacity auction is under way precisely to try to get investment in new gas-fired power plants. We are providing capacity payments over a 15-year period for investment in and building of those plants, which, under the relevant scenario, would not run very much.
My view is that investment on that basis simply will not happen. It is possible that no new gas-fired plant will clear the present auction process. We will get underwriting for some existing gas plants, on an annual basis, to continue to supply, but there will probably not be investment in any new gas plants. It is quite possible that without considerable financial assistance there will never be any investment in gas-fired plants in the medium term.
If that is what is ahead, might it be a better to invest in bringing forward CCS, so that the gas plants could run at the appropriate level over the relevant period—and some coal plants could run as well—than to seek the will-o’-the-wisp of providing increasing amounts of money to supply gas-fired power plant providers so they can develop plants that will not run much? Economic policy is directly relevant to the idea that we get on with carbon capture and storage, beyond the first two plants that have been subject to the competition reward, and underpin it over the next period. To my mind, that is the only way in which mineral-based fossil fuel can continue to run on our systems to any great extent over the next period.
I am not the only person saying that. The Governor of the Bank of England, Mark Carney—I was going to say that he is my good friend, but unfortunately he is not; I wish he was—warned just a few weeks ago that on the present arrangements, industry was in danger of backing stranded assets. He told a World Bank seminar that the “vast majority of reserves”—that is, fossil fuel reserves—“are unburnable” if global temperature rises are to be limited to below 2°. He meant that under present circumstances, we simply will not be able both to burn those fossil fuels and reach the 2° target. With carbon capture and storage, however, the scenario starts to change.