Select Committee on Environmental Audit Written Evidence

Memorandum Submitted by the Institute of Directors (IoD)


  (i)  This is the response of the Institute of Directors (IoD) to the Committee's inquiry into the options for investment in meeting future requirements for new electricity generating capacity—"Keeping the Lights on: Nuclear, Renewables, and Climate Change" (Environmental Audit Committee Press Release dated 21 July 2005).

  (ii)  The IoD is an individual membership organisation made up of some 54,000 directors of business and other important organisations worldwide, mainly in the United Kingdom. Members of the IoD are drawn from all sectors, and functions within organisations.

  (iii)  The IoD is also involved in scrutinising United Kingdom Government and European Union (EU) policies. This includes making responses to public consultations. The IoD gave written and oral evidence to the House of Commons on the UK's climate change policy, in 1999. [180]It also gave evidence to the House of Lords (on EU climate change policy) in 2004. [181]It has published policy papers on various environmental issues, including energy and climate change. [182]The IoD also advises its members on issues connected with energy use and environmental practices. One of the most recent was a guide to directors on issues connected with climate change. [183]This was produced with the support of the Carbon Trust.

  (iv)  Aspects of several of the specific questions posed by the Committee are addressed in this response under the heading used in the Committee Press Release, as well as the principal questions posed by the Inquiry.



1.   What are the latest estimates of the likely shortfall in electricity generating capacity caused by the phase-out of existing nuclear power stations and some older coal plant? How do these relate to electricity demand forecasts and to the effectiveness of energy efficiency policies?

  (v)  According to work by Cambridge Econometrics published on 16 September 2005 UK demand for all sources of energy taken as a whole over the years 2005-15 is likely to increase by between 0.25% and 0.75% per annum. [184]This was despite a forecast fall in industrial use. It was estimated that increases in transport, household and commercial use would offset industrial reduction.

  (vi)  The Department of Trade and Industry (DTI) has commented that the reduction in electricity supply from the planned phase out of existing nuclear power plant will be made up by an increase from gas-fired power stations and from renewable energy sources. [185]

  (vii)  There have been concerns about reliance on gas for reasons of concern about security of supply from some parts of the world. Notwithstanding carbon sequestration, for which to be sure there are plans, the fact of greater reliance on a source (ie gas-fired power plant) that generates greenhouse gases is worthy of note. Current UK Government policy means that this would be occurring at the same time that UK nuclear power would be being phased out. More seriously, if the Government is determined about meeting its own commitments on greenhouse gas emissions then energy mix as such should be put back on the policy agenda. [186]The IoD has urged previously that the Government should fulfil its commitment to initiate a debate about the need for nuclear power. [187]

  (viii)  Energy efficiency measures are key in themselves, yet they are already factored into many energy forecasts. As the DTI has stated previously a range of measures is required to tackle problems of energy policy and of atmospheric greenhouse gas emissions. No single measure can—or should be expected to—provide a guarantee in either policy area.


2.   What are the main investment options for electricity generating capacity? What would be the likely costs and timescales of different generating technologies?

  (ix)  In general a stable public policy environment is desirable for investment in new electricity generating capacity. It was stated in the 2003 Energy White Paper that "Government is not equipped to decide the composition of the fuel mix used to generate electricity".[188] Yet a policy strand deliberately underlying that White Paper is that of focusing on greenhouse gases and seeking more application of renewable energy technology. In this sense the Government has already intervened in the energy market (and there are instruments such as the renewables obligation that do just that).

  (x)  Returning to the topic of nuclear power, note that Sir Alec Broers, President of the Royal Academy of Engineering, stated in 2003 that renewable energy would neither prevent global warming nor power blackouts: "I think we need both [nuclear and renewable energy]". [189]The long lead time for construction of nuclear power plant is another reason for a decision sooner rather than later.[190], [191]The construction periods are a decade or more, most likely. For such investment timescales stability of public policy is certainly desirable.

  (xi)  Current Government policy, which relies heavily on targets for renewable energy, may or may not lead to real changes. Rather than relying too much on targets for renewables, economic policies that will encourage innovation seem more likely to lead to breakthroughs in the required technologies. One thing is for sure; at present there is no guarantee that any particular renewable energy source will ensure adequate supply of energy. It seems quite likely that renewables will come to play a much bigger role over time. Yet there are other issues to be considered. Apart from engineering considerations around efficiency and continuity of energy supply from a range of technologies, from wind to photovoltaics, there are issues such as land-use planning to think about. Expressions of public support for more wind (ie renewable) power are not found to be consistently acceptable when subject to some of the long delays of the planning process, at least when it comes to onshore wind power.

  (xii)  Other factors such as the availability of trained personnel to design, build and operate some of the new technologies come to the fore. Such concern for the supply of sufficiently educated and skilled people is not confined to the energy or environmental sectors, but it does appear to be a subset of a national concern over the availability of skills in science and technology in general. This relates to Government education and skills policy. The IoD has previously referred to this in the context of energy policy. [192]

3.   What is the attitude of financial institutions to investment in different forms of generation?

  (xiii)  The Committee posed a supplementary question as to the impact of a major programme of investment in nuclear power on investment in renewables and energy efficiency. Of course, with a finite amount of investment, a focus on one technology would deny some resources to others. Yet it may ultimately prove to be the case that diversity of emphasis and of investment will be crucial. As referred to in paragraph viii above, a mix of approaches is needed. If one energy source is interrupted, we need to be able to rely upon another. Thus it is important to ensure that there is security of supply that we can control, and also to invest more in research and development on new technologies of various sorts.


4.   If nuclear new build requires Government financial support, on what basis would such support be justified? What public good(s) would it deliver?

  (xiv)  On the nuclear front the Government's Energy White Paper states that if innovation in low-carbon technologies did not make enough impact, then costs of cutting carbon emissions would be higher. It is of significance to note that it also that they would be higher if improved energy efficiency savings were not to be made, or if both new nuclear power capacity and carbon capture and storage did not materialise in the long term. [193]So the basis of deciding whether or not there were any need for financial support should lie around considerations of energy demand and of UK and international policy on the importance of greenhouse gas reductions. The public goods would include energy supply and security of energy supply.

5.   In respect of these issues [Q 4], how does the nuclear option compare with a major programme of investment in renewables, microgeneration, and energy efficiency? How compatible are the various options with each other and with the strategy set out in the Energy White Paper?

  (xv)  The Government's energy White Paper of 2003 has sought to promote energy efficiency measures and renewable energy sources as the main means of reducing the UK's carbon dioxide emissions. Scepticism has been forthcoming, not only from environmental groups but also from some energy experts. For example, by rejecting nuclear power and not investing enough in renewable sources some have said that this will not do enough to move away from reliance on oil and gas. [194]

  (xvi)  The strategy set out in the Energy White Paper already involves potentially conflicting goals (reducing greenhouse gas emissions; maintaining reliable energy supplies; promoting competitive markets, raising sustainable economic growth and improving UK productivity, and ensuring all homes are adequately and affordably heated). Thus deciding upon the relative allocation of resources as between nuclear power and other energy technologies or measures is no different in this respect.

20 September 2005

180   Memorandum by the Institute of Directors (IoD) (CC8), Environment, Transport and Regional Affairs Committee UK Climate Change Programme Memoranda relating to the inquiry submitted to the Committee, House of Commons Session 1998-99, HC171-II, The Stationery Office (TSO), London, 20 January 1999, pp 21-25, and Environment, Transport and Regional Affairs Committee UK Climate Change Programme Minutes of Evidence Wednesday 3 March 1999, Session 1998-99, HC171-ii, TSO, London, 3 March 1999, pp 40-45. Back

181   Memorandum by Geraint Day, the Institute of Directors (IoD), The EU and Climate Change Volume II: Evidence, House of Lords European Union Committee, 30th Report of Session 2003-04, HL Paper 179-II, TSO, London, pp 248-252. Back

182   See, for example Energy: the policy climate, IoD Policy Paper, Geraint Day, IoD, London, 2004, and Global Warming-Implications for Business, IoD Research Paper, Geraint Day, IoD, London, June 1998. These and others may be found at under "Transport, Environment & Energy". Back

183   Climate change how UK businesses can benefit by reducing carbon emissions, IoD and the Carbon Trust, Director Publications, London, September 2005. Back

184   Cambride Econometrics news release, 16 September 2005: Back

185 Back

186   See for example Memorandum by the Energy Intensive Users Group, The EU and Climate Change Volume II: Evidence, House of Lords European Union Committee, 30th Report of Session 2003-04, HL Paper 179-II, TSO, London, pp 257-260. Back

187   Energy: the policy climate, IoD Policy Paper, Geraint Day, IoD, London, 2004. Back

188   Our energy future-creating a low carbon economy, DTI, Department for Transport (DfT) and Department for Environment, Food and Rural Affairs (DEFRA), Cm 5761, TSO, February 2003, p 87, para 6.47. Back

189   Mark Henderson, "Nuclear power is `critical to Britain's future'", The Times, 18 August 2003, p 10. Professor Broers also said that "The view of wind power is over-optimistic-that we can get to 20% renewable energy by 2020 and that it will be as straightforward as that. Some forms are far more expensive than we think they are." The costs of having back-ups to wind power needed to be factored in, for example. Back

190   "Come clean on your nuclear policy", Financial Times, 28 August 2003, p 16. Back

191   The Energy White Paper also states that the expectations being placed on energy efficiency and renewables are not only extremely ambitious, they are also "uncertain": Our energy future-creating a low carbon economy, DTI, DfT and DEFRA, Cm 5761, TSO, February 2003, p 12, para 1.23. Back

192   Energy: the policy climate, IoD Policy Paper, Geraint Day, IoD, London, 2004, p 36. Back

193   Our energy future-creating a low carbon economy, DTI, DfT and DEFRA, Cm 5761, TSO, February 2003, p 28, box. Back

194   Natasha McDowell, "Experts cast doubt on Britain's green energy ambitions", Nature, Vol 421, 27 February 2003, p 879. Back

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