§ 5.16 p.m.
§ Lord Tombs rose to call attention to the possibility of power interruptions in the electricity supply industry; and to move for Papers.
§ The noble Lord said: My Lords, this debate takes place exactly one year after a similar one on 8 January 2003, during which contributions were made by a number of noble Lords present here today. During that year little has happened to relieve the anxieties which I then expressed concerning the reliability of electricity supply in the United Kingdom in coming years as a result of the fragmented organisation which followed privatisation of the industry and a consequent lack of any coherent planning for the future of this long-term industry. Instead, the Government have shown a touching faith in the ability of the market mechanism, supplemented by a raft of committees, to provide for the future. This faith persists, despite the virtual expropriation of British Energy following the 40 per cent fluctuation in wholesale electricity prices and serious difficulties for other generators although it is only fair to acknowledge the Government's own contributions to the British Energy debacle through imposition of the climate change levy, disproportionately high rates and high fuel reprocessing costs. Incidentally, this last burden suddenly became negotiable after the financial collapse of British Energy.
§ I want to set aside transmission failures such as those that occurred in London and the Midlands during last August and September. While serious in their impact, affecting hundreds of thousands of people, they were essentially one-off and short-term. I shall speak today of interruptions that are likely to 212 arise as a result of inadequate reserves of generating plant. Such inadequacies are not at present recognised and, when that hurdle is surmounted, will take several years to repair because of the planning and construction times required to provide new generating capacity even if generators can be induced to invest on the scale required.
§ Operating margins today are substantially lower than those obtaining prior to privatisation. This is so partly because the higher margins of yesteryear were required to allow for the very rapid development of generating plant size, with the consequent risk of type faults arising from installation of large numbers of similar units without prior operating experience.
§ A second reason was to allow flexibility in fuel use to deal with violent changes in the price and availability of competing fuels; in this way we were able to deal with two major coal strikes and serious dislocations in oil supply. That flexibility has now been abandoned in present and planned new generation capacity.
§ The third and most important reason was to provide for plant breakdown and the possibility of severe weather conditions. Those needs remain, of course, and we should remember that we have enjoyed a series of mild winters which may have induced a false sense of security.
§ The diversity of plant to accommodate fluctuations in the fuel market has been largely abandoned over the past 15 years. Today, coal plays a much reduced part in the industry's portfolio and we are becoming steadily more dependent upon supplies of gas. In so far as it is possible to draw any conclusions from the energy White Paper, that trend seems likely to continue to a point where future electricity supplies will be vulnerable to events largely outside our control. I shall return to that topic later.
§ The need for an operating margin to cope with plant breakdowns and severe weather conditions is brought to the attention of government, electricity companies and the public by National Grid Transco through its annual seven-year statement and subsequent updating reports. In doing that National Grid Transco, although not itself responsible for the figures, draw the attention of Ofgem and DTI to current and future trends. Ofgem seeks to devise market controls that are essentially short-term, and DTI, through a wealth of advisory bodies, seeks to peer into the future.
§ In a long-term and capital-intensive industry, that does not provide a satisfactory framework for development. Since the role of electricity in the domestic, commercial and industrial sectors is essential to national prosperity and stability, it must be a matter of the greatest concern. To say that is not to denigrate the efforts of those involved in what passes for forecasting. But the remit of National Grid Transco is to operate and plan the gas and electricity transmission systems; that of Ofgem is to control competition and safeguard consumers interests; and that of DTI is to shape government influence on policy and performance.213
§ In matters of future strategy Ofgem and DTI can and do provide useful background advice and they could do a great deal more to create a useful climate in which the generating companies could plan their future. But neither Ofgem nor DTI will build new generating plant. That responsibility lies with the generating companies which operate in a short-term environment dictated by the demands of the City and the signals provided by Ofgem through its control of trading. Nowhere is the long-term balance of fuels and the associated generating plant or security of supply considered in a committed way. That responsibility is dissipated between bodies without the authority or the ability to fill the vacuum arising from the form in which the industry was privatised and the somewhat haphazard, and frequently damaging, regulation and policy-forming that has resulted.
§ The present situation is illustrated by the National Grid Transco seven-year statement, of which the latest edition is that for 2003. I shall return to its view of operating margin over the coming years in a moment. First, let us note that the winter operations report, published by National Grid Transco in October 2003, stated that the peak demand for the previous winter occurred at 17.30 hours on Tuesday, 10 December 2002. The demand after load management reductions was 54.8 gigawatts. The available generating plant totalled 55.7gw, resulting in an effective operating margin of 0.9gw—less than 2 per cent. That uncomfortable situation prompted Ofgem to arrange with generators to return some mothballed plant totalling about 2gw in time for the current winter. But the narrow squeak last winter itself illustrates the fragile nature of the plant margin and of the measures which are available to address it effectively, even in the short term.
§ So, looking further ahead, the seven-year statement for 2003 indicates possible plant margins varying between 18.7 per cent and 26.7 per cent for the years 2003–04 to 2009–10. Those figures would be encouraging if they could be regarded as realistic. But the seven-year statement itself points out that the figures are not reliable for the following reasons.
§ First, they include 7gw of new gas turbine plant for which there are no firmly committed commissioning dates. Past dates indicated by some generating companies have slipped by several years from those indicated and cannot be regarded as reliable. No doubt some of that plant, and perhaps some not already declared, may be commissioned in the period under review, but the figures are not secure and construction times make them increasingly doubtful within the period surveyed.
§ Secondly, the statement makes no assumptions about plant being withdrawn from service. Much of our existing coal and oil-fired plant is more than 30 years old so that the likelihood of that happening is considerable and is made more likely by the forthcoming European directive on carbon emissions. But, since the companies can give as little as six months' notice of such intentions, no sensible provision is made.214
§ Thirdly, some 8.6gw of installed CCGT plant is contractually subject to interruption of gas supply and only 5.9gw—about two-thirds of that plant—has standby distillate oil provision.
§ Fourthly, the statement makes some optimistic assumptions about interconnector capacity at time of peak demand. It must be born in mind that the French interconnectors were installed for trading purposes and that there is no guarantee of their supplying their maximum capacity at the time of our peak demand. Indeed, at the time of the last winter peak they were unable to do so. On these grounds, the winter operations report suggests that it might be prudent to reduce the combined imports at peak from France and Scotland by 1.2gw. But we must bear in mind that this still assumes import of about 1gw from France for which there is no contractual requirement.
§ Fifthly, the seven-year statement assumes additional import capacity of 1.2gw with Norway in 2006 and a further 1.2gw from an interconnector with the Netherlands in 2007. Of these, the Norwegian interconnector has since been turned down by the Norwegian Government and the Netherlands interconnector remains in the planning stage. As a result, the Norwegian import of 1.2gw will not be available and it would be imprudent to assume that the import capacity from the Netherlands will be available at the time of our peak demand even if that interconnector goes ahead.
§ In my view, based like that of the seven-year statement, on insecure data but on some considerable experience, the plant margins may be below those projected by some seven to 10gw, reducing the plant margins over the period to single figures which would be inadequate and would bring a serious risk of prolonged load disconnections.
§ So where does this leave the medium-term future of an industry on whose reliability the prosperity and standard of living of our country depends? That the industry is fragmented is beyond doubt and the mechanisms for obtaining an overall view are consequently diffuse. National Grid Transco has tried bravely to fill the gap with its seven-year statement, but has to rely on uncertain information from the participants. The results of the exercise are highly speculative and do not survive critical examination. The industry is running on a strictly short-term view shaped by market forces which are averse to risk and uncertainty—two factors inescapable in planning for a long-term industry.
§ The medium-term picture, seven years ahead, is a worrying one, with the likelihood of power interruptions, but the longer term provides grounds for even greater concern. Market pressures on generating companies will ensure that future generating plant will be gas-fired. This will cause a steady drift towards dependence on imported gas from distant fields and consequent exposure to rapidly rising prices and risk of interruption. These risks will, of course, be increased by the diminishing contribution of our coal and nuclear plant.215
§ The equanimity of the Government in the face of these trends is staggering and is epitomised in the energy White Paper. It can arise only from a lack of familiarity with the factors involved, coupled with the fact that responsibility for energy supply is now disseminated among a number of departments with no clear focus of responsibility. It may be that the highly subsidised "clash for wind", itself an unreliable resource, stems in part from a desire to be seen to be doing something to which none of those disparate departments objects. But it will contribute little to the major problems which I have outlined.
§ I ventured some suggestions to rectify this unhappy situation in the previous debate a year ago. They received a dismissive response from the Minister charged with replying, the noble Lord, Lord Sainsbury, and I do not intend to repeat them today. If the Minister is so minded, he can refer to Hansard for 8 January 2003.
§ It gives me no pleasure to describe the unhappy situation which now besets a great industry to which I have devoted much of my working life and for which I was responsible for some years. I fervently hope that today's debate will concentrate minds on the risks which we are running and provoke an urgent search for an informed solution. The problem will worsen with the passage of time unless the control mechanisms are fundamentally changed and made more effective. In this situation, procrastination is indeed the thief of time. My Lords, I beg to move for Papers.
§ 5.30 p.m.
§ Lord Peyton of Yeovil
My Lords, it is a very great pleasure to support the noble Lord, Lord Tombs, who, this year as well as last, has placed this House in his debt. He has spent a great deal of his life in the industry; he knows what he is talking about; and he tells the truth. I suggest—I have no hope of this sensible suggestion being taken up—that Ministers have that speech before them as compulsory reading because it is clear to me that they have not yet understood what this matter is all about.
Unhappily, as the noble Lord, Lord Tombs, himself said, his reward for last year's speech was to be virtually ignored. I am of a slightly less kind disposition than he is and therefore I shall read out a section of the bromide-studded reply of the noble Lord, Lord Sainsbury, which was obviously decorated for him by the department:I hope that, overall, noble Lords will take comfort from the fact that we continue to address the strategic issues that face the electricity industry. Strategic analysis continues to be carried out, and the Government, the regulators and the industry are all fully engagedWhat a terrible prospect.We also need to prepare policies for the coming century".There is an original thought for your Lordships!The Government's energy White Paper will outline the key energy policy issues for the future. It will be published in the spring"— [Official Report 8/1/03; col.1050.]I have absolutely no doubt that it left the noble Lord, Lord Tombs, full of hope that an enlightening White Paper would follow. Imagine his despair, which we all 216 shared, when a glossy, colour-printed but bromide paper appeared telling us nothing of what the Government intended.
The debate has centred around two anxieties. The first is the insufficient margin of generating capacity. The noble Lord, Lord Tombs, dealt with that issue at length and I shall not enlarge upon it, but it is a desperately serious matter. It seems to me that, at present, any suggestion that the margins are inadequate is met with something approaching ridicule or just bare-faced surprise.
The other problem is one of totally muddled organisation. Overall responsibility for ensuring the security of electricity supply is of absolutely paramount importance. Such is the organisation that no one—no body, no Minister, no one—is responsible for this extremely important matter.
I fear that Ministers have entrenched themselves behind ill conceived policies and, from that position, they are not good listeners. They have pinned some hopes on renewables, but I believe that those hopes, if realised at all, will not come in time. I certainly share the belief that Ministers have made a cardinal error in disregarding the need to keep the nuclear option open. They shelter behind the phrase "keeping the nuclear option open". One asks them what they mean, and I have twice asked the noble Lord opposite that question. Of course, I recognise that he is not a Minister in the Department of Trade and Industry, which I imagine he will take as a blessing rather than a misfortune. Nevertheless, he was not privileged to be the bearer of anything like an answer from his department. It was a very disappointing exchange—so disappointing, in fact, that a week or so later I renewed the attempt with equally little success.
I do not wish to go on at length. However, my conclusion is that Ministers have entrenched themselves behind a thoroughly wrong-headed policy and that they have not understood the catastrophic consequences of a breakdown of supply. I recall a speech made by the noble Lord, Lord Stoddart, in last year's debate. It showed that he very clearly understood, as I do not believe Ministers do, how such a breakdown would affect every individual and every home in this land and how it would threaten business and the economy and do untold harm. I hope that the Minister who is to reply to the debate will try to drum into such audience as he can find in the Department of Trade and Industry some measure of the concern that we, here, feel about those catastrophic consequences and our fear that the department has not yet seen fit to acquaint Ministers with them.
What I fear most is that the speech made today by the noble Lord, Lord Tombs, will receive the same degree of attention from Ministers as did his equally meritorious speech last year. That is an uncomfortable position for the noble Lord, Lord Tombs, but it is a disastrous position for us all. I hope that the noble Lord will not take this as a measure of party stance or an indication that we are anxious to stick a knife into the Government. It is a measure of deep concern about 217 a problem which we feel the Government are skating round and neglecting almost totally. I am happy to support the noble Lord.
§ 5.37 p.m.
§ Lord Jenkin of Roding
My Lords, we are all very indebted to the noble Lord, Lord Tombs, for deciding once again to bring this important issue before the House. Our acquaintance goes back a great many years. I have never forgotten the time when he and I crawled up between the inner and outer skins of the Hunterston nuclear power station so that he could demonstrate to me the effects on stainless steel of carbon dioxide at, I believe if I remember correctly, 600 degrees centigrade. It was not a pretty picture. Our paths have crossed on a number of occasions since then and, as my noble friend Lord Peyton said, we are very much indebted to him for again bringing this important issue before the House.
The debate is very well timed in some respects, although I believe that it puts some of us under some constraint because we are already deeply involved in the Energy Bill. No doubt some of these issues will be aired when we reach Grand Committee on that Bill. However, I believe that there is a distinction here between the short term and the long term, and the Energy Bill will address principally the longer-term issues. It is therefore appropriate that I confine my remarks today to the relatively short-term issue of the immediate dangers to the security of our electricity supply.
Noble Lords will recollect that in 2003 there were several major power interruptions in this country and also across the world and several minor blackouts in more limited areas. That brought home to many people that it is all very well placing huge emphasis on reducing carbon emissions for the benefit of the environment, or increasing output from renewable sources, or seeking to maintain low electricity prices in order to protect the fuel-poor. But in fact these events have reinforced my view that security of supply in an advanced industrial country such as ours must now be seen as a—or possibly the—primary policy objective.
We are today an electricity-dependent society. It will be no answer for the authorities, when confronted with major blackouts—and after all last year was but a foretaste of what might come—to argue that they are cutting carbon emissions, promoting wind farms and phasing down nuclear plants, because in fact maintaining the security of supply will increasingly be seen by people as being the highest priority.
I should like to draw the attention of the House to two documents which bear directly on the subject matter of the debate. The first has already been referred to by the noble Lord, Lord Tombs; it is the Winter Operations Report of National Grid Transco, which was published on 14 October last year. It is the latest in a whole series of annual reports covering last winter—2002–03—and an overview of this winter,covering both electricity and gas transmission systems".218 It also contains analyses of wider supply security. It is a technical document, produced by skilled professional people and aimed at the main professional players in this field—the Government, the regulators, the generators, the distributors and the suppliers.
Despite a number of apparently bland assurances that we shall be okay in all but one in 50 cases, a careful reading of the document indicates that the real situation is a good deal less reassuring than appears at first sight. There are all kinds of things that may go wrong. It starts with a comfortable 6-gigawatt margin of capacity above average peak winter demand for electricity. A number of scenarios are postulated which could in prolonged cold conditions—and after all these are not unusual in this country—reduce this margin of 6 gigawatts,to between a deficit of 0. I GW and a surplus of 0.7 GW".It is true that that is a "worst case" scenario, but it is, for goodness' sake, the job of the authorities to plan for the worst case.
The authors put forward a number of changes to existing arrangements to provide for what they call,an added level of security in such worst case scenarios".There are nine specific proposals put forward in the document. They are all technical and not easy to summarise within a limited period such as we have. However, I think that I can give the House the essence of what the report recommends. It states:National Grid Transco remains strongly committed to supporting market processes"—in general one supports that—that will facilitate an appropriate level of energy security".But it recommends that electricity supply security would be enhanced if a number of market changes were to be introduced. The changes are then numbered one to nine. They commend:NGT's proposals to strengthen the Electricity Market Imbalance Price…This should encourage a further return",to activity of what they call,mothballed generation and encourage increased availability of generation and interconnector imports.That is only the first change. The second change sees a need for the,proposed new Maximum Generation Service for this winter. This would give NGT access to"—what they call—'reasonable endeavours' generating capability of the order of a further 0.6 GW".The report continues in similar vein: there are a number of quite specific, very technical improvements on how the generating market works in order to provide enhanced security for the supply of electricity to this country.
The report points out that there should be a new process to enable,trading of interruptible rights, allowing shippers to substitute interruption sites with other shippers and hence…when the electricity market is tight [to] enable some market priority to be given to sustaining gas fuelled generation".219 I have only reached the first seven and I have not mentioned them all.However"—the report states—we remain concerned that there may be circumstances in which security of supply cannot be maintained by market mechanisms alone".I have always been a supporter of markets as an effective way of ensuring the supply and distribution of goods and services, but, as the noble Lord, Lord Tombs, pointed out, one is dealing here with very long timescales. The time needed to bring a new power station from design to generating can sometimes be as long as 20 years. In these circumstances, the normal market mechanisms find it difficult to work properly. The report therefore proposes a number of other solutions for the problems of interruptible combined cycle gas turbines over the peak electricity demand period, where market mechanisms have not already achieved this, and so on.
These are all minor and technical changes. I am sure that the Minister will be aware of the report, but I hope that he will be able to answer the question: how many of the nine measures listed in the report are currently being taken? If not all of them, why not? This report has been on the Minister's desk since October when it was published. I do not believe that National Grid Transco would have put this document into the public domain if it had not intended it to be taken very seriously by the authorities. That is the first issue about which we need answers from the Government.
The second document is the recently prepared report for the Adam Smith Institute, written by Professor M A Laughton, a Fellow of the Royal Academy of Engineering. He is a leading authority in the field of energy in general and electricity in particular and is a key adviser to the Government on these matters. That report looks a little further ahead than the NGT report. But it contains some quite disturbing messages. Perhaps I may read to the House one or two of those which have caused me concern as to where we are going in the future.
The heading in the Executive Summary is "Prioritising Security of Supply". It states:According to the International Chamber of Commerce (ICC) security of supply will be the biggest energy challenge for EU and OECD industries during this century. Therefore, to build a strong energy policy around this premise, it must be recognised that security means both security of primary energy supplies (from oil, gas, coal, nuclear and renewable resources) as well as of power supplies to the final consumers".The report points out that the one does not necessarily guarantee the other. If one runs out of generating capacity, regardless of how much fuel one has, one cannot supply people with electricity.
The report turns to the way forward. It states:A rethink regarding investment in generating plant is also required. Britain is facing a shortage of generating capacity in the next few years as unfavorable market conditions see mothballing of much existing plant and discourage new investment".The report goes on to discuss the longer term. In light of his analysis of the situation, Professor Laughton's recommendation should not surprise us; namely, "a balanced mixed energy policy".
220 The House will remember that the Government's policy during the next 20 to 30 years may result in up to 80 per cent of our electricity supplies being met by imported gas, much of it from very unstable countries. Professor Laughton therefore states:It is essential that Britain's energy policy is reviewed as a matter of urgency with the primary remit of ensuring security of power supplies".He continues,significant questions are raised concerning the increasing vulnerability of the UK electricity supply industry".I do not want to risk straying into the area of the Energy Bill, but Her Majesty's Ministers will fail in their duty to the country if they do not pay heed to these authoritative and compelling judgments of Professor Laughton. His warnings are clear. The consequences of failing to heed them could lead to disaster. In the end, it is the responsibility of government to see that the lights stay on. I would welcome assurances from the noble Lord, Lord Davies of Oldham, that the Power to the People paper will he treated with the utmost seriousness that it certainly deserves.
Our people will not lightly forgive the Government if, in the face of the warnings that are implicit in the National Grid Transco report and explicit in the Laughton report, large areas of the UK are repeatedly plunged into darkness.
§ 5.53 p.m.
§ Lord Stoddart of Swindon
My Lords, I join the noble Lords, Lord Peyton and Lord Jen kin, in congratulating the noble Lord, Lord Tombs, on once again introducing this subject. As all those who have spoken so far have pointed out, it is vital to the interests of this country.
I wish the Government would take notice of people such as the noble Lord, Lord Tombs, who has wide experience not only of the electricity industry, but of other industries as well. When he worked in the electricity supply industry, particularly when he was the chairman of the Electricity Council, he was not only well respected, but also well liked and admired. I can also say from personal experience that he was a livewire and a dynamo in that role. He and I used to negotiate across the table when he was chairman of the Electricity Council and I was a member of the national joint council, representing NALGO. I know he thinks that I was a bit of a pest then, because I was always demanding more money than he and his colleagues were prepared to grant to us, but, nevertheless, we were very good friends and always finished our meetings with a good lunch just along the road in Millbank. Therefore, the noble Lord really must he listened to and I wish the Government would do so.
After our previous debate on the matter on 8 January 2003, I had some correspondence with the noble Lord, Lord Sainsbury. He wrote that spare capacity amounted to 17.5 per cent. The total available plant was 64.9 gigawatts, of which 17.5 per cent was spare capacity. The predicted peak winter demand was 55.3 gigawatts. That was roughly confirmed in a letter 221 from the noble Lord, Lord Davies of Oldham, to the noble Lord, Lord Jenkin, on 23 October when the July update of the plant margin was 16.5 per cent for the coming winter rising to 18.1 per cent when the Isle of Grain and Deeside power plants came on stream.
The noble Lord, Lord Tombs, said that those figures are overstated and that, far from having 17.5 per cent spare capacity, we have far less. That is very worrying indeed. My view remains that those figures—not those of the noble Lord, Lord Tombs, but those that were given to me and to the noble Lord, Lord Jenkin of Roding, by the Minister—represent the barest minimum to ensure security of supply. Security of supply means the absence of power interruptions or significant voltage reductions.
I worry also about whether the National Grid is completely up to scratch in dealing with abnormal loads or serious breakdowns in the network. Recent experience has shown that that is perhaps not so. That is another matter to which the Government should give their attention.
I reiterate what I said previously about maximum demand. The noble Lord, Lord Jenkin, also touched on that matter. It is some years since we suffered a severe and prolonged winter, with low temperatures over an extended period of time. Last winter's maximum demand figure of 55.3 gigawatts could well be significantly exceeded, since people have added to their stock of electrical appliances over the years. The Government and the electricity supply industry seem not to have taken due note of that fact. People keep on buying appliances and adding to the potential load. That potential load has not been tested for a very long time. That is why the Government and the electricity supply industry should be wary. Under those circumstances, the plant margin could be quite inadequate. The plant itself—I know about it because I worked at a power station—would be under greater mechanical strain, resulting in a greater number of outages than anticipated. That is another risk that has not been tested in the past few years.
I am aware that working power stations and plant are supplemented by mothballed capacity. It mainly consists of oil and, as the noble Lord, Lord Tombs, said, old-fashioned and outdated plant, which could not in fact be brought in to use at short notice. Indeed, to put it in working order and on-stream would take at least weeks; and probably many months before it could deliver power to the grid. It would be useful to hear the comments of the noble Lord, Lord Davies, on those points.
Can the Minister also tell us whether renewable energy—mainly wind turbines—is or will be included in the total plant availability and taken into account when calculating the plant margin? That is an important question that should be answered. I sincerely hope that it is not, as the vagaries of wind, even at sea, are well known. All too often, when icy conditions prevail, wind speeds are at their lowest. If that capacity is taken into account, that is dangerous for security of supply. If not, it shows the futility of relying on windmills to supply 10 per cent of 222 electricity, as back-up capacity will have to be provided. That makes wind power unreliable and expensive as well as environmentally damaging.
Finally, I must reiterate my regret that we no longer have a department of energy to oversee what is a vital service to the health, safety and wellbeing of our people and to industry and commerce. I hope that the Government will reconsider their attitude. I am sure that I and other noble Lords could suggest some departments that could be slimmed down or even abolished to pay for a new department of energy. That department could give leadership to the industry, which, as everyone knows, is too fragmented and lacks a proper co-ordinated way to provide electricity supply and, above all, security of supply.
§ 6.2 p.m.
§ Lord Gray of Contin
My Lords, I join other noble Lords in thanking the noble Lord, Lord Tombs, for giving us the opportunity to discuss this subject. We are extremely fortunate to have in this House someone with the noble Lord's vast experience and knowledge of the whole energy industry. Indeed, as I listened to his address, it emphasised to me how important it is to have Members of his calibre. We would be deprived of many such contributions were we ever to change into a House that consisted of directly elected and only elected Members.
Electricity is the lifeblood of the country and safe and sound security of supply is of paramount importance. It is, after all, a vital part of ensuring the very existence of our transport system and all our industries are dependent on it. Our homes and offices without electricity become miserable to say the least. Little wonder then that the public has become alarmed, not to mention irritated, at any suggestion of power cuts.
The Institution of Civil Engineers recently produced a short but useful assessment of the state of the UK infrastructure which contained a passage on power generation. That drew attention to the fact that no country has achieved significant reductions in energy demand through conservation and that renewables can make only a limited contribution. Yet the Government hope to increase the contribution from renewables to 20 per cent by 2020.
Our current mix for electricity generation is 32 per cent coal, which will disappear by 2016 if emission constraints are enforced; 23 per cent from nuclear power—by 2020 only one nuclear power station will be operating—and 38 per cent from gas. However, after 2006, we shall become a net importer of gas, while by 2013 our dependency on imported gas will have risen to almost 70 per cent. Those imports will come initially from Norway and later from West Africa, the Middle East, and former Soviet republics—hardly encouraging in terms of security of supply. The present mix is completed by 4 per cent from oil and 3 per cent from renewables.
So, after 100 years of self-sufficiency in energy resources, we are facing the future in a cavalier fashion, producing a White Paper that makes 223 hopelessly over-optimistic forecasts and places an unrealistic reliance on renewables, especially wind power. All the renewables are dependent to varying degrees on weather, but as so much is expected of wind power, it is the adverse effect of high pressure and flat calms that cause most concern. To place such faith in a source of energy subject to intermittency is highly irresponsible.
I recall expressing disappointment when a Conservative Government decided to discontinue research into the fast breeder reactor. I remember well being told then that the need for the fast reactor was still 40 years away. Almost 20 of those years have already passed. What a wonderful opportunity has been missed in the White Paper. Renewables could still have been given a role to play—no one denies that they have a useful role—but the real challenge was ignored. The White Paper should have proclaimed wholehearted support for nuclear power now, with a positive declaration that existing nuclear power stations would be replaced.
Keeping the nuclear option open is simply not good enough. Nuclear power's carbon-free qualities should have been built on in the White Paper. Global warming is a threat to the world that has been played down for far too long. The resolution of disposal of nuclear waste is not insurmountable: it has been resolved in other parts of the world, most recently in Finland. The White Paper should have highlighted the advantages of nuclear power as recognised in so many countries worldwide. There are 27 nuclear reactors under construction in nine different countries and the total number of reactors now approaches 450. Are we to be left behind yet again?
The White Paper pays only lip service to the nuclear industry, instead of using it as the centrepiece of our energy policy for the future. It is still not too late, but the present Government show little sign of accepting the challenge.
§ 6.10 p.m.
§ Lord Lea of Crondall
My Lords, I beg the leave of the House to speak briefly during the gap. Earlier, I was at a meeting that I could not avoid. I wish to follow the theme covered by the noble Lord, Lord Gray, as it is the most crucial question of energy policy introduced by the noble Lord, Lord Tombs, today. The problem is that electricity is unlike any other commodity; you cannot store it. There is a system in north Wales to take water to the top of a hill so that it can come down again, but that cannot be done in any other part of the country.
That brings us to the problem of measuring base load. In my first question I shall paraphrase the remarks of the noble Lord, Lord Stoddart:are we supposed to be counting renewables in the base-load requirement? If so, it is a very odd definition of base-load requirement, because it is not reliable. If we are not counting renewables, we need a margin—15 per cent or whatever—on top of the current customary margins for a set of stations where we are asking investors to believe that there is a rate of return on 224 investment for capacity that is used only occasionally. That will not be nuclear capacity, as it is not technically possible to use nuclear energy as compensating capacity. I will be corrected if I am wrong, but I understand that one cannot use it as compensating capacity relative to wind energy.
That means that the whole base-load capacity that we have to rely on must include even more imported gas capacity, in which people will have to invest. Where is the incentive to invest in that capacity if it will be used only intermittently? It is not therefore a question of being against wind power, but about reminding ourselves of the nature of wind power and its unreliability, which leads to greater difficulty in security of supply than we already have. It is perhaps useful to consider security of supply in two separate senses of the term: the first is relying on Azerbaijan, the Middle East or elsewhere, and the second is technical security.
I conclude by echoing many other speakers. Not only must we pay lip service to keeping open the nuclear option, we must ask our friends in the Government to think seriously about the timescale. It is a bit like joining the euro, on which I shall not be echoed by the noble Lord, Lord Stoddart. Do we not need to make clearer the timescales and ensure that the arithmetic adds up to a greater extent than in the White Paper?
§ 6.14 p.m.
§ Lord Ezra
My Lords, I declare that I have been actively involved in the energy sector for some years and am currently chairman of Micropower. which promotes the small-scale generation of electricity.
Together with all noble Lords who have spoken, pay tribute to the noble Lord, Lord Tombs, for initiating, yet again after a year's interval, a debate on this important issue, and for repeating what he said before—it bears repetition. Like the noble Lord, Lord Stoddart, I had dealings with the noble Lord, Lord Tombs, when he was chairman of the Electricity Council. But whereas the noble Lord, Lord Stoddart, was trying to extract from him the maximum amount of money possible for the members of his union, I was trying to get a fair price for the excellent coal that we supplied to the power stations. The noble Lord, Lord Tombs, and his colleagues stood up to that twin onslaught with much fortitude.
The current energy position calls for very careful thought. We have had the White Paper, but it was basically an aspirational document. To pay it a tribute, it set out the problems fairly clearly. But many of the actions are still to come.
As other noble Lords have said, the question of interruptions in the electricity supply sector divides itself into two parts—the short and longer term. In the short term, attention has been focused on two issues: first, the reliability of the transmission and distribution network, and, secondly, the reserve capacity of electricity generation to meet untoward conditions, both of which have caused concern. The DTI and Ofgem have claimed that there is no real risk 225 of power interruptions this winter, apart from exceptional circumstances. Nevertheless, as the noble Lords, Lord Tombs, Lord Jenkin of Roding and Lord Stoddart, have pointed out, the reserve of generating capacity is now at a lower level than it has been for many years. What is stated to be the reserve could well be lower in the event because of outages at the time, to which the noble Lord, Lord Stoddart, referred from his great experience of operating power stations.
The short-term problem of possible interruptions of energy supply is serious, but the longer-term issue is even more serious. As matters now stand, over the next 10 to 15 years, a large part of the present nuclear and coal-fired capacity is likely to be closed down. That will start to happen in the intermediate term, not in the distant future. At the same time, as the noble Lord, Lord Tombs, pointed out so clearly, there is doubt about new investment in gas-fired generation. That is due to major increases in gas prices compared with wholesale electricity prices. The future trend in gas prices will undoubtedly go upwards as increasingly we become importers and put pressure on supplies.
The energy White Paper sets out four objectives of energy policy: competitiveness, security, diversity and sustainability. It is not possible to keep those four balls in the air at the same time. It has emerged clearly, and was emphasised in today's debate, particularly by the noble Lord, Lord Jenkin, and others, that security of supply is undoubtedly the most important energy issue that we now face. The reason is that for the first time in our economic history we shall become increasingly dependent on imports. Coal supplied us with all our energy needs for centuries; then we found gas and oil in the North Sea and we developed our nuclear capacity. Although we have had to import a certain amount of oil, we have never been in the situation that is likely to arise in the next decade or so. That is one risk. It has been emphasised in this debate, and it is well known, that we stand at the end of the European transmission line for gas. The specific problem that we are addressing today is that there will be an increasing gap in the availability of electricity capacity.
The Government have emphasised renewables and energy efficiency as the principal means of achieving their energy objectives, that is of making good the possible shortages in electricity supply and in meeting their Kyoto objectives. The trouble is that under neither of these headings has the headway been made that would give us reason to think that the Government will achieve their aims. Renewables' performance so far has been much less than anticipated, and the prospects are uncertain. However, as far as energy efficiency is concerned—particularly in the domestic sector, where the biggest savings remain to be made—while the Treasury has carried out two consultations, little has been done to bring about the great surge in saving that is required. We are left with the prospect of an impending electricity generation gap of substantial magnitude.
226 As I understand it, next year the Government hope to produce proposals to deal with hazardous nuclear waste. It may be that in the light of the proposals made then, they will finally decide on the future of nuclear capacity, the great uncertainty emerging from the White Paper. Even if they did decide—which is uncertain—to go ahead with new nuclear capacity, we are still left with a major problem, because it would take at least 10 years before new nuclear could come on stream, allowing for consultation, planning and safety procedures. It could be even longer if it was decided to adopt new technologies that are in the process of development. Whatever decision is taken on nuclear, the prospect of a generation gap in the intermediate term remains. It calls for urgent action. The Government must now review their policy of exclusively concentrating on renewables as the means of filling that gap. This is just not feasible, as has been pointed out by previous speakers.
I will mention other steps that could be taken. I have pointed out that the White Paper was pretty good at analysing the problem, and all these steps are indicated in the White Paper. What is lacking is the policy to carry them out. Coal remains our most important indigenous energy resource. We still have substantial reserves, but if we go on as we are, in the next 10 to 15 years there will be virtually no coal-fired stations in operation because of increasingly stringent emission standards, as well as the age of the stations. Clean coal technology offers a means of replacing existing coal-fired operations and together with carbon extraction can compete environmentally with renewables.
What should the Government do about this? There is a simple measure that they could take. An extension of the equivalent of the renewable obligation to clean coal technology could mean that the two or three projects that are now on the drawing board for such plants could start being constructed. In the United States, they have devoted 1 billion dollars to the development of clean coal technology. This compares with the few million pounds that are being spent in this country.
We must consider ways in which we can get good dividends from acting as they do in Germany on the recovery and treatment of methane from coal mines. If the methane escapes in the atmosphere, as the noble Lord, Lord Jenkin of Roding, and other Peers have frequently mentioned in debates, it can cause untold damage. Converting it to electricity by treating it can be extremely beneficial in comparison. It remains a mystery why the Government consider that methane from landfill sites is a renewable source of energy, but the same methane from coal mines is not. Yesterday, the noble Lord, Lord McIntosh of Haringey, referred to this as a nonsensical situation. In Germany, both are considered to be renewable, and there is support for both. The sooner we do that here, the better.
Perhaps the most important development in electricity generation would be to have a more decentralised system, with localised or distributed generation. It creates substantial advantages by reducing pressure on the National Grid and avoiding transmission losses, and by enabling waste heat to be 227 used, virtually doubling the fuel conversion efficiency and thereby reducing the rate of emissions. The trouble is that the most effective way of doing it—through combined heat and power—is now in the doldrums because of the substantial increase in gas prices. In the case of CHP, as in the case of clean coal technology, there is a way out of the problem that is quite simple: extending a type of renewable obligation to support CHP. Such measures are within the compass of government, and I am sure that we shall propose relevant amendments to the current Energy Bill. The Government should consider such measures very seriously.
A new technology for micro-CHP or micropower has been developed, and I have declared my interest. It takes the form of a domestic boiler capable of producing heat and electricity, bringing all the advantages that I described to domestic users. The first such appliances are likely to be marketed during the next 12 months, but, if the full benefit is to be derived from this exciting new technology, we will need help during the build-up period. We should not repeat the mistake made over the condensing boiler, which has advantages over conventional boilers, just as micropower boilers mark an advance on condensing boilers. As the energy White Paper demonstrated, in Britain, in 2002, condensing boilers accounted for 12 per cent of the market, whereas, in the Netherlands, as a result of concerted and determined efforts, the figure was 75 per cent. That shows what can be done, if the will is there.
In conclusion, we face a major electricity generating gap in the next 10 to 15 years, due to the likely closure of nuclear and coal-fired stations, coupled with a slow rate of investment in new gas-fired stations. Even if the Government decided to go ahead with further nuclear stations, the inevitable time lag would necessitate other measures. The technology is available and was fully identified in the energy White Paper. Aspiration must be converted into action. A first step would be an urgent review of electricity generating prospects and a list of actions to be taken to safeguard the future security of supply.
§ 6.28 p.m.
§ Earl Attlee
My Lords, I too am grateful to the noble Lord, Lord Tombs, for introducing this timely debate. We have been concerned about such matters for some time. The noble Lord paints an alarming picture of capacity shortfalls.
It is easy to forget how severe are the effects of power cuts of any duration or frequency. It is easy to forget what happened in the 1970s with the three-day week. The result was severe damage to the economy in the short term, and, in the longer term, many factories and organisations felt that they ought to have their own generating capability. That was a complete waste of resources, as the generators were rarely used.
I saw for myself the effect of power shortages in war-torn Bosnia in the 1990s. There, high-density urban housing was heated by coal or electricity, and it probably needed both for the systems to work. 228 Because of the conflict, there was neither, but there was misery and suffering. The Bosnians installed an improvised stove in each apartment and burnt the wood that they collected from the forests round about. That would hardly be practical for the centre of Birmingham or Manchester.
My noble friend Lord Jenkin spoke about the need to have security of supply as a priority over other very desirable considerations, such as carbon emissions and low energy prices. The people of Birmingham or Manchester would be very unforgiving in the event of substantive power cuts. Our high-density urban housing is heated almost exclusively by gas. There will be no alternative fuel to be used by those households. The Government's White Paper rightly talks about fuel poverty. However, on these Benches, we believe that they are complacent about fuel famine.
As for industry, it would be the first victim of power allocation. We have always had interruptible power contracts for major industrial users, but in the event of a power famine we might have to return to the nightmare of regular brownouts, and not just for electricity.
We have seen the significant effects of power cuts on the public transport system. When I pursued the Minister on that, his body language was very revealing. There seemed to be something with which the Minister was not comfortable. With the demise of the Lots Road facility, is the Minister confident that there is no risk of disaster on the Underground or elsewhere on the rail system in the event of a significant failure of the electricity supply system?
The good news is that my information is that we are unlikely to see power cuts this winter unless the conditions are exceptional. I expect that the Minister will say something similar when he responds. But I think that your Lordships would feel even more comfortable if he put some flesh on his caveat when he calmly tells us not to worry ourselves.
What weather conditions does the Minister think constitute exceptional circumstances? For instance, how many days with a daytime temperature at however many degrees below zero would he exceptional? We have had several exceptionally mild winters; we do not want to be caught out by an average winter. The noble Lord, Lord Tombs, talked about a false sense of security. The noble Lord, Lord Stoddart, talked about the possibility that demand might be higher this winter than last winter. He also pointed out the difficulties of bringing plant out of mothballs quickly.
Your Lordships seem to have three strands of concern about power supplies. The first is the sources of primary fuel and the mix—or, rather, the lack of it. It seems that a large proportion eventually will be gas, as observed by many noble Lords. As a net exporter, we do not need to have much gas storage capacity. But, as an importer, we will be obliged to store gas under the EU energy directive. My understanding is that the French store 70 days worth of gas. How many days of gas supply does the Minister think that we should 229 store? Are there the regulatory levers in place to make that happen? We also use vast amounts of oil for transport, but that is not relevant to today's debate.
The noble Lord, Lord Ezra, talked about coal and clean coal technology. I have no romantic ideas about UK deep-mined coal, but we should maintain a significant coal burn. The Minister will need to respond to the points made by the noble Lord. However, the EU large combustion plant directive clearly will have a big impact. I understand that a noncompliant plant can be used for a short while during a year. That would be useful if there was no wind for the UK wind farms. However, does the Minister have any plans to avoid non-complaint but fully serviceable plant being scrapped and to have it put in mothballs instead? If he did so, it would be available in the event of a crisis, but there would be a cost of maintaining it.
Many noble Lords, including my noble friends Lord Peyton and Lord Gray of Contin have talked today or recently about new nuclear build. I think that the people of the country are relaxed about nuclear power, but they have been convinced that the problems of nuclear waste are insurmountable. My noble friend Lord Gray briefly talked about the Finnish experience. My noble friend Lord Peyton talked about the cardinal errors being made regarding the Government's nuclear policy—or, perhaps, a lack of nuclear policy. I think that my noble friend is right.
The Select Committee of your Lordships' House has shown the way towards establishing a deep geological depository for the waste. As I observed at Second Reading of the Energy Bill, the Government have put that issue itself into a deep geological depository. I have asked the next question before, but I have not received a satisfactory answer. What possible conclusion could CoWRM come to other than to build a deep geological depository, as outlined in the Select Committee report?
Many noble Lords, including the noble Lord, Lord Stoddart, have identified the folly of relying on renewables when only wind seems to be effective, if expensive, and with its own difficulties. My noble friend Lord Gray said that the reliance on wind was "highly irresponsible" and that this was because there might be no wind due to meteorological conditions just at the point of maximum electricity demand.
The second strand is the transmission and distribution infrastructure, the failure of which caused the August 2003 blackout. It is to be hoped that that was a wake-up call for the Government. Can the Minister assure the House that the regulatory mechanisms that will be in place after the implementation of the Energy Bill will be sufficient to ensure that major failure cannot occur again?
The third and final strand is that of generating capacity, which is the excess of supply over demand rather than the mix, or lack of it, both now and in the future. Many noble Lords have focused on that, including my noble friend Lord Jenkin. He pointed out that the market mechanisms have many benefits, but they are not a panacea, especially in the long term. I hope that the Minister can respond to his questions.
230 I can see how market signals can motivate generators to take plant out of mothballs and into service. What I do not understand is how the market can signal the need to build new plant. Even if those signals are received, the market might respond with the shortest lead-time solution, which would be gas fuelled, as mentioned by the noble Lord, Lord Tombs. That could be despite increasing pressure on gas supplies and prices.
I cannot see how the market could stimulate new nuclear or any other build given the long lead time, and the determination of the Government not to make progress on nuclear waste management. It may be that the Government are relaxed about the lack of a UK nuclear science base on the grounds that we can always import the necessary technology under licence, if necessary.
The problem is that in the future we may be struggling to find enough nuclear scientists and engineers to decommission our current nuclear infrastructure, let alone examine even the safety case of a new plant from a position of skill and experience. I share the concern of many noble Lords about the split in energy responsibilities between the two departments of state; namely, the DTI and Defra. Who is responsible for keeping the lights on? Which Secretary of State? In conclusion, we are not convinced that we have secure electricity supplies for the foreseeable future.
§ 6.37 p.m.
§ Lord Davies of Oldham
My Lords, we are all grateful to the noble Lord, Lord Tombs, for introducing the debate. This time last year, he sent out signals to which the Government reacted at the time. I shall seek to identify areas in which action has been taken during the intervening 12 months in response to some of the short-term issues, also identified by the noble Lord, Lord Jenkin. Noble Lords will recognise that in this debate I have both to respond to short-term issues—anxieties have been expressed about last winter and the margins at that time and how well we will get through this winter—and, at the same time, to address intermediate and longer-term issues in terms of how we provide energy for the country in this decade and for decades to come.
I want to emphasise that I regard the noble Lord's introduction as most thought-provoking. We take the points that he made very seriously. I completely disavow any intention that the noble Lord, Lord Peyton, thought that I might have of engaging in party-political banter over such an issue. Far from it; this is an issue on which we are all united in recognising that the need of power for our country is as significant as any requirement could be. As the Government, it is our job to address ourselves to issues both in the short term where there have been one or two problem areas identified, and, of course, in the longer term.
In the international context, we are aware that in recent months others have suffered some severe shortages of electricity, which have brought home to us what, in advanced economies, a shortage of power 231 supply really represents. We all recall the colossal problems in North America a few months ago. Of course, we have had minor problems ourselves. I say "minor" because the numbers of people affected have been relatively few or, if a large number of people have been affected. it has been for a very short period of time and in a very particular way.
Nevertheless, any shortage in our electricity supplies has a marked impact on the way people conduct their lives and that is why we need to set out to guarantee that power failures will not occur in this country. While we may not be able to give a 100 per cent guarantee—no system known to man can achieve perfection in such a complex area—we want a transmission system that meets the standards we have set in the past and want to see in the future, one that delivers power 99.9999 per cent of the time. When a failure occurs, we shall address the causes of that failure and learn lessons from it.
The noble Lord referred to the difficulties caused by the storms last winter and the breakdown in power supplies that occurred in certain areas. The then Minister for Energy immediately instigated a review by the consultants British Power International of how companies performed during that difficult period. The report indicated that some companies had performed better than others and the recommendations made were conveyed to each of the companies involved, asking them to take steps to improve their performance in the event of future storms.
In August 2003, my honourable friend the Minister for Energy, Stephen Timms, wrote to all the companies concerned inquiring about progress on implementation of the BPI recommendations. It is apparent that all of the companies have responded to the findings of the BPI report by implementing numerous initiatives aimed at better performance in the aftermath or future storms. Such initiatives include dedicated emergency planning managers, better facilities to predict resource requirements in view of weather forecasts, more rigorous testing of management contingency plans and better communications with local authorities and the media. While we cannot predict storms, we can ensure that reactive mechanisms are in place which are sufficiently robust to guarantee that the impact on people from any potential difficulties is reduced to the absolute minimum.
The BPI report also made certain generic recommendations. To consider these and further to encourage the distribution network operators towards best practice in storm performance, representatives from the DTI, Ofgem and the DNOs established the Network Resilience Working Group. Energywatch was subsequently invited to participate. That structure has been put in place to improve as best we can the response to the impact of these kinds of short-term problems. Although over recent years we have enjoyed mild winters, storms can have a devastating effect in certain areas, so we need to have in place robust measures in order to be able to respond in an effective manner.
232 The noble Earl, Lord Attlee, referred to another short-term event; that is, the power cut on 28 August last year which affected the London Underground system. Let me assure the noble Earl that the Government acted quickly to meet concerns over the power cut. The Minister for Energy wrote to National Grid Transco registering his concerns and asked it to provide him with full reports on the nature of the breakdown. The reports outlined that the power failure appeared to be the result of isolated equipment problems rather than a general fault in the net work or a shortage of generation. However, I agree with the noble Earl that when a system as significant as the London Tube network is out of action for even a short period, it has a devastating effect on many hundreds of thousands of our fellow citizens. That is why we need to be as robust as possible in our response to such events.
Much of the debate has pursued an argument which has been presented to the House at Question Time, and in which I have been privileged to play a small and humble part; that is, operating margins. The noble Lord, Lord Peyton, addressed the matter with great eloquence and, at certain points, with a measure of dolefulness that I do not fully share with him as regards what the present operating margin represents.
Let me emphasise one point. Last October I wrote to the noble Lord, Lord Jenkin of Roding, and indicated that at that point there had been an improvement in the generating margin from 16 per cent to 18 per cent and that I hoped that the margin would improve further over the next few months. That has proved to be the case. We now have an operating margin of 20.9 per cent. While I recognise that that is a very different margin from those sustained in the mid-1980s, I thought that noble Lords opposite in particular had then engaged in a transformation of our energy supply industries on the basis that those margins were too wide and often concealed an uneconomic approach to energy supply. Today we have a system that is more market sensitive and works to more realistic operating margins.
The noble Lord, Lord Tombs, may disagree with the assessment of the position, but let me point out that it is clear that the market is responding to the signals being sent out and is increasing the necessary margin for this winter. I imagine that, for the foreseeable future, there will be considerable dispute about what the margin should be, but that should be set against the background of our assertion that, on recent experience, the margin has held up well enough to guarantee supplies to our people. If it is contended that we have been extraordinarily fortunate, that the weather has been particularly benign or that people have not been switching on their new-fangled technology and consumer goods to the same extent and that all these factors have to be taken into account, let me say that of course we recognise that increasing demands will be made for power supplies. The noble Lord, Lord Stoddart, identified the point. We are concerned to ensure that, in the longer term, those 233 needs are met. However, in the context of the Kyoto agreements, we are quite properly addressing the ways in which energy production will shift over time.
I recognise that some noble Lords such as the noble Lord, Lord Gray of Contin, who expressed himself in gentle but stringent terms, believe that the generating margin can be met only in terms of nuclear generation. The Government do not have a closed mind on this issue. We recognise that if a gap was to emerge in our ability to sustain the necessary energy margins which could be filled only by increased nuclear generation, then that option is being kept open. That is why resources are being devoted to ensuring that we continue to produce people with the necessary research background and technical skills to sustain our nuclear industry—not only in the management of the run-down of the industry as projected in the White Paper, but also, if necessary, in order to enhance nuclear production. That was expressed quite clearly last year as government policy.
However, we do not foresee that nuclear generation will be necessary because we have several other strings to our bow. One of those is our commitment to renewable energy, which I do not think has been given as warm-hearted a response this evening as it might deserve. Derisive references were made to "windmills", suggesting Don Quixote and the 16th century. However, we are talking about sophisticated wind turbines. It has also been suggested that they will all fail at the same time because the wind is intermittent. The whole concept of wind turbine power generation is predicated on their very wide dispersal right across the United Kingdom. Only a brave person would attest that because it is calm in one part of the country, it would be calm in all parts. Obviously that is not the case.
There is of course an intermittency factor—I do not seek to underestimate that—and that is why we are devoting resources to the storage of electricity from such production units. We have not made the progress we would have wanted to make by this point but we have to recognise that if a resource has within it a factor of intermittency, a storage element is of importance. We cannot discount that factor.
Let me reassure the noble Lord, Lord Stoddart, that the contribution of renewables will be a part of the equation of the margin of capacity. Equally, it is not as certain a source of supply as various other energy sources. We will need to build in a greater unreliability and uncertainty factor because of the nature of the resource. But anyone who contends that, if we evaluated these figures over a certain number of days per year we could not guarantee that under most climatic circumstances the wind would blow sufficiently in order to guarantee that the turbines will produce a certain percentage of our electricity, underestimates the analysis undertaken when we seek to advance the contribution of renewables to the overall position.
If we fail to reach the target—which is not a modest one—of obtaining 10 per cent of our resources from renewables by 2010 we shall have to address the issue 234 of filling that gap from other sources. It was indicated that "other sources" could be exceedingly unreliable. It is of course the case that the only safe and reliable energy resource is one which lies utterly and totally within one's boundaries, exploitable only by companies totally committed to selling only within the United Kingdom. That is the blessed state which was the basis of our glorious days of industrial revolution in the 19th century, and more recently to a degree.
However, in the 21st century, such a luxury is not vouchsafed to us or to any other country in the world. At the present time, with the exception of Canada, all G7 countries import energy. Noble Lords will be aware that one of the most significant economies—the Japanese economy—has had a bumpy ride of late, but I do not believe that any of your Lordships attributes that to a particular energy problem even though the Japanese economy is dependent totally upon the import of energy.
When we say that we will have a reliance upon gas imports and that the indications have been that these will be from unreliable sources, that will be true for every country in Europe. We will be dependent upon the supply lines that the rest of Europe is dependent upon. It is inconceivable that the Government would construct an energy policy without taking into account the huge amount of natural resources that have been developed in parts of the world distant from Europe. Efforts have been directed towards producing an adequate and successful pipeline capacity to deliver, and Germany, the Netherlands, Italy, central Europe, Poland and the United Kingdom are all in the same position. We are part of an economic framework which will be dependent upon the successful transmission of these resources.
When noble Lords indicate their anxieties about these resources, it is of course accurate to say that they are less reliable than indigenous resources. But if that had been the overwhelming case that ought to have obtained in regard to energy supplies, the history of the coal industry in this country would have been very different over the past three or four decades and we would not be in the position we are in today.
I recognise the properly articulated anxieties of noble Lords. The Government cannot be complacent about the issue of the electricity supply of a country and society which is totally dependent upon its effective distribution from the networks for its essential energy. I emphasise that the Government have learnt the lessons from last winter and from the issues introduced by the noble Lord in his contribution to the House. It is almost 12 months to the day since he first introduced them.
We shall consider the debate very seriously. The noble Lord, Lord Peyton, sometimes casts slight doubt on my effectiveness in the Department of Trade and Industry. I pay due regard to the fact that I am not there 90 per cent of the time as I have other obligations in the House. Nevertheless, an important debate has 235 taken place in the House to which I am obliged to respond. In that context, the issues raised need to be addressed in a serious way.
§ Lord Jenkin of Roding
My Lords, I understand that in the time available the Minister may not be able to deal with all the points that have been raised. But I asked him a specific question about the nine-point recommendation in the National Grid Transco report. Perhaps he will be kind enough to write to me on how many of those nine points are being implemented.
§ Lord Davies of Oldham
My Lords, I intended to refer to that issue in my general response to the question about the lessons we are learning from developments over the past few months. The noble Lord will recognise the constraints of time. A number of specific questions have been asked but I have not been able to do justice to all of them. I shall write to the noble Lord on that point. I know the importance he attaches to it. If I am not effective in that respect, I suspect that he will use the forum of the Committee stage of the Energy Bill to address the issue. I am not neglecting the point. The noble Lord will recognise that in such a wide-ranging debate I am not able to respond to every particular point.
I hope that I have indicated to the House that the Government have acted promptly in areas where particular problems were identified last winter in regard to short-term factors. We have addressed those issues and they have been a part of the burden of the debate.
As to the more general issues in regard to energy policy, I can only state that the Government's policy has been well defined in recent months. Noble Lords have identified their anxieties about particular parts of that policy. I hope—I suspect it may be a forlorn hope—-that I have set parts of some minds at rest on these issues. I have no doubt that, either under the guidance of the noble Lord, Lord Tombs, or others, we shall return to these fundamental issues, which are basic to our society and our economy.
§ 6.59 p.m.
§ Lord Tombs
My Lords, I thank noble Lords who have taken part in the debate for their contributions both this year and last in the case of those other patient souls.
Perhaps I may make some general remarks and then turn to the Minister's helpful reply. The common theme of all contributions is security of supply. I chose to make my speech about that today to try to highlight the fact that there is no reliable information available. That comes clearly through the seven-year statement. Because of the formation of the industry, there is no one able to collect reliable data—and unreliable data do not lead to reliable conclusions. This is a warning for the Government, as much as anything—I am trying very hard to be constructive. The collection of this data is not the National Grid/Transco's job. That is not its field of expertise, and never was. But it fills a vacuum which arises from the structure of the industry.
236 I spend a fair amount of time talking to people who used to work for me in the industry. Some are still employed, some are retired. I find among all of them a great concern about the lack of clear direction in the industry. Morale is low.
There are problems, too, in the investment community. The Minister may know that the Carbon Trust recently commissioned a consultants' report on the attitude of investors to investing in renewable energy. The investors said that they had so far lost £4.5 billion on what they describe as conventional power stations, by which I think they mean non-renewable source power stations, probably including nuclear. That is a big hangover, and it does not fill them with enthusiasm when it comes to trusting the Government. Much of this arose, of course, from that unfortunate regulator error of NETA, which we discussed last year and which will haunt us for a long time.
On the general question of procrastination, I chaired a Select Committee inquiry into the disposal of nuclear waste almost exactly five years ago. For four and a half years, that gathered dust steadily in a number of departments. It has recently surfaced with the Nuclear Decommissioning Authority, but it still has made no progress on the construction of a long-term disposal facility. The problems are not real; the problems faced by other countries are just being kicked around by various departments, I fear.
Let me turn to a few points made by the Minister. First, I did not in fact refer to winter storms, although he was kind enough to say that I did. I excluded the question of distribution and transmission interruptions, and said that I wanted to concentrate on plant margin. If I have made my note correctly, I think he may have cause to regret his claim that the plant margin has improved to the point where we can guarantee supplies. I stand to be corrected, but I shall look at Hansard with more than usual interest.
My other point is a minor correction. Interconnected trading goes on all the time. Electricity is bought and sold. The point I sought to make is that it cannot be relied upon at peak by any country because there is no contract for exports at peak between countries. That is just a common thing.
I cannot expect—indeed, I did not expect—a detailed response to all my points because of course the Minister had no notice of those points and he cannot come here briefed about every possibility. But I hope that he has taken what I have said seriously and that the Government will realise the fragile ground on which they are standing in the seven-year statement. It is prepared with the best of intentions and done in the best way possible, but the information is duff and the results are duff. I do not know whether the Hansard reporter can spell that—it is D-U-F-F.
237 I have enjoyed the debate. I cannot guarantee not to raise the subject again in a year's time. If I had more faith in governments listening hard and looking at the facts, I might, but I will not guarantee it. I beg leave to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn.