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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 88-iv House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE ENVIRONMENT, FOOD AND RURAL AFFAIRS COMMITTEE
CLIMATE CHANGE: THE "CITIZEN'S AGENDA"
Wednesday 10 January 2007 ALAN SIMPSON MP Evidence heard in Public Questions 526 - 574
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environment, Food and Rural Affairs Committee on Wednesday 10 January 2007 Members present Mr Michael Jack, in the Chair Mr Geoffrey Cox James Duddridge Patrick Hall Lynne Jones David Lepper Mrs Madeleine Moon Sir Peter Soulsby David Taylor Mr Roger Williams ________________ Memorandum submitted by Alan Simpson
Examination of Witnesses
Witnesses: Alan Simpson, a Member of the House, gave evidence. Q526 Chairman: Can I particularly welcome to this evidence session in the Committee's inquiry, "Climate change: the 'Citizens agenda'", the member of Parliament for Nottingham South, Alan Simpson, a former member of this Committee and a devout advocate of all things to do with energy saving and many other issues connected with sustainability as well. We are very grateful, Alan, for you giving up your time to come and give evidence and also for the quality of the evidence that you have submitted. It is not often that a witness brings their own personal fan club with them, but I see that you have done that to give you that little added extra support, and we are delighted that they are here with us today. If you need any member of your team to add a little bit of evidence, we can always record that for the benefit of Hansard. Alan Simpson: I thought I would bring my own heckler! Q527 Chairman: We are delighted about that. It was a heck of a project to decide to do, but it addresses, I think, one of the issues in terms of climate change which is focusing on the existing built environment as opposed to new-build, but what were the factors that motivated you to not just take an existing property but one that was, effectively, a derelict structure and decide to do what has now turned out to be the project as featured in your evidence? Alan Simpson: I think you may describe it as a genetic defect that I have had a long-standing interest in the regulation of older properties. There is something that draws me to them. My interest in trying to put in renewable energy systems dates back 30 years, but that was just tinkering with the process. I suppose what brought it to a head in relation to Lacemakers House was two things: it brought together work that I have been involved in on housing poverty issues for the best part of 30 years, which work has been continued in the Commons largely through the work that I have done in the Warm Homes Group. In that context what had become clear was that the Government's programmes, both in terms of the eradication of fuel poverty and in addressing climate change and renewable energy systems, had already taken the low-hanging fruit, the easy work had already been done, and since about 80 per cent of the population will live their lives in 80 per cent of the existing housing stock, it leaves us with about two-thirds of the existing stock that we are going to have to do something with. I thought that, if I am right in saying I do not believe that we have more than a decade in which to make profound changes to the way we relate to the built environment, then I had better start doing so myself. So I set about looking for what I hoped would be about the worst and hardest of starting positions, and the house that found me certainly seemed to be that: abandoned, derelict for about 40 years, 18-inch solid brick walls, difficult to access - at least the walls were not moving - and I thought that, if only for demonstration purposes, people like us had to be part of the process of driving that change. Q528 Chairman: When you decided to do it did you look round for experts to advise or did you sit and look at it yourself and say, "Well, I have got a certain amount of knowledge. This is what I want to be the end specification"? Looking at the evidence there are two key themes that run through it: the use of sustainable materials and, within that, if you like, the choice of appropriate materials to give you thermal properties within the build, and then the question of being a net generator, that the property becomes a net generator of energy. How did you decide on what would be the specification of this? Who helped you to do it? What I am interested in is that you had the advantage here almost of an untouched canvas, being that it was a derelict building. Most people with older building have got an existing structure that they are living in. The reason I am asking these questions is that perhaps you could say a word or two about what lessons you have learned from that project that you think could assist in the wider question that you have just referred to, which is what do we do with the existing housing stock? Alan Simpson: From where I started, the advice that I would offer to anyone is begin with a good architect. In that context I was extraordinarily lucky to have known for some time the architect that I worked with on my house and with whom we are now working to try and create a whole zero-energy zone in the part of the city. He was absolutely pivotal in making much of what finally happened possible. The benchmarks of the brief, however, were benchmarks that I provided. I wanted to produce a place that would be a net exporter of energy. I wanted to ensure that the building itself was able to minimise its energy requirements in terms of the quality of insulation, and the requirements to recycle as much of the existing materials and incorporate other people's existing materials into that process was the final add on when I started to think seriously about ecological foot-printing and not drawing on new resources for everything that we did. Q529 Chairman: Coming back to the point I made about existing housing stock, in other words people who do not start from the position you did with a wreck but have got their existing houses, what are the things you have distilled out of your approach to which if somebody were to look at this project they might say, "I could do that with my house"? Alan Simpson: I think the things that I have learnt are, first of all, that there is a phenomenally exciting array of choices available to us if we start to look. It is just that the process of looking and finding is quite hard work. The second is that we can dramatically change the whole picture about our relationship between the built environment and energy systems if we do things collectively rather than individually. I think, if I look at the process of working on my own house, I would now say that ten times as many real, exciting opportunities exist beyond the individual level, and so we need to be humble enough to acknowledge that pursuing things collectively will deliver an enormous amount more than us all setting off individually. Finally, in the hierarchy of things that people can do with existing properties that they live in, almost certainly it begins from saying massively raise the insulation standards of your existing property. In real terms you are getting something like a 15 to 20 per cent return on the capital that you invest in that as a result of the energy savings by really high quality thermal insulation. The second is that, in terms of the ecological relationship between yourself as a consumer and the energy system, the easiest thing is to switch supplier to a green energy supplier, and the third is to move as quickly as you can into the area of local energy systems, because the gains there are enormous. Q530 Chairman: We are going to talk in more detail on that, but I am going to bring David in in a second. One final question. In actually taking your wreck and transforming it into the project that we now have the evidence before us about, did you have much interaction with the world of officialdom, for example with building regulations and officials giving sanction to what you were doing, and, if that was the case, did you encounter any particular difficulties or were people in Nottingham very encouraging to what you were doing? Alan Simpson: I ought to put on record a word of praise to the Planning Department in Nottingham. Many of us will find reasons not to praise the planners, but I have to say that, given the difficulties of the building, the site, the fact that it is in the middle of a conservation area, they were very sympathetic and supportive of bringing the building back into effective use. They were quite clear about the terms and constraints that had to be adhered to within the conservation area. We, in turn, worked very strictly to meeting those criteria and things went through very, very positively. It would be completely unfair of me to say anything other than very positive things about my experience of the planning process, but I suspect, again, much of that was down to the fact that, from the start, I worked alongside an extremely good visionary architect. Q531 Chairman: What is the value of the project? Alan Simpson: In commercial terms or personal terms? Q532 Chairman: No, I was interested in terms of how much has it cost, to give us a flavour of what has been involved. I suppose the interesting question would be if you had been able to do a costing of doing it up conventionally, bringing it back into habitable use versus what you have done, perhaps to try and establish the degree of on-cost? Alan Simpson: Perhaps the easiest thing is to talk about the difference rather than the actual costs. The estimate that we have made is that it cost about £30,000 more to do all of the environmental work. That included a complete solar roof that generates just over three megawatts of electricity per hour, the incorporation of the micro-CHP complementary heating system and the internal and external levels of render and insulation and the water recycling. In all, all of those measures came to about £30,000. Chairman: That is very helpful. Q533 David Taylor: There will be a fair number of lessons, Alan, from your experience in terms of how best to approach, possibly, the major upgrading of existing housing stock. One of the main hassles for anyone that has lived in a house when major work is going on is the sheer inconvenience of it all. How long did the project take from almost taking occupation of the site to moving in, and at what point did you move in? Was work still going on around you? This is a serious point. Alan Simpson: No, this was an extremely serious point. It took 18 months to two years in total. I will not pretend that it did not overrun, we had least a six-month overrun, and at the end there were real concerns that we had as a family about which would arrive first, the stairs or the baby. In the end it was the baby. Q534 David Taylor: At what point did you move in, in practical terms? Alan Simpson: Just after the stairs! No, we moved in when our daughter was about a month old and we should have moved in about six months before she was born. I think to describe it as fraught would be mild. It was a big project and a tough and disruptive course. Q535 David Taylor: Particularly with housing stock you would normally want to have some buffer properties into which you could detect the current people and then to do the work. Alan Simpson: I think that is interesting, because that is what we have moved on to in relation the Meadows zero-energy zone proposal. That would be to take 4,000 existing properties and to try to turn them into a zero-energy zone in ways that do not necessarily involve massive disruption. In terms of energy generating systems, you could fit a solar roof, you could fit a ground source heat pump, you could fit air source heat pumps. If we look at wind generation, I think the economics of individual wind generators on properties do not make any particular sense in cities. What we are looking at there is a community wind generator, the likes of which they have, fairly commonly, in Germany. Certainly there would be common ownership of this, which is not disruptive of individual households. You cannot get away with non-disruption at all, but for solid, brick properties I suspect that you are talking about external render, and that again can be done in ways that have minimal disruption to the internal living arrangements. Q536 David Lepper: Alan, you have emphasised the importance of the architect, you have described the architect as "visionary". Have you formed a view, or does your architect have a view - I wonder if you have discussed it - about the extent to which the trade and education of architects is sympathetic to the kinds of work that your architect has been doing? Is your architect a loner, ploughing a lone furrow? Alan Simpson: No, I do not think the architects are necessarily the problem on this. There are real problems with developers and the brief that developers give to architects. I have taken some of this through already with the confidences of the construction industry. Basically, I have suggested to them that their relationship to society is pretty much one of the relationship between the car thief and the car owner. They are in the process of stealing as much as they can from the public regulatory system to get away with building on the cheap and for short-term profit, leaving the rest of society to pay massively the long term cost, including the running costs. When I talk to architects about this their response is to say, "Just change the rules of the game. You guys make the rules. Just change them." This is happening all across Europe. We are the only ones, in a European context, who have a rules base in our society that almost chases the cheap and cheerless. I do not think you would find any objections in the architects' world. There would be screams amongst developers, but precisely the same developers are building buildings in other parts of Europe to substantially higher qualities than we require them to build in the UK and, in the context of Germany, are building them and incorporating energy generating systems within them as a matter of course. Q537 Lynne Jones: In relation to architecture, your house is in a conservation area but I take it your insulation was internal? Alan Simpson: No, both. Q538 Lynne Jones: I do not know whether there are any features on the house, but if you are doing retro fitting and you are doing external insulation or even doing internal insulation, one of the problems may be the alteration in the character of older buildings or buildings in conservation areas or listed buildings? Alan Simpson: We did not have any of those problems. The character of other buildings within the conservation area was a mixture of external facings, some of which had already been rendered, some of which were retained brick, so our proposals to put in the external rendering just had to be consistent with the character of the buildings that had been rendered within the conservation area. Q539 Lynne Jones: Have you any thoughts on those houses where you have got, for example, external features where it would be detrimental to the character of the building to render over? Alan Simpson: We went to look at some buildings in Germany that had had to deal with that as an issue, and they have been developing a different form of insulation, which is a form of polystyrene sandwich which is very thin but has a bubble-wrap centre to it filled with sort of anti-freeze liquid. I do not know, but the whole rationale of it is that they can produce current Scandinavian levels of insulation in coats that are maybe two centimetres thick, so that would obviate the need to put it on externally; you would be able to do it internally. Chairman: Are you going to buy one, Patrick. You were looking very surprised. Q540 Patrick Hall: I am stunned, but I am very interested that you can achieve insulation in two centimetres. We have been used to the fact that you need air, and space, and wood and polystyrene and all that. This works? Alan Simpson: Absolutely, and I think this is the thing that gives me the great basis of excitement about what is possible. None of the things that we visited are Utopian, they are all up and running now. The question for the UK is how do we quickly catch up with what already exists and not pretend that somehow we are leading a game just because we have decided to play in it. Q541 James Duddridge: One of the things that fascinated me about the project was the use of recycled building materials. How did you access those building materials? How did you find out where to get them? Alan Simpson: Again, this has to be put down to the architects in the first instance. Then a lot of people, when it became known, just sent information into us and they said, "Are you aware of this?" In a sense, to begin with we had to go out looking for that information. Once it became clear that there were people who were interested in knowing, we then became the recipients of lots of stuff that people felt was useful to know, and much of it was. We ended up making strange arrangements. The people who came and did the installation of the solar roof were also involved in the building of an eco-house and they wanted to know if they could use the timbers from our place that we could not recycle in our own place, and we said, "Yes." In a sense there was a private bartering process, or a sort of trading for free process, in the pooling of that information, and the excitement that it is possible to tap into is just vast, it simply is not well organised. I think institutionally and structurally, for the purposes of this inquiry, there are questions about how might government best help this to become available in a way that was easy to members of the public who did not have the time, the knowledge, the inclination to spend going off on that sort of pursuit. We ought to address how we can make changes that do not require everyone to go and invent that sort of wheel for themselves. Q542 James Duddridge: Is there an ideal single point of information that you would propose? You mentioned government use. I use things like Freecycle, not for major renovations, but for odds and ends, and that seems to be a good source of getting building materials and disposing of residual building materials. Alan Simpson: I would tend to say that at least at the point of coordinating information that is a legitimate role for local authorities in the present and the future to be asked to play. It does not give them a monopoly of control and distribution of those resources, but it says we should have a public responsibility for making it easy for our citizens to find out, and I think the value of something like a local authority doing that is that they are not there with a vested interest in selling their own product. So for me that is the most sensible starting point. Q543 Chairman: In your evidence, Alan, you say about systems and materials, less impressive is the availability of verifiable data, and it is certainly something where people have come before the Committee to date and put forward ideas, either for generating electricity or materials to save on energy or reduce emissions, but there is no, if you like, true product information to verify that it does what it says it will do on the tin. Do you want to comment on that? Alan Simpson: Yes. I suppose I ought to be thankful that the initial plans that I had to incorporate a wind turbine on the house did not come to fruition, mainly because the supplier could not get round to delivering the wind turbine. They were having real problems in the reliability of their equipment at the time. But the more I went into it, the more it became clear that those of us who are supporters of wind generation need not be drawn into the token gesture, and, unless you have sites that can access constant wind speeds and draw on a wind turbine which is significantly larger than any you would attach to a house, then you are asking people to throw a significant amount of money at something that just will not deliver anything on the tin. So that has been my criticism of the microgenerating industry. If this is as important as they think it is, and I think it is, then we have got to be very, very clear that about what products claim to do and the circumstances in which they claim to do them. I am pleased that B&Q are now selling wind generators, but I would not advise anyone in a city that was not in the middle of a howling gale for most of the year to even think of going down that path. Q544 Lynne Jones: We had some supplementary evidence from B&Q about their efforts at selling their green message, and they said in the week that their advertising went out the wind generator was the item they sold most of. Is it not worrying that companies are actually homing in on people's desire to be green and then not focusing on what really needs to be done? Alan Simpson: Absolutely, and there is a minor tragedy in this. The good news is in the level of interest and sales. It means that they were knocking on a door that the public were desperate to open and become part of, but actually they were selling them completely the wrong products, and all that would come out of that is disillusionment. It seems to me that if the issues about climate change were required to make our own changes at a profound and rapid pace, then you would have to ask in what circumstances society will be asked to do that, and you either do so in fear or in hope. If you want to mobilise hope you have to make sure that people feel optimistic that what they are able to shift into is part of the answer. If they become disillusioned and they feel they have just been ripped off, then they will step back and will not be part of the process of rapid and constructive change. It does worry me enormously that inappropriate claims are currently best placed to drive the market. Q545 Patrick Hall: Arising out of the question that we have just had, Alan, the lack of a single point of information and advice on recycled materials, one of the key points of this inquiry by this Committee is to identify the obstacles that face people who wish to do the sorts of things, maybe not as far as you have gone, but people who want to improve their contribution to the issues of global warming as well as their own expenditure on energy. You have come across, by undertaking such a major project, difficulties and obstacles. You may have had fewer than other people because you are an MP. It is difficult to identify that, but you may well. What do you think are the main obstacles, not necessarily to going quite as far as you have gone, but to people who genuinely want to do something about these issues themselves in their own home? Alan Simpson: I tried to set out in the paper that one of the problems, I think, is that, although the renewables market is an exciting one, it is also an immature one in that people are enthusiastic about their own product but there is very little reliable information about how different systems interface, and getting that interfacing in place is a real problem from where we are now. I cited the example of the early stages of the computer industry where there were fabulous individual programmes that were being produced but they could not talk to each other; and that is pretty much the same in the question of how systems interface. I think that there is a case for a national lead that brings that together. I was talking earlier today with a colleague who was going to France to look at the French initiative around Narbonne where they have insisted that all of the renewable generating industries come together to work on this interfacing. Twenty-six thousand people are involved in the site working on precisely that integrated development of a coherent programme. That is the scale upon which the serious development of alternative renewable networks has been taking place and, without that public intervention to say you are going to have to come together, you are going to have to work out the interfacing. Individual companies do not do it by inclination, they do not do it because they do not have the resources to do it. I think that interfacing is one thing. The second is the rules of our current market. I gave the most successful example that I have come across, and that is the changes in the legislative structure for the energy industry that have been brought about in Germany, both in the 1991 electricity feed-out and in the 2000 Renewable Energy Sources Act, and the scale of changes and citizen buy-in that followed from that was phenomenal. Chairman: I want to talk about that in a little more detail, so I am going to move on to Geoffrey. Q546 Mr Cox: I completely agree with you about the danger of disillusionment. During the summer I hosted and helped to organise in my constituency a manufacturers' exhibition for local and regional manufacturers of microgeneration technologies. We were rather expecting a trickle of people through and, to our astonishment, before we even opened the gates, there were 200 people outside. During the morning we had 500, with several hundred more in the afternoon, so there is a huge appetite. During the course of that expedition it became very clear that what you say about the immaturity of the renewables energy market is a real problem. It is a problem not only because - would you agree with me - many of the suppliers really are just starting out and there is a lack of quality assurance and confidence that they can deliver what they say they can deliver, but, secondly, the problem is that invariably you find that you have to have one or more of these technologies in order to reach a critical mass in terms of energy generation, and they are not very good at joining up their technologies. If you ask them, there is a sort of blank stare that comes over them. My question to you really is: how are we going to enable people to have confidence - you had this problem with your wind turbine - so that manufacturers are going to be able to deliver at this stage and, secondly, that they are going to be able to join them up so that it will actually produce benefits for the householder? Alan Simpson: Let me just turn that one round. For all my criticisms of the manufacturers, I think that within the energy market that we have in the UK it is remarkable that many of them survive at all. We create market conditions that are unhelpful, in practical terms, to the real promotion of a renewable energy sector, so the fact that one survives at all is down to the manufacturers much more than public policy. The way we change this is that in terms of reliability there has to be an obligation that stems directly from government requirements either of local authorities or of regional offices or incorporated into planning and building requirements. So you change the market rules, you set the requirements about interfacing and I think the countries that have made most progress on that have simply told the sector that they are coming together and that they have to work on interfacing and that there is a public lead in the interfacing role so that there is a sense of public responsibility for being able to show that interfacing can take place. In my case it turned out to be interfacing between the combined heat and power system and the photo-voltaic roof, but it would have been a similar sort of problem had it been combining ground source heat pumps, air source heat pumps, wind generation, or whatever. Q547 Mr Cox: Is there a role for a body giving independent advice? In my case my home is about to be audited by a local association called the Devon Association for Renewable Energy. They are coming to audit the house and give me advice. I do not know whether that sort of organisation, which is funded by the RBA, exists around the country. Is there a case for having an independent advice source for this? Alan Simpson: There is, and it may be that it is sensible to do it on a regional basis, it may be sensible to do it on a local authority basis, but it seems to me that somewhere that has to be publicly driven. It just will not happen if we invite the industry to do so itself. They have too many disparate interests and too many other over-arching interests about whether they can survive or not to take on that coordinating role. I think if it does not come from a public lead, it is not going to come at all. Q548 Lynne Jones: To what extent do you think that an independent service should include help with installation? I do not know how you organised it, it was a big project, but part of the problem is not just getting hold of the bit of kit, it is actually installing it. B&Q, just going back to the wind turbines, will install it. I understand that Powergen, when you can get the CHP boilers, will arrange for the installation. How do you co-ordinate not just the supply but the installation? Can I also say while we are on the CHP, I have checked and you cannot get the Whispergen boilers now and their availability is not likely to be, if at all, until the end of this year. Have you got any knowledge of what has caused the hold up in that supply and whether it is different in other countries? Alan Simpson: It is different in other countries, I think, largely because other countries have set for themselves much higher targets for renewables. It is interesting that, in terms of the latest announcements of targets towards 20 per cent renewables by 2020, at least 12 of our European partners already have 2010 targets that are well ahead of our 2020 targets. So the countries that have set themselves the highest target level have created conditions for their manufacturing companies to develop a manufacturing flow that can deliver the goods. Too many of our own companies are trying to do so on what they consider to be a wing and a prayer. Q549 Lynne Jones: Did yours come from New Zealand? I understand Whispergen come from New Zealand. Alan Simpson: Do they? That is interesting in itself. I shall and try and find that out. Q550 Lynne Jones: If it was in Germany, could I get one of these things? Alan Simpson: In Germany you certainly have a huge and vibrant renewables market. They have constructed their emphasis differently. Chairman, can you allow me to go into the renewable tariffs system, the renewable energy system for Germany. They have set a series of preferential tariffs for different renewable energy sectors. The greatest preference is given to photo-voltaics, where they will guarantee you for 20 years four times the market price of any energy that you supply, as opposed to the energy that you purchase. That reduces at five per cent a year, but it is a phenomenal incentive. You can see the return on the investment and that has produced a cavalry charge of citizen interest in getting solar roofs. Other countries have made dismal approaches to renewables. There are different structures of incentives for community-based wind generation. The CHP generating systems are in about three or four of the EU countries, and I would expect that, whatever tariff system favours that as the technology, so the industry will have responded and will meet the need. You are right, though, in saying that in my experience getting the generator and then getting it installed, getting the connections done, not by Powergen but by Eastern Gas, and having that interface with the electrics for the photo-voltaic roof did require a certain amount of re-plumbing after the plumbing and plastering had been done, and Eastern Gas agreed to step in and, since they cocked it up, pick up the cost. That is why I am saying that it is this immaturity in the interface that worries me and, if we want citizens to be involved, we have to take as many of the creases out as we can legitimately be expected to predict. Q551 Lynne Jones: What people would like would be to be able to have a number of different technologies but have somebody organise the whole lot for them. Who should be doing that? What kind of organisation? Do we need new companies to do that? Alan Simpson: I am fairly relaxed on whether that should be the not-for-profit independent sector or the public sector, but it is not going to happen until we change the rules, and that is what worries me. We can talk about the structures for making something work, but if we do not have the rules change to make that an obligation, then it is not going to work. I just feel that everywhere else that I have looked at big initiatives making profound change they have been driven by governments that have had the clarity to change the rules. In the context of this preferential tariff system in Germany, not a penny of it comes in taxation to the Government, it is all a requirement to be internally financed by the energy sector. Q552 Chairman: Can I pin you down on that one. I looked at that and my understanding was that any additional cost in giving the preferential tariff for the photo-voltaics was, if you like, pooled in what was the cost of electricity to all other users. You quoted in your evidence, I think, a pound a week extra cost. Is that right? Alan Simpson: A pound a month. Q553 Chairman: So it is, effectively, a big pooling arrangement by the industry to cover the cost of the preferential rate that is given to PV? Alan Simpson: That is right, and all of the EU countries that have their own systems have different senses of which renewable sector has the most preferential tariff, but I would also point out that every one of them incorporates within it a time guarantee that will be, at the lower end, a minimum of ten years guaranteed preferential tariff but normally up towards the 20 years. So, again, they are building in certainty, both within the energy sector and the minds of the public, about how they can plan to take advantage of this and how secure it is. Our current approach to the energy market is just a million miles away from it. We are locked into thinking about a short-term energy market where even the companies themselves complain that the 28-day rule about systems entitlement to chain suppliers just means that most of them are reluctant to go beyond the low-energy light bulb approach to the problem. I am a big fan of low-energy light bulbs, but there are only so many you can use. Q554 Lynne Jones: Sticking to this issue of the preferential tariffs, we had evidence from the Scottish and Southern Energy Micropower Council, who I presume from their title are keen on microgeneration, but they said that studies have shown that people are being rewarded at a much higher level than is actually justified by what the suppliers are getting back and the energy that is exported onto the system, the main issue being the losses in transactions, et cetera. So they are actually saying that the energy companies are paying out more for microgeneration than they get back. Obviously, your proposal would be a sea-change really. Do you think that the measures in the Climate Change and Sustainable Energy Act will actually help matters, or do we really have to be more radical? Alan Simpson: No, I would say what a whingeing bunch they are. Scottish and Southern, as you will see from the table--- Q555 Lynne Jones: I am sorry, they are the Micropower Council. I do not think they are generators, they are interested, but maybe I am wrong there? Alan Simpson: I do not know. All I can say is that if you want to change the nature of the market, then you have to change the rules in the way that others of our European partners have already done, but it means changing the nature of the energy market from one that is a short-term price-based consumption market into one that is a longer-term market based on sustainability and which moves, as ministers say they wish to move, into an energy services market rather than just an energy consumption market. I have spent the last two or three years going round talking to every energy company in the land about their long-term plans to sell less energy, and not one of them has any plans to sell less energy. They will all tell you energy consumption is a huge problem and we have to reduce it, but not them. So they are all captives in this careering race into climate catastrophe. None of them are going to be able to change until there is a change that comes out in central government policy about the nature of energy markets. It is a real culture change for us to think about the built environment as a contributor to energy systems rather than just a consumer of energy supply. It actually does not take much to do that, but it requires big changes in the structures, including the ability to develop common energy services companies rather than energy supply companies. Q556 Mrs Moon: I wonder, if I am feeling confused about way forward, how the member of the public moves forward. I decided I would take the first step by going to my energy supplier and asking them about the offers they had on insulation and on cavity wall insulation. They came along, they did a survey of my house and they said, "You do not want to put any more insulation in your roof, love, because the insulation will take you above the level of your rafters and you will not be able to store anything in the roof. I would hang on until the new technology comes along that will be thinner." So they told me not to do my roof. As for cavity wall insulation, there is no problem: "For £250 we can cavity insulate your property, but we cannot begin to estimate what the cost of the scaffolding will be to put up before we can do the cavity wall insulation. It might be £1,000, it might be £2,000. You would have to find that out for yourself, you would have to get it erected around your property and then we will come and do the insulation." So, the reply I got was far more complex than the one I was expecting. In terms of the market for renewables, I live on the coast. I do not have your problems living in a city, I live on the coast, and it is too windy for me to have a turbine. You begin to wonder where does a member of the public go? What is the one thing that Government can do to remove this log-jam of conflicting advice that leaves you almost unable to move? Where is the priority to be? Alan Simpson: I do not think there is a single priority. I tried to move for an amendment in the Budget debate that would relate to the reimbursement of Stamp Duty for properties that were A-listed in terms of their thermal efficiency. If you had some system that said, "We are going to thermally grade properties and that this shall be a requirement of their letting or in property transactions and in which there are financial advantages that come from being in the higher efficiency thermal efficiency bracket", then the industry will respond and I think that we would see a whole series of people putting pressures on the demand side. You then have issues about the verification claims, and I think that has to be addressed by some sort of public initiative that does not have a vested interest in selling you, not the product that they do not supply, but the product that we just happen to be specialists in, so that they get your house tailored to their needs rather than to your needs. I think that independent advice is a second point, but I think that there are other issues. I mentioned in my submission the problems about the interfacing between Warm Front and EEC. It is estimated that 30 per cent of low incomes who are eligible for Warm Front funding for raising the thermal efficiency of their properties are being asked to pay additional payments because the cost of insulation exceeds the level of Warm Front. It used to be under EEC/1 that it could dovetail in with the Warm Front funding, and so the excess costs could be met by the energy company and that would count against their EEC obligation. That was ruled out of order by Ofgem, and we are now facing an increasing number of people who cannot afford that top-up payment and so are not getting the full project or, in some cases, not getting it done at all. So I think there is a serious case for saying that, rather than just taking a doubling of EEC that the Government is committed to, I do not think EEC works, and to double that funding and make it twice the size of the Warm Front programme but disconnected from it will leave large numbers of the most vulnerable people still out in the cold. So I think there is a very strong case for a single Warm Front programme that reconnects the contributions that are coming from the industry to the contributions that are coming through public dependent programmes. The final thing, as I say, is that if we change energy market rules we could dramatically make huge gains that are already being experienced by citizens in other parts of Europe. Q557 Sir Peter Soulsby: Could you say a bit more about the benefits of connecting EEC and Warm Front because you will not be surprised that the Energy Retail Association told us that EEC is nearing the end of its effective shelf life and the twin goals of reducing carbon emissions and tackling fuel poverty lead to conflicting priorities and also it is very difficult from your perception of it. Can you say a bit more about the mechanism for connecting the two and the benefits of it? Alan Simpson: At the moment the mechanisms have been severely undermined and I think the Energy Retail Association are quite happy about that, they see the undermining of the link between EEC and Warm Front as a way of getting EEC itself brought to an end. Their policy objectives are to encourage Government policy to place no continuing obligations on the energy industry to address the problems of fuel poverty, so I think that they are a serious part of the problem. For members of the public all you want is to see your house properly insulated and raised to a decent standard and you cannot have that without the disruption, but you want it once not several times. That is not happening because if you ask companies what they are doing with their EEC commitments it is becoming more and more remote from the fuel poor because they are making their choices against what is consistent with their company interests given that their customer base has the right to change suppliers within 28 days, so they are all pursuing the cheapest, least cost contribution in the climate change agenda. It is rapidly spinning around in a single circle, it really is not taking us out of the hole when the hole itself is getting a lot deeper. That is why I say I think there is a need for the Government to bring the two back together and maybe to make the EEC contributions actual cash contributions rather than notional ones and for those cash contributions to be going into a central pot that addresses the fuel poverty and climate change targets. That should be driven by national, regional and local plans rather than separate company plans. I think if we do not bite that bullet it really will leave us in a huge mess. Q558 Sir Peter Soulsby: If the mechanism was changed to adopt that, are the sums of money involved adequate to achieve that? Alan Simpson: EEC3 will be doubling the EEC2 funding and that provides substantial amounts of money, no question about it. Is it likely to be used effectively? No, not under the current terms, and, in fact, it would be siphoning money from the most direct intervention programmes that we have through Warm Front and into ones of much more questionable quality and of virtually no levels of public accountability. It is down to a verification formula with Ofgem, but if you ask any Member of the House how this was working in their constituency for their constituents, I suspect that none of us would be able to come up with a coherent answer. There are claims being made about gains being made, none of which we can find. Q559 Chairman: It is not a bit artificial though because EEC is funded by energy users - it is not that there is a national pot of money that funds EEC, it is the energy industry which is charging its existing customer base to fund EEC to fund its energy reduction obligations, and the thing I find unusual about it is the structure. The focus is set by Government, but in actual fact it is right that you address the fuel poverty issue and for those who are on lower incomes maximise the return for the energy that is used, but at the moment there does not seem to be much EEC focus on the rest of the potential for progress. Alan Simpson: Again, I think in my submission I made the point that Government expectations about what EEC will deliver in terms of carbon savings amounts to three million tonnes of carbon by 2010 and this is our big idea. You set that against the German Renewable Energy Sources Act, which last year delivered 58 million tonnes of carbon savings, with an industry that has an annual investment of €6 billion and an annual turnover of €12 billion, has 150,000 new jobs created within the renewable energy sector, 300,000 Germans having their own stakeholding or shareholding in community-based wind generators. This is why their industry has grabbed a huge slice of the renewable energy markets worldwide. The trouble with those bloody Germans is they are bloody good. They do wonderful things and they do them in ways which genuinely empower citizens. When we went around Munich we encountered large numbers of people who were gung-ho enthusiastic about this because they could see how directly it benefited them. Most of us would have real difficulty in describing a tonne of carbon, we know it is a problem but if asked it would be a bit hard. In case anyone gets pinned down, I worked it out that it is probably best describable as the size of a ten metre hot air balloon, so that is the equivalent if you are talking about millions of tonnes to millions of those balloons. People still do not understand what it means to them but they do understand what it means in terms of their current energy bills. NEA, National Energy Action, made a submission last year in which they just pointed out to Ministers that what had happened in terms of people's average household energy bills between mid-2003 and mid-2006 is that their gas bills had gone up from £330 to £519 and their annual electricity bills had gone up from £242 to £332. People can understand the scale of an increase in their bill. They can also recognise a cheque when it drops through the letter box, and you change the rules so that people can have cheques dropping through their letter box and all of a sudden you will find a lot of people being keen not only to be ecologically virtuous but to be able to bank that virtue at the same time and we do not have that, we have nothing that makes it attractive for the citizen to be the driver. Q560 Chairman: Let me follow that up and ask you, you were saying that we needed to change the contractual basis and drop the 28-day rule and that would have some effect, Ofgem have made an announcement that this is going to be dropped. You said that you have been around to the power generation companies but you found little by way of evidence that they wanted to pursue policies to reduce energy consumption. In those discussions did you get any indication that if the 28-day rule contractual basis was removed that this might alter the way that they either sold energy or provided services associated with the supply of energy? Alan Simpson: No, I did not and I do not think it is sufficient. I know the electricity companies are keen to have the 28-day rule dropped, but if you did that under the current arrangements I think very little would change. What you have to do is to look at if we were serious about moving into energy service companies what would the nature of those companies be like? I suspect we would be turning the clock back to where our energy companies started. I think it was 1817, Manchester Metropolitan Police Commissioners, a revolutionary body if ever I heard one, set up the first of the country's gas companies on Water Street, people came and looked at this little gas light outside the police station and thought, "Marvellous, is it not, it will never catch on, but it is marvellous". Within ten years that had become the Manchester Gas and Water Company providing the entirety of gas lighting and water for the then City of Manchester. Everything that was driven in the era between 1817 and 1880 was driven around a metropolitan agenda of energy and water security. That is happening today in a European context around the notion of decentralised energy system where instead of our current UK national grid which has a 20 per cent efficiency ratio of energy inputs to energy outputs, the Danes, in particular, claim that it can be between 90 and 95 per cent efficient in transferring energy inputs to energy outputs, but it is local energy systems. Q561 Chairman: Can you explain a term which you used in your evidence which was this private wire system, where does that fit in with this? Alan Simpson: This is absolutely where it takes us. Let me give you the practical example of this from my own city. Boots has its headquarters in Nottingham and a substantial amount of manufacturing. On its main site it has an energy generating capacity basically to provide backup energy in the event of a black-out. Under the 1989 Energy Act, companies are allowed to have private wire systems so that they can feed and supply their main site and other satellite sites and within that there is what is called the exempt licensing regime. There are two sets of arrangements. The first is that if you have the private wiring in the way that Boots do, you can generate up to 50 megawatts of electricity for distribution but only one megawatt of that can be for domestic purposes. For practical purposes, one megawatt is enough for 1,000 houses, so that is what a private wire system can do. You can also have a similar exempt licence using the public wiring network but if you are using public wires you are only allowed to generate five megawatts of electricity of which 2.5 can be for domestic purposes. So, all of this precludes the scope of delivering energy service companies in the way that the Environment Minister is saying he is keen to do beyond a maximum size of 2,500 properties. Everywhere in the country that has tried to explore this has realised that to make any coherent sense, you have got to be going beyond that figure of 2,500 properties. Our own plans for a zero energy zone in part of Nottingham would work within a zone of 4,000 properties. At some stage it is likely to make sense for it to be the whole of the city. When we went to Munich they have an energy services company for the whole of Munich. Q562 Chairman: Is that relevant to the point you were making earlier about the need for collective action in electricity generation so, in other words if people have a district based wind generator for argument's sake, this private wire restriction could curtail such a development where people would invest in a piece of kit to power their area? Alan Simpson: Absolutely, because if it was more than 1,000 properties you could not get permission to have it. Q563 Chairman: Tell me how you reconcile the paradox between the fact that wind energy is generated usually in remote locations and it requires some form of grid arrangement to take that renewable energy to urban areas where we have been discussing earlier the ability to generate wind energy is very low. It almost feels from your evidence that you are knocking the grid, yet the grid is the delivery mechanism for renewables which you could not generate from the localised network that we were just discussing. How do you get the best of both worlds? Alan Simpson: I think you can. What you talk about is a web or a network rather than a grid for the 21st century. It may well be that to move entirely into decentralised energy networks would be too big a single step for the UK to take. We had separate submissions by some of the current wind generators about their ability to deliver a North Sea air-tricity network which would deliver ten gigawatts of electricity for the UK. If you bear in mind that the entirety of the current nuclear contribution to electricity supply is 8.4 gigawatts, this proposal of just networking the existing wind generators in the North Sea for less than the cost of a single nuclear power station would deliver way more than the entirety of the nuclear content; you could do that. This would be a legitimate shift in terms of what the UK Government nationally chose to do. It is not incompatible with what is happening in other parts of Europe in terms of the much more efficient context in which you will reduce the base load of demands because you have a weave of local energy systems that themselves are much more efficient. I think once you start to do that you discover that there are other possibilities which open themselves up. For instance, I heard in one of the previous inquiry sessions you had with Dr Ray talking about the problem of standby appliances and the fact that they consume three megawatts of electricity or three tonnes of carbon --- Q564 Chairman: This was standbys on television sets. Alan Simpson: Yes, which is more than the entirety of the EEC contributions; they swamp that in a single year. If you had an energy services company, what you could do is offer long-term energy supply contracts, energy security contracts, in which you could give away the energy systems which were appropriate to different houses, you would just give them away, in exchange for a ten-year contract. The generating systems would be ones in which, as a common ownership company, you could raise the thermal efficiency of the properties and you would make money as a company by people consuming less energy. In the generating of energy you would agree on a split of the surplus energy in terms of the profits which came from them. If you really wanted to then make money, you would use the power of those companies to be the purchasers of ecological white goods. Developers do this now in all of the new developments which are going up. You will find them all fully furnished but by and large with poor quality appliances, all of which have the standby ten watt consumption or more. You can get the one watt standby appliances but you have to purchase them. If you purchase them collectively, that is the way in which you change the standards that work in the marketplace. You could use those powers of local energy services companies to change the framework of the consumption of energy using equipment. I think that can be done at a collective level in a way which it cannot at an individual level. Q565 Lynne Jones: I am not sure I have taken in all the mechanisms of all that, but I have just found this article which was in Science in Parliament about the London Climate Change Agency. They are setting up an energy service company, but it is a joint venture company in conjunction with an energy supplier, EDF Energy. Obviously that is now on the cards. Is that perhaps a more practical model to take this forward, or is that a model which is constrained by the current regulatory mechanisms? How would such a company be affected by your concerns about the private networks and the maximum amount of generation? Alan Simpson: It is as good as you can get under the current UK rules. I am amused about this because EDF are the partners in that; they are the principal owners of it. With EDF in other European countries, where they are the energy sector partners, the ownership of the company is in public hands, and the energy sector partners then compete for the contract to be the partner, but they are not the owners of the company in the way that they are in the UK. I think that just replicates an oligopoly in the UK energy market when you could have a much stronger sense of public accountability if you looked at some of the existing forms of public energy services companies which exist in other parts of Europe. I do not want to knock the London Climate Change Agency, I think they are doing what they can within the tight limits which are permitted currently within the UK. Q566 Lynne Jones: Are you saying there is more competition by doing it with the public sector being in control? Alan Simpson: I am and I am saying it particularly. First of all, there is certainly more public accountability because those companies have much stronger citizen involvement in driving their own climate change agenda. That sense of direct and local accountability is much more established elsewhere in Europe than we have here. The second thing is in terms of the energy sector partner, it is much clearer that the public company, or the common ownership company, then invites energy suppliers to put in their own bids. It is a bit like franchising: you get to be the company that wins the partnership franchise for a defined period of time. If you cannot deliver, then your competitors are free to put in a stronger bid. That is quite different from an ESCo which is owned by the energy company itself and where they are the ones who call all the tunes. Q567 Lynne Jones: On carbon trading: you have been sceptical about emissions trading, and you support carbon taxes to reduce emissions. Could you say why you think taxes are a better mechanism of reducing carbon emissions than personal carbon trading? Alan Simpson: I am not sceptical; I am completely cynical about it. I think this is the great intellectual scam of our time. The Treasury loves it because no-one understands it, and the City loves it because they make a huge amount of money out of it. It is almost impossible for citizens to take part in because it is obscure to the point of desperation. I thought I would bring along with me a copy of the application form for me to become a participant in this carbon trading to apply for a ROC, a renewable energy certificate. It is a 56 page guidance booklet with 26 pages of application, 204 questions, and five places for the citizen to sign. It is enormously complex and obscure. Q568 Chairman: Is that for a ROC or a rocket? Alan Simpson: A ROC. This is where it is supposed to be assisting you to become part of the process, but you would be a micro-generator in that. I think it is worth bearing in mind that there was a conference about 18 months ago in Durban, in South Africa, about civil organisations looking at this issue and about carbon and climate justice. They passed a resolution saying they were deeply hostile to the idea of turning carbon into a commodity. They argued that this was the largest privatisation of the earth's carbon cycle of process that they had come across. I think there is a great deal to be thought through in that context. My objections to it are both philosophical and practical. Practical: the Environmental Audit Committee has done its own analysis of the complete shambles of the first phase of emissions trading. Phase 2 is likely to be no better because the allowances have been over generous. The scheme works by giving allowances to those who pollute but not to those who do not. Q569 Lynne Jones: What about those problems with how it was set up? In order to get agreement it was necessary, perhaps, to make things not as efficient as they might be, but once it has been accepted, people would argue that it is successful. There is also less resistance to the concept of emissions trading or carbon trading than there is to taxation. Is it not a more acceptable approach which in the end will get the job done? We only have to look at VAT on fuel, for example, to appreciate the problems. Alan Simpson: Let me give you a different example. The argument for emissions trading was based on the US 1990 Clean Air Act to pursue the desulphurisation process. At its best, that aims to maybe reduce sulphur emissions by about 30 per cent. We passed our own Clean Air Act in the early 1960s, and we just told industry that acceptable emissions levels were to be cut, and they were given a three-year period in which to make those cuts. We were told at the time that the whole of the economy would collapse, we just had to live with the smog we had at the time. In fact, once it was done and their rules base was changed, everything changed accordingly. It has been immeasurably more efficient in delivering that change than anything which has come out of emissions trading based on the US Act. I want the Committee to consider the limits of this. I think intellectually it is a scam but, in practical terms I would ask you to look at the annex at the back of the Department for Transport's recent report on The Future of Air Transport. In the back, on the very back page, they talk about the scenarios in which the price of carbon for carbon trading is to have gone from its current figure, which yesterday was €3.40 per tonne of carbon, to £140 per tonne by 2030. Their projections of the effect this will have on aviation is it will reduce the ticket flight sales, currently around 200-250 million a year, from an expected 465 million ticket sales to a figure of 455 million. Q570 Lynne Jones: You would have to factor in growth. Alan Simpson: This is factoring in growth. Q571 Lynne Jones: No, but if you did not do anything, what would be the numbers of ticket sales? Alan Simpson: This is the central case which is the non-intervention. It is that by 2030, under the current terms, there will be 465 million ticket sales for flights within the UK. With this tradable carbon taxing at £140 per tonne, it will reduce that growth by ten million tonnes; next to zero impact. Q572 Lynne Jones: Your approach would be to have a big tax on air tickets, so what evidence have you got? Alan Simpson: No, it is not. Q573 Lynne Jones: What would your alternative be? Alan Simpson: What you have to do in aviation is move towards non-tradable quotas. You say to people, "You can have carbon quotas allocated to every airport", and you say, "They will reduce at two per cent per annum in-line with our commitment" or "five per cent per annum - whatever you want - in terms of our carbon reduction targets", and you work out how best to do it. Q574 Chairman: One thing I no longer have is the time quota! Alan, thank you very much indeed for your evidence, both written and oral. You know the form: you cannot withdraw anything you have said, but if there is anything else you want to let us have by way of further information, we would be delighted to hear from you. Alan Simpson: I will supply you with the more detailed figures of materials used in those houses and on carbon savings. Chairman: Thank you. |