Energy Booster

Posted On: 
7th June 2013

Michael Fallon’s schedule would be enough to make any minister feel exhausted. Fortunately, he is a limitless source of energy

Michael Fallon opens his desk drawer to reveal the secret weapon in his daily drive for ministerial efficiency: a private stash of muesli bars and energy snacks. The blood sugar boosters may look like elevenses or teatime treats, but it turns out they are Fallon’s only meal during working hours. “There’s no time for lunch,” he declares breezily. Given the seemingly endless list of his duties in both the Department for Energy and Climate Change (DECC) and the Department for Business, Innovation and Skills (BIS), it’s no surprise that the minister is so hard-pressed.

But as a Thatcherite who cut his political teeth in the 1980s (he’s one of the very few ministers in this Government who was also an appointee of Mrs T), it’s clear that the ‘lunch-is-for-wimps’ motto is both a badge of pride and a statement of intent.

Brought in as a BIS minister last year, Fallon’s no-nonsense approach and Stakhanovite work rate impressed the Prime Minister so much that he gave him the extra job of Minister of State for Energy this spring.

With the run-up to the next election focused on policy implementation, he knows he’s been installed as Mr Delivery and has little time, literally, for anything that gets in the way.

“There’s a lot of work and I run between BIS and DECC,” he says. “It means you just have to focus on what’s essential… I’ve shortened meetings.. there’s no need to have hour long meetings.”

“I’m the Small Business Minister, I deal with deregulation, access to bank finance. I’m the Aerospace Minister. I’m the Industry Minister: automotive, construction, retail, electronics, all the main sectors. I deal with Regional Growth Fund, Local Enterprise Partnerships. Outside London, I’ve been to every region in the country. And I also do privatisation, like Royal Mail. Here [at DECC] I do oil, gas, nuclear, electricity market reform and renewables – and the legislation.”

And the legislation tends not to be small scale, six-clause bills. Last year, he shepherded the portmanteau Growth and Infrastructure Bill through a tricky set of political fences. This week he guided the equally extensive Energy Bill through its final Commons stages. It’s been a baptism of fire that would unnerve most Ministers of State, and he’s had to get rapidly up to speed on everything from getting consumers cheaper bills to the longer-term funding of extra energy capacity for the next few decades.

The minister, whose work schedule makes him look like a one-man productivity drive, borders on the evangelical about the merits of the bill’s £110bn investment in energy supply and the 250,000 jobs it will create to 2020.

Just as important as the bill itself are the crucial draft ‘Contracts for Difference’ with electricity suppliers which Fallon will publish next month. From gas to nuclear, from onshore to offshore wind, the 15-year contracts lever is the vital investment needed to keep the lights on in Britain.

“This is the year investors will get clarity,” he says. “We hope [the Energy Bill will] be on the statute book before Christmas”. The Government is also designing the ‘capacity market’ at the moment and he says he hopes to start announcing more details soon.

“The capacity market we are designing at the moment and we are hoping to start announcing more details of that as the summer goes on….They [the industry] all want us to get on with it and we are getting on with it. That’s one of the things the Prime Minister sent me here to do, to make sure we now deliver.”

“What we’ve said is we are minded to run the first auction in 2014, we can’t do that until the Energy Bill is law and until we have approval from Brussels for the capacity market and the secondary legislation in place. We are talking to Brussels all the time. They see our proposals in draft. But we certainly couldn’t run one anyway before the middle of 2014.  So we are minded to run one in the second half of ‘14 for delivery in 18. It takes four years from scratch to build a gas station, through the planning and construction, it takes seven years to get a nuclear station on line. So four years is pretty quick.”

Fallon has a typically robust reply when asked to what extent energy policy is about market failure and to what extent Government failure.

“It’s about the previous Government’s failure to build new power stations, that’s the biggest failure of all,” he says. “In 13 years they simply didn’t build the new capacity we need, so stations have been going off-line, all the coal-fired and oil-fired stations are being withdrawn, we are going to lose very soon some of the older nuclear stations. Nothing was done in 13 years so we have to fill that gap and we have to do so as quickly as we can.”

Targets, however, are the wrong way to get results, Fallon insists. He successfully fought off the Tim Yeo amendment to insert a 2030 decarbonisation target into the bill this week. “I’m wary of targets that are too specific, and that are too early and that are too tightly drafted in statute. We’ve had to look again at the huge expenditure by the last Government on lifting people just over the child poverty target line, rather than spending that amount of money on the poorest children. That’s a very good example of how targets can misallocate public spending.”

Even when John Hayes was still in post, the PM clearly saw the potential for linking up his business minister to energy policy. Last Christmas, Fallon was asked to co-chair the Nuclear Industry Council with Ed Davey. Now he has control of nuclear issues, he is keen to stress nuclear’s importance to the UK’s low-carbon future, despite the Fukushima aberration. “The industry is recovering its confidence. There are over 60 stations under construction around the world, 32 countries now planning new stations, in France, Finland and hopefully here. I launched a supply chain event for Horizon [Nuclear Power] down in Gloucester last week and 200 British companies came to be sure that they wouldn’t miss out on the supply chain opportunities for our next stations [at Oldbury and Wylfa]. And then we have Sellafield and then proposals after that for perhaps further stations at Sizewell and some of the other existing sites. So nuclear is gathering pace.”

The first new nuclear power station in a generation was expected to be Hinkley Point in Somerset, but French firm EDF is the only bidder and it’s clear that it’s not a done deal. “It doesn’t all rest on Hinkley and EDF. I was left in no doubt last week as to Hitachi’s commitment to Horizon, which is a long term commitment to new nuclear stations in Britain, which is very welcome.” Still, given EDF is the only firm involved in Hinkley, doesn’t the company have the upper hand as it negotiates? “That’s my point, we are not over a barrel,” Fallon says. “We have Hitachi ready to come in, they are next in line. So we are not wholly dependent on Hinkley. We would like to do the deal with EDF but we are not going to do it at any price. It’s a very complex negotiation and we are inching closer but we are not quite there yet.” The ‘strike price’ for nuclear at Hinkley has been assessed at between £93 and £95 per megawatt hour. Fallon says: “It isn’t just the strike price, this is a very complex negotiation. We are still apart on five or six issues.”

On nuclear’s benefits for UK jobs, he’s bullish: “And there are big opportunities for us overseas, once we get the expertise and the supply chain strengthened. Obviously it’s been hollowed out, we’ve lost skills during the long dark period when nothing nuclear was built but we can recapture that and there is huge export potential there. Not just decommissioning also in the operation of these stations, in the regulatory regimes, there’s an awful lot that we can earn from abroad.”

Another area where Fallon is just as keen to accelerate progress is on shale gas exploration, and he’s waiting eagerly for the British Geological Survey report on the Boland site in Lancashire. “It’s very exciting but it’s also very important. Shale has dramatically lowered the cost of energy for industry in the States and it is very important that Western Europe is not put at a disadvantage, that we don’t start losing manufacturing processes, steel plants or chemical plants to the States because of the long-term cheaper cost of energy there. And we are not the only country interested in shale, there’s Poland and elsewhere.”

As for the UK, he says: “There are a number of small companies now revving up. What I want to do now is inject more pace into this. The Chancellor has announced the fiscal incentives that will apply, they are being discussed in detail with the industry and they will be firmed up by the summer and they will be in the Autumn Statement and they’ll take effect from next April.

“Fracking is not a new technique. We’ve been hydraulic fracturing for oil for dozens of years. There have been 10,000 wells fracked in Canada. Ten thousand. Quite safely. We have in place already very strict controls by the Environment Agency on things like the water contamination and on methane emissions. Health and safety has to be satisfied that the fracturing itself is being done safely and responsibly. There has to be planning permission, there has to be a licence and finally there has to be consent from here [DECC]. There are five locks to ensure that shale exploration is going to be safe and responsible. But it would be irresponsible not to go down and have a look at what’s there.”

“I’ve been over to the States and I’ve learnt about the rather different regulatory approaches state by state. It’s clear that some states have been much tougher in their environmentally protection than others and we can avoid that. We will avoid that. We have one system here.”

“It isn’t fracking, but I authorised the first shale drill recently for Balcombe in West Sussex. That’s an exploratory well that’s being dug there. It’s subject to a few more pieces of information they’ve got to give us, but they will go ahead in June.”

Fallon adds that local concerns will also be taken into account. “We’re working with the industry on a package of community benefits so that if there is shale extraction in your area, the community will benefit directly either through reductions on energy bills or through other investment, in the village hall or whatever. There will be some benefit.”

“It won’t be exactly the same [as onshore wind benefits] but there will be community benefit from shale gas exploration just as there will be also for onshore wind and indeed for nuclear. There has to be for the area affected during construction for example, there has to be some relief, seven years of construction.”

Asked how different they will be from wind farm cash schemes, he replies:  “These won’t be exactly similar packages but they’ll have a consistent theme but as far as possible the local community and that doesn’t necessarily mean a large county council but the local community should benefit and where possible people should see reductions in their bills

“It’s not a bribe. It acknowledges some of the disruption involved in the construction and in the operation of these sites.”

Of course, persuading local communities to agree to new forms of power production is not always easy. Fallon accepts that many areas are against onshore wind turbines, even though they can now provide a serious chunk of our total energy (6% on average but getting up to 12% this windy January and February). Only a third of planning applications is successful.

The minister is sympathetic to local concerns. “It’s becoming harder and harder for developers to find suitable sites. But there are areas in the country that do feel under siege from repeated applications. The package I’m going to be announcing in a couple of weeks [in the end it came early, today] will, I hope, alleviate those fears,” he says.

This planning protections package will ensure the community benefits. “As far as possible the local community – and that doesn’t necessarily mean a large county council but the local community – should benefit and where possible people should see reductions in their bills. And I’ll be announcing the onshore package in the next couple of weeks. That is partly to give communities a stronger say over where turbines are sited but partly also to give developers more certainty about the rules.”

From forcing the Big Six electricity firms to give customers a better deal to securing jobs, Fallon knows energy policy is a frontline political issue. “I think it’s moving up the political agenda. People are more aware of the total cost of their energy and more aware too of what they can do to reduce that cost. There are also measures in the bill on electricity demand reduction, which are just as important. The Green Deal is important. You know, we’ve got to prize energy more.”

So, what are Fallon’s own personal views on climate change? Is he a John Hayes-style sceptic? Or would he describe himself as a climate change realist? “You are getting me into theology now, I don’t deal with that,” he says, adding with a smile, “that’s the other side of the department, isn’t it?

“You are not going to draw me on that. I’ve not had time to get into the great climate change debate. My job is to make sure the lights stay on and we get new investment in energy and a better deal for the consumer. I do not have time all day, I’m afraid, to read these various tracts. There are lots of them and a very polarised debate. Instinctively I’m… well, anyway… I’ve not gone into it.”

Fallon used to relax by playing chess, an ability that probably comes in useful during the complex regulation and policy making he now handles. He tells a lovely story of how he once played world champion Garry Kasparov.

“It  was just after the wall fell in ‘89, when the iron curtain came down. Kasparov came over to play the Parliamentary chess team of Commons and Lords. There were 20 of us signed up for this. It was done in Westminster Hall in the Jubilee room and there was a big rectangular table and we were all told that he would play White and you couldn’t move until he stood in front of you because he was memorising all the games. He walked round in the middle of this rectangle playing you all simultaneously, which is what they do. He arrived, stood there and said it was such an honour to be in the Houses of Parliament the mother of democracy that he wouldn’t dream of playing White that we should all play White against him.”

Fallon laughs at Kasparov’s ingenuity: “So we’d all spent weeks and weeks scrubbing up our defences, like the Sicilian defence, all this stuff, and suddenly we all had to choose an opening against the greatest player in the world.

“Of course as the weaker guys dropped out and he came round faster and faster. You were just trying to work out what he’d done last time, what on earth his move meant, and suddenly he was standing there in front of you. I played next to Tam Dalyell, who was completely bonkers. He advanced four pawns in a row up the left hand side. Kasparov kept coming round and staring at this. He’d never seen anything like it before. These ships going hunting the Belgrano, these pawns advancing. It was very funny. We all lost and a very snooty man kept walking round behind me from the English Chess Association or whatever they are called and started saying to his colleague: ‘Have you seen any interesting games yet?’ It was all a question of who would drop out first. I think eventually our honour was saved by somebody from the Vote Office or printed paper office. Some unknown clerk was the hero of the day who had held him to draw I think.”

“I did one thing with the Kasparov match. I managed to notate it. I don’t think anyone else managed to have time because he kept whirling round the table. I’m too embarrassed to take it out and see where I went wrong. But Fallon versus Kasparov, I have a note of it.”

The early 1990s, Communism, even remembering the old Commons ‘Chess and Bridge Room’ (it was next to the ‘Smoking Room’, he points out), all prove just how long Fallon’s been around.

It’s a testimony to Fallon’s political longevity that his current post completes an arc that started back in 1987, when Mrs Thatcher appointed him as a young PPS to Energy Secretary Cecil Parkinson. One of his first jobs was to attend a meeting with the Icelandic embassy to discuss an interconnector with the UK. Several decades later, he had a meeting last week with the Icelandic ambassador to finally secure that very same geothermal link. “But also there’s a strong sense of déjà vu because electricity market reform is essentially about updating the pool of electricity arrangements set in place after privatisation back in ’88/89,” he says.

One difference between now and then is perhaps that there’s a greater sense of urgency from politicians given the climate change science. “Yeah, I think there’s an awareness that there are huge costs to fossil fuel energy. You are getting me back into climate change, aren’t you?” It’s the elephant in the room in a way isn’t it? “Well, it may be. But I’m telling you the truth, I have not had time to sprawl on that sofa and start reading loads of climate change literature. I’ve been too busy.”

Only this week, Davey railed against those who disbelieved the scientific consensus on global warming. Perhaps keen to avoid the spats of his predecessor, Fallon is more diplomatic about his boss. He even puts in a kind word for his ‘other’ boss, the Business Secretary. “It’s very hard not to get on with either Vince Cable or Ed Davey. I think they are personally charming, cooperative and trusting. It’s hard to get over to you but we are actually too busy to spend a lot of time on differences, political differences. On policy we are all in the business of delivering.”

Still, Fallon is refreshingly candid on the limits of cooperation in Government. “Life would be a lot easier if we didn’t have the Coalition,” he admits. In what ways? “The process of coalition for both sides is time consuming, bits of it can be tedious, there are an awful lot of people to be consulted, getting agreement across Whitehall is made doubly difficult by the Coalition.” He adds swiftly: “But then if we didn’t have the Coalition we would be stuck with the rest of Europe, way behind on our fiscal plan. The great strength of the Coalition is that it is a five year programme which we have stuck to, of getting the deficit down. Fair play to the Liberal Democrats they have never wavered in that central purpose.”

Europe is obviously one area where the two halves of the Coalition don’t exactly see eye to eye.  Yet despite being a dedicated Eurosceptic, Fallon displays a hard-nosed pragmatism.  Whisper it quietly but he even voted ‘Yes’ in the 1975 referendum.

“Most people voted ‘Yes’ then because there wasn’t a very clear alternative and those who want to leave will still have to sketch out an alternative trading framework for this country to replace any trade we lose as a result of higher tariffs or other barriers if we leave. So that still remains true.”

Fallon also stresses something older MPs often cite about 1975 and the context of the vote. “I also voted yes for another reason. This gets forgotten now, but I did want to see Europe enlarged. I really did see the Community as the best possible avenue to end the communist regimes in Eastern Europe and the fascist regimes in Greece and Spain and Portugal. I really did see the Community as an avenue of hope to get democracy going in those countries, so there it’s been a huge success. It’s a great thing to see free elections now taking place when they didn’t in 1975, you forget too easily Greece, Spain and Portugal were dictatorships then. And of course half of Europe wasn’t free at all.”

There is a ‘but’ to all of this, however.  “But in terms of regret, yes Europe has now become something quite different. It’s become a much more of a process that is coercive, harmonising, compelling. That’s the bit I certainly regret. It’s not so much an organisation as a process, that is slowly but surely trying to weld member states together in a way that is very alien to us here,” he says.

 “We can’t ignore this huge home market on our doorstep, however depressed it is at the moment. It’s the largest home market in the world and there are a huge number of jobs dependent on it. Perhaps not the three million that the pro-Europeans claim but there are a huge number of jobs and a lot of trade dependent on it.

“But I’m always struck and I was struck again yesterday as I was visiting a company in Tracey Crouch’s constituency… so many of the companies I visit have kind of parked their business with the zone - and are now saying ‘well we are now going for orders in Brazil or Nigeria, Angola, Korea’. Our companies are successfully trading across the world.”

On the EU referendum itself, he stresses just how much Brussels needs to reform even before we get to the 2017 plebiscite.  Asked if he agrees with Liam Fox that the UK shouldn’t fear life outside the bloc, he says: “I don’t think we need to be fearful of anything, but we do need to see what reforms are possible.”

“Some of that work is underway. We don’t have to wait for the election to complete the single market, to complete the market in energy, in digital, to improve the budget and some of their processes and to make sure we get free trade agreements with the States and with Singapore and with Japan. That whole agenda, we don’t have to wait for the election, a lot of that work is underway at the moment. We need to see whether we can get a much more outward looking and more liberal Europe that can better accommodate British interests. That’s not impossible.”

That ability to stick to the Coalition script while expressing the irritation of fellow Tories has made Fallon a reassuring figure for many of his party’s backbenchers.

A Westminster veteran who’s held both a northern marginal and a southern safe Tory seat, he’s politically savvy enough to hold business and jobs meetings in key seats like those of Tracey Crouch and Richard Fuller. He’s also smart enough to know the energy industry doesn’t like tales of infighting or instability. When it’s put to him that he’s the fifth energy minister in five years, he says: “Let me hit this nonsense on the head. It’s a very false statistic. The Prime Minister wants to leave people in place longer – Blair managed to change them every year. Charles Hendry was here for two and a half years, Mark Prisk was my predecessor in BIS for two and a half years. John Hayes had to be moved for other reasons. He was required at Number 10… The industry had a lot of stability under Charles. I’d love to be here ’til the election.”

But with backbenches and No.10 alike impressed by the steady Fallon hand, isn’t it possible Cabinet may beckon before 2015?

“Cabinet? No, no… That’s not something that’s on the agenda. I’ve only just got here. I really don’t want to leave. I think it’s important for the industry that they do get a reasonable amount of continuity.”

With that, the Energy Minister eyes one of his drawer snacks. His favourite performance enhancer may be a Kellogg’s Rice Krispies Square bar. But it seems Michael Fallon’s real drug of choice is Getting Things Done.

Fallon on… having two jobs

“You just have to focus on what’s essential. I’ve shortened meetings… there’s no need to have hour-long meetings.”

Fallon on… the EU

“It’s become much more of a process that is coercive, harmonising, compelling… slowly but surely trying to weld member states together in a way that is very alien to us.”

Fallon on… playing the world chess champion

“I’m too embarrassed to take it out and see where I went wrong. But Fallon versus Kasparov, I have a note of it.”