17 May, 2013

Energy

I have long admired Matt Ridley (author-The Rational Optimist) and now note that he has become a member of the UK House of Lords.
I have also been "dining out" lately with the contention that energy costs are replacing labour costs as the most important factor in establishing competitive advantage between countries. Against that background, you will understand my attraction to Viscount Ridley's maiden speech in the Lords on Tuesday.


Matt Ridley’s Maiden Speech in the UK House of Lords-14th May,2013
Viscount Ridley: My Lords, I wish to speak on the subject of energy and, in response to the prominent references in the gracious Speech, on the importance of economic competitiveness. However, as this is my first time speaking in the House, I hope that noble Lords will indulge me in a few preliminary remarks.
It is an enormous privilege and a daunting responsibility to speak in this House for the first time. I know that it is customary on such occasions to pay thanks to the staff but I have to say that I have been genuinely overwhelmed by the generosity and thoughtfulness of all the staff since I have come here.

I have also been touched by the warmth of the welcome that I have had from noble Lords on all sides of the House. I particularly thank my noble friends Lady Seccombe and Lord Henley, who have mentored me in my early weeks.
Listening to debates over the past few weeks, it has become clear to me that this is a House that not only respects but expects knowledge and expertise. This is something that my father made clear to me when he was enjoying a long and distinguished career in this House, but he would speak only on subjects that he knew something about—in his case, particularly the Territorial Army, the north-east of England and local government. When I spoke to the hustings a few weeks ago before being elected here, I said that if elected I would speak on three main issues: the north-east of England, science and technology, and enterprise and innovation.

I am here to fill the vacancy caused by the sad death of Lord Ferrers, and I pay tribute to that giant of a parliamentarian, who was on the Front Bench under no fewer than five Prime Ministers. I may hope to match his long legs but I do not expect to match his length of service.
I am that strange chimera—an elected hereditary Peer. As a result, I am acutely aware that I am here thanks at least as much to the efforts of my ancestors as to my own. I would not be human if I did not feel a smidgen of pride in being the ninth Matthew Ridley in direct succession to sit in one of the Houses of Parliament since the son of a buccaneering Newcastle coal merchant was elected to the other place in 1747. That brings me to the subject of my speech.
In 1713, exactly 300 years ago, the Newcomen steam engine was just coming into use all over the north of England. One of the very first was commissioned at Byker on the north bank of the Tyne by my buccaneering ancestor, Richard Ridley, in 1713. Within 20 years, more than 100 of these great clanking monsters were transforming the coal industry by pumping water from deep mines and vastly increasing productivity.

The effect of that innovation was momentous and global. By lowering the cost of energy and raising the wages of labour, it set in train a whole series of events, including the mechanisation of industry and the increase in demand for the products of that industry, and so the great flywheel of the industrial revolution began to turn. For the first time, an economy grew not through an increase in land or labour but through an increase in energy, because mineral energy from beneath the ground showed an unusual property that had not been shown by wood, wind and water or by oxen or people—that is, it did not show diminishing returns; the more of it you dug up, the cheaper it got.

At this point, I should like to declare an interest because I am still in the coal-mining business, albeit indirectly. However, my aim here is not to praise any particular kind of energy but to praise the cheapness of energy.

Today, an average British family uses as much energy as if it had 1,200 people in the back room on exercise bicycles pedalling away on eight-hour shifts. It is worth remembering that when people talk about how many jobs can be created in any particular sector of energy. We could create a lot more jobs by making energy on treadmills. What counts is not the jobs we create in producing energy but the jobs we create in consuming energy if we make it affordable—or, indeed, the number that could be lost if we make it unaffordable.
One reason why we in this country are falling behind the growth of the rest of the world is that in recent years we have had a policy of deliberately driving up the price of energy. To quote a recent report from the Institute of Directors:
“The UK’s energy and climate policies are adding more to industrial electricity prices than comparable programmes in competitor countries, putting UK industry at a disadvantage and making a rebalancing of the economy more difficult”.

Household energy costs have doubled in the past 15 years. In the US, where gas prices used to be the same as they are here, they are now one-quarter or one-fifth of the level here. That is an enormous competitive advantage to the US and a disadvantage to us. The chemical industry, as a result, is very keen to move to the United States, and other industries, including the cement industry, are feeling the pinch from high energy costs. Near where I live at Lynemouth on the north-east coast, the country’s largest aluminium smelter recently closed with the loss of 515 jobs, largely due to the rising cost of energy.

A nation can compete on the basis of cheap labour or cheap energy but if it has neither then it is likely to be in trouble. Surely these are not controversial remarks. I know that I am not supposed to be controversial in a maiden speech so, lest I go too far, I will now revert to talking about the north-east of England.

It is worth noting that the north-east is the only region of England with a trade surplus with the world, something to which the noble Lord, Lord Adonis, drew attention in his recent report on the region. We are also a region with strong offshore engineering capability, and I think that the north-east could once again steal a march on the world and deliver competitive energy to the rest of the world. There are 3,000 billion tonnes of coal under the British sector of the North Sea and, thanks to pioneering work at Newcastle University and elsewhere, the technology now exists to gasify this coal, getting carbon monoxide, hydrogen and methane from it and putting carbon dioxide back in. If this technology can be made to work then we can bring plenty of jobs not only to the region but, more importantly, to the whole economy by lowering the price of energy. There is enormous entrepreneurial spirit in our regions but it is held back by the high cost of energy.

So, for the sake of pensioners in fuel poverty, for the sake of small businesses struggling to meet their energy bills and for the sake of large businesses all too ready to leave these shores, let us repeat what our ancestors did in the early 18th century and drive down the costs of energy so that we can drive up living standards.

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