Memorandum by the Environment Agency
The Environment Agency welcomes this opportunity
to provide written evidence to the Trade and Industry Committee
on the Government's Energy Review.
We offer the following comments:
The Environment Agency welcomes the
Government's Energy Review as an opportunity to put us back on
track to meeting the goals set out in the 2003 Energy White Paper,
in particular our long term carbon reduction goals.
A key failing of current energy and
climate change policy is the lack of mechanisms to incentivise
investment in carbon reduction post 2012. Central to the success
of the review in putting us back on track to meet our carbon targets
will be the introduction of new market based measures to create
such incentives. We believe these measures should be technology
neutral and support both supply and demand side measures.
We believe the goals set out in the
2003 Energy White Paper are the right ones and that we now need
to do more to make this approach work. Improving energy efficiency
should be at the centre of any new policy on energy.
The review will be a major test of
the Government's Sustainable Development strategy. All environmental
impacts should be considered and a system-wide approach taken
to minimising unsustainable and intergenerational environmental
impacts. Technologies should be required to pass an environmental
and safety threshold before they can then compete for carbon credits.
To meet long term targets for carbon
reduction, energy policy must be responsive and adapt to changing
circumstances by strengthening measures or bringing new approaches
as necessary. The review needs to set clear objectives for energy
policy with measurable milestones over shorter periods of time
(perhaps every year or 2-3 years).
On the specific questions posed by the committee
we advise that:
The Environment Agency does not take
a position for or against nuclear power. Nuclear installations
need to achieve high standards of safety, security, environmental
performance and waste management. If they can meet these criteria,
the advantages of nuclear power in terms of carbon reductions
and energy security need to be market-tested against other ways
of achieving emissions reductions and energy security cost-effectively.
We are concerned about the displacement effect that a large programme
of investment in one capital-intensive technology like nuclear
may have on energy efficiency, CHP and renewable technologies.
The best strategies for energy security
will be full exploitation of cost-effective energy efficiency
to reduce demand, open European energy markets with fair competition
and strong incentives on suppliers to manage down price volatility
through hedging or long-term contracting.
The potential for microgeneration
in the UK is large. The Energy Savings Trust recently concluded
that 30-40% of the UK's electricity demands could be met through
microgeneration technologies, with major contributions from CHP
(both fuel-cell CHP and Stirling engine CHP), micro-wind and solar
The Environment Agency has specific interests in microgeneration.
These include our role in licensing hydro power and our work on
biomass, incineration, planning, and sustainable buildings and
communities. We support a greater contribution from microgeneration
in a way that is sensitive to the local environment.
We believe the goals set out in the 2003 Energy
White Paper are the right goals for energy policy and we welcome
the Government's Energy Review as a chance to put the UK back
on track to meeting these goals. In particular this review is
an opportunity to introduce new, long term, measures to set the
UK back on the path to achieving the substantial carbon cuts required
to avoid dangerous climate change.
Section 2 of our evidence outlines the headline
messages that the Environment Agency will put to the DTI in our
submission in response to the Energy Review consultation. Section
3 then offers advice on the specific questions posed by the committee
on nuclear new build, gas dependency and the potential contribution
1.1 The Environment Agency's role in energy
and climate change
The Environment Agency is the Government's principal
adviser on the environment. We have important roles in both climate
change and energy:
We are the Competent Authority for
the EU Emissions Trading Scheme in England and Wales.
The Environment Agency regulates
the emissions from major industrial activities, responsible for
40% of UK GHG emissions, including the major industrial energy
users and fossil power stations.
We regulate the disposals of waste
from nuclear power stations, including radioactive discharges.
We take a lead role for England and
Wales in adapting to some of the serious effects of climate change,
including flood risk and water resources management.
We support adoption of renewables and low carbon
technologieswe have already switched every one of our 2,000
sites and facilities to 100% renewable electricity, in some cases
integrating renewable energy into new developments. In the last
four years we have reduced our energy use per person by 18%.
2. HEADLINE MESSAGES
The key issues that we will raise in our submission
to the Energy Review include:
2.1 Targets and programme management
The 2003 Energy White Paper signalled that "significant
progress" should be made by 2020 in reducing our carbon dioxide
emissions and suggested that cuts in the order of 15-25 MtC from
"business as usual" levels of 135 MtC would put us on
course to achieve a 60% reduction. However, a formal target for
2020 CO2 reduction has never been set. The Energy Review should
set out the contribution that energy policies will make to achieve
carbon reductions by 2020.
The danger in setting targets 15 years out in
the future is that without sufficient mechanisms to back them
up they become meaningless. The review needs to set clear objectives
for energy policy and a mechanism for tracking progress over shorter
periods of time. This tracking could be in the form of interim
targets (perhaps every year or 2-3 years) or an envelope of improvement
along an agreed trajectory towards the target.
Energy policy must be responsive and adapt to
changing circumstances by strengthening measures or bringing new
approaches as necessary. A programme management approach would
then ensure that environmental performance does not drift away
from targets because relative fuel prices change, policies don't
deliver expected benefits, or parts of the economy grow faster
This will also allow us to adapt the programme
if the need for more severe cuts in CO2 is agreed, for example,
driven by the science on "dangerous climate change".
It is also vitally important that we meet our
2010 target of a 20% reduction in CO2 emissions to maintain credibility
in our climate change commitment with business and our leadership
internationally. We look forward to the publication of the Government's
revised Climate Change Programme and the introduction of new measures
including a strong cap for phase II of the EU ETS to put us back
on track for meeting this target.
2.2 A long term investment framework
A key failing of current energy and climate
change policy is the lack of mechanisms, with the exception of
the Renewables Obligation, to incentivise investment in carbon
reduction post 2012 (both Kyoto and the EU ETS only extend out
to this date). Energy-using businesses and the energy supply sector
need reliable signals that investments in low carbon technologies
will have a value over a longer period than is currently the case.
Central to the success of the review in putting us back on track
to meet our carbon targets will be the introduction of new market
based measures to create such incentives. These measures should
be technology neutral as well as investment credible and support
both the supply and demand side measures.
There are a number of ideas in the literature
about what type of mechanism might perform this role.
They all conclude that Government should provide a price for carbon
that will be sufficiently robust for investors to include in project
finance appraisal, for example through the auctioning of carbon
contracts. Government would then be able to recoup this cost through
future climate change and energy policy measures such as the emissions
2.3 Energy efficiency
We believe the goals set out in the 2003 Energy
White Paper are the right ones and that we now need to do more
to make this approach work. Improving energy efficiency should
be at the centre of any new policy on energy. The Energy Efficiency
Innovation Review concluded that there are over 20 MtC of potential
savings from energy efficiency by 2020, with further cuts possible
Many of the existing energy efficiency programmes
are relatively young and small in scale although have already
achieved a great deal, for example:
Since 1970, improvements in UK homes
have resulted in the doubling of energy efficiency with consumers
benefiting by saving £10 billion whilst reducing carbon emissions
by 28 MtC per annum. This is three times the savings from the
whole UK nuclear industry and is almost as much as the emissions
of all the UK's coal power stations put together.
By 2010 existing policies are expected
to deliver savings of 3.6 MtC per year in the business and public
sectors alone. With additional cost effective measures, as suggested
by the Carbon Trust, this could increase to between 4.7 and 5.1
MtC saving per year.
The most recent emission projections
by Defra show that, despite underestimates of the losses due to
the "comfort factor", existing policies are expected
to deliver 3.6 MtC of savings from the domestic sector by 2010.
Now energy efficiency programmes have proved
themselves they would benefit from being substantially scaled
up. We need to build on the work and recommendations of the Energy
Efficiency Innovation Review and think through how we can move
to a much more energy efficient economy, placing energy efficiency
concerns at the heart of energy suppliers' goals. This could be
for example, by moving towards a cap and trade system for domestic
energy supply and a tighter cap for phase II of the EU ETS. Energy
efficiency measures would compete well against other ways of reducing
carbon if allowed to qualify for any long term mechanisms to incentivise
As well as improving the efficiency of end use
of energy there are also substantial opportunities to improve
the efficiency of the energy supply systems through more decentralised
energy located near points of use
and increased use of CHP.
Major improvements in energy efficiency will
only be achieved through substantial domestic, commercial and
industrial behaviour change. We recommend that Government addresses
all four corners of its sustainable development diamond, engage,
enable, encourage and exemplify,
in order to successfully promote changes in the way we collectively
use energy in society.
2.4 Energy supply
To promote low carbon energy supply we advise
that Government puts in place mechanisms to promote a price for
carbon that will be sufficiently robust for investors to include
in project finance appraisal without causing large distortions
between competing low carbon options. It will be crucial that
new mechanisms to promote low carbon energy supply are open to
all technologies and able to support low carbon options for both
electricity, heat and combined heat and power markets.
In order to preserve investor confidence in
Government mechanisms and to continue momentum on renewable energy
development, the Renewables Obligation should remain in place.
However issues around how it interacts with the planning system
and the diversity of renewable energy technologies it is able
to support need to be considered as part of the review.
Innovation and delivery policies should generally
be considered separately. In order to continue to develop those
low carbon technologies that are further from the market such
as offshore wind, the marine technologies and carbon capture and
storage, the Government will need to set out a clear innovation
strategy for energy supply technologies back up by associated
2.5 Minimising wider environmental impacts
The review will be a major test of the Government's
Sustainable Development strategy. All environmental impacts should
be considered and a system-wide approach taken to minimising unsustainable
and intergenerational environmental impacts. Technologies should
be required to pass an environmental and safety threshold before
they can then compete for carbon credits against each other.
We are currently carrying out work to determine
what represents Best Available Technique for new build coal fired
power stations and working with the Health & Safety Executive
(HSE) on licensing issues that would relate to any new nuclear
build. This difficult issue of finding a viable long term management
option for the existing radioactive waste created by the UK's
past nuclear programmes is currently being considered by the Committee
on Radioactive Waste Management, which is due to report shortly.
This must be addressed, as well as ensuring that wastes arising
from any new generation of nuclear power station can be properly
For technologies that are further from market
such as carbon capture and storage we would like to work with
DTi to address potential environmental concerns early and put
in place any regulation and monitoring arrangements necessary
for demonstration projects.
2.6 Public consultation
The current Government consultation poses only
very broad questions on energy policy and does not set out specific
policy proposals at this stage. We advise that once the Energy
Review team reports in the summer Government should carry out
further consultation on more detailed proposals for the way forward.
3. SPECIFIC QUESTIONS
3.1 What are the "particular considerations
that should apply to nuclear" new build?
The Environment Agency does not take a position
for or against nuclear power. It shares regulation of nuclear
sites with the HSE. HSE regulates nuclear safety, occupational
health and safety and onsite radioactive waste management, whilst
the Environment Agency is responsible for regulating the disposal
of radioactive discharges and waste.
All nuclear installations need to achieve high
standards of safety, security, environmental performance and waste
management. In regulating disposal of radioactive waste we ensure
that radiation doses to the most exposed individuals are within
national standards and internationally agreed legal limits. We
also ensure that operators use "best practicable means"
to ensure that radioactive waste is minimised and radiation doses
are as low as reasonably achievable. In practice this means that
doses received are well below legal limits.
Before any new nuclear build can take place,
the Government and the nuclear industry must design a waste management
strategy that meets the tests of sustainability and public acceptability.
We welcome the fact that the Government has set up a committee,
CoRWM, to develop options for dealing with nuclear waste and look
forward to its recommendations in July.
It is a legal requirement that new practices
involving radioactive substances are "justified" ie
that the benefits outweigh the associated detriments. We are working
with both DTi and HSE to consider the issues surrounding justification
for new types of nuclear power reactors. We are also working with
both organisations on streamlining licensing and authorisation
We will give early consideration to recent progress
in plant design and operation to reduce radioactive discharges,
and the quantities and problems associated with the management
of solid radioactive wastes. We will use that information to determine
the best available technology and set out the environmental standards
any new reactors will be required to meet.
If nuclear power can meet criteria on safety,
security, environmental performance and waste management, its
advantages in terms of carbon reductions and energy security need
to be market-tested against other ways of achieving emissions
reductions and energy security cost-effectively. We are concerned
that if Government puts in place a programme of dedicated subsidy
for nuclear new build, this could drain resources from investment
in innovation and development of a whole range of promising low
carbon options. These include energy efficiency, renewable energy
and potentially carbon capture and storage. Instead we would advise
introducing technology neutral support mechanisms to incentivise
Nuclear power accounts for 8% of the UK's primary
energy (20% of electricity generated). The success of the Energy
Review will depend on developing a strategy for the other 92%,
not least transport. It is important that cost-effective greenhouse
gas reductions are sought across all sectors.
3.2 Views on "the implications of increasing
dependence on gas imports"
Both the uncertainty in the security of supply
and the price volatility have been a significant concern for industry
this winter. The Environment Agency has been as accommodating
as possible in allowing industry the flexibility to switch to
other less clean fuels subject to the provision that the environmental
impacts were acceptable. These arrangements have been made on
a one-off basis and will not necessarily be available in future.
Operators should plan on this basis.
We advise that the best strategy for future
energy security will be full exploitation of cost-effective energy
efficiency to reduce demand for energy. We consider that there
are considerable opportunities to reduce the demand for energy.
The best form of energy security is not to need that energy in
the first place. In addition UK Government and the European Commission
should continue to push for open European energy markets with
fair competition in order to promote more efficient distribution
of available supplies and create a greater diversity of potential
Energy security issues normally manifest themselves
in price rises rather than interruptions to supply. Different
approaches to contracts and use of financial incentives to hedge
against price rises could guard against this. Our recommendation
is that if Government wishes to shield consumers from such price
rises then they should adopt market based solutions to energy
security. These could be in the form of incentives on energy suppliers
to invest in energy security, for example through demand management,
additional capacity, diversity of energy sources, storage or long-term
Government should also promote the use of a
diversity of energy sources through technology neutral mechanisms
to encourage low carbon technologies and an innovation strategy
to develop those sources of energy supply that are further from
the market. The UK has very favourable renewable energy resources,
exploitation of which would reduce our future dependence on gas
Some of the causes of the difficulties this
winter are already being addressed through greater diversity of
sources, improved infrastructure and increased storage capacity.
The environmental impacts from all responses to energy security
concerns need to be considered. Responses that benefit both security
and environmental goals such as energy efficiency should be considered
as preferable. Other solutions may have environmental impacts
that need to be taken into account and minimised. For example:
Importing gas from a wider range
of suppliers will have a higher sulphur content than North Sea
gas. This has an environmental impact through sulphur dioxide
production. This will add to the overall total of sulphur dioxide
emissions from the UK and may cause a local air quality problem
near significant gas users. We would not support any further derogation
in the sulphur content of gas without significant work to establish
and mitigate the environmental impact.
When gas supplies are in danger of
being interrupted, or have a volatile price, then industry will
wish to have the flexibility to switch to alternative energy supplies.
This encompasses a wide range of alternative fuels including oil.
These will have higher environmental impact than gas and also
have other issues including the need for careful transportation,
storage and handling. Improved security of gas supplies would
help avoid the need for alternative and standby fuels of this
Coal fired power stations have been
utilised much more than expected in the last few years. They have
a much higher environmental impact than gas and offer the ability
to stockpile and source supplies from a range of and countries
and coal types. Any future build of the coal fleet will be to
much higher environmental standards and the extent to which these
offer an environmentally acceptable alternative to gas to deliver
diversity in fuel sources needs to be considered. We are currently
undertaking a study to determine standards for Best Available
Techniques for new build coal and will report in early summer.
3.3 The capacity of microgeneration to meet
a substantial proportion of UK electricity and heat demand in
the medium and long-term.
The current contribution from microgeneration
to meeting energy demand is small with less than 100,000 microgenerators
installed in the UK of which most are solar water heaters installed
The potential for microgeneration in the UK
is large. The Energy Savings Trust recently concluded that 30-40%
of the UK's electricity demands could be met through microgeneration
technologies, with major contributions from CHP (both fuel-cell
CHP and Stirling engine CHP), micro-wind and solar PV.
A Green Alliance report concluded that a total investment of around
£13 billion would deliver around 15GW of additional microgeneration
capacity. This is similar, they argue, to the amount required
from Government to subsidise a new generation of nuclear power
There are a number of benefits that a substantial
contribution from microgeneration would bring:
It would help improve the energy
efficiency of the electricity generation system. Around 65% of
energy is lost before it reaches businesses, factories or homes.
By being located at point of use microgeneration helps to reduce
transmission losses. Some microgeneration technologies also have
high conversion efficiencies, for example, micro- CHP and small
scale biomass heat can have efficiencies as high as 75-80%.
Microgeneration can help to engage
consumers directly in energy. There is some early evidence that
when householders take direct responsibility for their energy
provision they become much more willing to take action on energy
Microgeneration technologies can
help improve energy security as they represent a whole range of
different technologies and fuels, most of which are renewable
and plentiful in the UK. MicroCHP and small scale biomass
can also ease the burden on gas consumption by either using gas
much more efficiently or providing an alternative energy source
The Environment Agency has specific interests
in microgeneration. These include our role in licensing hydro
power and our work on biomass, incineration, planning, and sustainable
buildings and communities. We support a greater contribution from
microgeneration in a way that is sensitive to the local environment.
There is a range of technologies that are classed
under the microgeneration banner. Common barriers include land
use planning constraints, metering, and the high costs associated
with a development market that has not reached critical mass.
There are also low levels of consumer awareness. We look forward
to publication of the Government's strategy on microgeneration.
We hope it will contain actions to address some of these barriers
and support for microgeneration technologies.
Our main recommendations to Government on the
microgeneration strategy are:
Encouragement to incorporate microgeneration
into buildings and support for continuing grants with a community
The planning system can contribute
to progress with microgeneration by supporting regional and local
targets. Guidance on the planning implications of some types of
microgeneration such as solar thermal panels could help reduce
Widespread adoption needs to be underpinned
by promotion, impartial advice and practical guidance for users.
Accreditation of installers will be important to ensure systems
can be trusted to perform well.
The strategy needs to support microgeneration
while recognising the need for high standards of environment protection.
High standards need to be adopted and the effects of large scale
adoption of some technologies monitored, eg possible air quality
impacts of biomass.
The public sector should lead the
way in using microgeneration projects where practical, as the
Environment Agency has at its new offices at Wallingford.
To show the full contribution this
proposed strategy will make to sustainable development, the social,
economic and environmental benefits from microgeneration should
The Environment Agency in this evidence has
set out both its headline messages to the Energy Review as well
as its responses to the specific questions posed by the committee.
We welcome this Energy Review as an opportunity
to put us back on track to achieving carbon reductions of the
scale needed to avoid dangerous climate change.
74 Potential for Microgeneration Study and Analysis,
Energy Saving Trust, November 2005. Back
The European Commission has signed up to the need to keep global
warming under 2C and to achieving emissions reductions to
keep us on this path. New climate change science suggests that
to keep to under 2C will require deeper and quicker cuts
than previously thought. Back
For example, A new British Energy Policy, Dieter Helm, Oct
2005 and An Alternative to Carbon Contracts, Paul Ekins,
The Carbon Trust 2005, The UK Climate Change Programme: Potential
evolution for the business and public sector. Back
Defra Feb 2006 http://www.defra.gov.uk/environment/energy/review/pdf/savingssinceapril2004.pdf Back
A recent Greenpeace report (Decentralising UK Energy: Cleaner,
cheaper, more secure energy for a 21st century Britain, Greenpeace,
March 2006) showed that Carbon emissions can be up to 17% lower
in a decentralised rather that centralised scenario mainly due
to savings in the transmission network. Back
Securing the Future, the UK Government Sustainable Development
Strategy, March 2005. Back
Potential for Microgeneration Study and Analysis, Energy Saving
Trust, November 2005. Back
Potential for Microgeneration Study and Analysis, Energy Saving
Trust, November 2005. Back
Decentralising UK Energy: Cleaner, cheaper, more secure energy
for a 21st century Britain, Greenpeace, March 2006. Back
Seeing the Light, Sustainable Consumption roundtable, October