House of COMMONS
MINUTES OF EVIDENCE
environmental audit committee
nuclear, renewables and climate change
Monday 21 November 2005
SIR JONATHON PORRITT CBE and MS SARAH EPPEL
USE OF THE TRANSCRIPT
Taken before the Environmental Audit Committee
on Monday 21 November 2005
Ms Celia Barlow
Mr David Chaytor
Mr Tobias Ellwood
Mr Nick Hurd
Dr Desmond Turner
Mrs Theresa Villiers
In the absence of the Chairman, Colin Challen was called to the Chair.
Witnesses: Sir Jonathon Porritt CBE, Chairman, and Ms Sarah Eppel, Policy Director, UK Sustainable Development Commission, examined.
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?
Sir 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 here in 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, i.e. 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?
Sir 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?
Sir 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?
Sir 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 per cent 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?
Sir 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 not any 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?
Sir 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?
Sir 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, 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?
Sir 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, 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?
Sir 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 illusive 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?
Sir 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. 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, other than 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 high-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?
Sir 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 technology. 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?
Sir 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, in promotion of biomass, Government would say that it has now begun to address that issue, 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 per cent 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?
Sir 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 nuclear, underperforming technologies, if I can put it like that, before we get into nuclear. 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 one, marine technologies, 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?
Sir 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?
Sir Porritt: Early days; early days. I think that the Emissions Trading Scheme in phase one was set 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 it 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?
Sir 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 per cent 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?
Sir 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 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 usual 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, change, here, 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?
Sir 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 two 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?
Sir 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.
Q600 Colin Challen: Does the SDC take a view on the proposal for some kind of independent carbon auditing committee, perhaps something similar to the MPC of the Bank of England?
Sir Porritt: I have followed those proposals with interest. Certainly, in terms of the point I have just made about monitoring, we have not had a chance to come to a collective opinion about that, but I think some kind of independence in this process is going to be fundamental. It is so difficult for people to get a really strong sense that we are delivering against these goals, these targets, unless there is a degree of independence built into it. A lot of the monitoring and calculations, the auditing that is done at the moment, is not as robust and transparent as it needs to be.
Q601 Mrs Villiers: I would like to take you back to the energy efficiency issues which were raised briefly before. Although obviously considerable progress on energy efficiency was a key part of the White Paper, clearly you are worried about progress being made on that, as are many of this Committee, I think. Perhaps you could expand a little on your views on the Government's record so far in this area?
Sir Porritt: I think the first thing to say is that considerable progress has been made. There is a school of thought, which seems to be gathering strength in various quarters in Government, both in DTI, as I understand it, and elsewhere, that "efficiency does not work," that the gains to be had from a concerted strategic pursuit of efficiency through the economy will not produce the gains that actually we need. We would rebut that suggestion completely, and if you look at the EEC, which clearly has been a very successful intervention, indeed many of those involved in delivering against that target are well ahead of their target and will be delivering the 2008 target by 2006. From our point of view, that says one thing: fine, it works, let us get after a much more ambitious energy efficiency commitment in the next round, let us look at some of the design issues associated with it but let us drive it harder. The Home Energy Conservation Act has had some marked success, and some local authorities will be able to point to tremendous achievement in terms of their responsibilities as energy efficiency bodies in that regard, but it has not worked across the board and there are many local authorities that are falling far short of what is asked of them. Our take on that is, if it works for best practice in the sector, work out what it is that made it work for them and then find interventions either to incentivise or drive, sticks and carrots, I am not sure which the best route to that would be, to make sure this becomes common across the whole of local government, rather than in, I think it is, just a third that have now achieved their targets under HECA. For us, we would look at relative success in those areas and we would say if you have got relative success you have got some ratchet opportunities here to wind up this stuff. However, that will not get us far enough, which is why I mentioned that clearly we need to step up our act on, I was talking about, equalisation of VAT on refurbishment and new build. We think there are ways in which local authorities could be empowered to do more, in terms of rebates perhaps on council tax, which is one initiative being taken forward by Braintree and being looked at now by a number of other local authorities, is it possible to achieve greater commitment from 'able to pay' consumers around energy efficiency than we have been able to do up until now. Clearly there is a cost entailed in all of that and you might well ask the question, have the energy suppliers really worked hard enough to drive the products which would persuade many people in those 'able to pay' categories to make more investments in the use of efficiency in their own home. I am sure they would have given you evidence saying this is proving to be extremely difficult and it seems like consumers are very reluctant to take up these offers. Okay, then you go back and ask what is necessary to incentivise consumers to get much more involved in those improvements in their own homes.
Q602 Mrs Villiers: You mentioned there were certain lost opportunities, in terms of changes to the Building Regulations, which could encourage energy efficiency. Perhaps you would expand on that and say what you think are the other big challenges the Government faces on energy efficiency. In what other areas could they be driving forward this agenda?
Sir Porritt: Could I ask Sarah to come in, from the Commission's point of view, in particular on our disappointment about some of the outcomes this summer from the debate about the Building Regulations, and then move on to the sustainable buildings case.
Ms Eppel: In the consultation document which ODPM released last year they did have a proposal which would expand the Building Regulations to people applying for extensions, loft conversions, basement replacements, etc., which would require them to get permission from the local authority. The proposal was that if you applied for permission to do such a conversion, or an extension, you would have to have an energy audit, which would be the same audit as will come in in 2007, the Home Condition Report. That would give cost-effective advice on what you could do to your home to improve the efficiency, so you could catch people who perhaps were paying for a £20,000, £30,000 refurbishment of part of their home and say, "Please do the cavity wall insulation, which will cost you an extra £500, and you can get grants from the energy suppliers to do that." It was meant to try to stimulate home owners who were doing work already to install the energy efficiency measures, for which they could get grants. That was not in the package which ODPM announced this year, so we were very disappointed with that.
Sir Porritt: I think we are disappointed about the slowness with which ODPM has brought forward what we would see as being a perfectly reasonable set of demands, around its policies in the growth areas, in particular. Without getting into the debate about the numbers of new homes that are required to meet housing demand and affordability issues, it is clear that we are going to see a very large number of houses built over the course of the next ten, 15 or 20 years. That is going to cause a lot of impact, there is no question about that, particularly in some of the growth areas to the east of this country. We cannot quite understand why ODPM has not pursued single-mindedly a sort of deal, if you like, which is to say, if that is the consequence, according to Kate Barker and the Treasury, dealing with demand and affordability issues, then the price you are going to pay is that not one single extra house will be built which does not meet the highest sustainability standards available to builders anywhere in Europe, and we do still lag a long way behind their standards. What is the downside to that? The downside is certainly not a competitive downside, because everyone would have to compete on a level playing-field. There may be a cost downside, inasmuch as those sustainability additions, if you like, will increase the cost of each unit built, not by a very great deal, according to the Sustainable Buildings Task Group, and those extra costs will be absorbed very quickly into the net value of that home and certainly will be buried, in terms of the benefits to the house owner, in terms of reduced energy costs, and so on. When we look at a kind of big picture deal like that, it seems incomprehensible to us that ODPM has not been absolutely explicit in saying "That's what we're now going to secure, and not a single house will be built in those growth areas without it meeting these standards." We have even put forward a number of, I hope, more creative ways of doing that. One of the ways in which you might do this would be to go for carbon neutrality on all that new build by securing improvements and efficiency elsewhere in that growth area, so that instead of trying to make new homes completely carbon-neutral you seek an accelerated set of mechanisms to drive increased efficiency within the same area, so that the consequence is net carbon neutrality. There is just so much more that could be done here, and this is very frustrating, to see how - the word which springs to mind is, unfortunately - 'constipated' this entire approach is at the moment, for no good reason, as far as we can understand it.
Q603 David Howarth: Can I press you for just a few more details, because it strikes me as being a very important area. Have you had any discussions with ODPM about what you have just said, and what is the content of their argument for not going along what seems to be a perfectly reasonable and sensible course?
Sir Porritt: To be fair, the principal area of work that we are engaged in with ODPM is around existing stock and we have been working with ODPM on a substantial piece of work, looking at what needs to be done to secure major efficiency savings in the existing stock as well as pressing hard for new build. We believe that is critically important, because obviously most housing is existing stock not new build so that is where we have had our principal focus, but we have engaged with ministers, with David Miliband and others, on the opportunities that we see to be there, as regards the projected new housing in the growth areas, and our advice has been listened to sympathetically. There is a lot of concern about the degree to which this might drive up the cost of new housing. Our argument is that this is something the house builders will get their heads around very quickly. They have already discounted the fact that they are going to have to get better at sustainable construction techniques and have been expecting a major hike in the efficiency demands put upon them for many years now and they have not emerged really as yet. As soon as something becomes standard and part of the basic business of building any new house, costs will very quickly start to come down. Instead of it being a niche area where you are having to go out and source the materials on a case-by-case basis, a lot of additional cost involved in the supply chain, as soon as this becomes a set of standard practices then manufacturers, building material suppliers accommodate to that change, you get economies of scale coming through the system and the net cost is reduced very rapidly. Why that argument - and it is not just our argument, I should add - is not as influential with ODPM as it might be, actually I am genuinely mystified.
Q604 Mrs Villiers: It is very interesting, the extent to which a really serious eco-home standard, yes, it might add cost to some developers but it would be incorporated quickly into the value of the eventual home and I think consumers would be prepared to pay extra for the long-term benefits. Turning to the overall cost of energy efficiency, it was put to this Committee by Dieter Helm that energy efficiency was sold to the Government originally as being a zero cost, or a negative cost, option. Now it seems pretty obvious that to do it properly and effectively does require some money to be spent. Do you think that one of the reasons why relatively little progress has been made on this is because policy-makers have expected it to be zero cost, when in fact it has considerable cost if you do it properly?
Sir Porritt: I am not sure about that bit of the history. Again I might turn to Sarah, because Sarah was Policy Director at the Energy Saving Trust at the time when many of these ideas were first being raised. I do not quite remember the history of it in those terms, in Dieter's terms, as it were, and I do not remember anybody saying it was completely zero cost.
Ms Eppel: It was presented as being a lot cheaper to save energy than to find new supply, and that remains true, and if you take a bottom-up approach, in terms of what measures you put into a home, for example, and what you can save from each of the measures, whether it is insulation or a new boiler, still it remains true. I think perhaps his interpretation was that therefore it was presented as a zero cost option, which I do not think was true. It was also presented as your major policy instrument is the energy efficiency commitment and that is not a cost to the Treasury, and that remains true, because it depends on the energy suppliers and the cost for it goes on the householder, on the bills. What I think is not correct in his assumption is that therefore it was presented as not needing any government involvement or any government money, because I know that is not true. It was certainly emphasised at the time that government communications, government engagement with local authorities was needed to stimulate a total package.
Q605 Mr Hurd: Low-cost energy efficiency has been presented as a policy of no regrets; therefore it is disturbing to hear your sense that the Government may be cooling a little, in terms of enthusiasm. Do you think underlying that is a concern about the difficulty of relying on energy efficiency to deliver absolute reductions in carbon emissions against a background of growing demand and the risk that future demand turns out to be higher than anticipated?
Sir Porritt: It is a legitimate concern because if efficiency does not deliver absolute savings then clearly it is not delivering what Government needs it to deliver, there is no question about that. I think a lot of this goes to the culture of people responsible for energy use, of a home scale all the way through to those managing very large amounts of energy, in a factory or in a building, whatever it might be. The Sustainable Development Commission has just done a piece of work for the Sustainable Consumption Round Table, looking at some of the attitudes of consumers associated with microgeneration, what is it that gets them focused on this, what is it that turns them from being perhaps dangerously oblivious to the responsibilities that they have now and the opportunities they have to reduce their cost into energy-responsible and energy-intelligent consumers. It is quite clear, even from this very small piece of work that we have done through the Sustainable Consumption Round Table, that an absolutely critical aspect in this is the knowledge and understanding of the individual household to see the advantages coming through the system. The study that we did looked at a small number of people who, as it were, inherited microgeneration, so they did not go out and make the investment for themselves, they came into it through an affordable housing scheme, in a housing association system, whatever it might be. I am touching on this only because it is fascinating to read the way the research sees how they turn into people who become much more knowledgeable about energy in general, about connectedness between point sources and huge greater issues like climate change. For me, underlying this issue about the Government's ambivalence, hesitation, over energy efficiency is the complete befuddlement on their part as to how to engage with citizens now about the challenges of climate change and what it means, and to do so in a positive, upbeat way that does not look as if they are beating them round the head again with a sort of instant, apocalyptic meltdown. That means we have not got a properly-informed, conscious, intelligent body of citizens able to take advantage of both efficiency and renewable offers at the domestic scale which would really drive the absolute gains that we are talking about. There is a process here, there is a loop in this system, you have to drive up awareness and commitment before it is likely that you are going to achieve some of those really big gains.
Q606 Mr Hurd: With respect to the challenge of engaging consumers, is there a structural problem with the EEC, as the chief policy instrument, that it requires the consumer to believe that energy companies want to sell them less energy?
Sir Porritt: Sarah, do you want to go for that one?
Ms Eppel: I think there is. I think it is difficult for consumers even to read the stuff in the bill. If it is about the energy supplier selling them less energy, it is a bit counter-intuitive. It seems to me incredibly easy to overcome that by communicating to the householder that it is part of the government programme on climate change. It sounds terribly straightforward and I am not quite sure why government has not already done that.
Q607 Mr Hurd: Would it not be even easier to open up that market to clients which the consumer might trust to sell them energy?
Ms Eppel: They would need to restructure the Energy Efficiency Commitment slightly, as it stands, because the obligation is on energy suppliers only and anybody else who wanted to participate, for example, a supermarket or a major brand that generates trust, would do it only if they were going to make enough profit. That will be the middle line between the energy supplier and the consumer and actually that is very difficult. They would need to restructure EEC but then there is an opportunity in 2008 to do that, so our recommendation would be to look very much more closely at the way it is structured at the moment to try to get those opportunities. I would say also, in addition to that, I think smart metering is a very, very powerful tool, and that is not just the suppliers it is also to do with Ofgem and deliberating the inclusion of those in the total package for the householder.
Q608 Mr Chaytor: You said earlier, I think in respect of the current review of energy and revisited in the White Paper, that as Chairman of the SDC you did not have access to such processes. Your main complaint is that neither the ODPM nor the Prime Minister's Office are listening to your advice, so my question is, where is the SDC going wrong, if you do not have access to the processes and they are not listening to your advice?
Sir Porritt: As an advisory body, if everybody automatically acted on every piece of advice we offered them life would be very easy, but it is not really like that. Clearly, when we are offering advice that cuts against what Government believes is the best way forward then they are going to resist that advice. I cannot envisage a day when the Sustainable Development Commission will ever achieve the status that everything it said was adopted automatically, to be honest, and we are listened to in other respects. Again, and I must be fair to ODPM here, much of what we have been saying about existing staff is being taken very seriously now by the Department and we feel they are making very good progress on that front. There is still a lot to do there, but it is an open door now whereas before it was a closed door. As to the Prime Minister, I think that there are many issues surrounding his own views about climate change and how to deal with that and it is not my experience that the advice that we offer has been disregarded by the Prime Minister.
Q609 Mr Chaytor: Should the SDC be involved essentially in this forthcoming energy review?
Sir Porritt: I very much hope that it will be and that is something that we have raised officially. My feeling is that the review does need to be ultra-attentive to issues of trust, transparency and accountability. The Government might be minded to push that through without taking much care of those particular aspects, and I think that would be an own goal, it would cost them very dear in the end result, because people would say, "Well, it was all a fix, wasn't it?" A bit like the time when the Government was pushed very reluctantly into the public debate about GM, which turned into a national debate called 'GM Nation?', my hope is that the Government will anticipate high levels of public concern about this in advance and create a process which brings independent advisory voices, both inside and outside Government, fully into that process.
Q610 Mr Chaytor: Just switching tack a little bit, you are very confident about wind power meeting its targets and it is on track to achieve 500 megawatts by the end of this year, in fact. Are you equally confident about other forms of microgeneration?
Sir Porritt: These are very early days for microgeneration technologies, in reality. If you look at the sorts of core opportunities there, if you are talking about mini wind turbines, micro CHP, solar water schemes, PV, there is a body of operating experience in this country, a much larger body of operating experience in other countries where these things have been rolled out more purposefully, and that body is sufficient to say that we can already achieve substantial gains by virtue of making these technologies easier to use, more effective. I think the example, as we see it, of Merton, in the first instance, then Croydon and now I think there are more than 25 local authorities that have stipulated this ten per cent of the electricity for a new development must come from point source renewable systems, has been extremely well received, as we understand it. People were very worried that it was going to create this massive negativity on the part of developers, "Oh, we're not going to go to Merton, we're not going to Croydon, so we're not going to faff around with this ten per cent." As I understand it, the evidence reveals that there has not been a phenomenon of that kind, developers have been much more positive about it. What it shows me is that, if really you start to drive these things, make them more easily accessible, give people a chance to experiment, get some of the scale advantages that you need, mini wind turbines, for instance, until we get real scale around those turbines the price will not come down far enough to make it available to a large enough number of people, so can we incentivise that, in the first instance, can we make it easier for people to make those investments now.
Q611 Mr Chaytor: Targets are essential to the development of microgeneration?
Sir Porritt: Targets is becoming an extremely controversial area of policy, of late, from the biggest climate change negotiations all the way down to smaller-scale targets. For me, any strategy that is brought forward without carefully thought-through targets is not going to be worth the paper it is written on.
Q612 Mr Ellwood: Mr Porritt, you spoke about the 40 nuclear reactors as lemons, I think it was, earlier. To go back to nuclear energy in general, and bearing in mind the comments that have been in the papers today made by Tony Blair, and indeed the increase in the gas prices that we have seen recently, could you bring us up to par, just very briefly, with what the SDC has been doing, I understand you are doing some research on this subject of nuclear power, and what your findings have been so far?
Sir Porritt: We are in the middle of that piece of work now. It is a major piece of work for us and we are looking at seven major areas. We are looking at waste and decommissioning, safety and security, environmental impacts, CO2 impacts, resource availability, public perception and cost. They are each big studies in their own right. Some is specially-commissioned new work from a variety of different academics and consultants. Some is desk resource, which we have done inside the Commission. We are on track with that piece of work, we hope to have that finalised in January/February next year to feed in immediately to help shape some of the review, if that is the point at which the review eventually is announced. We hope at that point to bring forward a quite definitive set of insights into the degree to which nuclear power may or may not have a role to play in helping us deal with the challenge of climate change and the parallel change of energy security.
Q613 Mr Ellwood: Can I confirm that it is January/February, which is only about three or four months' time, rather than a year hence?
Sir Porritt: No, definitely January/February, within the next three months.
Q614 Mr Ellwood: Rather than leaning on the SDC's views and considerations, which I presume you are not going to comment on at this stage; would that be right?
Sir Porritt: I can comment on what our existing position is, in terms of the policy that we presented to the Government at the time of the Energy White Paper, but it would be hard for me to have anything definitive to say about what we are going to say in January or February.
Q615 Mr Ellwood: Are you allowed to step outside that SDC bubble and give your own views, or would you be reluctant to do so?
Sir Porritt: I think that might be unhelpful.
Q616 Mr Ellwood: We might find it very helpful.
Sir Porritt: One can understand that. I would not mind putting on the record, just very quickly, where the SDC is now, because you might find that helpful.
Q617 Mr Ellwood: That would be very helpful.
Sir Porritt: It is just a brief paragraph, Mr Challen. This was when we were asked, as part of the contribution to the White Paper, to look at different supply options to see how they performed against the then Sustainable Development Strategy, so here I am quoting: "Nuclear power does not perform as well against the sustainable development criteria as energy efficiency and renewables and on the basis of the above analysis" and there is a whole great report about this, "realisation of the full potential of energy efficiency and renewables would render the building of new nuclear capacity unnecessary." We have revisited that position, clearly, in the light of current concerns about both climate change and energy security, and it is against that sort of comparative methodology that we will be offering advice to Government.
Q618 Mr Ellwood: Bearing in mind what you have just said and the fact that we have had an indication now from the Prime Minister on his views on nuclear energy, where do you think the Government will be going?
Sir Porritt: There have always been a number of people in Government who have remained persuaded that nuclear power is a critical mix of our energy supply system, and that was made very clear at the time of the Energy White Paper. It did not dismiss nuclear for all time, it said simply "We're not bringing it forward now." I do not want to try to take a guess on where the Government is going to go. My feeling is that too many people are panicking at the moment about nuclear and they are coming up with all sorts of ludicrous statements about the degree to which nuclear will or will not help us to meet these targets. We have done a calculation, for instance, of the benefits that you would get from a new build programme, both replacement and new generation, in terms of supplanting different amounts of CO2. It is much, much smaller than people think, much smaller. Lots of people are using very dangerous phraseology, like zero carbon or carbon neutral, this is complete nonsense. This is a technology that is not zero carbon and most people in the business of promulgating nuclear technologies know that, so they are either lying or they are trying to pull the wool over people's eyes. This is a technology that still has a carbon burden, not as much as other technologies but still it has a carbon burden and we need to be aware of these things. There are a number of statements flying around about nuclear being the panacea to these problems, which cause us enormous anxiety, because that is not the right way to address these issues. The right way is systematically and rigorously to assess the contribution of nuclear against these very demanding criteria of energy security and climate change.
Q619 Mr Ellwood: Two very short questions. First of all, the entire debate on nuclear energy seems to have been speeded up, partly because of, hopefully, our own choice of debating this in the first place, but also Digby Jones came out with comments this week as well. Do you think we may see the position taken by the Government on nuclear prior to the actual results of the energy review being reviewed?
Sir Porritt: That would be a catastrophe and extremely foolish. What is the point of offering people a proper review and a chance to re‑engage in these critical areas, which we have welcomed openly, we have said it is a good thing to go back in and re‑examine the nuclear option, there is nothing wrong with that, it is stupid of the NGOs to say it is not necessary. It is always necessary to keep options on the boil, keep reviewing, but simply to jump to a conclusion before any of that analysis has been done I think would cost the Government a lot in terms both of credibility and public support.
Q620 Mr Ellwood: Then it does beg the question as to why The Times led with the article today?
Sir Porritt: I am sorry to say, I have not read that yet, so I do not know.
Q621 Mr Ellwood: In your own study that you are doing on nuclear energy, which you broke down, are you actually looking at nuclear energy as a whole or are you considering the different types of reactors you were critical about, the British reactors, but, for example, the Canadian systems versus the South African?
Sir Porritt: We are looking at all the new technologies coming forward.
Q622 Mr Ellwood: Comparing one versus another?
Sir Porritt: Up to a point.
Q623 David Howarth: I will ask just one supplementary to that and then one question of my own. Is the work that you going to do going to be comparative across technologies and are you going to include any discussion of carbon capture and carbon sequestration?
Sir Porritt: Not as such. We are very alert to the growing interest in carbon capture and sequestration. I feel actually it is a very important area of debate, perhaps an excess of enthusiasm in the minds of some people as there is an excess of enthusiasm for nuclear. Clearly, clean coal technologies, if I can put it like that, have to be set alongside nuclear and other supply options as part of the energy mix that we are going to need for the future. It is not just we hate the way this debate is phrased, it is not just nuclear versus renewables, we want to do a trade-off here, it is nuclear versus renewables versus cleaner forms of fossil fuels and use of fossil fuels, because those three things have to be considered together.
Q624 David Howarth: To ask you about the present position on nuclear waste, you mentioned that, I think it was, as the first of your items of the new work, what is the existing position of the Commission on nuclear waste?
Sir Porritt: The existing position is remarkably similar to the position of the Government as we understand it, which is that it would be unacceptable to bring forward ambitious new plans for a new generation of nuclear power stations until the problems associated with the disposal of nuclear waste had been resolved. That is the very strong position taken by the Royal Commission on Environmental Pollution. As we understand it, various ministers have also indicated, at different points in the past, that they would be extremely reluctant to impose further legacy costs on future generations without some "solution" to those problems being available to people.
Q625 David Howarth: That is a technical solution and not just a financial solution of people being required to save money over a period of time?
Sir Porritt: Indeed, it has to be both.
Colin Challen: Thank you both very much for being very generous with your time. It has been very useful. Thank you.