Examination of Witnesses (Questions 199
WEDNESDAY 13 MARCH 2002
199. Welcome, gentlemen. Thank you very much
indeed for the memorandum which the Renewable Power Association
put in. Mr Byers, thank you very much indeed for coming and your
colleagues. Perhaps you would introduce your colleagues, we would
like to know who they represent and so forth, and then we can
begin questioning you on your memorandum.
(Mr Byers) Certainly. It is very pleasurable
to be here. I will just introduce myself and invite my colleagues
to do so also. I am Chief Executive of the Renewable Power Association,
which is generally pan-technology and attempts to progress the
relevance of renewable generation in the UK. If I can start with
Max, on my left, he will introduce himself.
(Mr Carcas) I am Max Carcas. I am the Business Development
Director for Ocean Power Delivery. We are a developer of wave
power technology in Scotland. We are currently developing a machine
called Pelamis, the full scale version of which will be tested
at the beginning of next year at the Marine Energy Test Centre
(Mr Wolfe) I am Philip Wolfe. I am the Chairman of
Intersolar Group. We are the only existing UK manufacturer of
solar cells and our company is the seventh largest producer of
the new generation thin film solar cells.
(Dr Pitcher) I am Keith Pitcher and I work for First
Renewables. We are a developer and operator of wind farms and
biomass projects, including the Arbre Project in North Yorkshire.
Chairman: Thank you very much indeed all four
of you, we are very grateful for your attendance here this afternoon.
We will start with Mr Challen.
200. Good afternoon, gentlemen. As I understand
it, currently about three per cent of our energy, electricity,
is supplied by renewables and much of that is through hydro electrics.
There seems to be a lot of scepticism about 2010, that we are
going to get to ten per cent. Do you share that scepticism and
would you like to comment on it?
(Mr Byers) Yes. I think your figure is approximately
accurate, it is largely dominated by large hydro which will not
increase and, indeed, there is a fair proportion of landfill gas
in that figure which will probably decline by 2010. I think the
community as a whole is very optimistic that we can deliver as
an industry but only after certain barriers to development and
deployment of the technology are eradicated. The longer that eradication
takes, the less likely the ten per cent target shall be. There
are clear technologies which are now economic and those very close
to being economic which can contribute to that ten per cent but
we should be realistic about investing as a nation in those technologies
which will not come to large scale fruition by 2010 and, therefore,
if the 20 per cent target is required by 2020 we should be investing
as a nation now, not just for domestic consumption but also for
201. I know it is very difficult, it is like
asking the question who is going to win the Cup, but what would
be your best guess for 2010 on how much we will be producing percentage-wise?
(Mr Byers) Again, I would have to answer parametrically
with how many obstacles there are. The obstacles at the moment
are clearly known to the Committee. NETA is a problem. Planning
is a problem. Bankability is a problem. Connection to the network
system is a major issue. If you remove them all I would say ten
per cent is extremely pessimistic. If it stayed as it is today
if we get to six per centthat is a personal viewwe
would be doing quite well.
202. I understand the DTI has given some understanding
of what the share of renewables might be between on-shore and
off-shore wind, energy from waste and biomass etc. They imagine
that will be about a quarter each. Do you think that is a realistic
assumption, that it will be divided equally between those? We
have heard a bit about tidal and so on. What is the mix going
(Mr Byers) As you said, it is very difficult to answer.
It is clear that on-shore wind should have a large growth. Biomass
in this country should work but at the moment has certain barriers:
agricultural planning and, indeed, economic price. At the moment
I would say a quarter each is probably being optimistic for certain
203. Could you elaborate on that. When you say
"optimistic for certain technologies", what do you have
(Mr Byers) It is difficult to see confidence in huge
energy crop development in the current economic climate.
(Mr Byers) Agricultural crops for energy production.
(Dr Pitcher) If I could add to the last point. As
I mentioned before, one of our projects is the Arbre Project and
farmers have grown 1,400 hectares of short rotation energy crops
for that project, however for the future with the price cap which
has been set by the Renewables Obligation biomass is unique amongst
renewables in that it has a fuel cost and there are many benefits
that come with growing those energy crops but currently all of
the pricing of that has to fit within the financial constraints
of the Obligation. So in order to make this work we have to have
a mechanism that supports the farmers who are growing this which
is called Agricultural Certificates or Rural Development Certificates.
This is an item which has been raised both with the DTI and with
DEFRA who understand the principle of it but we have to now work
out how existing programmes, like the set-aside arrangements and
so on, can be structured to make this economically viable both
for the farmers and to get within the numbers within the Obligation.
Providing that happens, I have to say, there is definitely an
appetite there for farmers to grow these crops. We demonstrated
this with our first project and we are seeing people come to us
on a daily basis wishing to do it. There is a lot of confidence
around providing we can get the financial mechanisms in place
for this next generation of projects.
205. This is a final two-pronged question. What
do you see as the main obstacle to developing renewables? Secondly,
what is the most immediate thing the Government needs to address
to remove that obstacle?
(Mr Byers) I think I mentioned briefly the four challenges,
three of which are largely under the control of Government and
local government. The trading arrangements I am sure you have
been bored to death with but they are extremely prejudicial for
small embedded generation at the moment. That is in the hand of
Government. Secondly, the planning arrangements are well discussed
in terms of review of what should be done to allow a more positive
attitude to renewable generation at sites throughout Britain,
not just in remote parts. Thirdly, a rather antiquated network
connection regime which discourages the connection of useful,
small, local renewable generation to a grid designed to survive
the Luftwaffe rather than renewable energy. Fourthly, more or
less as a consequence of this we have moved to a market based
support system after five years of consultation, which the Renewable
Power Association welcomes, but it should be recognised that the
risks have increased in the eyes of bankers. Therefore, if you
wish to encourage diversity and not just one or two champions
of major oil companies coming to the rescue, bankability needs
to be considered pragmatically in the Government support network
because most bankers are still awaiting 1 April and they like
to wait for two years to see what happens. Small developers need
to start now and certainly in the agricultural sector it takes
five years to grow sustainable crops and we are talking about
eight or nine years to 2010. If I were to pick one thing to fix,
206. I do not know about predicting who will
win the Cup but could I tempt you to think of a league table.
You represent all perspectives of renewable energy and you mentioned
in your opening remarks about the fact that some are economic
now, some are close to being economic and some cannot possibly
happen unless there is a huge change in support systems and the
other systems that you have just mentioned. Where are we in terms
of getting this done? Who are the frontrunners at the moment in
terms of technology? If we are serious, not just as a Government
obviously but as a nation and the United Kingdom, about getting
to that ten per cent and then 20 per cent target, who should we
be backing now?
(Mr Byers) The Government has taken the position that
they do not want to back winners.
207. Who would you back?
(Mr Byers) If I can just finish the second part of
the sentence. De facto they have, not only because they
have pitched a one price support mechanism but also they have
identified-sub-sectors of capital grants which are only available
to certain technologies. To get to the answer, if you ignore planning
and business development barriers, on-shore wind is extremely
economic now, landfill gas is extremely economic now, a variety
of small scale biofuel generation and agricultural use is economic.
If we move generally into the agricultural crop and the biogas
generation then perhaps further down the lineI will defer
to my friends on the leftphotovoltaics, wave, various marine
power. An essential fact from history needs to be recognised,
and certainly the Germans, the Japanese and the Americans have
recognised it, that volume production reduces costs exponentially.
I think Philip will certainly add weight to that. By putting turbines
on the ground for wind power the cost of wind power has dramatically
fallen over the last decade. So the challenge for the industry
and Government is to decide whether you want to back BP, to use
an analogy, to deliver all your oil exploration or whether you
want a balanced programme over 20 years to support technologies
with market forces certainly but also with kick-start and a hope
to get volume into certain technologies. I would like my colleagues,
who are more aware than I, to comment on certain technologies.
(Mr Wolfe) Just to pick up on a part of your question.
As an Association we are not suggesting that the Government should
be supporting technologies which will never be economic or should
bridge some kind of funding gap to technologies that will never
be economic, but certainly the different renewable technologies
are at different stages of development and some of them are uneconomic
today but will be economic in the future. Our perception is that
rather than necessarily seeking to prescribe exactly how much
of the ten per cent, or whatever the target is, should go to different
technologies, the intention should be to identify technologies
that can become economic and create the environment where that
is possible and then allow each to find its own level, broadly
speaking, on economic grounds. If you take photovoltaic technology,
for example, which is basically a solid state semi-conductor technology,
just like the transistor was, that has massive potential for cost
reduction as production volumes build. The major support for that,
therefore, will be creating a market environment where the market
is to some extent underwritten and the industry will then be entirely
happy to invest in the capacity that is needed to build production
and take it to the stage where it is economic. We are not looking
for any sort of long-term subsidy situation, what we are looking
for is, firstly, an elimination of barriers and, secondly, a degree
of pump priming to enable these technologies which are at an earlier
stage to break through the volume barrier and, therefore, establish
themselves on economic grounds.
208. Can I just come back on that. You said,
Mr Byers, that the Government said they would not back winners
but they de facto were and you have also mentioned how
the volume can change the winners, if you like, and we have certainly
seen that ourselves as a Committee in Germany looking at the Thousand
Roofs Programme there. Surely, in a sense, if the Government is
absolutely fixated, and that is the question at the moment, on
getting the ten per cent and then the 20 per cent target that
has been suggested, are they not right to back winners? Do they
need to invest in more off-the-wall esoteric renewables, if I
can put it that way? Should they not be just plumping for wind,
which you said yourself is cheap, accessible and relatively predictable,
at least in historic terms? Is that not a reasonable way forward
for the next ten years?
(Mr Byers) I would certainly advocate a large expansion
in wind power in this country because we have an ample resource.
I also believe in democracy taking its course. If you can remove
the planning barriers then on-shore wind will provide a large
proportion of the ten per cent. I am reminded of a programme that
I watched yesterday where the Americans ignored jet engine development
in the Second World War because they thought they had enough turboprops
to win the war. Is that a typical analogy? If we are looking at
carbon, about energy efficiency to 2050, there is a huge potential
for wind, and I am here to advocate wind development. I have also
worked in gas, electricity and oil and I do advocate a more balanced
investing approach in order to encourage employment, agricultural
diversity, development and export potential across a multitude
of technologies. That does not mean that you need to invest customers'
money in white elephants. I agree that wind is a major potential
winner if you can get the community to accept it. Its off-shore
costs are yet to be proven but the potential wave energy density
in this country is phenomenal. We abandoned funding in 1979 and
we lost a major commercial opportunity but also threw away some
white elephants 20 years ago. I am trying to give a balanced answer
here. Picking one winnerI would advocate the Government
is more diverse than thatbut certainly if we do not develop
wind in this country we are missing a major opportunity.
(Mr Wolfe) There is a technological aspect to this
as well, of course. Some of the renewables are by their nature
intermittent and, therefore, if you plump for just one of those
you are really multiplying the effects of intermittence whereas
if you spread it better you will get a better match. Wind typically
produces about three times as much power in the winter as in the
summer. Solar typically produces about eight times more in the
summer than the winter. If you have a good match of those you
can basically even things out. If you go for just one you are
multiplying the effects of the non-continuous nature of some of
these forms of generation.
(Mr Byers) A final point might be that wind tends
to be where the demand is not.
209. That is a good point.
(Mr Carcas) The Performance Innovation Unit considered
three things in their energy review: economic, social and environmental
criteria. Certainly there is a case, I think, for looking at which
technologies have the greatest potential for real social and economic
benefits to the UK in terms of creating an indigenous renewables
manufacturing industry. The Danish example is well known. Ten
to 15 years ago wind power was producing electricity at perhaps
12 to 15 pence per kilowatt hour. The Danish gave a very clear
and unambiguous market pull mechanism as opposed to what has traditionally
been our approach here, which is a technology push mechanism,
and that led to deployment of technology and really that is the
best way of getting costs down over time. Germany is currently
offering 30 pence per kilowatt hour for solar power and they are
clearly staking a claim on that technology. Portugal is proposing
22½ euro cents per kilowatt hour for wave power and they
are clearly making a stake for that technology. In terms of the
support mechanisms, the capital grants are technology specific
but the mechanism by which you access those does not
210. Is that the Green Technology Challenge?
(Mr Carcas) No, the capital grant is allocated, for
example, for the support of off-shore wind. That is £74 million
and the Performance Innovation Unit have estimated 15 per cent
of that going to support eight individual projects around the
UK. The mechanism for doing that is still very unclear.
(Dr Pitcher) Can I add one final comment. One thing
which I think is important not to lose sight of are the resource
assessments which have been carried out in this country and those
show where if we put development in and we can see there is a
way of getting the cost down to a level which is a good number
then we do not want to have a very small amount of energy coming
from those areas. For instance, wind is a classic example where
there is a major resource potential. Also biomass as well. All
the studies which have been carried out, both at UK and European
level, have said in all scenarios a number of these technologies
have to feature at scale, not only to meet the 2010 target but
the targets beyond. We believe that it is very important to take
a pragmatic look at those technologies which have a great potential
and ways of unlocking those to meet not only the interim targets
but targets beyond so in the long run we could get those costs
down a lot faster than we would do by just going on a piecemeal
211. In response to a question from my colleague,
Mr Challen, about targets, you mentioned export. I assume that
you mentioned export as the potential of the United Kingdom to
develop renewables is perhaps greater than any other European
Union country, including Germany, which might wish to buy renewables
from us. Is that not a widely optimistic view for the medium term
given the problems that we have got in meeting the targets we
have set for domestic use?
(Mr Byers) If I understand the question, we may be
talking about different exports. I was not talking about export
of physical electricity, I was talking about export of expertise,
manufacturing, service, maintenance. Yes, I think you are absolutely
right, it is hugely optimistic to imagine that we can export a
great deal at the moment because we are second to bottom of the
European table in terms of everything from recycling to renewables
but we have had expertise in this country in a large number of
areas in this sector and we have not allowed them to develop,
so we are importing Danish turbines, German PV. My colleague on
the left will comment about his position as a manufacturer. It
was not the physical export of green electricity that I was referring
to, it was a labour base and a capital base which we could export
to other countries.
(Mr Carcas) If I could come in there just to say that
the Danes currently employ 20,000 people in the manufacture of
212. In that sector alone?
(Mr Carcas) In that sector alone it supports 20,000
jobs, which is comparable to that directly employed in the off-shore
oil sector in the UK.
213. I want to take us back to wind and biomass
to carry on from your point about the fact that we are enjoying
a comfortable position of propping up the rest of Europe, second
to bottom. We are talking about wind and we have said if a winner
is going to be picked, wind is the one. My constituency is in
East Anglia and I picked up my local newspaper a couple of days
ago to find that Brian Wilson was saying that East Anglia is going
to be the UK capital for wind energy. Do you think the Government
is doing anything at all apart from verbally, empty wind if you
like, because certainly having represented the constituency since
1997 I have seen no energy into utilising that great resource
of wind in East Anglia at all by this Government?
(Mr Byers) Mrs Clark, I have to say that if we are
not careful East Anglia will be a marine environment and, therefore,
we will be looking at different technology or maybe off-shore
wind. The Minister is speaking a lot and I have a lot of time
for his officials who I believe are genuinely and professionally
trying to put policy into action. However, occasionally one stumbles
into quagmires of rhetoric. We would advocate a more integrated
approach. No particular ministry, no particular government, is
to blame but we do stumble across situations, particularly as
a pan-technology group, whereby one minister does not feel that
is in his or her remit, it does not overlap with another minister
and, therefore, a particularly obvious point is unaddressed in
terms of developingI hate to use the wordjoined-up
policy, whether it be transport, agriculture, energy, environment.
As to East Anglia, I am not an expert. You clearly will not be
looking at tidal power in the middle of Leicestershire, therefore
geography determines quite a lot in terms of what is feasible,
but I do have a problem with picking a single winner if it is
off the Orkneys because the demand centres tend to be rather closer
to this building.
214. Could I just follow on about biomass in
that case. I believe Dr Pitcher was talking about it. The Government
is anticipating 25 per cent of the 2010 target coming from biomass.
We know what biomass is but the Government seems to be doing so
little to actually advertise it that I would say the vast majority
of my constituents do not even know what it is. Is this realistic?
(Dr Pitcher) As I said before, the encouragement we
are getting from the farming community in this country has changed
dramatically for a number of reasons because of all the troubles
they have had over the past five or six years. However, we are
seeing a move towards the environmental aspect of agriculture
in the Second Pillar starting to happen, so the rhetoric is definitely
there. In terms of Yorkshire and Yorkshire men, the definition
of them as people from north of the border with the generosity
wrung out is sometimes the case, if they are putting their money
into growing biomass, which they are, I think that is a very good
encouragement for the rest of the country to say "we have
done it there, there is no reason in principle why we should not
do it elsewhere". Biomass plants can be moved to sites where
they are environmentally acceptable, where they can connect into
the grid and so on, so there is a lot of flexibility in where
they are located. The two principal activities that are in this
are to have the Rural Development Certificates in place to recognise
the environmental and other values that come with growing energy
crops, and the second one is the efficiency with which we use
that biomass in the technologies. Our project is an example of
this where the overall efficiency of ten megawatts is greater
than the large 1,000 megawatt power stations are achieving and
the next generation of those will be even better than the first.
There is a technological programme under way which has started
to prove that and that must continue. I would like to say that
is based on UK know-how. That is what we have done in our project,
for example, with Alstom, who are based in Lincolnshire, who have
designed and developed the gas turbines for this work. That is
a very positive message there. There are two things in terms of
the technology and the fuel and if we can get those together,
if we can get the barriers taken down that David mentioned earlier,
then I think there is a very healthy opportunity for that to occur
throughout the UK.
215. Mr Byers, Denmark is probably the most
obvious example of a country that has invested particularly heavily
in wind technology. We now hear that the Danes are beginning to
scale back to some degree on their wind turbine programme. Do
you or your colleagues, briefly, have any explanation for why
(Mr Byers) What Denmark has done is just elect a new
government, so the last government is always to blame. From what
I understood last week, it is a little bit to do with scaling
back from introducing what is called a Renewable Energy Certificate,
which is a tradeable instrument. I would not like to comment in
great depth but it may be to the advantage of certain Danish companies
to scale back in that area for purely commercial reasons. What
they are certainly not doing if you look at the market capitalisation
of a company like Vestas is scaling back on production because
they are exporting it to us.
(Mr Carcas) If I can add there as well that, of course,
the Danish have certainly exceeded the ten per cent target that
we have already set so to a certain extent they are allowed to
rest a little bit.
216. Are you saying that in that area they have
essentially done enough?
(Mr Carcas) No, but in comparison to the other European
countries they are obviously streets ahead.
(Mr Byers) And they have not suffered any system insecurity
or great disruption by reaching a very high level of renewable
217. Would you like to comment on the report
to the Scottish Parliament suggesting that wind energy in Scotland
could actually supply a very high percentage of our energy needs?
(Mr Byers) I have absolutely no doubt that Scotland
could provide England with an awful lot, whether it be commonsense,
porridge oats or wind power. The difficulty is transmission and
perhaps the Scots' resistance to having their hillsides and their
coastlines covered in English windmills. Being of Scots origin
myself I cannot predict the inter-company tensions there but quite
clearly because of the wave climate, because of the wind climate,
Scotland has probably higher energy density and accessible areas,
if the population will allow development , of certain technologies.
Transmission costs money and at the moment there is a limit on
the amount of Scottish hydro power that can come south. Arguably
you should actually put embedded generation embedded where the
demand is. I have no doubt that the Scottish climate effectively
and its land mass, which is relatively unpopulated, could provide
England with a great deal of renewable energy but at some cost.
We have heard of schemes for the cable down the west coast of
Scotland. I question not the validity of putting that in as a
piece of British infrastructure, but who pays for it is a very
fundamental question. Whether it is state aid or whether the commercial
projects have to pay for it themselves is a question of optimisation.
What I am advocating on behalf of the RPA is balanced broad technology
confrontation of the next 20 to 30 years. Pick winners by all
means and if you can play your aces in a game of cards then play
them to win the tricks you need to. Picking geographies, which
is what you are suggesting, is clearly driven to some extent by
planning, by availability of resource and by transmission to demand
(Mr Carcas) As a Scottish company we obviously very
much welcome the resource assessments carried out in Scotland.
To just describe what was actually involved, they looked at the
resource, both technically and economically, constrained at prices
up to seven pence per kilowatt hour by 2010 and from memory I
think the conclusion was that 60 gigawatts of total renewable
energy could be accessed under those limiting criteria by that
time. It was not saying that that would be accessed by then but
what could be accessed by then with the big exception of grid
capacity. Within that 60 gigawatts, again from memory, I think
14 gigawatts were from wave power.
218. In respect of the reasons which are preventing
you from meeting the targets, what would you say to those people
who, in response to the proposals for wind, have concerns about
possible environmental damage to birds and wildlife?
(Dr Pitcher) On our second project at Ovenden Moor
in the Yorkshire Pennines, as part of the planning we have developed
with English Nature to carry out a widespread improvement on a
moorland area and to monitor the effects on flora and fauna in
that area. We will be publishing the report later this year when
the final survey is carried out. It was due last year but because
of foot and mouth it was not able to be completed. All of the
work carried out to date since the operation which started in
1993 has concluded that there are no changes whatsoever on that
moor versus the birds in particular on an adjacent moorland which
is a SSSI. We are seeing the patterns going up and down as predators
and climatic factors are there, so from that we can conclude the
effect of the wind farm, both during its construction and in its
subsequent operation since 1993, has had no effect whatsoever
on that wildlife at all.
219. It would be very helpful if you could perhaps
let the Committee have some additional information on that, particularly
in respect of skylarks, kestrels, sparrowhawks.
(Dr Pitcher) We have interim studies carried out which
are not currently in the public domain but I can see if I can
get those released and send those to the Committee, if that would
be of help. When the final report is produced later this year
I will make that available to you as well.