Select Committee on Environmental Audit Minutes of Evidence

Examination of witnesses (Questions 40 - 59)




  40. You have a problem with the Treasury.
  (Lord Whitty) It is not the usual problem with the Treasury. There is a heritage problem with the Treasury.

Mr Chaytor

  41. Can I go back to the question of photovoltaics and your example of new buildings being clad with photovoltaics? That assumes that in terms of photovoltaics at least the renewable energy is cost effective, but what I do not understand is how it can be cost effective in the construction of a new building, but it cannot be cost effective in the cladding of an existing building?
  (Mrs Liddell) This is a very interesting point, and it is one that I asked the industry as well. This is an emerging technology and it is one where there is a degree of greyness about the actual costing. I have asked my officials in the DTI to do some more exploratory work in relation to photovoltaics. There are certain countries that are further ahead than we are in relation to PV, but we need a proper handle in the economics of it and I am not confident at the moment that we do have a proper handle, not just on rebuild, but on restoration and refurbishment.
  (Lord Whitty) The technology is moving on substantially in this field. Although it may be the case that solar energy and photovoltaics are not particularly cost effective in terms of replacement of whole chunks of your roof, it may well be that as technology gets built into the tiling and the design of roofs, then within this 10 year period it becomes much more cost effective and much more competitive and we will be encouraging some of the R&D to achieving those kind of built-in improvements.

Joan Walley

  42. Can I follow up what you were saying earlier on about the distance from market and the whole issue of competitiveness, and ask whether or not there is likely to be further concessions possibly to be able to deal with issues like net-metering so that in the UK we can be on a par with Germany where it is possible to really help and assist and give a helping hand to those new emerging technologies and perhaps get on a more equal footing so that we can really take off on renewable energy? Have you any more specific proposals in mind?
  (Mrs Liddell) The Utilities Bill is neutral on the issue of net- metering, because I think we are not at the end of the game yet in relation to net-metering. I look with interest at some of the net-metering schemes. In certain parts of the United States, for example, you can have domestic net-metering where people may have PV panels and fuel cells. I do not think we are necessarily at the end of the game on net-metering. We have not closed the door.

  43. We have got a situation where we have it in practice in the United Kingdom, have we not? Could the Government not give more of a helping hand?
  (Mrs Liddell) There is a joint government/industry working group on embedded generation network access issues[1], which I think is probably what you are thinking about, looking particularly in relation to the arrangements for connection and charging for embedded plant. There is a further `specials' group[2] working with the NETA programme looking at the difficulties that certain aspects of renewables and CHP may face in relation to NETA feeding into the grid, and we are consulting with the industry on changes in the generating licence exemption regime which may also help.

  44. I was actually thinking about Eastern Energy's example by doing it already. Can I go back to the electricity trading arrangements? This Committee was just a little bit concerned that the Office of Gas and Electricity Market in respect of Appendix 5 of the Environmental Appraisal said, "The implementation of the new trading arrangements is likely to have both positive and negative environmental impacts, but overall is likely to be slightly negative." I just wondered what options the Government had considered or suggested that the Office of Gas and Electricity Market considers in order that that result, instead of being slightly negative, could actually come out to be positive?
  (Mrs Liddell) I think if you take NETA in isolation you do come to that conclusion, but if you also put that in the overall package of government proposals, such as the Climate Change Levy, the proposals for the new energy efficiency standard of performance and the replacement of NFFO with the renewables obligation, then you redress the balance. Of course, we cannot lose sight of the fact that lower electricity prices help competitiveness and help people on low incomes and the fuel poor, which is a priority, as you know, of the Government. If you take it in isolation you will get a slightly negative picture, but if you put it in the overall environmental package, it is more than balanced.
  (Lord Whitty) As Helen has indicated, it is part of the strategy to try and switch the supply companies from being simply suppliers of electricity to suppliers of energy services which of themselves actually deliver electricity or gas more efficiently and saves fuel that way. We are particularly focusing, in terms of government schemes, on the fuel poor, but that spills over and we will increasingly get into the areas of mainstream users of electricity. I think the electricity industry in particular welcomes the concept that they are energy services companies, not electricity supply companies.

  45. Finally on this, can I just confirm that the NETA document has now been referred back to the DTI? It is really for the DTI to further review associated issues with this, including embedded generation? Is it now for the DTI to further consider this whole issue?
  (Mrs Liddell) This working group in embedded generation is still meeting, and I think it will meet probably up until about the autumn because of the nature of some of the issues that are taken into account. We work very closely with the industry on this. The only way forward really is to do this with the industry as a group and make it work.

Mr Gerrard

  46. Can I start with a couple of points about energy projections? We have seen the paper that came from the DTI, which appears to have the status of a working paper. Can you tell us what you expect to do with this paper? Is it going to be published at this point? Will it be approved by ministers? Can you give us any timescales on that, because it looks like an interesting and useful paper?
  (Mrs Liddell) One of the reasons why it is published as a sort of working paper and why energy and emissions projections are a set of parameters is because of the sheer complexity of the work and the pace at which the policy agenda is moving. For example, issues like that the Climate Change Levy have to be taken into account. One of the reasons why we wanted to encourage debate rather than giving tablets of stone on energy emissions and energy projections is just because of the fact that we know there is a huge amount of work being done on this and we want to take everybody's view into account. We have had a small number of responses to the working paper projections, together with a significant number of follow-up enquiries. Obviously I am not in a position to say what the conclusions are, and what we are currently doing is reviewing the responses. It is interesting that almost as many who think our projections for certain fuels were too high is matched by almost exactly the same number who think it is too low, which is an indication of the complexity of the work. Once that is all done we will certainly publish it. The whole issue of energy indicators I know is something that this Committee has taken a great deal of interest in. The whole issue of energy indicators is one where we are very much open to suggestion in relation to energy indicators and to the development of new indicators to give a much better picture of energy projections. We do that, not just within the United kingdom, we are also encouraging the European Union to look in a more focused way at energy projections.

  47. You have talked about some of the changes in generations that are going on now and the alteration to the consents policy, renewables, but in that paper it is suggesting that the reduction in emissions up to 2010 is very much to do with the reduction of emissions from power generation and is associated with the shift to gas. What happens once the scope for more gas generation disappears? There is an implication for diversity, but also a suggestion in here is that we could end up, between 2010 and 2020 with an increase in emissions, carbon dioxide emissions going up by between 5 and 8 per cent between 2010 and 2020?
  (Lord Whitty) This is clearly one of our concerns in the whole Climate Change consultation. One of the reasons why we have set a domestic target which is above that is because we could see a situation where carbon emissions in total around about 2012 are beginning to go up again significantly. That is why we have proposed, in the Climate Change consultation, some substantial measures relating to other non-energy sources. In a sense, if you like, if you look at it crudely, the energy sector has delivered a substantial carbon saving and the transport, the industry and the domestic sectors, need to deliver and we need to intensify the programme so that it is continuing to bite beyond having met the Kyoto target for 2010. That will also have its effect in terms of energy efficiency in energy generation. So if you take that together with the switch in the renewables obligation and so forth you have less demand coming from the industrial, transport and domestic sectors as a result of our programme on those sectors, and you have a change of sourcing in the energy sector itself, which should moderate any tendency of the sort that you are looking at in the second decade.

  48. Are you saying these figure are based on policy before some of the changes?
  (Lord Whitty) Yes, the terms of the Climate Change policy have of course not yet been specified, but it is policy which is extant now. Some of the energy savings which we are looking at in the Climate Change policy will build on further developments of EESoPs, of HEES, of the regulator's activities and so forth, as yet undefined, but we will be accepting very broad terms. Those are not taken into account in those projections, only in the specific ones to which the Government is already committed. Even if they are not on the stream, EESoPs 4, for example, there are other presumptions of improvements in domestic energy use and industrial energy use which are not taken into account in this.

  49. Can I move on to the question of fuel poverty and HEES, which you mentioned, and the new HEES scheme coming into effect? I know that is something that we generally welcome, but there are one or two specifics that I would like to ask about HEES. First of all the targets. The targets have been expressed in terms of houses. Is there any question of looking at how that target is defined, whether it is households, numbers of people, who is actually lifted out of poverty or the types of people who are lifted out of fuel poverty?
  (Lord Whitty) The new HEES is essentially geared at doing precisely that. It is looking at the priority areas in terms of fuel poverty so that we are concentrating the help on pensioners on benefit and on families on benefit. So the changes in the new HEES as compared with the old HEES are very much focused on those two priority groups, and in particular on pensioners who are 70 per cent of the fuel poor and 90 per cent of the deaths and so forth. It is a very focused programme and it is household related, not house related. I think some of the difficulties with earlier programmes have been that they have been largely concerned with the social housing sector, whereas actually the bulk of the extremely fuel poor are in the private rented sector or the owner-occupied sector, where we are now focusing activity.

  50. We have had a memorandum from National Energy Action saying that the initial findings from some of the new HEES pilot schemes are suggesting that some of the people who benefit from HEES have not actually been taken out of fuel poverty. Is that something which you support?
  (Lord Whitty) I think under the old HEES scheme because there was a limitation on the amount of money you could pay on energy efficiency measures—there was a limit of £315, whereas under the new scheme we are able to introduce a whole new central heating system and associated measures up to £2,000 in relation to pensioners—it probably was true that some of the benefits were not sufficient, although there were improvements in the comfort and health of the families, to take them completely out of the definition. That is what I think the NEA comments relate to and we have addressed in relation to the priority areas under the new HEES system.
  (Mrs Liddell) If I can just come in there, it is also important to recognise that in addition to HEES or using HEES as a lever, it is important that the industry thinks imaginatively about ways of addressing fuel poverty. That is one of the areas where, because the Government has given a high priority to fuel poverty, we are now seeing projects coming forward from the industry like Transco's "Affordable Warmth", TXU's "Stay Warm" and Scottish Power's "Nest Makers", all of which relate to ensuring firstly that people can actually afford the fuel, but secondly that the fuel they can afford does not disappear out into the atmosphere.
  (Lord Whitty) It does have to be seen in that way. Within the new HEES system itself we would expect all of the targeted group would be taken out of fuel poverty, with very, very few exceptions, which might relate to people in very large properties or, of course, at the end of the day it is voluntary and people may refuse help. We are reasonably confident that the new HEES will take all of those targeted groups out of the definition of fuel poverty.

  51. I understand the point that it is not HEES alone and that there are some differences, and we were very pleased with the changes that were made from the old scheme to the new to widen what could be done, but actually the comment from NEA did specifically say, "The new HEES pilot schemes", so can we get some assurance that there will be monitoring of what happens on those schemes?
  (Lord Whitty) There will be very substantial monitoring and the full report on the pilot scheme will be fully assessed. My understanding is what has been measured relates to people who benefited largely from the old schemes, even if they were also included in the pilot scheme.

  52. One of the aspects of fuel poverty is the spending on winter fuel supplements for pensioners, £1.2 billion for next year. How far is that weighting the spending too far in one direction? What about children? We have seen the report suggesting the extent of child poverty in the United Kingdom and some of that must be associated with fuel poverty.
  (Lord Whitty) Yes, but the figures speak for themselves. As I said just now, 90 per cent of the winter deaths are actually in the pensioner category and, therefore, in terms of winter fuel payments it is pretty clear that they are the priority area.
  (Mrs Liddell) In relation to reducing VAT on fuel as well, that helps all families. The Inter-Ministerial Group on Fuel Poverty which Larry and I co-chair involves colleagues not just from DETR and DTI—we are always the departments that you will think of in relation to fuel poverty—but also Treasury, DSS, because of the importance of not just fuel direct, but also the whole range of policies and health as well, and also the Cabinet Office because of their social exclusion agenda.
  (Lord Whitty) And the devolved administration.
  (Mrs Liddell) And the devolved administrations, because tackling fuel poverty can never just be seen from the point of view of our two departments, it is so all embracing, particularly when it relates to families and relates to children.

  53. Do you think you have the right balance yet between the sort of spending that is going on with the winter fuel supplement compared with the investment to actually improve properties and make it easier for people to keep comfortable at a low cost?
  (Lord Whitty) These things develop over time and clearly if new HEES manages to take most of the pensioners out of fuel poverty, certainly in the priority groups and younger families which are also targeted under HEES, then the requirement for effective income supplements begins to diminish, but we are not at that stage yet and we will not be at that stage for some years. I think, therefore, we need to move on both tacks in terms of winter fuel payments with effectively direct subsidy to income as well as physical improvements to the house. The balance will change over time, undoubtedly.

Mr Thomas

  54. I think you said in your opening remarks that the draft Climate Change Programme consultation process has just ended. What has that consultation process revealed? Do you have anything to tell us today about the vulnerabilities?
  (Lord Whitty) It finished about six days ago and we have had a significant number of replies. I regret to say that I am not party to any analysis and it will take a bit of time before we finalise that assessment. It was a very commendable and high quality response, as I understand it. We would intend, between now and the autumn, to assess that, look at the programme again and publish the final programme in the autumn.

  55. Can I ask you to reflect on your own initial feelings of moving towards the final programme, particularly the relationship between the domestic target and the Kyoto target and to say a bit more about whether that final programme will be setting in train targets for us to meet that 20 per cent commitment, or are you pitching 20 per cent in order to meet 17.5 per cent? If so, are we not in danger, therefore, of pitching back from even the 17.5 per cent? Where do you see the final programme taking us?
  (Lord Whitty) The programme is set out in terms of known programmes and reasonable assessments as to how those programmes will develop, so we would expect not only the committed EESoPs programme and the committed decisions in relation to HEES and the regulations to be delivered, but for that to be cumulatively improved on through that 10 year period. Those are all in the 17.5 per cent, but there are other areas where we have not included a precise figure. I think if you look at page 115 of this and look at the end of the summary table you will see that there are areas which are not included in that 17.5 per cent because they are unspecified. That actually includes some of the activity by the devolved administrations where they are slightly behind us in developing their programme. It excludes aspects of local authority and excludes, rather significantly, I think, any real assessment of how far changes in public awareness themselves make a contribution to this as distinct from price mechanisms and industrial programmes. We do believe a substantial effort on the propaganda side and education side will deliver significant goods. Awareness is actually fairly low at this point in time and we need to take substantial steps to tackle that issue, but there is no natural figure in the 17.5 per cent for that.

  56. Would you concur that the 20 per cent is an aspiration and your 17.5 per cent is a deliverable target?
  (Lord Whitty) They are both aspirations and deliverable.

  They are aspirations in the sense that you want everybody to focus on them—


  57. They are not commitments though?
  (Lord Whitty) As I say, there are clear government programmes in there. Not all of the details for those government programmes are yet extant. It is a government commitment to adopt policies which will help meet that target. In addition there is the other 2.5 per cent which is unrelated to specific programmes, but that does not define the difference between aspirational and achievable.

Mr Thomas

  58. What are the vulnerabilities in the long-term about the possibility of emissions rising after 2010? We are also a very carbon intensive economy. Where are the growth sectors in terms of carbon intensity? Where are the vulnerabilities? Where could the dangers come of not reaching target aspirations, or whatever you want to call them today?
  (Lord Whitty) I think in the domestic area which we have referred to, if we do not proceed as rapidly as we intend by intensifying the HEES and other programmes on that front and to building regulations and other regulations in relation to new and refurbished building, there is a danger that inertia might allow the domestic use to continue to creep up. The other area, of course, is transport, and unless we have effective policies to both restrain the growth of car based use and at the same time, given that we will not restrain it entirely, a more rapid introduction of cleaner fuels both through oil technology and attitude to engine design, through that period, I think transport is a potential problem for us. We would aim to keep the CO2 emissions to no more than those in the early 1990s, but, nevertheless, that is quite a difficult and challenging target and it does require a lot of individual choice in the sense of how often you use the car and what the cost of that is and in terms of the nature of the vehicles which are actually on the market. As it happens, Helen and I have a session next week on the alternative fuels, new fuels and engine design, bringing, for the first time, the oil companies and the manufactures together, which I think we need to build on. They are both engaged in this field, although they have not perhaps talked to each other quite a frequently as they should, or talked to government. We are hoping to get some serious benefit from that.

  59. Will you be looking at green diesel as part of that?
  (Lord Whitty) Green diesel is part of it. The green diesel is the front ended part of it largely. We hope that we will be able to achieve green diesel more or less 100 per cent in relation to lorries in a relatively short period. We are looking beyond that to not only gas, but also fuel cells and the use of other alternative fuels, because, as I say, although we can restrain a bit by traffic management measures and demand measures and tackle congestion, there will nevertheless still be a growth in traffic and that means that the higher proportion of vehicles that are cleaner in terms of all sorts of emissions, but in this context carbon emissions, the better we will achieve the target.
  (Mrs Liddell) That is where my bit of the food chain comes in, because I have to be sure that the refiners are focusing properly on the need for cleaner technologies so that it matches in with the car industry creating cleaner vehicles.

1   The joint Government/Industry Working Group on embedded generation network access issues was formed in March 2000. It meets monthly and is expected to produce its report around the end of the year. Back

2   The Specials Working Group within NETA has completed the majority of its work and is likely to be winding down over the next few months. Back

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