Examination of Witnesses (Questions 80-99)
DEPARTMENT OF
TRADE AND
INDUSTRY
21 FEBRUARY 2005
Q80 Mr Williams: You got it wrong
then, did you not?
Sir Robin Young: I think we got
it right, because we are just on schedule—just—to
hit it. We are not exceeding this target at all, even by the Oxera
figures.
Q81 Mr Williams: In that case why
do NAO say that it is more money than they needed to come in?
It would have been a good business project at the lower price.
Was that lower price ever offered?
Sir Robin Young: No. With respect—
Q82 Mr Williams: You do not know.
You do not actually have anything on which to justify this figure
other than the fact that it has produced the level you wanted,
but you have no way of knowing whether you could produce the same
amount for less.
Sir Robin Young: I think that
is true.
Q83 Mr Williams: That is quite interesting,
because we are worried about value for money. We are told that
one third of the support to generators exceeds their needs. What
would you estimate that to be?
Mr Collins: The figure of one
third relates to the value of the scheme out to 2027-29 if it
remains unchanged. We have already said that we are looking at
the issues which the NAO has raised in this area in our current
review of the renewables obligation. It is important to bear that
in mind. The other very important thing to bear in mind here is
that the costs of renewable energy projects are extremely site
specific. No wind project is of exactly the same cost. It depends
on the connection costs and the wind speed and so on. Through
the system that we have, with a single level of support, what
we do is incentivise the development of the most economic projects
first and in that way we seek to control the cost to consumers
of the scheme. That is the context in which the NAO has raised
this particular issue.
Q84 Mr Williams: How long are the
contracts of people who are at the moment investing in the cheaper
sources of supply?
Mr Collins: The generator will
have a contract with an electricity supplier and the details of
that contract are a commercial matter for them.
Q85 Mr Williams: So we do not know
what life of services these generators are going to enjoy.
Mr Collins: We have a scheme which
offers a single level of support for every kind of renewable—
Q86 Mr Williams: I know that, that
is what I am complaining about.
Mr Collins: That incentivises
the most economic projects. We are aware of the issue which the
NAO has raised in relation to some onshore wind and landfill gas
projects and we are looking at that in our current review. We
have some external advisers to support that analysis and we will
publish it and then we will consult on its findings and if necessary
or appropriate we will look at amendments to the obligation.
Q87 Mr Williams: It really gives
a new meaning to the term windfall profits, does it not? Perhaps
the Chancellor should consider calling on the precedent of the
banking industry and the early days when he came into office and
consider whether perhaps there should be some form of windfall
tax on those who are all rushing to get into these cheaper technologies.
But you cannot answer that.
Sir Robin Young: No.
Q88 Mr Williams: I know we are talking
about a different policy objective, but in terms of the overall
supply of electricity, with this coming on stream, how long could
we continue with our present sources of generation as envisaged
to be available, plus this 10% which is coming in? How long would
it be before capacity would not be adequate as a supply? There
must be a notional date at which we have to make major new capital
investment in electricity generating. When is that?
Sir Robin Young: A lot depends
on the Energy White Paper. It depends on energy efficiency. Half
of the savings we have to make by 2020 to hit our Kyoto targets
are in energy efficiency. It is assumed that we will use a lot
less energy because of energy efficiency measures.
Q89 Mr Williams: Yes, but you are
not answering my question. That is just talking about the efficiency
on the supply side. I have asked you a question on your reasonable
predictions. Are you saying then that we can meet all foreseeable
future demand without any other major generating investment other
than this which is taking place in renewable.
Sir Robin Young: The government
has a choice, which is set out in the White Paper.
Q90 Mr Williams: I am asking you
whether it is logical. It cannot be, can it?
Sir Robin Young: There is no "it".
Q91 Mr Williams: With the nuclear
plants running out. I went into the Ministry of Technology in
1969 in Tony Benn's days and we inherited the first generation
and the plans for the second generation of nuclear power stations.
There is an issue which everyone is pussyfooting around which
is what is going to be the next source of major power generation
as opposed to tinkering at the edges. When is such a decision
going to have to be taken?
Sir Robin Young: This Government,
in its Energy White Paper, has said that it will take a decision
soon as to whether to review the building of new nuclear power
stations. The Government will also have to take decisions about
the length of life of the existing power stations, the one which
you will remember from your days.
Q92 Mr Williams: In the terminology
of your Department what is the outer limit of soon?
Sir Robin Young: I would expect
it not to happen in the next two or three months.
Q93 Mr Williams: That is a fairly
good bet. What about the next two or three years?
Sir Robin Young: Who can predict
what any new administration will do. This White Paper does not
contain proposals for building new nuclear power stations. However,
we do not rule out the possibility that at some point in the future
new nuclear build might be necessary.
Q94 Mr Williams: Does the White Paper
relate output to foreseeable demand?
Sir Robin Young: Yes.
Q95 Mr Williams: What is the estimate
there?
Sir Robin Young: It does not give
the estimate for your question, but it points out that if we do
very well on energy efficiency, we will need less energy and that
affects the answer to your question about the amount of supply.
That is why they are putting huge weight on the energy efficiency
arrangements meeting over 50% of our Kyoto targets. Then the White
Paper looks at the future length of life of existing nuclear power
stations and then finally it says that we have not ruled in or
out a possibility of future nuclear build. We do say in the White
Paper that 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; familiar topics to you,
I imagine, from earlier days.
Q96 Mr Williams: I was fascinated
to read the other day an American scientist saying they now think
they have a new solution to it in a process called vitrification.
I remember when Solly Zuckerman was the Chief Scientific Adviser
and I was a green little Parliamentary Secretary in the Ministry
of Technology and we were told where we did not have a solution
to waste that the scientists would have the lifetime of the power
stations in which to search for such an answer and that they would
certainly find an answer, but at that stage, in 1969, the best
bet was something called vitrification. Here we are, 35 years
on, and vitrification is still only a disposal point in the sky.
Sir Robin Young: When I was Private
Secretary to Mr Nicholas Ridley in DoE 25 years ago we were looking
for four deep sites in which to put the stuff.
Q97 Mr Williams: What about the alternative
sources, the bio sources? We have concentrated on the wind processes
because of the environmental storms they have created in certain
parts of the country. What are your projections of the potential
on the bio side both in pricing terms and in capacity terms?
Sir Robin Young: At the moment
biomass is 15% of the current 2004 renewable sector. As the report
says in paragraph 2.28 on page 27, it has been slow going to get
biomass going. Bio energy is taking time to fulfil its potential
across the whole of Europe.
Q98 Mr Williams: Is that only in
this country?
Sir Robin Young: No, it is across
the EU.
Q99 Mr Williams: What about in America?
Sir Robin Young: I have notes
on the European Commission's recent report on the EU.
Mr Collins: Biomass is used in
America but not in significantly greater amounts than in the EU.
Sir Robin Young: It has been slow
going but it is in our list of projects which we are supporting
more at the research end. DEFRA have just started a new task force
to look at it under the NFU man, whose name I have now forgotten;
Sir Ben Gill. It has been disappointing how the energy crop sector
has not flourished.
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