Examination of Witnesses (Questions 80
- 99)
WEDNESDAY 23 JANUARY 2008
MRS SARAH
RHODES, MR
MICHAEL DUGGAN
AND PROFESSOR
DAVE DELPY
Q80 Dr Turner: But you do not have
any basis for comparison with any other mechanism.
Mr Duggan: A great deal has been
said about the German success with the feed-in tariff regime.
I think that the most important fact is that the Germans have
had a consistently supportive policy since the feed-in tariff
regime was brought in in 1992. They had their first terawatt hour
per year of renewables from wind that was reached before 1995
and that happened to us in 2004[4],
I think, which is actually the time after the Renewables Obligation
was brought in. It has been that long-term consistency of policy
that I think has led to the majority of the German success and
they seem to have addressed the issues around planning and grid
access much more efficiently than we have up to now and the Government
are trying to address that through the current Planning Bill and
reforms of the grid access. Just on the cost-effectiveness point,
I would like to make the point that the feed-in tariff and the
RO are quite difficult to compare. A feed-in tariff regime sets
the price that the generator receives. It obliges, in the German
case, the regional network operator to pay that price. It is then
supported by a lot of hidden subsidy, if you like, or hidden costs
that the network has to find which are completely opaque. They
are not included in the feed-in tariff regime at all. In contrast,
the Renewables Obligation actually applies to the supplier, the
supplier who supplies the end customer, and so the cost actually
reflects much more the entire network cost from generation through
the grid balancing costs and the other costs to the supplier.
So, it is a bit apples and pears as a comparison to directly compare
the costs. We accept that the Renewables Obligation has not been
as efficient as we would have liked, which is why we are reforming
it—to improve the cost effectiveness—and just on to
the investment climate. Ernst & Young produced an independent
country attractiveness rating from the point of view of renewables
and it has consistently over the past few years put the UK as
one of the top countries that it measures which includes all the
major European markets, America and some other international markets.
Chairman: Dr Gibson, would you like to
come in at this point on feed-in tariffs while we have it on the
agenda.
Q81 Dr Gibson: What I really am concerned
about is, are there any champions for feed-in tariffs anywhere
in Whitehall? Is it likely to happen? Will there be a pilot in
it? Do other different types of renewables feed into the system?
Will we have a feed-in tariff? Will you try it and see—will
you suck it and see?—or are you just hard and fast that
Renewable Obligations are the big thing?
Mr Duggan: I cannot judge what
decisions ministers will take in—
Q82 Dr Gibson: They were not very
good last night on the issue when a friend of mine from Nottingham
South raised it.
Mr Duggan: I sat through some
of that debate in the officials' box, so I heard some of that
at least and I think it will be interesting to see when we have
a kind of more rounded debate in—
Q83 Dr Gibson: Gosh! How exciting!
What is said in the Chamber counts, does it?
Mr Duggan: I am sure that it does.
Absolutely.
Dr Gibson: Great! Good! That is fine!
Q84 Dr Turner: Perhaps we ought to
spend more time there!
Mr Duggan: I think that there
will be scope for more rounded debate of the issues.
Q85 Chairman: I think what worries
us, if I may be perfectly frank with you—and I know that
it certainly worries Dr Turner who is a supporter of at least
trying to get an answer to this question—is why feed-in
tariffs are so off the agenda as far as your Department is concerned.
If you are looking at incentivising people to bring new technologies
into the marketplace, surely getting a direct return for their
investment in terms of feed-in must be why the Germans have been
able to install ten times more wind capacity and 200 times more
PV capacity than the UK. It cannot just be by accident, can it?
Mrs Rhodes: May I come in here?
Q86 Chairman: Yes, help him out.
Mrs Rhodes: They are not off the
agenda, they are firmly on the agenda. The work that we have done
through the Energy White Paper has been to enable us to work to
a different target and, as Michael said, that is intended to deliver
us 5% renewable energy by 2020. We are in a different space now;
we are in a space where we are committed to delivering 15% electricity.
Therefore, everything is on the agenda. We are about to announce
today that we are starting work on a new renewable energy strategy;
we are looking at everything. We will look at that. Dr Gibson
has a point that maybe we should pilot some things, but we should
not lose sight of the importance of investor certainty here and,
while it would be lovely to be moving around between all sorts
of different measures, we are all learning in this, all the countries
are learning, so maybe we are beginning to see evidence that one
or two systems are working more efficiently, but it still may
not be in our interest to move around when people understand what
our incentive system is and we do not necessarily gain from changing
that. That is not to say that it is not all on the agenda, but
it is to say, "Do not lose sight of the arguments on both
sides".
Q87 Mr Cawsey: I represent a constituency
where there has been a great deal of effort to put in renewable
wind technologies over several years yet, on the ground, there
are none there or very few. So, at least to me, that does not
appear to be a matter about Renewable Obligations versus feed-in
tariffs. The simple truth is that you cannot get the permissions
necessary to put the things up and that is not going to change
whether you have obligations or tariffs, is it? Do you have a
feeling for how much of the problem is the incentive to people
to invest in the first place or actually the practicalities of
getting permissions to put them up?
Mrs Rhodes: We have information
on the amount of capacity that is queuing through the planning
system and it is very significant, so we know that there are projects
that will come forward provided we can deal with some of the blockages.
Q88 Mr Cawsey: Where would we be
compared to some of these more successful countries if you could
model where we would have been without the planning restrictions?
Mrs Rhodes: I am not sure that
you can really make those kinds of hard and fast distinctions
but we are seeing a willingness to make the investment; we are
very aware that there are barriers in terms of actually being
able to get the approvals. Planning is a very significant part
of that and of course the Government have introduced the Planning
Bill to try and deal with that, but we will have to look in our
renewable energy strategy as to whether that is enough.
Q89 Chairman: So, we blame the local
authorities and not the Government.
Mrs Rhodes: Well, the system is
designed for something else.
Q90 Dr Turner: Feed-in tariffs are
not the whole story in Germany obviously because Germany has also
had the benefits since 1995 of the Renewable Energy Act which
addresses the obstacles in addition to any investment difficulty.
You refer again to investor security and confidence and stability.
If you reform the ROC system—we have now developed the banding
system—you are still going to have to grandfather existing
ROC rights. So, whatever changes you make, you are still going
to have to make grandfathering arrangements. So, why not take
the opportunity to look at it root and branch and perhaps test
the possibility of a feed-in tariff system as against a ROC system
because it is simpler, it is more transparent and it is administratively
much, much less complex?
Mrs Rhodes: The short answer is
"Yes, we absolutely need to do it and we will look at these
through the renewable energy strategy".
Q91 Dr Iddon: Energy related research
is funded by a large number of organisations and I could read
a list out here but I want to save time. What mechanisms are in
place to co-ordinate the activities of all these different bodies
and to convey a clear picture of their respective authority, responsibilities
and funding?
Professor Delpy: Let me answer
obviously on behalf of the Research Councils and mention some
of the others as well. It does look a crowded landscape and I
think it is true that it is and it reflects the relative speed
with which this has come up the agenda. Research Councils UK have
answered this problem as far as the academic community is concerned
by working I would say extremely well together in their cross-council
energy programme, by working through a mechanism of setting up
large consortia of academics, for instance in the SUPERGEN consortia,
a total of 13 consortia taking academics from across the country
and bringing them together. Those consortia meet regularly obviously
with the UKERC, the Energy Research Cntre, and the ERP. We have
at EPSRC put in place a senior energy research fellow, Nigel Brandon,
at Imperial and, through the UKERC which is based there, we have
also created a database of the research that is happening. I would
say that, on the research side, although it appears to be a complex
landscape, first of all there is an enormous breadth of activity
which has to be tackled in terms of research from fuel cells,
wind, wave, biomass, an enormous range, and therefore I think
that one needs a variety of different funding mechanisms, but
what you need to ensures is that the people who are being funded
by these mechanisms are aware of what is happening across the
UK as a whole and I would say that through these consortia that
is in fact happening.
Q92 Dr Gibson: It has come to me
where I last saw the word "consortia". I saw it with
Graham Beaufort(?) writing to me about the physics cuts, the alleged
cuts on a daily basis. Will it affect these programmes that you
are talking about? He implied that Scotland's consortia would
be affected.
Professor Delpy: I would say that
in general it would not. The cuts that have been talked about
via STFC are predominantly affecting the particle physics and
astronomy community. The rest of the physics community receives
tremendous support both from STFC, EPSRC, NERC and BBSRC.
Q93 Dr Gibson: So, there is no attempt
to curtail the work at all?
Professor Delpy: No. I do not
think that there would be any significant effect.
Dr Iddon: Why do we not have a single
energy authority in this country making this co-ordination much
easier and driving the research forward?
Q94 Dr Gibson: Why do we not have
a department? Dave King wanted one.
Professor Delpy: Or a single NSF
and NIH, a single science council Yes. It is one of those attractive
ideas that, when I was at UCL as Vice-Provost, I always thought
looked great. When you actually get down to examining NSF, then
below that top level name there are in fact more subdivisions
than we have research councils anyhow. If you look at all the
research councils across the developed world, they do generally
split up in such a way as to handle particular communities. So,
whether you actually have seven separate research councils as
we have, or whether you have an overarching body but then seven
or ten or 15 divisions below that I do not think matters too much
as long as those individual research councils are working well
together and are aware of what each other is doing and how they
are doing it.
Q95 Chairman: It is more than just
research councils, is it not? We are talking about the whole gambit
of whether organisations which the Government have set up ...
Can you answer Brian's question, Sarah?
Mrs Rhodes: Indeed. You can look
at our system and you can say that it is a very crowded landscape.
You can also look at it and say that it is plural, it is aimed
at making comparisons—
Q96 Dr Turner: You could also say
that it was chaotic.
Mrs Rhodes: You could, indeed.
The questions that you need to ask and that we all need to ask
looking at it is, can we get some strategic direction through
it, does it represent good value for money for government spend
and, if you are the customer out there, can you actually find
where you get some support for what you want to do? We deal within
a landscape that we have just been changing. There is a new Energy
Technologies Institute now in this system and we think that it
is an extremely good development and an extremely useful development
and I am sure that you will be talking to ETI. We also have a
new and different Technology Strategy Board in this. Those are
two large, heavyweight players in this market; they are working
out what their direction is intended to be. Coming back to my
points on how we work out the strategic direction and how we make
the links, we all work very closely together to ensure that we
all try and ensure that our objectives through the system are
the same objectives and they are aligned, so that we are all facing
in the right direction and we are talking to each other. ETI itself
is going to be a very useful new player in this in the way that
it brings us all together. Research Councils on the board, Technology
Strategy Board is also on the board, we in BERR are on the board;
it is a place where a lot of things come together and it will
be very useful.
Q97 Dr Turner: You are right, it
is very diverse, and we have a lot of things going on, but the
trouble is some countries are choosing winners, they are developing
technologies and exporting technologies based upon those winners.
Would it not be more suitable if we had a renewable energy authority
choosing winners and driving things forward instead of allowing
people to thrash all over the place?
Mrs Rhodes: Yes. It would be absolutely
great if we thought we could choose winners, if we thought we
could say, "Yes, there is one technology, we know it will
deliver for us, will do everything we want, let us put everything
we have behind that", but we are really not in this situation.
Just from hearing all the questions on all the different technologies
you were talking about in the first session, what is the potential
of solar, what is the potential of biomass, what can we do through
using our waste better, what can wind do for us, there are so
many different options. If we pick winners we do seriously risk
picking the wrong one and government's track record at picking
winners is not one that would give us confidence. Let us accept
this is a portfolio, it has to be a portfolio approach, and what
we are collectively about are two things through this entire system:
we are about proving technical feasibility, showing things can
be done at scale, and really fundamentally we are about driving
down the costs.
Q98 Chairman: And letting other countries
cash in on the work we do by developing these technologies?
Mrs Rhodes: I would not at all
underestimate the benefits. We have to have a substantial capacity,
a skills capacity and industry to deliver that. There are lots
of benefits in the fact that we have these targets, let us use
these targets, let us gain the greatest benefits from them, but
let us remember that renewable electricity generation is very
much at the top end of the cost spectrum; our work is designed
as to how we can bring it down.
Q99 Graham Stringer: I understand
it is government policy not to pick winners and they have made
mistakes when they have gone for LPG and in other areas, but has
not the opposite case of sitting back got two problems with it?
One, it is an abdication but, two, it also obscures the fact that
they are investing in particular areas of the energy industry,
they are just not admitting that they are making very clear energy
choices between nuclear and wind because there is a large amount
of money going into it. What they are doing is stopping a transparent
debate about nearly trying to pick winners, is that not the case?
Mrs Rhodes: You are right that,
if you like, the spectrum narrows as you go up. When we are in
the research area there are so many potential ideas, there are
so many things that need to be brought through, that there is
a wide range of things that are looked at on that basis. When
you get towards the area that my department particularly funds,
which is demonstration, pre-commercial deployment, the way we
approach this is by ensuring that we have, if you like, a strategy
for each of the key technologies that is looking very much at
what are the barriers to deployment and how can we use our own
capital grant funding to deal with those barriers coupled with
the market pull measures, like the RO, the potential of feed-in
tariffs we have been talking about, and how do we make sure that
the system works for the technologies that we regard as the most
important ones. Increasingly, we are going to have to be making
choices between those and increasingly, as there are so many different
technologies, we have to ask that really difficult question of
can we pay for all of this. This is why we are where we are with
all the different things we aim to be funding. When I say "we"
I do not just mean "we" in terms of how BERR spends
its capital grant or any other department does, but in terms of
"we" as a country. Our consumers pay for this, our taxpayers
pay for this, how are we collectively going to get to the right
investment most efficiently and most cost-effectively? That is
the fundamental question we have to ask ourselves.
4 Note from the witness: "actually 2002". Back
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