Examination of Witnesses (Questions 400
WEDNESDAY 26 MARCH 2008
MP, SIMON VIRLEY
Q400 Dr Turner: I am not suggesting
you should apologise for the Marine Renewables Deployment Fund.
My point is has there been enough support for leading up to the
stage where people might qualify for the Marine Renewables Deployment
Fund? If the government had put more support in at that point
we might have had more companies able to access the Marine Renewables
Malcolm Wicks: I will not look
back but what I am saying now is that there are more funds available,
so I think the future looks much better.
Mr Virley: As the Minister says
the amount of funding is increasing; there is, of course, the
role of the private sector as well as public money going in, and
on the Marine Renewables Deployment Fund we have had the report
from the Renewables Advisory Board that has looked at this and
given an inkling that the criteria are appropriate, and we expect
the SeaGen project, for example, at Strangford Lough to be deployed
this weekend, which will be a very good step forward.
Q401 Dr Iddon: Going back to Renewables
Obligation Certificates, of course, banding is in the present
Bill before the Houses of Parliament now, and presumably the new
banding scheme will kick in next year, some time in 2009. Now,
the British Wind Association have given us some evidence to suggest
that there really is a period of only three or four years to incentivise
new technologies, or existing ones, such as offshore wind which
require long lead-in times with respect to planning and logistics,
and they are expensive anyhow to establish. So what the British
Wind Association is arguing is that we only have from 2009 to
2012 approximately, or perhaps one or two years later, for the
new banding scheme to incentivise these technologies. What have
you to say to the British Wind Association's complaint?
Malcolm Wicks: That their task
is urgent and the challenges are great, but we shall overcome.
That is my message to them.
Q402 Chairman: They will be greatly
reassured by that, Minister!
Malcolm Wicks: And they should
be, because we are doing so much to facilitate the development.
Britain has done things in the past relatively quickly. I do not
think everyone understandsthis Committee doesin
a sense the series of revolutions that we need if we are to reduce
carbon to the extent we say we will by the middle of the century.
This is going to need revolutions in terms of motor transport,
in terms of housing we are building, and, of course, the way in
which we generate in particular electricity. So the challenges
are huge but the job of government is to facilitate and tackle
planning problems, look at some of the technical important issues
around MoD and radar, and to reorganise the Renewables Obligation
and so on to bring forward these technologies, and to do the R&D,
and I think we are putting these things in place.
Q403 Dr Iddon: It is the cut-off
date of 2027 that worries that particular industry. Is that a
magic date? Why was it chosen? Are there any plans to extend it?
Malcolm Wicks: No, nothing is
set in stone. That was the date and we are now, as it were, revisiting
our renewable strategy in the light of the very demanding European
target and we will be consulting on our initial ideas on the strategy
in the summer. So no, I would not say anything about the date.
I cannot predict what it will be but it is not set in stone.
Q404 Dr Iddon: That is important
for the industry to hear from you, thank you. Could you now give
us your argument, which, of course, I have heard before in the
Energy Bill Committee but members of this Committee will probably
not be aware of it, as to why the Government has turned its back
on feed-in tariffs and has chosen banding of Renewable Obligations
Malcolm Wicks: Feed-in tariffs
are obviously just one means of bringing forward renewable electricity.
People often cite Germany as an example of where feed-in tariffs
have been deployed. Our view is that we have in place a Renewables
Obligation which is now proving successful; we are reforming it
through the Energy Bill, as we have discussed, to make it more
sensitive to new technologies; and with the other reforms, and
I will not keep repeating myself, on planning and so on, we are
confident that for macro, large-scale renewable deployment, this
is a success and can be more successful in the future. What I
have said, however, is that we need to revisit whether we are
providing enough incentives for microgenerationsomething
I am very interested in and the Government is very interested
in; there is not a great deal of microgeneration in Britain at
the present time. There are some incentives for householders in
terms of micro, but are there enough? Maybe not, and I have said
that as part of our renewable energy strategy review we will look
again at microgeneration and on the table will be one or two different
mechanisms including feed-in tariffs, but that is not about large-scale
deployment or turning our back on the RO, which we think is the
appropriate mechanism, and one does not want to keep chopping
and changing because of investor confidence.
Q405 Dr Turner: Quickly, what is
your view on research published which suggests that the ROC is
an expensive mechanism in terms of the quantity of renewable energy
it has delivered compared with the feed-in tariff system, which
would not cost the Treasury anything, whereas the ROC costs the
Government a considerable amount? Given that you have already
recognised that there is very good case for a feed-in tariff mechanism
for microgeneration, where the ROC is far too cumbersome, while
you are at the point of reviewing the support strategy, would
it not make sense to look at feed-in tariffs across the board?
Malcolm Wicks: For, as it were,
macro renewables as well? No, I do not think it would, because
what a lot of companies and investors say to us is that they need
some long-term certainty. They are happy about the way in which
we are reforming the RO but we need to look again at whether we
are in the right place for microgeneration. I notice that when
people talk about the virtues of the feed-in tariff they seldom
talk about the costs, and in Germany the costs are very considerable.
If I can give the Committee some figures from the International
Energy Agency, the German feed-in tariff regime between 2000 and
2012 will result in payments of 68 billion EUR, of which some
30-36 billion EUR is additional cost to the renewables, and by
2012 the annual cost will be between 8.1 and 9.4 billion EUR,
so feed-in tariffs, particularly for solar PV, have been "successful"
in Germany, but at a huge cost to the German economy and the German
citizen. If I can give you one more figure, solar PV would provide
some 4.5% of their renewable electricity by 2012 while taking
some 20% of total payments, so you can deploy anything if you
throw money at it, and in Germany it is now very expensive, so
much so that the tariff is now coming down because of concern
about the sheer cost to Germany of this deployment.
Q406 Chairman: It is an issue that
concerns us mostly because the other point which I think it is
fair to put to you, Minister, is the fact that Germany is producing
roughly 20% of its electricity through renewables largely because
of the incentives caused by the feed-in tariffs, so we cannot
have it both ways. If we want renewable electricity, somehow we
have to incentivise it. Would you accept that is a reasonable
position for a government to take?
Malcolm Wicks: Certainly I have
said myself that we have to recognise that bringing forward renewables
is expensive vis-a"-vis traditional fossil fuels,
and that is a price that the customer will have to pay, yes.
Dr Turner: Do you not think the comparison
you should make is between the cost of subsidising wind in Germany
as compared to the cost of subsidising wind in Britain, and if
you look at that in terms of euros per gigaWatt I think you would
find it would possibly come out cheaper in Germany.
Chairman: We will leave that hanging
in the air, Minister. Gordon Marsden?
Q407 Mr Marsden: Minister, I am encouraged
by what you said about the need to revisit the incentives of microgeneration
but there is another problem, is there not? At the moment the
cost of purchasing and installing microgeneration is pretty high
and companies, if they are going to bring down those future costs,
will need to develop the mass market but they are not likely to
make a big investment in that mass market unless there is a reasonable
expectation. One might say it is a chicken and egg argument or
that they are caught between a rock and a hard place but, on the
specifics of targets, why has the Government so far not produced
a target for microgeneration?
Malcolm Wicks: We discussed this,
I remember, when Mark Lazarowicz, our colleague, brought forward
his Private Members' Bill, and I think the main argument against
the target at the present time is that it is too soon. There has
been so little deployment and some of the technologies are relatively
unproven, I think, for example, micro wind turbines are still,
as it were, feeling their way to some extent. There could come
a time, I would not rule it out, that it might be feasible to
present a target, but I do not think it is there yet.
Q408 Mr Marsden: I accept that but,
pushing you a bit more, Dr Johnson said the prospect of hanging
concentrated the mind wonderfully so will not the prospect of
there being a target, and a significant one, concentrate the minds
of both the people who want to install and the people who want
to manufacture? What I am saying is that I accept the point you
are making but, again, is the direction of travel where you are
looking at this seriously, or is this just a blue sky idea for
Malcolm Wicks: No, it is more
than that. We are doing a great deal. Webeing in this case
the Department for Communities and Local Governmentare
looking at the planning issues there and recently made an announcement,
so it is now much easier to fit solar panels, for example, and
I hope soon it will be much easier to fit micro wind turbines.
In many cases you will not need planning permission to do some
of these things in the future, and in my experience that is really
quite helpful; we do really want to make it easier for people
who might be feeding their microgenerated electricity back to
the Grid to get their ROCs in an easier way. We also have a low
carbon buildings programme, which some criticise and say that
we are not spending enough on, but it is a difficult issue how
much you should spend. Certainly through phase 2, which is community
buildings and public service buildings, there is some £40
million to try to bring forward microgeneration.
Q409 Mr Marsden: On that particular
issue do you feel that your colleagues in other departments, for
example, are doing enough to recognise the steer that you are
giving them? For example, the predecessor committee to this Committee
did a major inquiry into building schools for the future, Sustainable
Schools, and one of the criticisms that was made in that report
was essentially that Building Schools for the Future (BSF) was
powering ahead, charging ahead, without many of these elements
being properly in there for schools and for local authorities.
That is just one example but there will be other major public
procurement projects. Are you confident you have those points
you are making sufficiently embedded in other departments to make
the step change that you are talking about?
Malcolm Wicks: I am not an expert
on the school building programme, although clearly there is a
huge opportunity there, but I am committed myself to make sure
we spend some of our low carbon building programme money on existing
schoolsnot so much to give them a bit of clean energy supply
but all the more because of the educational impact on children,
and I have seen this in schools. In the Ashburton learning academy
school and the library and the adult learning centre in Croydon
you have a whole array of photovoltaics, they have a panel that
shows the children how much carbon is being saved, and when I
spoke to the young geography teacher it was very exciting to hear
how she is using that as a way of teaching her subject, so I think
there is an educational issue here. To take the very encouraging
example of DCLG, which I have mentioned already, the Government
is now committed that by 2016 we will only build in this country
zero carbon housing. Now, there are all sorts of issues about
what we mean by zero carbon housing, what is the definition, does
it all have to be on-site renewables or can it be slightly off-siteall
those issues are being discussedbut that is going to drive
forward production of thermal efficiency, materials, design and
renewables, and local energy systems, distributed energy, to make
that a reality quite soon, by 2016.
Mr Virley: If I may add, there
have been over 200 schools who have now benefited from grants
and the low carbon buildings programme, and in the Budget there
was a commitment that all new public sector buildings, in addition
to the zero carbon homes commitment, should be zero carbon from
2018, so there are some significant steps forward there.
Q410 Mr Marsden: Finally, if you
are not going to set an immediate target how do you get some momentum
behind microgeneration, and can you set out what the timeline
is likely to be to consult on the new strategy for supporting
Malcolm Wicks: We will be consulting
on our initial ideas on renewables in general including microgeneration
in the summer, and we will be producing our final strategy document
as soon as we can thereafter. There is a need for urgency because
of the European targets.
Q411 Mr Marsden: So in the autumn,
would that be fair to say?
Mr Virley: March. The negotiations
will probably take the best part of a year to complete, so we
will not know the final shape of the Directive, the targets and
the flexibilities in the Directive, probably until the early part
of next year.
Q412 Mr Marsden: But the United Kingdom
Government's position will be clear by the autumn?
Malcolm Wicks: We will be consulting
this summer but not producing the final strategy until the spring
of next year because we will not know what the final details of
the Directive are, including the flexibilities.
Q413 Mr Marsden: Minister, you said
in a speech two years ago to the University of Brighton that you
saw a future where solar panels, heat pumps and even micro wind
turbines are seen on every street. Do you still stand by that?
Malcolm Wicks: Yes, I do. That
is what I would like to see, and some of the R&D technology
is now very encouraging. I was at the launch the other day of
the Baxi micro CHP boiler, for example, so those ideas about combined
heat and power are now, as it were, getting into the kitchen,
or wherever and, again, that is an example of R&D in the private
Mr Marsden: Thank you.
Q414 Dr Iddon: BERR and Ofgem are
currently undertaking a review of the United Kingdom electricity
transmission system. When will the final report appear, and how
will the findings of that report be taken forward? Are you anticipating
any primary legislation will be necessary, for example?
Mr Virley: The Transmission Access
Review report we are expecting in May, and that work is under
way at the moment. That will obviously feed into our overall consideration
in the renewable energy strategy, and provide an important building
block. There is a range of options being looked at, including
the system that is used in other countries that is called "connect
and manage", as well as others, and we are considering the
means of implementation of those final recommendations, which
will be part of the overall renewable energy strategy.
Q415 Dr Iddon: And will any primary
or secondary legislation be necessary?
Malcolm Wicks: That work is still
under way so it is just not possible to say at this stage.
Q416 Dr Iddon: In a previous evidence
session we had people representing the transmission system in
front of us and I was left with the distinct impression that it
was all a mess, really, in that we have capacity standing idle
waiting to be connected, particularly in Scotland 9.3 gigaWatts
could be connected tomorrow. Would you agree it is a nonsense
that we have access to the Grid based on date of application,
which leads to the crazy situation where we have readiness for
the Grid now queuing behind systems that have not been built yet?
Malcolm Wicks: That is why we
are reforming it. I understand the criticism.
Q417 Dr Iddon: So the Government
Mr Virley: National Grid have
published proposals about what to do about the queue in Scotland
which will mean changing some of the current order of schemes
in the system, and that again will form an important part of our
steps towards the renewable energy strategy.
Q418 Dr Iddon: When are you expecting
the current mess to be sorted out? Within a year?
Mr Virley: It is a gradual process.
There are a large number of projects in the queue at the moment,
so it is work under way, and National Grid are focusing on the
issue at the moment.
Q419 Dr Iddon: I got the distinct
impression there might even be court cases if people did not get
access according to the present arrangements. Are you anticipating
any problems of that kind?
Malcolm Wicks: We are not satisfied
with the present arrangements, which is why we are reforming them.