Energy policy in Wales

On 15th December 2014, I delivered a keynote speech at the Policy for Wales Seminar: Energy Policy in Wales – challenges and opportunities for developing the sector.

The seminar, which took place at the Angel Hotel in Cardiff, was chaired by Alun Ffred Jones AM, chair of the Environment and Sustainability Committee at the National Assembly for Wales, and Jeff Cuthbert AM, member of the Environment and Sustainability Committee.

Carl Sargeant AM, Minister for Natural Resources, Welsh Government; Baroness Randerson, Parliamentary Under-Secretary of State, Wales Office; and Peter Davies, Commissioner for Sustainable Futures and chair, Climate Change Commission for Wales, also gave keynote speeches.

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Diolch yn fawr iawn Alun.

So let me say how I see things. I see that our energy policy is heavily influenced by three or possibly four shibboleths.

The first is that the CO2 emitting energy caused by man is creating runaway global warming and despite Britain’s contribution to this being only 2%, Britain must become a world leader in cutting carbon emission and the rest of the world will follow.

Secondly, that we are running out of fossil fuels and scarcity will drive up the price by so much they will, in any case, become unaffordable, and those economics have been used to justify much of our policy.

And thirdly, as mentioned by Peter just now, that we live in an uncertain world where we are becoming increasingly dependent on imported energy and that this is bad for our security.

And so in London and Cardiff we have been developing energy policies which have, directly and indirectly, pushed up the price of coal and gas and put subsidies instead into nuclear, wind, solar and other forms of renewables. Governments are hopeful that the rest of the world is going to follow our lead, that we will cut our CO2 emissions, we will prevent global warming, and we will be better off as well within 10 to 15 years. Ministers, in fact, argue very strongly that there would be an upfront cost to all of this but that we would start to reap the benefits by around 2020.

Well I haven’t looked at what the oil price is this morning. I think it was about $65 a barrel on Friday and expected to fall further but I would imagine that some of the people making these predictions would now be feeling a little bit silly. In fact, I went through on Google last night and had a look at some of the predictions being made and I saw some people were predicting oil prices of $324 a barrel by 2015.  Well we are not quite at the new year yet but I think that is most unlikely.

Now I fully accept the issue about energy security but I want to take issue with some of the other shibboleths sort of shaping our policy. I think it’s important I do this because Peter knows perfectly well, as I have debated this with him and probably some other people here, that I am what is known lazily as a climate change denier. In actual fact, I don’t deny climate change at all. I don’t deny that CO2 has an impact on climate – it’s a scientifically accepted fact. What I do have issue with is the idea that the climate only started changing around about 200 years ago after the industrial revolution. In actual fact, most scientists would agree that the earth has constantly been changing climatically but over the last million years or so we’ve been living in an era of ice ages with 100,000 years of ice… sorry a million years of ice followed by… sorry, sorry, let me get my figures right… 100,000 or so followed by 10,000 years of an interglacial and we are in an interglacial at the moment. Within these interglacials there have been cycles of warmer and cooler times; warmer times when the Romans were here growing grapes all the way up into the Midlands; then there was then a cooler period during the dark ages; a warmer medieval period when temperatures were at least as hot as they are now; followed by something called the little ice age. Really, by coincidence, we started to come out of the little ice age at exactly the time we began industrialising, which means of course that some of the warmth that’s taken place since then, approximately 0.8 degrees, is obviously down to the fact that the earth was naturally going to warm up.

I’m also very concerned by the lack of correlation between CO2 increases since 1800 and temperature changes.  Of course we have seen an increase in temperature that took place, certainly up and into the first part of the 20th century, but from 1940 to 1970 there was a big drop in temperatures, leading some to think that the ice age had started again. From 1970 to about 1997 we had increases in temperature and suddenly the widely accepted view about anthropogenic global warming, and then nothing at all. The Met Office experts have since come in, the IPCC accept this, and said there has been no global warming for 17, nearly 18 years, i.e. no increase in temperature whatsoever, and that worries me because our energy policy is based on the fact that we have to reduce CO2 to prevent global warming.

As far as leading the world in carbon cuts, which is another argument put forward in 2008 when the Climate Change Act was passed, we have seen no progress whatsoever and we saw in Lima over the weekend, no progress whatsoever. Britain has set itself out under different governments to be a leader in carbon cuts but if you want to be a leader, somebody has got to follow and nobody else is.  The rest of the developing world have made it quite clear that their priority is going to be to lift people out of poverty by providing them with the cheapest energy they can possibly get, and to be honest who can blame them for it. Meanwhile, the wealthier countries and the big emitters like America are simply saying that they are not going to have any part of it.

Now the next idea I take issue with is this notion that we are about to run out of fossil fuels, although I think it’s becoming more widely accepted now anyway that we are not and I think Peter would probably accept this.  We are not about to run out of coal, that’s certainly true, and we are not about to run out of gas or oil either. There’s enough coal to last us for hundreds of years and if we adopted fracking technology, and I agree there’s a debate to be had about that, then we would find that we had hundreds of years’ worth of gas as well. As far as oil is concerned, everyone has been predicting for ages the demise of oil – peak oil was supposed to start around 2015 – yet the recent fall in prices suggested that simply isn’t going to happen at all. This is a fall in price that’s taking place at a time of unprecedented instability across the Middle East. Normally, instability in the Middle East drives prices up, as we saw in the 70s. At the moment, prices are falling. If stability comes back to the Middle East, they are likely to fall even further, which is why the oil companies are absolutely confident that we will be driving with petrol and diesel well into the second part of this century.  And you know, people say, well they would say that, wouldn’t they?  I don’t think they would. I think they would say the opposite. It’s not really in their interests for everyone to know just how much oil there is because it drives the price down.

As I say, the predictions of huge price increases are simply looking premature. I remember going to a meeting of transition towns in Chepstow a few years ago where they were happily predicting vast increases in prices, as was the Government, as was everyone else. It simply hasn’t happened. We’ve based our energy policy on predictions that haven’t come true. We try to read the markets but even people who spend their whole life trying to read the markets aren’t able to do it very well.  I don’t know why anyone thought that a bunch of, frankly, Members of Parliament, civil servants and environmentalists would be able to do better.

Now when it comes to energy security, and Peter mentioned this earlier on, I’ve got a lot more sympathy. I am very concerned at the way we’ve become dependent on imports from elsewhere in the world. At the moment, we are very dependent on Qatar for our gas supplies and if we didn’t have Qatar then we would be looking at Russia as well. So the idea of energy security is actually something I am fully signed up to and I think it is well worth us supporting renewables in order to reduce our dependency on imported energy – but not to the extent that energy costs become a real issue for the industry and homeowners.

Let me just map out a couple of simple mathematical facts.

We obviously derive a lot of our energy through electricity and we can create electricity using coal, gas, nuclear or offshore, onshore wind or other forms of renewables. The mathematical facts are simple, and these are rough approximations, somebody can tidy up the figures afterwards.  It costs for 1 megawatt hour of electricity from coal about £45; from gas, I’ve seen figures of £55 to £60; nuclear or onshore wind, everyone seems to agree the cost of a megawatt is £95 from nuclear or onshore wind; and from offshore wind around £150, with other renewables costing a lot more.

Now you can hide behind any mixture of subsidies and taxes you want, but the fact is that the more we use low carbon renewables to generate our electricity, the more the prices will go up. I often hear NGOs and MPs, and Peter has just said it himself, that people are complaining all the time about energy costs for home owners, and for industry as well, but then very often the same people are going on to demand increases in renewables as a percentage of overall electricity generation, which is bound to push the costs up further. We have very much a mixed message coming out. And those who raise their voices the loudest against nuclear power are often the same people who call for carbon free energy. Do they not realise that nuclear is the only really reliable means of generating base load electricity without actually creating carbon emissions? Personally, I think it’s great news that we are going to have a new nuclear power station in Wylfa.

There are people outside, and probably inside here, who are complaining very loudly about fracking and will no doubt be calling for more wind energy. Again I think many people are just unaware that at present we can’t store electricity. We have to feed it on to the grid as it’s being taken off and because of the intermittent nature of wind energy and the inability to store electricity, wind has to be backed up by other means of energy generation. The most effective way of matching grid need is using gas because gas generators can be, if you like, turned up and down very, very quickly to match the necessary outputs. So if we are going to have a viable wind energy sector in this country, we are going to need to have access to gas as well.

Of course the environment is very, very important and we should do nothing at all that puts the environment at risk. We would, in my opinion, be silly not to explore this possibility – the possibility that we could derive our gas from underneath our own soil, generating very well paid jobs and bringing revenue into areas, rather than bringing it in from Qatar, and at the same time supporting a wind energy sector.

There are many now, here no doubt again today, who will decry Mrs Thatcher’s role in the miners’ strike 30 years ago. As a grandson of a miner, you know, we could talk long and hard about this for hours. I’ve very strong views and you won’t be surprised to know that I was on Mrs Thatcher’s side, but the reality is now we live in a changed world and those people who talk about what was going on 30 years ago have got very little to say about the European Union Large Combustion Plant Directive which is going to finish off the coal industry in this country. We live in changed times and I fully support a coal industry in this country. I think there’s huge prospects for coal and we should be making the most of it. We’ve got it there in the ground and we should continue to support the industry.

So to answer, really, the question which I came here to do, which is how I think energy policy should be developing, I think we should continue to get the brunt of our energy from coal and gas, preferably coal and gas that is produced in Wales or in the rest of the United Kingdom. Whatever Peter says about the big conversation, I have conversations on the doorsteps of people at every single election – and don’t forget there’s one virtually every year now in Wales. I knock on doors all the time, thousands upon thousands of doors, I have those conversations and what people are saying to me is that energy is too expensive. People by and large are less worried about global warming than they are about energy prices, and I say that as somebody facing an election myself in a couple of months’ time.

But, as I said earlier on, I’m more than happy to support a renewable sector in this country, and more than happy to go out and make the argument for an increase in costs that has to be borne somewhere along the way, because of the importance of energy security. What frightens, worries, annoys and angers me, is that I’m forever getting emails from people saying you must do something about fuel injustice, about fuel poverty, all the rest of it, and then the very same people are going on to demand that we have many, many more renewables. If the people who want renewable energy are not willing to make the argument for higher prices, don’t expect the politicians to, because they won’t, and it’s no good getting angry with me, Mr. Right Wing Global Warming Denying Conservative, as I’m sure you all will. I will look forward to it, because the reality is that most other MPs, who won’t come here and won’t make these sorts of comments, are saying the same thing.  Ed Miliband who did a lot to support the renewable industry is now saying he wants to freeze energy prices. He’s making an argument, in fact, that energy prices are too expensive. He’s playing straight into the hands of people like me, because he is not going to be able to keep energy prices down by just telling the companies to keep them down. He’s going to have to do something about the taxes and subsidies if he really wants to cut the cost of energy generation.

There is, of course, and here I agree with Peter, a huge future for Wales because we’ve got the lot here. We’ve got coal, gas, nuclear and wind and if we can get the message right, then we can take advantage of all of them and we can make energy generation a huge part of economic growth over the next century.

Thank you.

David Davies, MP for Monmouth

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