Energy: Gas Prices

My Lords, I thank the noble Baroness, Lady O’Cathain, for initiating the debate. The great joy of being in one of the winding-up positions is that an issue so specifically focused on one area is often covered, as it was in this case, especially by the excellent speech of the noble Lord, Lord De Mauley. I will be able to cut large sections out of my speech, which at this time of the day will be helpful. I would like to raise a point mentioned by the noble Lord, Lord Patten. The fact that there are no Back-Bench speeches from either our Benches or the Government Benches is probably due to the failure of debates being moved to a Thursday. As every Front-Bencher knows—or anybody who has initiated a debate on a Thursday—you can often strong-arm your friends to come and speak in your debate, but it is very difficult to get anybody else to turn up when the weekend beckons. As the phrase went in the Army, Wednesdays are a terrible waste of two awfully good weekends. I will start with a question. I hope that the Minister will not think I am being facetious, but I was amazed by a number of rumours spreading yesterday about meetings being held in the DTI, where people were being called in to discuss whether there was a real issue of us running out of gas capacity in the coming winter. I would be grateful if the Minister could answer that. He might not know right now, but it would be helpful if he could write to us. I found that an interesting rumour when I was preparing for this debate. Obviously we have had many problems over the past year. As the noble Baroness, Lady O’Cathain, pointed out, some were unfortunate, such as the fire at Rough, and others were due to matters beyond our control, such as the problems with the supply coming through from Russia. I thought that the excellent speech of the noble Lord, Lord Owen, was very instructive. The reports all give a very cynical view of the Russian attitude and it is useful to have a positive aspect as to why it undertook its actions. As we will become reliant to a large degree on Russian gas, any moves to control the flow of that gas into the market has to be a major worry and will have a major impact on the price—as was shown at the time, with the prices rising to a record high. I know that the Minister will say that a number of the issues that have been discussed over the past year are being addressed. I was gratified to see that National Grid has announced that £9 billion is to be spent on dealing with imported gas and the connection of renewable wind resources to the national grid. We should not miss one of the problems with the price indication of gas. Gas prices have been remarkably low for a number of years. Many people can afford even 25 per cent rises without noticing them too much. However, there is a real problem with fuel poverty in the country, and that is something we should address. I hope that the Government will look at talking to Ofgem, the regulator, about tariff systems that would reflect the use of gas. Knowing that fuel poverty is a real issue, lifetime tariffs—as they are called—give out an amount of gas at a low price. However, any excessive use of gas over and above the normal use of gas attracts a significantly higher price. That is an interesting solution to one of the problems we have at the moment. The cost and wastage of fuel is directly indicative of the income of those who use the fuel. Larger properties waste proportionally more fuel through heat loss than smaller properties, because they can afford to do so. We have discussed the issue of gas prices, which is mainly to do with the spike that came about, I believe—and as is now becoming widely accepted—due to the illiberalisation of the European gas market. It seems ridiculous that there was gas in Europe ready to be pumped but it was not coming to us. I was quite shocked that research done by Global Insight has shown that failure to liberalise continental energy markets will expose the UK economy to an extra £10 billion in costs in 2006. We should take that issue extremely seriously. When we had a debate on that very issue, we called on the Government to do something with the European Commission. I see from newspaper reports of last week that the offices of E.ON, RWE, Gaz de France and several other dominant European energy groups were raided under the Commission’s anti-trust probe. That is a useful step forward, which will tackle some of the problems. However, the issue is much more fundamental than that. That is to a large degree due to the nature of the industry in Europe. There seems to be a consolidation of the European gas market, which flies in the face of an open and liberalised economy. Of particular concern are some mergers proposed at present. They would send up gas prices because we will end up with such large groupings as are being combated by the anti-trust probe. To give an example, the proposed merger between Gaz de France and Suez in France will do nothing to liberalise the market. There is also a mooted merger between Enel and Eni in Italy and a hostile bid for Endesa in Spain by a German national company. All of those are of real concern if we want reduced gas prices. I hope that the Government will support moves by the European Commission to block the proposed merger between GdF and Suez because, if it goes through, gas liberalisation will be ever more difficult to achieve. One way to deal with the price of gas is to introduce competition in the electricity market. I have a couple of questions about the energy review. It was suggested that the energy review would be published in the summer; we have heard that term a number of times before, and the parliamentary summer seems to end around November. Can the Minister give us a clearer indication of when the energy review will be published? To be cynical, the comments of the Prime Minister might suggest that the outcome of the review has already been stated. I noted that the noble Lord, Lord Jenkin, was especially gratified to hear the words of the Prime Minister. I very much hope that the review will be published in full; that there will be a chance to debate its outcome; and that we cannot just take it as read that nuclear will be an option. We on these Benches do not agree with nuclear power for many reasons. One of the main ones is cost. The noble Lord, Lord Jenkin, raised the issue of clean coal and how cheap it could be, and the fact that renewables are open to subsidy, which I very much support. Nuclear power, which was to be too cheap to meter, has proved far from being so and has received massive government subsidy over the years. I am especially concerned by the proposal from energy companies, raised by EdF, to build nuclear power stations for free if they could set the tariff limit for electricity over a very long period. If we are to enter that negotiation, talking about gas prices is somewhat secondary because we are already rigging the electricity market for the next 30 to 50 years. Other areas will be covered in the energy review. I was keen to hear about clean coal. I know that my noble friend Lord Ezra has raised that issue many times; he apologises for not being able to be with us. It is a feasible technology that needs investment. Carbon storage and capture is one way that we could combat climate change. We need to consider diversification of the energy market. There is no silver bullet. That is another problem that I have with the nuclear debate. We often discuss nuclear power in this Chamber as if it is the only option and excludes any other possibility. I do not believe that nuclear is the final word in electricity. It will deal with only a small proportion, unless the Government heed the words of the Chief Scientific Adviser and discuss building eight to 10 nuclear power stations. Then a significant proportion of our energy would come from nuclear power. However, as the energy review has not yet been published, I do not know whether the Government have any figures for the number of nuclear power stations that they would consider. The noble Lord, Lord Patten, mentioned co-firing, and I very much welcome his words. I believe that co-firing has a place. I have been considering the Drax power station and carbon reduction from using co-firing methods. However, the Drax calculation—this backs up what the noble Lord said—is that there is no point in undertaking co-firing if you have to bring the source material from further than 40 miles away. If it is further than that, you are using more carbon in transportation and production than you are saving by co-firing. Another area that would be advantageous to consider in future, which is hardly ever mentioned, and which, although it has been around for a long time, has recently made significant strides—I hope that we can have a debate on it in future—is energy storage, the storage of electricity. Some massive advances have been made in its technology. Although it is not quite financially feasible yet, I believe that it will become feasible in the very near future and will help to smooth the spike in the grid that takes place so regularly. I conclude by welcoming the Bill to be debated this afternoon. I am especially disappointed that I shall not be able to take part. It originally initiated in this House as a Private Member’s Bill, the Renewable Energy Bill, which I introduced a year ago, and was then introduced to the Commons as a balloted Bill. I welcome the efforts that the Government have made to use that Bill and add many more clauses to further the renewable energy debate. The Government are to be congratulated on that. However, as I shall not be around this afternoon, perhaps I may ask the Minister to write to me. The Bill raises the issue of dynamic demand, which concerns electricity supply, so it is not quite outside this debate. The DTI is under an obligation to supply funding for research into dynamic demand. However, those pursuing dynamic demand have had problems over where that funding is to come from within the DTI. I hope that the Minister can look at breaking that deadlock.