Examination of Witnesses (Questions 600-605)
MR ANDREW
WARREN AND
MR IAN
MANDERS
24 JANUARY 2007
Q600 Sir Peter Soulsby: Coming back
to the question of tariffs, have you given any thought to what
sort of levels of tariffs are actually necessary in order to make
the whole thing work, to make it attractive to people to invest?
Mr Manders: It obviously has to
be so that they can make enough profit after borrowing the money
and paying the interest and the capital. Certainly in Denmark
farmers club together to buy a wind turbine because it is a form
of farming as far as they are concerned; they have the land and
they put the turbine up and then they earn enough money from the
feed-in tariff to pay for that turbine and to make a profit. That
is probably the level that we have to think of; it has to be attractive
enough to match interest rates and the capital.
Q601 David Lepper: You talked about
councils and the role of councils. What about the expertise of
people in council planning departments so far as microgeneration
is concerned? You tell us.
Mr Warren: Patchy is the word.
Q602 David Lepper: Is anything being
done to overcome that patchiness or if not, what should be done
and who should be doing it?
Mr Manders: There have been some
attempts. The DTI did a programme called It's Only Natural which
was primarily about persuading local planning authorities to accept
wind turbines or wind farms. At the same time it did have the
benefit of educating planners and also leading members of local
authorities and councillors about renewable energy. But that is
just a drop in the ocean. There are 400 local planning authorities
and sustainable energy is a new area for them. They are not used
to it. They are not trained to handle it. It is not surprising
that they do not know very much about it and many of them are
quite fearful of going down that road because obviously if you
make a mistake, your mistakes find you out very, very quickly.
The Government are working on this new planning policy statement
to have every local planning authority consider sustainable energy
as part of their evolving local development documents. There is
a big gap there. Most local authorities will not be in a situation
where they actually have the expertise to implement that policy.
Something has to happen somewhere. I am sure the private sector
will step in and there will be consultants who will be plying
their trade round local authorities saying they can solve that
particular problem for them. There may also need to be more help
from organisations like the DTI on this particular issue.
Q603 David Lepper: Some of us were
in California last year as part of the first stage of our inquiry
and one of the schemes we saw there involved the supply by the
electricity service company of low energy, very efficient refrigerators
to small businesses in a scheme that aimed to get them all using
them. Do you think in this country we need a scheme of that kind
in terms of encouraging the uptake in homes or in businesses of
the appliances that are going to be more energy efficient?
Mr Warren: Up to a point that
is what the Energy Efficiency Commitment is intended to do but
it obviously has a ceiling. As I understand what has happened
in California to date, there has been a remarkable record there.
Even though they have had very substantial growth in wealth and
in population, electricity consumption per head has stabilised
over the last 15 years or so and that has been, as I understand
it, because the regulators who oversee the electricity companies
have basically said to them that it is cheaper for your customers
for you to be helping them to save energy than it is for you to
be investing in new power plants. That has been particularly possible
to do because you very often have integrated utilities there and
you are probably referring to Pacific Gas and Electric in this
particular location.
Q604 David Lepper: Yes, that is right.
Mr Warren: In essence, if we go
back again to the discussion we were having with the Chairman
at the start of this session, that is the sort of ethos that one
is trying to reach in this country, in reaching towards the whole
idea of energy service companies. We will not be able to do work
on the commercial refrigerating side of things as yet because
all of the duties for them refer only to the residential sector.
There are actually very few mechanisms, methods, public instruments
which deal with the commercial sector and address the commercial
sector at all in the UK, which is one reasons why it has been
an area which has seen exponential growth in energy use.
Q605 David Lepper: I just wondered
to what extent one of the problems in this country is the 28-day
rule that allows customers to change supplier. Is there a reluctance
on the part of the service providers, the energy providers?
Mr Warren: In practice the regulator
here, Ofgem, did offer the opportunity to relax that rule in order
to enable new energy service contracts to be introduced. I do
not know whether that was taken up very widely, but there is sufficient
recognition within Government about the need to see longer-term
investments into energy saving measures not deterred by the understandable
requirement in a liberalised market that you do not tie in a customer
forever, that it is perfectly possible to have effectively two
contracts: one which relates to the energy saving measures and
one which relates to the consumption. It is not perfect and it
is not as easy to do as it is in the integrated market in California,
but it is possible.
Chairman: Andrew, Mr Manders thank you
both very much indeed for your contribution. There were one or
two quite stimulating new perspectives, particularly in terms
of landlord and tenant, which we have not heard of before and
we are grateful to you for that. Standard warning: you cannot
undo anything you have said, but if there is anything else you
would like to send us by way of additional commentary, then the
Committee is always grateful for further thoughts. Thank you both,
not only for your oral evidence but also for the written evidence
which you submitted earlier. Thank you very much.
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