Examination of Witness (Questions 120
- 127)
WEDNESDAY 21 MARCH 2001
DR JAMES
MARTIN
120. So you think that any electricity that
has been generated by renewables, we should just work our way
through it? What is a realistic figure, if we want to use renewables,
to set up as a target, or should we not set a figure for that?
(Dr Martin) No. I think we should be playing a leadership
role in the world to develop new renewables technologies and the
success criterion for our CO2 considerations should be how much
CO2 we can save by other techniques, for example, energy efficiency,
fuel conversion, CO2 sequestration. Renewables per se is merely
a sub-set of CO2 saving, so I do not think there is a good, bad
or indifferent number for a renewables percentage. CO2 is actually
the target. It is very beguiling to get off down the renewables
course but we must look at the fundamental objective which is
CO2 saving in this context.
Dr Turner
121. Leaving aside the philosophical points
which you are raising, I would still like to know what you think
is the achievable contribution of wave and tide to just, for example,
the United Kingdom, if you leave aside the economic restraints
for a moment and look at it purely as a technological challenge.
(Dr Martin) There is good published documentation.
I refer you to the report by Tom Thorpe, published in 1999, where
he demonstrated that about 30 terrawatt hours per annum, which
is about ten per cent of the United Kingdom's electricity, could
in theory (and that was the nature of your question, I believe)
be produced from wave and tide.
Dr Iddon
122. Can I ask you whether you think the renewables
obligation, both north and south of the border, is doing the trick
in encouraging greater use of renewables and what changes would
you make to the obligations, if any?
(Dr Martin) The renewables obligation is certainly
engendering in my company—I start there—a view that
it would be economic to build on-shore wind. As I have already
said, we have actually done a calculation and put our money where
our calculation is. Yes, there is a stimulant as a result of adding
£30 per megawatt hour to a company that has a large customer
base as ours does. We have a five million customer base. We can
make that investment because we can see that the 2010 commitment
to renewables we will have to fulfil. Whether it is sufficiently
attractive to encourage somebody without that customer base to
invest I think is questionable, because a new investment must
be bankable and hence the market must be clear. If, for example,
all the companies who had an electricity customer base self-supplied
with renewable energy by building plants, there would actually
be no market for a third party developer to sell his renewable
electricity into. It will be interesting to see how the business
develops and whether people are prepared to take the risk of investing
in what is effectively a merchant renewable generation plant which
does not start life with a tied demand.
123. Some forms of renewables are more advanced
in their technological development and even producing, like wind
power. Do you think there is an argument for banding the developing
technologies and giving them preferential subsidies?
(Dr Martin) Yes, I do. For the plant manufacturing
and UK equipment export reasons I have said, I think the United
Kingdom's main contribution to the global position is in technological
advancement. Therefore, by banding one can actually encourage
new technologies to emerge, so I think there is a potential to
encourage those that are further back down the development curve
and I think the NFFO mechanism has actually been a good case in
point. It has brought down the unit cost of wind energy.
124. So you would want to see wave and tidal
receive more subsidy at the moment than, for example, wind?
(Dr Martin) Yes, because I believe that the effect
of the present system, which is basically a least cost process,
will be on-shore wind and that ultimately the amount of that which
is built will be controlled by public acceptability issues, not
technological ones.
Dr Jones
125. I take your point, Dr Martin, about the
global obligation and the leadership role, but to develop those
technologies, to see the investment, do we not need demonstrators
here? I get the impression that the companies say: "We have
got these ten per cent renewables. How can we provide that obligation?"
Is that enough or is it even counter productive where you have
just got a situation where the companies are reacting to this
Government's exhortation? How can we make companies more proactive
in terms of developing these technologies which you think are
so important?
(Dr Martin) Companies develop things because there
is potential and because there are economic rewards in so doing.
It is as simple as that. At the moment those rewards are not manifest
by any other means in the market place apart from a Government
obligation. I will give you an example. We have a green electricity
tariff. In fact, we have two green electricity tariffs. One is
at zero surcharge in conjunction with the Royal Society for the
Protection of Birds. The take-up on that tariff is extremely small,
presumably because the market interest is not there. That is the
only conclusion one can draw. It is very well advertised. There
is not even a cost penalty in this particular case. It is the
only green electricity product in the market place that does not
have a cost penalty, and yet it is not being taken up. Commercial
companies react to customer value and at the moment the customer
is not seeing it, so regulation in this case through the renewable
obligation is being substituted for market forces and that is
a legitimate way of encouraging things to happen, as long as it
is targeted at the real problem, which is CO2, not an arbitrary
renewables number.
126. You seem to be implying that it is not
enough just to have this ten per cent renewables obligation and
more needs to be done if we are going to have the potential both
in terms of developing the world capability to provide renewable
energy, but also for our own economic wellbeing. Potentially there
is of course a lot of advantage if we can develop these technologies.
What needs to be done to move forward?
(Dr Martin) Yesterday's announcement of the Carbon
Trust was an interesting example. That I hope will produce a carbon
trading mechanism in which companies can apply their creativity
to the most cost effective and economically advantageous way of
meeting a carbon decline requirement. That removes the question
of whether it is renewable, energy efficiency, carbon sequestration.
All of that gamut of technologies is then available and we actually
address the primary objective function, which is climate change,
not some construct, which is renewables.
Chairman
127. We have overrun by only three or four minutes.
I think we have done extremely well. Dr Martin, you have given
us an enormous amount of information. Some of it has raised our
eyebrows, only because we probably had not thought of one or two
things. Your point that we should be concentrating more on providing
equipment properly proved and tried for China and India than we
should be using it ourselves is something we shall take note of.
Thank you very much indeed. I do not know where you have travelled
from today.
(Dr Martin) From Perth in Scotland.
Chairman: Thank you for coming so far and for
helping us this afternoon on this Committee. We wish you a safe
journey home.
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