Select Committee on Environmental Audit Written Evidence

Memorandum submitted by the Chemical Industries Association

  The Chemical Industries Association welcomes the Committee's decision to launch the above inquiry. We believe that the security of supply aspect of the energy debate in the UK, as highlighted by the phrase "Keeping the lights on" in the title of your inquiry, should not be lost in the arguments over climate change.

  We leave it to better qualified specialists to provide responses to the detailed technical and economic questions you pose, but have some general comments from the perspective of our industry as consumers both of energy and of hydrocarbon resources as feedstocks. The latter are used in the manufacture of petrochemical intermediates which are themselves used to make products as diverse as dyestuffs, plastics, adhesives, paints, pharmaceuticals, detergents, cosmetics and toiletries.

  1.  Although the formal notice of the Committee's inquiry makes no reference to gas, other than indirectly by mentioning "CCGT" as one of several large scale generation technologies, we believe that the role of gas is critical to any assessment of future generation options. In order to avoid having to contemplate the replacement of nuclear capacity, the Energy White Paper proposes such a heavy dependence on gas for our future energy needs that it carries enormous risks for our fuel security, quite apart from limiting scope for reducing CO2 emissions. High and volatile UK gas prices are already putting UK industry at a huge competitive disadvantage. We are projected to become ever more reliant on imports, either via long pipelines from which others will be seeking to draw supplies, or by using expensive specialised ships and unloading terminals for transporting liquefied natural gas over considerable distances. The liquefaction process is itself energy intensive. Moreover, to use such a flexible and versatile resource for such a large proportion (already 40%) of our electricity generation, when alternatives are available, seems wasteful in the extreme. We believe that hydrocarbons should preferentially first be used to make products, which after being recycled as many times as possible, can ultimately be incinerated for energy recovery. The same is true of biomass: growing, harvesting and immediate burning of such materials (other than waste) is an extremely inefficient means of converting solar energy, while denying first use of renewable sources of molecules for products.

  2.  Most renewable energy sources, whether wind, wave, tide or solar, provide irregular supplies. The last three have known cyclical variations within a day, month or year, and can to some extent be balanced. Wind, however, has no predictable behaviour. Although variability can be minimised by networking very large numbers of geographically dispersed installations, this means higher grid costs and even then the amount of power which can be guaranteed available at any given time (at least from within the UK) is but a tiny fraction of nominal aggregate capacity. The grid needs to be able to call upon dependable generation capacity immediately when required, in order to assure system integrity and certainty of supply. We believe that the Committee should investigate the feasibility and cost of providing complementary means of storage or other back-up capacity for such inherently variable renewable sources. A combination of wind and associated hydrogen generation and fuel cells might work, but it seems inevitable that other forms of standby capacity will also be required.

  3.  Our industry's raw materials are mainly commodities bought at global prices, while its primary products are similarly sold into global markets. The cost of the conversion process depends principally on the cost of energy, since the technology which determines the efficiency of large scale chemical production processes is generally available to all the main competitors. The competitive position of companies is therefore closely tied to relative energy costs. At later processing stages where products become more specialised there is some ability to protect margins through differentiation, but the viability of the UK's producers of primary products remains an essential foundation. We ask, therefore, that the Committee keeps the need to ensure competitively priced energy for UK industrial users as a prime consideration throughout its deliberations.

5 September 2005

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