Examination of Witnesses (Questions 240
- 259)
WEDNESDAY 28 MARCH 2001
MR PETER
HAIN, MR
JOHN DODDRELL
AND MR
JEREMY EPPEL
240. We have Wavegen and Ocean Power Delivery,
two of the country's leading wave power companies, and they told
us that they are actively considering moving part of their research
to Portugal because of the lack of such a facility. Are you aware
of this? Might that, perhaps, give an added impetus to you looking
at this issue?
(Mr Hain) I actually was not aware of that, and certainly
we will follow that up right away.
241. Can you look at what needs to be done to
attract companies like that into the UK?
(Mr Hain) Well, of course, they are in the UK.
242. There are other companies as well. If we
have the few that are in the UK moving abroad, then we are not
likely to attract more are we?
(Mr Hain) I have not heard that they are about to
move abroad—
243. It is part of their—
(Mr Hain) Although it could be part of extending their
arm. I will encourage British companies to find investment opportunities
abroad and work abroad, but as part of spreading our expertise.
We do want to preserve and develop a solid British platform. Certainly
I will look at that and get to the bottom of it.
Dr Turner
244. Could I just enlarge on that point slightly,
Minister? One of the problems which keeps being brought to our
attention with respect to either installing or testing devices
is access to the grid. The provision of a grid point of access
is virtually the most important aspect of a test site, so long
as it is in suitable natural conditions. Is there anything the
DTI could do to facilitate that?
(Mr Hain) Obviously, yes, we can help. That is not
something that I was aware was an enormous hurdle to the overall
momentum of the project. I think we are, really, in a demonstration
stage of the technology at the present time, but, of course, the
renewables obligation will provide plenty of opportunity if the
technology starts to take off. I think I am right in saying that
Islay is connected to the grid.
Dr Turner: Islay is.
Dr Jones
245. If I can come in there, it is only able
to transmit a proportion of the power it generates. In fact, Wavegen
has been quoted £0.5 million to be connected fully to the
grid and Ocean Power's device, which is due to be installed, is
facing a bill of £1 million to be connected. We are not talking
about anything like Millennium Dome sums of money but it is a
step for those companies. So what are you going to do about these
specific problems?
(Mr Hain) Are you saying that that is an obstacle
to their development?
246. Yes, because they cannot transmit all the
power that they generate into the grid. This was a problem, for
example, in Dounreay with the nuclear fast reactor. Do you know
who paid the substantial costs to get that generation into the
grid?
(Mr Hain) No, but nuclear has enormous liabilities.
Dr Jones: This was before they started generating
liabilities. As I understand it, there was a lot of public money
being put in to connect such remote facilities. Obviously, with
wave and tidal power a lot of the facilities will be at the edge
of the grid and this is a very important issue.
Chairman
247. Minister, before you answer, if I may add
a little bit. At the time of Dounreay, for example, Dounreay would
have been nationally owned and the grid would have been nationally
owned, and I am sure the nationally owned managers would come
together and do it. We are now talking about a situation where
the grid is privately owned, and where, with projects such as
Islay, although the research is government-sponsored the projects
will be privately owned. So it is a very different situation when
you have got two privately-owned organisations from when we had
two state-owned organisations. One is not necessarily suggesting
the Government has to spend the money but the Government might
have to bang a few heads together and act as a catalyst. So I
make those comments before you answer Dr Jones.
(Mr Hain) Yes, I am quite happy to look at either
a role of banging heads together or a role of providing public
assistance, if it is justified and if it can be defended. One
of the reasons that we are providing finance on a very large scale
compared with what it has been in the past, which is next to nothing,
is precisely to assist with capital costs of projects, including,
doubtless, connections to the grid. I would not want to see any
successful renewable project, least of all wave power or tidal
stream power, founder because of the cost of a cable. Our Embedded
Generation Group and the Performance and Innovation Unit and the
work we are doing will consider all this and, again, I look forward
to reading your recommendations on that.
Mr McWalter
248. I think, perhaps, you have addressed this
already, Minister but it is worth dwelling on it. There was a
joint DTI and DETR memorandum which said that the long-term commercial
viability of wave and tidal power remains uncertain. That was
written in March 1999 and you were not in post then, and I get
the impression there is going to be a fresh breeze blowing through
that judgment. One of the issues, in part, is that the assessment
of commercial viability has looked very much at the prototypes,
or whatever, whereas we know that with the Danish wind business
once they actually had the thing up and running and then they
redesigned the turbines, and so on, the costs fell very dramatically;
once you have got the thing up and running you can see where you
can make economies. Do you now, basically, disavow that remark,
and wish to replace it by one saying: "Well, we expect to
make the commitment needed to wave and tidal energy to ensure
its long-term commercial viability is assured?"
(Mr Hain) I do not want to disavow that statement
made two years ago, but a lot has happened since, both on the
development front and in terms of the Government putting its money
where its mouth is in that respect. There is naturally—and
I guess the Committee is more familiar with this than most ministers—a
balance to be struck between backing a technology and pouring
lots of money into it, which then proves commercially uncompetitive
compared with other renewable sources, and depriving it of the
investment and support which could stop it developing in the way
that I think it has the capacity to develop in this instance.
So we have got to get that balance right. I hope that we can resource
potentially commercially successful wave power and tidal stream
power with the backing that it needs.
Mr McWalter: In the case of Islay, electricity
apparently is produced at a cost of about five pence three farthings,
as it were.
Chairman: Is that a metric farthing?
Mr McWalter
249. I thought I would put that word "farthing"
back into the Parliamentary vocabulary. Do you think that we can
seriously expect wave and tide energy to be able to compete with
fossil fuels without the massive subsidies that certainly nuclear
power receives and certainly the massive subsidies per kilowatt
hour it received when it first came on stream?
(Mr Hain) I do not think that renewable energy will
get off the ground in the way it needs to be without massive support.
That is why the renewables obligation is such a powerful driver
because it requires electricity suppliers to have 10 per cent
of their market share from renewables. So that will inject resource
as well. In fact, we estimate—I will be corrected if I am
wrong—about £600 million through the renewables obligation,
which means that if you add together the various components of
support—our £250 million, plus other support—you
are talking about round about £1 billion worth of support
for renewables, including this area, over the coming years. That
is a lot of support. However, I would readily concede that nuclear
energy never would have got off the ground without the massive
public subsidy it had—rightly or wrongly, from different
points of view.
250. The sort of devices currently on stream
have got potential capacities of up to 130 kilowatts. If you are
talking about the investment needed to get power delivery of 2
megawatts or something, you are talking about a very, very different
level of investment. Given that the DTI analysis itself says that
the potential export market for wave energy, even excluding tidal
power, is estimated to be in excess of £1 trillion, at some
stage or other has there not got to be a brave, major investment
in devices of the right sort of order to get all of those teething
problems at initial stages and so on sorted? That is something
that is very clear that the EPSRC is utterly unable to do. The
scope of it and the investment needed is way beyond their current
ability.
(Mr Hain) Again, I think we are in the infancy of
a strategy and the development of the technology and capacity
for it to provide increasing shares of energy.
251. This infant needs to be reared very quickly,
does it not?
(Mr Hain) I think you are right.
Dr Jones
252. Can I just turn to the question of planning
permissions? Last month you announced a consultation on proposals
for a one-stop shop for gaining planning consent for offshore
wind farms. We have been told by one tidal energy company that
they are going to place their prototype device off the coast of
Iceland because of the prohibitively high cost of obtaining planning
consent from, apparently, seven different planning authorities,
with the prospect of about two years to get planning consent.
What are you doing to alleviate the situation?
(Mr Hain) As you indicated, that consultation document
is an attempt to strip down the levels of application people need
to go through. I think there is a serious problem here, both in
the sheer bureaucracy and in the associated costs that have to
be waded through—if that is the right term—coupled
with (and I think I referred to this in the House last week, Chairman)
what, frankly, I think is the schizophrenia on the part of the
public and the authorities; that, on the one hand, everybody wants
clean energy but nobody particularly invites a nuclear power station
in their back yard or a coal-fired power station or even a gas-fired
power station, but when it comes to renewable energy, particularly
wind farms offshore or onshore, or doubtless in the future we
will have wave and tidal stream (and I am aware of this problem
in respect of the company locating in Iceland, but if you have
got any more details I will look at that), when confronted with
a decision you get a less enthusiastic commitment from the local
community and from the relevant planning authority. We have to
engage in a public debate that confronts people with some pretty
stark choices here. What really do they want?
253. It is important to take account of the
possible offshore environmental degradation that could occur.
(Mr Hain) Oh of course.
254. Why did you not, though, when you announced
this consultation over planning permission for wind, consider
this might be an issue for other forms of renewables?
(Mr Hain) It is offshore.
255. It is for all, it is not just for—
(Mr Hain) For offshore wind, yes.
256. I am talking about tidal and wave.
(Mr Hain) That is tidal and wave as well.
257. So that is included in the current consultation?
(Mr Hain) Yes.
Chairman
258. I think that brings us just about to the
end. I did want to conclude with a question which you have made
very much easier, Minister, by your personal commitment, made
very clear to us this afternoon, to alternative energy generation.
What I was going to say was that many of the people who have been
to give evidence to us and the submissions we have had have said
they have had difficulty in getting investors' capital into their
projects because there seems to be a less than adequate degree
of enthusiasm or commitment from government for these types of
projects. This afternoon you have given a very strong personal
pledge. Do you think it would be possible sometime in the not
too-distant future for the Government to come out with, perhaps,
a more publicly announced pledge to support the need for renewable
energy which might encourage investors to believe they have got
a long-term opportunity of having a return on their capital?
(Mr Hain) I will certainly look at that, Chairman,
with a very sympathetic mind. Clearly, the Prime Minister's commitment
a few weeks ago was an important and ground-breaking event, and
created quite an impact. In fact, in this very room, I think it
was last week (the weeks go by quite quickly in this job) there
was the all-party renewables group meeting. I expected it to be
a fairly small meeting but it was absolutely packed, with standing
room only. I think that is an indication of the interest. As to
capital financing, Britain has not been very good at venture capital
in these sorts of areas, and I think we, as a Government, need
to look at this very closely. Again, I will study any recommendations
and evidence that you have with a great deal of interest because
it is something that I really do think we have a responsibility
to take forward.
259. Minister, thank you very much indeed and
thank you, too, to Mr Doddrell and Mr Eppel. Minister, you have
given us a lot of information this afternoon. We are most grateful
to you. You have also been kind enough to say that you are looking
forward to our report. That gives us an added incentive to make
sure that our report is as helpful to you as it can be, in the
hope that when we do present it to the House you and your department
will take an interest in it and it will, perhaps, then be mutually
beneficial to us to have the report that reflects our views on
this subject and for you to have the report that is from, almost,
an independent point of view on the benefits of alternative energy.
We thank you for helping us and we hope we, in due course, can
help you.
(Mr Hain) Thank you very much. I look
forward to it.
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