Examination of Witnesses (Questions 240
- 249)
WEDNESDAY 30 JANUARY 2008
MR NICK
HARRINGTON, MR
JEFF ALEXANDER,
MR RAVI
BAGA AND
MR KEVIN
MCCULLOUGH
Q240 Chairman: If it ever arrives.
Mr Harrington: It will be a concern
for us if it does not.
Q241 Mr Cawsey: You mentioned earlier
quite a lot about environmental impact assessments and in some
of the information that we received we saw that for instance Marine
Current Turbine's Seagen project had an £8 million budget
for a tidal turbine development of which £2 million was the
environmental impact assessment. Do you think we have reached
a stage where the costs of these assessments are now a deterrent
to investment in renewables in the UK?
Mr Harrington: I think you will
find the reason for that is that nobody has done it before, and
as nobody has ever done a project like that before, there are
understandable concerns from stakeholders whether a revolving
propeller is going to kill seals. It is thought it probably will
not but the first time you do a project you need to get answers
to a lot of very pressing questions of that sort. When the next
project comes along, we will know the answer to that, so the same
level of investigation and monitoring is unlikely to be required
in subsequent projects. For these first projects that would be
a big burden to place on that company. It is a fairly small company,
and I think if at that stage public sector research resources
could be brought into play to look at the impact of that technology,
and perhaps others at the same time, that would be a way of reducing
the burden on the small companies developing their technologies.
Mr Baga: I was going to say that
in slightly different words. Any new technology will raise questions,
and those questions will be legitimate and they need to be answered.
I suppose in the process of taking technologies from the test
bed through to commercialisation, we need to make sure that we
consider the environmental impact assessment as part of that package
of work in taking them through this process and that will help
reduce that burden of cost or perhaps have that burden shared
more equally amongst developers.
Q242 Mr Cawsey: There is some argument
that the Government should provide baseline assessments that could
be used. Would that help reduce the cost and speed up processes?
Mr Baga: Or part of the framework.
Again, if we are turning to research and development, I suppose
the choice of technologies you have is immense and not everybody
is going to be able to invest in all of the technologies all of
the time because you just have not got the resource available,
so pooling those resources is something that is happening through
the ETI where essentially a number of companies are investing,
and we are certainly putting our money into that pool, and there
is no reason why those sorts of institutions cannot be used to
carry out these assessments which will benefit everyone.
Q243 Mr Boswell: Alongside the assessment
is there some merit in looking at the concept of having a research
programme, whoever runs it, which is dedicated to mitigating the
environmental impacts; it is both recording what they are and
also seeing whether they are real constraints on the development
of technology or could be remediated?
Mr Baga: I would agree that has
got to be part of that package.
Q244 Chairman: If you could just
answer this final question as briefly as you can please. It has
been very interesting looking at this whole issue of some of the
other problems. It is not simply developing the technologies and
then deploying the technologies; there is a whole set of other
issues involved. One of them is the speed at which you can get
from beginning an application right through to actually connecting
the generation of power to the grid, and that seems to be another
great obstacle. Briefly, what is the timescale between getting,
say, permission for a—
Mr McCullough: Getting to the
point of permission is the hardest challenge.
Q245 Chairman: Is there not a problem
then getting connected to the grid? Is there not a backlog there?
Mr McCullough: If the developer
is planning all of his successive steps and has the funding to
be able to apply for the grid early, and therefore take the exposure
on that (because it is a financial exposure with a final sums
liability that would currently apply to that developer) and can
take that early lead, then at best you are probably looking at
a two or three-year period at the moment. Quite typically you
are looking at more than that. If you take our most recent example,
we are currently constructing Little Cheney Court adjacent to
Romney Marsh near Dungeness. That had been in the determination
lifecycle for seven years before we actually started constructing
it. That is an extreme but it is becoming more typical and there
are many obstacles.
Q246 Chairman: So is the principal
reason then planning? Is that what we are talking about?
Mr McCullough: The principal reason
is planning but it would be wrong to accept that that is the sole
reason; the principal reason is planning.
Mr Harrington: There is another
issue which you might wish to be aware of and that is land assembly.
These projects are being brought forward by private sector companies
who do not have the ability to use compulsory purchase powers
in the way that public sector organisations do. They can obtain
those powers but they can only initiate the process when they
have obtained a generating licence. They have to apply, get a
consent, get a generating licence and then commence compulsory
purchase procedures. You might have one landowner where you need
to dig a trench across his field and it could hold the whole thing
up for another two years.
Q247 Chairman: One of my and my colleagues'
concerns here is that if we are going to encourage small entrepreneurial
generators of electricity to get access to the grid, they cannot
possibly afford all the time delays and the huge cost, and yet
if you go to Germany grid operators are required to prioritise
renewable sources for access to the grid.
Mr McCullough: Indeed there is
an EU Directive to give renewable energy priority dispatch to
the grid, which is at the operational end. One of the things that
you hit on there, Chairman, that is very key—
Q248 Chairman: I thought I was.
Mr McCullough: —is that
many of the organisations, and at least two are represented on
this panel, operate across multiple countries, and whilst we are
all very willing to invest very large sums—in my own case
over 1 billion a year[3]—then
we are faced with having to look, for any shareholder, where we
can put that money to work in the most efficient and most predictable
and planned way. The temptation will be great for many developers
to find the path of least resistance to do that. Unless we can
make collectively the planning and consent and determination and
all that goes with that more predictable in the UK (and that does
not mean to say that they all have to be passed) then we will
be at severe risk of losing out in investment. That is one of
the key reasons why we are behind our European neighbours in deployment
of renewable energy.
Q249 Chairman: Any other comments
on this? The issue of priority of getting onto the grid for renewables
would help this process, would it not, it would stop that log
jam?
Mr McCullough: If anybody applies
to that National Grid at the moment to get a grid connection,
typically you will get an offer within a 90-day/three-month period.
The challenge is that because the current transmission directives
that apply are very old in statute and apply to centralised generation
in particular, and therefore have various rules to be complied
with that do not lend themselves to a more decentralised form
of generation, so gaining the application and the right to apply
is not actually the hurdle; it will be the cost of that application
and the grid strengthening. If I want to put 30 megawatts in the
middle of north Yorkshire, for example, the cost of the grid application
there (because that connection point is deemed to be at capacity)
means that I as the developer would have to pay for the strengthening
of the whole area network to allow for that incremental increase.
That is the subject of very deep study at the moment with the
Transmission Access Review.
Mr Baga: I would like to make
an important point. That is only one side of the story. The other
side of the story is that renewables technologies do not deliver
a large share of our power. Even at 20% that is still only one
fifth, stating the obvious. If you are going to give priority
access to renewables, that will affect investment decisions in
other technologies. The underlying issue is we have a queue, we
have a limited amount of transmission capacity and that needs
to be expanded. There is work on-going through the Transmission
Access Review. If priority access is given to renewables at the
expense of other technologies being able to connect, then that
weakens their investment case or adds uncertainty to the investment
case in those technologies, and so you really need to weigh those
two up. The third thing you need to take into account is the eventual
cost to the consumers. Particularly in the case of renewables
where your capacity is used intermittently, you do need to take
into account the costs of then maintaining the back-up and the
other sources of generation and supply that will be needed to
compensate for that. In principle, everybody would agree that,
yes, where we have a renewable source we should be making the
best use of it, but there are some other consequences of that
approach that need to be dealt with before coming to any hard
and fast rules on it.
Chairman: Okay, we will leave it at that.
Can I thank Nick Harrington, Jeff Alexander, Ravi Baga and Kevin
McCullough very much indeed for your appearance this morning.
3 Note from the witness: RWE Innogy intend
to invest €1 billion annually from 2008 onwards in renewable
technologies. Whilst the UK will attract a significant proportion
of this investment, RWE Innogy will also be investing in renewables
in other countries. Back
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