Examination of Witnesses (Questions 20-39)
DEPARTMENT OF
TRADE AND
INDUSTRY
21 FEBRUARY 2005
Q20 Chairman: No, I did not expect
for a moment that you would accept the word "stealth".
By excluding non-fossil fuel obligation sites within the renewables
obligation £1 billion is generated for the exchequer. Is
this not also taxation by stealth? The reference is paragraph
3.12 on page 38.
Sir Robin Young: It is indeed
taxation and in the third indent the report produces the figure,
which we agree with, between £550 million and £1 billion.
Q21 Chairman: So you accept that
figure of £1 billion generated for the exchequer, do you?
Sir Robin Young: I certainly accept
". . . between £550 million and £1 billion",
as the report says in the third indent. The report is an agreed
report and we have agreed it. Again, I have to object to the word
"stealth". During the Sustainable Energy Bill, this
was much talked about, amendments were put down; during the Energy
Bill which became the Energy Act, this was talked about and amendments
were put down.
Q22 Chairman: I am not using the
word "stealth", but what has happened to this £1
billion? As I understand it, it has just gone straight into the
consolidated fund?
Sir Robin Young: It does not arise
until the period up to 2010.
Q23 Chairman: What is going to happen
to it? Is it going to be returned to the consumer, is it going
to go to this industry or is this going to be used by the Treasury?
Sir Robin Young: £60 million
of the surpluses which have arisen so far have been committed
by the Government to promote renewable energy and that is probably
about half of what has been accumulated so far; I do not have
an up-to-date figure, but the £1 billion is the accumulated
amount.
Q24 Chairman: So you accept the fact
that not all this money is either going to go back to the consumer
or going to go to the industry.
Sir Robin Young: Back to the Exchequer.
Q25 Chairman: It is going to go to
the Exchequer?
Sir Robin Young: Yes, where it
has not been hypothecated or where the Government has not used
it.
Q26 Chairman: Yes, so it is a stealth
tax, is it not?
Sir Robin Young: It is not a stealth
tax; it is an arrangement whereby the surplus which is taken from
the consumers goes back to the Exchequer on behalf of the tax
payer. I do not think I would like to accept the word "stealth".
Q27 Chairman: But the fact is that
this extra money is being generated and it is not being returned
to the industry, it is being given to the Treasury. It is a free
gift to the Treasury, is it not?
Sir Robin Young: Yes, it is going
to the Treasury, as set out in paragraph 3.12.
Q28 Mrs Browning: There are several
government departments who have an interest in this area of policy,
yours is but one of them. From your perspective at the DTI, what
do you feel the key objective of this renewables policy is?
Sir Robin Young: To play our part
in the climate change overall plan, and to encourage a rather
exciting, innovating, technologically interesting and potentially
job creating part of the British energy sector.
Q29 Mrs Browning: And do you feel,
from the DTI's perspective, that integrity of the longer term
supply is important?
Sir Robin Young: Yes, we do.
Q30 Mrs Browning: In respect of the
figures for renewables up to 2010 and then up to 2020, we see
from Sir John's Report that you are on target to meet your renewables
by 2010, but that that will incur a 5% increase in costs, which
the Chairman has touched on. Is it not the case that as far as
energy supply overall is concerned you are also from your department
looking at a situation where nuclear is going to be phased out
by 2020 with the old Magnox generators being closed down? How
do you square this integrity of supply over the next 15 years
with renewables really only replacing, if that, if they meet their
target, the very reliable source of nuclear energy? When we look
at the figure here on page 2, we see that so much of this renewable
is either offshore or onshore wind. How do you judge, from the
point of view of the department with responsibility for business,
the integrity of supply of renewables?
Sir Robin Young: You are completely
right. Our Energy White Paper in February 2003 went through that
line of argument in huge detail. On nuclear, as the Committee
must know, I am quoting now from the White Paper which says "While
nuclear power is currently an important source of carbon-free
electricity, the current economics of nuclear power make it an
unattractive option for new generating capacity and there are
also important issues for nuclear waste to be resolved. However,
we do not rule out the possibility that at some point in the future
new nuclear build might be necessary, if we are to meet our carbon
targets".
Q31 Mrs Browning: What do you reckon
the lead time is, for example, if you were to put nuclear onto
an existing nuclear site?
Sir Robin Young: You would need
some heroic assumptions about licensing, permission and the length
of time that the planning process would take, but it is long time,
which I am sure is underlying your question.
Q32 Mrs Browning: It is underlying
my question, but the point I am really trying to get to is that
renewables are all very laudable in terms of carbon emissions,
but it just seems to me that your Department is so focused on
hitting an environmental target set by another government department,
that you are completely losing sight of what one would expect
the DTI also to be arguing for within government and that is the
integrity and continuity of supply over this same period. What
have you actually said to your colleagues in other government
departments about that?
Sir Robin Young: The whole Energy
White Paper was around exactly that: the need to have a secure,
sustainable energy supply and the need to hit our environmental
targets. These are twin objectives for the government and the
renewable section of the Energy White Paper makes it plain that
low carbon generation is a feature both of our industrial policy
and of our environmental policy. I agree that the nuclear chapter
in this white paper makes it plain that we are neither ruling
out nor ruling in future new nuclear build, which I suppose you
might say is more of a holding paragraph rather than a final decision
of ultimate policy and it is in the context of the low carbon
generation chapter that the nuclear is being looked at. We in
the Department are absolutely at one with our DEFRA and other
colleagues in trying to get both a sustainable and secure energy
supply and one that helps meet our environmental targets.
Q33 Mrs Browning: But if you are
going to meet your targets as per page 2 here, with such a disproportionate
amount of wind power, that would not guarantee integrity of supply
through to 2020, would it, because the wind does not blow all
the time?
Sir Robin Young: No, but the Report
is good in describing the technological challenge which we are
already overcoming by better storage, improvements to the grid,
which will capture the wind, offshore and on. The Report also
is optimistic in that they say we will hit our 2010 targets and
table 1 on page 2 is the consultants' estimate of the mix which
will prevail in 2010. I think it is a challenge well worth going
for without prejudice as to whether or not a future government
decides to go nuclear. I think the United Kingdom is rightly focusing
on renewable energy as part of its contribution to overall energy
policy. You see in table 6 on page 13 that we are actually out
of kilter in lagging behind in the amount we get from renewable
energy sources.
Q34 Mrs Browning: Could I just bring
you back to you this point? If you meet your targets and if you
keep the proportion of wind energy in comparison with other types
of renewables, as shown in this report through to 2020, you are
not going to be able to guarantee integrity of supply much beyond
2015, are you? If we are going to be dependent on wind energy
to replace nuclear, are the lights not going to go out at some
point?
Sir Robin Young: No, our absolute
determination is to have a policy which does not make the lights
go out.
Q35 Mrs Browning: How are you guaranteeing
that? Will you give me a guarantee today that the lights will
not go out? I know you are leaving today and I just wish you were
going to be there for another 20 years for all sorts of reasons.
Sir Robin Young: Not if the lights
go off.
Q36 Mrs Browning: Are you going to
guarantee, from a government point of view, that your plans in
place are going to say that nuclear will be phased out, you will
phase in this proportion of wind energy and the lights are not
going to go out in the next 15 years because of integrity of supply?
Sir Robin Young: The absolute
guarantee is in the white paper, that a reliable competitive and
affordable supply of energy is a number one priority for the government,
of equal priority to the low carbon objective.
Q37 Mrs Browning: But that is an
aspiration, that is not telling me how you have actually tangibly
planned for that within your department's plans.
Sir Robin Young: We certainly
are planning for that by looking at the future energy mix, by
discussing with the sectors and with the energy sector more widely
exactly how to do it so as to get the right mix. The new nuclear
decision will be taken at some point or other in the future exactly
to get the balance you want between a sustainable energy market
and the environmental objectives. This would face any incoming
government and is a challenge for us all and for all other developed
countries.
Q38 Mrs Browning: I doubt either
of us will be in this Committee in 15 years time, but as I light
the candle when the lights go off, I will think of today.
Sir Robin Young: Please remember
this conversation.
Q39 Mrs Browning: I shall indeed.
May I just ask you why you think the Deputy Prime Minister, on
9 August last year, changed the planning guidance in order to
facilitate more land-based wind turbines on the English countryside?
Sir Robin Young: Paragraphs 2.3
to 2.10 of the Report deal with the planning aspects and what
we found, as paragraph 2.6 says, is that there was a strange diversity
of approach from planning authorities throughout the country and
as between various parts of the United Kingdom; both the time
taken for applications and the result of applications in the planning
process showed an unacceptable variety. So after much consultation,
we did as paragraph 2.8 says, tried to get a more consistent way
of approaching planning for renewable generation throughout the
regions of the country. So each English region now has targets
for renewable generation, a sort of indicative minimum for the
contribution which their region is meant to make to the overall
UK aim.
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