Examination of Witnesses (Questions 320-339)
ENERGY NETWORKS
ASSOCIATION
31 OCTOBER 2006
Q320 Mr Clapham: Which anticipates
my next question. So we are saying that distributed electricity
is more of a question of active management rather than capacity,
and you think that the active management approach will be able
to manage it even to the levels that we may see in 30, 40 years?
Mr Goodall: Given enough time
and planning, yes. Do not ask for it tomorrow, but if you say
in 15 years there will be this much and it will be here, yes,
that will be achieved, if the companies are appropriately incentivised
by the regulator.
Q321 Mr Clapham: So if we were to
see, for example, government incentivise microgeneration by suggesting
that people were distributing electricity into the network, should
we see, shall we say, the market price, we are likely to see that
expansion, you think that that could be actively managed?
Mr Goodall: Technically we are
certain we could actively manage systems if we know what is coming
and when. The ability of individual companies to cope because
of their specific networks is a slightly more complex question
because it straddles technical and regulatory. But in principle—and
it is the perennial word you will find in almost every discussion
on energy—the higher the degree of certainty the better
the likelihood you will get the answer, "Yes, we can do that."
Chairman: Thank you. Mark Hunter.
Q322 Mark Hunter: Moving to a slightly
different area, we are beginning to see now some local areas,
such as Woking and Kirklees, for example, taking a lead in developing
local energy generation schemes. Where we see this kind of clustering
of microgeneration, does it present issues for network management
in the particular regions concerned and, if so, what might they
be?
Mr Goodall: Clustering of new
and novel technologies by definition is going to present a new
set of issues. The degree to which they become a problem is something
that will vary again by the specific circumstances. It is worth
exploring at this point, though, the relationship with the existing
network because of course very few so-called islands or experiments
of that like completely divorce themselves from the existing transmission
and distribution networks, and if we take any model, particularly
far in the future, one might imagine that people can effectively
opt out of systems, but I cannot see how the system is not going
to continue to be required, if only for when those local systems
are not functioning very well or at all. That is why the real
question here is about, if I may, the attempt at anticipating
the ability of these systems to inter-relate. There is a demand,
therefore, for considerable ongoing research into actual applications,
which is why we see the power zones that have been incentivised
to see what happens in practice. I am well aware that we could
open a huge sub-technical debate at this point about specifics.
It may be that perhaps we could give you a more detailed answer
on some of those questions by correspondence.
Q323 Mark Hunter: You could, but
do you want to say anything about the specific examples I have
mentioned and the issues they have created in terms of linking
into the network?
Dr Popovic: We are not aware that
Woking itself has imposed any difficulties for the existing networks;
however, I think that when we are planning our system that we
envisage "Wokings" around the country, so that the networks
can actually have information and be informed of these kinds of
developments on time. But, at the same time, we should also be
trying to optimise our system design so that it is conducive to
"Wokings" and that overall the electricity networks
are optimally designed. Probably it is the same for safety, reliability
and security standards. So Woking, in a way, has been the first
example. We did not exactly know how it was going to work, but
at the same time it did not pose significant problems for the
existing networks. However, it is much better if we have that
dialogue on time and if we can plan and optimise the networks
for the future. I think the Olympic Village is another example
which our networks are currently supporting and EDF Energy in
particular.
Q324 Mark Hunter: Thank you for that,
and if you want to follow up with a note that would be appreciated.
If I could briefly come to my second question? We heard from our
previous witnesses today about issues around the planning regime
in local authorities for distributed generation. Could you say
something about the network from the network perspective and whether
or not you think there is a need for reform of the planning regime
for distributed generation, including microgeneration?
Mr Goodall: This is planning as
in consenting for construction?
Q325 Mark Hunter: Indeed so, yes.
Mr Goodall: The green shoots of
success are indicated in the Energy Review. It is again significant
to note that there has been relatively little built in terms of
transmission and distribution networks for some time now, but
there is increasing evidence that we will need to build a little
more. The suggestions made in the Energy Review are promising
because they seem to be heading in the right direction and I believe
that further guidance is due on them shortly and we anticipate
them.
Q326 Mr Hoyle: Obviously I like the
way that any challenge that can be thrown at you that you can
overcome that, given time.
Mr Goodall: Touch wood!
Q327 Mr Hoyle: No, that is interesting.
But one of the big issues, whatever industry or whatever area
we cover, is the lack of qualified technicians, engineers and
trained staff to meet the requirements for the network. Is this
an issue?
Mr Goodall: It is a very big issue
for all sectors and the transmission and distribution business
is no exception. However, although we do not know the exact shape
of the future we know that there is going to be an increased amount
of activity in the networks and the companies are already taking
on apprentices and we are seeing some renaissance in the power
engineering courses as well. A Power Academy has been established
as well. What we find—and assume that this is anecdotal
because it is early days—is that of the apprentice cadres
that are being taken on and we see a number of them beginning
to find their levels in companies that have, after all, in many
cases shed people because they simply did not need to do both
the construction and the R&D work as in the past. So the early
signs are there that we are probably going to be able to head
off a lot of the short-term issues for staffing. But we are also
having to—and it is no bad thing—look at career returners
and also mid-career re-skilling as well because the nature of
how networks are being run is changing in a way it has not done
for quite some time. But we are very aware it is a live issue
and the same people are being hunted by the other utilities as
well.
Q328 Mr Hoyle: So this could be a
constraint on the industry, or not?
Mr Goodall: It is possibly a constraint
but I do not think it is a fatal one because there are a number
of companies, because of the nature of contracting as well now,
which are able to meet some of the demand as it flexes. It is
complicated by the fact that we are seeing a very large growth
around the world in networks and therefore the demands for people,
and, again, this is where as much clarity as possible as to the
intentions means that the scheduling and the allocation of resources,
particularly by third party companies, may actually work fairly
well for our domestic purposes.
Q329 Mr Hoyle: So we will not need
workers from Romania and Bulgaria, we can manage without them?
Mr Goodall: It is not for me to
comment on travel between European states.
Mr Hoyle: But where are you going to
get your skills from? I will put the question another way. You
will not be reliant on former communist bloc countries to backfill;
you can actually train and ensure there is enough recruitment
within the UK?
Q330 Chairman: Dr Popovic should
probably answer that question!
Mr Goodall: Let me give you an
example. In Ireland they have recently done a great deal of work
and there are some very exotic surnames in Irish villages now,
based on the number of workers who have come from Member States
throughout the Union, and I do not think that we will not see
cross-border movement of people in any sector in the coming decades,
and I do not think electricity will be any different to that.
Q331 Mr Hoyle: Do you think you can
train and skill up from the UK with young people here?
Mr Goodall: The UK certainly has
young people and it certainly has the talents and it certainly
has the abilities. I think that what we will require are the best
people to do the job.
Q332 Mr Hoyle: Can you persuade them
that this is an industry which is worth training for; that is
what I am driving at?
Mr Goodall: I would like to think
so.
Q333 Chairman: Dr Popovic can you
tell us where the best electrical training is in Europe?
Dr Popovic: I think that the status
of the engineering is much higher in Europe, especially in Eastern
Europe and Germany, than it is here. So this is not attractive
to young engineers here; even if they choose engineering they
choose it and do it for getting analytical skills so that they
can move into business and the City and consultancy and so on.
So in the Power Academy and the Research Academy what we are talking
about now is aiming to give this profession a little higher status
and make it more attractive and not to see it as a dinosaur, as
was just pointed out.
Mr Hoyle: People will be better off reading
engineering rather than politics and the classics!
Chairman: I think Mr Phelps will come
in as I bring in Brian Binley to ask some questions.
Q334 Mr Binley: Dr Popovic, I noticed
that you said that microgeneration was very small as an extension
of the whole of your business at the moment and Mr Goodall said
that he was anticipating further increases in microgeneration
but he implied that he could not quantify the figures. I notice
that a report produced by EST suggested that given that policy
intervention is put in place by the government, microgeneration
could reach 30 to 40% of current UK electricity demand. Do you
agree with that report?
Dr Popovic: I would not say that
I disagree with the report, but I should also refer to what our
colleague from the Energy Saving Trust has just said, that given
the support and given the right regulatory and supporting mechanisms
then the potential for the microgeneration is to achieve 30 to
40%. However—
Q335 Mr Binley: Could I be very rude
and just cut across? So it is achievable; that figure is achievable,
are you saying?
Dr Popovic: I would not be able
to confirm it or not because I have not been doing the study.
Q336 Chairman: But instinctively
you see no technical objection to that kind of level?
Dr Popovic: Depending on how you
are going to shape the future generation mix.
Chairman: Exactly. That is helpful, thank
you.
Q337 Mr Binley: Can I now come on
to Ofgem, which has introduced a range of measures designed to
facilitate the connection of distributed generation, including,
as you will know, a revised connection charging arrangements and
the creation of the Regional Power Zones. What has been the impact
of those changes? And, as a supplementary to that, does Ofgem
need to do more?
Mr Phelps: The introduction of
those initiatives was at the last review so they have been in
place since April 2005, so it is early days, yes. I think it is
a reflection of the turning point that we have on the technical
side in networks, and it also needs a turning point on the regulatory
side as well. So, in the past, traditionally we have been, in
a sense, regulated and the companies have priced according to
energy flowing in from the transmission network through to customers,
and we used to deal with the odd generator who connected to a
distribution system by charging him the total cost of connection,
and that was it—there were no ongoing charges at all—very
straightforward. This was clearly seen as a barrier to any increase
in the amount of distributed generation and so a whole new package
of measures was introduced to make these barriers less and to
create some sort of incentive for the companies to go out there
and to facilitate the connection of distributed generation in
order to cope with this change in the framework. It is a first
step in what needs to be quite a series of movements to accommodate
this longer-term change.
Q338 Mr Binley: Are you confident
it is a good foundation; that is really what I am asking?
Mr Phelps: It is a start. There
are certain issues with it. The incentive, I understand, works
quite well in southern Scotland but it is not working very well
in north Wales because it is a given pounds per kilowatt incentive,
which, in north Wales, where the network is much more sparse,
it is much more costly for the companies to connect, and so therefore
again we are in discussions with Ofgem and hopefully we will be
able to develop these things alongside them.
Q339 Mr Binley: My final question
is about the country's grid capacity, which is now nearing the
end of its design life, and many commentators, including the Sustainable
Development Commission, have suggested that we have a unique opportunity
to fundamentally rethink our approach to the whole of energy distribution.
Do you think that Ofgem and the Government can take a sufficiently
long-term strategic view of network policy within the current
structure of comparatively frequent price control reviews?
Mr Phelps: Yes. I do not think
the five-yearly price control is incompatible with longer-term
thinking. I think perhaps in the past it maybe has contributed,
along with the straightforward RPI-X approach, where the emphasis
has really been on cutting your operating costs, and I think the
companies have taken a short time perspective in sync with that,
in order that they were, in a sense, playing the regulatory game
in order to respond to the incentives that Ofgem put to them.
As an organisation we have been pressing Ofgem to take a longer
term perspective and it is clear from the discussions we have
had with them and their Energy Review submission that they recognise
that they need to look not just five years, but ten, 15, 20 years
out; but you can still conduct a five-yearly review within a framework
of 20 years because you would not want a review every 20 years
because some of the assumptions clearly, as we know, go haywire
within two or three years, let alone five, 15, 20 years. So you
may need the five-yearly reviews for a touch on the tiller, perhaps,
within an overall framework, which is saying that perhaps this
is where we want to move towards—not necessarily where we
want to get to, but this is where we want to move towards. And
we need to, and we are talking to Ofgem about deriving and developing
scenarios of different types of network development and seeing
if we can get from here to there over this longer timescale. So
it is achievable.
Mr Binley: Thank you.
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