Examination of Witnesses (Questions 80-99)
DEPARTMENT FOR
ENVIRONMENT, FOOD
AND RURAL
AFFFAIRS & THE
CARBON TRUST
5 DECEMBER 2007
Q80 Mr Dunne: Coming to an end does
not mean failure, it means that your involvement has come to an
end.
Mr Delay: Not at all.
Q81 Mr Dunne: You mean correct.
Mr Delay: It means our involvement
has reached the end. They actually go onto a programme, it is
a defined programme with a range of activities that they can benefit
from, at the end of which, as an investor readiness programme,
we would very much hope that they would be in a position to raise
third party funding.
Q82 Mr Dunne: In view of the cost
being the largest barrier to the take-up of energy efficiency
technology, do you believe that the abolition of capital allowance
could have a significant deterrent effect on investment in energy
efficiency going forward?
Mr Delay: Enhanced capital allowances
will be around for some time, but the immediate impact of it is
indeed blunted at the lower level. We find that many businesses
refer to the Energy Technology List that underpins the enhanced
capital allowances scheme as much as to the scheme itself, so
there is the financial benefit of an enhanced capital allowance,
accelerated depreciation, but there is also though the assurance
of looking at the Energy Technology List that provides over 14,000
different products that have energy efficiency verification built
into their being part of the list. A lot of public sector bodies,
who cannot benefit from enhanced capital allowances, nevertheless
use the Energy Technology List that underpins it as a guide to
good procurement of energy efficient equipment.
Q83 Mr Dunne: I am confused. Are
you suggesting that enhanced capital allowances for energy efficiency
will continue following the last Budget, or are they coming to
an end?
Mrs Ghosh: I suspect, unless our
Treasury colleague can comment on that, we will need to give you
a note on that.
Mr Gallaher: We will provide a
note.[2]
Q84 Geraldine Smith: Can I ask a few
questions about the standard surveys that you carry out? How long
does it take to do one of these standard surveys and how much
work is involved?
Mr Delay: It is typically three
to four days. Over time we have seen the need of the customer
change quite significantly. Three or four years ago a general
site survey or an opportunity assessment would be literally a
general let us look at the business, let us see what the opportunities
are, and would take three to four days. Increasingly, we find
that customers are looking for a higher level of either sectoral
expertise or technical expertise in a particular area, so for
instance a business may say, "We have looked at our business,
we understand where we think the opportunities lie, we are pretty
convinced we have an opportunity here for a CHP plant; could you
provide us with a survey that does not just look at the company
in aggregate but looks specifically at the opportunities for CHP
within the business?" That again is just an example of continually
refining our offer to ensure that we are in line.
Q85 Geraldine Smith: But you will
do some standard surveys where you go into a company and look
at various ways to reduce emissions.
Mr Delay: Yes, we do.
Q86 Geraldine Smith: You must be
able to train people up on that so that you can employ people
just doing that constantly rather than using consultants; it must
be an extremely expensive way to do that.
Mr Delay: Firstly, we did have
some concerns over the consultants' ability to actually deliver
exactly what we were looking for on a consistent basis. We now
have an accreditation scheme in place that allows us to accredit
consultants to work against a specified range of products and
services that we have. That has increased the number of consultants
from 330 to 414 at the moment, which is quite a significant increase,
so we are training consultants, we are bringing them on board
with what the customers are looking for,
Q87 Geraldine Smith: What is the
advantage of using consultants rather than just having salaried
staff?
Mr Delay: Firstly, having a wide
range of consultants allows us to pick specialists in particular
areas, either by geography—
Q88 Geraldine Smith: I understand
in specialist areas, but I am saying for a general survey where
you just go into a company. There must only be so many things
you can tell a company they can do to become more energy-efficient;
I am sure people could be trained up on that, it cannot be that
complicated.
Mr Delay: I take your point and
I think there are two things. For larger companies that are more
sophisticated it does go beyond the: "Look, here are the
ten things you can look for and you will find answer somewhere
in this ten". Our focus has been very much on large carbon
emitters and large energy users that are typically more complex
companies where you do need a level of specialism and engineering
skill that would not be easy to replicate in directly employed
staff. When it comes down to smaller businesses, those with energy
bills of less than £50,000, there are opportunities to train
people to be able to do the basic site survey in a more effective
way and we are actually looking at that very much in conjunction
with the RDAs, we are looking at ways of extending our reach into
smaller organisations, by using relationships that a variety of
business advisers already have, training them in the specific
areas of energy efficiency that they would need for smaller businesses.
So, yes, we can do it, but typically at the smaller end rather
than at the larger end.
Q89 Geraldine Smith: There must be
a lot of easy hits as well within large companies, easy ways where
they can become more energy efficient and it can be quite standardised.
I accept all the differences in different companies, but they
also have a lot in common I would think and there must be so many
ways you can reduce energy.
Mr Delay: That is absolutely right.
When it comes to the basic building fabric of commercial buildings
you are right, you look at your heating and ventilation, you look
at your lighting systems, your controls, there is a lot you can
do. Having said that, you would be surprised how many examples
we have of really quite sophisticated organisations that have
not taken advantage of those opportunities. We worked with Manchester
United Football Club, we looked at Old Trafford and the reality
was that the east stand was performing well in terms of energy
consumption but the north and south stands were not, simply because
the substation arrangement and the metering arrangements meant
that the lighting was on more in the north and south stands than
it was in the east; we put the whole lot onto a common basis and
we have actually seen an 18% reduction in the energy consumed
by Old Trafford. It was as simple as that. Another example would
be the RAF where we have a small case study looking at an enormous
hangar where Nimrods are maintained. Basically the old method
was that at four o'clock in the morning the lighting and the heating
came on and it did not go off until midnight. We now have a big
red button on the wall and whoever is actually operating within
that hangar on an hourly basis goes down, hits the red button
and that gives them another hour of heat and light, so enormous
savings on really very basic things. You are right, there is nothing
in terms of rocket science about this, but actually getting the
implementation through into businesses is perhaps more challenging.
Q90 Geraldine Smith: Do you work
with government departments as well?
Mr Delay: We do. We run carbon
management programmes for the public sector generally; we have
well over a hundred carbon management programmes for local authorities,
30% or 40% of higher education, 12% of the NHS as we speak, and
we also work with central government departments.
Q91 Geraldine Smith: If you walk
through Whitehall and Victoria Street, why do you find all those
Government buildings lit up like Christmas trees every day? I
am sure if you walk through you will find all sorts of computers
left on.
Mrs Ghosh: I think this really
picks up a number of the points made in the Report. Tom and his
team can do as much as they can possibly do in terms of giving
people advice on structures and construction and energy efficient
equipment but very often it comes down to how you manage the building.
An awful lot of energy efficiency and, indeed, sustainable development
is actually about management decisions. So, in Defra, you are
absolutely right one of the things we have had to focus on is,
for example, the cleaning staff who come in in the evening. How
do you instil the lights being turned off if they are not automatically
activated by people moving about, doing an internal Act on
CO2 campaign to get people to turn off their screens at night?
It is about managing the building and relating to staff and persuading
staff to support the efforts you are trying to make. I think that
will be true in any Government department in Whitehall or Victoria
Street.
Q92 Geraldine Smith: The thing that
concerns me a little bit is that you are employing a lot of consultants
with chargeable head figures up to £700 a day, I wonder if
you cannot do that in a more cost-effective way to deliver those
services to your customers?
Mr Delay: I think we find it difficult
to provide our customers with the specialised service they want—
Q93 Geraldine Smith: I accept the
specialised but what about the standardised?
Mr Delay: Although I mentioned
414 consultants we do not employ 414 people every day. They are
scattered around the UK. When we get an enquiry in, when our account
manager talks to a customer, they will first establish what is
the kind of service, what is the kind of need the customer wants
and then obviously consider where geographically they are located.
It is only a small subset of that 414 who can be effectively deployed
to meet a particular customer need. The question is could we have
an employed team of energy consultants going around, where would
we locate them in the UK, how would we ensure they have the skills
required to meet the customer needs. I think the challenge we
have is that the customer needs as we perceive them are changing
very fast. Three years ago, yes, you are absolutely right, a general
energy service would probably have been sufficient. Increasingly,
what we are finding in customers of all sizes is a need for sectoral
experience or, indeed, the technical experience to a particular
issue, so I think we would find it more difficult.
Q94 Geraldine Smith: You mentioned
earlier one of the advantages of being a private company working
for the public sector was there was more confidence with business.
Is that the only advantage? There must be all sorts of disadvantages,
less accountable even if it is done in-house.
Mrs Ghosh: Can I just challenge
that one. I think what is so striking, and it comes out very strongly
in the Report, is that if one looks at the outcomes to which we
tie Tom and his team in terms of very precise, measurable, quantifiable
carbon reductions with a price on their heads, it is very difficult
to think of a way of performance management that is more accountable
than that. If Tom were not providing cost-effective services we
would not be giving him the money. I think the idea that just
because an organisation is in the public sector or in the private
sector there is a greater or lesser accountability, this is a
very very transparent model, and, indeed, enables this Committee
to look at, in this kind of precise detail, costs and benefit
analysis of this kind. There is also the issue about the greater
financial flexibility and leverage that the private sector model
gives the Carbon Trust which would not be true to the same extent
in the public sector. There again I think that is a real advantage
of private sector activity. I just would like to come back to
a point I made earlier, which is a theme which is emerging, this
is very much an organisation set up to deal with a market failure.
When the market is no longer failing, when the pension funds and
the private sector energy efficiency advisory market is fully
functioning, the Carbon Trust will not be needed. That is actually
back to what will you be doing in five years' time. As Tom said,
they may not be doing this bog standard—if it is bog standard
in any cases—energy efficiency advice because they will
have moved on to the next market failure area. The accountability
point is one that is misconceived in terms of the performance
management of the organisation.
Mr Delay: Yes, I have to say we
feel very accountable as an organisation for the provision of
public service. We very much see ourselves as a public good company,
hence our not-for-dividend status and our commitment to reinvest
any profits that we make as well as allocating resources to task
as best we can. If I could just draw attention on page 13 to a
couple of very quick comments which address your point. "The
Confederation of British Industry confirmed to us that they welcomed
the fact that the Carbon Trust did not have to pursue a specific
political agenda." In the sentence immediately following
that: "The A quarter of the customers in our census of the
Carbon Trust's customers who rated the Carbon Trust as providing
better energy advice than others explained that this was because
they were independent and did not have to promote particular services".
Q95 Geraldine Smith: Very quickly,
you touched on it earlier, but you will give me an assurance that
you will do more to reach some of those smaller companies?
Mr Delay: We are working on it
very hard as we speak.
Geraldine Smith: Okay.
Q96 Mr Davidson: Given that your
objective is partly to reduce the consumption of carbon in energy,
to what extent are you focusing on those companies which you think
have the largest hits rather than just spreading yourself widely
across the board?
Mr Delay: To be compliant with
state aid, our advisory services are treated as a general measure
and, therefore, not subject to state aid. That means we need to
provide advisory services to all business and public sector organisations
in the UK, irrespective of size, irrespective of carbon footprint.
In practice we do that by offering a very clearly segmented offer
that is much heavier for large organisations, be they public or
private sector, they have a significant carbon footprint, an opportunity
to reduce carbon emissions, than we do with smaller businesses
which, one, do not have the time, frankly, to want to commit to
this agenda at the moment but, two, also need to be managed, supported
in a much more focused and cost-effective way. What we provide
is to all businesses from the very small to the very large but
it is quite clearly segmented and what we offer to different businesses
is very much down to the carbon opportunity that they present
us with. We do operate on a reactive basis, we cannot operate
on a proactive basis and highlight a particular sector, segment
or, indeed, size of business that we would want to work with,
the state aid rules prevent us from doing that.
Q97 Mr Davidson: Let us be clear,
you are forbidden from identifying those areas of the economy
where you could make the biggest gains most quickly by the European
Union's state aid rules? Is that a yes or a no?
Mr Delay: It would prevent us
from targeting them in an explicit manner. It does not prevent
us from having an offer to large companies—
Q98 Mr Davidson: No, but when we
speak to people here on a number of areas, we ask them, are you
specifically focusing on that, being active, doing your best to
achieve these objectives. I think you are telling me, no, you
are not.
Mrs Ghosh: I will just quote the
Report. As Tom says, it has to be a general measure, a measure
conferring a benefit which is potentially available to all undertakings
in a Member State. In that sense, in order to accord with those
rules, the Trust has to make its offer to everybody, to all the
undertakings.
Q99 Mr Davidson: That is right. So
if people walk through your door then you have to deal with them
equally, even though lots of them in comparative terms might be
time wasters, whereas you are not allowed to go out and focus
on those where you can achieve the most quickest?
Mr Delay: No, we are able to provide
appropriate service to everybody. If there is somebody who is
clearly time wasting, we can discriminate against clearly the
time wasting nature of their inquiry. What we cannot do is go
out and promote a very specific segment of the market. What we
can do is make our services widely available through our participation
in hundreds of events, through ongoing marketing—
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