Examination of Witnesses (Questions 65
- 79)
WEDNESDAY 23 JANUARY 2008
MRS SARAH
RHODES, MR
MICHAEL DUGGAN
AND PROFESSOR
DAVE DELPY
Q65 Chairman: We move on to our second
set of witnesses this morning on our inquiry into renewable electricity-generation
technologies and we welcome this morning Mrs Sarah Rhodes from
BERR, Dr Michael Duggan from BERR and Professor David Delpy, the
Chief Executive of EPSRC on behalf of the Research Councils UK.
Welcome to you all. I am sorry that we are running a few minutes
late but I do intend to finish by 11.25. May I begin, Sarah, with
the same question as I asked the previous panel regarding this
figure of 20% renewables by 2020. What is the Government's view
at the moment in terms of electricity generation? How much electricity
will we have to generate from renewables by 2020 to meet your
targets and indeed the European targets?
Mrs Rhodes: We are expecting the
Draft Directive to be published today and we are expecting that
it will have a target for the UK probably of 15% overall. We will
obviously have to wait until we see it in print but that is our
expectation. It is also worth recognising that there is a separate
target in there of 10% biofuels for road transport, and we are
required to meet both.
Q66 Chairman: Is this specific for
electricity generation?
Mrs Rhodes: No. The 15% is renewable
energy. There is a separate 10% within that for road transport
and therefore the question that you rightly ask me is, what is
the expected percentage share for electricity? We have a fair
bit of work to do to work out what we think is the right percentage
for electricity but I entirely agree with the views you have had
so far that it is somewhere between 30 and 40%; it is a large
amount. Electricity is likely to take the larger share of this
because although we will want to do a fair bit through heat, it
is a very difficult market in which to achieve those kinds of
savings.
Q67 Chairman: Michael and David,
do you agree basically with that assessment?
Professor Delpy: From all the
information I have heard and seen to date, yes, I would think
that is a reasonable assessment.
Mr Duggan: I will have seen the
same papers that Sarah has.
Q68 Chairman: In 2006, renewable
energy accounted for 4.55% of all electricity generated. Why is
the UK implementing its renewables more slowly than other European
countries, particularly like Germany and Spain? Why are we so
far behind?
Mrs Rhodes: We have had the advantage
and the disadvantage of a ready supply of fossil fuel. We have
been an oil and gas producer. Therefore, we have been in a position
where we have had a ready supply—
Q69 Chairman: Germany has had a fair
bit of coal, has it not?
Mrs Rhodes: Yes, absolutely, it
has. We have been blessed and now we have to deal with the fact
that we need to catch up. We are putting a lot of resource into
the question of catch-up and I would say that this is very much
a question of sensible investment. This is a question of cost.
How do we plan our way most economically to achieve the 20% target?
I would also say that this is a question of not just focusing
on that immediate 20% target, although it is incredibly important;
we also have to look to the wider picture that we will probably
have to reduce our carbon emissions by much more in the longer
time. At the moment our target is 60% by 2050 though the new Carbon
Committee may put us up to 80%. Yes, 2020 matters a lot but let
us not also lose sight of the larger picture.
Q70 Dr Gibson: I get absolutely baffled
by figures in this field; I think everybody gets a bit fed up
and I am sure that the public do not understand a damn about 20%
10%. Do you not think that confuses the picture and that we need
a different language? We have 4.55, we have 20, we have 60 and
we have 80 and so on. Do you think that is helpful when the measurement
of it is probably inaccurate anyway?
Mrs Rhodes: You are absolutely
right that people need to understand a clear target because behaviours
are one of the most important things and behaviours of us as consumers,
individuals and organisations, is terribly important to reaching
whatever our targets are. So, yes, but this is a picture that
moves constantly. The science is moving, the evidence is moving
and the policy is moving. So, yes, you are right, we do have to
find a way of communicating that really effectively.
Q71 Chairman: There are that many
figures being bandied around that it is difficult for this Committee
to get a grip of it and we have actually decided that we want
to do this inquiry. I see communicating it more broadly is difficult
and you have introduced new figures today which are coming out
of the European Directive. Professor Delpy, wind has been a very,
very important part of actually meeting these targets as far as
the UK is concerned. The British Wind Energy Association suggested
that new investment in terms of wind technologies would in fact
decline after 2012. Is that a huge concern?
Professor Delpy: I think that
one has to distinguish between the wind base that is going to
be installed now and the technology has already been developed.
The Research Councils are funding developments that will come
on stream in I would say at best in six to seven years' time,
reality often in ten to 20 years' time. The research that we are
funding in the wind turbine area relates to probably the offshore
aspect of wind turbines where there are particular problems which
have not yet really been successfully answered and a tremendous
amount of work in modelling of wind turbines and airflows in order
to both maximise efficiencies and to deal with the large variation
that I think Dr Gibson mentioned that occurs in the load factor
that wind turbines experience.
Q72 Chairman: Is it not all to do
with the Renewable Obligations and the fact that we do not know
what is going to happen after 2012? Is that not one of the core
issues in actually trying to give the industry some sort of sense
of security to actually make long-term investments? After all,
2012 is only four years away.
Professor Delpy: It is and, as
I say, I am not sure that you are actually asking the right person
because I suspect that these are issues that relate to regulation,
to fiscal policy and to local planning policy rather than to basic
research. If the Research Councils have an obligation there, I
think it is to ensure that we have a supply of engineers and scientists
who can in fact support the industry.
Q73 Chairman: If you cannot answer
it, obviously the man who is responsible for regulation is in
front of us, so he will be able to answer it.
Mr Duggan: The Renewables Obligation
was brought into effect in 2002 as a 25-year instrument. Most
of these projects that come, wind farms and the like, have investment
periods and payback periods of the order of 15 years and only
a bit on individual business models, and clearly an instrument
which ends in 2027 will start to run out of impact between the
2010 and 2015 period.
Q74 Chairman: What are you doing
about it?
Mr Duggan: That time has started
to approach within a sort of reasonable policy timescale at about
the same time as the 2020 target has come up, so clearly the consultation
that will take place on the 2020 target, one of the things we
will have to do is consider what it is that we do as the next
step, either in extending the Renewables Obligation or in adding
to the Renewables Obligation, to bring on increased investment
over that kind of timescale from 2010 onwards.
Q75 Chairman: Come on, you are advising
the Government. What is your view?
Mr Duggan: I think the interesting
thing is that the Renewables Obligation was set up, as I said,
really in the context of an attempt to reach renewables targets
around 2010. I think that moving to a hard 2020 target and a much
later target requires quite a major review of what we should do.
A lot has been said about feed-in tariffs, for example. My view
is that feed-in tariffs are not the kind of silver bullet that
they are sometimes regarded as. The changes we are making in banding
the Renewables Obligation will significantly increase its efficiency
and make it a much more flexible instrument, so I think that extending
the Renewables Obligation would certainly be one major policy
option that we will be considering.
Q76 Chairman: Giving out more ROCs
does not in fact achieve anything unless there is a value to them
and in fact investors can actually see that there is a long-term
investment value to those and that is one of the big problems,
is it not?
Mr Duggan: Investor confidence
is a very important factor in that.
Q77 Chairman: Given that Government
policy says that this has to be led by private sector investment,
it is more than just a factor.
Mr Duggan: I think the evidence
is that the Renewables Obligation has inspired a lot of investment.
We have seen the levels of build and onshore wind deployment has
grown by 40% a year for the last couple of years. There is a great
deal of investment, gigawatts of capacity, that people are prepared
to make that is held up in the planning and grid queues. I do
not think that the Renewables Obligation has failed to bring forward
investment in renewables over the past few years. In fact, I think
it has succeeded because we have seen a tripling of the deployment[3]
in the first five years of its existence.
Q78 Dr Turner: Can you back that
up with reasonable evidence because (a) you are starting from
a very low base so, if you had not tripled the deployment, by
God, you will have been doing very badly and (b) the uncertainty
of the value of the ROC can hardly be discounted because there
are theoretical circumstances when the value of the ROC can be
zero. So, it would not matter how many ROCs the generator held
because, if they are not worth anything, that is not going to
give them very much confidence, is it? Given that feed-in tariffs
have produced much greater deployment in Germany at no greater
cost, in other words much less cost per gigawatt, how is it that
you can justify sticking to the ROC the British way especially
when it is so administratively complex as well? I talk to the
people in the industry a lot and they tell me that, as an investment
climate for renewable energy, Britain is the worst in Europe.
Mr Duggan: As I said, in terms
of the evidence in the past few years, we have seen a great deal
of investment come forward. That has not always delivered projects
on the ground as we would have liked and that has not been due
to a failure—
Q79 Dr Turner: Can you be sure that
it is the ROC mechanism which is actually pulling that investment?
Mr Duggan: Yes because, if you
look back, without stimulus and under the previous regime, the
non-fossil fuels obligation, we saw very little growth at all
in renewables deployment and that took from the early 1990s through
to 2001 and we were only at a couple of per cent renewables and
a great deal of that was the kind of historical hydro that had
been built more than 50 years ago. So, the RO has delivered a
tripling of renewable deployment and that is entirely down to
the financial incentive that the Renewables Obligation has brought
forward.
3 Note from the witness: "RO eligible
generation was 4,884 GWh in 2001 (the last year before the RO
was introduced) and 14,554 GWh in 2006". Back
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