Select Committee on Trade and Industry First Report

4  Engaging communities

90. We have concentrated, so far, on the ways in which households can take individual action to reduce their carbon dioxide emissions through the use of local energy. But a greater proportion of our energy needs could also be sourced within communities. This can take a variety of forms, from providing combined heat and power (CHP) for housing developments or town centre offices, to installing solar panels and wind turbines in schools. Local leadership is the key driver for this through, for example, the practical implementation of planning guidance, and by inspiring communities to adopt new technologies. In this Chapter we examine the part local government can play in promoting local energy, and then look specifically at the support Government may provide in encouraging a greater role for community-level CHP.

The role of local government

91. While climate change has risen up the political agenda within central Government over recent years, there has also been a steady increase in awareness within local government of the need to cut carbon dioxide emissions. In response to this, some local authorities, pioneered by the London Borough of Merton, have begun to use the planning laws to promote greater use of local energy in new developments. Other authorities, such as Woking, have gone further still by seeking to revolutionise their communities' energy sources. This section looks at the examples of Merton and Woking, and the ways in which their success can be replicated elsewhere.


92. In August 2004 the Government published its Planning Policy Statement (PPS) on renewable energy, known as PPS 22.[141] For the first time, this required local planning authorities to give due regard to the Government's targets for renewable energy—10% by 2010 with an aspiration of 20% by 2020—in their planning decisions. In particular, PPS 22 confirmed the legal right of councils to "require a percentage of the energy to be used in new residential, commercial or industrial developments to come from on-site renewable energy developments".[142]

93. The London Borough of Merton, which had campaigned for the inclusion of target-setting in PPS 22, was the first local authority to adopt this approach in setting a target for all non-residential developments above a threshold of 1,000 m2 to incorporate at least 10% of their energy needs from renewable energy equipment.[143] The first development required to meet the target was a 4,500 m2 set of industrial units. There, the developer installed ten micro-wind turbines and nine kilowatts of solar photovoltaic capacity. The Council has been surprised by the response of construction companies to its policy. Whereas some detractors had argued that it would drive away developers, put off by the cost of meeting the 10% rule, in fact the opposite has proved the case. Companies building in Merton have seen the policy as providing them with an opportunity to "get ahead of the game in designing, constructing and marketing low carbon buildings for the future".[144] This is because many companies see the widespread uptake of Merton-style rules as inevitable. In addition, the extra construction costs of less than 3% resulting from the policy can be offset by the ability of the developer to sell the units at a premium because of their energy-saving technologies.

94. The 'Merton rule', as it has become known, has grown in popularity, with more than 80 other local authorities following suit.[145] However, this still leaves around 330 local authorities that have not set targets. Last year, the Government conducted a review of take-up of the Merton rule and found that just under half of those that could reasonably have been expected to adopt a target—i.e. those that that had revised their local plans since PPS 22 came into force—had not done so.[146] Part of the reason for this may be that local authorities do not understand the technologies, or the potential impact of adopting a target for on-site renewables.[147] Several of our witnesses praised the example set by Merton Council,[148] although the Micropower Council told us the language of the guidance was still not strong enough as it failed to compel all local authorities to adopt targets for on-site renewables.[149] In fact, some authorities are finding it difficult to implement their own Merton rules simply because current planning policy is not stringent enough.[150]

95. In December 2006, the Department for Communities and Local Government (DCLG) published its consultation paper for a draft Planning Policy Statement on climate change.[151] If implemented, this will expect new developments to optimise their carbon performance and make the most of existing and planned opportunities for local renewable and low-carbon energy supplies. The new Statement would supplement, rather than replace, PPS 22 (as well as various other Statements), but would aim towards a more comprehensive approach to reducing the carbon footprint of future developments, of which local energy would be just a part.

96. The London Borough of Merton has set a clear example of how local government can show leadership in promoting the use of local energy in new developments. However, many authorities have failed to follow its lead. The Government should increase pressure on those councils to implement targets for on-site renewables in new developments, with a view to all local authorities having such targets in place by 31 December 2009. This would create consistency for developers and councils across the country. Progress in this area is crucial if local government is to demonstrate its capability to respond to any future policy instruments for tackling the causes of climate change, such as new planning guidance.


97. Since the early 1990s, long before the introduction of PPS 22 and the Merton rule, Woking Borough Council has been at the forefront of developing local energy systems. Under the policy pioneered by Mr Allan Jones MBE, Woking has incrementally expanded its local energy capacity over the past 15 years, funding growth of that capacity by re-investing money saved through its energy efficiency projects. Since 1999, local energy development in the town has been taken forward by Thameswey Energy Ltd (TEL)—a public/private joint venture energy service company, wholly owned by the council, allowing it to operate outside the capital controls of local government. TEL provides local energy, including cooling, heat and electricity to all Woking's institutional, commercial and residential customers.[152] In 2002, Woking was the first local authority to adopt a comprehensive Climate Change Strategy, aimed at meeting the Royal Commission on Environmental Pollution's target of a 60% reduction in carbon dioxide emissions by 2050.[153] The town has now built up a network of over 60 local generators, including cogeneration and trigeneration units, photovoltaic arrays and the UK's first hydrogen fuel cell station.[154] In so doing, the council has reduced its own carbon dioxide emissions by around 77% and those of the borough as a whole by 17%. Importantly, it has achieved this using its own funds, without financial support from central Government.

98. One of the key features of the Woking example is that its energy system runs on a local private wire network. This is where a single party runs its own network off the licensed distribution network, allowing a certain amount of unlicensed generation and supply to take place outside the main electricity market.[155] In the case of Woking, Thameswey Ltd runs the private wire network, providing connections for the whole town. Under this set-up, because the operator is unlicensed, it is able to avoid costs such as the Renewables Obligation, Climate Change Levy and the Energy Efficiency Commitment. This helps promote the financial viability of the more expensive low-carbon energy sources used in Woking. There are disadvantages, however, to the use of private wire networks. Customers are not protected in the same way as those supplied by licensed energy companies, and cannot easily switch energy supplier. These networks are also still dependent on the external public networks for backup power, when necessary.[156] Nevertheless, there is increasing support for the use of private wire networks and these are a key feature of future plans for energy supply in London.

99. The experience of Woking demonstrates the importance of leadership at a local level, with individuals having an ambitious vision of how they can directly contribute to reducing their communities' carbon dioxide emissions. Other local authorities should seek to learn from Woking's example in developing and implementing their own strategies for tackling the causes of climate change.


100. Many of the lessons learnt from Woking and elsewhere are now being transferred to London. For example, the Mayor of London's Energy Strategy commits him to using his planning powers to help achieve a 20% reduction in London's carbon dioxide emissions by 2010, relative to their 1990 level. All new developments are to consider CHP and heat-fired absorption cooling, and to produce at least 10% of their energy needs from on-site renewables.[157] The Strategy requests London boroughs to set targets consistent with this, following the example of Merton, although the Mayor does not have the power to compel them to do so.

101. Another feature of the Energy Strategy is the Mayor's request for each London borough to identify at least one potential site for a zero-carbon commercial or housing scheme by 2010, and for councils to use their powers as landowners or partners to bring about its development. Underpinning this recommendation is the experience of the Beddington Zero Energy Development, known as BedZed, near Wallington in Surrey. Completed in 2002, and consisting of 178 homes, BedZed was designed to be the UK's first totally carbon-neutral community, powered by PV panels and wood chip-fuelled CHP.[158] However, the CHP plant has faced expensive operational difficulties and has been abandoned for the time being, so that around 90% of the development's electricity needs are now drawn off the local distribution network. Nevertheless, many aspects of the project have been successful, including its energy efficiency measures, which mean residents pay less than £400 a year for power and water.[159] The experience from this development will provide valuable lessons for future schemes of the same nature.

102. Modelling the approach taken by Woking, the Mayor has established the London Climate Change Agency—a commercial company, wholly owned by the London Development Agency—whose aim is to help reduce London's carbon dioxide emissions. Its delivery arm is the London Energy Services Company (ESCO), a joint venture with EDF Energy, which will design, finance and build new local energy infrastructure across the capital. The first tranche of projects includes 170 megawatts of community-CHP capacity, using natural gas to start with, though with the potential to use biomass, once a fuel supply chain has been established. Other projects include an eight megawatt wind farm, and solar photovoltaic schemes at City Hall and the London Transport Museum, with total investment for the first phase reaching around £100 million.[160]

103. The high level of energy consumption in London makes it an important leader in spearheading the greater use of local energy systems in urban areas. The London Climate Change Agency looks set to play a major role in exploiting this potential. We believe the UK's other large cities should seek to adopt similar strategies for tackling the causes of climate change, learning lessons from current experience in London, while also working to develop their own innovative approaches to reducing carbon dioxide emissions.

Encouraging community-CHP

104. Despite the fact that space and water heating accounts for a third of the UK's energy consumption, only 1% of it is produced from renewable sources.[161] The scope for carbon dioxide savings in this sector is therefore enormous. In Chapter 2 we noted that there is some potential for community-level CHP to make a contribution in this regard, particularly in urban areas for new build developments. Although current CHP stations mostly run on fossil fuels, they still produce lower carbon dioxide emissions than would the separate provision of electricity and heating. Also, once the technology is ready, fossil-fuel based plants could fairly easily be replaced with systems using renewable fuels, without affecting the attached heat distribution network. In some cases it would simply be a matter of switching fuel.[162]

105. There are several barriers to the wide scale development of community CHP. Because the initial capital cost of CHP stations is higher than for electricity-only plants, this means their economic viability depends on the ability to locate a stable demand for the heat generated. Communities are seldom able to co-ordinate themselves to take advantage of the potential for using CHP in their areas, or are simply unaware of the possibility. As one witness noted to us: "Somehow our culture seems to have lent itself less to these communal solutions …".[163] As we have seen with the example of Woking, it often requires the leadership of particular individuals to bring about change. With regard to renewable sources of heat, there is the added difficulty of securing a supply chain of biomass—an industry which is still in its infancy in the UK. The Government is currently developing a strategy for biomass, which is due to be published in the middle of 2007.[164]

106. Some of the evidence we received was critical of the level of support available for encouraging community and business-level CHP.[165] Businesses have access to enhanced capital allowances as well as exemption from the Climate Change Levy, but few have made use of these incentives. This is partly due to a lack of awareness, but also because firms are unlikely to look at their energy sources beyond the 20-year replacement cycle of their existing equipment. Funding is also available under the Low Carbon Buildings Programme for community and commercial projects, but the total level of support is not large or long-term enough to have a big impact on the level of take-up.

107. There was no clear consensus among our witnesses as to what would be necessary to see greater use of renewable heat within community-based schemes. The Renewable Energy Association (REA) told us it would like to see in place a long-term revenue support mechanism in the form of a Renewable Heat Obligation, providing a similar level of support for heat derived from renewable sources as the Renewables Obligation currently does for electricity.[166] Indeed, it seems perverse to us that a CHP station using a renewable fuel can receive Renewables Obligation Certificates for the electricity it produces, but no equivalent reward for its heat, despite the fact that this, too, contributes to reducing carbon dioxide emissions. This must act as a disincentive for the use of CHP in favour of electricity-only biomass power stations.[167]

108. A Renewable Heat Obligation, the REA argues, could be placed on suppliers of fossil fuels for heat, using data already collected from them as part of the requirements under the Climate Change Levy. In terms of cost per tonne of carbon dioxide saved, the REA believes such an Obligation for heat would cost only a third as much as the equivalent scheme does for electricity.[168] The Energy Saving Trust was, however, doubtful of the feasibility of such an approach. It argued that heat provision is more decentralised than for electricity, and it would therefore be more difficult to place an Obligation on 'heat suppliers' in a similar way to commercial electricity suppliers.[169] As a result, any such scheme would be far more costly to administer, and smaller scale heat producers might face the same difficulties in benefiting from it as households currently do for electricity under the Renewables Obligation. The Trust's preference was to raise awareness and use capital grants to stimulate the sector.[170]

109. There is some scope for reducing carbon dioxide emissions by encouraging greater use of community-based combined heat and power (CHP). However, while the current schemes to support such systems require a pro-active approach by communities to take advantage of them, a lack of awareness and co-ordination prevents many from doing so. Also, the reward for producing low-carbon heat is much less than that for low-carbon electricity. We accept the potential difficulties of implementing a Renewables Heat Obligation. Nevertheless, we recommend that the Government should look at other ways in which it can provide incentives for local areas to move towards community-based low-carbon heating, where it is appropriate for them to do so. Current policy places too much emphasis on the role of local electricity generation and not enough on the production of heat. Renewable, low-carbon heat production is the Cinderella of energy policy and this attitude must change.

141   Office of the Deputy Prime Minister, Planning Policy Statement 22: Renewable Energy, August 2004 Back

142   Ibid. Back

143   Appendix 62 (London Borough of Merton) Back

144   Ibid. Back

145   Speech by Ian Pearson MP, Minister of State ( Climate Change and the Environment), Climate Change Conference, October 2006 Back

146   Q 138 (Micropower Council) Back

147   Q 247 (Energy Saving Trust) Back

148   Qq 63 (Sussex Energy Group), 74 (Renewable Energy Association), 95 (Sharp UK) and 138 (Micropower Council) Back

149   Q 139 (Micropower Council) Back

150   Appendix 69 (Wellingborough Council) Back

151   Department for Communities and Local Government, Planning Policy Statement: Planning and Climate Change-Supplement to Planning Policy Statement 1, December 2006 Back

152 Back

153 Back

154   Appendix 27 (Friends of the Earth) Back

155   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

156   IbidBack

157   Mayor of London, The Mayor's Energy Strategy, February 2004 Back

158 Back

159   Daily Telegraph, 'Zero Carbon dream home is little more than hot air', 8 December 2006 , page 16 Back

160   London Climate Change Agency; Appendix 58 (EDF Energy) Back

161   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

162   Appendix 65 (Renewable Energy Association) Back

163   Q 21 (Sussex Energy Group) Back

164   For more information on bioenergy see: House of Commons Environment, Food and Rural Affairs Committee, Eighth Report of Session 2005-06, Climate change: the role of bioenergy, HC 965 Back

165   Qq 86 (Renewable Energy Association), 117 (Econergy) and 271 (Energy Saving Trust) Back

166   Appendix 65 (Renewable Energy Association) Back

167   Appendix 36 (Micropower Council) Back

168   Q 93 (Econergy) Back

169   Appendix 61 (Energy Saving Trust) Back

170   Q 272 (Energy Saving Trust) Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2007
Prepared 30 January 2007