Examination of Witnesses (Questions 160
- 170)
WEDNESDAY 12 JANUARY 2005
MR DAVID
PORTER, DR
JOHN MCELROY,
MR ANDY
LIMBRICK, MR
DAVID GREEN
AND MS
KIRSTY HAMILTON
Q160 Mr Mitchell: They just want
to flog more and more electricity.
Mr Porter: They indeed have an
interest in selling electricity. We cannot help that. It applies
to a number of gas-fired stations, it runs right the way through
the technologies through to small family businesses. We have members
who actually produce electricity as a secondary business to their
farm. It is fair to say that they do not have an interest in the
customer cutting his demand. The issue at the moment faces the
large vertically integrated ones, who not only produce electricity
through power stations, but also have retail businesses and millions
of customers.
Q161 Patrick Hall: Can I just go
back to something on renewables before turning to combined heat
and power, just one point to David Green? I think he said earlier
something about the Renewables Obligation adjusting the market
to make it favour wind power. Why is that? Why can we not have
a market in which a range of different renewable sources or generators
is favoured?
Mr Green: When the government
introduced the Renewables Obligation, it was a market-based mechanism
so it incentivises Business Council members, David's members,
John's company and others, it incentivises those companies to
hunt out the lowest cost way of delivering renewables into the
marketplace to achieve their legal obligations under the Utilities
Act. At the moment—it could change—the lowest-cost
technology in the marketplace is onshore wind which is why, although
in theory the Renewables Obligation is technology neutral, the
way in which the cost of the technology actually operates drives
the companies towards onshore wind. There are other technologies
which have been used. John's company has two small hydro schemes
for example, at Windsor Castle; there are other companies developing
and deploying some other quite innovative technologies but the
vast bulk of the market is a drive towards wind, because that
is the lowest-cost technology at the moment. That could change
over time. As capital grants come in they bring down the cost
of technology and other things become more cost competitive, but
at the moment, onshore wind is the lowest cost option. That may
well be, to be fair, a point you might want to pick up with my
colleagues at the RPA because they have a much more detailed knowledge
of that than I have.
Q162 Patrick Hall: Turning to combined
heat and power, I think it is fair to say that the public's awareness
of and understanding of this is perhaps not what it should be
and that includes of course, the advantages and disadvantages
of combined heat and power, never mind understanding exactly what
it is. Could I ask David to explain what it is and how it works?
Mr Green: Just to say that if
you actually want to see a scheme, I should be more than happy
to arrange for you to go to the boiler room of the House of Commons,
the main building, where there are two CHP systems, or, no doubt,
if you signed the Official Secrets Act, you could go to see the
secret boiler room underneath the Ministry of Defence where CHP
is keeping the Prime Minister's lights on. So there are schemes
very close to you. Essentially what it is, according to the DTI
energy statistics, is that the average efficiency of a UK power
station, traditionally coal, is about 34%, whereas the average
efficiency of the new generation of case combined cycle plant
is about 48% The efficiency tends to be on the lower side of that,
although, as David Porter has said, it has improved dramatically
over the last 10 years, because by and large, and you only have
to go past a power station to see it, heat is dissipated into
the atmosphere. If you design a power plant as a CHP plant, you
capture and use that heat where you can do it. You cannot always
do it for various reasons, but where you can on an industrial
site or near a large urban area, you can do that. By capturing
and using that heat, it increases efficiency from an average of
72% to 90%
Q163 Patrick Hall: Does that mean
therefore that combined heat and power is just a method of using
the heat and is entirely separate from the method used to generate
the electricity? So you could have combined heat and power attached
to coal or nuclear or gas.
Mr Green: You could have it attached
to anything which is a cost-effective fuel source. Traditionally
CHP was coal fired and in the last 10 to 15 years, it has been
gas fired. There are methane fired CHP systems in Britain, there
are geo-thermal-fired CHP systems, there are systems burning straw
waste. You can use anything that it is cost effective to combust
in a CHP system, although about 90% of CHP systems are gas fired.
Q164 Patrick Hall: How come it is
cited in the context of tackling CO2 emissions then,
because it could be attached to a generator that is belting out
CO2?
Mr Green: All power plants at
the moment produce CO2 unless they are using it a carbon
neutral source. The big advantage for CHP, which is why it reduces
carbon emissions fairly substantially, is because whatever the
fuel input source is, it is burning that fuel about three times
more efficiently and therefore you are getting less CO2
produced per megawatt of output. Broadly speaking, according to
the DTI energy statistics, every one megawatt of CHP that is produced
in the UK is reducing the UK's CO2 emissions by between
700 and 900 tonnes of carbon per year. This is why you get a substantial
improvement in emissions from CHP plant, particularly where it
is gas fired or biomass fired.
Q165 Patrick Hall: Does that mean
that by definition it is only limited in its scope in the sort
of distance that it can serve? In other words, has it got to be
just a district system?
Mr Green: It depends. Europe's
largest CHP system has just been opened in Immingham by Conoco
and that actually serves one very large petrochemical site. The
system in Whitehall serves 26 buildings. It depends on the heat
demand in the area, because CHP is, by and large, not driven by
the requirements for electricity. It is, by and large, driven
by the demands for heat, or in some cases cooling.
Q166 Patrick Hall: So it is not a
substitute for the traditional large power station.
Mr Green: Not necessarily. Quite
a few large power stations have CHP output. Other countries have
had a different model of developing their power generation industry.
For example, in Denmark, where they have had a lot of municipally
driven CHP systems, about 40% of their power consumption for the
whole country is from CHP; in the Netherlands it is about 60%
from CHP, they have had a different model of development.
Q167 Patrick Hall: I am fascinated
to know how micro CHP can work, even one that operates within
a single block of flats or one's individual house?
Mr Green: The technology for an
individual house is still being developed, as my colleague, David
Porter, mentioned. There are field trials going on for domestic
CHP schemes at the moment, but there are blocks of flats already
which have CHP systems in and indeed blocks of flats that are
looking at CHP systems. In quite a few of the constituencies of
members of this Committee, there are CHP systems operating in
swimming pools and leisure centres. You have probably all been
to them and do not even know they have CHP because it is just
a grey box in the basement. It is actually operating on 1,500
sites around the UK. The difficulty has been, since the market
conditions changed dramatically in 1997 and in 2000 with the introduction
of NETA, the output of CHP schemes, because the market has changed
so fundamentally, has gone down by about 50% and there have been
no major new CHP schemes since that time.
Q168 Patrick Hall: That was going
to be my next point. The UK is falling behind its own modest targets
and as you said in your evidence, capacity is actually falling.
What is the picture overseas and how can we learn from that if
it is a favourable picture?
Mr Green: It is broadly favourable.
It may be one of the ironies of public policy that when President
Reagan launched his energy strategy he did so at one of the US's
largest co-generation plants and the US has quite an ambitious
co-generation target and so have the Netherlands and Denmark,
as indeed have other countries. If it would be helpful, Chairman,
in view of the time, to give any more information on this, I should
be more than happy to do so, because I get a sense that the Chairman
is looking at the clock.
Q169 Patrick Hall: What he is wanting
to do is go to the boiler room and see it for himself.
Mr Green: I am sure we can arrange
that.
Chairman: I think we are going to have
to draw our session, interesting as it is, to a conclusion because
we have one other set of witnesses that I want to get through
before colleagues have to go. It would be very helpful to have
that information. Mark, you have a bursting postscript.
Q170 Mr Lazarowicz: Something which
you might be able to supply in writing. You have told us quite
enthusiastically about some of the measures that can be taken
by domestic consumers in relation to energy efficiency. I should
be interested to know a bit more about your suggestions as to
what the commercial consumer can do in the field of energy efficiency
to improve the current position.
Mr Green: I might have to give
you a separate note; I would need to look into that a little more.
Chairman: One final question to you,
which you do not have to answer now. We have heard a lot of information
from both groups, but perhaps you could just jot down on the back
of the proverbial envelope or postcard, the one thing that the
government should be doing that would help to get it back on track
to meeting the target that it set itself. With that, may I thank
you very much indeed for coming and also for your written evidence.
It was much appreciated.
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