Select Committee on Environment, Food and Rural Affairs Minutes of Evidence


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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