Examination of Witnesses (Questions 255-259)
DR KEITH
MACLEAN
2 NOVEMBER 2005
Q255 Chairman: Welcome Dr MacLean. I
am extremely sorry that there has been such a long delay. The
Government have not fallen, but I dare say there is some nervousness
amongst the Government whips which has caused a little further
delay. May I begin by asking a question about the demand side
and the scale of energy efficiency savings which the White Paper
envisages? Do you think that those are credible?
Dr MacLean: The way that the White
Paper is structured and the identification of the five or six
mega-tonnes of carbon to come from domestic energy efficiency
is certainly of the order of magnitude that we should be aiming
for, although it is not the order of magnitude which is being
achieved by the schemes which are currently in place.
Q256 Chairman: Do you think the savings
are deliverable within the timeframe?
Dr MacLean: No. What I am saying
is that it is sensible that targets of that sort of order of magnitude
are being set, but the current policy measures are unlikely to
deliver anything approaching that in the domestic area.
Q257 Chairman: Why is that?
Dr MacLean: At the moment the
focus is very much on the relative measures, the relative potential
measures rather than on absolute energy savings and in order to
deliver real carbon savings, ultimately there needs to be a reduction
in the amount of energy used or the amount of carbon which is
in it. On the demand side, really all we are looking at is something
which will reduce the overall amount drawn from the grid. The
amounts which are happening under the energy efficiency commitment
are tiny in comparison even with the modest target which is set
out in the White Paper.
Q258 Mr Hurd: May I ask about the market
for energy services? I should appreciate your comments on why
it has taken so long for that market to emerge and what the roadblocks
are. I understand you are involved in a project called Project
Rachel, which we should like to understand a little more about
and what progress you are making.
Dr MacLean: On the energy services
side, in some respects it is a very old concept where, certainly
in our old hydro-electric days, it was quite common to install
storage heating for people. The investment was made by our company
on their behalf and there was a longer-term relationship so that
was paid off as part of the overall energy costs. Under the current
liberalised market structure we have, with a 28-day rule in it
which means that an energy supply customer can change supplier
within 28 days, you do not have that long-term incentive for the
energy supplier to make the investment. That is really the difficulty
at the moment for an energy services company to find a contract
structure which allows the long-term nature of the relationship,
which allows the repayment of the capital over time. Despite the
experiments to get rid of the 28-day rule, very little has happened,
because that experiment is tied up with all sorts of conditions
and administrative processes about how it can be achieved.
Q259 Mr Hurd: And Project Rachel?
Dr MacLean: The basic concept
there is to look at moving the longer term relationship away from
the energy supplier to the distribution business and use the distribution
business as the mechanism for collecting revenues over a longer
term for the energy services investment which has been made, while
still maintaining the freedom of the end user to choose the energy
supplier for the residual commodity, electricity or gas, which
is being used. It is a bit like the reverse of the wayleave situation.
I have an electricity pole in the garden of my house and there
is an ongoing relationship with the distribution company, which
says it has to be there. If I sell the house, that then goes on
to the next owner and there is no question about it. By having
that enduring relationship through the distribution company and
effectively through a higher ongoing standing charge, you can
overcome some of those barriers within the energy supply rules
as well as get over some of the consumer concerns about what happens
if they move house. The obligation would simply move to the new
owner.
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