Examination of witnesses (Questions 40
TUESDAY 13 JUNE 2000
and MS SARAH
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.
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
(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.
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,
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
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
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.
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 measuresthere 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 pensionersit 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
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 DTIwe are always the departments
that you will think of in relation to fuel povertybut 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
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
(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
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
59. Will you be looking at green diesel as part
(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
The Specials Working Group within NETA has completed the majority
of its work and is likely to be winding down over the next few