Q
16Paddy
Tipping: We are all in favour of carbon capture and
storage. Are the measures in the Bill sufficient to bring forward new
schemes? Philip
Pearson: Not in themselves. They provide a
legislative framework to encourage private investment. In a sense, the
proposals in the Bill are a kind of minimum comfort zone. They are
absolutely necessary, but they in themselves will not drive forward
CCS. Government initiatives, such as the demonstration project, are
obviously part of the way forward, but there have been concerns over
the pace and scale of that. The TUC is pleased to advise the Committee
that it is a member of Yorkshire Forward regional development
agencys carbon capture and storage project, which is hugely
ambitious, with the potential to capture 55 million to 60 million
tonnes of CO2 from power, steel, ceramics and so on in a
regional system. It is difficult, however, to see the connection
between such an ambitious project and the Bill. The Bill provides a
basic set of rules and regulations, but it will not, in itself,
stimulate
investment. Roger
Salomone: We agree that what is in the Bill is
essential and lays the regulatory foundations. However, in terms of the
wider question of whether there are enough incentives out there to
encourage CCS to develop in a wider sense, we have the competition
project, which is quite narrow, looking at one kind of technology,
rather than the industry in the broad sense, and we have the EU ETS,
which should be the long-term mechanism, but which is not providing
those kinds of signals at the moment. I think that there is a question
about whether some kind of transition support could be provided to the
industry more widely. We have been discussing carbon taxes, and things
like that. The question of what happens to the auctioning revenues at
the EU ETS level is also outside the scope of the Bill but is
important.
Q
17Paddy
Tipping: So what more needs to be done to bring forward
carbon capture and storage? All our coal plants at the moment are
ageing and going to go out of commission. There is a prospect that,
unless we can burn coal more cleanly, either via better
combustion techniques or post-combustion carbon
capture and storage, there will be real problems. What else needs to be
done? Philip
Pearson: We are at the stage, with carbon capture, of
project development through demonstration and implementation. We are at
a stage that requires forms of Government support. This in turn raises
the question of where the revenue streams will come from. This in turn,
going back to Stern, suggests there should be a carbon price-related
revenue stream. The only one available so far is the EU ETS. Carbon
capture and storage is a potential candidate to join the EU ETS from
2012, or perhaps sooner if the Government could win that argument.
Meanwhile, there is no revenue stream from carbon emissions to support
CCS; there could beyou could get it from air passenger duty,
which is an environmental tax. You could get it from auctioning
revenues from phase 2 of the ETS. The Bill does not have a mechanism,
however, to fund through carbon pricing the good extensions on
electricity, CCS or offshore gas storage. A number of major restructure
projects are still without a mechanism. We have a problem with that in
the context of the Bill.
Q
18Dr.
Brian Iddon (Bolton, South-East) (Lab): The Bill favours
retrofitting for carbon capture and storage. Do you agree that the
Government should put their money on that technology, rather than the
pre-capture of carbon through reforming the gas? That has the advantage
of producing hydrogen, which would kick-start the hydrogen
economy. Philip
Pearson: The Bill does not cover this issue
specifically. It does not refer to post or pre-combustion capture or
regional networks. It just provides for the infrastructure
arrangements. What do we think about the pre or post-combustion
arguments? We think that both technologies need to be supported as well
as the third optionthe regional pipeline system, which is being
developed through Yorkshire Forward. I do not know whether they will be
giving evidence to this Committee, but that is a truly ambitious and
exciting project, which is not just about getting CO2 from
energy but from steel. Corus is a partner. It is a very important
initiative. Again, I think there is a problem on the funding stream.
Whichever option you go for, the stream is probably too thin and too
attenuated; it needs to be much more intense and broad in its
scope.
Q
19Dr.
Iddon: So why did BP pull out of the Peterhead
project? Roger
Salomone: We think that it is disappointing that the
competition was not broader. Any kind of technology will come forward
and be eligible to take part in that competition. You have to give
credit where credit is due. It is good that we got competition in the
first place. It would have been nice if it had been more open, because
it is always hard to predict which is going to be the most
cost-effective and useful technology several decades
hence.
Q
20Dr.
Iddon: Will the competition that is proposed in the Bill
attract BP back in? Its project was
pre-capture. Roger
Salomone: I would not have thought that it would have
encouraged that type of projecta pre-combustion
technology.
Q
21Mr.
Brian Binley (Northampton, South) (Con): May I pursue this
a little further. There is a feeling in the industry that the
Government have been premature in making decisions about the issue
through this competition and that they in fact close down activity that
ought to be opened up. Is that your general view at this
stage? Philip
Pearson: From the TUCs standpoint, yes, it
is. We have expressed that view through our representatives on the coal
forum. We believe that all options should be explored. There is a
question about resourcing, and if there are limited Government
resources then the Government have clearly made a particular kind of
decision. If resources are that thin, you could argue for post-capture,
pre-capture or a regional network, if only one of three major options
is to be chosen. The trouble is that the CO2 challenge is
too enormous to restrict to the development of one option only. The
European Union is looking for a dozen CCS demonstration projects by
2012, with some to be in operation by then. The UK was thought earlier
on to have the combination of advantages to put forward three or four
options of the 12. We have one option over a four or five-year time
period, and there should be several pre, post and regional systems over
a much tighter
timescale.
Q
22Mr.
Binley: Can I come to the industry now, because I
understand that money is available and people want to go ahead, but
they feel that they are being excluded by the way in which the
competition is framed, and so forth. Is that
fair? Roger
Salomone: I think that people do think that the
decision for the competition was premature. For example, we do not know
exactly what the competition criteria are right now, but we could have
had criteria around retro-fitting and global applications and there
could be other important ones such as cost-effectiveness. I do not see
how narrowing that down now does the situation any
favours.
Q
23Mr.
Binley: This is my final question. Do both of your groups
believe that amending this Bill to open up that particular aspect would
be a good thing? Is that what you are telling
me? Philip
Pearson: From our point of view, absolutely. If you
read the energy chapter in the CBIs recent report, it makes
very similar comments.
Roger
Salomone: We agree.
Q
24Dr.
Alan Whitehead (Southampton, Test) (Lab): Just a brief
question on competition in securing infrastructurefollowing on
from the question on how competition might develop carbon capture and
storage. Are you happy with the potential arrangements in the
Bill to stimulate the development ofparticularly
offshoregrid transmission arrangements through amendments to
the Electricity Act 1989 and the power of Ofgem to develop competition
for licences? Or do you think that further action is needed to ensure
that the delivery mechanisms for the development of offshore wind
generation can be sustained?
Philip
Pearson: This is an issue that was discussed recently
on the Renewables Advisory Board, where I represent the TUC with a
colleague from Unite. Following a presentation from Ofgem, there was
fairly
general concern about the lack of an effective delivery mechanism for
grid extensions to capture offshore wind. Competition was not really
thought to be the most sensible way forward: that is not how the grid
historically developed. It developed on a plan and
provide basis. Although most of the board members are from the
private sector, my impression was that the plan and
provide basis of grid extensions was the way forward.
In terms of
renewables, we urgently need two things: one is planning permissions
and the other is grid extensions. The critical path to securing a major
expansion of renewables offshore is grid extension. That is going to
take the longest and be very expensive. It needs a funding mechanism
and a delivery mechanism, and we are not convinced that Ofgem has the
right terms of reference to secure that. It does not make a lot of
sense to put this out to competition when the industry is saying that
it needs the access lines out there in the North Sea on a
planned and provided basis. That is the problem. Is the
competition going to achieve that? It seems
unlikely.
Q
25Dr.
Whitehead: So do you have thoughts on what sort of
alternative mechanisms might secure the aims that you are talking
about, over and above what is presently set
out? Philip
Pearson: I do not know what my colleagues would say,
but the obvious answer is to commission the provision of the grid. The
Government has a role to commission the provision of these extensions.
It may look as if that is an old-style way of providing infrastructure,
but we are facing unique sets of issues involving climate change, the
renewables challenge, carbon emissions and different energy security
priorities than existed 10 years ago. We think, therefore, that a
market-based mechanism in itself is probably not the right way
forward. Roger
Salomone: Our view is that it is a positive
development that we are moving from a piecemeal position now, in which
networks offshore are more the responsibility of the developer, and
bringing them into the existing regime onshore, where you have
recognisable transmission asset owners, and a system-wide operator.
That can only be beneficial. You are into the remit of long-term
planning that exists, for example, for the national grid. That is a
step in the right direction, which should provide more coherence and
more planning going
forward.
Q
26Dr.
Whitehead: Do you think that the combination of what is in
the Bill and the proposed developments in other legislation,
particularly the proposed marine Bill, will be sufficient to provide
that new framework, or are there other elements to it that you consider
necessary? Roger
Salomone: It will be a challenge. The Planning
Billmaking sure these things connect onshore with new
substationsthe marine Bill and the Energy Bill are all going to
have to be knitted together, and should be able to provide a
functioning
whole.
Q
27Mr.
Jamie Reed (Copeland) (Lab): I apologise if the Committee
has covered this while I have been away from proceedings. I think that
generating costs are of essential importance here, when we are looking
at
todays energy factors and CCS in particular. The last figures
that I have available to me show that the generating costs for coal are
approximately £29 per megawatt-hour, and roughly £30 or
£31 per megawatt-hour for gas. Do you have any fears about
rising generating costs, irrespective of the price of carbon, with the
introduction of CCS for those
technologies? Philip
Pearson: The answer has to be, simply, yes. There are
concerns about the on-cost of CCS, but CCS is not just a
problem for the UK to address for its own coal-fired generation, which
is burning around 60 million tonnes of coal per year. It is a
far greater issue; a global question. China completely overwhelms our
CO2 emissions from coal. It consumes around 2.5
billion tonnes of coal per year, and rising. We know the numbers on
coal-fired power stations. CCS is a global obligation, and we are in a
unique forward position to develop it. As I said earlier, we need the
funding streams to be in the forefront of this technological
development, which is why we felt so disappointed. I know there is a
cost question, which is at the heart of your point, but there needs to
be a far more ambitious CCS project in the UK than the one we have now,
and it would be wonderful if the Bill could succeed in addressing the
funding stream issues, as well as the framework
issues.
Q
28Charles
Hendry: The Bill allows for encouraging a whole range of
energy generation, perhaps a new fleet of nuclear, with all the work
that goes with decommissioning and the waste disposal related to that.
It allows for the opening up of carbon capture and storage; and a whole
new approach to offshore and marine renewables, with the Severn barrage
and things like that. What is your assessment, both from the TUC and
from the employers side, of the skills base in this country?
Can we actually deliver that range of projects, and what needs to be
done to ensure that we
can? Paul
Noon: That has been of major concern to the TUC and
affiliated unions, and something on which we have had good and
constructive engagement with the Government. However, we would like to
see many of the initiatives knitted together. A good 80 per cent. of
the members of my union are graduates, and it has been a source of some
frustration to see the number of engineering graduates in the UK drop
over the last 10 years. We talk to company after company that
tells us about the problems they have in recruiting graduates. The
issues relate not only to graduates; they relate to skills more
generally. One of the issues that is raised with us, by the electricity
supplying industry in particular, is the attitude of Ofgem and the
regulator to the price mechanisms that are there. There should be
sufficient capacity for companies in the area to invest in skills, or
perhaps it should be mandated that they be required to do so, so that
it is not just a question of profitability. There are some very
significant concerns. In particular, there is a focus on skills in
nuclear, again not only among graduates but at all levels. Some of the
things are being brought together in the national skills academy for
nuclear that has been established, but there needs to be a greater
focus on
them. Stephen
Radley: My colleague will in a moment come in on the
specific point regarding nuclear, particularly on the inspection
side.
I think that
in the short term a lot of this is down to the work that the sector
skills councils can do in terms of addressing some of the issues,
working with the HE sector, and other such factors. But beyond that we
need to look a bit wider. What we need to look at particularly is the
quality of the teaching of science and technology in schools: whether
it is being provided to a sufficient standard, whether we are enthusing
people about these subjects and whether they are getting good-quality
information about the opportunities that are open to them. There is a
big opportunity here in terms of communication: we can say, If
you want to be part of delivering the low-carbon economy, these are the
sort of things you could do and these are the sort of qualifications
that you need to develop. I do not think that that message is
getting across at all at the moment to people who are making subject
and career choices in school, and we need to be much more active on
that front. On a wider
point about addressing these skills issues, we are encouraged by many
of the recommendations that were made in Lord Sainsburys review
of science and innovation such as improving the quality of teaching and
of careers advisers, and perhaps most important, providing evidence in
subject lessons of how science is used in the workplace, in
manufacturing today; really building it in rather than providing it as
a
bolt-on. Roger
Salomone: Can I just add that I think the skills
shortage in nuclear is of particular urgency, particularly for the
regulators and inspectors who are going to run this new health and
safety regulatory function. In light of nuclear programmes potentially
starting up in the States, China and other places overseas, there is
going to be competition for these very skilled individuals. Education
is probably not the answer in the short to medium term, as you cannot
train a whole new generation of nuclear inspectors. It is about
expediting this process quickly and making the UK an attractive place
to work for those in the nuclear
industry.
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