Examination of Witnesses (Questions 100-109)
MR PHIL
BENTLEY, MR
MARTIN LAWRENCE,
MR JIM
MACDONALD, MR
GUY JOHNSON,
MR IAN
MARCHANT AND
MR NICK
HORLER
11 FEBRUARY 2009
Q100 Nadine Dorries: And you anticipate
these will probably be going in in 2013?
Mr Marchant: No. They need to
be out by then. They need to be going in probably next year or
2011 to come out of the system in 2013.
Q101 Miss Kirkbride: Where are the
skills going to come from to build these nuclear reactors? Are
they going to be domestic or are they going to be imported?
Mr Lawrence: We are working very
hard with the UK companies to develop UK projects going into the
future. We are working together with the University of Manchester
to set up some more research facilities. We are working together
with major UK companies like Rolls-Royce, which has shown a real
commitment to new nuclear. We absolutely believe this is a huge
opportunity for jobs here in the UK.
Mr Macdonald: I think what we
are also finding is that suppliers are trying to pool those skills
as well for the development of it going forward, but they will
be UK skills. There is another important fact, which is taking
us back to the points that we discussed earlier on in the meeting.
There are three elements to generation going forward. One is obviously
decarbonisation of electricity generation. That goes without saying
and is fundamental to all of us. We have also discussed the security
of supply going forward, and again that is absolutely fundamental,
but the third element we should never forget is the customer at
the end of the day who is going to be paying for this investment
at some stage, so, whatever the generation portfolio that we come
up with, it has to be cost effective from a customer viewpoint
to ensure that we are not vastly inflating their bills. We always
have to have the customer at the heart of what we are doing.
Q102 Miss Kirkbride: On the basis
of renewable energy, what timescale does the panel think that
householders will realistically be able to invest in their own
solar or wind energy with a payback time that makes it worth doing
from their own pockets?
Mr Marchant: It comes back to
my comment on the feed-in tariff. Maybe I am over-optimistic but
I believe we should have a feed-in tariff this year that will
allow some customers to make that decision. We will learn it,
we will have to change it, and I would think within about three
years we could have a vibrant micro-generation and micro-heat
strategy, and absolutely those jobs are for people who today maybe
have no skills. We are talking about new apprentice programmes,
new technical training. We can train people up in a two-year period
to make them qualified to fit those sorts of things. That is a
much easier skill issue to address than the sophisticated skills
that are needed for a nuclear programme.
Chairman: I want to move on to coal but,
just on the back of Judy's question about opportunities for British
industry, you will all be aware of the sensitivity about the construction
sector and the sensitivity about failed opportunities for British
construction workers in relation to one or two disputes at sites
around the country at the moment.
Q103 Paddy Tipping: What are the
prospects for the deep coal industry in the UK? Ian talked about
four or five new stations coming on. E.ON are the most advanced
with planning permission at Kingsnorth but not consent. What would
be the signal if DECC decided not to consent to Kingsnorth?
Mr Macdonald: Apologies—I
do not put myself forward as an expert, but the fundamental part
for coal for the future will be the large-scale proving of carbon
capture and storage. That is what is important. Again, you mentioned
Kingsnorth. We are delighted to be in the Government competition
for CCS. We have also made a commitment as a business that once
CCS is proven—and it has to be proven—certainly post
2020 we would not seek to build any power stations without that
added on. For me the fundamental part is that we have to get to
proving that CCS can work on a large scale and that will determine
the future, shall we say, of coal investment in the UK.
Mr Horler: At least three of us
are represented on the Carbon Capture and Storage Project, either
through new build or through retrofit. What I think would be a
terrible signal to this would be if, in the light of the financial
strictures that the economy is going through, that competition
was not able to complete and the funds were not available. If
I may, I would urge you to play that part because a lot of people
are putting a lot of effort into what is a very exciting project
that does not just mean carbon capture and storage and helping
to fill the generation gap. In our case it is 700 jobs in the
Scottish coal industry and the potential for creating a carbon
capture industry and hub that comes out of it, so I do hope the
funds are available.
Mr Marchant: As someone not involved
in the competition I would echo those comments. The reality is
that the competition was announced in May 2007 with a target date
of a preferred bidder by May/June this year. That does not look
like it is going to happen. I do not know because I am not in
the process but we are hearing talk of six, nine month delays.
That is unnecessary. We need to get on. Four years ago the UK
had the full leadership position in carbon capture and storage
in the world. We have been overtaken by many countries over the
last four years, and if we continue to delay doing anything, we
will get further and further behind.
Mr Horler: Although we have not
spent much time talking about coal today, it is absolutely a crucial
part of the generation mix going forward, and so we absolutely
need to see this signal that the Government is serious and that
the money will come.
Mr Bentley: The issue is that
we have to recognise that Kingsnorth on its own will emit eight
million tonnes of new CO2, so without the carbon capture we do
not think it should go ahead. It is not a case of just fitting
a flange on the side of it and saying, "It is ready"
for one day and it continuing to emit before that gets built,
so we would urge that for the Government to meet its renewables
and CO2 emissions target it has to insist on CCS and not allow
it to go ahead without it.
Mr Macdonald: Perhaps we can see
how the CCS competition works out on that one.
Q104 David Anderson: What is really
getting me is that this is not something that just happened today.
We have known that this has been going to happen and we have known
that the indigenous supplies of coal are without a doubt our biggest
supply of energy. Eighty per cent of gas comes from very unstable
origins, so why has there been such a delay? Everywhere we go
everybody speaks about the importance of CCS, but nobody talks
about moving forward. What the company is saying is that it has
all been the Government's fault, various governments, not just
the present one. Effectively, energy has been privatised for 20
years in this country. Is it totally the Government's fault? Have
you to bear some of the blame or is it just one of these things—nobody
is to blame and now we have to find a resolution?
Mr Horler: I think that is the
point: it is where we go looking forward.
Q105 David Anderson: It is also what
we learn about why are we not looking now? That is what I want
to know.
Mr Horler: There were certainly
some indigenous coals that we could not burn until we had installed
flue gas desulphurisation at Longannet, which now opens us up
to supplies there. I think the point is about what we are going
to do going forward and making sure that this competition happens.
We have a retrofit at Longannet. We can put 300 megawatts in place
there by 2014, so, as you can imagine, we are very keen to get
this going.
Mr Marchant: Industry is never
blameless but everybody involved in the carbon capture and storage
debate in the industry today is dreadfully frustrated, if that
answers your question. I expect in future hearings of this Committee
you will return to that subject because I think—
Q106 David Anderson: Do not worry;
we will.
Mr Marchant: I think it is something
where you can apply pressure to all elements—the Environment
Agency, to DECC, to Ofgem and to us to get something done.
Mr Horler: And to Treasury to
make sure the cash is there.
Chairman: That may be something we shall
look at in more detail. There is one area we have not touched
upon too much and that is the issue of fuel poverty and how that
is addressed.
Q107 Sir Robert Smith: Clearly, one
of the biggest concerns about the rise in energy prices is the
number of households being forced back into fuel poverty who have
been brought out of it. In many ways the Government relied on
price cuts when the market was working efficiently early on and
there was an abundance of supply to deliver the fuel poverty targets,
and now fuel poverty is rising. Is that a failure of Government,
a failure of industry? Has too much been put on expecting the
industry to deliver on the fuel poverty, and what can be done
to take it forward?
Mr Marchant: I fundamentally believe
that our industry will never be as good at dealing with social
justice issues as the tax and benefits system and, whilst we have
the most active social programme of any industry in this country
in dealing with the consequences of the prices we have to charge,
I query whether the burden is too great on our industry because
we do not know who these vulnerable customers are. We do not know
their tax and benefits.
Mr Horler: You know as well as
anyone that the issues of fuel poverty are around the housing
stock, around access to benefits and around fuel prices, and,
complementing Mr Marchant's comment, that is just one element.
I think the most damning statistic—and it is a statistic
that has come from the Department for Work and Pensions themselves—is
that in 2006 and 2007 there were £10 billion of unclaimed
benefits. The concentration should be on getting that to the people
that actually need it, not looking for one of the elements which
are driven by international energy prices.
Q108 Sir Robert Smith: But nearly
a year ago, when there were a lot of headlines about fuel poverty,
the one spin that was going to at least do something about it
was data sharing between the Government and the industry that
was meant to at least tackle some of that, because you have shown
quite a good ability to get people to claim the benefits; yet,
if you do not know who you should be contacting where has that
data sharing promise come to from the Government?
Mr Marchant: We have not shared
any data yet.
Mr Bentley: We have not but I
think it is coming down the track. We have the biggest social
programme. We have got over 500,000 customers on it, but potentially
it could be five million people receiving either income support
or pension credits or other benefits, so obviously, to Ian's point,
the wider the group of people you are trying to help the smaller
the amount of money. For us it is £200 per customer that
we are saving at the moment versus the standard tariff. If you
multiply that over a very large group of customers you end up
with numbers that just do not work. We all recognise our social
responsibility. We are all trying to help, give advice and direct
and target it, but I think the danger is that if you come with
a sweeping mandate of the social tariff over a very large number
of people the actual benefits will be quite small to the individual
home.
Mr Johnson: If I can come back
to where I started today, there is clearly a housing stock issue
here and we have perhaps not talked enough about the whole energy
efficiency programme, but do remember that we are talking about
a £3.7 billion programme for the industry, a £2.8 billion
programme for Government through Warm Front and its Decent Homes
programme, but £3.7 billion from the industry. For us we
are talking about £40 million in 2002-05, £150 million
in 2005-08, £500 million in 2008-11, so when Mr Marchant
talks about the industry's commitment to this, it is absolutely
massive in terms of our energy efficiency programme, and that
energy efficiency programme, because of things like our Warm Wales
and our Community Warmth programmes, does address many of the
things we have been talking about. It is working with local authorities
on a street-to-street, door-to-door basis. It is not just access
to insulation; it is access to Warm Front and it is access to
benefit entitlement checks, and through that we are insulating
about 1,000 homes every working day at the moment with that £300
benefit. Therefore, before we get perhaps too carried away with
the industry's £375 million expenditure over the next three
years on its social programmes (important though those are) and
again that is a major increase, look at the £3.75 billion
first, and again, as I said, 40 per cent of that on our list is
currently for insulation and 50 per cent is for priority group
customers, so we do need to focus on those areas, and I think
that in energy efficiency the housing stock area has a huge part
to play.
Q109 Sir Robert Smith: Prices are
going to go back up eventually, so unless we do the housing and
the income we are not going to tackle the problem.
Mr Macdonald: The housing is without
doubt the only sustainable long term solution that we see.
Chairman: The commitments you have made
to the increased Warm Front programmes are very welcome, and clearly
energy efficiency and energy services are part of the solution.
You have all been very generous with your time, and thanks to
my colleagues as well, but I think it is time to bring the Committee
to a conclusion. I would like to thank you all very much for your
very detailed responses; it has been a most fascinating discussion.
Clearly, there are issues that have been raised today that we
as a Committee may wish to address further and in more detail,
so thank you very much for your attendance. We very much appreciate
it.
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