Background
2. The Government's Energy Review report, The
Energy Challenge, published in July 2006, underlined the fact
that there is no single or simple solution to the issues of climate
change and security of energy supply in the UK. Rather, the Government
concluded that the answer lies in a multifaceted response, elements
of which include much greater investment in renewable energy,
new nuclear power stations, low-carbon transport, and a concerted
effort to use energy more efficiently. Whilst there may be debate
over the contribution each of these should make, there is at least
consensus on the need for action on various fronts.
3. One area highlighted in the Review as having the
potential to play a significant part in the UK's energy mix in
the long term is the greater use of energy produced by individuals,
businesses or communities for their own consumption, be it space
or water heating, or electricity. Such 'local energy' encompasses
a broad range of technologies that are capable of helping to reduce
carbon dioxide emissions, either because they are renewable, or
because they use fossil fuels more efficiently. Examples include
roof-top wind turbines, solar-heated water, and household combined
heat and power (CHP) systems that generate electricity in the
home and use the resulting thermal energy for domestic heating.
Whilst the primary aim of such energy production is for own-use
there is also the potential for surplus generation to be sold
for use elsewhere.
4. The concept of local energy represents a fundamentally
different approach to the current centralised mode of delivery
for energy used in heating and electricity in the UK. Historically,
however, it is not a new idea. In the early part of the twentieth
century the UK's electricity network was characterised by the
same principle, with power stations built near to the source of
demand and operated on local grid networks. In the 1950s and 1960s
this approach was supplanted by the structure we have today, with
most electricity produced by large power stations that connect
to a high voltage transmission system. This, in turn, feeds the
local distribution networks that supply homes and businesses.
In so doing the system exploits economies of scale, reducing the
unit cost of generating electricity whilst also, its supporters
claim, increasing security of supply.[3]
5. In recent years, however, changes in technology
have reduced the cost of smaller scale means of energy production
and made it easier for the networks to manage the connection of
a larger and more diverse range of generating units.[4]
Coming at a time of heightened concern over climate change and
energy security, the potential for individuals and communities
to make a direct contribution to tackling these issues has captured
the imagination of politicians and the general public alike. For
instance, the past year has seen a step-change in the level of
interest and take-up of Government schemes to support local energy,
as companies such as B&Q have entered the market, offering
to install roof-top wind turbines and solar water heating systems.
These developments have received support from all the main political
parties. In November 2006, Alistair Darling, Secretary of State
for Trade and Industry, said that there "is huge potential
for us to make energy a local issue, involving individuals, businesses
and communities."[5]
In turn, the leader of the Conservative Party, David Cameron,
has said that "the future of energy is not top-down, it's
bottom-up".[6] This
suggests there is a growing political consensus about the potential
long-run importance of local energy.
The scope of our inquiry
6. In both the written and oral evidence we received
we were surprised, and at times confused, by the plethora of terms
used in association with local energy. The Government's Energy
Challenge document uses the term 'distributed energy', although
elsewhere it is interchangeable with others, such as 'decentralised
energy' and 'distributed generation'. In essence, distributed
energy refers to the entire range of electricity generating technologies
that are not connected to the transmission network, as well as
all non-gas heat sources. This is not a helpful grouping for the
analysis of policy because generating units as diverse as a 100
megawatt combined-cycle gas turbine, a 10 megawatt onshore wind
farm, or a 1 kilowatt household solar thermal system, may all
be classified as distributed generation. The contribution that
each of these can make to reducing carbon dioxide emissions, or
increasing energy security, may vary considerably, as do the barriers
to their wider deployment.
7. The term 'microgeneration' is used to describe
small installations for generating electricity (up to 50 kilowatts)
and/or heat (up to 45 kilowatts thermal). It covers a range of
technologies, set out in legislation, including fuel cells, hydro,
solar, wind, biomass and geothermal energy.[7]
The expression is somewhat misleading for the uninitiated, given
its application to both electricity and heat producing technologies.
The upper limits on capacity that define microgeneration are also
rather arbitrary, since they preclude larger scale community energy
projects that may use similar technologies and operate under the
same principle of energy being produced at the point of use.
8. The focus
of this Report is on the various ways in which individuals and
communities can produce their own low-carbon energy. Hence, we
have used the term 'local energy' to incorporate both microgeneration
and community-level energy, whether electricity or heat, that
has been produced for own-use. We hope that this more accurate
and easier-to-understand term might command general acceptance
and recommend that it be adopted in all official government documents.
In our Report we look at
the range of available local energy technologies and the extent
to which they may play a role in achieving the Government's energy
policy objectives. Given the liberalised nature of the UK's energy
markets, a significant expansion of local energy capacity will
be achieved only if action takes place at all levels of society—the
individual, the community, and as a nation. We examine what needs
to be done in each of these spheres. We also consider the role
of Government in creating the necessary industrial capacity to
supply a long-term expansion in the level of local energy. Finally,
we look at the implications of such a change in the energy mix
for the future operation and management of the electricity grid
network.
9. During our inquiry we took oral evidence from
the Renewable Energy Association, the Micropower Council and the
Energy Networks Association, which represent various aspects of
the local energy industry. We also took evidence from the professional
association, the Institution of Engineering and Technology; the
advice body, the Energy Saving Trust; and Sussex Energy Group—an
academic body specialising in energy policy. In addition to the
57 memoranda received as part of our work on the Energy Review,
we received 12 pieces of supplementary evidence specifically on
this inquiry. We would like to express our thanks to all those
who have contributed to our evidence-gathering.
1 Department of Trade and Industry, Our energy challenge-securing
clean, affordable energy for the long-term, January 2006;
and The Energy Challenge, July 2006 Back
2
Trade and Industry Committee, Fourth Report of Session 2005-06,
New Nuclear? Examining the issues, HC 1122 Back
3
Department of Trade and Industry, Distributed Energy-A call
for evidence for the review of barriers and incentives to distributed
generation, including combined heat and power, November 2006 Back
4
Appendix 67 (Sussex Energy Group) Back
5
Department of Trade and Industry Press Notice, 'Government seeks
boost for local energy', November 2006 Back
6
Speech to the Local Government Association conference, July 2006 Back
7
Climate Change and Sustainable Energy Act 2006, Section 26 (1-3) Back
