UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 876-vii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

WELSH AFFAIRS COMMITTEE

 

 

ENERGY IN WALES

 

 

 

MONday 8 MAY 2006

 

National Assembly for Wales

 

MR ROBERT COTTAM, DR JOHN CONSTABLE, MR CAMPBELL DUNFORD

and MR PETER SOUTHGATE

 

MR ANDREW DAVIES and DR RON LOVELAND

Evidence heard in Public Questions 662 - 734

 

 

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Oral Evidence

Taken before the Welsh Affairs Committee

on Monday 8 May 2006

Members present

Dr Hywel Francis, in the Chair

Nia Griffith

Mr Martyn Jones

Albert Owen

Hywel Williams

Mark Williams

________________

Memoranda submitted by All Wales Energy Group

Examination of Witnesses

 

Witnesses: Mr Robert Cottam, MBE, Chairman, Dr John Constable, Policy and Research Director and Mr Campbell Dunford, Chief Executive, Renewable Energy Foundation, and Mr Peter Southgate, Committee Representative North Wales, All Wales Energy Group, gave evidence.

Q662 Chairman: Welcome to the Welsh Affairs Committee. We have a very tight schedule; the Minister is coming at two o'clock, so we will try to get this session over by then. Can you tell us a little about your group, your aims and objectives, and how you interact with the National Assembly for Wales and the UK Government?

Mr Cottam: As Chairman, I will attempt to answer that question. However, can I say that I thank the Committee very much for asking us to attend and for giving us the opportunity to express our views on the research we have undertaken? The All Wales Energy Group was founded in 2004, initially in response to a need for factual, scientifically researched information applicable to the growing wind-farm debate. Both proponents and opponents often exaggerated sometimes claims regarding wind turbines and their efficiency or otherwise. Its membership is made of both individuals and groups who share a concern over global warming and the need for effective policies in the use of resources, which will result in significant reductions to greenhouse gases and their emissions. To this end, AWEG commissions research, publishes papers and circulates reports. Over 35 local groups from around Wales subscribe to membership, in addition to individual members. Most groups have a membership of over 100, which puts AWEG membership at well over 3,500. AWEG is affiliated to the national charity, the Renewable Energy Foundation, and it has a seat on the Foundation's steering committee. AWEG has submitted numerous communications to the Welsh Assembly, its ministers, members and officers, including a presentation to the National Assembly's Sustainable Energy Group. Since AWEG's and the Renewable Energy Foundation's written submission to the Welsh Affairs Committee's inquiry into energy last November, there have occurred several notable developments, namely published research on the quantifiable carbon emission debt incurred in the construction of upland wind farms prior to operation, and the quantifiable absorption of CO2 by conifer plantations. Of most significance, following the gas crisis earlier in 2006, both in the UK and abroad, with Russia for example, has been the increasing emphasis on the need for security of energy supply. Finally, the DTI have now published outward data from wind turbine sites, which fall significantly below the British Wind Energy Association's promises. That gives you a broad outline of what we are about.

Q663 Chairman: One question occurs to me. How do you relate to this newly-formed Welsh Energy Research Centre?

Mr Cottam: We do not relate at all. We have not been asked to contribute or help towards it.

Q664 Mr Jones: Where does your funding come from? I know you have the Foundation, but where does the Foundation funding come from?

Mr Cottam: It is a charity. I will ask Campbell to explain.

Mr Dunford: The Renewable Energy Foundation is a charity. All of our funding comes from private donation; we have no corporate funding or any individual interest at all. Our purpose is to commission and publish research into all forms of renewable energy to make data available to the media, to the administrators and to the public on all matters surrounding energy, wherever we can. To that extent we have liaised closely with AWEG, as we do with sister groups elsewhere in the country and in Scotland, for example.

Q665 Mr Jones: So individual donations.

Mr Dunford: Individual donations entirely.

Q666 Mr Jones: And you cannot name who they are!

Mr Dunford: Some of it is in the public domain. If you look at our accounts you will see, for example, that large benefactors include major land-owners; those who are successful industrialists; those who have been concerned about energy policy, the effect upon, in some cases obvious things like landscape; but more fundamentally, the availability and cost of energy to the UK economy and its well-being. If you would like me to give you individual names, I can do that.

Mr Jones: No, that is fine.

Q667 Albert Owen: You remind us in your written evidence that energy policy is not devolved to the National Assembly for Wales, and thereby you assume it has been dominated at a UK level. Can you explain to us how this works in practice?

Mr Cottam: There is a distinction between Wales and the national government. It is as if energy policy is formed at a national level but ----

Q668 Albert Owen: You mean the UK?

Mr Cottam: Yes, but it gets affected in many ways by the devolved government. A clear indication that it can, unfortunately, is wind energy, where the form of renewable obligation certificates gives it quite a significant sum of money, raised from electricity consumers fundamentally; and yet the Welsh Assembly has no input on this. The renewable obligation certification system is a UK-Government decision. However, the Welsh Assembly disposes of policy because it is responsible for planning, so it has changed the planning guidelines to facilitate the implementation of the renewable obligation certificates and to accelerate their use. There is one example. Another example perhaps would be the DTI: it changes its research, or its facts and figures, in justifying decisions which it makes and recommends. For example, it was believed that wind energy had a carbon emission saving of 0.86 tonnes per megawatt hour, whereas the DTI might have thought that two or three years ago, but certainly two years recommended a carbon saving of 0.43 tonnes per megawatt hour, which is half. In other words, it came out two years ago, saying these wind turbines were half in carbon emission savings; yet when planning policy was implemented through TAN 8, still the 0.86 figure. There is necessarily a time delay, is there not, between legislature and the DTI and as it feeds through to the devolved government? That is just an example; there are other examples in other lines of inquiry.

Q669 Albert Owen: You have given some good examples, but as a group do you think there should be greater co-operation between different levels of government in the UK, or do you think energy should be devolved through the National Assembly for Wales?

Mr Cottam: It should be one or the other. I would quite like to see either.

Mr Dunford: The reality is that we are an island, and an island that is running out of energy of all sorts and forms. It is, in our view, something of a luxury to try and plan any form of energy, renewable, fossil or otherwise, totally in isolation. There are grid connections; there are fuel poverty implications, and you need an overview. Against that we would also say that as much should be done at a local level as possible because that is also healthy.

Q670 Albert Owen: You are advocating greater co-operation.

Mr Dunford: Indeed

Dr Constable: If I could refer the Committee to the Renewable Energy Foundation's submission to your inquiry and to our paragraph 1(a) talking about UK Government policy in relation to current and future energy needs in Wales, we note that it is a matter for concern from our perspective that UK energy policy is not regionally tailored. It tends to regard renewable energy resources and others indeed, in Scotland and Wales for example, as common UK properties to be exploited at will. While we accept of course that the overall national good may be seen as having weight in this context, we are concerned that particularly in relation to renewable energy resources, this breaches what we take as a golden rule of sustainable development, which is that a development should be beneficial to all parties at the relevant proximate level; and that distal benefits - benefits at a distance - should not be invoked, or not invoked carelessly. In our response to the Energy Wales Route Map, for example, we discussed this in some detail, noting with great pleasure a remark by Andrew Davies on sustainable development. He wrote: "In its fullest meaning sustainable development is a powerfully humanist concept centred on the needs of individuals, families and communities within the environment they inhabit." That is laudable. We observe that it would be welcome in the light of Mr Davies's remarks, if policy were clearer in its emphasis on the need to ensure that renewable energy development delivered secure and certain local benefits, in addition to whatever distal benefits it might deliver.

Q671 Albert Owen: You mentioned the Welsh Assembly Government Energy Route Map, and your written submission focuses considerably on this, but you are quite critical of it. You claim that it fails to take a holistic and inclusive approach to energy policy. Can you explain what aspect you feel has been neglected from the Route Map?

Mr Southgate: It is incomplete. It left out transport, which is the sector with the fastest-growing emissions. It is no good thinking that the matter of electric generation is an entirely separate issue to transport; it is not. It might be if you looked at it in a conventional way, but in terms of what is going on in the world at the moment, it jolly well is not. How on earth can you have a coherent policy when it leaves out one of its most important sectors? Another point is that because of what one can only describe as a bias that has grown over the last three years - and you can see it in the Assembly's own documents - towards large-scale onshore wind, then you have an imbalanced view of what can be achieved by using other technologies. I have written I do not know how many letters to ministers, pointing out that we could have tidal generation and wave generation now. They keep saying, "It is going to be ten years down the line". I am getting this letter back from a minister, when turbines are being built in Scotland by a company that is half Welsh - Camco. It is ludicrous. The commercial reality at the moment is that there is a whole raft of possibilities open to us. The real effect of Welsh Assembly policies is to hold this up because it has had such a blinkered view of what is available and what could be done.

Q672 Albert Owen: Thank you for that. You are clear that transport has been omitted and that there is a bias towards wind farms; but do you think the Route Map can influence the UK's energy review?

Dr Constable: I have no doubt that remarks made in Wales in relation to Welsh potential will be highly significant to the NGT energy review. Peter mentioned tidal projects: Wales has unique access to tidal projects, and they certainly are available now. Korea is currently building the world's largest tidal system in the Shihwa Bay; it is a 250-megawatt plant, and that is expected to be complete by 2009. This is immediately available. I suspect that if Wales were to take a proactive view on tidal energy, that would greatly reinforce those arguing strenuously for it in London, as many people are, as you must know.

Q673 Albert Owen: What would you like to see the Energy Review conclude? Obviously there should be more tidal instead of wind, from your perspective, but are you pro-nuclear, for instance?

Mr Dunford: We believe the first thing that must be done is that there should be a realistic understanding of what renewables can and cannot achieve. We believe that renewables have been hugely oversold in terms of people's expectations, both in parliament and among the general public. Realistically, therefore, we need a renewables menu of things that are achievable now and which are applicable to Wales and the United Kingdom as a whole. Among those we would put tidal and solar high, much much higher than they currently are. We would certainly encourage micro-generation, which is a huge area that is virtually unexploited in this country at the moment, unlike other economies; and of course the one area that is hugely overlooked is energy-saving. As a country we pay lip service to it, but there is no co-ordinated attempt to deal with energy saving. We also come to conclude, though we are the Renewable Energy Foundation, that renewable energy by itself can only make a contribution to the energy needs of this country, and we need a very mature re-examination of the other sources of energy that are available to us. In particular we need to have a much better use of fossils. We have been spending a great deal of our time on what you can refer to, as the Chief Executive of Shell does, as the green fossil; that is to say to make better use of coal in particular. We have so much of it; it is a vastly under-utilised resource; and the technologies to make use of that in a clean, constructive and environmentally friendly way, exist. That is what we would like to see.

Dr Constable: I refer you to our formal submission to the Energy Review in which we lay out a number of criteria, which we would like to see more firmly applied in UK energy policy, particularly in relation to renewables. The main criterion is an emphasis less on gross energy and more on timely delivery; in other words on power rather than on energy in the technical sense; and thus on renewables that are capable of firm generation. We believe that lack of banding in the renewables obligation is a very serious flaw. I am pleased to see that this weakness is now quite widely acknowledged, and I draw your attention to a very interesting exchange between Mr Mark Lancaster, MP for north-east Milton Keynes, and the Energy Minister, Malcolm Wicks, on Thursday. Mr Lancaster asked: "Does the Minister agree that we need to reconsider the renewables obligation, which focuses on wind power to the detriment of other emerging technologies?" The Minister responded: "Yes, I agree that the renewables obligation, despite its strengths, which have brought forward much renewable energy, could appear to be a blunt instrument, and certainly seems to be favouring one technology. Within the review we are therefore considering the issue that the Honourable Gentleman raises." That is very welcome indeed. We would like to see a broad spread, and we would like to see wind within reason, with much more emphasis on offshore wind. The BWEA published a long report recently indicating that offshore wind is in great difficulties - it is - and we acknowledge that those difficulties require government intervention to ensure that they are overcome. Offshore wind does have a lot to offer: the load factors are high and it can be brought into close proximity to centres of load; and if combined, as we are now arguing, with storage technologies, it could offer a higher degree of capacity credit and possibly a degree of firm generation, if well designed. But it probably only makes sense offshore. The main emphasis I would like to see in the Energy Review in relation to the renewables obligation banding is to encourage firm generation from renewables, and overall much more concern with balance.

Q674 Nia Griffiths: Can you express your dissatisfaction with the current system of renewable obligation certificates, and can you say what you would like to see come through now from the DTI?

Dr Constable: The obligation is complex but, as the Minister says, it is a blunt instrument. It generates a very considerable revenue stream, approximately 1 billion a year, extracted indirectly from electricity bills. The system itself makes no distinction between the intrinsic merits of renewable technologies. Consequently investors have done what investors must do; they have sought the least capital-intensive ticket to the gravy train. There is nothing strange about that and nothing personal about it; it is just business. Initially that was landfill gas, which is a good technology. Perhaps it was somewhat over-rewarded under the RO, but it is firm generation and it was burning methane that would otherwise have been released to atmosphere. The next cheapest technology in the list is onshore wind. The problem is that all the investors have concentrated on that to the exclusion of others; so when Mr Lancaster asked whether it is damaging other technologies, we all now that it is because those technologies simply do not get attention from capital investors. Campbell and I meet these capital investors on a regular basis, and they say: "Would you do anything different?" I suppose we would have to be honest; we would not, would we, if we were sitting in their chairs? The system has to incentivise capital to move towards technologies that happen to be more capital-intensive and which have higher intrinsic merit, for example tidal and biomass.

Q675 Hywel Williams: Dr Constable, in reply to Mr Owen you referred to "appropriate proximal level" in terms of costs and benefits for decision-making. How would you define that? Is there a definition that you would favour?

Dr Constable: I would like to see the categories mentioned by Andrew Davies as receiving benefits, so families, individuals, possibly abstract units, but concrete individuals where it is equitably distributed between local communities, both in terms of income and also benefit. For example, in Denmark, biomass heating plants generally speaking not only generate electricity, if they do; but they provide district heating to local communities.

Q676 Hywel Williams: Mr Dunford, you listed wave, tidal, micro-generation, fossil developments, saving and conservation as parts of the energy mix. Are there any of those that you would like to add, and also crucially how should these technologies be best promoted by the Welsh Assembly Government and the DTI?

Mr Dunford: The other obvious additions, as Peter said, would be in the transport area and in the agricultural area; and we can enhance our security of supply, reduce our imports and improve the environment by accelerating the use of bio-fuels. For example, it is perfectly possible to supply 5% of the total UK petrol burn at the moment from the amount of wheat we currently dump on world markets. There is a surplus. It does not mean growing another acre of anything. We have not been doing it, and we have not been doing it because the companies that want to do it have not been able to get the capital because all the money from the city - and I am a banker - has been going to the fast route, I fear. There are ten plants for anaerobic digestion installed per month in Germany on large farms to provide power for local villages and schools and that sort of thing. In this country the first one is struggling to get its planning permission in, as we speak. All of those things should be going forward now, if that answers your question.

Q677 Hywel Williams: I just asked how the Welsh Assembly Government and the DTI should best promote these.

Mr Dunford: It is very, very difficult. I do not much like setting targets that are not specific to individual technologies, because that leads to the sort of distortion that we are now seeing. I believe that if people are rewarded for energy efficiency for example - at the moment you have a mish-mash of grants that you possibly can get or possibly cannot get; your local energy supplier possibly will or possibly will not do something. Those who are aware and who can afford to do these things will of course do it because everybody wants to do their bit, but the large bulk of the housing stock will remain unaffected by these piecemeal initiatives. I think it does need a much more top-down encouragement to improve the housing stock and improve people's energy use. That can be done by the Welsh Assembly and it can be done centrally.

Mr Southgate: Can I raise a point of clarification? Was your question just about renewables or about other technologies?

Q678 Hywel Williams: It was specifically about renewables.

Mr Southgate: Because there are other technologies, like carbon capture.

Q679 Hywel Williams: Would you care to elaborate very briefly?

Mr Southgate: Carbon capture is about developing methods of using coal reserves so that they can generate current without producing CO2 or other harmful emissions.

Mr Cottam: There is an example of this with Richard Budge in the north east, and one of these carbon capture emission power stations, will be on line in 2009, all from coal and completely emission-free.

Mr Dunford: On the question of coal, the last and obvious thing that should be considered and in the UK as a whole is underground coal gasification. This is the combusting of coal underground, the piping to the surface of the product gases, which you can then use for energy generation for any other purpose, and the harmful emissions can be siphoned off without it affecting the atmosphere. This is way beyond pilot stage in other countries. The Chinese have 16 such plants working already so there is no reason at all why it cannot be done here.

Q680 Chairman: Why is it not being developed?

Mr Dunford: That is an extremely good question.

Dr Constable: It is being developed but not necessarily here in the UK. China and India have very active programmes in this regard.

Q681 Chairman: What is holding it up in the UK?

Dr Constable: I suspect it is also a question of the investment being directed in other ways.

Q682 Hywel Williams: You highlight the need to develop a hydrogen infrastructure. Can you explain why, and again outline what measures could be taken by the DTI and the Welsh Assembly Government to promote this?

Dr Constable: Both AWEG and REF are positive about hydrogen economy, but we are also realistic about it. The truth is, as we realise by the American Government for a long time, that the hydrogen economy will only lift off where there is a surplus of renewable energy, or indeed surplus of carbon-free energy. At present the only country that has such surplus is Iceland. Nevertheless, it is highly desirable that we prepare for it and that we remain in the industry, and are therefore able to benefit from manufacturing opportunities within it. I would say that the investment should be therefore in a technical and not a quantitative sense, so we should be looking at hi-tech employment, not necessarily gross quantitative employment of hydrogen economy. There is no point in developing broad-scale but utterly uneconomic hydrogen economy in the UK. As we say repeatedly in our documents, self harm in the United Kingdom would be a very poor advertisement for clean energy globally - a very important principle, given that our capacity to provide a quantitative role in global climate change policy is close to zero. It has got to be qualitative. The Prime Minister's recent statement Stop Climate Chaos makes this quite clear as well. I would say there should be hi-tech investment in university research, small-scale development of hydrogen economy to simulate manufacturing and showcase applications.

Q683 Mr Jones: What is the potential for solar power in the UK, both at the micro and the macro level, and what are the obstacles to achieving that potential?

Mr Cottam: We believe the potential for solar energy is very great in the UK. Sure, we do not have the climate of southern Mediterranean countries, but we do have sufficient sunshine. To give a quite obvious example, two years ago when I looked at incorporating solar panels into my house, the pay-off was 15 years; now the pay-off is less than eight years, and possibly falling. Also, not included in the figures, so it will be even less, is a system for increasing the efficiency of current solar panels by another 50%. Again, a Welsh firm has developed this, and I believe they have given it to an overseas European company to develop. This, again, will bring down the payback time in solar energy, so it makes financial economic sense for households to invest in it, because their life is about 35 years, according to the makers, and it certainly works. Of course it needs back-up over the winter period, but it can certainly save. Also, there has been a change in the kind of boilers that are available now, so solar heating can feed directly into a boiler and so can save on the central heating. Then of course, if we look around Cardiff, as we were talking this morning, the number of flat roofs and high buildings should be covered with solar panels.

Dr Constable: We regard solar thermal as possibly the most promising and under-exploited single resource in the domestic renewables sector, with the possible exception of ground-source heat pumps, which are slightly more limited in application. The UK has a housing stock of approximately 24 million houses. Solar thermal is currently economic, and with fossil fuel prices rising as they are, will become progressively more and more attractive. We are currently in negotiations with one of the UK's largest domestic property owners, to encourage him to adopt on a broad scale as many of these practicable renewable energy technologies, not least because it offers an almost unique opportunity at which you can enhance the UK's energy security and also tackle energy poverty with one blow. One of the problems with the energy White Paper is that it sets itself a broad range of tasks, which are very difficult to meet simultaneously. With solar thermal, you have a unique opportunity: you can cut people's bills and you can reduce national fuel burn. Positive direct investment from government might be a very positive step indeed. The details remain to be worked out, but it is an extremely promising idea. I apologise for my voice, which is fading away at a rapid rate!

Q684 Mr Jones: You are of course talking about direct water heating and photovoltaics as well? Can you cover photovoltaics?

Dr Constable: Solar photovoltaic is interesting but it is of course capital intensive. I think that realistically with the degree of insulation present in the United Kingdom it is not something we should think of just now. Other countries - Japan for example where I lived for a number of years - take these things very seriously, and they seem to be making some progress. It is solar thermal for us in the first instance!

Mr Cottam: If you are going to use photovoltaic it has to be very near where it is going to be used. As you know, the farther away power stations are from where it is being consumed - so the photovoltaic is not a strong output per capital investment, but on top of buildings it can contribute if it is going to be used in that building.

Q685 Mr Jones: Micro-generation.

Mr Cottam: Yes.

Mr Southgate: We have an appendix on solar power.

Mr Cottam: I mentioned this in the submissions we made.

Mr Southgate: Did you all get copies of the appendix?

Mr Cottam: The green is solar energy, the red is wind, and you can see how solar completely outclasses -----

Q686 Chairman: Can you supply us with that appendix, please?

Mr Cottam: Certainly.

Q687 Mr Jones: You have described biomass as "the most consistent and reliable power supply of all the renewables". Can you tell us what potential there is for biomass in Wales?

Dr Constable: By "consistent" I presume that AWEG was indicating through firm generation; it is standard combustion technology so it shares all the merits of standard combustion technologies. We are currently encouraging a Danish company, because they have such expertise in this field, to develop a benchmark project in the north of England, which would be a significant quantity of electricity, somewhere around 10 megawatts, and a significant quantity of heat, somewhere around 14-15 megawatts. In a new industrial and housing development it will provide district heating both to domestic residences and to commercial and industrial locations. This would also provide an incentive for a large landowner to maintain in good health 7,000 acres of forestry, which currently is uneconomic, and the woods are decaying and falling. This is happening all over the UK. We believe biomass can offer real opportunities for generating firm energy locally, enforcing local grid, providing affordable heat, reducing consumption of hydrocarbons, and also providing an incentive for sustainable forestry. The potential in Wales it would be difficult to quantity. I would refer you to the Defra biomass studies. Again, returning to the issue of scale, scale opportunities are sometimes a misleading figure. We are not really interested in scale; it is getting it right. It does not matter whether we have 5,000 megawatts of biomass or 2,000; the point is that it has got to look right economically.

Q688 Mr Jones: You mentioned ground-based heat pumps, but I do not think there is any mention of deep-drill geothermal. I know we are not exactly a hot-spot on the world's crust, but a couple of kilometres down there it is very, very hot. Have you considered geothermal in the context of the UK?

Mr Dunford: Thank you for making the distinction. There is a clear distinction between ground-source heat and geothermal, and people confuse the two. We do think there is a lot of scope for ground-source heat of course. In regard to geothermal, we have been speaking with the Cambourne School of Mines, which is the UK's centre of excellence, and where they have a team working across in France, where there is a significant amount of heat taken from the rocks. Their advice to us is that on the mainland UK there are very few economic sources. We are however - and this is a development in the last week - starting to look with some German experts at the possibilities of taking heat from the very large heated aquifers that are around in this country, but it is too early to say how much may come from that. We think that ground-source heat is a much quicker win, frankly.

Q689 Mr Jones: I am glad somebody is working on geothermal.

Mr Dunford: We have only just started.

Q690 Mark Williams: In your written evidence you make a very clear distinction between the large schemes - the Cefn Croes's of this world - and smaller-scale wind energy projects. How do you feel that the UK and Assembly Government policy and planning regulations should reflect the distinction between the large-scale projects and the smaller ones?

Mr Cottam: This is reflected in the studies that AWEG commissioned. Again, I will send you a copy. The green is micro wind generation; the red is macro wind generation; and you can see how micro generation in the first year can be on a par, but it is so affordable and so more unique it is a lot better. You can see the green superior to the red. It is produced by a recognised scientist of distinguished repute. There are certainly advantages. Obstacles to planning - because you still have to apply for planning for small wind turbines, if you are putting them on buildings - should be eased. Certainly if you are easing them for major wind-farm generation you should make it even easier for small ones. That would be our recommendation.

Dr Constable: Our position is slightly different on this point. Planning theory is something of a hobby of mine - which is a rather sad thing to have to admit, is it not? The fundamental issue in all planning is the balance between benefit and disbenefit. I see little reason why government should interfere in that fundamental issue where it is decided at local level. What is needed is better guidance for local councillors when they have to make decisions. If there are needless bureaucratic obstacles in the way of micro-generation, then by all means remove them, but I would be sorry to see any interference in the fundamental consideration of the upsides and the downsides of any particular project. One has to remember that even small-scale wind turbines can be a problem for somebody next door, and there is no reason why that person should be disadvantaged within the system. I think clearer guidance is required; the Companion Guide to PPS22 is in some respects unsatisfactory and could be improved.

Mr Southgate: Can I add a rider to what has been said? What we have not discussed is back-up. Large-scale wind farms require back-up, and it is now generally accepted that that will have to be in the form of gas turbines. Large-scale projects do not need that back-up because they are small enough to accommodate the energy they generate in batteries, or, as in the case in Denmark, they can produce hot water, which can be stored in highly insulated tanks. The difference is between gas-fired wind turbines and the genuine wind turbines, and there is a huge difference. I would just like to make that point.

Q691 Nia Griffith: Some councils are looking at giving permitted development status to certain types of renewable new insulation on buildings. Do you have any good examples of those in Wales where it is working successfully?

Mr Cottam: All insulation measures are beneficial. There are lots of examples but I would not like to pick on one.

Q692 Nia Griffith: I know that the City and County of Swansea are being encouraged by a local firm to look at something, but I wondered if you knew of any councils that had a firm policy of permitted development for micro-generation equipment.

Mr Cottam: They are usually aid - for example - benefits to put roof insulation and this kind of thing in, but I am not aware of any council benefits say to a building company where -----

Q693 Nia Griffith: I am talking about permitted development. It is a planning term; it is instead of having to go through the whole planning procedure, and there is an automatic acceptance that that is something which is allowed. That is what I was wondering, if you knew of any council in Wales that had that up and running.

Mr Cottam: I personally do not.

Mr Southgate: I have no knowledge of such planning policies, regrettably.

Q694 Mark Williams: In your evidence you mentioned in paragraph 5.49 that the DTI had removed its objections to the Swansea tidal lagoon project. Can you indicate your perception of those objections, and what lessons can be learnt in future with other projects?

Mr Southgate: In fact there were two lines of disquiet. We did not address the financial one because we felt it had been adequately dealt with by the Chairman of Tidal Electric, Peter Ullman, who pointed out that the DTI had come to the conclusion that the Swansea scheme was going to be very expensive, and they had based that view on a much smaller scheme that had been costed by Tidal Electric in Alaska. It was a totally different scheme. It was far, far smaller and the tidal range was relatively tiny. In short, it had nothing to do with Swansea, and so we did not deal with that aspect because we thought that Peter Ullman had dealt with it. The main problem - and we were deeply disturbed by this - is that the DTI had used technical expertise which apparently was based on the design of a barrage for the Severn estuary; and therefore they were thinking that the specification for such a barrage would be very similar, and the special location of the embankments around a tidal lagoon. The international firm of engineers that designed the tidal lagoon, W.S. Atkins, put the DTI right in a meeting, which I believe was held on May 20th last year, or perhaps May 18th. As a result of W.S. Atkins's explanation of the scheme, the DTI apparently agreed that they had been operating under a misapprehension and withdrew their technical objections. That is my understanding of what happened. Of course, it has done incredible damage to investor confidence. You can imagine somebody wanting to put money into this project and getting all these reports that (a) it is going to be too expensive, and (b) it does not work - it was just appalling.

Q695 Nia Griffith: What is your assessment?

Mr Southgate: As you probably know, there has been a recent proposal for a Severn barrage. Friends of the Earth Cymru have produced a really interesting paper comparing the benefits of that barrage with tidal lagoons. They have said they were going to get much better value for money with the lagoons - but that is their view. We have said that the Severn estuary tidal resource is the second greatest in the world, and it seems daft not to exploit it in one form or another.

Q696 Mark Williams: Is there an indication of differential in cost of those two things, the barrage versus the lagoons?

Mr Southgate: I would not be prepared to do that because you can appreciate that the costings are complicated. I can certainly let you have copies of the report I have read on the costings.

Mark Williams: That would be helpful, thank you.

Q697 Albert Owen: You mentioned that Swansea had nothing in common with an Alaskan projects. Are there any projects in Europe that are successful, that are working and producing regular electricity to the grids, things that we can assess? Obviously, the Alaskan project was completely different.

Dr Constable: You mean a lagoon? No. There is a barrage of course at the River Rance.

Q698 Albert Owen: We are hearing in our inquiry lots of proposals for lagoons, but we have not seen or heard of a working model.

Dr Constable: No, they are untried. We are very interested in lagoons partly because while we recognise the 17 terawatt hours proposed for the Severn barrage is of national significance, it is certainly 4.5% of UK generation and does have an environmental impact which is contentious, and the mitigation of which is also contentious, but nevertheless it is undoubted. Lagoons might be a way of addressing part of that. We have examined Tidal Electric's proposals and we have had informal discussions with our engineering advisers. They are interesting but they are untried.

Q699 Hywel Williams: If lagoons are being put up as an alternative to the barrage, how can one compare them? Can you compare them on a like-for-like basis if there is no evaluation of lagoons and no practical working example? Is it possible to say, "let us have one rather than the other"? It is a very broad question.

Dr Constable: If you were to read the MacAlpine proposal for the Severn barrage, you would find that that includes lagoons. They are proposing to put lagoons within the barrage enclosure to provide some degree of storage so that they could then sell at a very high black price on the market, providing peaking power, which would increase their income. I think it has to be faced that lagoons would not produce as much power as the larger Severn barrage, and that the cost per megawatt hour delivered might be higher than an overall Severn barrage. The Severn barrage proposal is in many respects very attractive from a national perspective. It is a very finely balanced and difficult debate. We have not yet stated opposition on it; we are still considering it.

Q700 Chairman: Can we end by asking you some questions on the role of the DTI and future developments. We note that in your written evidence you assert the necessity for what you call "the right Government backing to create new industries which could exploit the world markets in low carbon technology". What precise policy, planning and financial backing is required of the DTI in order to achieve this?

Mr Dunford: The first and fundamental step that we believe is necessary to establish a healthy renewable and sustainable market is a revision of the subsidy system as operated by the ROC. We think that is a sine qua non. Otherwise, the market will remain distorted and whatever legislators say, funds will continue to go down to the route of least resistance; so that is the first thing. The second thing is that there should be a shading of the support available for technologies which inevitably take longer to come to market because of the capital deployed. Inevitably, it will take longer to deploy a tidal solution than it is to stick up a prefabricated wind turbine, for example. That needs looking at therefore. The third thing is that we would like to see both energy conservation and micro-generation encouraged by the sort of blanket measures that we are frankly starting to try to pull together in the private sector, whereby individual households and communities, housing associations, estates of houses, for example, are rewarded for investment in micro-generation technologies - having solar panels on their roofs as well as putting in a better condensing boiler, or whatever that might be. At the moment it is totally piecemeal, and we do not believe that that can be left entirely to the private sector - it will not happen - so that needs leadership. We are confident from our discussions with some of the largest landlords in the UK, as well as with some of the mortgage providers, that with a little bit of intelligent government help from the DTI this can be pulled together.

Dr Constable: The point about the Renewables Obligation is crucial: if the RO is not revised, then desirable changes will be frustrated; and the Minister's remark, in response to Mr Lancaster's question, shows that that awareness is now gaining ground in government, and I am very pleased about that. We would like to see, in addition to that reform, a more general attitude towards interventions in the market. At the moment we have an apparently free-market instrument, the RO, which is a blunt instrument intervention in the market. Intervening in markets is very difficult, and in principle we would like to see the Government intervene less in the markets and to do so only by removing the tax burden. We think that is a way in which domestic generation could be considerably enhanced. For example, we do not see why you should not remove tax completely. Whether you go down the German route and provide 100% subsidy for the installation of any of these is a further question, and the cost of that would be very high. We think it might be interesting, and possibly unnecessary. It is rather better simply to take the tax off and let canny consumers make decisions and weed out those technologies that do benefit consumers.

Chairman: Thank you for your written and oral evidence; it was very clear and comprehensive. If you feel, in the light of questions posed to you today, that you wish to add a further memorandum, then we will be very pleased to receive it.


Memorandum submitted by Andrew Davies, AM,

Minister for Enterprise, Innovation and Networks

 

Examination of Witnesses

 

Witnesses: Andrew Davies, AM, Minister for Enterprise, Innovation and Networks, and Dr Ron Loveland, Director of Energy Wales, Welsh Assembly Government, gave evidence.

Q701 Chairman: Welcome to the Welsh Affairs Committee. Minister, we do know you, but for the record could you introduce yourself and your colleague?

Andrew Davies: Andrew Davies, Minister for Enterprise, Innovation and Networks, the name of my new department. I am accompanied by Dr Ron Loveland, who is the Chief Technology Officer for the Welsh Assembly Government, but who also heads up, a director, of Energy Wales, the new department set up to take forward any development of energy policy. Behind are Lynn Griffiths and Alan James, also of Energy Wales, and also the Office of the Chief Technology Officer.

Q702 Chairman: In July last year you published the Wales Energy Route Map for consultation. Are you in a position to tell us the main outcomes of that consultation?

Andrew Davies: I think it is broadly supportive of the approach about a broad mix of technologies taken forward in terms of energy production. Certainly our view, in terms of how we meet our energy production needs in the future, based on growing demand for energy, is very much the same challenge that the UK Government has identified in terms of its energy review, but also taking into account our almost unique duty to promote sustainable development and increasing emphasis on those energy-production methods which reduce our environmental impact.

Dr Loveland: Normally, we would by now have produced a finalised version of the Energy Route Map but that obviously awaits the outcome of the current UK energy review. There was also the summit meeting that was chaired jointly by Andrew Davies and the First Minister, which very much ratified the views expressed in the Energy Route Map but asked for more emphasis on marine renewables and coal, and a clarification of our position on nuclear.

Q703 Chairman: Do you think that the Route Map will be able to influence the UK energy review? I am struck by your remarks about the impact of democratic devolution on these matters. The Chancellor in recent times has remarked on the way in which we should move away from a model of the periphery and centre, and that devolution should be about some kind of sense of equality between the so-called periphery and the centre.

Andrew Davies: Obviously, in terms of our powers, energy policy as such is non-devolved. However, we are very much part of the UK energy production and energy grid. While Wales is a net exporter of energy production, in North Wales we are an exporter, whereas in South Wales we are a net importer. That is one of the reasons why energy prices in South Wales are some of the highest in the UK; so we are very much part of the UK policy context as well as part of the energy production system in the UK. There are some elements where we have a very strong interest and we do have powers, for example in terms of planning of power stations. We are part of the planning process, except of course under sections 36 and 37 of the Electricity Act, where any power station over 50 megawatt is a matter for, on the one hand, the relevant local authority, or the UK Government through DTI. We see ourselves as very much part of the UK. That is why we are playing a very full part in the energy review, but within that we have, we felt, our own distinct needs and requirements in Wales, not least of which are our commitment to sustainable development.

Q704 Albert Owen: Dr Loveland mentioned awaiting the outcome of the energy review, and obviously you want an integrated UK level, as well as having some devolved powers. How do you think your submissions will influence the outcome; and if the outcomes are different are you likely to listen to the energy review and go back out for consultation or just take on board those decisions?

Andrew Davies: Clearly, the lead on this is the UK Government, the DTI. We will obviously seek to influence that. For example, as members will be aware, we have argued very strongly that the Severn tidal barrage should be seriously considered, and we have continued to make that point, the First Minister and I, both in written submissions and also meetings we have had with DTI ministers. We have made the case that it should seriously be considered because obviously of its capacity to generate over 5% of the UK's total energy needs. There are therefore specific areas within the review where we think we have expertise, or potential that we can exploit. Clearly, we are within the UK Government's remit, and there is no way we can declare UDI. Clearly, we would have to work within that UK policy, but at the same time seek to influence that.

Q705 Mr Jones: Minister, in your paper you argue for a holistic approach to energy production in Wales, but we do have a predominance of wind power in Wales. What do you think needs to be done to get an appropriate level of diversity in energy production?

Andrew Davies: I would not say we have a predominance of wind power. Certainly in terms of renewable energy at the moment, by far the most commercially exploitable form of renewable energy or green energy is indeed onshore wind. Obviously, we have the first offshore wind farm in the UK, but there are still big issues around offshore wind. Certainly onshore is by far the form of renewable energy production that is most exploitable commercially in Wales. Our judgment is that hydroelectricity has probably reached its maximum in terms of significant development, but clearly there is a role for community hydro schemes. The First Minister, as I am sure you are aware, opened a community scheme in Talybont-on-Usk only a few weeks ago. We think there is significant development potential for biomass, again on a community level, although we understand there are significant proposals for larger biomass development, particularly in and around some of our major ports. We think there is scope in the medium term for marine technologies, whether that be tidal, tidal stream or indeed wave - and the Danish company Wavedragon have their R&D project down in Pembrokeshire. However, given the current state of technology, that is not commercially exploitable for some time. Tidal barrage, as has been shown in northern France, River Rance, is commercially exploitable, and based on that experience we have asked for the Severn tidal barrage to be seriously considered. The River Rance scheme in northern France has been generating electricity almost unobserved for forty years, and I understand at a lower price than nuclear; and obviously France has followed the nuclear route quite significantly. We also see very significant opportunities provided by micro-generation, and only recently launched consultation on micro-generation strategy, and we await the response of people on that. We believe that there is within micro-generation significant scope for photovoltaics, not the least of which of course is Sharp, the Japanese manufacturer, which has a European manufacturing facility in Wrexham in North Wales, and we will be doing everything we can to increase demand for that form of energy generation. In terms of renewables, onshore wind developments are the most significant and make the most significant impact in terms of reaching our renewable energy targets. I suppose our view is that it is likely to be an interim technology until such time as other forms of renewables reach a commercially exploitable stage of development. In addition we know for the foreseeable future, in terms of energy production, that fossil fuels will continue to make the most significant contribution, whether it is coal - and we are very dependent on the Aberthaw power station near Barry; and we are delighted that WE are introducing flue gas desulphurisation technology there to reduce sulphur dioxide emissions. Given the importation of LNG into Pembrokeshire, there is the likelihood of two gas-fired power stations. We feel that for the foreseeable future, while renewables will have a growing part to play, fossil fuels will generate the predominance of our electricity.

Q706 Hywel Williams: That is a long and very impressive list, Minister. However, in the holistic approach to energy would you not agree that demand management is part of the mix; that is to say, you should be looking towards conservation? I did note that you said in your introductory remarks that increased demand was - I do not think you said a given, but you seemed to assume that there would be increased demand. Can you address some remarks towards conservation and demand management?

Andrew Davies: You are quite right: it is clear that the most significant impact we could have on reducing carbon dioxide and other warming gases would be by reducing our energy consumption in the very first place. We are working with the UK Government seeking to do that very significantly, particularly through the management of our own estates, as a government, through the public sector - for example the work we are doing with the Carbon Trust on the NHS estate in Wales; we are improving efficiency, and reducing energy use. Similarly, in terms of the design of public buildings, this building probably being the best example of that, we are reducing energy use in the first place but at the same time we are looking at using renewable energy sources such as heat exchange through drilling into the earth's core. The challenge we have in the private sector is that until fairly recently energy has been fairly cheap in the UK. The First Minister and I meet with the energy industry regularly, both energy users and producers, and only a couple of years ago the biggest problem faced by energy producers was that energy was cheap and they were taking a lot of energy production out of circulation and mothballing for example the Fifoots power station just down the road near Newport. The incentive to save on energy costs at that time, when energy costs were low was minimal. Clearly, we are faced with a very different situation, and it will be much easier to encourage both industrial and domestic users to reduce energy now that the cost of energy, both gas and electricity, have improved significantly; so we are working very closely with the UK Government on a range of measures to reduce our use of energy, particularly in terms of design of buildings, making them more energy-efficient.

Q707 Chairman: You mentioned buildings. Your ministerial responsibilities also include transport. We were struck, during our recent visit to the United States, by the Green Cities' Alliance - cities like Chicago, Denver and Seattle. They place great store on public transport and the interface with development of brownfield sites for housing and other public buildings. Have you given much thought to the place of transport in this mix?

Andrew Davies: Very much so. Until fairly recently, however, we had very few powers in terms of transport; but since the Railways Act of last year and the Transport Wales Act have now reached the statute book, we have the powers, as a government and as a legislature, to drive an integrated transport policy. We are currently drawing up the All-Wales Transport Strategy, which is one of the first requirements of the Transport Wales Act. Our commitment to public transport is well known. Obviously, the powers we have had until now have been fairly minimal, if almost non-existent, to drive and deliver an integrated system at a local level. We are now working with local authorities, both individually and collectively across the four transport consortia in Wales, to encourage a modal shift. Our commitment to rail transport is well known. Obviously we opened the passenger services on the Vale of Glamorgan line last June, and next year we will be opening passenger services on the Ebbw Vale line for the first time since the Beeching cuts of the early 1960s. Rail use in Wales is growing very significantly, and I understand faster than any other part of the UK. Given that traffic growth is projected to be faster in Wales than the rest of the United Kingdom, there is a major imperative on us to encourage an even greater and more significant modal shift in the use of bus and rail. Wales is one of the few parts of the United Kingdom where the long-term decline in bus use has stopped and been reversed. To a large extent, that was a result of our policy on free bus travel for pensioners and the disabled. We are looking to build on that, working with bus companies to make bus travel even more attractive and accessible. Clearly, we are still very early in that process, and we realise there is still a very significant amount we can do in that policy area. We are working with the UK Government on the very important policy development of congestion charging and road pricing, as a way of reducing traffic growth.

Q708 Chairman: I take it from that answer that you would be looking at best practice in other countries, like the US and other European countries.

Andrew Davies: Very much so.

Q709 Hywel Williams: Can I refer back to my previous question? Are you planning on the assumption that demand will increase and therefore supply will have to be found? Are you planning that they will remain stable or decline? Which way are you looking?

Andrew Davies: Our assumption is that all the projections are, and our assumption is, that energy demand will grow. It is not something we welcome, and we will be doing everything we can to reduce energy use. But all the projections are that energy demand will grow. Clearly, given Wales's industrial and economic structure, we have companies like Corus and the metal industry, which are very significant users of energy. The aluminium industry is another one.

Q710 Mr Jones: You mentioned sections 36 and 37 of the Electricity Act and described this new paper as an anomaly. Can you explain why you see that as such; and what would be the benefits of transferring those powers to the Assembly?

Andrew Davies: It was at the time of Cefn Croes wind farm development, which I opened last year, which is the largest onshore wind farm in the UK at the moment, that the then Energy Minister felt that it was anomalous that as a government we had no locus in this; that it was a matter first for Ceredigion Council and then for himself and the DTI to determine. On that basis we argued that we should have similar powers to the Scots in terms of planning consent for power stations over 50 megawatt. We have been discussing this with DTI and the Wales Office, both at political, ministerial and official level. The current situation is that we are still discussing that with the UK Government. No decision has been made yet.

Q711 Mark Williams: Do you know when there will be an outcome to those discussions? Originally it was hoped that in 2003 there would be an outcome, but as yet there has been nothing. What is your perception on when?

Andrew Davies: The current energy review has to some extent overtaken that, and that is part of the discussions that we are having with the UK Government; so I think that particular decision has been put on hold until the outcome of the review is known.

Q712 Albert Owen: Going back to wind farms, you mentioned Cefn Croes and the largest one in the UK here in Wales, and also a number are spotted around the coast. There are three in my constituency that are relatively small but well-established. We found in this inquiry that there is significant opposition to wind farms, not just on land but also at sea. How do you think we can collectively manage this problem of opposition?

Andrew Davies: Certainly all the opinion polls that have been done on a UK and all-Wales level have shown that people understand the need for addressing the so-called energy gap, but also the need for renewable energy. The overwhelming majority of people in opinion poll after opinion poll have said they support a wide range of renewable technologies, but particularly onshore wind. I am aware, as we all are, that there is a very vociferous opposition to wind farms, as indeed there are to many developments. I am sure, as elected representatives, we get lobbied regularly on applications for mobile phone masts. Clearly, there will be opposition to any form of energy production, whether tidal barrage, tidal lagoon or any other form. I think a majority of people feel that given the challenge of global warming, wind farms are a necessary part of the mix, but I do accept that there is a vociferous minority that are against it.

Q713 Mark Williams: Amongst that opposition, many allude to the fact that there is a bias in the Route Map towards wind farms, as opposed to other forms. How do you address that?

Andrew Davies: I do not think there is a bias in there. I repeat what I said in my introduction: at the moment, in terms of renewable energy, onshore wind is the only really commercially exploitable form of energy production that will help make a significant contribution to energy production in the foreseeable future. I know it is very much a caricature of our position that, as a Minister, I am trying to cover the whole of Wales in wind farms and that I am hell-bent on this. Nothing could be further from the truth. In fact the TAN 8 process was very, very carefully designed to look at a wide range of factors and criteria, particularly those areas of Wales which, in terms of wind power, could make a significant development, but taking into account visual impact, and MOD issues such as tactical low-flying areas; and we felt that TAN 8 presented a measured and strategic approach. In Scotland and other parts of the UK there has been a different approach, which has been less strategic and more based on free-for-all. I think that other parts of the UK may well feel that our approach is the more desirable one, but we felt it was the right way to go.

Q714 Albert Owen: It is interesting that you mention the planning process and the TAN 8 guidelines, because that is one of the biggest criticisms that we are hearing; that it favours wind farms, and they get the go-ahead ahead over other projects. There is obviously some need to convince the public or even convince local authorities when action groups are consulted that TAN 8 is there. Do you feel that it can be improved even further?

Andrew Davies: The basic point is that you will get applications for wind farm development anyway, as they are finding in Scotland and in England; so these applications would come in anyway irrespective of whether or not we had TAN 8. We felt that the measured approach, through technical advice after consultation, was the best way forward, and then we would hopefully have agreement on which areas of Wales were the best in terms of exploitation, particularly of wind in this case. Clearly, that is a matter of judgment. Others may feel that it was better to have a free-for-all. However, I think the idea that we would not be getting applications for wind farm development in Wales if we did not have TAN 8 is quite erroneous; and the evidence in Scotland and England is that you would be getting them anyway; but at least we have a concerted approach for doing so now, based on objective criteria.

Q715 Albert Owen: Do you think local authorities are helping or clouding the issue when it comes to the consultation process?

Andrew Davies: Clearly, the design of TAN 8 was done after consultation and we will work very closely with local authorities, and they will be the primary recipients of any planning application; and then it is a matter for them to make a judgment on whether or not they approve any application. Clearly, if they turn an application down, then there is a method for hearing those appeals. Clearly, local authorities will continue to play a key role in any planning consent regime.

Q716 Mark Williams: We all agree that we are looking for a mix of different means of generation. You described wind power as an interim technology; and, again, notwithstanding standing the issues on technological viability of wave and tidal power, if we were going to construct some time line of opportunity, how far behind do you think wave and tidal technologies are behind an emphasis to date on wind farms?

Andrew Davies: The assessment we have had from experts in the field is that the tidal stream and wave technology is likely to be 10 to 15 years, because it is very difficult to say with any degree of certainty. This form of technology - who would have thought twenty years ago that a whole new industry would have grown up around mobile phones? If anybody had asked how quickly mobile phones would reach a mass market, I do not think anybody at that time would have said it would have been less than twenty years! Our best assessment at this time - and I do not know whether Ron wants to come in on this - is that it would be 10 to 15 years, but clearly if there is a technology which is proven technically and which is also attractive to investors, then possibly it could be before then; but our best judgment is 10 to 15 years.

Q717 Chairman: Dr Loveland, you have been very shy in coming forward!

Dr Loveland: If you look forward to 2020, bearing in mind the uncertainty that the Minister has suggested, which is always there, we should have some very strong marine renewable operations around the coast of Wales - wave/tidal; and hopefully the Severn barrage as well. By 2020 we would expect to see very significant marine. Can I also comment in regard to the discussion on TAN 8? There are many words in TAN 8 on onshore wind, because that, as the Minister has said, is the area where we are getting the applications. But there are also lots of words on the other technologies as well, where TAN 8 is extremely supportive.

Q718 Hywel Williams: For the Severn barrage we have seen costs of 10 billion. On what is that based, as far as you know? Is it based on academic research or are there companies that are bidding for this now, and is that the ballpark figure that they are working to?

Andrew Davies: The cabinet received a presentation from the Severn Tidal Barrage Group, which is made up of major construction companies - Taylor Woodrow, MacAlpine, Balfour Beatty and Alstom, I believe. Their assessment was based on the construction costs in the late 1980s - I believe 1989 - which they have calculated on the basis of subsequent construction industry inflation and other factors; so it is a rough estimate at this stage. They believe that given the scale of energy production, which could be between 5% and 7% of the UK's total energy needs, and given the revenue stream that they would receive, as I mentioned - for example the River Rance has been generating electricity quietly for forty years on a very predictable basis - they believe that it is a commercial proposition and one that they can make work.

Q719 Hywel Williams: You mentioned in your paper the "significant European Commission-driven environmental legislation constraints" that need to be overcome if the barrage were put in place. Can you give us more detail of those constraints and how they might be overcome, and how difficult it would be?

Andrew Davies: The Severn estuary does have a very high level of European designation. It is a special area of conservation; and we are very mindful of that. That is why, in our submission to the UK Government, we have asked for very comprehensive environmental impact assessments to be made, as well as economic and financial impact assessments. We are not ducking this issue. However, we feel that given the overwhelming consensus that global warming is a phenomenon that is occurring and given the fact that it is likely to lead to rising sea levels, an increased frequency of severe weather incidents, which include tidal surges - and the Severn estuary has the second tidal range in the whole of the world - given the very significant urban development in places like Cardiff, Newport, Bristol and Gloucester and other urban developments around the estuary, that the Severn barrage would also have a role to play like the Thames barrage in helping to control those tidal surges. We feel that since we last pressed, as part of the UK-wide Energy White Paper three years ago, the energy situation in terms of the costs and supply of fossil fuels, as well as the almost universal acceptance that global warming is happening, that the context has changed very significantly. Therefore, any downsides in terms of environmental impact may well be a price worth paying in terms of energy production and environmental protection.

Q720 Hywel Williams: Can I pursue that a little? Perhaps I am wrong, but I thought the Habitat Directive was in respect of specific situations rather than broad global effects like rising sea levels! Given the effect that the barrage might have, would the Directive not prevent its building in that it would be, for example, impossible to create a similar environment elsewhere, as has been done in Cardiff and when the water outside here was created? Would that not specifically prevent a barrage?

Andrew Davies: That is why we are requesting that the environmental impact assessment is undertaken, to test these propositions. The evidence from northern France in the River Rance, is that there is now greater biodiversity upstream of the barrage than existed previously. I am not a technical expert, but I understand that the river estuary has a high level of sediment in suspension, and as a result light cannot penetrate the riverbed. After the barrage has been built, much of that sedimentation is deposited, and it leads to a greater range of flora and fauna. We are accepting that there may well be changes. However, if I can contrast it with Cardiff Bay, it is not proposed that there be a permanently impounded area of water; there will be tidal movements. That is the whole reason for building it obviously. It may well be that there will be greater biodiversity. However, our belief is that the challenge of global warming will inevitably lead to environmental changes in areas such as the Severn estuary; and, as ever in government, you have to balance various considerations. We think that this is certainly well worth considering. But it is only by a full environmental impact that we can test these propositions.

Q721 Hywel Williams: Given the thrust of the Directive, therefore, would there need to be a derogation from a particular aspect of it in order to allow this development to succeed?

Dr Loveland: If I could just say a few words about the process, which we know quite well, as some of you are aware, because of the situation with Mostyn Docks, where we went through a very similar procedure. First, it is a case for the developer to prove there is no adverse impact. If it is thought that there would be an adverse impact, obviously you have to go to a case for overriding public interest; you have to look at alternatives and then consider the possibility of compensation. In the case of the Severn barrage you have a very interesting situation. Obviously one does not know until the studies are done, but it is not clear whether there will be an adverse impact per se because the barrage will tame the tides; it will take a lot of sediment out of the water, as the Minister has said; there will be increased biodiversity. First of all, that is an open question. The overriding public interest is that obviously you will be concerned with the global warming mitigation effects of the barrage. In regard to alternatives, everybody accepts that it will not be an issue in respect of the Severn barrage because we need a whole range of clean energy sources, including tapping the tides if at all possible. As for the compensation, that is an interesting one. If the barrage actually increases biodiversity and produces environmental benefits - if you have gone through all that and you still have a problem, the route then is through a derogation to Brussels, but there is a whole series of steps before you get there.

Q722 Hywel Williams: The barrage has been promoted in some ways as an alternative to the development of nuclear power. I have seen figures suggesting that two nuclear power stations would not then be needed. If the barrage did not go ahead - this is highly speculative, but would that change the Welsh Assembly Government's stance on nuclear energy in general, do you think?

Andrew Davies: I think opposition to nuclear energy is based on a wide range of factors. Clearly, there are major issues to do with the secure management of nuclear waste and there is a lot of public concern about that. In an opinion poll that was done by BBC Wales at the beginning of this year the overwhelming majority of people supported our view about energy production, as reflected in the Energy Route Map. Given our existing generating capacity, that also is likely to come through renewable energies, particularly onshore wind; but also energy production that is planned on the back of the importation of LNG through Milford Haven with the likelihood of one, if not two, gas-fired power stations in South Wales, as well as the possibility of another one at Uskmouth near Newport. Our belief is that there will be a very significant increase and enhancement of energy production in Wales; therefore we think it unlikely that investor would want to invest in a new nuclear power station. Over and above that, one of the clear messages that came through the energy summit that the First Minister and I chaired just before Christmas, was a view of energy producers that if a green light was given to nuclear energy production, it is almost certain that people need some form of government or public sector underwriting, if only for the management of nuclear waste. Therefore, from the point of view of a market or investors, that will represent a more secure investment and would distort what is currently the most heavily regulated market in Europe. So there is a concern amongst energy producers that that would distort the market and therefore would undermine the case for other forms of energy production, whether that be gas, renewables, or any other form of energy.

Q723 Nia Griffith: I welcome your very positive stance on the Severn barrage, and you have given us a very clear indication as to what might be done to alleviate the environmental impact. I would just like to ask what other consideration you are giving to other projects, not necessarily as an alternative to the barrage but things like the tidal lagoons and the marine current turbines perhaps to use in other areas of Wales.

Andrew Davies: I, and we as a government, have a very open mind on a wide range of renewable energy technologies, as I said earlier on. Our position on tidal lagoon is, again, that we have an open mind. It may well be that there is a place for tidal lagoon technology; however, it is clear that the proponents - and there has been one in south-west Wales in the Swansea Bay area - have asked for a very significant investment of public funds, and we feel that that is not justified. We have worked with DTI in looking at the costings of the proposals, and my understanding is that the costs of those are very significant. As with any form of energy production, there are some very serious and environmental issues that need to be addressed. The ball is basically in the court of the development proposers to come forward with those ideas and to go for a full economic financial environmental impact assessment. As I said, they are asking for significant public funds in order to underwrite the investment.

Q724 Nia Griffith: If they were able to raise those funds elsewhere, would you be willing to reconsider the issues?

Andrew Davies: Our view is the same as the DTI; the proponents should come forward with those proposals. If they have commercial backing, then obviously it can go through the full planning consent route. As part of that, they will have to bring forward a comprehensive environmental impact assessment. Clearly, that is our position. If they can get financial backing, that is a matter for them.

Q725 Mark Williams: Presumably the Swansea experience that you have mentioned applies equally to schemes suggested in North Wales and Pembrokeshire as well.

Andrew Davies: Very much so.

Q726 Albert Owen: Can we go on to the nuclear issue? Your paper is confident that sufficient energy consultation be supplied from a non-nuclear option over the next 10 to 15 years. You said earlier that the business sector was not fully confident in nuclear, yet the CBI in Wales is very pro-nuclear, so I wondered if you could deal with that one! How do you anticipate getting the base load supply that is needed for heavy industry? You mentioned LNG as one option. Do you have any other options?

Andrew Davies: Our assumption is that for the foreseeable future clean-coal technology and cleaner gas technology, and obviously the latest generation of gas-fired technology - the combined cycle gas turbine at Baglan Bay built by GE is the most efficient form of gas turbine that is available. Our assumption is, based on current technology, that it will be fossil fuels for the foreseeable future that will provide the base load. That is why, three years ago and now, we said to the UK Government that we were very interested in working with them to develop clean-coal technology. It obviously covers a whole range of technologies, whether it is from FGD at Aberthaw through to underground gasification, or indeed what has been pioneered in the US is the carbon capture of carbon dioxide and the sequestration and safe storage of that. Clearly, given that Wales has hundreds of years of coal reserves, we feel very strongly that clean coal has a role to play in that. Maybe, if as much investment had been made in developing clean coal technology as has occurred in gas, we would be in a much better position in Wales when dealing with the challenges faced by energy production.

Q727 Albert Owen: I would like you to respond on the business interest and private money and a level playing-field, because the CBI is coming out pro-nuclear.

Andrew Davies: My understanding is that the CBI would be representing more the energy users rather than the energy producers, and what I was feeding back from the energy summit was the view of energy producers and their concern that any undertaking to go ahead with nuclear power would distort the market. I can understand the concerns of business that obviously a supply of affordable energy is of paramount interest, particularly in Wales, where we have a high proportion of GDP generated by manufacturing, and obviously some of it heavy industry. I understand their concerns, but our view is that given the projected increase in energy production, particularly around gas, that should address their concerns about a secure and affordable supply of energy.

Q728 Albert Owen: Your position is very clear, but I still want to push you on this issue. If the UK energy review comes out pro-nuclear, the worry that Welsh businesses will have, and particularly the nuclear industry, is that many of the skills will just go across the border into England, and that will not be of economic benefit to Welsh manufacturing and the skills base. Could you respond to that?

Andrew Davies: As I said earlier on, we are part of the UK, whether a UK policy context or indeed part of the UK grid. We cannot declare UDI. Clearly, if there were any proposal for a nuclear power station anywhere in Wales, that would be a matter for the developers to come forward with that, and clearly if it were over 50 megawatt as a government we would not have a role in the formal planning process. Nevertheless, as I said, the overwhelming majority view in Wales, as expressed through opinion polls, has been that our policy reflects the overwhelming views of the people of Wales. However, in terms of the planning process it would be a matter for any developers to come forward and it would be dealt with under the normal planning process.

Q729 Albert Owen: I would add that the Welsh public are becoming more pragmatic towards nuclear, but that is a difference of opinion that we will have. I am very pleased that the Welsh Assembly Government has supported the plans to extend Wylfa because of the unique circumstances with Anglesey Aluminium and the smelter process there; but some people think that this is a contradictory position. I welcome it: I am pro-nuclear and pro the extension. If it were not for the Sellafield issue, then I think safe nuclear generation could go many years beyond the date specified at Wylfa. How do you respond to some who say there is a contradictory position?

Andrew Davies: I understand they feel that way, but I do not share that. I think there is a difference between extension of an existing nuclear power station and a new build. Our position on Wylfa is also heavily influenced by the fact that Anglesey Aluminium is a major employer on the island. It was a significant contributor towards the island's wealth as well as its employment, and it is heavily dependent on a supply of affordable electricity from Wylfa. If that were not the case, we might not necessarily argue for an extension of the life of Wylfa. Nevertheless, we have pressed the UK Government; they are very aware of our view, and they have a great deal of sympathy with it, but clearly they are considering that very carefully. There are very significant issues to be addressed.

Q730 Albert Owen: Have you any indication of how they are going to view it?

Andrew Davies: Not at this stage. We have made the case because of its impact on Anglesey Aluminium and the island, but there have obviously been meetings and an exchange of correspondence between not just myself but the First Minster to the DTI on this issue. We still continue to make the case strongly for an extension.

Q731 Albert Owen: You mentioned the unique circumstances, which obviously I agree with, on Anglesey Aluminium. They were built together uniquely as a kit, with one supplying the other. If there is no nuclear option in Wales in the future, that would be put at risk, and it would be very difficult to get the load base from any other source. Can you comment on that? I know you will not make the decision, but if there were a pro-nuclear decision, then do you think the existing sites are probably the best place for them?

Andrew Davies: Even if there were, for the sake of argument, a proposal to build a new nuclear power station on Anglesey to supply Anglesey Aluminium, given the fact that Wylfa is planned to be decommissioned in 2010, and if there is not to be an extension, there is no way that a new nuclear power station could be built, given the current consent regime, before 2010. Even if there were an extension of four or five years on Wylfa, again it would be highly unlikely that a nuclear power station could be built by the time that Wylfa was decommissioned. There are very practical economic planning issues to be addressed in that area. That is why we are pressing the UK Government for an extension so that other options, which may include nuclear, are considered. Our views obviously still remain about new nuclear build. Clearly, we are very aware of the issues and that is why we have asked for an extension; but there are practical problems in terms of the time taken to generate an alternative source of energy.

Q732 Mr Jones: Minister, we visited Tower Colliery this morning and heard there is about 250 million tonnes of coal that could be exploited. How much of that could we use, do you think?

Andrew Davies: As I said in my earlier response, we have argued very strongly that given the known coal reserves in Wales, clean coal has a very major role to play. We are very dependent currently on Aberthaw in terms of energy production in South Wales, and therefore a supply of domestic and Welsh coal is very important. That may include not just in terms of energy production but also in terms of supply of coking coal for the steel industry, predominantly Corus at Port Talbot. We argued very strongly three years ago, as we do now, that clean coal should be an important part of the mix. I was particularly interested, with your visit to the States, to look at this amongst other forms of energy production.

Q733 Mr Jones: I happen to agree with you, Minister: clean coal obviously has a part to play, certainly within Wales. Aberthaw relies on Tower Colliery, and Tower Colliery is going to close shortly, we have heard; so have you identified any sources of coal for Aberthaw and Port Talbot?

Andrew Davies: My understanding is that the proposed open-caste site at Fros-yr-Fran near Merthyr Tydfil - part if not all of that will go to Aberthaw, but clearly there are legal issues regarding the planning consent around that, as you will be aware. We would very much welcome the Welsh coal industry supplying Aberthaw, and when I visited Aberthaw power station earlier this year RWE, the company, were very keen that it be supplied locally. The local plant management were very keen to use Welsh coal because the alternative is to import coal obviously. That is my understanding in terms of supply locally.

Q734 Nia Griffith: When we had the Tower Colliery people before us they mentioned that if new deep mining is not started soon, we will lose the skills base and will not be able to pass on those skills. Do you see any future for deep mining in Wales; and, if so, what steps do you think we should be taking now to secure that future?

Andrew Davies: We are aware of this issue. In fact, Tower have said this; Tyrone Sullivan has said that there is a danger. That is why in principle we have supported the development of an indigenous Welsh coal industry, not just in terms of supply but in terms of the labour force. There have been proposals - plans at Margam and also other deep mines in the Neath Valley at Aber-pergwm and elsewhere, and that is why in broad policy terms we have supported the development of deep mining, partly of the issue of retaining a skilled workforce that understands the industry.

Chairman: Minister, thank you for your written and oral evidence, and that of your colleague Dr Ron Loveland and all your staff. You have always been very helpful to us; you have almost become an honorary member of the Welsh Affairs due to your frequency of attendance. We look forward to seeing you again very soon. If you feel that in the light of the questions we have posed, particularly in relation to conservation and efficiency and your remarks about public transport that you would like to send a short memorandum about that, we would be very pleased to receive it.