Q
4Martin
Horwood: Do you think that the Bill ought to address
that? Philip
Pearson: We think that the Bill ought to address the
carbon pricing issue much more
comprehensively.
Q
5Dr.
Stephen Ladyman (South Thanet) (Lab): The Bill is intended
in many ways to implement what is in the energy White Paper so can I
first ask both organisations to comment on how you see the energy White
Paper. Are you broadly supportive? Do you think that it has
deficiencies? Paul
Noon: Yes, we are broadly supportive. The TUC
certainly supports the objective set out in the Bill of sustainable and
secure policies; it reflects the evidence that we have been submitting
for a time. One of our concerns, however, is whether the market
mechanisms that it would put in place would deliver the required mix of
low-carbon energy production and how it will
operate. Stephen
Radley: What we were looking for from the Bill was
for the Government to put something in place that would encourage and
facilitate the growth of secure, reliable, competitive low-carbon forms
of energy. Largely, it does that. It does some sensible things in terms
of the consenting regime for offshore gas, and for storage in liquefied
natural gas facilities. There is now a sensible legislative framework
for carbon capture and storage and for nuclear power. There are some
areas, which we can probably explore in our evidence, where the
Bill could go further, particularly in encouraging the development of
carbon capture and storage and some of the emerging forms of technology
in the renewable energy area. Overall, we broadly support the
Bill.
Q
6Dr.
Ladyman: One of the biggest areas of controversy is going
to be the mix of power sources that are proposed and, in particular,
the inclusion of nuclear power in that mix. How does each of the
organisations feel about that? Does nuclear need to be in
there? Paul
Noon: At its annual congress, the TUC has carried
motions in favour of a balanced energy policy, including a nuclear
component. I cannot guarantee that every single affiliate or member of
the TUC congress is absolutely sold on that idea: unions have their own
views. However, the balance at the TUC has been in favour of all low
CO 2 generation capacity, including replacement nuclear. That
is the policy. We do not, however, see the question of competition
between nuclear and renewables in the same way as there might have been
adverse competition between nuclear and coal in the 1970s. We have
certainly not wanted to replicate that, and so we are in favour of new
nuclear build, but also in favour of a big emphasis on renewables. We
need as many low CO 2 energy sources as
we can get, coupled with energy efficiency as
well. Stephen
Radley: We would agree with a lot of that. We see
nuclear power as playing a very important part in a very balanced
energy mix. It would be unwise to rely on renewable power and clean
coal alone to deliver reductions in the carbon intensity of our energy.
Similarly, we have great hopes for carbon capture and storage, but that
is unproven and is some time away. We are looking for the Government
not to prescribe in any way what share nuclear should have; nor do we
see nuclear as being in competition with renewable power. The
Government’s role in this is to set the framework, provide
leadership and send some price signals out to potential investors.
Beyond that, it is up to nuclear power to prove it is competitive with
other forms of
energy.
Q
7Dr.
Ladyman: Is that conclusion based on the fact that you
perceive it to be sensible to have a mix of power sources for energy
security purposes, or have you come to the conclusion that nuclear
needs to be part of the mix because you have predicted how much energy
we need and you cannot see how we can deliver those needs without
nuclear power? Which of those is
it? Roger
Salomone: I think that it is a combination of several
factors: one is helping us to meet our emissions targets, which are
quite ambitious and quite close. It would contribute to the security of
supply. It would also contribute to the affordability of supply in a
world where fossil fuel prices are
rising.
Q
8Dr.
Ladyman: And in estimating how much energy we are going to
need in the future, do you think the White Paper has got it right? What
is your view of how the economy is going to grow over the next 20 to 50
years, and how will energy supply change with
it? Stephen
Radley: In terms of economic growth, I think that we
in this country face greater challenges than many of our partners in
the European Union. Our economy has tended to grow faster than theirs,
and all the reliable projections suggest that we are going to have
faster population growth. The sensible starting point is that economic
growth will continue at about the same rate that it has done over the
last 20 or 30 years, with some allowance for population growth.
Although it is a big stretch, we need to factor in assumptions that we
will see a significant improvement in energy efficiency, both in
business and in the home. Those are the factors that are driving the
projections of our energy needs, which are set out in the energy Bill
and which we would largely concur
with. Paul
Noon: From our point of view, looking at the energy
requirements of the future, we have been very conscious of the capacity
that will be lost through the closure of the old Magnox
stations—the closure of all but one of the existing nuclear
power stations, plus the coal-fired stations, which will also be
closed. I am concerned that the new generating capacity, which
has been put in place to meet this, should be both
environmentally-friendly and secure. That is one of the reasons that
brings us to the conclusion that nuclear should be a component, but we
also strongly support coal and CCS.
Q
9Dr.
Ladyman: One final question, if I may. Clearly, the Bill
has to be even-handed. We believe in fair trade and there can be
nothing in the Bill that particularly benefits British industry, but is
there anything in it that you might think could be a barrier to British
industry providing our energy supplies, as opposed to overseas
suppliers? Philip
Pearson: This is almost the $64,000 question: what
are the advantages to UK industry of the energy strategy? I did notice
that the Secretary of State referred to the green industrial
opportunities in his speech on Second Reading, to which the TUC would
say, “Absolutely.” But the question obviously is what
procurement mechanisms could secure a stronger green future for UK
manufacturing? I think that the Committee would need to address that; I
do not think that there are any simple answers. The Government had a
sustainable procurement task force looking into this very question and
it has been urging Government Departments to undertake a kind of
UK-favoured procurement strategy, consistent with the EU rules. The TUC
has argued elsewhere that we think that this is possible and should
certainly find expression through the energy strategy.
It is a huge challenge, and we
think that, in the next 10 to 15 years, some of the key issues are the
growth of renewables; carbon capture and storage, which is crucially
important; and getting the mix right between coal and gas. We think
that the mix is wrong at the moment: there is far too much emphasis on
the emergence of gas-fired power. We have coal resources and, subject
to clean coal technology, that is a direction that we should be going
in. All of these options should bring major industrial opportunities,
but it needs a lot more thought to secure those advantages.
Roger
Salomone: From our perspective, new nuclear-fired
capacity and new renewable-fired capacity provide major business
opportunities, and a number of reports stress that they do. It really
comes down to this: does the Bill provide an attractive environment
compared to other jurisdictions for investment in those areas? Is the
renewables obligation an attractive regime and is the framework that we
put in place for nuclear an attractive regime? It is mainly tied up
with that.
Q
10John
Robertson (Glasgow, North-West) (Lab): Mr.
Radley, in your answer to my colleague’s first question, you
said there were some sensible things in the White Paper,
which—being an old cynic—would suggest to me that some
things in that document were not so sensible. Perhaps you and your
colleagues could tell us what they are.
Stephen
Radley: I do not think that it was so much the case
that there were things in the white paper that were not sensible. It is
more the case that some things in there need looking at. In particular,
if we look at our renewable energy, we need to look at
whether—especially for some forms of it—other mechanisms
might be more appropriate. We might look at the greater certainty and
simplicity provided by feed-in tariffs. We are particularly thinking
about this in terms of some of the more emerging forms of renewable
energy, such as marine renewables, where we have made very little
progress at the moment and there have been very few applications to
take things forward.
What we are conscious of is that
we need to look very carefully at this, and what we do not want to do
is switch from an existing mechanism to another one and actually end up
with greater costs, because we have not looked at the numbers properly.
What we also do not want to do is introduce uncertainty for investors
by actually signalling that the regime may change at a time when they
are coming forward to make investments. It is perhaps a little
disappointing that the Bill has not looked at creating enabling powers
for alternative mechanisms for encouraging the development of new forms
of renewable
power.
Q
11John
Robertson: So I take it that your suggestion is that the
Government have invested money in one of two types of renewables, when
they should have been more diverse in how they were looking at
renewables? Stephen
Radley: It might have been sensible to look at
onshore wind to start with, because that was clearly the one that was
closest to the market. We have now got to the stage, particularly now
that we have these extremely stretching targets for renewable energy
from the European Union, where we need to look more actively at some of
the other forms of renewables; now is the time to start doing
that. Roger
Salomone: To add to that, I think that going from the
existing renewables regime to the banding is definitely a step in the
right direction—looking at technologies more specifically in
terms of what their individual needs and deployment characteristics
are. Steve mentioned something about marine renewables. We think that,
in that case, it might be worth looking at alternatives to the
renewables obligation, because one drawback of the RO is that it is a
little uncertain; it is not that easy to predict the value of ROCs, or
renewables obligation certificates, going forward. In the specific case
of marine renewables, where the costs are very unpredictable, if the
potential value of investments is also very unpredictable, it might be
worth looking at
alternatives. Philip
Pearson: To come back on that, we would support that
line of argument; the banding of ROCs is obviously an important next
step, as was flagged up in the White Paper. We think that that leaves a
gap in the promotion of small-scale renewables. We are aware of the
arguments against that position—the Energy Minister has
indicated concern over interference in the energy market—but the
present system is not delivering the pace and scale of renewable growth
that this country needs. That was clearly set out in yesterday’s
front-page story in the Financial
Times. There is a
piece missing in the jigsaw, and that is to assign a portion of
electricity to securing a feed-in tariff in the way that has happened
in Germany and Denmark— particularly in Germany, where it has
been enormously successful with approaching 200,000 jobs in renewables,
driven by a support mechanism that we do not have. That could fit in,
to drive that part of the renewables market, and it could be made
available in the Bill as an enabling power—perhaps time-limited,
but available subject to consultation—rather than having to
return to Parliament and go through the whole process of a new Bill and
so forth. Time is too short. Every year that goes by these targets
escape us and the CO 2 emissions keep increasing. We think
that
there is a serious opportunity regarding the feed-in tariff as one of
the issues that is perhaps missing from the Bill. We do have one or two
other ideas, but that one is particularly
important. Q
12Martin
Horwood: The witnesses have almost answered my questions.
To be absolutely clear, are both of you saying that we should amend the
Bill to provide enabling powers to introduce feed-in tariffs and that
that should specifically address marine renewables and microgeneration
in the first instance but allow the option for a feed-in tariff scheme
to gradually replace the renewables
obligation? Philip
Pearson: My thought would simply be that I do not
know whether you would specify marine renewables. I think that making
the mechanism available is the key
issue.
Q
13Martin
Horwood: But your intention would be that, in
particular, microgeneration and marine renewables are appropriate early
candidates for feed-in
tariffs. Philip
Pearson: Absolutely,
yes. Roger
Salomone: That would strengthen the Bill, but it
would obviously not specify what they were. We probably think that,
when you reviewed it, those two might emerge as likely candidates for a
different type of
support.
Q
14Martin
Horwood: And do you think that that
could operate in specific sectors, such as marine
renewables and microgeneration, alongside the renewables obligation
working in other sectors of the energy market? Do you think that that
is
feasible? Roger
Salomone: I think that it is feasible, because we had
a situation before—did we not?—with the non-fossil fuel
obligation working alongside the RO. They dovetailed at the beginning.
In some ways, I do not think that it is ideal; you would like to have
one mechanism for everything, but it might not be working for certain
sectors. Those technologies are not really part of the RO; there is no
commercial wind or tidal farm in the RO, for example. You might want to
revisit the obligation levels of the RO. That might be part of the
review as
well.
Q
15Paddy
Tipping (Sherwood) (Lab): I wanted to talk about carbon
capture and storage and clean coal technology. Before that, can we
return to carbon pricing for a moment and talk to colleagues from the
TUC about this? It is clear—is it not?—that for new
investment in generation, there has to be a high and stable price of
carbon in the future? Mr. Pearson, I think, told us that
that could be done through the EU emissions trading scheme, the third
phase of which will begin in 2012. If we want to make progress on
nuclear, however, we have to make some decisions about carbon pricing
before that. The nuclear White Paper talks about the European scheme,
but it also speculates about the notion of a UK-only scheme before
then. How do you think that that would
work? Philip
Pearson: A UK-only scheme is not something that we
have done any work on. We have moved from a UK-only scheme to a
European scheme and have done no thinking at all about reverting to a
UK-based
scheme. My instinct would be that we are within a European framework and
that is where policy needs to be made, especially given that, for phase
3, the European Commission is more likely to allocate by industrial
sector than by national
targets. Paul
Noon: As Philip says, all our thinking has been done
on the basis of bringing forward and strengthening the mechanism at
European level and, indeed, about the strong case for doing it
internationally, rather than
domestically. Stephen
Radley: For us, the focus has to be on what we can
achieve from phase 3 and beyond. Nuclear power plants have a very long
lifetime, and that is what investors will look at, as well as the
likely price of carbon over the next 20, 30, 40 years and beyond. The
primary focus must be on getting ETS right, making it more transparent,
getting everybody harmonised and working under the same laws, and
ultimately developing something that the rest of the world can buy
into. We see that very much as the primary focus and anything
UK-specific as a fall-back if we fail to achieve the progress we hope
to.
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