Examination of Witnesses (Questions 20-39)
SUSSEX ENERGY
GROUP
17 OCTOBER 2006
Q20 Chairman: It leads on to the
question that Mark Hunter is going to ask, but just on this before
I bring Mark in, I sometimes think that we make this all sound
terribly trendy and modern and difficult and new and challenging,
but actually we are only reinventing the wheel, are we not? Just
down the road, Battersea Power Station provided heat for the flats
on this side of the river for years. In my constituency electric
micro-hydro schemes provided the village with power. A lot of
this is old ideas coming back in again, is it not?
Dr Watson: Yes.
Q21 Chairman: Familiarity is always
a good thing for the British, I find!
Dr Watson: It certainly is an
old idea and one which was used a lot more in history, and if
you look at other countries the idea of community heating never
went away and has always been a central part of the way they have
done things. Another thing about the British I would point to—and
this is very much a personal view from working on this area—is
the individualistic nature of us wanting our own boiler in our
own home and our own choice. Somehow our culture seems to have
lent itself less to these communal solutions, which, again from
an economic point of view, would make more sense, probably, if
economics were all you are interested in, to have a shared district
heating system for a housing estate rather than everybody having
a micro-CHP boiler. But then culture intervenes and micro-CHPs
are seen to be very desirable if they can be made to work.
Chairman: Thank you very much. Mark Hunter.
Q22 Mark Hunter: I do want to ask
a question about Government attitudes because I think that is
central to this, but before I do, can I say thank you for the
paper that you have submitted because there is a lot of good stuff
in it, particularly about the Renewables Obligation, and I certainly
commend the work you do, I think it is hugely important and I
am sure we all do. The specific question I want to put to you
now—and I hope I can tempt you with this—is that I
think it is generally acknowledged that prior to the current energy
review there was not perhaps as much being done by organisations
like Ofgem and certainly the Government to realise the potential
of distributed energy, and I would like you to give a view, if
you will, about what the Government and Ofgem had done prior to
this Energy Review to realise the potential of distributed energy.
In your opinion would you say they had done a lot or a little
or somewhere in between? Might you be tempted to give a mark out
of 10 on the performance of both of them to give us some kind
of feel for what you, as a specialist in this area, feel that
the Government has done and how much further they have to go?
Dr Watson: I would probably give
different answers depending on whether you are talking about renewables
per se or the Renewables Obligation, in which I think the
government and Ofgem have, as the implementers of that, done better
in the last five years than had previous governments in previous
decades. In terms of deployment rates of renewables they have
actually finally started to move in a positive direction. I think
in microgeneration there has been obviously an awful lot of excitement
about this area, and rhetoric, and people putting wind turbines
on their roofs and so on. But in terms of substance I think until
very recently not a great deal. For example, Ofgem has just brought
out another statement of what they want to do about microgeneration
and that shows, I think, a change of tone; they are actually much
more helpful and the language is better: their previous document
was obscure and very difficult to understand, even for us as specialists.
So I think they are moving in the right direction, but I do have
to say that I think they could be doing a lot more; certainly,
for example, the Energy Review, which has a whole chapter on distributed
generation, as somebody who has worked in that area for 10 years
now I was rather disappointed that it was a lot of writing about
what could be done, but in terms of concrete proposals to move
things forward—added value, if you like—I would not
give it that high marks because all it did was to launch a couple
of new studies to look at the barriers and the problems, which,
to my mind, we know a lot about those and the question is what
can be done to overcome them.
Q23 Mark Hunter: Do you not think
there is a danger that the public's will towards these kind of
issues, alternative energy supplies, is running ahead of government
opinion on this, do you not think that the government has a crucial
lead role to play in all of this? Following on from the question
Julie asked a few minutes ago, it seems to me that this is such
a hugely important area but it is not going to succeed unless
there are yet clearer signals; and I do accept what you said,
that government has moved quite a bit in recent times. But it
seems to me that unless they are truly seen to grasp the nettle
and go for this in a meaningful way and provide the necessary
incentives that, frankly, the industry is always going to find
it difficult to sell the concepts to the public at large; is that
a fair assessment?
Dr Watson: I think that is right.
Certainly the rhetoric around the Energy Review and the kind of
speeches that people like Malcolm Wicks make, they often highlight
microgeneration as a big area and so do David Cameron and the
Liberal Democrats too. So there is that and that raises expectations.
The point I made previously about grant funding not really matching
up to those expectations and being spent rather quickly, and certainly
for householders—most of the extra money is going into community
schemes, which is all very welcome perhaps—I think there
is a danger of serious disappointment amongst consumers at this
point, unless they were to extend the grant scheme or put in place
another measure we have suggested in our report, which is to give
direct tax incentives both for microgeneration and energy efficiency
savings. These kinds of things have been done before and there
is no reason why they cannot be done again.
Mark Hunter: A switch to "green
taxes" I am tempted to say!
Chairman: Rob, I will bring you in later
because these questions flow and I want Lindsay to have a chance
to ask his question before Mark steals it from him.
Q24 Mr Hoyle: I think it has already
gone, Chairman; I think Mark has done a good job on this so what
I will try and do is dress it up from what Mark was saying. It
is about barriers and it is about cost, is it not, and of course
you talk about people who can afford to make gestures from this
House, but what we have to get to is the reality of those people
who wish to actually enter into the microgeneration and how do
we take those barriers away? All and well and good that B&Q
may have the deal of the week but you still have the cost of fitting.
It is all about connection costs and if you can get the tradesperson
who is actually accredited to fit this. So, quite right, there
is a lot of rhetoric but there are a lot of adverts going out
there saying, "Buy one of these," but what we may find
is that people can just about afford to buy it but what they do
not realise is that it comes down to the cost of fitting. So what
can we do? Would you agree with me that maybe we ought to look
at the actual energy companies doing free fitting because they
can benefit with the surplus power that is generated? Or possibly
do you think we should be stronger and go for a windfall tax on
energy companies in order to make it attractive to those people
and those households who really do wish to generate electricity
and play their part in saving the climate rather than pretending?
That is the first part of the question.
Dr Watson: The sense of your question,
the answer I would give is that there are a variety of approaches
to pursue. You could appeal to some consumers directly so that
you could go for grants or tax incentives and make sure that they
can get a fair rate for power they export and I think much more
can be done on that. But on the company side I think these proposals—which
was just a paragraph in the Energy Review, but I think is extremely
important and totally revolutionary—this idea of incentivising
them and instead of selling you more gas and electricity to actually
act as energy service companies—
Q25 Chairman: Can we stick on the
costs because Mick Clapham wants to ask this question later?
Dr Watson: Apologies for getting
off the point.
Q26 Mr Hoyle: What we have been trying
to do is say this is all well and good, but you have to pay tax
bills to get tax benefits.
Dr Watson: Yes, that is true.
Mr Hoyle: And you come down to households
who struggle and it is about Warm Front and all the other campaigns,
when maybe what we ought to be doing—and this is what I
am trying to tempt you into—is to say that companies surely
ought to be playing their part and £1,500 from B&Q and
then fitting or whatever (and I am just picking that as other
companies that supply) it gets down to fitting. How do people
overcome those costs and how do you think we can take that barrier
away? I suggest it could be that the energy companies do free
fitting and maybe supply because they can always—
Chairman: I am going to stop Lindsay
there because that is Mick Clapham's question.
Q27 Mr Hoyle: Everybody took mine,
Chairman, and left me very little to do, but you did not stop
them. Pity you did not because we might have been in a better
position! But obviously if you have medium-sized suppliers, I
wonder what can we do to change the system that we have, these
barriers; how do we take those away?
Dr Watson: I think it is to make
it simple and provide a one stop-shop. I am glad to see that Ofgem,
for example, has finally realised that people just want to deal
with one company when they are doing this and they will sort everything
out for them. So they deal with the supplier and they will sort
everything out, because that had not been clear before. But of
course the economic barrier is important and even if you use tax
incentives you are quite right, you have to think about people
who do not pay tax, if you are poor, low income, and you have
to think about how you build in microgeneration into that. The
Energy Efficiency Commitment, for example, which has part of it
directed at people with hard to heat homes, and so on, that is
now going to be expanded to include microgeneration. But I think
the advantage that companies have is that they can buy in bulk,
they can buy these technologies in bulk and sell them in bulk,
so they have the economic advantage and they should be encouraged
in any way possible to pass that on to consumers, but how you
do that is an open question.
Q28 Mr Hoyle: Windfall tax?
Dr Watson: Not sure.
Mr Sauter: Can I add one point
to the question, how do you incentivise energy companies to go
for this? I think there is also a tax issue on the company side
because you have, for example, the Affordable Warmth Programme.
If an energy company installs a boiler in a few of the households
the company can claim capital allowances for the installation
costs of the boiler and I think similar programmes could be extended
for microgeneration, for example, and therefore even poorer households
could potentially afford a microgeneration unit.
Q29 Mr Hoyle: Tax credits on companies?
Mr Sauter: Capital allowances
even if they are installed in private dwellings, not only business
premises as it is at the moment.
Chairman: Tony Wright.
Q30 Mr Wright: A lot of the questions
have probably been answered already, but it is not just about
the financial barriers but the technical barriers as well because
I am of the opinion that many people probably think that they
can just go into B&Q, pick up one of these wind turbines for
£1,500, just plug it in and the electricity is going to run.
I do not think people are aware of what the technical barriers
are: planning permission and extra costs on top of that, the ability
to get someone who has the ability to install the turbine itself,
and then pay it back as well. So what really are the technical
barriers apart from those that householders face?
Dr Watson: As I have said previously,
I think there are some uncertainties about the technical performance
of some of these technologies; so, for example, micro-wind, I
think the industry is supporting more trials of this technology
so that they can see how it works over time. For example, people
have worries about whether it might damage structures when it
is bolted on to the side of houses and that kind of thing. But
I think those things can be sorted out, I do not think they are
fundamental. The technical barriers that are also important are
things like grid connection in terms of if you get a high concentration
of microgeneration in an area and what does that mean for the
grid company? That may be more important, perhaps, in the longer
run. But certainly at this early stage perhaps the important thing
is that people get access to independent advice about these technologies
when they are buying them, and that is something I do not think
there is enough of around, and the same with installer accreditation
that I think you alluded to as well, which, if you want to talk
about that, Raphael could fill you in on that a bit more.
Q31 Mr Wright: Do you think that
it is probably too early for the consumer to go in to look at
purchasing a turbine in B&Q? Solar panels have been around
for years and years and gradually they are becoming more available,
but wind turbines are relatively new technology in terms of householders.
Do you think it is too soon at this time to put it into consumers'
hands for them to be able to go out and purchase?
Dr Watson: I do not think necessarily.
I think all new products have risks when they are first launched
and you can see analogies for domestic wind turbines: canal barges
and caravans have had little micro-wind chargers on them for years
as well. So there is experience of consumers buying small wind
turbines as consumer products in the English market. I just think
that it needs careful monitoring at the time, and I think B&Q
is taking a risk, for example; if it says £1,500 installed
and things start going wrong with the turbines they have liabilities.
I guess it is making sure that consumers are protected in circumstances
like those as they are protected for all kinds of other products.
Q32 Mr Wright: I am not sure if it
is £1,500 installed.
Dr Watson: That is what the website
says, £1,500 installed, which is an incredible price.
Q33 Mr Wright: Would you consider
that the technical barriers in, say, one large building would
be greater in, say, a community system, or would you say they
were similar?
Dr Watson: Similar; I cannot see
that there is a particular difference, no.
Q34 Chairman: But some of the more
capital intensive technologies, such as ground source heat pumps,
are best installed at the time of construction, are they not,
and would suit a large community building rather better in those
circumstances?
Dr Watson: Yes. The issue for
that technology is that obviously you need the land space, particularly
if they were a horizontal type of pipes under the ground rather
than vertical ones.
Chairman: If we have Peter Bone on a
supplementary first, and then I will bring in Rob Marris.
Q35 Mr Bone: Thank you, Mr Chairman.
We are talking about the technical problems, but solar panels
have been around for donkeys' years and they are used extensively
in the States. Why do we not hear more about that because all
I hear is about wind generation? If we have something and it works
why are we not promoting that?
Dr Watson: The grant scheme at
the moment covers all technologies, and actually the most successful
technology in the UK—and it is about 95% of installations—is
solar thermal microgeneration. So contrary to what you read and
see, that is what accounts for most of the installations. But
solar photovoltaics for electricity, I think the issue about that
one is that even with a generous grant it is still very expensive.
So it is the people who are very committed as you are talking
many thousands of pounds rather than £1,500 for a micro-wind
turbine or around £2,000 to £3,000 for a solar hot water
system. So you get real evangelists for solar PV and it can do
something significant, but it is more expensive and that is its
Achilles' heel.
Q36 Rob Marris: I am not sure if I understand
about the community systems. If we are talking about community
electricity I understand it, but if we are talking about community
heat I am concerned about the psychology of that: people leaving
their windows open because the other 24 units in the block are
paying for it. Is there any research on that or is there a way
of individually metering heat the way you can individually meter
electricity produced from a community thing?
Dr Watson: I think so. I do not
know if Raphael has anything from his background?
Mr Sauter: I do not know.
Q37 Rob Marris: Would it be possible
for you to look into that? I think you understand my point about
the psychology?
Mr Sauter: Yes.
Q38 Rob Marris: We could end up with
more carbon emissions because people are leaving their windows
open because they do not care.
Dr Watson: I have heard about
it anecdotally, but can't recall whether I have seen any research
on this.
Q39 Rob Marris: Whether there is
the technology to meter heat in contradistinction to electricity.
Dr Watson: Yes.
| 
