Examination of Witnesses (Questions 460-479
MR NICK
WINSER AND
DR LEWIS
DALE
16 NOVEMBER 2005
Q460 Mr Ellwood: May I come in on that?
Can you clarify for us the limitations of the British nuclear
reactors rather than, let us say, other types of technology which
are about?
Mr Winser: The types of reactors
that we have had in the UK have been run in an inflexible way
in the past. That does not particularly mean that all types of
nuclear reactor are inflexible, it certainly does not.
Q461 Mr Ellwood: That is what I am arguing.
Whilst we are looking at the possibility or not of these going
forward, we would not be replacing or using the same form of technology
and therefore this argument as to whether the inflexibility is
there or not should not play as much—
Mr Winser: No, indeed. Inflexibility
on the system is not a problem at the moment. Given that a substantial
amount of the nuclear fleet, the Magnox and the AGRs are currently
predicted to start to decommission over the next 10 to 15 years,
clearly something that is not a problem today will become less
of a problem. It really depends what replaces that and whether
whatever replaces it is inflexible or not. Generally, inflexible
plant has the potential to be problematic for us at some minimum
but in practice has not been a huge problem for us.
Q462 Mr Caton: To what extent would renewables,
especially micro-combined heat and power on a large scale, compete
with nuclear in terms of providing baseload capacity?
Mr Winser: It depends what you
mean by "compete". We would expect all of these technologies
to have different economics and those economics would vary from
period to period. We would expect the market to work in the way
that whatever was most economic in a particular period was what
would run, but we are merely observers of that. Lewis might be
able to give you some more insight into the economics of wind
power versus nuclear.
Dr Dale: In terms of the economics,
we, with the British Wind Energy Association and consultants of
the DTI have looked at the overall economics of wind compared
to, for example, gas at the margin and at the time we found that
wind would be slightly more expensive but since then gas has got
more expensive. There is the Emissions Trading Scheme and also
there are the support mechanisms that government has put into
place so it would seem to us that wind would run in preference
to other plants.
Q463 Mr Caton: What about other renewables,
like micro-CHP?
Dr Dale: As I understand it, the
front runner micro-CHP technology would be a replacement central
heating boiler using gas. Insofar as people were going to heat
their homes with gas anyway, this would be additional electricity,
an improvement in energy efficiency and so, again, you would expect
that to run when people use their central heating systems. If
that technology was also used in industrial and commercial premises,
you might see a different load shape, because people use heat
in those premises at different times. You would expect these technologies
to enter the demand mix and modify the demand profile that we
see at the transmission level as these technologies develop.
Mr Winser: In short, you would
expect to see wind power coming in at the market rate competitively
when it is windy. You would expect to see micro-CHP coming on
to the system when people would be running their central heating
boilers. Industrial and commercial CHP you would expect to be
coming on at times when industry is running anyway. Therefore
this concept of base load versus non-base load is not flexible
enough for what we are looking at going forward. Each of these
technologies will have somewhat different characteristics. I do
not think they can just be categorised into base load or non-base
load.
Q464 Mr Hurd: If I read your submission
correctly, paragraph 24 appears to be communicate some frustration
at the speed at which clarity on the commercial and regulatory
framework for Round 2 of offshore wind is proceeding and in fact
you state, "It is unlikely that significant connections would
be deliverable by 2010." It has been put to us in other evidence
that this issue is absolutely crucial, if this country is going
to meet its renewable targets. Could you expand a little bit on
where you see the blockage?
Mr Winser: Yes. We are, as I hope
you are getting an impression, very happy to be a commentator
on the industry as we see the market playing these issues out
in terms of the overall economics of balancing supply and demand
but, closer to home, for us, is the matter of the infrastructure
itself and we are very anxious to facilitate public policy by
allowing generation to connect promptly against whatever signals
come out of the market or any other mechanisms to encourage particular
types of generation. We do look very closely at developments that
relate to the infrastructure. We are working very closely with
the DTI and Ofgem and have done so to try to help—
Q465 Mr Hurd: My question was specific.
Are you frustrated by the speed with which Round 2 of off-shore
generation is being facilitated in terms of the commercial and
regulatory framework and, if you are, where is the blockage?
Mr Winser: We believe that some
early clarification of how the networks that are going to connect
off-shore wind power into the system would be very helpful in
getting better off-shore wind connected in the short term.
Q466 Dr Turner: One of the major impediments
to the development of the deployment of renewables is the grid,
both in terms of connectivity to remote sources of energy and
the north-south connector. What progress are you making in the
great re-wiring of the grid and are you finding the planning process
a major problem?
Mr Winser: Our normal regime is
to wait for applications to connect to the grid and to have a
look at what works would be required to put those in place. We
have been, with Ofgem and the DTI, much more proactive on that
because of the issues coming out of the large amount of wind power
that it is proposed to connect in Scotland and the north of England,
so we have stepped outside that normal process and looked at what
investments might be justified to get ahead of the game and make
sure that the connections to the grid, or reinforcements to the
grid, are not holding up the connection of wind power. Ofgem,
who I know are speaking later, have had the opportunity to deliberate
on that, and have worked with both ourselves and the Scottish
TOs to agree a new investment which will help reinforce from Scotland
down to the load centres in the south.
Q467 Dr Turner: In your report you touch
on this, the fact that there is a general increase from north
to south of power flows. Would that suggest that perhaps we are
not building generators, reactors and so forth in the right place
and we are actually enduring a cost in having to transport the
energy itself?
Mr Winser: No, it is a licence
requirement on us to have cost-reflective charges which are reflective
of the cost that is imposed on us running the transmission system
of a generator connecting a particular place. The purpose of that,
therefore, is to make sure that generators when they decide on
the overall economics, which will have many aspects to it, one
of which is location, when they look at location they take into
account not only the cost that they face themselves but the cost
that we would face in terms of connecting them to markets. That
process is in place and we do have cost-reflective charges and
that should give the right economic outcome, such that the total
cost is reflected in their decision.
Q468 Mr Ellwood: Getting away from the
cost itself, I understand that you have incorporated those into
the package that you are offering but either you or Ofgem, is
there no push to locate the generators in a sensible place to
begin with? That way you are not actually spending a lot of money
on the cost of transmitting the power from, in this case, what
is suggested in your report, from the north to the south?
Mr Winser: The story of wind power
is an excellent example of this issue, in truth, because as has
been reported widely, Scotland has rich resource in wind power
and clearly that is not close to the load centres. Indeed, as
we look forward to even as far as 2050 and look at renewables,
micro-CHP generation, alternative types of generations may come
on to the system. Whichever way we study that, we see that there
will be significant flows on the transmission network and flows
as great as today or probably greater. What that is a reflection
of, is the fact that when you reflect the true economics on to
those fuel sources going forward it is still economic to ship
the power from remote sources which are rich in renewable resource,
rather than locate close to load centres.
Q469 Dr Turner: You did not answer my
point about the planning process. I did not mean your strategic
planning, I meant town and country planning-type planning. How
long does it take you in practice to get all the planning consents
that you need, to build a major high voltage grid line?
Mr Winser: That entirely depends
on how the process of applying for planning permission goes. We
have had very long processes on overhead lines in particular—
Q470 Dr Turner: One said 20 years?
Mr Winser: Thirteen, actually,
which went to two public inquiries. Clearly there is not a solid
end-stop to that process. In terms of the new connections that
we would need to connecting wind power, clearly we will be reinforcing
the existing rights of way as much as we can, so we are not having
to apply for new planning permission; to push more down the existing
corridors for transmitting power. We have not got as far in the
process of making those new investments for wind power to find
out whether we are running into particular planning difficulties
on those ones.
Q471 Dr Turner: It is quite likely, given
the location of renewable resources, is it not? You tell us that
you are being proactive, which is good. How much investment have
you committed in advance to Scottish connections?
Mr Winser: There has been a piece
of work called the TIRG (Transmission Investment for Renewable
Generation) work which has looked at both investments in Scotland
and investments on the England and Wales systems. Lewis can probably
give you some details on what that work says will be required.
Dr Dale: The three licensees looked
at different scenarios of wind development in Scotland. We looked
at 2,000, 4,000 and 6,000 megawatts of wind connecting in Scotland
and identified the transmission works that would accommodate that,
and that would cost up to £1.5 billion for the 6,000 megawatt
case. That is about £250 per kilowatt, for each kilowatt
of wind connected.
Q472 Dr Turner: What sort of conditions
has Ofgem put on these investments you need to make?
Dr Dale: Ofgem have given some
funding for the initial phase of this work for us in England and
Wales. We have funding to prepare for works to reinforce the interconnector,
but the main funding for re-conductoring and strengthening the
interconnector is dependent on either sufficient wind developing
in Scotland or planning permission being gained successfully for
a new overhead line within Scotland, the Beauly-Denny Line, which
Scottish and Southern I think, and a small part Scottish Power,
have applied for consent. That line would allow a great deal of
wind in the north of Scotland to connect and meet load in the
south.
Q473 Dr Turner: Yes, I understand that.
This is why the time of the planning process is important. What
is the quickest you have ever been able to build a major line?
Dr Dale: The quickest I have been
able to build one was a connection for a gas plant in the Humber
area and we built that line in parallel with the power station
because we got consent for the line without a public inquiry.
Q474 Dr Turner: And how long did that
take?
Dr Dale: That took about two years.
Q475 Dr Turner: Two years was the absolute
quickest that you have ever had?
Dr Dale: Yes, but that would be
in terms of new rights of way.
Q476 Dr Turner: We are talking about
new rights of way, yes.
Mr Winser: A lot of the work that
may be required is work that would be reinforcement to existing
rights of way. That is not to take away from your point, though.
These things do take of that order, a couple of years, and we
have looked very carefully at the amount of generation that is
likely to come on in the various timescales going forward and
discussed that very carefully with Ofgem. We are entirely satisfied
with that process. It is important that we as an industry do not
find ourselves having built new transmission assets which then
do not have a strong economic case. We have to have that close
and iterative interaction with Ofgem to make sure that we get
the right balance between connecting people promptly and as between
that and the danger of stranding investment.
Q477 Ms Barlow: You say in your seven-year
statement that it is unlikely that any new application for generation
projects in Scotland or the north of England will be encompassed
within that seven year period because of the material increase
in new generation and the resultant reinforcement necessary to
the grid to the Midlands. Can you say what the implications of
this would be in terms of the likely contribution of wind power?
Mr Winser: Those statements are
based on the background of the applications that have already
gone ahead and been agreed, so we would not envisage that holding
back the first tranche of wind power to connect and, indeed, it
would not hold back connecting wind power in places other than
the north of Scotland. Lewis may be able to give you slightly
more colour on when we run into that constraint.
Dr Dale: For the particular rules
that came into place with the new electricity trading arrangements
for Great Britain we can make connection offers to wind generators
in Scotland with the network we have in England and Wales, not
waiting for reinforcements. On that basis, we have something like
5,000 to 6,000 megawatts of wind generation contracted to connect.
Some of that is waiting for planning permissions. Once they have
those planning permissions they can proceed to connection and
I understand we have made more offers to connect which generators
are considering at this time. There are enough offers to connect
that have been made to meet Government targets, for example. The
question is, will all those generators be ready to proceed and
make use of those connection offers? That will depend on whether
they get their planning consents and also whether they have a
viable financial project and we will just have to wait and see.
Mr Winser: But to confirm, there
is enough that has received connection offers at the moment that
will not stop the achievement of the Government targets for 2010.
Q478 Ms Barlow: If there were more, what
would be the likely implication of that?
Mr Winser: As more and more applies
to connect in Scotland, there will be dates that go further into
the future, but it is a matter of a few years and would not impact,
for example, on targets for 2020.
Q479 Ms Barlow: The changing regime which
Ofgem has required that you put in place penalises the more remote
sources of energy. Is that a disincentive to the development of
wind power?
Mr Winser: It comes back to the
discussion about cost-reflective charging. We are required by
licence to propose charges which are then agreed by Ofgem which
are cost-reflective, which reflect the costs of the transmission
network of people siting generation remotely from demand. That
is what we do. It is a cost-reflective challenging system. It
is meant to give the most economical overall outcome for the whole
of the industry and its investment.
Chairman: Thank you very much for your
evidence.
Mr Winser: Thank you.
| 
