Examination of Witnesses (Questions 680-699)
RT HON
ALAN JOHNSON
MP, MR PAUL
MCINTYRE,
MR RICHARD
ABEL AND
MR HENRY
DERWENT
23 NOVEMBER 2005
Q680 Mark Pritchard: Would you regard
it as green?
Mr Johnson: In relation to CO2
emissions, I suppose so, but I have never really thought about
whether it is green or not.
Q681 Mrs Villiers: I would like to ask
you about the Renewables Obligation. A number of the witnesses
that have come to the committee have expressed concern about the
inflexibility of the Renewables Obligation. Would you accept that
it effectively picks winners by incentivising the most commercially
competitive technology, without offering a great deal of support
to technology which is less developed and further from the market?
Mr Johnson: I would like to look
at those criticisms. I think the Energy Review should be looking
at that. We have tried not to pick winners. We have tired very
hard to ensure that all these emerging technologies where we do
have a natural advantage because we are an island nation have
properly been explored. I would be interested in evidence to the
contrary. A very important part about how we take this review
forward is to look at our experiences since the Renewables Obligations
was set.
Q682 Mrs Villiers: Do you have any ideas
that the department may be considering or that the review will
consider which could add flexibility and give more encouragement
to these less developed technologies like tidal power, et cetera,
rather than focusing on the current Renewables Obligation, which
tends to focus on things like wind power?
Mr Johnson: With tidal power and
wave power, one of the problems has been planning consents, transmission,
getting it into the grid. I was talking to a company in my constituency
that was thinking of going somewhere else in the world rather
than the UK. That is because of the delay in getting the technology
tried and tested. Those problems about infrastructure and grid
capacity, the market framework, and all of that, are very real
problems that we are seeking to tackle. The review might find
different ways to tackle them. They are important considerations.
Q683 Mrs Villiers: Are there any ways
you can consider tackling them which would not add too much to
the complexity of the current situation, which is already very
complex? Can we try to improve the Renewables Obligation system
without making it even more complex than it is at present?
Mr Johnson: We should but whether
we can is something we have to look at. We are looking for a simple
system, as transparent and as clear as possible. I am not saying
we are perfect at this and I am not saying there are things we
cannot do. We are committed to helping the kind of people who
have obviously spoken to this committee to get round the problems
and we do that on a regular basis.
Q684 Mrs Villiers: One suggestion was
made simply to auction contracts for long-term, low carbon generation.
Is that something that you have considered?
Mr McIntyre: Yes, those ideas
have been floated. That is the kind of idea we can look at in
the review.
Q685 Colin Challen: In 2001 the Government
said it wanted to be a credible player in PV development. In comparison
to the Germans, who have a 100,000 solar roof programme, and the
Japanese, who have a 70,000 roof programme, we have managed to
get to 3,500 in our programme and now the programme has been abandoned.
Why have we done so badly?
Alan Johnson: First of all, it
has not been abandoned. Clear Skies, which did the first project,
had a two-year life span. Now we have transferred it over to a
new project with more money. We have put £30 million into
photovoltaics. Yes, we are behind some other countries. We are
ahead of some countries in some areas. But we started late on
wind generation, for instance. So that has not been abandoned
and we think it is a very important part of the renewables mix.
I am sorry this has not been explained clearly. Perhaps we will
do you a note about this. When we issued our press release we
were very clear that one scheme was coming to an end and a new
scheme was beginning on PV, and the new scheme is now up and running.
Chairman: We would very much appreciate
a note on this whole area.
Q686 Colin Challen: And that new scheme
promises more money than the schemes that are now being wrapped
up in the new scheme.
Mr McIntyre: It is called the
Low Carbon Buildings Programme and it has a budget of £30
million.
Q687 Colin Challen: How does that compare
with the previous programmes which it replaces?
Mr McIntyre: There were a number
of different programmes in place before. The main point about
this is we are trying to move away from a number of different
schemes targeting particular technologies to a programme which
is, if you like, technology neutral, so instead of focusing entirely—
Q688 Chairman: I am sorry, the question
was about the funding. How does the money allocated to the new
programme compare with the money that was allocated to the previous
programme?
Mr McIntyre: For this programme,
the £30 million is less than the total that was allocated
to for the various schemes that were in place before.
Q689 Chairman: By how much?
Mr McIntyre: I am afraid I cannot
be—
Q690 Chairman: Perhaps when you write
your note to us you can let us know that as well.
Mr McIntyre: Yes.
Q691 Colin Challen: Does this not rather
contradict your earlier answer on the questions I posed about
the need and the urgency to invest in what we have available now
in technological terms over the next three, four, five years?
The Low Carbon Buildings Programme, which was originally stated
to last for six years is now only going to run for three years.
It does seem as if we are resiling from our commitment to these
technologies.
Alan Johnson: We are not. There
might be a problem, as we have put in our note to you, about how
we set our budgets. There is always a finite amount of money that
we are looking to spread around. We have just announced £40
million investment into clean coal technologies and some other
initiatives. There is some seed-corn funding there to get these
ideas up and running and then we expect other people to step in
rather than the tax payer. So there are always those issues. I
think on photovoltaics we have a good story to tell, we just cannot
recall it all in front of this Committee now. But we will put
it in the note. There is a misapprehension. There was a report
in the FT, that we had dropped photovoltaics, but we have
not. As Paul says, there might be less money, but that is not
always the benchmark of whether what we are doing is right or
not. It is not how much money we spend on it; it is whether it
is focused. The problem before was that there were a number of
different schemes, and we are now bringing it together—we
think, into a much more effective arrangement.
Q692 Colin Challen: There seems to be
a bit of a stop-start approach though. There was an eight month
gap between the ending of one or two of these previous programmes
and the start of the new programme next year. I am aware that
some people in the industry are very concerned, more than concerned,
about that approach. Do you not think that this sort of approach
does damage investor confidence?
Alan Johnson: I hope not. I did
not think there was an eight-month gap.
Mr McIntyre: Perhaps I may put
that into a little bit of perspective. I think under the old programmes
there was typically a four-month gap in any case between the calls
for bids, as it were, to spend the money. So, even if there is
a bit of a gap now between the end of the old programmes and the
beginning of the new one, I think there always has been in practice
a gap which has existed.
Q693 Chairman: How big is the gap? Can
you confirm?
Mr McIntyre: I think it has typically
been four months between calls for applications.
Q694 Chairman: Yes, but between the old
scheme and the new scheme, how big is that gap?
Mr McIntyre: My recollection is
that it is five months. It is not very different from the gap
between the calls under the old scheme and this.
Q695 Colin Challen: Do you guarantee
that the allocation—and I think it was £10 million
originally under Clear Skies—will all be spent by the end
of the financial year or committed and that none of that will
be rolled over and described as new money in the low carbon buildings
programme?
Mr McIntyre: I am afraid that
is a detail that will need to go in the note.
Q696 Chairman: Would you include that
in your note as well.
Mr McIntyre: Forgive me.
Chairman: The key issue here is not just
the funding levels which appear to be going down—which I
think you have confirmed indeed are going down, which sends a
message to the market—but also the discontinuity in the
approach of government towards the support it is providing towards
these new technologies. That in itself is a major impediment to
investor confidence. I offer that to you on the basis of conversations
I have had with people in this industry. It is a serious problem
for the Secretary of State and I hope that in your note you will
also tackle the problem of discontinuity.
Q697 David Howarth: Why is it that bids
could not be carried over to the new programmes to overcome this
gap? It sounds as though you are ceasing to take applications
and then starting the whole new system, requiring people to start
from scratch. Would it not be better to have some sort of holdover
system?
Alan Johnson: It would be, I agree.
There is probably a stunningly effective reason why we have done
this, but it will have to wait for the note.
Q698 Mr Chaytor: Is the real driver behind
this Energy Review coming three years after the previous White
Paper, the need to replace seven per cent of low carbon energy
output? Has the Department conducted a cost-benefit analysis of
the alternative ways of achieving that seven per cent replacement?
Alan Johnson: No, but I think
that is precisely what the review will be about. It will be about
that kind of cost-benefit analysis.
Q699 Mr Chaytor: Within the review documentation
there will be such a cost-benefit analysis, examining all the
alternative ways of achieving that seven per cent, of closing
that seven per cent gap.
Alan Johnson: I cannot guarantee
what is going to be in the document we publish but I would find
it very strange, given what this review is about, if we did not
do that kind of analysis. I think it is very important.
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