Select Committee on Environmental Audit Memoranda


Memorandum from the Energy Saving Trust

  The committee asked the following areas to be investigated:

    1.  Levels of achievement so far and the current rate of progress.

    2.  Expectations of the proposed renewables obligation and the definition of "acceptable costs to the consumer".

    3.  The impact of the all the Government's reforms of the electricity market, including new trading arrangements for electricity generation, on the prospects for new renewables capacity.

    4.  The level of Government spending on renewables-related R&D.

    5.  The level of government support for non-fossil fuels for electricity generation over time.

    6.  The interaction of the planning system and the development of renewable sources of power generation.

  It is our intention to concentrate our response on areas where we feel the Trust's expertise can benefit in achieving the aim of the inquiry. These would be areas 2 and 3. We would also like to point the committee towards our submissions to consultations by the DTI on the new renewables obligation, to Ofreg, on stimulating renewables generation in Northern Ireland, and to the DCMS, on using money from the New Opportunities Fund to support renewables. All these responses are attached to the submission of evidence in appendices 1-3, and reflect current Trust policy on renewables in the UK.[38]


  The Energy Saving Trust welcomes the increased support for renewable energy that the last years have seen. We believe that particular areas of renewable energy, eg community renewables need a further increase in support. This can have valuable benefits for the acceptance of renewable energy in the whole population and contribute to rural development.

  The Trust believes that the overall costs of a sustainable energy policy have to be measured taking into account the supply and demand ends of the market. We believe that the additional cost of renewable energy production will be balanced by a reduction in energy cost achieved through energy efficiency measures, leaving the cost neutral. Energy efficiency measures work progressively, and contribute to the well-being of a particularly disadvantaged part of the population, thereby generating further benefit.

  The current uncertainties in the supply market revolve mostly around the introduction of NETA and the report of the Embedded Generation Working Group. We believe that the effects of NETA on renewable energy should be closely monitored, and we hope the government will take forward the measures proposed in the EGWG report.


  1.  The Trust was established as part of the Government's action plan in response to the 1992 Earth Summit in Rio de Janeiro, which addressed worldwide concerns on sustainable development issues. The Trust is the UK's leading organisation working through partnerships towards the sustainable and efficient use of energy by households and small businesses. Our membership includes the Secretary of State for Environment, Transport and the Regions, the First Minister of the Scottish Parliament, the National Assembly for Wales, the Secretary of State for Northern Ireland, and many of the UK's energy companies. This response should not be taken to be the policy of any member of the Trust.

  The Trust's main interest lies in promoting the efficient use of energy, and to this end it carries out a variety of activities, such as administering national energy savings programmes under the Energy Efficiency Commitment, research and development into new energy services offerings. The Trust also currently provides accreditation for renewable energy tariffs under its Future Energy scheme. The Trust is currently assessing the feasibility of projects that would be aimed at stimulating household level renewables and community projects, through the provision of advice and practical support.


2.  Expectations of the proposed renewables obligation and the definition of "acceptable costs to the consumer".

Support for renewable electricity generation

  The Trust recognises that the generation of renewable electricity in the UK has received increased policy support during the last year, with the publication of the preliminary consultation on the RO, the commitment to fund large-scale, new technologies like energy crops and offshore wind, the publication of regional planning targets and the recommendations by the Embedded Generation Working Group. These developments create a positive environment for the growth of renewable electricity generation in the UK. Current barriers include uncertainties about the impact of NETA, the planning process, the current problems in getting connections to the grid, and the falling price for electricity, generated by fossil fuel and nuclear power stations.

Community-level renewables

  The Trust would particularly like to see a policy development aimed at increasing the deployment of community level renewables, following the example of Swaffham, where the installation of Ecotricity's turbine has been a huge success. More detailed recommendations for increasing deployment of renewable generation can be found in the response to Ofreg, together with our response to a consultation on the use of money from the New Opportunities Fund.

  Another exciting development is the potential for household-level renewables, eg solar water-heating and rooftop photovoltaics. There is currently little support for non-grid renewables, and none for heat/transport. The Renewables Obligation does not currently propose to explicitly support community schemes.

Acceptable cost to the consumer

  Regarding the "acceptable cost to the consumer", we would like to encourage the government and the regulators to think in terms of an integrated, sustainable energy policy. While the cost for renewable generation are higher than that of large-scale fossil generation, because the latter does not have to pay for the externalities caused by it, there are also benefits to consumers from installing energy efficiency measures. We expect that in the period to 2010 the cost to consumers in total will be neutral between the increase in energy efficiency and the increased deployment of renewable generation. The Renewables Obligation and EEC could be linked symbolically, to increase public understanding and acceptance of the expenditure and benefits involved in achieving a sustainable energy market in the UK.

Voluntary green tariffs

  The introduction of funding through the Renewables Obligation will create problems for the future design of voluntary green tariffs, because of reluctance by NGOs to back green tariffs that are not additional. Additional green tariffs would have to factor in the extra funding given to ordinary renewable generation through the Renewables Obligation. This would most likely price them out of the market.

  We believe that the way forward could be voluntary green tariffs based on a fund model, where the funds are being used to create additional capacity outside the RO. Our discussions with NGOs on the matter indicate that they would support such a model. We are concerned that green tariffs in some form should still be an option in the domestic market, to allow consumers the choice to avoid pollution through their electricity consumption. This will secure increasing awareness of renewables issues, and will still allow committed customers to "lead" the market. The regulator should monitor the market for green tariffs on a regular basis.

3.  The impact of the Government's reforms of the electricity market, including new trading arrangements for electricity generation, on the prospects for new renewables capacity.


  The introduction of NETA is generally seen as a barrier to the further deployment of renewable capacity by the industry. This is related to the unpredictability of when renewable capacity will be available to generate, and an expectation that it will be penalised under NETA rules. Whether the emergence of consolidators (as has been suggested by Ofgem) will solve the problem remains to be seen following the introduction of NETA. While this is the ideal solution in theory, in practice it may be difficult, and renewable generation may not be able to demand a sufficient price for the electricity generated, if it has to work through intermediaries. We would suggest close monitoring of the developments in the market following the introduction of NETA and a very early review of NETA's effects on renewable generators.

Embedded generation working group

  The work of the EGWG was aimed at providing a framework supporting the deployment of smaller scale, embedded generation. The results of the forthcoming consultation will be crucial to the future deployment of renewable generation capacity in the UK. Especially in the light of the challenging target set for renewable capacity expansion until 2010, new access arrangements for this generation are necessary. The EGWG has provided a good and insightful overview of the issues involved. In the opinion of the Trust, further consultation should consider the impact of the reforms on renewable generation, and aim to reflect contributions made to network performance by this form of generation in the price it receives.

January 2001

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