Examination of Witnesses (Questions 560-579)
MALCOLM WICKS
AND MR
PAUL MCINTYRE
10 OCTOBER 2006
Q560 Chairman: Flattery is not necessary
Minister; you are a very good witness.
Malcolm Wicks: It is certainly
not necessary this late; maybe at the beginning.
Q561 Chairman: Earlier would have
been more worthwhile.
Malcolm Wicks: Yes, earlier would
have been more helpful.
Chairman: We shall turn to some of the
strategic issues about fossil fuels.
Q562 Mr Clapham: This session has
been very interesting. I think we detect a change in emphasis
since the beginning of the Energy Review. We were told during
some of the evidence we took that we should not be too worried
about being over-dependent, for example on gas. This morning you
have pointed out that the way in which the market is developing,
by 2020 we may be 80% dependent upon imported gas. Given that
at the start of the Energy Review security of supply was a very
important aspect, have you now changed your view and are you going
to leave the energy economy to be decided by the market process
and in doing so have you accepted that it is going to be dominated
by gas?
Malcolm Wicks: Certainly what
I accept, given what has happened to our own reserves in the North
Sea, is that we are going to be heavily dependent on imports of
gas for the foreseeable future. It is therefore important that
we try to get a better balance than the pure projections would
suggest, first of all by investing in energy efficiency, because
the best energy of all is the energy we do not need to use; secondly,
from renewables, because by definition that is based in the UK
or just offshore and if we can move towards 20% of our electricity
coming from renewables that would be good. Enabling nuclear to
come forward, should the investors want to deliver on that, is
important for our security too and also in terms of coal we need
to have a proper and rigorous look at the future of British coal.
Coal is often not talked about a great deal—it is by Mr
Clapham and myself but not by many others—yet about 30%
of our electricity generation comes from coal annually. Last winter
it was more like 50% for periods. Most of that coal but not all
of it is imported. As you know, we are establishing a coal forum
where we shall bring together different parties, including the
trade unions, including the generators, including the coal producers
to discuss the issues at stake there. I had already had preparatory
meetings on that and we have an important agenda. The coal forum
meets for the first time in a month or so.
Q563 Mr Clapham: It seems to me that
you have now decided to move away from the whole idea of a very
diversified energy economy. We have heard what was said for example
on nuclear, the gas importation is going to result in 20% by 2020.
Most of that gas by that time is likely to be coming from one
source, from Russia.
Malcolm Wicks: No; no. With respect,
no.
Q564 Mr Clapham: But we are talking
in terms of a large amount of the gas coming from that area of
the world. Bearing in mind that of the four major oil and gas
companies in the world, two of which, Shell and BP, are now saying
they only have about 10% of the world's reserves, does not the
fact that we are going to become overly dependent upon one source
of supply or one region of supply really put us into a very difficult
situation when we are talking about ensuring security and ensuring
stable prices?
Malcolm Wicks: Where are we? We
have agreed that there is going to be a decline in the gas we
are getting from our own North Sea, the wider UK Continental Shelf
and it could be 80 or 90% from other parts of the world by 2020.
That is where we are. We need that gas. In terms of domestic heating,
to take an obvious example, there are no immediate short-term
other options on that. We need that gas. Will we be importing
a lot of gas? Yes, we will but it will not all be from one place.
It is absolutely crucial, in terms of diversity, that we source
it from different places and in different ways. I have mentioned
the LNG from Qatar. I visited the plant in Qatar, a very impressive
place, the terminal being built at Milford Haven. That could deliver
20% of our domestic gas requirement. The Langeled pipeline from
the Norwegian fields could produce another 20%. We shall get gas
from other places such as Algeria and maybe some from Russia.
The Russian issue is a much bigger one for other parts of the
European Union than for us. We have to be smart about where we
source gas from, but what I said, and I think the Energy Review
points in this direction, against what a pure market-driven approach
might have delivered if we had not had the Energy Review, is that
we need to produce more energy ourselves and now we are repeating
ourselves through renewables, nuclear and a long, hard look at
coal and by fully exploiting the North Sea. Although it is in
decline, we have a very robust relationship with the industry
and there are all sorts of possible resources west of Shetland
for example which we need to exploit with the industry.
Q565 Mr Clapham: So what you are
telling us is that despite the fact we set off on the Energy Review
to look at diversity, the market mechanism is going to deliver
for us a dependency on gas.
Malcolm Wicks: That is not what
I have just said, is it?
Q566 Mr Clapham: It seemed to me
that it was.
Malcolm Wicks: No, what I said
was that we are going to have to import a load of gas, yes, but
we are not going to do it from just one or two regions of the
world, we are going to do it from different places, we are going
to do it through pipelines, LNG, interconnectors. Let us be as
smart as we can about diversity, but we need to balance that with
other sources of energy, much of which we can produce here in
Britain.
Q567 Mr Clapham: Let us just turn
to the coal scene. A large part of our imports of coal—and
we import 35 million tonnes of coal per year for burning in power
stations—used to come from a whole number of sources around
the world, a lot of it from Australia. However, as you are aware
from your meeting with the Energy Minister in Australia, Australia
now has long-term contracts with the Asian-Pacific economies,
China, Japan, India, so there is likely to be little coal from
there. Last year the coal came into the UK from two sources, basically
from Russia and from South Africa. Are we able to say that is
a stable source of supply or are you taking the view that we need
to do more to ensure that the indigenous source of supply is maintained
in the UK?
Malcolm Wicks: Just as with gas
we need to source our coal from different places. You are right,
the last data I saw on this shows quite a large chunk of it—we
could give you figures—is coming from Russia. There is no
problem about that supply. Coal reserves are abundant throughout
the world. I do not feel so anxious about this as I might with
some other imports. I have said—we are at one on this—that
if we can see a future for the British coal industry then we have
to go for it. The purpose of the coal forum is to test out that
idea.
Q568 Mr Clapham: Let us go for it
and let us look at the big issue which is facing the coal industry
at the present time. They are being disadvantaged by the earlier
contracts which were signed. They are only getting a small amount
of revenue from their main source, which is the generators, the
local generators and they are facing a situation where there is
likely to be the closure of two coal mines unless we can get an
understanding with those generators to pay a reasonable price
for the coal they get from an indigenous source and a source which
does create security. Are you prepared to intervene to try to
bring the sides together so that they can come to an understanding
on the price of the coal which is supplied by British collieries?
Malcolm Wicks: This is a difficult
and complex matter. You are right that the coal industry has some
fairly long-term contracts with generators. It would be very odd
for Government—and we are not going to—to try to rewrite
contracts freely entered into.
Q569 Mr Clapham: Facilitate the sides
coming together.
Malcolm Wicks: My understanding
is that some of our collieries are now being paid a lower price
than the world price of coal. That is the issue and that is difficult
for them. There are two things really. One is—and this is
the purpose of the coal forum—that we need to bring the
generators together with the coal producers just to talk really.
It seems to me that there has not been as much dialogue as there
should be and the coal forum will enable that to happen and there
are some encouraging developments already on that. Your second
one was whether I am prepared to ... ?
Q570 Mr Clapham: Facilitate the coming
together of the two sides.
Malcolm Wicks: Government really
has to be very careful. These are commercial contracts. It would
not be right for Government to say that they have to rewrite that
contract or for us to do very much by way of intervention. Should
we use our good offices to encourage the coal producers and the
generators to talk about current problems? Yes, we should and
I already have.
Q571 Mr Clapham: With regard to the
coal forum, it is going to be much more then than a talking shop,
we are going to have the people who are really involved in the
industry, the generators together with the coal suppliers, and
maybe in that situation some of these issues regarding contract
prices could be discussed in that forum.
Malcolm Wicks: Some of the broad
issues. This is not a negotiating body about particular contracts
or particular sums of money and it just would not work and not
be appropriate for the coal forum to become a negotiating table.
Some of the broader issues here are important. It seems to me
that basically we need to test the hypothesis. What is the hypothesis?
It is surely, given that there is a good deal of coal under the
ground in Britain and we have a tradition of coal mining, that
if we can only bring clean coal technology to bear—it is
expensive but if we can bring clean coal technology to bear—and
we can get a better relationship in the long term between the
people who buy the stuff, the generators, and the coal industry
which produced the stuff, surely—this is the hypothesis—there
should be a reasonable future for the British coal industry. That
is the hypothesis I want to test out in the coal forum. That is
why we established it.
Chairman: In concluding this section
of the session we shall just turn to the subject of the inquiry
which the Committee will begin its major work in very shortly
and that is microgeneration and local energy generation.
Q572 Mr Bone: It would appear from
all we have heard that the Government had, before it went into
this Energy Review, the basis that we were going to have a centralised
distribution system. It does seem that a chapter was bolted onto
the Energy Review because somebody said we must say something
about microgeneration and distributed generation. Within that
chapter you have someone who wants to put a windmill on top of
their house plus a small wind farm or even a small operator of
a gas turbine. They obviously face different issues. Was it even
worth putting that chapter in?
Malcolm Wicks: It was not bolted
on. There is growing interest in what people call, in a rather
inelegant phrase, distributed energy, local energy sources. That
can mean different things. You are going to do an inquiry on this.
I welcome that. We are very actively looking at this and in an
appropriate way we can work together on this. It is very important.
We did not bolt it on. I know some protagonists try to say it
is either national grid or local energy. Actually what we are
doing is testing out whether these can be complementary; that
is pure commonsense. It includes issues about combined heat and
power and recently Greenpeace challenged me to go to look at a
combined heat and power station in Copenhagen. I said to Greenpeace
"Only if you bring me back" and they did keep to the
deal. It was very impressive because it was much larger than I
thought, it was a huge power station, it was burning straw as
well as coal and a whole range of things and it was producing
heat for 200,000 households in Copenhagen and much business and
retail and so on. I was terribly impressed by it. We need to understand
better why CHP, which plays a role in Britain but not a very significant
one, has not taken off in the way that one might imagine it should.
We need to look at that and then of course we need to look at
some of the issues about more microgeneration as well, which are
very important and the Government has published a strategy paper
in advance of the Energy Review on microgeneration.
Q573 Mr Bone: That is very helpful
because it leads onto the second point I was trying to make. The
Energy Review promised aggressive implementation of the microgeneration
strategy. What did they mean by that?
Malcolm Wicks: It means that we
are very ambitious for it and we want to see a roll-out of microgeneration
as quickly as possible. That is why the Chancellor of the Exchequer
found another £50 million for what we call our low carbon
building programme, so we have £80 million or thereabouts
to use. We want to roll that out as quickly as possible over the
next few years so that it will become more common to see what
you call windmills, wind turbines, solar panelling, photovoltaics,
heat pumps and all the rest, see more of it on our own dwellings,
but, I think as important, in community centres, libraries and
schools. I am particularly committed to the idea that we should
enable more of our schools to have something about them which
is microgeneration. Then, if you have that little panel which
I have seen which shows how much CO2 is being saved, okay it might
help the school with its energy, but educationally it is absolutely
crucial because it is a fantastic way for teachers and everyone
else in a sense to reconnect the child with what energy is all
about and therefore connect energy with what the environment of
the planet is all about and within our low carbon building programme
we are working on ways in which a reasonable proportion of that
can be used for schools and microgeneration. I have seen it work
in practice and when it does it works very well.
Q574 Mr Bone: One of the problems
is that when you start using words like aggressive.
Malcolm Wicks: You did.
Q575 Mr Bone: No, you did in the
Review.
Malcolm Wicks: Obviously an entirely
sensible usage of the word.
Q576 Mr Bone: There is a serious
point. My constituency is threatened with being surrounded by
windmills; we already have some. People feel that when you start
talking about aggressive it means you are going to overrule local
planning decisions. That is the sort of thing people feel when
you use that sort of terminology.
Malcolm Wicks: I am talking about
little windmills, not big ones. I am talking about microgeneration.
There is a whole issue about the development of onshore wind,
but I thought by micro you meant—
Q577 Mr Bone: The problem is that
it was all put in the same chapter. Let us try another one then.
How will you measure your success in this area of your aggressive
policy? How will you measure whether you have been aggressive
enough?
Malcolm Wicks: I want to be sure
what we are talking about. Are we talking about microgeneration?
Q578 Mr Bone: Yes, I am talking about
that.
Malcolm Wicks: What I said was
that it will become a more common sight on our public buildings,
our schools, church halls, homes to see some evidence of microgeneration.
That is how I would measure success.
Q579 Mr Bone: Could we have perhaps
a percentage? Will 50% of schools have a windmill in five years?
Malcolm Wicks: With respect, no
you cannot have a percentage because that is not quite where we
are really. It is very interesting though that in the Private
Member's Act that Mark Lazarowicz won powers have been taken to
enable Government in due course to set a target for microgeneration.
We are not there yet frankly.
| 
