Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 300-319)



  300. Where is the technical side at? My understanding is on that side of the country the rock is extremely hard and that if you dangle a cable across a lot of rocks and the tide and waves move it about a bit it gets cut up by the rocks. Is there something which has happened which makes you more optimistic?
  (Mr Wilson) I hope if what you say is right it is something the study will reveal in advance.

  301. Is this very much speculative?
  (Mr Wilson) Is it very much speculative? Of course it is speculative in the sense that we have to test its technical feasibility and also its economic feasibility. We certainly would not have taken it to this stage if there had been any prima facie evidence that it was simply not a runner.


  302. Is it not the case that previous wave power experiments have been questioned on the fact that the normal cable, which in these instances would have been about five kilometres long, was vulnerable to the wave power rubbing against rock and that it has been suggested to us that the more predominant rock form in the West Coast of the UK is gneiss. That rock is of a kind which is particularly sharp and inhospitable and if you are going to have 400 miles of this as distinct from five kilometres it could present dangers. It may be that in the intervening period since wind technology was rejected, the old wave power experiments and the introduction of new means that there have been heavy duty cables of an order hitherto never considered before. Has this been fed in? This seems to be fairly substantial prima facie evidence, to use your expression, Minister.
  (Mr Wilson) There are subsea cables on the West Coast so obviously in these instances the problems you refer to have not been insuperable. The point of doing this is to answer these questions and we would not have got this far if it was thought the rock was incapable of being cabled, and that is very basic. I think the question is very well worth asking.

  303. We look forward to your answer.
  (Mr Wilson) Indeed.

  304. All I am saying is that british energy—small "b", small "e"—the history of it is littered with ideas from the bright ideas box that come out prematurely and raise expectations and cost money and very often never actually produce the goods at the end of the day. If this one is of a different character then we will hold our breath and wait and see.
  (Mr Wilson) If I can use another method. Better to light one candle than to forever curse the darkness. If you do not ask the questions you do not get the answers.

  305. This is a question which maybe should have been asked before the match was even taken out of the box to light the candle, with respect.
  (Mr Wilson) If it is common ground that much of the renewables potential in the UK is on the Western seaboard, if it is common ground that the transmission problems at present are severe and if it is common ground that it will be environmentally very difficult to address that problem on a land based solution then I would have thought it could equally be common ground that it is not a bad idea to see if a subsea cable provides an alternative option.

Sir Robert Smith

  306. Is there only one danger that if the land based solution really is the only solution it takes your eye off the ball and stops the preparation work eventually having to come to terms with that?
  (Mr Wilson) I do not think it does at all. We are going to have a preliminary view by the end of the year on whether this is worth taking forward to a further more detailed study. I would not expect that further study to be in a timescale that would delay anything else.

Mrs Lawrence

  307. Can I just say, Minister, as an MP whose constituency has three sides fronting the western seaboard, and we are hoping to have a gas pipeline come ashore there soon, I really hold great store by hoping that plan does go ahead. Some of those giving evidence to us have suggested that both renewables and CHP will never reach their full potential and your targets because of difficulties with transmitting to the infrastructure on two levels. One is the technical one, which to some degree you have gone into there, but also commercial. Technical in the sense that the infrastructure as it exists at the moment is geared up to large power stations to feed in to the grid and the second one is the commercial costs for small renewable generators to connect to the grid. How can we ensure that the infrastructure is made more flexible to counter both of those potential difficulties?
  (Mr Wilson) I thank you for your comments incidentally on the subsea cable concept. Can I say to reinforce your point, there is one commercial wave power station in the world just now which is on the island of Islay. It is one megawatt. It cannot send its full output to the grid because the infrastructure is too weak to carry it. If we are serious here about talking about renewables then that seems to me to be a problem which has to be addressed because we are not going to light up Islay, never mind the United Kingdom, from renewables unless we can overcome the infrastructural difficulties. I am slightly surprised by the negativity, Mrs Lawrence being an honourable exception, to investigating the possibility.


  308. Realism not negativity.
  (Mr Wilson) Time will tell.
  (Mr Hirst) This is something the Department has put a lot of effort into. As you probably know there was the report of the Embedded Generation Working Group and now we have set up a group jointly with Ofgem to take forward its recommendation. This is exactly the point we are addressing, that we have an electricity network which was designed on the basis of large power stations feeding through the strong British network and then through into the distribution network and increasingly in future we expect smaller scale generation, including particularly renewables, will be embedded in the sense that it feeds directly into the distribution network, in some cases directly maybe into people's homes, if you are talking about micro CHP. There are a whole range of issues, some of them are physical configuration but they are also the codes and requirements for when you first connect to the system which are designed for some larger scale stations. There is a question of how you distribute the costs of sometimes reinforcing the system locally and also the question of what credit people who are contributing electricity much closer to the demand should have for the fact that they are in some respects enhancing the flexibility of the system. All of those issues we are taking forward as fast as we can through this joint group. They are all very important, I agree.

  309. Can I just ask you something very specific. I know of an incident within my own constituency, for example, where a photovoltaic system was set up.
  (Mr Wilson) Yes.

  310. The difficulties experienced by the Western Energy Centre to get that connected into the grid almost put them off despite their commitment to renewables. Are things as small and practical as that being fully addressed?
  (Mr Hirst) We are certainly hoping to move to a system where if you have a very small scale generation system, CHP or micro CHP, you would be able to connect up quickly provided it conforms, of course, to the safety requirements. Everyone realises you have to have that. Provided it conforms to the type codes and, therefore, the safety requirements you should be able to connect that up very quickly with absolutely minimum fuss, yes.

Linda Perham

  311. The DTI and DEFRA have overseen over the last about 20 years a number of schemes and programmes to encourage efficiency gains and efficiency in both the industrial and domestic sectors. What success do you think that those have had?
  (Mr Wilson) I think frankly limited success, particularly in the domestic sector, because not enough people are already persuaded that when they have to make choices about domestic expenditure the measures which they would need to take as individuals to reduce their energy needs are sufficiently high priority. I think in the industrial sector that because there are more pressing requirements to reduce energy costs there has been substantial success. We would certainly start from the premise that there is maybe a 20 per cent potential for domestic consumers to reduce their energy needs. I believe that once again the PIU Report, if it gives priority to energy efficiency, hopefully can help stimulate a new priority being given to addressing that problem.

  312. If you say there has been limited success in the domestic side, if prices fall then people will be less keen to go around switching lights off as I have done for many years. That is obviously a small thing but there are other larger contributions to savings on energy on our domestic side. Would that not be difficult if prices are falling because there is less reason to conserve energy?
  (Mr Wilson) I think that a lot of the savings which can be made can come from the greater efficiency of household equipment. We should certainly be seeing greater efficiency in all the tools which we all use in our homes. I think there is a combination of it being consumer led and also being producer led which will hopefully lead increasingly to energy efficient surroundings. When I say there has been limited success, I do not want to underestimate what has been achieved and of course local authorities and others have led very successful energy efficiency programmes, by no means negligible, but there is still a long way to go.

Mr Lansley

  313. One of the questions we asked the Department related to industrial competitiveness and in your memorandum you made it clear that you recognised that some industries had a higher demand for energy, they were relative intensive users of energy. As things stand at the moment what estimate do you make of the relative impact of costs on those energy intensive industries in this country compared with their competitors and hence their competitiveness?
  (Mr Hirst) One of the Department's formal targets is to try to ensure that energy costs in the UK are maintained at below the average level of countries in the European Union and the G7 which is a rather rough proxy for saying that they should be competitive. Our energy using industries should be competitive. At the moment the picture is quite complicated but I would say that we are actually in conformity with that. Across the board generally our energy prices if you look both at electricity and gas, I have to say generally because of course you look at particular companies and particular deals, are below the average, yes, of the prices faced by competitors in other countries in the European Union.

  314. When you look forward now to the issue of enhanced security or security of energy supply in the future, would you treat that target of maintaining our competitiveness as entirely compatible with securing our energy supplies in the future? Let me put it in two parts. Number one, is it compatible in your view and, if not, would you make it an overriding consideration to try and continue to achieve such a target?
  (Mr Wilson) If I can just elaborate. Security of supply is the overriding objective and the overriding responsibility of Government but competitiveness is obviously an extremely high priority and, therefore, we try to reconcile the two. Ultimately security of supply has to be the highest priority.
  (Mr Hirst) It remains a key objective of the Department.

  315. In your memorandum you take the view that there may be no reason for these two objectives to be brought into conflict depending on the measures which are chosen. Why do you assume that if we are to take measures to promote security of supply and those implied additional costs of realising our energy sources inside the United Kingdom as compared with importing them, why do you take the view that measures would be able to offset that cost without it having an impact on competitiveness of industry?
  (Mr Wilson) We recognise that in promoting renewables, for instance, that there is a cost, that the cost by 2010, I think, is put at 4.4 per cent. As in anything in Government there are a range of objectives which have to be reconciled. We have environmental obligations to meet, therefore we promote renewables. We want to create a manufacturing industry based on renewables, therefore we promote renewables. We have a security of supply imperative, therefore we want to stimulate domestic production of electricity. If you put these alongside the competitiveness issue all I can say is—and to reinforce what Neil has said—competitiveness is an extremely high priority but obviously Government policy is always going to be a synthesis of a range of objectives and I have named three of them.

  316. I suppose the point I am making is that at the end of the day if we place a premium on security, and we may have to pay a cost for that premium, your memorandum seems finessed away so the measures one adopts if they are marketplace measures will promote energy efficiency but those costs will be finessed away. Have you actually done any modelling to see what those costs may be and how that can happen? It seems to me unlikely that the costs will be wholly finessed away but they do have to be met and we may have to acknowledge such a premium before embarking down a particular path of securing our own supply.
  (Mr Wilson) I just acknowledged one such cost and I do not think there is any attempt to finesse them away. I think what we constantly have to do is to call on other interests to balance the considerations in the same way that we are trying to do. Anybody who takes an absolutist position, for instance, on renewables, everything should come from renewables, has to recognise that the costs will be very much higher than we are talking about and that is in conflict with our competitiveness objectives. Certainly on my part I have no wish to deny that there are trade-offs or, indeed, any reluctance to quantify them as far as possible but, as we were discussing earlier, we have already seen the beneficial effects of NETA in reducing wholesale electricity prices by 25 per cent so that is good for competitiveness. I can only come back to the point that we have a range of obligations and imperatives which may ostensibly be in conflict with one another but which come together in what I hope is a balanced energy policy. Could I say, Chairman, further to what Mrs Perham was asking about: when I said the domestic success had been less great, I think the statistics are worth putting on the record. In the industrial sector energy intensity fell 62 per cent in the last 30 years, in the service sector by 43 per cent but in the domestic sector only six per cent, so clearly there is a huge amount to be done.


  317. Does the industrial figure take account of the collapse in the manufacturing industry as well?
  (Mr Wilson) The industrial figure is based on the consumption per unit of industrial output.

  318. Can I just say NETA and the Climate Change Levy started on the same day. I presume you have been monitoring the impact on industry of both of these. Have you got any figures you can share with us, that is to say the cost to industry after discounting of up to 80 per cent as against the fallen prices or is it too early to say this?
  (Mr Hirst) I think it is quite early to say. We would have to follow up with what numbers we might have.

  319. Would it be correct to say that the CCL is a Treasury driven measure?
  (Mr Wilson) It is an environment driven measure.

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