House of COMMONS
MINUTES OF EVIDENCE
TRADE AND INDUSTRY COMMITTEE
Tuesday 10 October 2006
MALCOLM WICKS MP and MR PAUL McINTYRE
USE OF THE TRANSCRIPT
Taken before the Trade and Industry Committee
on Tuesday 10 October 2006
Peter Luff, in the Chair
Mr Brian Binley
Mr Peter Bone
Mr Michael Clapham
Mrs Claire Curtis-Thomas
Mr Lindsay Hoyle
Miss Julie Kirkbride
Mr Mike Weir
Mr Anthony Wright
Witnesses: Malcolm Wicks, a Member of the House, Minister of State for Energy and Mr Paul McIntyre, Head of Energy Policy, Department of Trade and Industry, gave evidence.
Q435 Chairman: Minister, welcome to this evidence session in our continuing investigation into the Government's Energy Review. We are very grateful to you for coming so soon after the summer recess to update us. I should like to apologise to everyone in the room for the crowded nature of today's meeting. The Commons authorities have seen fit to put us in rather a smaller room than we needed and I apologise for that. We have a lot of ground to cover so I am encouraging my colleagues on the Committee to ask short questions and, Minister, I would encourage you to be as brief as is commensurate with accuracy in your replies, if that is possible. I should also like just to make clear what structure we are following in our question session. We are beginning with some wider policy questions about the context of the Energy Review, then moving to reducing demand issues by looking at carbon trading then on to the nuclear question, new nuclear build, then moving to fossil fuels at that stage and ending with a session on distributed generation and microgeneration, local energy and power. That is the structure and I hope that helps. Welcome, Minister. May I ask you to introduce your colleague?
Malcolm Wicks: I am joined by Paul McIntyre who is the director of our Energy Review team. I shall certainly have regard to your stricture to be brief in my answers, particularly for the more difficult questions. May I say that we published the outcome of the Energy Review back in July - on 11 July? The purpose of the review was to address a range of questions but in particular two major challenges facing us in the 21st century: one, climate change or global warming and the second, energy supply and - I think the term is justified - energy security. We are now going through a period of consultation on a range of important and specific matters, so that process is under way. In due course we shall be publishing a White Paper on energy policy.
Q436 Chairman: That is helpful; thank you. We look forward to that White Paper sometime in the New Year I believe.
Malcolm Wicks: Sometime next year.
Q437 Chairman: Sometime next year; before the summer recess anyhow. May I just put it to you that this document, the original document on which the review was based, is really about electricity generation? It is about keeping the lights on first and foremost, the second half of what you alluded to in your opening remarks. It is even true of the follow-up document that overwhelmingly it is about electricity generation. There are sections on the contribution that domestic space and water heating can make but relatively brief sections. Was it not a very heavily skewed consultation?
Malcolm Wicks: I do not think so. We were looking at both demand and supply issues. There are very strong statements there about energy efficiency. Indeed we would go further in the housing sector and say we should stop talking about energy efficiency in a slightly woolly way and start to talk about energy reduction in the housing sector and therefore the reduction in carbon emissions and how we can bring that about. On heating it is crucial. I think some 30 per cent of carbon emissions are from the heating we use. At present most of us rely on gas supplies for our domestic heating. There are issues about gas supply but that has proved efficient and reliable. In the Energy Review we talk about the need for us to do more work on combined heat and power, which is a technology which has a lot of advantages and which we see in other countries and in other ways in terms of microgeneration; some of the microgeneration is about the production of heat. It is something we are very aware of.
Q438 Chairman: Was this first document not really about the Prime Minister's wish to get nuclear sorted out? Was this not the real purpose of this first document?
Malcolm Wicks: No and I am surprised you put it that way. We were always concerned to conduct an holistic review of energy policy with some strong statements in the review report about demand and efficiency.
Q439 Chairman: I know that numbers are not everything, but we reckon that 45 of the 73 pages in this document are about electricity generation and in the final document there are really only six or seven pages on domestic contribution. It is still overwhelmingly about electricity, is it not?
Malcolm Wicks: Much of it is about electricity of course, but it is not all about electricity. We have some things to say about transport and you will be seeing more on that from the Government in the future.
Q440 Chairman: Transport is not really under the auspices of this Committee and we must leave that for our colleagues in the Transport Committee, but I am glad to hear that. You gave a figure earlier on, but my figure is that 59 per cent of total private energy consumption by households is room heating and you say that is mainly gas, so do we not need a much greater emphasis on these other issues in the continuation of the review?
Malcolm Wicks: We say quite a lot about gas supply and we are at a critical time in terms of gas supply as we move relatively quickly from being self-sufficient in gas, because of the UK CS, the North Sea, to becoming a heavy importer, indeed the key statistic always in my mind is at the moment maybe 10 per cent of our gas is imported but by 2020, quite soon now, it will not be 10 per cent it will be 80 or 90 per cent. We talk about the implications of that.
Q441 Chairman: We will look at those issues later. We have had a huge debate, in this Committee and in the general public, about the carbon neutrality or otherwise of nuclear power and the contribution nuclear power can make, but if you actually manage to move the British population largely from old boilers to gas condensing boilers with solar systems in their roof you could virtually halve the carbon dioxide emissions. Is that not a more important climate change objective than generation?
Malcolm Wicks: It is why the Government some years ago said that new boilers have to be condensing boilers. It is why the Department for Communities and Local Government are working very hard now on housing standards and also - and I should be happy to discuss this with you at an appropriate time today - it is why we talk about why we need really a revolution as we move supply companies, the people who sell us our gas and electricity who after all have an incentive to sell us more gas and electricity. How do we move them to becoming what some would call energy supply companies where actually they get incentivised for helping us as householders to reduce our energy and our carbon emissions? We say a great deal about that and indeed some of the most radical proposals in the document are around energy efficiency.
Q442 Chairman: If I were to express a view, I should like to see the future debate on the Energy Review concentrate much more on these issues. There are some really important objectives to be achieved there.
Malcolm Wicks: It is a crucial part of the agenda. For some reason people want to talk about nuclear all the time and we say some important things about nuclear and we are hardly dodging that issue, but, given at the moment - back to electricity - 19 per cent of that electricity from up there is from nuclear roughly, I have always said this was not going to be a 19 per cent review but a 100 per cent review and not just about electricity.
Q443 Mr Binley: My concerns are about the demands we are placing on specific sectors to reach our goals, particularly electricity generation and heavy industry. You will know that they are already subject to a sizeable number of controls ranging through Climate Levy, EU Emissions Trading Scheme, Large Combustion Plant Directive, and so forth. I wonder whether we are not placing too many demands on those specific industries whilst neglecting others where fuel continues to increase.
Malcolm Wicks: All sectors, and indeed all individuals, have to play a part in climate change. One of the distinctive and encouraging features of the British debate is the way in which we are a society, a democracy, a parliament which is increasingly concerned about climate change. I think most of us in this room would agree that the science is now absolutely clear, that those in denial about global warming are really the flat-earthers in the world, increasingly a minority. If we think that global warming is the most important challenge facing the world - and I think many of us do - and for once the politician, when talking about his or her favourite subject, saying it is the most important challenge facing the world, does not exaggerate. If we think that is true then frankly we need to have a multi-faceted approach to tackling it. In simple plain English we throw everything at it and the heavy users of energy, the industries, the energy sector, because they are heavy users and therefore heavy emitters, have to play a full part. Are there significant parts to be played by other actors in this situation? Yes, there are and I am happy to say something about how we want to introduce an energy performance commitment. We need a framework to encourage people who are not in the European Union Emissions Trading Scheme, big service industries like the supermarkets, Tesco's and Sainsbury's, Government, the National Health Service, to reduce emissions and we are working hard on that.
Q444 Mr Binley: You are talking about new tools to help these particular industries, these particular sectors.
Malcolm Wicks: Yes.
Q445 Mr Binley: Can you expand on that just a little?
Malcolm Wicks: Yes. If you look at the range of mechanisms, the range of tools we have to reduce emissions - we can talk about the relative balance and the pros and cons of different ones but I have said that we need a whole menu of these things - we have the EU Emissions Trading Scheme essentially aimed at the energy sector and the heavy industrial users of energy, the big emitters in steel and chemicals, glassware and so on. It is a newish scheme, it is not without difficulties at the moment, but by producing that scheme on a European basis we are encouraging those industries to make savings in terms of emissions, to become more energy efficient. When they do they can sell their allowances and make bigger profits as a result. Those who do not make a contribution in terms of energy efficiency have to buy allowances. I think it is a particularly intriguing way in which governments across Europe have found and produced a market mechanism to produce the desired results. We can talk about how successful it is at the moment; I think it is rather fragile. I should liken it to a two-year-old who is just learning to walk, but if we can grow that two-year-old into a mature mechanism, then all sorts of things become possible in terms of bringing in surface transport, aviation and could also be one way - probably not the only way - of helping us fund carbon capture and storage. So we have that for the heavy industries, but we do not have it for others who are not such sizeable emitters but quite significant users of energy and therefore contributors to carbon emissions like the retail sector, like the Government even. The idea of an energy performance commitment which we are consulting on the pros and cons of would be to produce a kind of emissions trading scheme for those sectors. Do we not already see signs of some of those retail people being on the agenda?
Q446 Mark Hunter: It seems to members of this Committee that it would be unreasonable to expect the DTI alone, perhaps even the DTI plus Defra, to implement all of the changes outlined in the Energy Review report. Yet we are concerned that in the past other departments have paid little heed to the impact of their policies on energy use. How do you propose that the Government energy-proofs these policies across the board and how will you achieve buy-in from other colleagues?
Malcolm Wicks: The implication of the question is right, that although you need a lead department on energy and a lead department on the environment those two departments are not the whole picture. We have already touched on housing, which is absolutely crucial and therefore the Department for Communities and Local Government, the Treasury obviously has a strong interest and so on. How we achieve buy-in is through the Cabinet committee system. There is a Cabinet committee on energy and environment which we report to in this process through to the Cabinet. Perhaps, with your permission Chairman, I might ask my colleague Mr McIntyre to say something about how we do this machinery of government at official level?
Mr McIntyre: May I start by referring to the way we prepared the Energy Review report. We had an inter-departmental team based in the DTI but with representatives of all the departments with an interest in that. In terms of preparation of the White Paper, we have established a programme board chaired by the DTI, but again with representatives from across Whitehall, and that will drive progress towards preparation of the White Paper.
Q447 Mark Hunter: Would you accept that in the past evidence has suggested that other departments have not always paid as much heed to the impact of their own policies on energy use as perhaps they should have done?
Malcolm Wicks: Yes, one would have to accept that.
Q448 Mark Hunter: What is going to be different this time?
Malcolm Wicks: Most institutions in Britain have not taken energy savings seriously enough. Most institutions have not and still do not take their contribution to the problem of climate change seriously enough. Therefore across Government as a whole, apart from the policies we have on transport and housing and energy, we need to make sure that the entire Government moves towards a carbon neutral status and this is our objective. I could go into what that means, but the power of government procurement is really very important here because after all the Government buy a lot of lighting, as does this parliament - I suspect not terribly well - a lot of appliances of different kinds and we said in the Energy Review that we are going to use government procurement to drive up standards in terms of electrical appliances; it is one part of the question.
Q449 Roger Berry: Could Mr McIntyre, just for the record, be quite specific about which government departments are involved in the way you have just described?
Mr McIntyre: Yes, I can: first of all the DTI, then also Defra, the Treasury, the Department for Transport, the DCLG and the Number 10 Strategy Unit as well.
Q450 Chairman: One thing which has always puzzled me is why the Treasury leads on carbon capture and storage.
Malcolm Wicks: I do not think it does lead on it.
Q451 Chairman: Your document talks about the Pre-Budget Report and Treasury consultation.
Malcolm Wicks: Because it is an expensive commodity is the very simple answer to that question. They have been doing consultative work on that and there is every likelihood that in the PBR there may be some words from the Chancellor on it. We have a great deal of interest in that at a technical level; we are doing a great deal of work. I do not think it is such a mystery. This is quite an expensive commodity and how do we enable and incentivise?
Q452 Chairman: If the Treasury led on everything which was expensive there would be no need for any other government department. That argument is a road to perdition.
Malcolm Wicks: You are talking about very close colleagues.
Q453 Roger Berry: Given the importance the Government rightly attach to fuel poverty, why is the DWP not involved?
Malcolm Wicks: Mr McIntyre talked about the major departments we have been consulting.
Q454 Roger Berry: Is the DWP not a major department? It was.
Malcolm Wicks: I served my time there for four years. I have had conversations with a DWP minister and we have met with the DWP officials about some of the aspects on fuel poverty.
Q455 Mr Clapham: Just picking up what you said about the Treasury, are negotiations taking place with the Treasury regarding a demonstration plant on carbon capture?
Malcolm Wicks: In the Energy Review we talk about the need for a demonstration project; that is our judgment about this. As you know, around the world now there are bits of good practice which suggest that carbon capture and storage could become a reality, not least in Norway where they have successfully returned CO2 to depleted reservoirs and the CO2 had been there for eight or nine years. This is not just theory; this is beginning to be practice. What we do need in the world now are some major projects, some major demonstration projects. There is a lot of interest in Australia. I was talking to the Australian minister about this only last week when we met for a climate change meeting in Mexico. There is interest in the United States and certainly interest in Europe. Therefore it has been said that there could be some statement on this in the PBR.
Q456 Chairman: To be fair, though I have doubts about the balance of the document when transport merits eight pages - which must thrill the supporters of the fictitious unlimited-spurt campaign, which has puzzled some of my constituents over the weekend, but leaving that aside - I think this report is quite a good document, but probably the document should have begun the consultation process rather than concluded it. It seems to promise so many consultations. My staff tell me there are 17. Some are specific: Annex A says nuclear power is to get a proper consultation; there are references to seeking views for the policy framework so that is a consultation and individuals, supported by officials will lead discussions with industry on something else. I do not know how many consultations there are in this document in total of one kind or another, but it is a huge ongoing work programme, is it not?
Malcolm Wicks: Yes, because this is a serious business. One can always have fun about something leading to another consultation; it is good fun. With respect, it is serious because there is a range of things; we have set out a framework and thank you for what you said about the review which is a serious evidence-based document.
Q457 Chairman: It is a good document.
Malcolm Wicks: Inevitably, once one has made a decision that in the right circumstances there should be nuclear reactors, there is a whole range of issues around disposal of waste and we might come onto planning. Similarly what we say about distributed energy is important and needs further work with the regulator to see how that might be brought about et cetera.
Q458 Chairman: I am always nervous when governments promise to seek views and consult. I just want to know what procedures you have in place to make sure every single one of those pledges to consult and seek information is delivered on and people like us in this Committee become aware. For example, we think yesterday you issued a consultation document on the Renewables Obligation.
Malcolm Wicks: Yes.
Q459 Chairman: We cannot get hold of it. These consultations are very important, but Mr Marris could not even find it on the website this morning. What I should like from you, Minister, is an undertaking that after these consultations are launched this Committee is kept fully informed about each and every one of them and perhaps, where documents are produced, that they are sent to the Committee. That would be helpful.
Malcolm Wicks: I am told that it is on the web, but we shall check on that.
Q460 Rob Marris: I cannot find it there. It may be on there, but it is not findable, nor is it in the Library, nor is it in the Vote Office.
Malcolm Wicks: Let me ask Mr McIntyre to say a little bit more about the consultation process. It might be helpful if, after this meeting, we quickly send you a note of the different consultative exercises that there will be.
Q461 Chairman: Yes, I should like that very much. Thank you.
Mr McIntyre: On the question of consultations, the purpose of the main document is to set out a sense of direction, but also to set out within a number of the areas that there is a need for Government to consult on how that sense of direction should be translated into detailed policy. The reform of the Renewables Obligation is an important example of that and also the case that the Minister has already mentioned, the proposal for an energy performance commitment. Some of these consultations have already been rolled out, they are going to be rolled out over the autumn and the plan is that as much as possible in terms of conclusions from that further work and consultation will be wrapped up in the White Paper.
Chairman: Perhaps you could ensure that we are included in that roll-out process so we are aware of the consultations as and when they begin please.
Q462 Mark Hunter: The Energy Challenge document suggests that one of the ways of reducing energy demand would be to shift energy suppliers from a focus on selling as much energy as possible to providing energy services such as energy efficiency measures. It also says that the energy companies are in fact willing to do this. Could you explain to us a little how it would work and also whether or not you think there would have to be public subsidy to help poorer consumers take advantage of this?
Malcolm Wicks: There is no need for subsidy as such. The problem here is that demand from the housing sector is increasing. This is despite probably more insulation, more thermal efficiency, despite some of the newer appliances we are buying being more efficient. With the whole range of electrical appliances which we and our children have in our houses now energy demand is going up. We think it is possible and certainly desirable that energy demand starts to decline and that is why your question is important. How would this work? Again, forgive me, it is something we need to consult the industry about, but we do want to move towards a situation where in future the supply companies, the people who supply us with gas and electricity will be financially incentivised, they will make more money if they help the housing sector and each of us as individuals to become more efficient and reduce our demand. In other words, instead of company X coming to us and basically saying they will sell us gas, they will sell us electricity, it would be lovely if we bought both from them and they would occasionally read the meter and we pay them and that is it, that is more or less the end of the relationship. What this would involve would be the company coming to us and asking to look at our house, looking at the thermal efficiency, the need for cavity wall insulation if that is appropriate, loft insulation, asking to talk to us about the whole range of appliances we use, asking to talk to us about microgeneration, whether we would be interested in thinking about microgeneration. That is the kind of revolution we need to bring about.
Q463 Mark Hunter: Do you think price incentive is key to that?
Malcolm Wicks: Yes. At the moment the incentives from a climate change point of view, conservation point of view, are all in the wrong direction, are they not? If they sell more gas to you and me, they make more money, more electricity. We have to reverse that; it is a cultural revolution that we are bringing about here.
Q464 Miss Kirkbride: Minister, I quite agree with you that we need a cultural revolution, but given that this Government are quite keen in interfering in all sorts of walks of life I am surprised that you are not willing to be more proactive when it comes to changing the way we use our energy supply. I think one of the principal barriers to many people actually investing in mini wind turbines - my leader apart - and solar power and all of these things is that the returns are just not great enough. They are still too expensive to cut your bills in any timescale that most people looking at spending thousands of pounds in reducing their energy consumption are really prepared to consider. Unless the Government are prepared to be more involved in forcing our hand to do this and therefore hopefully making these things cheaper by more people wanting them I do not think you are going to get this cultural revolution and you are not going to see demand going down by so much. It is too easy to do nothing.
Malcolm Wicks: We have a programme of government grants to householders. We have a low carbon building programme which is worth some £80 million and not all but some of that money will go to householders to kit themselves out with microgeneration so we do have a grant aid programme. The real secret here, and it is a very familiar story, is that at the beginning of new technologies they are very expensive. The first television was a very expensive item.
Q465 Miss Kirkbride: It has taken 30 years on televisions, has it not?
Malcolm Wicks: What we need to do is start to benefit from scale and with our £80 million, which will enable us to bring on a lot of microgeneration technologies, you will start to see the benefits of scale, in other words prices will tumble. That has to be it. The other important thing is that I hope a lot of active citizens who might have reasonable salaries will not always be looking for grants. People spend a lot of money on electrical appliances, plasma TV screens and that. I hope some of those individuals will say that even if the payback period looks a bit long this will be their contribution, they want to do that. Just talking to people I know of more and more people who would like to be doing something of this kind. I do not think this is about too much government intervention. I do think we have to resist this a bit.
Q466 Mark Hunter: You will be aware that some of the individuals who have pursued microgeneration schemes are having difficulty selling the energy they have generated back into the system because the supply companies are not always as interested as they might be in co-operating with them.
Malcolm Wicks: Two things. One is that the new Act of Parliament on Climate Change, introduced by our colleague Mark Lazarowicz, which has Royal Assent, talks about the requirement for supply companies to offer a price to people. I said in that committee that we would keep a careful eye on it to make sure the price was right. Yesterday Ofgem, the regulator, also said useful things about the need for microgenerators to be able to sell their electricity if they are lucky enough to generate so much that they can sell it.
Q467 Mr Wright: We are talking about the energy saving equipment and one of the problems the manufacturers have is to look in that crystal ball about what the Government's view is going to be of the demand there is going to be for their particular products. Have the Government announced their energy efficiency target for the energy efficiency commitment after April 2008? If not, when is it going to do so?
Malcolm Wicks: There are consultations now led by Defra, on the energy efficiency commitment, but Defra ministers have made clear their ambition about increasing the scale of that commitment.
Q468 Mr Wright: When can we expect the target to be put forward?
Malcolm Wicks: Next year, I am advised.
Q469 Mr Wright: Do you consult with the manufacturers of the energy saving equipment over this particular issue?
Malcolm Wicks: Yes, we do have a lot of consultations with manufacturers.
Q470 Chairman: We can still buy B-rated energy efficient condensing boilers. Would it not be good just to wipe them away and only have A-rated condensing boilers?
Malcolm Wicks: That is where we have to move to and we have to move in that direction at a European level. There is a good deal of interest in the European Commission and the European Parliament about that. It is not my subject as such, but ditto the kinds of cars we are allowed to buy in Europe.
Q471 Chairman: In climate change terms that is quite a quick gain.
Malcolm Wicks: It is, yes.
Q472 Mr Hoyle: Colleagues touched on the problems for industry not knowing what the future holds, but industry is taking the easy option, is it not? What is happening is that we are setting targets and expecting industry to meet those targets but industry is turning round and saying "Hang on a minute. We might as well do more damage to the climate by moving abroad". So they move to China where nobody cares about the climate. We are having a negative effect and that is the danger. What are we going to do to keep industry in the UK, not allow it to move to China, Brazil or wherever it does not matter about the climate because energy is cheaper and labour costs cheap and this is going to be at the expense of the UK. The problem is that they are all fine words, they are all fine actions, but the reality is that we could end up doing more damage to the climate.
Malcolm Wicks: I understand the concern, but, with respect, I think you exaggerate the argument. We are seeing now a range of industries across Europe, certainly across the United Kingdom, taking this agenda very seriously and being incentivised to do so by the European ETS. Clearly in terms of the crucial details around the Emissions Trading Scheme, we do have to be aware of that danger that we do not just want to let some dirty industry, heavy emitters, to up sticks and relocate where there is no regime. That is a question of getting the balance right in the roll-out of the Emissions Trading Scheme, but also of course it points to the need to reach international agreements about carbon. The meeting last week in Monterrey, which I attended together with the Secretary of State for the Environment, indeed the Foreign Secretary gave a keynote speech, was very much about the process of discussion internationally, so that many of the emerging economies like Mexico itself, South Africa, obviously India and China, are part of this challenge and are meeting the challenge.
Mr Hoyle: In fairness may I say I accept what you are telling me, but the proof of the pudding is in the evidence we have taken. We have had manufacturers from the car industry saying that energy is one of the issues and one of the reasons why they are not going to produce in the UK. The truth of the matter is that we have lost two major companies and both reported to this Committee that it is red tape and energy costs which are making them consider moving elsewhere. I rest my case.
Chairman: Costs rather than carbon costs.
Mr Hoyle: Absolutely, but it is all built in.
Q473 Mr Weir: Everybody who generates electricity has told us that what they really need is a robust system to provide a long-term price for carbon across a wide variety of sectors and they are talking 10 to 15 years. You talked a lot about the EU Emissions Trading Scheme but one of the difficulties with that was a sudden drop in the price of carbon which went a long way to undermine the scheme. Can we really expect the scheme to deliver this long-term cost price for carbon?
Malcolm Wicks: I likened it earlier to a toddler; the Emissions Trading Scheme is quite a young creature. We are very committed to seeing it grow. We all understand that while the UK has been rigorous about its approach to our own allowances here in the United Kingdom, some other countries, some other parts of Europe frankly are just not playing the game on climate change. There is a big test for the European Union and the Commission in terms of the current round, really to make sure that all nation states, all 25 states in the European Union, are serious about it when they are looking at their national allowances. This is a very big test for the Commission.
Q474 Mr Weir: How long are you going to allow the toddler to grow? If the scientists are correct, we do not have decades to get this right. It has to be done soon. Has the German Government not taken steps to give long-term commitments on carbon costs? Is the UK Government thinking of doing something similar?
Malcolm Wicks: The UK Government's record is a good one on this. If you look at the allowances we offer compared with some other nation states then we are very serious about playing the game because we are committed to the Emissions Trading Scheme. I quite agree that time is not on our side. Global warming is not theory, it is leading to rising infant mortality rates from diarrhoea and malaria in Africa even as we speak. Time is not on our side and we need to act urgently, but it is vital that we put faith in a European-wide scheme. While we are responsible for two per cent of CO2 emissions in the UK, the European Union is the international arena where we need to engage. We are focusing on this very hard.
Q475 Mr Weir: I accept that, but you also talked earlier about bringing transport into this scheme at some point. You were consulting about that. You have been consulting also about bringing air transport into this scheme. We are told that airlines are going to be one of the biggest emitters, but there does not seem to be much progress in bringing airlines into the trading scheme.
Malcolm Wicks: It is the position of the UK Government that at the appropriate time aviation should be part of the scheme. It is fragile at the moment. This next round is a key test for the Commission. We need to show that it is serious. That will help the price of carbon, the market for carbon. When it grows we can start to think about transport, aviation and so on. I am very hopeful about this. It is easy to be critical at the moment of various nation states, but we need to grow this. Logically I do not see why, in time, this should not emerge as an international ETS. Why logically, at the appropriate time, should California and Norway and other states of different kinds not join in this scheme? There is a lot of interest in the United States at state level in this kind of emissions scheme.
Mr Weir: You again talk about time and one of the things is that the generators need something now to give them a long-term price for carbon. How long will the UK Government continue to discuss this or will you look at taking unilateral action if the EU Emissions Trading Scheme does not come up with a suitable system shortly?
Q476 Chairman: You do say in your document that you will keep open the option of further measures to reinforce the operation of the scheme. When will that keeping the option open be terminated and action taken?
Malcolm Wicks: This next round and how it progresses is absolutely crucial. You are right to remind us that we do say that; we keep that option open because we are committed to this. Obviously you could take action at UK level far, far better if we can build a robust creature at European Union level. I share your frustration actually, but the DTI, despite its immense powers does not run the European Union; not yet. Therefore we have to negotiate very hard with some of the countries.
Chairman: We did have the presidency quite recently.
Q477 Rob Marris: In terms of building new nuclear power stations, which at the moment certainly is controversial, do the Government have in mind any numbers which might be built in what the industry is pleased to call a fleet.
Malcolm Wicks: Yes, I often puzzled over the word "fleet".
Q478 Rob Marris: Nuclear power stations sailing around the estuaries of Britain polluting there.
Malcolm Wicks: We should not want them to float off. No, we do not. What the review document says is that the Government feel that nuclear could be an important part of the energy mix in the future. We think that there are implications for the Government around planning and the carbon framework is also important. Given the relationship between the state and the market, given that we are talking about a liberalised market, given that we are talking about private companies, it is not for Government.
Q479 Rob Marris: So you have no numbers in mind.
Malcolm Wicks: It is not for Government to say that we shall have X nuclear reactors and so on. My colleague Mr McIntyre might say something about our assumptions when we do some analysis on this.
Chairman: I should just say that you have sent us your response to our report on nuclear but the Committee have not seen it yet. We know it has been sent and we shall make arrangements to publish it as soon as convenient but we have not actually physically received it yet.
Q480 Rob Marris: Do I understand correctly that it is broadly a question of leaving it to the market and therefore you do not have in mind numbers of new nuclear power stations because that will depend on the energy mix as determined by the market. Do I understand you correctly there?
Malcolm Wicks: Yes. Government will not be building nuclear reactors, will not say they want X number of nuclear reactors. I always thought myself that if at the moment one fifth of our electricity is from nuclear, if the market came forward with something to replicate that broadly in the future, from my own point of view it seems to me that would make a useful contribution to the mix. We are not going to do anything to facilitate that, nor this percentage nor that percentage.
Q481 Rob Marris: Do I take it that if you are doing nothing to facilitate that, there will be no direct subsidies for new nuclear build?
Malcolm Wicks: No direct subsidies, no.
Q482 Rob Marris: And there will be no indirect subsidies either.
Malcolm Wicks: No.
Q483 Rob Marris: Is that right? Is that the Government's position? No direct subsidies and no indirect subsidies. Am I clear on that?
Malcolm Wicks: No cheques will be written, there will be no sweetheart deals.
Q484 Rob Marris: Is new nuclear power station building viable without a high price for carbon under the Emissions Trading Scheme?
Malcolm Wicks: The carbon framework incentivising carbon reduction hopefully through the development of the ETS is very important here. Also of course what is important and we set out some arithmetic on our cost/benefit analysis, is the economics of nuclear vis-à-vis the economics of gas and oil.
Q485 Rob Marris: Under the ETS does the price of carbon not partly determine the economics of new nuclear?
Malcolm Wicks: Yes, it does, but I am also saying that the price of gas and alternative fuels is also important. Although it would be a silly energy minister who would predict prices, nevertheless the economics have moved in favour of new nuclear because of the relatively high price we have seen recently of oil and gas. It is not just to do with the ETS it is to do with a wider economics judgment.
Q486 Rob Marris: What if, at the European level if we get it, the ETS works in a way which most people would see as desirable, namely emissions fall, in that scenario the price of carbon is going to fall and that is likely to make new nuclear less economically viable. What would the Government seek to do in that situation, which is in one sense a desirable situation if the price of carbon is falling because there are fewer emissions because people have cleaned up their act literally and metaphorically?
Malcolm Wicks: We are certainly not there yet. The whole objective is to see CO2 emissions fall. I think this line of questioning is rightly focusing on the importance of ETS but it is not the only focal point and prices of rival fuels are also pretty important.
Mr McIntyre: On the point about the carbon price and the possibility that it might fall if emissions fall, the carbon price will be determined by the relationship between emissions and the allocations that the emitters get. It is not just determined by the level of emissions. On the wider point, we did publish with the review our economic study, our cost benefit analysis of nuclear which sets out some scenarios for the future and the economics depend on a number of factors not just the carbon price. They depend on assumptions about future gas prices because gas is probably the alternative fuel for the generators and also for nuclear costs, so these scenarios take combinations of those factors and the conclusion we reached was that on the scenarios which are more likely then the cost/benefit analysis for nuclear came out as positive to different degrees. There were also some scenarios where it came out as negative and obviously a judgment has to be made as to which of the scenarios is more likely, but overall we felt that the judgment was positive.
Q487 Rob Marris: Are you familiar with the work of Amory Lovins at the Rocky Mountain Institute who suggests that the opportunity cost of spending money on nuclear build is actually bad for the environment because you get a bigger bang for the buck, a better improvement for the environment if an equivalent amount of money is spent in energy consumption reduction and in generation through other means?
Malcolm Wicks: I have met him in the States and talked to him and am aware of his views. I am aware of a range of views and they do not all point in the same direction. Our own judgment, to repeat myself really, is that to tackle the issue of climate change - there are other related issues about energy security which are relevant to nuclear but in terms of climate change - we just have to have a multi-pronged approach. We made a judgment which might be controversial that nuclear probably should be part of that. For those who are sceptical about the economics - I am not myself, but for those who are sceptical and think it cannot be afforded - then the test will be, will it not, when the market does not come forward with any proposals?
Q488 Rob Marris: As long as I can get you to reiterate - and I was pleasantly surprised at your statement - that there will be no direct subsidies for new nuclear build in the United Kingdom and there will be no indirect subsidies. Did I understand you correctly?
Malcolm Wicks: That is right. We are not in the business of subsidising nuclear energy.
Q489 Miss Kirkbride: Unlike the whole of the industry, do you believe that it is possible to see a private nuclear build programme in this country unless the Government successfully negotiate the long-term price of carbon? Can it still happen?
Malcolm Wicks: A thriving carbon market, hopefully through the ETS, will help bring forward ---
Q490 Miss Kirkbride: Help or be crucial, be the deciding factor?
Malcolm Wicks: I should say help. We are repeating ourselves on this side now. I think the price vis-à-vis gas is also pretty critical in this.
Q491 Miss Kirkbride: The Prime Minister is going to be very disappointed because the industry does not believe it can happen unless the Government play their role in the long-term price of carbon.
Malcolm Wicks: That is not what I am hearing.
Q492 Chairman: Is the difference not that the companies which like to build nuclear reactors can take a view on what is going to happen to gas prices and oil prices using their informed judgment of the market? However, the price of carbon is set by Government effectively and they have to know what the Government's intentions are and you are being a bit Delphic about it. I actually have to say that I think it would help; I think Julie is right. What I hear from the industry is that they have to have greater certainty in the long-term price of carbon to make that decision.
Malcolm Wicks: We are very committed to the long-term nature of an emissions trading scheme. We hear all the time - I agree with you on this - that the industry wants certainty.
Q493 Chairman: Is the truth not that you are trying to be good Europeans. You are making the pledge to ETS but actually in the document you are rightly saying that the Government will go beyond ETS if it has to in order to deliver nuclear power. That is what you are saying, is it not?
Malcolm Wicks: I am saying that the ETS is very critical to this but it is not the only factor.
Q494 Mr Bone: You are very clear that there will not be any indirect subsidies for new nuclear build. I am surprised that I have heard that today. Does that mean there will be not a single tax advantage for building new nuclear build, as one example, because that would be an indirect subsidy?
Malcolm Wicks: No, there will not be any special fiscal arrangements for nuclear. It should not be a surprise, with respect, because we have said it very clearly in the Energy Review. You could pursue this if you wanted by saying that nuclear waste is quite a complex subject and we are going to look very carefully at that to make sure that the full costs of new nuclear waste are paid by the market.
Q495 Roger Berry: The thing I do not understand about the argument is that the Government said that energy security is a policy objective. The energy security is being identified as a benefit of nuclear, as indeed for some other energy sources. I do not understand a policy which says that energy security is an objective and that nuclear helps fulfil this objective and yet the Government will offer no incentives to achieve that objective by providing support for nuclear. I just do not understand it.
Malcolm Wicks: Where we are in terms of trends and policy objectives is that at the moment all the projections show an increasing reliance on imports, particularly for gas. I gave a figure earlier: by 2020 it could be 90 per cent of our gas being imported and it is only 10 per cent at the moment. Is that a worry? I personally think it is a worry and what we have to strive for in the future is a better balance between the imports we shall need to make - and we need to be careful about where they come from; they must not all come from one region and some should come in as liquefied natural gas, some from pipelines from Norway, et cetera. We need a better balance between that and a bit more self-reliance and a bit more home-grown energy. Fortunately some of the things we need to do about global warming, energy efficiency, renewables, nuclear, carbon capture storage are some of the same things we need to do for energy security. We have set out a framework which we think will deliver that.
Q496 Roger Berry: But if the Government's policy towards the nuclear industry is that this is a matter for the market to decide, but we have a problem of energy security which has to be addressed by Government, I do not understand how on the one hand in relation to nuclear you say you will let the market decide and there will be no intervention, yet one of the reasons we are sympathetic to nuclear is precisely because it gives us greater energy security. You have a policy objective which suggests a policy instrument doing something to support those energy sources which promote energy security, yet you are telling us that you are not going to do that.
Malcolm Wicks: It is because we have confidence that the policy framework we are putting forward will deliver that balance between home-grown energy and imports that we are achieving. We feel that will happen. One exception to this, where we are more interventionist, is with renewables. I do not know whether we are coming onto that. There we have said that we should like to see 20 per cent of our electricity coming from renewables by 2020 and through things like the Renewables Obligation and one or two other mechanisms, grants, we are trying to facilitate us hitting that target.
Q497 Mr Binley: I am sorry, Minister, but I really am confused. Last year the Government promised that they would make a final decision on nuclear for better or for worse and I hear prevarication on this subject which gets cloudier and cloudier. The nuclear energy people tell us that decision needs to be made very quickly because of the timeframe to which you have alluded. Can you tell us when the decision will be made?
Malcolm Wicks: You have not heard prevarication from me because we have said in the Energy Review document that we feel that nuclear should be part of the mix in the future. I have also said - and this is consistent with where we are in terms of the balance between government policy and a liberalised market - that it will be for the market to deliver that. We are now going to pursue a range of consultations to see what barriers there might be in terms of planning, for example, which might get in the way of that. We are not a command economy. Some colleagues here may regret that. We are not in the business of saying there will be ten nuclear reactors, one in your constituency maybe, and we are going to pay for them and lay the concrete and so on.
Q498 Mr Binley: One in yours?
Malcolm Wicks: Possibly. We are not in that business and I doubt you would want us to be in that business.
Q499 Mr Binley: At some stage somebody has to make some decisions about this.
Malcolm Wicks: I thought we had? I thought there had been some controversy about that.
Q500 Mr Binley: I am not sure you have.
Malcolm Wicks: I think we have made a decision.
Chairman: I think you probably have too.
Q501 Mr Weir: The nuclear industry have told us when they came before us and it was reported again at the weekend that pro-nuclear groups have said and agreed that a long-term storage solution for waste needs to be in place before there is any investment in new stations. Do you think that the work of the Committee on Radioactive Waste Management has achieved that as yet?
Malcolm Wicks: It is an expert and very important report and the formal position is that my colleague the Secretary of State for the Environment will be presenting the Government's response to that committee quite soon now.
Q502 Mr Weir: What timescale are you talking about before there is actually a disposal system in place for dealing with historic never mind new waste?
Malcolm Wicks: I think you will see an announcement before Christmas. It is for Defra to say this not me, but that is roughly the timescale. Obviously there is then a process of local communities coming forward with offers of being the site for this. That is the process we are in. We are talking about quite a long period here, of course we are.
Q503 Mr Weir: I appreciate that as much as anyone. Given that the cost for disposal of historic waste has risen from an original figure quoted of about £40 billion to perhaps as much as £90 billion if stories be true, you have told us that there will be no direct or indirect subsidies for nuclear power stations. Is that the same for the disposal of waste?
Malcolm Wicks: Yes.
Q504 Mr Weir: Are you expecting companies to pay for that?
Malcolm Wicks: Yes.
Q505 Mr Weir: Absolutely?
Malcolm Wicks: Yes.
Q506 Mr Weir: Why then in the Energy Review and again when the Secretary of State introduced it, did he use a rather strange phrase "a full share of the cost of disposal"? What do you mean by that? Can you give us an assurance that they will pay all the costs of disposal?
Malcolm Wicks: Yes, they will. We have two things, have we not? We have a legacy of nuclear waste which, perfectly properly as these were state enterprises, the state has to sort out, it is long-term, it is scientifically complex, engineering-wise it is complex and it is certainly expensive. Surely we all agree that given that legacy we have to do something about that. I think that through the nuclear decommissioning authority, which is clearing up the waste from different sites, and the decision which has to be made and will be made by Government about the outcome of the CoRWM report, in other words the final repository for the waste, I can be proud of the fact that we are the first Government tackling this issue. I am ashamed of the fact that governments and parliaments in the past for several decades have dodged the issue. I think that is a national disgrace. We are actually tackling it and it is important. So we are putting that in process and then of course, should the market come forward with proposals for new nuclear reactors, we need to work out a formula so that they pay the full cost of disposing of that waste.
Q507 Chairman: May I just check? "Full cost" is still an elusive phrase. Do you mean the marginal cost of increasing storage capacity to cope with the additional waste generated?
Malcolm Wicks: These are difficult issues. Our objective is that they should pay the full cost. We need to think through exactly what that means in terms of formula and arithmetic. I cannot quote you the figure now. Perhaps Mr McIntyre could explain the process we go through on this with your permission.
Mr McIntyre: I cannot quote a figure either, but the Minister is right that there will be a process now of working with the industry to translate that principle of full share of the costs into practice so that would-be developers of new nuclear build have clarity about what that would mean in practice.
Q508 Mr Weir: Will you then be setting up a fund against a nuclear developer going bust in the future? Will they be putting money in as they go along to make sure that full cost is met?
Malcolm Wicks: These are issues we have to look at, how money can be set aside on a regular basis for eventual costs. That is just the kind of question we need to look at in detail.
Q509 Mr Weir: You have not made a decision on that yet?
Malcolm Wicks: No, we have not. We have to consult on that. I do not apologise for us consulting on that. It is in all sorts of ways a complex question.
Q510 Mr Weir: Everyone we spoke to highlighted the importance of achieving a political consensus on nuclear power before proceeding with new build.
Malcolm Wicks: Including the SNP.
Q511 Mr Weir: I said that "they" said, I did not say I did. Do you think the Energy Review will achieve that consensus or build towards a consensus?
Malcolm Wicks: I am certainly happy to shake the warm hand of the Scottish Nationalist Party on nuclear. This is an historic breakthrough and it will be recorded in Scottish prints as such I am sure, so thank you for that.
Q512 Mr Weir: It is nice to see a minister twisting words into something which was not said.
Malcolm Wicks: I am just being polite and repeating your answer.
Q513 Mr Weir: I asked a question which other people asked about political consensus. Do you think there is any chance of a political consensus?
Malcolm Wicks: I shall make a note of your constituency and consider it. Seriously, I think it is important that the major political parties strive towards a consensus on energy policy, I really do. I shall not comment on Her Majesty's Loyal Opposition's position, but if I have understood it - and I do not always understand it - I think the Conservative Party see a place for nuclear in the right circumstances. Given all we have said about long-term certainty, appropriate frameworks, it is important that we strive for that consensus and I met with shadow ministers, members of the Liberal Democrat Party, now we are going to have a big summit with the SNP on these issues, and that is important.
Q514 Mr Weir: It is news to me.
Malcolm Wicks: The market and, more importantly, the public would demand that of us. These are very important issues. When the history of the twenty-first century is written, not just for the UK but globally, these twin issues, global warming and energy security, will loom as importantly as some of the big issues about war and peace and the rise of the welfare state in the twentieth century. This is absolutely vital and we should not play party politics with it and we shall not.
Mr Weir: I asked a straightforward question. There was nothing party political about it.
Q515 Miss Kirkbride: Can you clarify whether there can be any new nuclear build in Scotland without the permission of the Parliament and therefore your Liberal Democrat colleagues?
Malcolm Wicks: In terms of the planning regime for that scale of plant, this is a matter for Scottish Government because those planning issues are devolved. This will be a matter for those in Scotland.
Q516 Miss Kirkbride: So no.
Malcolm Wicks: It is for them to determine. It is an important British industry, it brings much investment into communities, jobs and it is for the people of Scotland to decide.
Q517 Miss Kirkbride: My question was whether you needed the permission of the Scottish Parliament for new nuclear build and the answer was yes, therefore no, you cannot do without it.
Malcolm Wicks: That is the devolution settlement.
Q518 Chairman: This question of paying for waste is actually quite an important one, as your document acknowledges. I found on page 192 that "Details of the work programme and timetable to establish arrangements for dealing with the costs of decommissioning and waste ... will be published by the time of the White Paper". So actually, by the time the White Paper is out, we shall only know how you are going to analyse the problem, you will not have reached a conclusion on the problem. Is that right?
Mr McIntyre: The wording is "by the time of the White Paper" and the objective will certainly be to have made progress on this issue by the time of the White Paper.
Q519 Chairman: It says "Details of the work programme and timetable to establish arrangements". So by the time of the White Paper we shall have the process by which you will arrive at an agreement. It is actually also a very important issue for the industry to have clarity on costs but it seems that clarity on costs is quite a long way off, if I have understood your document correctly.
Mr McIntyre: There is no specific timetable for reaching agreement on clarity about the costs as yet.
Q520 Chairman: Minister, if you were a private investor, would you make an investment in a nuclear power station not knowing how much the Government would charge for decommissioning and disposal of the waste?
Malcolm Wicks: No, but the investment decisions may or may not relate to the timetable for the White Paper. We just have to get this right. We have to do proper work. We shall be able to give some pretty clear indications by the time of the White Paper of the direction in which we are moving, even if we cannot put all the arithmetic.
Q521 Chairman: I am not trying to score cheap points. These are very important issues for the private investor.
Malcolm Wicks: I know that there is immense interest, indeed suspicion, that somehow Government are really planning to subsidise a new generation of nuclear reactors. I want to make it absolutely categorically clear that is not our intention. I have said that there will be no Treasury cheques, there will be no hidden incentives and there will be no fiscal regimes special to the nuclear industry, there really will not. I am absolutely determined, in terms of these issues about eventual decommissioning and waste, that will not imply hidden subsidies either. Getting to the arithmetic for that principle statement is a complex task and that is not an excuse, it is a complex task. I am absolutely clear that we are not in the business of subsidising nuclear fullstop.
Chairman: We shall move on, otherwise we shall be repeating ourselves. We shall turn to some of the licensing and planning issues now, not just nuclear but also the other energy technologies as well.
Q522 Rob Marris: Starting on nuclear, Mike Weir was asking you about political consensus and we have run that round the block. If we are going to have this love-in, all lovey-dovey consensus on new nuclear build in England and Wales perhaps, why, in terms of nuclear, would we need this pre-licensing and planning reform proposal if we are all going to have our wonderful consensus about new nuclear power stations?
Malcolm Wicks: We have a problem in our countries that large projects - sometimes not so large projects - are just taking too long to deliver, in the case of power stations years and years and years with the whole circus of legal costs and the whole theatre around them. There is a determination, not just across Government but I think many people share this outside Government, that we should have a more sensible and a speedier process and that would go for onshore wind, offshore wind, it would go for nuclear, it would go for a whole range of infrastructure that we need. By the way, you could have this discussion about transport and many other things; we happen to be having it about the important area of energy. What we need to do, given that Britain, one way or another, needs a huge amount of investment in our energy structure over the next 10 or 20 years, one way or another we need a more sensible planning process. I emphasise that this is not to deny local people and local interest groups, environmental and others a proper say about the siting of particular pieces of kit. That has to be maintained. The idea of pre-licensing is that you can say here is a wind farm, here is a nuclear reactor or a gas-powered station let us pre-license it so that the regulators are satisfied that it is safe and all the other things as a piece of kit. Then the local inquiry can purely be about local issues rather than becoming a national or international occasion to re-open the whole debate about whether windmills or nuclear are desirable. That is what we are trying to do.
Q523 Rob Marris: What has the reaction been to that under The Energy Challenge, when you were talking about streamlining the planning process for energy projects, because that is what the DTI is about?
Malcolm Wicks: The reaction from many people in industry, business, trade unions, who know that we need this infrastructure, is a recognition that at the moment planning and the time for planning in Britain is a bit of a joke and we do need to speed it up. I am also sensitive to the fact that some environmental groups think this is just a cover for doing nuclear very quickly and it really is not about that. I repeat that at a local level we need to have the proper procedure for local people to represent local views.
Q524 Rob Marris: Do you think pre-licensing just on the nuclear would actually assist in speeding things up, given, as I understand it, that the design for Sizewell B was pre-licensed?
Malcolm Wicks: Yes, I do think pre-licensing for nuclear, maybe for carbon capture and storage projects, a range of things you could think of, would speed things up.
Q525 Rob Marris: Would you be quite happy with a nuclear power station in Croydon?
Malcolm Wicks: Yes ... if there were a site.
Q526 Mr Weir: I am curious about what you were saying about pre-licensing and pre-licensing the station itself. That often still leaves the question with power and it is the same with wind farms or anything else; it is not just the station but the power lines towards it, the siting of the pylons, all these issues which bog down public inquiries in many ways. Are you looking at doing anything about these? Are you talking purely about the type of station itself?
Malcolm Wicks: No, we are looking more widely at that.
Mr McIntyre: We would be looking at the associated works involved for the transmission network as well.
Q527 Chairman: We will turn now to fossil fuels and gas which have been in the news quite a lot recently. Can I give you an opportunity first of all perhaps to update us on how you think this winter is going to be?
Malcolm Wicks: This winter is going to be the last of two or three winters which we are experiencing where the balance between demand and supply for gas is going to be quite tight. That is what the arithmetic suggests, it is an imperfect arithmetic because much depends on the weather; long may this continue. I do not know what it looks like now, but long may yesterday continue. It is going to be tight and the reason for that is that while on the one hand the good news is - and we have seen a lot about this in the last week - that the Langeled pipeline for the Norwegian gas fields is now open and I had better not say that recently we have been awash with gas because I get into trouble for that sort of language ---
Q528 Chairman: Well they seem to be giving away gas.
Malcolm Wicks: Perhaps in the last week. There are several other developments, including the interconnector, which I know is controversial but it has increased its scale; a number of developments which are good news. There is Centrica's Rough storage facility which had an accident last winter at a critical time and which is now more or less full up. That is all the good news. Against that of course we are seeing the continued decline of gas from the North Sea and the wider UK continental shelf, which is more or less making up for the new supplies. Although I detect rather more confidence and optimism in the air, we as Government need to keep a very tight grip on this. We are in regular contact with all the key agencies, all the key industries in the North Sea, the supply companies, to make sure we are in the best possible place to get through this winter. It would be foolish for a mere Minister for Energy to predict what will happen to price.
Q529 Chairman: The extraordinary events of the last couple of weeks happened at a time when there is no high demand level for gas in the UK. You do not read anything into those negative gas prices in the wholesale market for this winter.
Malcolm Wicks: No. Although we have known about Langeled coming on stream at about this time for a very long time the market has reacted in such a way that has been atypical and it has been a blip. Occasionally the energy market operates in a territory between economics and the psychiatrist's couch and we have been through that era.
Q530 Chairman: You will understand that the Committee are obviously concerned about domestic fuel prices. We have written to all the major gas suppliers asking them to explain their pricing strategy and how they are responding to changing market prices. Is there anything you would like to say about domestic gas prices which must be of some considerable concern?
Malcolm Wicks: They are of serious concern. Within the whole energy debate about big issues of climate change we have to make sure our most vulnerable people are warm enough in the winter, to put it in very simple terms. Obviously rising prices make it more difficult for us to eradicate fuel poverty and that cruel correlation between people being old and being cold. We are very concerned about this. I had noted that our regulator - and that is what he is there for - has spoken in tough language about his need and his ability to keep a close look on what is happening to prices. Alistair Buchanan has said some very strong words. We fully back the regulator in that. We have a regulator and I expect with confidence that the regulator will do his duty.
Q531 Mr Hoyle: Obviously the public are very interested about whether they are going to be warm this winter. Whatever happens the question is whether they can afford to put the heating on. We talk about older people, but there are people with disabilities and there are also families and those are the people it is going to hit the hardest. There is great concern that people are desperate about how they will pay the energy bills over the winter period; that is if the lights do not go out and the gas fires go out. If, everything being equal, the gas continues to flow thoroughly, which we expect, and I recognise what you are telling us, we should not have a shortage, we should be fine, but how will people pay the bills? What we have seen is the price going up and up - yet there is a rumour that gas prices may come down - people have been so frightened about the price of gas that they have entered into two-, three-, four-year agreements that they cannot get out of and yet may not be able to afford to put the heating on. What is your worry?
Malcolm Wicks: I am worried about those very same issues. I recognise that it is not just the elderly, but the elderly in particular always pay their bills and that fear that they may turn the fires off is a very real one that we need to overcome. That is why I have said what I have said about the regulator needing to keep a very close eye on this. Alistair Buchanan, the chief executive, has spoken very strongly about this. I have said that we expect the regulator to do his duty at the appropriate time on this. Meanwhile it is so important that we make sure that the help is available in England through Warm Front and the equivalents in Scotland and Wales to make these homes more energy efficient, which is why we are looking at the energy efficiency commitment. In the last Pre-Budget Report £300 million extra was found by the Chancellor for these kinds of anti-fuel-poverty programmes. All that is important. We have £300 for the over-80s' winter fuel payments, £200 for the over-60s. What we are going to be doing with the Department for Work and Pensions, with whom we do work very closely on this - we have been discussing this recently - is to try to target some of the most vulnerable households and really bring to their attention and enable them to have some of the energy efficiency programmes which are in being. One of the sad things when you look at housing data - certainly when I last looked at it - is that very often the most vulnerable people, not just the old but the old elderly - inelegant phrase - those over 80, are likely often to be in the most energy inefficient dwellings, particularly when they are owner-occupiers or private tenants. We need to target that group with the help that is available.
Q532 Mr Hoyle: Who do you think has let the consumer down? Do you think it is the suppliers or do you think it is lack of government intervention? At what point do you think the Government will intervene. We both know that the lack of storage facilities helped increase the gas prices last time they hit the spike with no spare capacity in storage and we are still below our European competitors. They have many more storage facilities. If the companies are not going to do it will the Government intervene and build them for them and then charge them?
Malcolm Wicks: In terms of who has let the customer down, I explained earlier the circumstances, the circumstances being that we have a rundown of supplies from the North Sea, the wider UK continental shelf; I am advised the rundown of gas happened at a faster rate than many of the experts were predicting several years ago. There is a sense in which the huge amount of infrastructure which is now coming forward, the Langeled pipeline in the first quarter of 2008, the LNG, liquefied natural gas coming in from Qatar, which in time will be 20 per cent of our gas requirement, all that infrastructure is coming into play. All I would say as Energy Minister for 15 months or whatever it has been is that I had rather hoped the market would have responded a year or two earlier than it did. I do not blame anyone; there is a huge global demand and no-one could have predicted prices. That is the situation. In terms of the vulnerable customer, to use that awful phrase, we are where we are and we have to make sure we target the most vulnerable more effectively with the resources we have at present, which are quite considerable in terms of home energy efficiency.
Q533 Mr Hoyle: I totally agree. On LNG I agree with you that we have the ability now to bring in LNG, but we had a ship which was on its way to the UK to deliver some LNG, the Americans put in another bid, the ship was turned round and it did not arrive in the UK. What guarantees can we have in the future that the price will not change on its way here and be redirected?
Malcolm Wicks: Last year essentially the Isle of Grain terminal performed well for the great bulk of the time the LNG was coming in from BP and Sonatrach from Algeria. The Qataris and big companies have invested a huge amount of money in Milford Haven in an LNG terminal and I do not think you make that kind of investment if you are not confident the gas is going to arrive.
Q534 Mr Wright: In terms of the market forces, Ofgem would argue that it is not a dysfunctional market, but what we saw last year was obviously very, very close to an involuntary gas defect in terms of supply to industry at the end of last year. When you came to give us evidence last time you predicted that there would not be the associated problems which were in the press. What we have to look at is what happened in the last week or two when gas was just flooding the market in terms of the price; it absolutely collapsed. Surely that pinpoints the fact that the market forces cannot predict the right amount of gas at the right time. Surely that indicates that we are at the mercy of the industry itself. Quite clearly there has been a massive amount of investment in new lines; you mentioned Langeled, there is LNG, there is the BBL pipeline, all of these pipelines, with the price of the commodity not at a high level. Surely that is going to create a problem for them, therefore market forces cannot determine getting the gas at the right time.
Malcolm Wicks: It is back to our earlier conversation and I shall come to your question in a moment. Let us be absolutely clear that there is no threat in terms of energy supplies to the British household; I just want to make that clear and no-one was implying that. Last year some silly things were said about that. The British domestic customer will get gas.
Q535 Mr Hoyle: Only if they can afford to put it on.
Malcolm Wicks: Yes; sure. I just want to clarify that for those present. One of our numerous consultations is about the adequacy of supply and within that the issue of storage. We shall be consulting on that. I personally think that we need more storage capacity for gas; that is my view. There are in fact ten projects, I had better not say coming on stream because planning permissions may interfere with some of them, but the industry is investing a lot more in storage. Do we need more storage than we have had in recent years? Yes, we do and we need to talk to the industry about that. In very simple terms, what has happened is that there was a time when we could rely on the North Sea as a natural store: we now have to be slightly smarter than that because we cannot rely on that historically going forward. We need more storage capacity and there are other supply issues we shall be consulting on.
Q536 Mr Wright: Is it not a fact that the high price we are now paying for the energy costs, at a time when there is a glut of gas on the market is because the system is actually not functioning as it should be, therefore the consumers are paying a high price for what is really a dysfunctional market?
Malcolm Wicks: Let us remember that for ten years, that kind of period, the liberalised market delivered lower prices than in most of Europe both to industry and the domestic customer. It is only in the last year or so that we have run into some difficulties. It is still the case - though I shall check this and clarify it - that our domestic householders are paying lower costs than the average in Europe. I think that is the position. Let us put that in context. What is dysfunctional is the European energy market. There is no doubt about that. It is the policy of the European Union to have a liberalised market, in other words proper competition, no monopoly or duopoly situations, proper competition. We have it in Britain and in many other parts of continental Europe we do not have it. That is an ongoing thing that the UK Government is pressing the European Commission on and our partners in Europe. We have two European Commissioners who have made strong statements about this; not just statements, they have had dawn raids against some of the companies, seizing documents. There is real determination at Commission level to liberalise the market. That is important because we all know what happened last year with the poor old interconnector. The interconnector was a perfectly decent project, a feat of engineering, but when our prices were sky high on the spot market the gas was just not flowing in through the interconnector in sufficient quantities. That was a delinquent market, it was not behaving properly because of restrictive practices and we are pressing very hard on those issues.
Q537 Mr Bone: We are going back to what the Minister was very kindly talking about when he last came to see us.
Malcolm Wicks: Yes.
Q538 Mr Bone: It was perhaps a little unfair earlier on when a member asked whether the problems were the Government's fault or the industry's fault. I think part of the problem lies with the EU. You were going to go into battle on behalf of the country and the Energy Council. How would you say we are doing out of ten with our challenge to Europe to do what it is supposed to do? Are we five out of ten, eight out of ten or one out of ten?
Malcolm Wicks: I am being serious now and for our commitment on this I would give us modestly ten out of ten because that is the highest mark I can award on your points system. Seriously, when we had the presidency of the European Union we pressed this, it was top of the agenda in all sorts of ways.
Q539 Mr Bone: And absolutely nothing has happened.
Malcolm Wicks: I think we are seeing results. You have the two Commissioners now who produce strong reports. I know that you are a fervent European and something has happened. We have had the dawn raids, they have seized documents. That is pretty tough from the European Commission. They have seized documents and they are determined to do this. I am trying to be honest about all this now.
Q540 Chairman: Being as honest as you are able to be.
Malcolm Wicks: I am sure the minute will be amended to "being as honest as always". The other thing which has happened which is more worrying is that since the spat between Russia and the Ukraine you have seen in certain countries a rise of a new kind of energy nationalism, a more parochial concern. We shall just have to see how these two forces battle each other out. From the UK point of view, we are absolutely determined. Why? Actually this is good news for European industry, it is good news for the European domestic customer because the record in Britain, over ten years until recently, has shown that this produces much lower prices and we want it for Europe, we want it for Britain.
Q541 Chairman: We all accept that the European market is dysfunctional, we all know it is going to take a long time to sort out the dysfunctionality, there are long-term contracts to be unwound, a mass of complex investigations to be undertaken, it is not going to be a quick fix. We started too late in the process, but we shall get there in the end. The British market is also dysfunctional, that is what we have seen recently, is it not? We have a problem of our own as well, as Tony Wright was highlighting.
Malcolm Wicks: I am not sure I would concede that. What I would say is that we recognise that there are issues around supply and there are issues around storage which we are consulting on.
Q542 Chairman: We shall now turn to fuel poverty.
Malcolm Wicks: We touched on it earlier.
Chairman: We shall touch on it at greater length.
Q543 Roger Berry: I understand the deep involvement of DWP in all of the work of this review, although in over 200 pages of the review we have four and a half pages on fuel poverty. I would be the first to acknowledge the enormous amount the Government have done thus far in tackling fuel poverty, there is no question about that, but does the Minister not agree with me that in terms of new proposals this review is a little thin?
Malcolm Wicks: There are two or three aspects to tackling fuel poverty. One is the price issue of course. What we have seen is very considerable progress. I am trying to find the figures here about the number of households in fuel poverty. We can talk about the definition but we are down from 5.1 million households in 1996 in fuel poverty to 1.2 million in England more recently. Of course the line on the graph paper starts to move in the wrong direction because of rising energy prices, hence our need for the regulator and more supplies and these big macro issues as well as those regulatory issues that we need to touch on. There are no quick fixes on that. Secondly, we need to move forward on income maintenance. When I was Pensions Minister the development of pension credit particularly aimed at the poorest householders, particularly the older elderly, was very important. Winter fuel payments have been crucial because, given the fear of the bill arriving, the arrival of the £200 or £300 shortly before Christmas does give some comfort. It will be for the Chancellor to look at future provisions in that direction. Then of course we need to move forward on the home energy efficiency schemes, the Warm Front, the energy commitment, all of these fronts.
Q544 Roger Berry: Which is why I acknowledged all of that and sang their praises and asked where we go from here. The specific emphasis in the review is people eligible for pension credit aged over 70. Presumably, given that you cannot control gas prices, the three things you can do are: the level of pension credit; the extent of take-up which is referred to; and thirdly energy-saving measures, Warm Front and so on. Given that of this group, as your report points out, one in five of people eligible for pension credit over 70 are living in fuel poverty, which of these three instruments will give us the biggest bang, the biggest result?
Malcolm Wicks: It is a balance between them all, is it not? You cannot just say one of the three, to be honest. In the long term thermal efficiency and enabling people to have drier and warmer homes through new appliances, through loft insulation, all of those things, maybe using renewables and microgeneration to tackle fuel poverty, which is something I want to develop. That is important. The Energy Review was not the place - and you will understand this - for us to make public expenditure announcements and budgetary announcements. That is properly the province of the Chancellor of the Exchequer not the Energy Review.
Q545 Roger Berry: There are possibly just one or two financial implications of this review, but if these are ones which have to be deferred, so be it. The question was actually a factual question. The Department for Work and Pensions must know, for example, if you had 100 per cent take-up of pension credit for this group, how many it would take out of pensioner poverty. That is the kind of information which would be useful. If that practically solves the problem them you have some idea about the solution. If it is Warm Front type measures, could I ask you specifically, given the approach in winter, where there is concern obviously, are the Government contemplating fast-tracking people in this group in terms of Warm Front?
Malcolm Wicks: That is what we are trying to do.
Q546 Roger Berry: Is there a commitment to fast track, because it is not in this document?
Malcolm Wicks: I do not know that fast track is the right term because that suggests a queue-jumping thing.
Q547 Roger Berry: For reasons you have given this is a particularly vulnerable group of people.
Malcolm Wicks: Of course they are; of course they are. We want to identify more people on pension credit who could benefit from the help of Warm Front and the equivalent in Wales and Scotland so that we can get the process moving just as quickly as possible. That is what we are doing. I spend a lot of time trying to improve the take-up of pension credit and it is not for this Select Committee but the take-up rate is very good, particularly amongst the poorest and so on. It would bring a lot of extra money to people. Even if you did move to a 100 per cent take-up, it is not going to solve the problem of fuel poverty. It is one answer, but it is only one answer.
Q548 Roger Berry: Which would suggest, although obviously you cannot say anything this morning, that the Chancellor ought to look at the level of benefits for people over 70 as well as the energy saving measures. In paragraph 2.110 the report says "We recognise that older households in receipt of Pension Credit are not the only group suffering from fuel poverty. We will consider rolling out this approach to further identified vulnerable groups after this winter". Is it possible to give the Committee a clue as to who these other vulnerable groups might be that you have in mind?
Malcolm Wicks: Clearly, although there is a particular concern about the elderly, particularly those over 80, say, because physiologically they are less resilient when it comes to the cold - you may recall that as a young man I did some research on this problem myself - but there are clearly others with disabilities of different kinds, some families with young children living in appallingly insulated dwellings. These groups are of concern too; of course they are.
Q549 Roger Berry: This Committee and others have pointed out that there is a very large number of severely disabled people who, for example, have mobility impairments and therefore if it really is a winter fuel allowance and not simply an alternative way of topping up the basic state pension, it really is meant to deal with people who face a winter fuel crisis. I welcome the fact that you have said the Government are considering extending support to groups such as that.
Malcolm Wicks: What I have recognised is that it is not just the elderly who are vulnerable and obviously there is a debate as to whether that income maintenance for some of those groups is best delivered through disability benefits of different kinds or in other ways. I do not think I have arrived at the conclusion that you would like me to on that one.
Q550 Roger Berry: I think you are getting closer, are you not?
Malcolm Wicks: I do not think so. That is another ministry I used to be in and another select committee I used to be a member of.
Roger Berry: May I just emphasise that I really genuinely do believe that the attention in this review given to fuel poverty in terms of new proposals is a bit thin? If it is waiting on the Treasury, so be it, but I very much hope you will take some of these comments on board which I know have been raised with you by some organisations outside this Committee as well.
Q551 Chairman: Speaking as someone whose fuel bill is going up very sharply this winter, despite insulation and a condensing boiler ---
Malcolm Wicks: I do not think you are in our target group, but I shall check.
Chairman: My point is that I should like to see the extra VAT I am going to be paying the Chancellor in higher fuel prices directed back to vulnerable groups. The Chancellor is making extra money so he has more money to spend on those vulnerable groups.
Q552 Mr Weir: This particular phrase struck me as well, "after this winter". Given that we are told that the supply situation with gas will stabilise after this winter, Scottish Gas - I presume British Gas down here - are guaranteeing price falls next year. Why is it after this winter, which is obviously going to be crucial to many people who have had huge increases in bills over this year before you are looking at rolling these out? Are you not prepared to look at these for this winter to help people now rather than when prices start to fall next year?
Malcolm Wicks: Let us remember that these home energy efficiency schemes in Scotland, England and Wales are there already; they have helped many hundreds and thousands of people in different circumstances and they remain there. It is the task of different agencies, statutory and voluntary, to find people who need help. That work continues. What we are saying is that on top of that, for this winter, we are mounting a special initiative to identify some of the most vulnerable elderly people who might need help. This is not the only weapon in the armoury in terms of trying to help these people.
Q553 Mr Weir: Yes, but you specifically identify other vulnerable groups, but you are not doing anything for them this winter according to what is said here.
Malcolm Wicks: I have just explained, have I not, that through the existing programmes many of those people are being helped? On top of that there is going to be a special initiative for the vulnerable.
Q554 Mr Weir: What about the winter fuel allowance which was mentioned earlier which is important for many pensioners and we all concede that?
Malcolm Wicks: Mr Berry pushed me on that one and I shall not hide behind the fact that I am no longer in that Department. There is a perfectly legitimate argument which would say that for many of those vulnerable groups there are other income maintenance measures: the range of disability benefits; for vulnerable families the tax credits and child benefit and the rest. I understand the argument.
Q555 Chairman: They are not going up on quite the scale of the fuel bill yet.
Malcolm Wicks: There is an argument that winter fuel payments should be extended to other groups and it is not for me to enter into that argument today.
Chairman: It is nice to have that on the record.
Q556 Rob Marris: I just want to focus a bit more on the Warm Front thing. In light of our earlier discussions today it appears a bit contradictory to be handing out money to people to burn more fuel when we are trying to protect the environment and the way to square that circle is on the Warm Front kind of initiatives in terms of energy conservation. I wonder whether I could get an undertaking from you, because what seems to be happening in my area is that Warm Front use very expensive contractors. There is a threshold for the amount Warm Front will pay out for a pensioner and the amount of the bill above that threshold is sought from the pensioner himself or herself. Clearly if Warm Front are using expensive contractors the proportion of cases where a personal contribution is sought from the pensioner will rise. It appears - and I stress the word "appears" - to be a racket. I am still trying to get somewhere with Warm Front on why they use the contractors they use and the prices they charge. I wonder whether you could give a little help from your end to look into this because of course if - and I stress the word "if" - high prices are being charged by the contractors, they are ripping off the taxpayer as well as the pensioners.
Malcolm Wicks: If you have evidence of a racket, I should like to see it. We cannot have any racketeering in this area.
Rob Marris: I should like the Department perhaps to furnish the Committee with what oversight you do to make sure there is no racketeering, what structures are in place to make sure that exclusive contracts are not signed.
Chairman: We did not tell you we would be asking this question so it would be helpful if you could give us a note on this aspect of your procedures.
Q557 Rob Marris: No, I was not asking for an answer today.
Malcolm Wicks: I shall take that away. Many of us as constituency MPs have visited homes of quite vulnerable people when this work is done and nearly always with beneficial results and happy customers. It is awful to think that some of those vulnerable people could be subjected to racketeering, should that exist. I shall look at the oversight and the monitoring, of course I shall.
Q558 Rob Marris: I wish to make it clear that I support the scheme. I think it is a good scheme, but I just wanted a note on what oversight there is to try to prevent any such racketeering.
Malcolm Wicks: Right; we shall do that.
Mr Hoyle: You pointed out that people like the Chairman do not need the winter fuel allowance, but many MPs actually receive a winter fuel allowance. Maybe we would be better off looking, via your good offices in speaking with the Chancellor, at certain groups who ought not to be getting this money and we ought to give it to people who are much more in need, such people as those with disabilities. Maybe we ought just to re-look at that so we can actually re-circulate the money to where people need it.
Q559 Chairman: We shall take that as a statement unless you want to respond Minister.
Malcolm Wicks: I think we should say for the chronological record that the Chairman is not yet eligible for winter fuel payments and judging by his appearance many years will elapse before he is eligible.
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 per cent 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 per cent 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 per cent of our electricity generation comes from coal annually. Last winter it was more like 50 per cent 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 per cent 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 per cent 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 per cent 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 per cent of our domestic gas requirement. The Langeled pipeline from the Norwegian fields could produce another 20 per cent. 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 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 common sense. 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 have 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 re-connect 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 per cent 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.
Q580 Mr Bone: Is that the best I am going to get?
Malcolm Wicks: That is pretty good actually.
Q581 Chairman: I mean this in the nicest possible way, but you do not strike me as the most aggressive of ministers.
Malcolm Wicks: No, I am the most amiable especially before select committees after almost two hours.
Q582 Mrs Curtis-Thomas: When the National Grid came to give us some evidence earlier on this year they talked about what they would need to do in order to allow microgeneration systems to link up to the grid. They talked about a £1 billion plus investment - £3 billion - which was needed in order to link microgeneration back into the system and they also cited it as a major inhibitor for the development of microgeneration. Given that, you have talked, wonderfully by the way, about the type of grants which are currently available to people living in domestic dwellings for microgeneration systems. You talked about £80 million, but that comes down to a 50 per cent grant and I know quite a number of people who have taken up that particular option. That is fine, but the level of investment needed in the grid is substantially more than that. How do you see a continued expansion in microgeneration within the context of a network which is not actually geared to take any spare capacity which may derive from that?
Malcolm Wicks: I would need to talk to National Grid, as we do of course, on this particular issue to make sure we are using the same language of microgeneration.
Q583 Mrs Curtis-Thomas: It is fairly easy. Most engineers in this country know that linking up a nuclear power plant is not difficult, but if you have numbers four, six, ten and 12 Bartholomew Crescent also wanting to link up to that system, then it seems to be that there is a fundamental problem. They can use the energy within their own establishment, but they cannot export it out and back into the grid. That is really what we want to see, is it not?
Malcolm Wicks: Yes, we do. It involves things like smart metering as well so that the customer can see what is being used. When I say I do not recognise that figure I am not saying it is wrong or right; I just need to talk to them about that. Generally we recognise that in terms of broad approaches to renewables and microgeneration, yes, of course there are quite important challenges for National Grid and local wiring systems.
Q584 Mrs Curtis-Thomas: I think those important challenges have very, very big numbers attached to them in terms of the investment required. At the moment the lack of investment is probably impeding the development of microgeneration systems.
Malcolm Wicks: I am sure there are people already, but I shall check this, who are already selling back to the grid without massive investment.
Q585 Mrs Curtis-Thomas: That may be because of where they are located. I am only telling you what National Grid actually said when they came to give us evidence on this matter.
Malcolm Wicks: I had better check the record on that and pursue that.
Q586 Mrs Curtis-Thomas: Your encouraging words with regard to the adoption of microgeneration as far as schools are concerned is very, very encouraging and the marvellous programme we have for building schools for the future means, for instance, that every school in Knowsley is going to be demolished bar one and new schools built. My understanding is that at the moment the contract documents for those schools do not stipulate that they need to be environmentally friendly. So we can talk about it and say how commendable this is, but there is massive public investment going into new buildings now. Mass creation is one thing, but actually embedding that requirement into a contract appears to me to be very, very different. You talk about getting other departments to do their bit, but how does this actually translate in this massive building programme?
Malcolm Wicks: It translates very clearly. I have met with the appropriate Education Minister - it was then Maria Eagle, who is now Sustainable Development Minister - about this very issue. I can assure you that the Department for Education and Skills are very much seized by this and they are going to be doing it. They recognise that we have a fantastic opportunity in what is a massive school building programme to make sure that ---
Q587 Mrs Curtis-Thomas: Minister, may I just interrupt? "Make sure that they are doing it" is not actually translating into "they are doing it". What I should like to do is to get some Parliamentary Questions put down so that we can see exactly how many of those new schools have actually implemented this excellent technology. That investment should be put to better use and I certainly want to see where the truth of the situation lies in comparison to the rhetoric on this important matter. We need that assistance.
Malcolm Wicks: May I suggest that I shall certainly draw this to the attention of the Education Minister responsible and your Committee will probably do this? I have been very impressed by their whole approach on this and they see this as a major opportunity, whereas, more modestly, I see what we can do with some microgeneration money as a way of putting it on some existing schools, those which are not going to be rebuilt to give the children that education opportunity.
Mrs Curtis-Thomas: I agree with that.
Q588 Chairman: This word "microgeneration" is defined in the Energy Act as generating heat and electricity, but when people hear the word "generation" they imagine we are talking about electricity. In microgeneration you would say that heat production is if anything possibly more important than electricity generation, would you not?
Malcolm Wicks: Yes, indeed. Solar panelling is about warming up water, very successfully I am told, and of course within the array - I do not mean this pejoratively - of weird and wonderful micro technologies it seems to me the heat pump is a very interesting development, reasonably popular in many continental European countries and just beginning to get into market here.
Q589 Chairman: If social housing units were built with ground heat source pumps in, you would find the people of England would not have any gas bills to pay. There are extraordinary opportunities there.
Malcolm Wicks: It is notable that you have a number of progressive authorities, Croydon under Labour control, now I think changed party, I cannot recall, Merton, a number of local authorities ---
Q590 Chairman: And Woking under Liberal Democrats.
Malcolm Wicks: I am sure one or two of those. --- who now say that any new construction under a certain number of dwellings - I cannot remember the figure - has to have 10 per cent of the energy coming from renewables. The Department for Communities and Local Government are looking at that and the Mayor's Office in London and all that.
Q591 Chairman: There are just lots of words floating around here. I do not think the vocabulary is clear and helps. Your energy report talks about distributed energy, the Act refers to microgeneration. I do not think people know what this is. There is a need for clarity of language here, is there not? This is not a criticism of you; we have to find a new vocabulary to express what it is.
Malcolm Wicks: I like the idea of a lot of words floating around a select committee. You are right except that there is a family of things here. The thing I saw in Copenhagen, a whacking great power station doing wonderful CHP, was local at one level, for much of Copenhagen but rather different from the windmill I want to put on my roof.
Chairman: I am more interested in a solar panel on mine, but having a listed building they will not let me of course.
Q592 Rob Marris: Who built and paid for that power station in Copenhagen? Was it private sector or public sector or private with public monies in it?
Malcolm Wicks: I think private sector but with encouragement from public policy. I am sorry but I am not at all sure.
Q593 Chairman: I am sure Greenpeace are listening to this session and I am sure they will write to Mr Marris and the Committee to tell us more about that power station.
Malcolm Wicks: They will.
Q594 Chairman: May I just bang a particular drum? I was very disappointed by your lack of ambition in the document for micro-hydro installations "limited by the availability of suitable locations". I should just like to draw your attention to Worcester city, where I live. Powick Mills on the Teme had a hydro station in 1894 which produced electricity for half of the city until 1950. Fladbury Mill in my constituency produced electricity for the whole village until the mains came there. There is a lot of opportunity here for micro hydro. Can I encourage you to be a bit more robust?
Malcolm Wicks: It was remiss of us not to mention that example in the Energy Review document.
Q595 Chairman: It was.
Malcolm Wicks: It does remind us, doest it not, that the water mills and all of those things were there centuries before someone came up with the terrible term "distributed energy".
Q596 Chairman: Exactly. The idea that hydro all comes from big dams in Scotland is misleading. There are lots of local English opportunities and Welsh opportunities to do it. Finally may I just clarify? Do you know whether the Leader of the House has any plans to give the House a debate on the progress on the Energy Review? Is that something you are pressing for?
Malcolm Wicks: I do not know of any plans. I should certainly welcome such a debate.
Q597 Chairman: It would be helpful to have a debate before the publication of the White Paper certainly; it is such an important subject.
Malcolm Wicks: I should welcome a debate. Certainly we have not really had the time today, have we, to explore all the issues?
Q598 Chairman: No; exactly. The timing of the White Paper again? Are you prepared on reflection to give us more clarity about the timing of the White Paper?
Malcolm Wicks: Yes, I can do that: next year.
Chairman: An honest answer anyhow. Minister, thank you very much. We have put you through not the windmill but the mill today and you have responded magnificently. Thank you very much indeed.