Select Committee on Innovation, Universities, Science and Skills Minutes of Evidence

Examination of Witnesses (Questions 400 - 419)



  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 Deployment Fund.

  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 understands—this Committee does—in 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 Certificates instead?

  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 microgeneration—something 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 the future?

  Malcolm Wicks: No, it is more than that. We are doing a great deal. We—being in this case the Department for Communities and Local Government—are 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 schools—not 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-site—all those issues are being discussed—but 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 microgeneration technologies?

  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 sector.

  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 are intervening?

  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.

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