Q
66Anne
Main: Several of you have touched on what I would call the
nuts and bolts of this, and that is the planning system. I was
interested to hear that you felt you could have a new nuclear power
station facility up and running by 2017. There is a crossover with the
Department for Communities and Local Government. A Bill dealing with
strategic infrastructure is currently being considered. How confident
are you that there will be engagement, so that if the Energy Bill is to
move forward in whatever form it is refined in Committee, planning will
not end up scuppering what is supposed to happen? Recently, there have
been criticisms in reports that the DCLG does not communicate its
vision outside. You may have the aim of having a power station by 2017,
but planning permissions may not be forthcoming. Are you confident that
there is enough strength in the Bill to deliver what you think will be
needed for our future energy, dovetailing with
planning? Denis
Linford: The Planning Bill going through the Commons
will create the infrastructure planning commission and national policy
statements. As I understand it, there will be a national policy
statement for nuclear, based on the White Paper and the strategic
siting assessment that will be carried out over the next couple of
years. With that, and with the need to consult people affected by our
projects, we think that process can work and that we can get consent in
time.
Q
67Anne
Main: What about wind, and other renewable developments,
which are in some areas equally
contentious? Rupert
Steele: If enacted, the Planning Bill will
undoubtedly be extremely helpful in enabling the industry to make the
kinds of investment in a variety of different technologies that are
going to be necessary to meet the supply gap, get the grid developments
made that are necessary for renewables to continue to grow, and, if
appropriate, invest in nuclear. So it is a hugely important Bill and I
am confident that the people in the Government machine who co-ordinate
these things are aware of the important link between that Bill and this
one. Guy
Johnson: The difficulty that we are all struggling
with at the moment is the current system. I talked about the Gwynt Y
Mor example, where we put in a section 36 in December 2005, and you can
see the frustration at the moment. I absolutely agree that the Planning
Bill will considerably improve the current arrangements.
Dr.
MacLean: Could I just
raise one other issue? Energy policy remains a UK reserved matter;
planning is devolved. We are now seeing energy legislation or energy
policy moving into planning legislation in the form of the national
policy statements, and they will not have the same primacy in the
planning system in the devolved Administrations. This is a particular
issue for renewables, where so much of the resource is in Scotland, and
so much of the delivery is expected to come from Scotland. It is
essential to find appropriate ways of ensuring not only that there is
joined-up thinking between the Energy Bill and the Planning Bill, but
also that there are appropriate solutions to join up the approaches in
the devolved Administrations so that we do not find that energy policy
is being set by planning policy, which is one of the dangers we have at
the moment.
Q
68Mr.
Swire: I think you are a little bit optimistic to think
that the Energy Bill is going to solve all the problems of local
planning, particularly with the commissioning of new power stations and
so forth. I should think there will be tremendously contentious
decisions that will drag on for a long time.
Regarding the point made on
offshore wind farms, have you altered your thinking or been in
discussions with the Ministry of Defence, following the reports about
the interference that offshore wind farms could cause to radar and air
defence?
Rupert
Steele: We have not. I have to say that I agreed with
the editorial in The Times, which said that this was an
issue that needed to be sorted
out—
Rupert
Steele: We need the MOD and the relevant technical
experts to deal with it.
Q
69Mr.
Swire: Does this come as news to the
industry? Rupert
Steele: We have focused on and are developing mainly
onshore, where the problems are better understood.
Sara
Vaughan: It is not big news. We have had an issue on
one of our planned developments at Humber, and we are exploring that
issue further.
Q
70Steve
Webb: I am going to dot about on subjects a bit. In the
Bill, the nuclear operators have to meet their share of clean-up costs,
and we do not know what they will be, so there is a provision for a
margin of uncertainty—an element of risk just to make sure.
Clearly, the Government could make sure by making that margin huge, but
that would be unattractive to you as investors. On the other hand, they
could make it very, very small and you would want to invest, but the
taxpayer would run a risk. Do you have a view as to the optimal size of
the scale of the margin of risk that the Government should allow, that
would encourage you to invest but would not leave the taxpayer
unnecessarily
vulnerable? Denis
Linford: I think it is too early to say. There is
clearly going to be detailed guidance issued and consulted on shortly,
so we will see more detail of this over the next few months. No doubt
we will be discussing with the Government what those cost estimates are
and what margin for uncertainty there should be. It is a bit too soon
to say what the right outcome should be, but clearly, from our point of
view, it would be helpful to have a fixed price with that margin to
protect the
taxpayer.
Q
71Steve
Webb: But if they over-egg that margin, might you walk
away? Denis
Linford: The long-term liabilities are not a very big
element of the total cost, so one should not over-emphasise the
importance of those costs in the investment decision. We think that
only about 5 per cent. of the total cost of a nuclear station over its
whole life is accounted for by those long-term liabilities. However, we
clearly need to get this right in consultation with the
Government.
Rupert
Steele: Obviously, I do not think that it is the
Government’s intention to set the margin at a level where it
becomes a money-spinner. It needs to be set at a prudent level that
gives the taxpayer a good degree of protection. Clearly, at some point
if it is inflated just for the fun of it that would start to affect
investment decisions and we think that that would be wrong.
The other point that I would
make, of course, is that the new arisings of waste from a new nuclear
programme would be much easier to handle than the legacy, because we
are all very, very focused now on nuclear waste issues in a way that
the people who initially built Sellafield in the late 1940s perhaps did
not have at the top of their minds, for reasons that we all know. I
think that one just needs a little perspective on this
issue.
Q
72Steve
Webb: The Bill has some provisions about metering, but
relatively minor ones. Obviously, we have had some discussion about
smart metering and the roll-out of it. My worry about some of the
models on rolling out smart metering is that five or six of you all
turn up with your own individual vans to your own individual customers
installing your own individual smart meters in the same road. Is there
a way of avoiding that happening while still getting a rapid
roll-out? Barry
Neville: Absolutely there is. There have been a
number of models developed to try to get around that problem. What you
do not want is British Gas turning up and doing Nos. 2, 4 and 7, and
doing gas in one, electricity in the other and dual fuel in the next
one. The desired outcome is really one company going in through that
road and fitting one meter that is able to speak to a meter in the
north or the south or the east or the west. I think that that is the
position that the industry is trying to get to, so that you can get the
cost efficiencies of that type of roll-out.
I think that you would also get
further benefits, even in terms of public education, because if you get
the opportunity to go down, street by street by street, there are other
things that you can do when you are in the home: energy efficiency
advice, benefits and health checks. This is a real opportunity that I
think that the Government should take. I think that the Government are
well aware of the situation, but I think that we are looking for
something further in this Bill, such as the mandation of metering that
will give it the kick-start that we need.
Dr.
MacLean: It is important
to recognise what needs to be rolled out, and the difficult part is the
basic infrastructure around the telecommunications to make the two-way
link and some sort of base unit into which various other things can be
plugged. You can have plenty of competition around what you plug into,
but you have to get that base unit in there. We believe that, at the
moment, a real opportunity has been missed to take the enabling powers
in the Bill that would allow a mandated roll-out. If we had that there,
we could then work in parallel on the options for how best to do that
roll-out, but for a lot of it there are not a lot of options; we just
need to get on with it and put that basic infrastructure in place. We
need to get moving with that roll-out. We would like to see that in the
Bill.
Sara
Vaughan: Just to reinforce that point, part of the
reason for that is that we think that trying to do it under the
European Communities Act 1972 will not work because its powers are not
wide enough, because the provisions of the energy services directive,
which would enable it, do not completely cover the
point.
Q
73Dr.
Ladyman: At the end of the day, you may acknowledge
Government targets but I guess that you will do what the law requires
you to do or what the market drives you to do. Given what you know
about the market, do you perceive that we have the legislative
framework in place with this Bill for you to hit the
Government’s target on renewables? I am not talking about the
Commission target because Dr. MacLean has already said that he does not
believe that we can hit it. However, is the Bill sufficient to ensure
that we hit the existing Government
targets? Rupert
Steele: The Bill probably contains the right
provision, give or take some minor points of detail. However, there are
some things that could prevent delivery. The most important of those
are grid connection and planning. The banded renewables obligation
provides a framework that can support the roll-out of renewables
financially. It will have to be extended in time and level to get
beyond the 15 per cent. or so that we might reach by 2015 because there
will be insufficient years left to fund the lifetime of projects.
However, the key constraints are getting these renewables connected and
getting planning permission to install them. The delivery of renewables
is fundamentally dependent on addressing those two
issues. Guy
Johnson: My answer to the question is yes, subject to
the detailed point that I raised in relation to the transitional
provisions for existing renewables plants and those in the course of
construction. The issue for us relates to
planning. Dr.
MacLean: I would probably
also say yes, the Bill can help to hit that target in conjunction with
the Planning Bill and in conjunction with something similar being done
in Scotland. There is the proviso that we believe that the transmission
arrangements are inappropriate, particularly to do with access and the
codes structure for dealing with that. The initial work that is being
done between the Department for Business, Enterprise and Regulatory
Reform and Ofgem is already beginning to recognise that there may need
to be legislative changes to ensure access. Again, on the basis of the
European Commission statement on priority access for renewables, we
must ensure that those that have got planning permission can connect to
the system and that others are encouraged to do
so.
Q
74Dr.
Ladyman: I am generalising, but given those caveats, you
have basically said that the Government have hit the right mark with
the Bill in terms of renewables. Changing the question slightly, in
terms of the Government’s desire to cut carbon, will the market
and this legislation allow us to hit the carbon
target? Dr.
MacLean: Not yet. It is
not enough
yet.
Q
75Dr.
Ladyman: If in the Climate Change Bill there is a 60 per
cent. carbon target—or possibly an 80 per cent. target,
if those people who are pressing for
it get their way—is there any way that that could be delivered
without a significant nuclear component? If that is the case, do the
legislation and the market point us in the direction of delivering that
target? Dr.
MacLean: The big thing in
the carbon reduction equation is to recognise that we must take two
parallel approaches. The first is to manage and reduce our consumption
and the second is to decarbonise the residual supply of that demand.
There is usually far more focus on the latter than on the former
approach of getting the demand side to be better managed. That happens
across the whole
package. We are
talking about an energy Bill, but we have talked almost exclusively
about electricity. Heat is another important aspect in reducing carbon
and in hitting the renewables targets. We feel that the Bill could have
done more to introduce incentives for renewable heat. At the moment,
there is a perverse incentive to develop solutions for electricity
rather than for heat. Quite often, it would be better to channel that
investment into a heat solution rather than an electricity one. We need
to get to grips with the demand side. We need to make sure that we are
looking at energy across all its facets. In that respect, there are
gaps in the Bill that will need to be filled at some time in the near
future. Denis
Linford: Specifically on nuclear, we do not believe
that the targets can be achieved without nuclear, so we believe that
nuclear should remain part of the mix along with renewables and,
hopefully, carbon capture and storage in due
course. Sara
Vaughan: I would agree with
that.
Q
76Dr.
Ladyman: Just to come back to what Dr. MacLean
said about constraining demand, I suspect that some of our witnesses
later today or in the next session will tell us that if we had loads
more energy efficiency, we would not need nuclear. My quick mental
calculation—if this is wrong, forgive me—is that if the
economy grows by 2 per cent. a year between now and 2050, the economy
in 2050 will be about two and a third times the size that it is today,
so even if we put in place energy efficiency on a scale that could
constrain that, it is likely we would still need as much energy in 2050
as we are producing today, perhaps even
more. Sara
Vaughan: There are also some solutions that may
involve the need for more electricity. For example, if you are looking
at something like zero-carbon homes, you cannot capture the carbon that
is emitted from a gas boiler, so you have to be looking potentially at
some sort of electrical heating, but doing that from what is a
zero-carbon source. If we are looking at the transport sector and
perhaps at transport that is fuelled by hydrogen, again that would
entail a large electricity demand in order to do the conversion. Energy
efficiency, as Keith said, is part of the mix, but no, it is absolutely
not enough on its
own.
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