Examination of Witnesses (Questions 1-19)
SUSSEX ENERGY
GROUP
17 OCTOBER 2006
Q1 Chairman: Gentlemen, welcome to this
first evidence session into I am not quite sure what; I think
we began calling it Microgeneration; we toyed with Distributed
Energy for a while and now we are calling it Local Energy Generation,
so you can probably anticipate what my first question is going
to be. But before I ask that question can I ask you to introduce
yourselves, for the record?
Dr Watson: Thank you very much
for inviting us to be here today, particularly for being the first
on in your inquiry. My name is Jim Watson and I am a Senior Fellow
with the Sussex Energy Group, which is a large energy policy research
group at the University of Sussex. This is my colleague, Raphael
Sauter, who is a Research Fellow with the same group.
Q2 Chairman: What do you think that
we should call it and what is it?
Dr Watson: It has different names
because it actually operates at very different scales. The catch
all is distributed generation, which, technically, is generation
that is connected to the distribution network of an electricity
system rather than the high voltage transmission network. Then
you talk about microgeneration and that is normally associated
with energy generation within inside the house, so I guess your
local title is designed to encompass both of those things, but
people usually make that distinction and we all do that too.
Q3 Chairman: You talk there very
largely about electricity and I have been struck by some of what
I have seen about the importance of heat, rather than electricity,
particularly at the domestic level.
Dr Watson: Yes, I think at both
levels, although historically in the UK we have not been that
great at using heat, particularly the community heating at the
larger level. Certainly in homes one of the leading technologies
being developed is micro-combined heat power, which is as much
a heat technology as electricity technology. But the definitions
tend to refer back to the electricity system.
Q4 Chairman: So it is local energy
production. The word "generation" conveys always a sense
of electricity, does it not?
Dr Watson: Yes.
Chairman: That is our starter for ten.
Brian Binley.
Q5 Mr Binley: Thank you very much.
A locally distributed energy system is not new, as you know, and
in fact our more centralised system grew out of it from the turn
of the century onwards. Can I ask you what you think were the
incentives for the centralisation of electricity generation that
we have today? And what arguments that you would put, very briefly,
now in favour of returning to a decentralised network? And I would
like to hear something about business plans, about cost because
I see little about costs in real terms in your paper?
Dr Watson: I think a lot of it
was about cost. If you look back in history to pre-Second World
War there was a lot of very disparate local electricity systems
often controlled by local authorities and the question post-war,
with nationalisation, was: shall we standardise and stick them
altogether? There are two drivers for this and they are both economic.
One was economy of scale, the size of power stations grew beyond
60 megawatts to 100 and then to 300 and getting up to 500 and
beyond. The second one is an economy of system; the ability to
integrate different systems together means you have more redundancy,
you are sharing risk around and that kind of thing. So that is
the logic behind the growth of systems, and that kind of economy
of scale I first mentioned started to, if you like, run out, it
started to reach diminishing returns. I think probably around
the 1970s and 1980s, the bigger and bigger power plants started
to offer more problems than they solved. What has happened recently,
I guess, is more than one thing: one is that renewable energy
technologies, although some of them operate at larger scales,
many of them operate at medium or small scale; and the second
thing is that district heating—although that has always
been around—is there; and of course microgeneration technologies
were not around back in the early 20th century. So those things
have happened, but I think the other thing is that it is now possible
in a system to link many, many more generators than we used to
be able to do because of advances in control technologies, information
technologies and all of those kinds of things, and markets. So
there is a dual evolvement which has come together there.
Q6 Mr Binley: I understand that but
you still have a centralised system which was bought at cost and
you are going to have to produce a localised system which needs
to be bought at cost and you still have not told me about the
business plan element of that scenario.
Dr Watson: The business plan:
I guess if you are thinking about the business plan for an energy
producer or an energy supplier like EDF Energy or somebody, they
make very little out of supplying electricity and gas to us in
terms of their profit on their supply business. They make a lot
on generation—that has been widely reported—and they
make a lot on emissions trading certificates. The one way in which
they think they might be able to make a business plan out of,
say, microgeneration is to sell a package of energy services for
consumers. Again, that is a rather new thing; it is not something
that they were thinking about way back.
Q7 Mr Binley: Dr Watson, you have
not answered my question. What I will do is ask if you will be
very kind to put some figures down on a piece of paper and let
us have them, and if you could do that rather quickly that will
be helpful, because this is a big black hole in this argument
and we do need to deal with it face on. My second question concerns
security of supply. This is becoming a much more important matter,
as my colleague Rob Marris pointed out to me this morning, when
we see the problems with nuclear energy and the cracks that are
appearing, and it may be that it is a bigger problem than was
first reported. So security of energy supply is more than just
maybe what were our enemies, in many respects, holding us to ransom,
it is more than that. So can I ask you, does the intermittent
nature of renewable energy mean that we would still need large-scale
back-up capacity? How does that fit in with security of supply?
Dr Watson: If you are thinking
about renewables, first I think it is a mistake to say that renewables
are intermittent per se. Some renewables are intermittent,
i.e. wind, and I would say probably wave, but some are more predictable
like tidal stream and some biomass technologies. So that is the
first thing to say. The other thing to say is that there has been
quite a lot of research done—and the particular study I
would point to is by the UK Energy Research Centre on intermittency
and what it means to the system—which shows that, yes, we
do need a certain amount of back-up and a certain amount of other
sources to stand by when the wind is not blowing, but it is not
quite as bad as some people, namely the Royal Academy of Engineering,
for example, would make out. Actually what you have to look at
is each gigawatt hour of wind power, for example, and what it
is going to do to reduce carbon emissions. You have to distinguish
between that and having capacity sat there just in case the wind
does not blow, as it were. So there are costs attached, of course,
to the system, but just about all generation sources add costs
to the system in one way or another. Nuclear adds costs because
it is not very good at load following; microgeneration will add
costs because at least until we have more information about how
consumers are going to operate that it is going to be an uncertain,
risky thing for people managing grids and networks, and so on.
Q8 Rob Marris: In terms of cutting
carbon emissions, is distributed energy, if we can call it that,
the only viable option in the long-term?
Dr Watson: No, definitely not.
It is a viable option and it can do a heck of a lot to
cut carbon emissions in various ways.
Q9 Rob Marris: Briefly, what are
the other options that you see as viable?
Dr Watson: Obviously nuclear can
de-carbonise the electricity supply and if you were to use electricity
to generate hydrogen it could possibly start de-carbonising transport.
The other big thing, which may be more important but certainly
from a global perspective, is carbon capture and storage and storing
carbon captured from fossil fuel power plants. Then of course
you have demand side action and energy efficiency and I think
one of the arguments for concentrating on microgeneration in the
home is that it connects consumers to energy use and you can potentially
connect the supply and demand parts of the energy system together
in the same place, and that is something that renewable power
stations and nuclear, carbon capturing storage, which are remote
from housing, people and demand do not do. So I guess that is
one area where it has a particular strength.
Q10 Rob Marris: Do you have in your
own mind—and you may not be able to give it to us today—the
ranking order of carbon saving in all the various things, whether
it is distributed energy or carbon capture, all the things you
have talked about, which of course must have some energy input
to captured carbon and nuclear power, and so on, the sorts of
things you have mentioned?
Dr Watson: We did have a look
before we came at the evidence on this and there are some studies,
although we found it quite difficult. I think it is probably something
that we can go away and do a bit more work on and find out because
I think some of the government processes around either the Energy
Review or the previous White Paper have ranked things. But we
in our project did some figures on microgeneration specifically.
I do not know if you want to mention that, Raphael?
Mr Sauter: Based on our calculations
we did it for three technologies, which were PV, micro-CHP and
micro-wind. And one important point on microgeneration is that
it depends heavily where the unit is installed because it depends
on the wind speed and how much it generates and so on. So on average
good wind speeds and good sites for the units could reduce the
carbon emissions by 10 or 15% for an average household, for example.
With regard to costs per CO2 saved, a good-sized micro-CHP would
be the cheapest option of the three, whereas micro-wind is a little
bit more expensive. PV is the most expensive option.
Chairman: Mr Sauter, when you are speaking
it would be helpful if you directed your words to me because it
is a little difficult to hear what you are saying and I think
our stenographer might find it easier as well.
Q11 Rob Marris: If you have the time
I would very much welcome, as would my colleagues, if you could
come up—and I appreciate that there all kinds of things
with variables in it—with some kind of averages which we
can look at in a ranking order, which I would find helpful. So
that, for example, we did not wholeheartedly come out in favour
of microgeneration and then get caught with our trousers down
and find that there is a better ways of saving CO2.
Dr Watson: It is worth saying
that usually at the top of such ranking orders is energy efficiency,
and generally it is not a cost it is a benefit. We can go into
all the reasons why people do not do it even though it is beneficial.
Q12 Rob Marris: It sounds like a
large piece of work but if you have time I would welcome it but
I quite understand if you do not.
Dr Watson: We will certainly try
and search out—I think I know that these things exist—what
is available for you.
Chairman: Thank you very much. Mike Weir.
Q13 Mr Weir: We are told that microgeneration
could produce between 30% to 40% of the UK's energy needs and
save about 15% of carbon. Could you tell us what you see as the
areas of greatest potential of the growth of distributed energy
capacity in the UK?
Dr Watson: In microgeneration—that
is the Energy Saving Trust figures I guess that you were quoting—the
30% to 40% is very large, and I think that is quite an optimistic
scenario based on fairly large cost reductions over time. But
the potential is very great. If you think of, for example, that
1.3 million homes change their gas boiler every year, if half
of those were switched over to micro-combined heat and power—assuming
the technology works, which it does not quite yet, the companies
keep delaying the launch of their products, which is a question
you might want to come back to—if people were to replace
maybe half of those with micro-CHPs over a period of time, maybe
over 10 to 15 years, you could produce as much electricity through
all of those as the Drax Power Station, the largest power station
on the system. So even though each thing is small the effect is
quite large on aggregate. If you look at things like micro-wind,
I think that particular technology is in danger of being slightly
oversold. There are a lot of sites where it will have symbolic
value, it may make people think about their energy use, but in
many urban areas the kind of wind resource you are going to get
at the level of the house roof is not going to be that great,
and our calculations for our report, Unlocking the Power House,
showed that. So there is again a question mark there. So I would
say that the potential across the board is quite good, and then
of course you have the potential of larger distributed generation
and there I would particularly look at, again, community heating,
if we could get over the longstanding barriers that we have in
the UK to have community-heating systems, which is another set
of questions. And renewables have a long, long way to go; we have
really struggled to get to 4% of electricity from them.
Q14 Mr Weir: But in your answer you
have said that domestic combined CHP technology does not work.
You have said that there are doubts over micro-wind, which I know
other members also agree with this issue. How realistic are the
figures we have been quoted there? How far away are these technologies?
Are we all grabbing at microgeneration and finding the technology
is always just out of reach, a bit like nuclear fusion?
Dr Watson: It certainly would
not be in the same bag as nuclear fusion. I myself would not put
it in the same category. Microgeneration, as with renewables,
is a group of technologies; some are available now, as you have
seen: solar PV, solar hot water you can buy now; some biomass
boiler technologies you can buy now, but it is the particular
micro-combined heating power projects that have been delayed.
The micro wind turbines you can buy now: at this early stage it
is just hard to say how they are performing.
Q15 Mr Weir: What is your best guess
of the timescale before microgeneration makes a significant impact
on the amount of energy, electricity in particular, that we are
using in this country?
Dr Watson: It is very hard to
tell but I would expect that at least something within the next
decade, that it is able to produce some per cent of energy that
you could look at and find is significant. But it is very, very
difficult to tell because there are so many unknowns. But I think
its potential will make it worth pursuing, and I come back to
the point that I made in my previous answer, which is that it
does connect people with their energy demand in a way that many
other generation technologies do not, and that to me will win
arguments for it.
Q16 Mr Weir: But accepting that point,
those who are calling for a distributed/decentralised energy network,
are they being unrealistic in the short term? Do we have to have
a centralised network along with a decentralised one or could
we ever move in the foreseeable future to a totally decentralised
network?
Dr Watson: I think if you look
forward over several decades it is possible to imagine scenarios
where you have a mostly decentralised network. I am not one of
those people who say that you can throw away the high voltage
grid and completely do away with central generation. Work we did,
for example, within the Tyndall Centre, which we have summarised
in our written evidence, looked at different types of scenarios
for systems in 2050, so that far ahead, they are commensurate
with the 60% cutting carbon emissions, and some of those were
highly decentralised—they did not have any central nuclear
or fossil with carbon capture and storage stations—and we
were really interested in whether those systems would deliver
energy securely every half hour when people need it. Using the
limited, I admit, analysis that we could do given that it was
far ahead, we found that it was certainly no worse and, in fact,
in some cases better than the centralised scenarios. So I do not
think there is a technical reason over decades why that cannot
happen, but certainly in the short term I think we are being unrealistic
to think we could move very, very fast towards a decentralised
system. Maybe that is not an either or/question; I think sometimes
it is set up as an either/or question and perhaps should not be.
Q17 Mr Weir: Even in renewables they
are feeding into a centralised system at the moment with the large-scale
wind farms, and you are saying to us, basically, that that is
going to have to continue for the foreseeable future and we are
not going to get to the stage where everybody has a windmill on
their house and a CHP boiler and we do not need the big stations?
Dr Watson: No. I think even if
everybody in the country had a CHP boiler and a PV roof they are
not always going to generate at times you want the energy. So
again I would go back to the historical answer which opened this;
there are the benefits of economies of system, of connecting things
together.
Q18 Mr Weir: Shifting it about?
Dr Watson: Yes, and I do not think
that is going to go away.
Q19 Miss Kirkbride: I think one of
the frustrations today is that a lot of people want to do more
to cut their energy use, to improve their energy efficiency, and
yet there are not the proper technologies at affordable prices
offering real returns. So based on your expertise and giving the
best guess about what will happen with these technologies, can
you describe what a home's energy generation/capacity is going
to be in 10 years' time in your average British home? What are
we going to be doing with energy? What will we have? What will
it be?
Dr Watson: That is very difficult.
It really depends on whether incentives change, to be honest.
If incentives stay where they are now we will get a class of early
movers, early adopters—the greens and the people who like
the technology—who will go for it, perhaps, and people who
will do this anyway, but I think without much stronger incentives
from government there is a real danger that the mass market for
microgeneration, for example that would occur if there were a
significant grant or a good deal from your energy supplier for
exports or both, is less likely to develop. I would point to the
fact that the grant scheme that currently exists is almost 50%
spent and it is only six months into a three-year time period,
and that is for households. So it is a rather academic answer
but actually a real answer, that if the incentives were put in
place I expect it would go much further and much faster.
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