Select Committee on Trade and Industry Written Evidence



Q.1  What more could the Government do on the demand or supply side for energy to ensure that the UK's long-term goal of reducing carbon emissions is met?

  ABB agrees that the Environmental challenge is a key issue that needs to be tackled and believes that the Government can impact long-term levels of emissions through a coherent policy framework to remove market barriers to implementation.

Demand Side Energy and the Importance of High Quality Equipment

  Technology that can help reduce carbon emissions have been developed and successfully marketed overseas, however take up of the new technology has been slow in the UK. ABB believes that there are several ways in which the government can intervene to encourage the use of high quality and technologically advanced equipment.

  The importance of implementation:

    —  the Utility Industry is one where high quality equipment can help build sustainable and energy efficient delivery systems;

    —  demand side customers have to be able to install the most efficient equipment to reduce energy usage, such as motors and drives which reduce CO2 emissions; and

    —  replacing old equipment like for like will not create a sustainable future and will undermine other schemes to reduce carbon emissions.

  The impact of implementation:

    —  If ABB replaced all old drives and motors in our global customer sites (but not in those of our competitors), with new variable speed drives, we could save the amount of energy equivalent to that produced by building 10 large nuclear power stations.

  Creating Incentives:

    —  Business Rates: The Government could use business rates to provide incentives for investment in the appropriate technology.

    —  The Emissions Trading Scheme (ETS): This scheme will also play its part. However, put figuratively, ETS needs to be carrot and stick, rather than just stick.

    —  Use of the Carbon Trust's UK model of ETS: This model has many advantages over the European model and in particular creates opportunities, for emission reduction, not just in half-hour metered premises but more widely.

    —  A Coherent Policy Framework: Implementation of the new technologies is currently market led, and would benefit from higher level planning and a UK policy framework. The current framework makes energy inefficiency profitable for individual companies at the expense of the infrastructure as a whole.

  The need for a coherent policy framework that takes a holistic approach can be illustrated with reference to the following examples of infrastructure that impact the whole energy system in the UK:

The Importance of Networks

  Electricity demand is connected to electricity supply by networks. These very networks either enable or disable flexibility of generation in terms of the mix of generation methods or in terms of the connection methods employed to meet demand. The documentation for this very review appears to assume that the future replacement of network equipment will be merely like for like. Failure to replace network equipment with upgraded kit is a missed opportunity.

  The concept behind current networks was an "hierarchical" system. In this system power flows from conventional large power generation through a Transmission Network and then on through a, mainly passive, distribution network. This old design is now so inflexible that it proves inadequate to cope with the mix, and the geographical locations, of new distributed generation and storage facilities.

  It is the networks, not Nuclear Plants, that have the longest replacement lead times. Networks have an average replacement age of 40 years. It is unusual to be given a chance to implement a wholesale equipment replacement programme and, therefore, to do things differently. We have just such an opportunity now. Unless we seize it the opportunity will be wasted and we shall bequeath a chronic problem to future generations.

The Environment and Under Grounding

  An important area where the Government could also assist is in the promotion of under grounding technology for overhead power transmission lines, in particular when such lines go through areas of outstanding natural beauty (AONBs). This technology has been used for 50 years on the continent. A programme of under grounding offers three major advantages:

    —  it avoids the long delays caused by planning deliberations about overhead cable;

    —  it makes power connections in an environmentally friendly way; and

    —  it strengthens our grids and provides power quality improvements.

Technological Barriers or Market Barriers to Reducing Carbon Emissions

  The Energy Review Document suggests there are a number of technological challenges to be overcome (page 56 "In the absence of significant breakthroughs in the electricity storage technologies ..."). But these technologies are already installed and proven. In Alaska ABB has installed an electricity transmission storage system delivering 27MW for 15 minutes (and which can provide up to 46MW for 6-7 minutes). It has been operational since 2003 and is operating in extreme conditions.

  Technology is not the problem, the problem is market barriers which hold up the deployment of effective technology. These market barriers are a complex combination of economic, environmental and regulatory factors. A key reason why the true value of technology is not recognized is because of the procurement models introduced to deliver cheap electricity to the end consumer. These models were created in response to different regulatory incentives. These incentives in turn had been put in place to drive behaviour a certain way but had several undesirable side effects , such as reduction of any commercial R&D in the field to almost zero for 10 years. But there are two serious problems with the procurement models as follows:

    —  The models have tended to take account only of capital cost not combined operational and capital costs.

    —  Many of these models do not consider the effect of power loss or power quality, omissions which then have to be corrected in other ways, which leads to even more inefficiencies.

  In addition, technology already adopted overseas has failed to gain a foothold in the UK because the market in the UK is so highly fragmented. The free market approach suits our company fine but the way the market has been split has given rise to some perverse outcomes. There are circumstances in which the return from an investment does not accrue to the company initiating, and investing in, a project but to another company engaged in another element of the project altogether. A company is unlikely to make an investment that assists another company and not itself! Examples of this anomaly are available if required.

  By the same token, typically, technology that has been used overseas in excess of 25 years with safe operating conditions is not considered safe enough for the UK regulatory regime. ABB would therefore suggest that the regulatory regime be reevaluated in the light of overseas practice.

  Financing and completing the largest renewable energy projects is only a realistic option if they have an advanced and high quality infrastructure to enable them. This is especially so for the UK's off-shore wind farms, an example of a low risk technology that have been proven in off-shore oil platforms in the North Sea. This, and other, technologies can deliver an off-shore grid system that could also strengthen our inter-connection with neighbouring countries while protecting us from fault transference or helping us in black start conditions (should this ever be necessary). The economic case is clear but co-ordinated government project management would be needed to deliver this major additional infrastructure. This infrastructure would also allow future renewable wave or solar power to be connected in a cost effective manner. Details are available on request.

Q.2  With the UK becoming a net energy importer and with big investments to be made over the next 20 years in generating capacity and networks, what further steps, if any, should the Government take to develop our market framework for delivering reliable energy supplies? In particular, we invite views on the implications of increased dependence on gas imports.

Q.3  The Energy White Paper left open the option of nuclear new build. Are there particular considerations that should apply to nuclear as the Government reexamines the issues bearing on new build, including long-term liabilities and waste management? If so, what are these, and how should the Government address them?

Q.4  Are there particular considerations that should apply to carbon abatement and other low-carbon technologies?

Q.5  What further steps should be taken towards meeting the Government's goals for ensuring that every home is adequately and affordably heated?

  Comments are also invited on the following issues, as described in the text:

    (i)  the long term potential of energy efficiency measures in the transport, residential, business and public sectors, and how best to achieve that potential;

    (ii)  implications in the medium and long term for the transmission and distribution networks of significant new build in gas and electricity generation infrastructure;

    (iii)  opportunities for more joint working with other countries on our energy policy goals; and

    (iv)  potential measures to help bring forward technologies to replace fossil fuels in transport and heat generation in the medium and long term.

  Our current free market approach is very good at encouraging the development of innovative commercial models for stakeholders but this market is not good at designing the most coherent technical architecture for UK Plc. Each of the players in the market will be driven by a different set of commercial imperatives for their business giving rise to different technical solutions which increase the return on their investment. For example, in the electricity market, when each stakeholder has optimised their commercial model from 40 plus different generators, one transmission operator (but three asset owners) and 14 distribution companies it is unlikely that the best technical solution will be delivered for UK plc. It is more likely that the commercial models will fail to deliver a whole system approach. Technical solutions are normally designed on a whole systems basis. By "cherry picking" components or mixing different parts of different solutions it may be possible to deliver the lowest cost but technical coherency will almost certainly be lost. There are many examples that can be given upon request.

  There is indeed the prospect of "significant new build in gas and electricity generation infrastructure" and it will be in place for 40 plus years. If this new infrastructure is not designed to be flexible then all our options for the future are limited. Normally commercial and regulatory models change more frequently than the physical components of infrastructures—we face a choice between designing in flexibility, capacity, reliability and security as a coherent whole system or leaving these matters to market forces.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2006
Prepared 21 December 2006