Select Committee on Environmental Audit Minutes of Evidence

Supplementary memorandum from the Combined Heat and Power Association

1.   With reference to question 1 (Mr Green): can you confirm that you are referring to the final report of the Consolidation Working Group?

  Yes, I was referring to the Consolidation Working Group, which OFGEM is facilitating for the DTI.

  Since my evidence session at the Committee, OFGEM has published (on 7 February) the report. It has not been accepted as an accurate reflection of the issues and I attach a copy of the joint letter sent to OFGEM. [7]

2.   With reference to questions 14-15: We would be grateful if you could send the figures on the employment levels of Siemens of CHP in Germany.

  Regarding employment levels of Siemens of CHP in Germany.

  We have pursued this question with the company. They advise that it is difficult to give a precise answer, since they do not maintain records specific to the number of people working on CHP. It is the case that many of the component elements of a CHP plant are common to other power generating technologies, and hence a demarcation between staff employed in CHP and other generation business can be difficult to determine. This is particularly the case for Siemens who supply into a wide range of markets.

  Germany is the centre of Siemens Power Generation business. The company state that the total number of people employed worldwide by Siemens in their Power Generation business is about 26,000. They advise that a safe assumption would be that between 5 per cent and 10 per cent are employed in CHP business, implying total employment in this market sector of between 1,500 and 2,500. These people are employed in the project management, engineering and construction of plants, as well as the manufacture of gas turbines, stream turbines, generators and other equipment for these plants.

3.   With reference to question 22: Can you confirm whether there is any written documentation to show that DTI had been in favour of a single cash out price?

  As to the statement about the DTI favouring single cash out price.

  This point was made by a senior DTI official during the course of a meeting the Association had with Peter Hain whilst he was Energy Minister. As I do not have access to the official note of the meeting I am unable to provide specific documentary evidence.

  However, in respect of the wider impacts of NETA and the need to ensure that the new arrangements would accommodate renewables and CHP, the October 1998 White Paper—Conclusions of the review of Energy Sources for Power Generation is quite specific:

      "6.41  The Government has identified some areas on which further consideration will be needed. These include: . . .

    —  Renewables and CHP. There are also concerns about the way the proposed arrangements might impact on some renewables generators and CHP plants where the output is relatively small and difficult to predict. Arrangements need to be developed to help these generators to operate effectively within the new trading arrangements.

—  NFFO . . . The proposed arrangements do not contain a Pool price to use as a reference price in NFFO contracts and a new reference price or other solution must be developed."

  I hope this will assist the Committee, and I am also attachng a copy of the DTI Press Release that set out the Government's overall approach in 1998, and made specific reference to "encouragement" for CHP and renewables.[8]

4.   With reference to question 26: Can you confirm which company you were referring to in this question.

  The company referred to was Smartest Energy Ltd (who is also a co-signatory to the letter to OFGEM concerning the outcome of the Consolidation Working Group).

February 2002

7   See Annex. Back

8   Department of Trade and Industry, Press Release P/98/769 dated 8 October 1998 [not printed here]. Back

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