Examination of Witnesses (Questions 581-599)
21 NOVEMBER 2005
JONATHON PORRITT
CBE AND MRS
SARA EPPEL
In the absence of the Chairman, Colin Challen
was called to the Chair.
Q581 Colin Challen: Good afternoon, Mr
Porritt. I apologise straightaway for the fact that I am neither
Mr Ainsworth nor Mrs Walley, but both of them are absolutely unavoidably
detained this afternoon so you have me instead in the Chair. Just
looking at where we are, we have got this new review taking place
on energy policy yet that follows a review and a White Paper only
two years ago. Do you think really we need another energy review
and perhaps a new policy so soon when the previous one was supposed
to set policy for many years to come?
Mr Porritt: Our view is that we
do not really need another review, as in the Energy White Paper
type review, in policy terms. I think we would probably distinguish
between policy terms and political terms. Since the Energy White
Paper there has been a very lively current debate about the degree
to which energy security issues were dealt with sufficiently in
the Energy White Paper and with a particular focus on nuclear
power. From a political perspective, you can sort of understand
why the Government, and DTI in particular, has chosen to suggest
that another review is necessary. In policy terms, ie the sufficiency
of what is in the Energy White Paper, absolutely we do not need
another review.
Q582 Colin Challen: You do not think
that anything has changed really in policy terms, in terms of
our security of supply or other issues of that order?
Mr Porritt: No. I know people
raise lots of question-marks about the modelling capabilities
of the DTI, but presumably they were able to see everything three
years ago that is there to be seen today.
Q583 Colin Challen: Do you think enough
time has elapsed for us to evaluate the impact of the White Paper?
Mr Porritt: No. We do not think
that has happened as yet and, indeed, if one looks at a lot of
the policy options on which the success of the mix proposed in
the Energy White Paper depends, it is clear that those policies
have not yet worked their way through the system sufficiently
to demonstrate what could be done as a consequence. On both efficiency
and renewables, certainly Combined Heat and Power, it is clear
that the outcomes as of now, three years in, do not give you all
the answers that you need to demonstrate whether or not those
targets are going to be achieved.
Q584 Colin Challen: Do you think that
we have actually set about, as a Government, pursuing the goals
of the White Paper sufficiently hard enough, that perhaps we need
to have been more radical, in terms of energy efficiency and the
development of renewables?
Mr Porritt: A huge amount depends
on what is going to happen through the review of the Climate Change
Programme and it is clear that if the Government is capable of
doing what it has committed itself to do on many occasions now,
not least in the last general election manifesto, of getting itself
back on track for the 20% target by 2010, then a raft of new policy
measures clearly will need to be brought forward to fill the gap
that has been identified. The fact that there is such a substantial
gap, and it may be anywhere between ten million tonnes to 14,
15 million tonnes, is a very clear indication that the policies
in the White Paper have not been driven hard enough in the intervening
years to have kept that gap smaller. I think, when we look at
some of the savings that have been netted since the Energy White
Paper, they are disappointing, particularly some of the energy
efficiency outcomes. Although people have been saying, for pretty
much since the point at which the Energy White Paper was published,
that the only way to make this new set of policy instruments really
work was to drive them incredibly hard and unambiguously, the
truth is we have had ambiguity, a lack of purpose and a falling
short on all the key elements in the Energy White Paper during
that time.
Q585 Colin Challen: Since we are going
to have this review now, do you think that should involve the
public a great deal more in consultation and stakeholder involvement
in order for it to command public confidence, particularly since
it is coming so soon on the heels of the previous White Paper?
Would not this mean we would have to have a very long period to
establish a sound, well-based review?
Mr Porritt: I think it is really
critical that there is proper engagement with the public on this.
One of the great new aspects of the Government's Sustainable Development
Strategy, which we have been extremely supportive of, is the very
strong emphasis on governance issues and seeing governance as
a critical component of good sustainable development strategy
and implementation. Were there to be any hint of cutting processes
short, either in the consultation process or indeed in advancing
any policies that might emerge from that review, it would be a
very serious own goal indeed. There is no reason to cut those
processes short, certainly not in the consultation phase, when
in reality, with a well-planned process over time, the additional
number of weeks or months that might be involved is really relatively
small, given the prize that is on offer to the Government, which
is to run a review process that really makes people feel involved,
to trust the outcomes as being objective, dispassionate, transparent,
and so on, and that is the big prize for any Government to shoot
for.
Q586 Colin Challen: For how long do you
think this review should last, if it is to be credible and if
it comes up with radically different conclusions?
Mr Porritt: Not knowing exactly
what the terms of reference are for the review, because I believe
that has still to be finalised in the last detail and some of
those details could make a big difference, if there were to be
consideration of demand side issues, for instance, efficiency
issues, then clearly that would be a longer and more complicated
process than if they were looking just at supply side issues,
where obviously they would be able to foreshorten some of those
processes. Our feeling on the Commission is that most of that
work was done for the Energy White Paper anyway and either it
had validity then, and one assumes that it did, or the Government
is going to have to reconsider all of the basic inputs into the
Energy White Paper process all over again. I really cannot believe
that would make much sense, because it would invalidate the White
Paper and there does not seem to be any good reason to invalidate
the White Paper.
Q587 Colin Challen: You have referred
to ambiguities in the last couple of years and perhaps a lack
of purpose on the part of the Government. We know that one of
the ambiguities was over nuclear and that was quite deliberately
politically inspired, one might suggest. Are there any other examples
of ambiguity that you might wish to point at in the way that the
Government has dealt with these issues since the White Paper?
Mr Porritt: I think there is a
lot of ambiguity around the way in which this Government pursues
energy efficiency. The wording is fine; it seems to imply that
they have an understanding of the preconditional importance of
energy efficiency to any sustainable energy strategy. In reality,
delivery is half-hearted: to look at the whole question about
strengthening the Building Regulations, for instance, where we
have had a series of opportunities during the course of this year
which have been missed, to look at the opportunity to drive other
energy efficiency processes much harder than that, the use of
the Buildings Directive, and so on. The words are there, but the
determination really to make this stick with key people often
is seen to be lacking at that point. My own reading from that
is that, historically, politicians have had a problem understanding
the central significance of efficiency and demand side issues
versus the significance of supply side issues. For reasons that
I still find difficult to understand, too many politicians get
far too obsessively fascinated with supply side options and do
not devote enough time to the intricacies and complicated politics
of making demand side politics and efficiency really work. Frankly,
if we got efficiency sorted out and really went for it, as an
absolutely critical combination of different measures, interventions
and outcomes, then a lot of the concerns that people have about
so-called supply gaps would look a great deal less frightening
than they do today.
Q588 Colin Challen: On the issue of the
review, should that be contemporaneous with consultation, or should
we see what the Government has to say to justify why this review
is necessary and then consult on that?
Mr Porritt: I do not know by how
much the Government wants to declare its hand in these matters
early on, as it were. I try to avoid slipping into any form of
conspiracy thinking about this, but it is clear that there is
a very strong agenda in different bits of Government to bring
forward the nuclear option. It would be extremely difficult to
avoid that conclusion since the time of the election, very difficult
to avoid it. We have had a growing spate of commentaries and references,
from the Prime Minister downwards, through to the Government's
own advisers, (some of them, at least, certainly not myself),
claiming that it is almost impossible to think of meeting the
challenge of climate change and dealing with security issues without
the nuclear option being brought back into play. That seems to
be a pre-positioning, as it were, a decision taken in advance
of a proper review, and frankly we think that is a pretty illegitimate
process. If this is a proper review then review, things properly,
do not come to a decision in advance and take everybody through
a six-month, nine-month, one-year process which is just a rather
inadequate fig-leaf for a decision already signed off in different
bits of Government. I am not saying that has happened. I do not
know. I would not have access to processes of that kind, obviously,
but if it has happened then really and truly they should spare
us the agony of a notionally transparent and above-board consultation
and simply say, "Here is what we are minded to do; what do
you think?" Which is different from what I believe is going
to be brought forward through the energy review, which is to say,
"We think there are some new issues surrounding security
and new issues surrounding climate change which weren't adequately
considered in the Energy White Paper and we need to take account
of those."
Q589 Mr Hurd: To bring you back to the
energy efficiency issue, you expressed some frustration about
the lack of political oomph behind that. We have got plenty of
questions on that to come, but to what degree do you think the
Treasury is a roadblock, in terms of implementing really meaningful
energy efficiency policy?
Mr Porritt: The Treasury has enormous
influence, obviously, over many of these areas. We have given
advice to the Government, along with many other organisations,
that one of the areas where the Treasury could make an incisive
but substantive difference would be the equalisation of VAT between
new build and refurbishment. That has been a policy position of
the Commission from the start. It is something for which there
seems to be very substantial external support, from a variety
of different sources, and it is hardly controversial, inasmuch
as it would seem to be creating one of these elusive level playing-fields
that Treasury claims to be so supportive of, and yet even that
simple, incisive intervention is not acceptable to Treasury. There
are issues around there which are very worrying; it is a question-mark
as to why they do not want to do what they could do quite easily.
They are more complicated areas, certainly those which might involve
further expenditure, and the truth is that were we to get really
serious about energy efficiency there would need to be further
investments of public money, as well as private sector money,
to secure those bigger gains that are on offer. Then you get down
to the question, does that represent better value for the taxpayer
than investment in new supply side options and what is the best
bang for the buck, to use Mrs Thatcher's inelegant phraseology,
at that point.
Q590 Dr Turner: One of the many targets
which are somewhat in doubt is the White Paper's targets for deployment
of renewable energy by 2010 and 2020. Would you agree that much
of the achievability of this is dependent upon the conditions
of the market? Do you feel that the combination we have at the
moment, of Renewables Obligation together with capital grants,
is sufficient, and certainly is it sufficient to do anything more
than just bring on offshore wind?
Mr Porritt: It should be sufficient.
This year has been quite an important year, for instance, for
the wind industry. We will see 500 megawatts of wind power installed
by December. This is a very significant step forward, and if you
track out some of the growth that is in the pipeline now through
to 2010 it demonstrates clearly an enormous contribution to the
ten per cent target. Unfortunately, there are serious impediments
at the moment around offshore wind farms, which are where can
we achieve the royal scale in terms of new capacity in wind. As
I understand it, the Government is in discussion with all those
developers around the five or six biggest offshore developments,
which between them could contribute somewhere between 2,000 and
3,000 megawatts over the course of the next four to five years,
by far the biggest chunk, if you like, of the total that we are
going to be able to take advantage of between now and 2010. I
do not think any changes to the Renewables Obligation or to the
grant programme would affect that necessarily, apart from the
fact that some of these issues are not to do with the wind installations
(the wind farms) themselves but are to do with Grid connection,
which clearly is causing a big problem. Another part of this where
I think there is a serious problem is in the whole area of microgeneration,
which we believe to be extremely important, investment in smaller-scale
renewables, not necessarily large-scale as the most obvious place
to go but small-scale microgeneration for new offices, as is happening
in Merton, Croydon and other local authorities, small-scale renewables
for schools, hospitals, public buildings, an astonishing array
of opportunities for us to take advantage of existing—not
new but existing—technologies right now. The recent microgeneration
strategy from the DTI is extremely disappointing; it indicates
that actually there will be less money available, as we read it,
for microgeneration than there has been up until now. On that
front, I do not think the policy mix looks robust enough to drive
a microgeneration strategy and we have called for a combination
of things on that score, not necessarily only more money. We do
think more money is necessary, but we have talked about a `microgeneration
commitment' so that energy suppliers would need to provide for
a certain percentage of microgeneration, in the same way as they
have an energy efficiency commitment.
Q591 Dr Turner: Microgeneration is not
the only technology area that is not well served necessarily by
the Renewables Obligation; the same could be said of emerging
technologies. Would you agree, or not, that there are flaws in
the Renewables Obligation as it stands at the moment?
Mr Porritt: I think the difficulty
about that is that even if there was much more substantial investment
in wave power, tidal stream, all of that array of different technologies,
they would not make any contribution to the 2010 target, or very,
very, very small. The question is whether the Renewables Obligation
is fit for purpose to get us to the target for 2010. The second
question is whether it is fit for purpose to go on growing the
renewables base thereafter. My answer to the second question is
that clearly we need to do more. One of the consequences of the
way the Renewables Obligation is designed at the moment is that
it is ensuring the lion's share of the private sector money is
going into wind and will continue to do so; that is the `value
for money' technology choice, there is no question about that.
I would have thought that a review of the Renewables Obligation
would look fairly carefully at whether that is leaving other technologies
stranded without proper support either from central government
or indeed from the private sector, and certainly from those enthusiasts
around the UK for some of the marine technologies. I think that
is a very clear view which they have stated already to this Committee,
that without some serious thought as to the longer-term contribution,
2010 to 2020, from the marine technologies, that is not going
to make the contribution it could.
Q592 Dr Turner: In fact, would you agree
that the whole structure we have at the moment is geared solely
to bringing on relatively mature technologies, like wind, and
cannot handle the development problems of an emerging technology
which clearly cannot be commercially competitive on its first
short run of machines, so other processes are needed in order
to do that? Other European neighbours have just such processes;
do you think we should?
Mr Porritt: It is a bit ironic
that is happening, given that some of the key thinking in the
Renewables Obligation was to bring forward precisely those new
technologies. The areas where we might be doing a lot more include
promotion of biomass, (Government would say that it has now begun
to address that issue and it will respond to the working group
of Ben Gill with some recommendations); it has issued its policy
directive already, as regards biofuels, in the Renewable Fuels
Obligation; on issues like PV (photovoltaics) other countries
are miles ahead of us, years and years ahead of us. I think it
is widely understood that there is no shortcut to that, other
than making a grants programme really effective in bringing forward
new technologies, and those PV technologies, particularly in combination
with other technologies, through microgeneration strategies, and
so on. On that score, I think there is a lot more to be done.
These are difficult times to press Government for any increased
public expenditure in this area, but if the 20% target means anything
at all it means that they are going to have to prioritise expenditure
to deliver those bits of it which currently are remaining very
elusive.
Q593 Dr Turner: Do you think that the
Government's present strategy of not picking technological winners
is a sensible one under the circumstances?
Mr Porritt: I can still sympathise
with a Government position which takes that as its central priority,
given some of the lemons in which this country has invested in
the past, not least a succession of underperforming nuclear technologies,
if I can put it like that. There is not necessarily anything wrong
with them not picking technologies per se, as long as the
system which you have for bringing forward different options is
open, genuinely permits new technologies to come through the system,
and then rewards technologies on the basis of proven success and
empirical data as to how they perform. At the moment we are just
not seeing enough coming through the system. To take marine technologies
for instance, particularly wave power, tidal stream, and so on,
yes, the DTI has a fund dedicated to this of £50 million.
That will begin to make a difference when it starts to roll out,
but if one looks at what other countries are spending in that
set of technologies alone, Portugal and Spain in particular, who
have the same comparative natural advantages as we have, in terms
of west-facing resource here, they are already determined to move
those investment profiles forward much faster than we are.
Q594 Dr Turner: Do you think there is
something of a conflict between the need to develop renewable
technologies and the basis of our electricity market, which for
the past few years has been designed to drive the wholesale price
of electricity down to its lowest possible level? Do you think
that the public is going to have to get used to paying more for
its energy, particularly for its electricity, if we are going
to have a sustainable future?
Mr Porritt: Uncomfortably for
governments, we are of the opinion that energy prices have been
too low up until relatively recently to drive the kinds of changes
in the market that we need. The increase in energy prices coming
through the system now, not just gas but obviously the increased
price of oil, is much more helpful, in terms of shaping medium-
and long-term markets, than seeking the lowest possible cost.
When the price of oil went up to $60 a barrel, or thereabouts,
in strong contrast to what government ministers were saying, we
were suggesting that one of the best things you could do to drive
forward a sustainable energy strategy was to keep prices that
high. Unless you keep prices that high, we believe we will not
see the new investments in the technologies that are required
to make our economy more efficient, to enable people to live as
comfortable and high quality a life as they have now, whilst reducing
the cost for those most in need.
Q595 Dr Turner: Would you agree that
another factor in the equation is the cost of carbon and that
the current cost of carbon is not high enough to deter carbon-emitting
producers and bring forward carbon-abating technologies?
Mr Porritt: Early days; early
days. I think that the Emissions Trading Scheme in phase one was
set up in such a way that it was not likely to send out a strong
enough set of signals. I do not think the outcomes at the moment
are that bad. I am not sure at the moment what carbon is trading
at, (21, 22 euros a tonne?) whatever it might be at the moment.
I think, to be absolutely honest, we ought to celebrate the fact
that there is now a mechanism for putting a cost on carbon. Until
very recently, you could take a punt about what the cost of carbon
might be, but it was your punt versus somebody else's punt. At
least now we have an operating market, however inadequately operating
at the moment, which clearly will become more effective after
2008 as we go on to phase two, which is setting a proper price
on carbon. When you start talking to large, carbon-emitting companies
about what would happen if they had to reflect these liabilities
in their balance-sheets, it is a very interesting reaction that
you get, because, of course, this is the first time that companies
have had to front up on the true externality entailed in the irresponsible
use of energy we have had up until now.
Q596 Dr Turner: Do you think that perhaps
a more direct and transparent method than emissions trading might
be more effective, such as, as has been proposed by at least one
select committee in this House, a carbon tax credit regime?
Mr Porritt: We have welcomed the
arrival of the Emissions Trading Scheme and we have welcomed the
apparent determination of the Department for Transport to include
aviation in that Trading Scheme, as we see these as very useful
complements to other aspects of policy. The likelihood of the
Trading Scheme delivering everything that we need, in terms of
moving an entire economy and society into a carbon-constrained
world, is pretty close to zero in our opinion. From that perspective,
it would provide more transparency to citizens, to business, to
governments, about what the intention was, were we going to hit
the 60% reduction by 2050, if we began to look at the gentle introduction
of a carbon charge with a specific view to taking carbon out of
the economy across the piece. The problem, as we see it at the
moment, is that the instruments being used by Government, particularly
the Climate Change Levy, are business-focused and do not involve
the vast majority of citizens in this country, in terms of their
own lifestyles, the way they manage their own households, their
transport, and so on. If you want to get carbon out of the economy
you have got to go after carbon, not just carbon as business uses
it and takes responsibility for it. That is a politically more
complicated thing to do but that is the only way in which we are
going to get anywhere near those longer-term targets that the
Government has set.
Q597 Ms Barlow: Many organisations, including
I believe the SDC, have called for a separate sustainable energy
agency. Do you think it is necessary to create institutional change
so that we can achieve the targets of the White Paper?
Mr Porritt: In our submission
to Government at the time of the Energy White Paper, we did indeed
recommend a separate sustainable energy agency, on the basis that
we felt the level of cross-departmental collaboration required
to achieve the outcomes of the Energy White Paper was almost impossible
to imagine. You have got five principal departments, all of which
have a share in achieving those targets. It is exceptionally difficult
to get that level of joining up, exceptionally difficult, and
simply redefining a PSA, in order to involve the Department for
Transport in a particular part of that process, is simply not
adequate. I think there are two areas where we would urge reconsideration
of the idea of an independent climate change agency, or sustainable
energy agency, whatever it might be. The first is on the whole
question of modelling and the degree to which the DTI is or is
not genuinely capable of producing a modelling process which gives
complete confidence both to the political and to the business
communities. On two occasions, the SDC has had run-ins with the
DTI on its modelling. On both occasions, we have been batted away
as not knowing what we were talking about, and on both occasions
our concerns were later justified in terms of the DTI's changes
in their own model, in their own projections. There are huge concerns
about whether the DTI modelling process is currently fit for purpose
in a much more complex world. The second thing is monitoring and
having a system that will really give people the transparency
and absolute accountability that we need now to demonstrate whether
or not the projected savings are or are not being made at different
points in the system. To give you one example, obviously, if you
look at Building Regulations, there is an expectation that increasing
those Regulations will lead to savings of X through increased
efficiency in new build. If those houses are not being built to
the standards that are necessary to generate those savings, then
much of the gain which you hope to achieve disappears in a burst
of hot air, which is precisely what is happening. Many houses
are not being built to the standards to which they should be built.
Who is going to take responsibility for the monitoring of that
process, pursuing those kinds of shortfalls, underperformances,
which are going on all over the place? Whether that amounts to
the need for a new agency I am not sure. We are going to be considering
that again on the Commission. The likelihood is that we will be
recommending some independent institutional development, on those
two grounds definitely, and possibly to overcome some of the problems
about cross-departmental collaboration.
Q598 Mr Hurd: Can I expand just a little
bit on the flaws which you think might underlie the DTI modelling.
If I have understood your earlier comments correctly, you see
the hand of the DTI behind this energy review. I am interested
to know a little bit more about the problems you see with their
modelling; what is wrong with it?
Mr Porritt: The question about
modelling rapidly becomes extremely arcane and specialised, which
is a sort of shorthand for me saying I am not sure I can go into
that sort of detail at the level that you want me to. What is
worrying about this uncertainty over the modelling is that there
are two huge sets of variables which can be used to demonstrate
the need for different outcomes. One is projections about how
fast the economy is or is not growing, which has a major effect
on the way in which then you model emissions and abatement of
those emissions; and the second is future energy costs and the
way in which you feed those in to affect the different models.
Those are both enormous sets of variables which have a huge impact
on the way in which you can forecast or project the backdrop against
which these emissions savings need to be achieved. There are then
much more complicated, more specialist problems, as regards some
of the modelling. I would happily send you the paper that we did
on that, if that would be useful, this was at the time of the
Energy White Paper, I have to say, but in which we have not engaged
since then.
Q599 Dr Turner: Do you think a new agency
could be given the extra role and the very important role of strategically
planning the development of renewable energy and capitalising
properly on our uniquely rich resources?
Mr Porritt: It could. Whether
Government would be prepared to give any independent agency that
amount of control over a critical strategic area of both policy
and practice is an altogether different question. It would have
huge impacts, obviously, not just for the principal departments
involved but equally for the whole regulatory system. As yet,
we have not touched on the role of Ofgem, but it is clear that,
if we are looking at both the efficiency issue and microgeneration,
the role of Ofgem is absolutely critical to driving these two
combined processes and there is a lot more that would need to
be done there. I suppose I am being excessively pragmatic here.
I think it is extremely improbable the Government would go the
whole hog of saying, "Here's the agency that is going to
tell us what now needs to happen" to the markets, to Ofgem,
to pricing and all of those things. I think that may be a bridge
too far for Government, for any Government actually.
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