Examination of Witnesses (Questions 140
- 159)
WEDNESDAY 12 JANUARY 2005
MR DAVID
PORTER, DR
JOHN MCELROY,
MR ANDY
LIMBRICK, MR
DAVID GREEN
AND MS
KIRSTY HAMILTON
Q140 Mr Drew: What do you need, particularly
in terms of a clearer strategy from government, as the signal
for rather more than some outline research to see what are the
commercial realities, the planning obligations and the political
necessities of moving in this direction which some of us see as
not just inevitable, but long overdue?
Mr Porter: I think the nuclear
industry would answer that, at least partly, by saying that they
need the political strategy for the disposal of waste dealing
with rather more quickly than it has been; that has been dragging
on a bit. I ought also to say that if the answers for nuclear
power were readily available, we would have heard them by now.
Q141 Mr Lazarowicz: Another element
in the energy mix is the renewables sector. In respect of that,
a couple of points; it has been suggested by WWF, and I think
others, that the Renewables Obligation (RO) should be extended
to 20% by 2020 along the line of the level in the Energy White
Paper. How far do you agree with that aim, and if you do not,
what would your alternative target be?
Mr Porter: We are always more
comfortable when the government, which has quite a big hand in
a liberalised industry, is clear and consistent about its policy
towards energy. As an association, we are actually looking slightly
shorter term with renewables. We accepted very readily the 10%,
in fact we put that idea forward before the government did and
we have more recently accepted the 15% by 2015. The renewables
industry is fortunate in the sense that it does have these rather
more firm targets out there. They seem to acknowledge that the
industry is one with long investment horizons and big capital
requirements and it is probably fair to say that we would like,
in a sense, rather more of that sort of thing for the rest of
the industry.
Q142 Mr Lazarowicz: Does that mean
you do not agree with the target, but you do not object to it
either?
Mr Porter: Exactly. We have no
objection to the 2015 target for renewables.
Q143 Mr Lazarowicz: The idea is that
the Renewables Obligation should be 20% by 2020.
Mr Porter: Twenty per cent by
2020. We do not have a firm policy on that, but, equally, there
has been no objection in the Association to it and bear in mind
we represent all the different technologies.
Mr Green: Just setting aside for
a moment the issue of the target, and I would share a lot of the
views that my colleagues from the AEP have outlined, the more
important thing that we tried to bring out in our submission is
the technologies which are covered because of the way in which
the RO is structured. It tends at the moment to drive companies
towards one particular suite of technologies. A case has been
made by the Royal Commission on Environmental Pollution for trying
to find ways, and it may be done inside the Renewables Obligation,
it may be done outside the Renewables Obligation, but in terms
of delivering the overall target of 20%, trying to find a broader
suite of technologies which could be supported. One area that
the Business Council has certainly taken an interest in, and indeed
our Chairman John Roberts is on the government's task force on
this, is the potential for biomass. For those people here who
are constitutional anoraks such as myself, the Energy Act is entirely
focused on electricity and completely misses out heat and its
dimension. One of the issues that the Royal Commission on Environmental
Pollution has raised is that if you were to reconfigure thinking,
so you focused on waste heat, particularly the potential for renewable
heat, you might actually broaden the suite of technologies that
would enable you to get the 20% target and perhaps do it in a
way that could also help revitalise rural communities and other
communities which are looking for new markets, for example for
agricultural waste products. We certainly hope that the taskforce
which has been set up, which involves Sir Ben Gill former president
of the NFU and our chairman and a former chief economist at the
DTI, will produce over the next few months some creative answers
in this area which might help broaden a suite of technologies
which are supported by the government, whether it is within the
Renewables Obligation or by other mechanisms.
Q144 Joan Ruddock: I was going to
ask about whether the current UK climate change plan actually
addressed the issue of renewables and the importance of investment
adequately. I think there is perhaps a bit of an answer there.
Mr Green: The current plan is
effectively the climate change strategy that was adopted just
after the change of government in the formal communication to
the UN in 1998-99. What we are in at the moment is the review
of the climate change programme (CCP). It was clear from the Secretary
of State's early comments that the initial evaluation is that
the measures we currently have in place are not going to deliver
the 20% target which the government adopted; hence my comments
earlier about the need for new measures in a number of sectors.
Yes, I am sure there is more that can be done in the electricity
sector. There is similarly a lot more that needs to be done in
a range of other sectors and quite frankly, having come back from
a week's walk in Austria and seen the potential even a country
like Austria has to do a lot more in energy efficiency, I came
back wondering why we are so pathetic in this country on these
issues.
Q145 Chairman: May I ask you for
some guidance, as a sort of sub-debate from Joan's question, on
micro schemes? Some people have suggested that instead of the
large-scale generation that we addressed a few moments ago, micro
schemes might be more efficient. Can you just give me a 30-second
introduction to micro schemes and whether we ought to be looking
at that?
Mr Green: Micro schemes as a family
of technologies would include small-scale solar photovoltaics,
the conversion of solar energy into electricity, would include
small biomass schemes, would include small-scale CHP schemes,
small-scale fuel cells; it is a generic term covering a number
of different technologies. There are some exciting developments
going on in this field, E.ON UK have committed to a programme
to install quite a large number of micro CHP schemes and there
is a field trial going on at the moment to see the extent to which
they will actually save carbon. There is undoubtedly more potential
to use solar photovoltaics across the UK, be it in industrial
buildings or in commercial buildings. It is a pity, for example,
that the government is not using its own power of procurement
to do these things because the new Home Office building that you
will all shortly be seeing rising 100 yards away is not going
to be a shining paragon of solar. It will have energy efficiency
measures built it, but it is those sorts of things that can be
used to do much more to drive forward that market. Finally, bearing
in mind the timescale, if I could just for a moment take off my
hat as chief executive of the Business Council, I also chair the
Mayor of London's London energy partnership. The Mayor is committed
to setting up a climate change agency and at the centre of that
is going to be a strategy for adopting a very distributive model
for energy supply in London which, from the calculations that
his staff have done will show a significant potential in London
to have a much more distributive model of energy supply which
would also relieve pressure on power imports into London and would
hopefully over time make London's energy supply more secure, having
more local sources of generation. As a London MP you will probably
particularly interested in this.
Q146 Joan Ruddock: I would indeed
and I have a personal interest in it, as you know. I thought Mr
Porter was looking a bit sceptical during that response and I
would just like to invite him to make some comment, particularly
on the micro schemes but also about energy efficiency. Why have
we got to make an assumption that the domestic consumption just
goes up and up? Why can we not do what other countries in Europe
have done so well?
Mr Porter: We have seen it happening
for a long time and people who use electricity appear to want
it to do more and more for them.
Q147 Joan Ruddock: But it can be
done more efficiently; you know that and we know that.
Mr Porter: Absolutely, but in
my lifetime, I have seen many, many government sponsored energy
efficiency schemes come along and fade away and be replaced.
The Committee suspended from 4.32pm to 4.52pm
for a division in the House
Joan Ruddock: I was simply asking why
domestic energy requirements are just going up and assumed to
be constantly increasing and why we could not do the energy efficiency
measures other European countries have done so successfully?
Q148 Chairman: One of the problems
is that as soon as you say that everybody leaps on the band wagon
and says "Ah, future building regulations". We are going
to get better but the emphasis on the existing stock of buildings
is very poor. We fall back on what I might call the domestic standpoint,
a diet of yet more insulation in the loft and draft exclusion,
but we have not really gone beyond that. You might like to incorporate
a comment on that in response to Joan's point.
Mr Porter: I mentioned that there
had been many energy efficiency measures over the last few decades.
It is very difficult to argue that one should not go for energy
efficiency. It clearly makes sense, but it requires incentives
to be built in to make anything substantial happen. It was also
suggested that I looked sceptical when we discussed micro-production
of electricity. I am sure that was a misunderstanding. I shall
keep my eyebrows more firmly under control at select committees
in future. The position is that it is fair to say that the jury
is out on the effectiveness of very small-scale production. A
trial is going ahead, but it is that; it is a trial. If the implication
was that the existing producers of electricity would probably
look upon that sort of thing with fear, I would say that is probably
not the case and if they were convinced it was going to be practical
and efficient, they would be into that business. In fact one of
our larger members is involved in that now. However, we need time
to see just how efficient that type of production actually can
become.
Q149 Joan Ruddock: May I follow that
up because again you seem to dismiss the energy efficiency as
a hopeless lost cause and say there need to be incentives. Presumably
your industry could keep up its income by charging more for people
who are using less. Your business does not have to be affected
in the long term, because people and their machines become more
efficient and therefore use less energy because you have a price
mechanism to deal with that. Why is your industry not more proactive?
Why do you dismiss energy efficiency, given its environmental
gains which we all know are so enormous?
Mr Porter: I would not like you
to think that we dismiss energy efficiency. In fact, energy efficient
is key in one sense to what our members do. The competitive market
has driven power stations to become more and more efficient. I
know that is not the point that you are making, you are looking
at the domestic side.
Q150 Joan Ruddock: You are relying
on the domestic demand continuing to increase.
Mr Porter: We operate in a competitive
marketplace. It is so competitive that some of our members actually
go bust and that is the context and it is not true to say that
we can simply go on charging people anything that we want. I will
ask John McElroy to add to that, if I may.
Dr McElroy: I think the issue
on energy efficiency is that it has to be done by a mix of measures.
Effectively, energy costs in this country are relatively low;
most of us in this room do not over-analyse our electricity or
our gas bills. Until we have incentives which encourage us to
look at the issue much more seriously, then it sits at the bottom
of the pile, rather than at the top of the pile. Whilst I know
the issue of building regulations was raised, it is quite an important
aspect for new buildings coming on and possibly also in relation
to upgrading existing buildings. I think other issues, which I
am sure David can cover in more detail, such as stamp duty, such
as fiscal incentives in relation to installing energy efficiency
devices, all have their part to play and also education of the
consumer is absolutely core to all of this. So, it is not going
to be solved by any single policy measure: it needs a basket of
targeted measures and education to really drive it up the agenda.
At the end of the day, you would need a very strong price signal,
if you were going to drive it that way. Price signal on its own
is not going to do it.
Mr Green: I would agree with what
Mrs Ruddock said. There is significant potential for more energy
efficiency. The Business Council very recently organised a meeting
which was lead by Mark Clare, Chief Executive of British Gas with
Lord Whitty, the then energy minister, to discuss the next stage
of the energy efficiency commitment. What was interesting was
that there was no doubting the firm commitment at the highest
level in the companies to energy efficiency, very keen to get
on with the job, but frustrated at the lack of an holistic approach
across government in that at the moment, the drive from government
for energy efficiency is very strongly focused on increasing the
energy efficiency commitment, and that has cost implications for
all of us and for poor consumers in particular, when what many
of us feel is that there needs to be a much bigger suite of measures,
so you need some demand for measures that encourage us all to
use energy more efficiently in our homes by, for example, changes
to the VAT regime so that we could buy more energy efficient appliances
and they are recognised, changes in the way in which white goods
are monitored for energy efficiency, so that when we buy new appliances
for our homes they are not necessarily bigger, but they are more
energy efficient. That can be done through a range of EU regulations,
most of which have not been revisited for five or six years and
can be revisited again. There are more things that can be done
with building regulations etcetera. As you have rightly said Chairman,
and I am sure you know from your past political experience, one
of the difficulties is that energy efficiency tends to be a bit
like apple pie and motherhood. Everybody thinks it is great, but
it is so great it is actually diffuse across government. So yes,
the department you shadow has formal responsibility for it, but
if you actually think about it, you have Defra with the formal
policy custody for it, most of the levers to deliver lie to a
certain extent with the DTI, but, certainly when it comes to housing
stock, also with ODPM, when it comes to tax measures with Treasury
and when it comes to executive arms to deliver, you have the Carbon
Trust, you have the Energy Saving Trust, you have other bodies
which hang off those. It is not that there are not enough people
doing it, it is that they need to be more focused and more driven
so things really do happen. The message I would suggest from other
countries is that what they have had is a much more focused drive,
it has really harnessed industry to get out there and deliver.
It has happened in other sectors where consumer markets have been
transformed; the telecoms market. You could argue that similar
efforts and liberalised markets could make a real difference in
energy efficiency. One only has to look at one's own home to think
about the number of energy using appliances we now all have in
the home that we did not have 10 years ago. Most of those could
have been, at the time of being introduced to the market, regulated
in a way that was not heavy-handed regulation but made sure that
when they came into our homes, they were more energy efficient.
So instead of buying a digital TV box that consumes huge amounts
of power, it was a low energy digital TV box or instead of buying
a computer that is not particularly energy efficient, the ones
you buy are all energy efficient. There are all things that can
be done. It happens in America, it happens in Australia.
Q151 Chairman: You have made a lovely
apple-pie-and-motherhood statement. You have just told us everything
and I am sitting here looking at a printout from the Energy White
Paper with this box that says energy efficiency savings at 2010
and it has this great list of things which can be done in the
home and that is great. But it comes down to who is going to accept
responsibility for driving the policy forward. Who ought to be
driving it? Who ought to be talking to the manufacturers of washing
machines, because some of them are now plastering the front of
them with this kind of information, but who ought to be getting
hold of this and saying "right, we are going to drive this
policy forward"? What you said in your statement is that
here are all the potentials, but it also says it is not happening
as fast as it should be. Who should be getting hold of it and
making it happen? Where does the buck stop?
Mr Green: In the current Whitehall
framework we have—and it may change after election, that
is not in our gift, I do not know—in the current framework
I would argue that the department you shadow, Defra, are the key
department and they really need to have the resources at their
disposal to drive this forward.
Q152 Mr Lepper: Mr Green in a way
has answered the question I was going to ask and that was your
view of the connections and the liaison between government departments
on this issue. In a sense, you have dealt with that already. Do
you feel there are, whether they are working or not, mechanisms
in place between government departments to drive this forward?
I take the point you have made about Defra as the lead department,
but are there mechanisms there to bring government departments
together on these issues and they are not being used properly
or are they simply not there?
Mr Green: I am not a civil servant,
so I do not know. All I would say, and I think I probably speak
for all my colleagues, and they could probably all give you apocryphal
stories of complete lack of co-ordination, is that we would probably
all like to see much stronger co-ordination and leadership on
energy efficiency, both within Defra and between Defra and other
departments. Now those mechanisms may exist or it may just be
a lot of full e-mail boxes between different government departments.
Q153 Mr Lepper: Or a bit of both.
People ought to know whether that exists or not and if you are
not aware, then—
Mr Green: We spend an awful lot
of time, John, David, all of us, on actually informing the different
government departments about what we understand is happening in
other parts of the system.
Q154 Mr Lepper: Individually?
Mr Green: Individually. We are
happy to do that because we want to make things happen. One could
argue that if you had a better machinery of government in this
area, the delivery would be much stronger.
Q155 Mr Lepper: You mentioned your
recent experience of a visit to Austria and I think there are
similar councils for sustainable energy to yours in Australia
and in the US. Not necessarily now, but perhaps in some other
information you give to us, are there examples there of how government
departments co-ordinate, work together, on driving forward, for
instance, energy efficiency programmes particularly in relation
to the domestic consumer which you feel might be helpful to us?
Mr Green: I can certainly give
you a note, but the key thing one has to recognise is that the
two other countries are both federal structures, so a lot of delivery
is actually not so much at national level but at state level where
you tend to find co-ordination can be slightly easier because
you have one functional tier to deal with. If it would be helpful,
Chairman, I can certainly provide you with a brief note without
going into too much detail.
Chairman: That would be very helpful.
Q156 Mr Mitchell: I thought David
Green's answer on this question of energy efficiency in the household
was much more imaginative and interesting than that of the producers
who effectively said their business is to go on producing electricity
as much as possible and if there is going to be any pressure to
energy efficiency in the home, it will come from the pressure
of the eternal escalation of prices. You demonstrated a degree
of interest which bordered on total apathy.
Dr McElroy: I think that is contrary
to what I actually said.
Q157 Mr Mitchell: You were not saying
anything specific.
Dr McElroy: I said that price
signals on their own would not drive the delivery of energy efficiency
and that what was needed was a range of measures including fiscal
incentives, regulatory measures such as building regulations or
appliance standards and also the need to educate and engage the
consumer.
Q158 Mr Mitchell: In other words,
somebody else should do it not you.
Dr McElroy: We have a part to
play in it, but we cannot deliver it on our own; we can deliver
it in partnership.
Q159 Mr Mitchell: Why can you not
think more imaginatively like, for instance, reducing the charges,
or charging people on the basis of their success in reducing consumption
by solar panels or other kinds of measures you can introduce?
The more you reduce, the less you pay or charge more on those
who do not do anything. It does need something, an approach like
that, but you wanted to leave it to other people.
Mr Porter: I ought to point out
Chairman that the generating industry is composed of a range of
different types of company. Some of them are large vertically
integrated companies with power stations and retail businesses,
but the majority of generating businesses of course are free-standing,
power production only businesses.
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