Select Committee on Trade and Industry Appendices to the Minutes of Evidence


Memorandum by the Institution of Civil Engineers

Q1.   Given the imminent dependence of the UK on energy imports, how can the UK maintain a secure energy supply? What mix of fuels would maximise security?

  If security of supply is the primary concern, then the only course of action for base load generation as current things stand (and with a view to the longer term), would be a return to coal fired generation (for which the nation has several hundred years of reserves) and/or possibly nuclear generation.

  The first has the difficulty of CO2 emissions; so its constraint is to have full CO2 removal and storage to meet UK/EU offered Kyoto targets, which would attract significant cost and require innovative resolution.

  The second alternative of nuclear, which is large CO2 free, has the even harder hurdle to cross of general public acceptance and competitive pricing (neither of which are foreseeable in the short to medium term). Nuclear also has the downside of needing a full ten years (or in some cases longer) from planning to commissioning for any of its developments.

  Gas in the medium to longer term has to be recognised as a stop gap measure which will feature far less in the mix portfolio in 20 years' time. This is as supplies will require an extended infrastructure to the Central Asian states or mid African states, which will attract higher security of supply risk and increased cost.

  Renewables (without the advent of electricity storage such as the Regensys Project) are unlikely to make a serious contribution to baseload generation, although larger wind developments such as those 200 MW + schemes now being proposed in Scotland will help raise its contribution with time.

Q2.   Is there a conflict between achieving security of supply and environmental policy? What is the role for renewables, and Combined Heat and Power schemes?

  Yes is the simple answer—the recently introduced New Electricity Trading Arrangements [NETA] has effectively killed off the fledgling CHP market and is seriously constraining small stand-alone wind developments. Embedded generation below 50 MW has no easy route into the new commodity trading market. Other than wind, little sizeable activity is taking place in the renewables sector. The Government's target of 10 per cent renewables by 2010 will fall short on current investment figures—even 7 per cent by 2010 may be over-optimistic.

  The environmental planning hurdles for new renewable developments means that around a third of such proposals are put through too an exacting process and many are stood down. The same is true for transmission and distribution development to support renewable projects, which in themselves attract public inquiries—reinforced network connection costs can also be prohibitive.

  Increasing renewable capacity onto the network will also have a detrimental effect on network management. The present distribution and transmission networks are designed to transport large volumes of electricity from the current single point large sites of generation. Many of the best renewable sites however are in remote areas where network connection is weak, often at the end of tapered distribution lines with associated voltage control and thermal rating problems. The displacement of high performance conventional generators on the grid also gives rise to transient and dynamic stability problems. Renewable generation machines tend to have smaller inertia, no contribution to system synchronising power, poor voltage support and no support to frequency control.

Q3.   What scope is there for further energy conservation?

  Effective measures to curtail demand and improve energy conservation are an absolute must in any future energy policy. In future, Negawatts (or watts saved) will become more important than Megawatts consumed. Government should turn its mind to meaningful measures to promote Negawatts—savings made in one industry should not be allowed to be wasted by increased demand in another [for instance improved building performance through use of better insulation materials, solar panels for low grade heat etc should not be sold short by allowing new demand such as Internet Hotels each needing a supply of 20 MW [unless that new load can be met by renewables or possibly CHP sectors]. Mechanisms for securing energy saved in one sector must be nailed down and policed to prevent demand increasing in another, without serious attempts to curtail and/or have supplied by sustainable means.

Q4.   What impact would any changes have on industrial competitiveness and on efforts to tackle fuel poverty?

  These will be substantial in both terms of industrial competitiveness and fuel poverty.

  Regulation has helped achieve the lowest electricity prices in real terms in the UK since 1974. However regulation has run its course [Railtrack is a case in point] and unnecessary over-zealous regulation is now overseeing the demise of the home grown liberalised companies. Take over by foreign consortia is now almost complete—this will ultimately be of no benefit to Britain, its ESI, its industry as a whole and the British consumer. The Industry is now overly regulated so that the benefits secured by privatisation have been largely squandered. With the exception of Scandinavia possibly, Britain ten years ago led the world in its approach to introducing competition into the electricity industry. Profit erosion and sweating existing assets means that the UK energy utilities are becoming emasculated and that short-term decision making applies.

  In the medium term, energy will become a much higher priced commodity (possibly within seven years)—fuel poverty will become a very serious issue, particularly for the elderly in the lowest economic third of the population. Industrial competitiveness will also be impacted, but the issues facing Britain will be shared with Europe where energy prices can be expected to rise significantly as well. Future energy sourcing, pricing and energy use behaviour in the USA will dictate western world trends. Large coal reserves in the Far East, coupled with a likely disregard for CO2 emission controls, will further aid this region's competitive advantage.

Q5.   Is any change of Government policy necessary? How could/should Government influence commercial decisions in order to achieve a secure and diverse supply of energy?

  Regulation of the gas and electricity industry in its current form should be severely curtailed. Rather than leading on low prices, regulation should concentrate on how best to meet environmental targets and international commitments, whilst promoting a diverse and secure mix.

  Demand reduction must become a key Government target. Energy savings initiatives need to be sufficiently rewarded so that such drives are self-perpetuating. Energy conservation measures need to be tightened for new developments of any nature and incentives to substantially increase retro-fitting programmes should be introduced.

October 2001

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