Examination of Witnesses (Questions 100-119)
DEPARTMENT OF
TRADE AND
INDUSTRY
21 FEBRUARY 2005
Q100 Mr Williams: In view of what
I have described as the windfall profits in relation to the wind
sector of the technology, when do you envisage bringing the actual
subsidy more in line with the costs of the technology and the
provision of it?
Sir Robin Young: In the review
we are carrying out this year in 2005 we will look at what we
think are the necessary incentives to get people to come forward
with projects which will allow us to hit the 2010 target whilst
ensuring those not excessive profits are part of it. We will look
carefully at all the suggestions that there are excess payments
for some schemes which are not outweighed by insufficient payment
for others. This is a package. The answer to your question is
2005.
Q101 Mr Williams: In terms of the
conventional supply, it is now suddenly becoming conventional
wisdom that China and India, but China in particular, are going
to be enormous gobblers up of the world's supplies of power. Does
that not mean we are going to have to make major generating decisions
earlier than we possibly expected?
Sir Robin Young: That is taking
me a bit wide of my specialist subject.
Q102 Mr Williams: You are planning
it.
Sir Robin Young: Yes, yes.
Q103 Mr Williams: Planning takes
odd little things like changes into account, does it not?
Sir Robin Young: I completely
understand. We have obviously looked very carefully with the Foreign
Office and others at the areas from where we need to import our
gas and oil supplies. You will have noticed recently an important
treaty with Norway trying to shore up that bit of our trade in
energy. We are now net importers of energy, which we were not
when you were a minister in the Ministry of Technology. It is
therefore really important that we research and plan for where
we can get future energy sources. That again is part of the Energy
White Paper and is something constantly under review as part of
our sustainable energy policy.
Q104 Mr Williams: When was the most
recent review?
Sir Robin Young: In 2003.
Q105 Mr Williams: But the Chinese
explosion has come since 2003.
Sir Robin Young: That is true.
I am no expert on China, but I think a lot of their energy is
their own energy and I do not think they are importing from the
same areas of the world as we import our energy from.
Q106 Mr Williams: According to their
energy ministers they need something like 70 nuclear power stations
and I have forgotten how many conventional ones to have the slightest
hope of meeting their foreseeable demands and therefore they are
in the world market. So that throws completely out of gear our
projections for the future in terms of external sources of power
for ourselves and the costing of it.
Sir Robin Young: I do not think
it throws it completely out of gear, but you are absolutely right
that we should constantly revisit, as we are each year, our assumptions
about imports of energy in the light of emerging changes in China
and we shall do that. We are doing that every year.
Q107 Mr Williams: I hope you enjoy
your life post-PAC; it is good to see you and I wish you well.
Sir Robin Young: Thank you very
much.
Q108 Mrs Browning: Just for the record,
is it the case that between now and 2020, as things stand at the
moment, we will see nuclear disappear and energy which contributes
20% of our energy mix at the moment without putting carbon emissions
up into the atmosphere. That will be replaced over exactly the
same time period with exactly the same 20% replacement by 2020
of renewables including a high proportion of wind energy which
actually needs traditional energy to back it up because it cannot
be guaranteed. Is that what we are looking at here?
Sir Robin Young: There is no planned
equivalence between what we have seen as the fastest realistic
acceleration of the renewable energy and any calculation about
nuclear. If there is exactly the arithmetical—which I am
not certain there is, I cannot confirm your figures—
Q109 Mrs Browning: It is about 20%
of the supply, is it not?
Sir Robin Young: It is about,
but it is an accidental equivalence. We are not planning 20% of
renewable energy because of the nuclear going down, we are planning
it anyway. If a future government revisits this nuclear question,
which is put aside for future decision in the Energy White Paper,
in my view we would still want to push forward the renewable energy
contribution to overall policy.
Q110 Mrs Browning: The point I am
just trying to get on the record here is that by 2020, if things
look as they do today—and I did ask you the question about
what you thought the lead time was to commission a nuclear power
station if we were to start today and I suspect it would be a
good 15 years—
Sir Robin Young: Yes, I think
that is right.
Q111 Mrs Browning: So we are looking
at 2020, with 20% of the non-carbon nuclear energy disappearing,
being replaced with 20% renewables which do not necessarily have
the ability to be self sufficient inasmuch as they need a backup
of a more traditional supply, certainly on the wind energy side.
How much will we have contributed by 2020 then in terms of global
warming in the sense that we will not actually be any further
forward, will we? It is an exact transfer from one energy source
to another. We will not have rowed back on what we throw up as
emissions. We will be exactly where we are today.
Sir Robin Young: It is a very
complicated sum, as you point out. The Energy White Paper sets
out the mix of things which we are doing to hit our Kyoto targets
which do indeed require a real reduction and it is a mix of energy
efficiency in households, energy efficiency in industry and commerce,
transport, the EU emissions trading scheme and renewables. It
is not right to pick out renewables and pick out nuclear and then
look at those two. The overall Kyoto performance is a mixture
of all those things set out in the Energy White Paper and in the
climate change documents. The climate change review later in the
year will revisit all our promises to hit the Kyoto targets and
any new emerging targets. It will take account of our review of
the renewable obligation and it will include no doubt another
decision, or possible decision on nuclear, both the longer life
for existing nuclear plants and the potential for building new
ones.
Q112 Mrs Browning: I shall not press
you any further on that. I am sure you are not retiring, so I
wish you well with your next venture. I am sure you will be delighted
to leave this rather bizarre policy behind.
Sir Robin Young: Certainly not,
but thank you for your good wishes.
Q113 Mr Davidson: Looking at paragraph
3.6, it mentions there that public investment in renewables is
expected to reduce further future generating costs. How quickly
do you expect these costs to fall?
Mr Collins: What we know is that
the costs of wind power have fallen very substantially around
the world in the last decade in particular and there are good
reasons why we could hope to see similar cost reductions in other
renewable technologies both as a result of economies of scale
from larger markets and also from technological innovation. We
have published, as part of one of our reviews, a set of projections
or estimations of where those costs may be and obviously there
is a lot of uncertainty in that area, but all that material is
on the department's website. It sets trajectories for the different
technologies and the possible situations.
Q114 Mr Davidson: In terms of the
Renewables Obligation, if you do not have a fall in costs, how
is that benefit going to be shared out and how are consumers going
to benefit from that?
Mr Collins: Really it is something
we have to keep monitoring as time goes by and we see how the
renewables obligation is performing, we see what the trends in
renewable energy costs are and also the other factors are what
is happening to the underlying electricity price, what is happening
to oil and gas prices. It is something we acknowledge that we
will need to continue to look at as the obligation evolves to
ensure that we achieve our twin objectives of increasing renewable
generation at the minimum cost to the consumer.
Q115 Mr Davidson: What I am not clear
about from that answer is what sort of mechanism there is to devise
what is acceptable to the consumer and if there are savings in
generation, how they are divided.
Mr Collins: In our current review
we are looking at the position of the most low cost renewable
technologies.
Q116 Mr Davidson: So this will be
made up at the time, will it? Is that what you are basically saying?
Mr Collins: We can look at whether
there is a way of dealing within the renewables obligation in
a general way and a process which would allow for a sort of tapering
of support over time for technologies.
Q117 Mr Davidson: Looking at paragraph
2.20 leads me to ask just how much extra the extension of the
renewables obligation quota to 15.4% in 2015-16 costs the consumer.
Is that all within the 0.5% a year or is that going to be a different
figure?
Mr Collins: Yes, a similar kind
of calculation would apply to that.
Q118 Mr Davidson: But there was no
calculation. It was just a question of a figure plucked out of
the air by ministers as being something which was deemed acceptable
to consumers.
Mr Collins: At the time that decision
was taken the department did look at the cost to consumers and
indeed that was discussed across government as a whole before
any decision was taken.
Q119 Mr Davidson: May I just clarify
how you are establishing cost to consumers? Sir Robin, whatever
happens to you when you leave here you are not likely to be on
benefits, I should have thought, and your wife works as well.
Therefore the cost of fuel to you is going to be a much smaller
percentage of your income than it is to many people in my constituency.
I am not entirely sure that the needs of those who have least
are being adequately reflected by the proposals you are putting
forward to ministers in terms of what is acceptable. What help
can you give me on that?
Sir Robin Young: We can certainly
assure you that ministers were extremely concerned about the effect
on the consumer of this policy, as the report admits. They concluded,
rightly or wrongly, that 0.5% per year was okay, particularly
at a time when electricity prices were falling. This Committee
has looked at the new electricity trading arrangements and you
will be familiar with BETA (British Electricity Trading Arrangements).
However, the context has now changed. Electricity prices are now
rising again. Next time round, when we invite ministers to take
a view, they will need to look at that against their electricity
prices for poorer people and take a fresh view. They will certainly
look very, very closely at the impact of this on the poorest consumers
as well as everybody else.
| 
