Examination of Witnesses (Questions 20-39)
RT HON
EDWARD MILIBAND
MP, MS MOIRA
WALLACE, MR
WILLY RICKETT
AND MR
SIMON VIRLEY
25 FEBRUARY 2009
Q20 Nadine Dorries: Hopefully we
will see an improved service before next winter, before the people
need it.
Edward Miliband: That is definitely
the intention. Definitely.
Q21 Chairman: Before we leave the
Department's structure, it is very difficult in terms of budgets.
I have been looking through your departmental budget and some
of the headings are very tight, shall we say. Do you feel that
the settlement that you have had is adequate in relation to, say,
the department having adequate resources?
Edward Miliband: I think these
are challenging times. We have turned two departments into three
essentially, because you now have DECC, BERR and Defra, and we
have done it within existing resources—and I think that
is right in these challenging times. Obviously that makes both
the administration side and the programme side tough in terms
of the priorities you have to set out, but I think that is the
sort of world we live in, and all of us have to play our part
in ensuring not only that we do the right things in our department
but that we meet the overall fiscal strategy of the Government.
Yes, it is challenging, yes, it requires hard prioritisation,
but, yes, I think it has been the right way to go.
Q22 Chairman: There is one that looks
like a bit of a bright spot but I wonder if you could explain
whether it is ring-fenced, and that is the Nuclear Decommissioning
Agency, where it appears that their income is substantially more
than was originally projected. Is that substantial increase within
a ring-fenced budget or is that available for the department?
Edward Miliband: I believe it
is a ring-fenced budget. It is an oddity, if you like of our department.
When you think about the approximately £3 billion worth of
spending, a very significant proportion of that goes on the NDA
but it is doing very important work in terms of decommissioning
and it is a ring-fenced budget, yes. I think it is important that
that money that is needed for decommissioning is properly protected,
as it is in all our interests.
Chairman: Perhaps we could turn now to
the issue of security of supply, which of course is one of your
department's very important responsibilities.
Q23 Charles Hendry: Secretary of
State, the United Kingdom has about 13 days of gas storage, Germany
has about 100, France has about 120. Germany is now looking at
a significant increase in its own gas storage capacity following
the recent Russian-Ukraine dispute and others are looking in a
similar way. Does it disturb you that we have such a little proportion,
especially as we are going to be increasingly dependent on imported
gas in order to keep the power stations operational?
Edward Miliband: Could I say first
of all, Charles, that it is a pleasure to have you on this Committee
because you bring experience from the front bench, although I
know you are not here in that capacity. Let me try to set out
some of the context and I will come to the specific question you
ask. This winter is quite interesting as a test of arrangements.
We have had the Russian-Ukraine dispute as people will know which
had a significant impact, really more on Europe than on us, but
it has a knock-on impact on us because the Interconnector which
goes between ourselves and the Continent was exporting much more
time during this winter than would be normal. We have also had
the coldest winter since 1996 so far and I think that the system
has withstood that test reasonably well. It is worth remembering
that the North Sea during this time—and of course the North
Sea is declining—has been supplying over half our gas supply.
The reason I say that, and this is important, is that people use
the comparison with Germany but if you look at the percentage
of imports that can be catered for by storage between ourselves
and Germany—Germany does not produce its own gas, but if
you look at the demand in Germany—and you look at the amount
they rely on imports and storage as a percentage of imports, it
is broadly speaking the same as in the United Kingdom. So I think
you just have to be a little careful about these comparisons that
are made with Germany because, although we are a declining producer
of indigenous gas, we are still a producer and it has been very
important to us this winter. To come to your question, I would
say that we do need more gas storage over time as the North Sea
declines. There are 17 gas storage projects that we know about
that are being planned. They are in different phases. Some of
them have received consent and some of them are obviously waiting
for consent, but there are 17 projects, and we do need to ramp
up our gas storage. If you are asking me, "Do we need more
gas storage in the future?" I would unequivocally say yes.
As I say, our arrangements this winter have withstood reasonably
well according to everything that the National Grid have told
me, and I am in very regular touch with them, with the challenging
circumstances reasonably well, but we do need more gas storage,
yes.
Q24 Charles Hendry: Two things come
out of that. First of all, does it concern you that we have been
seeing over this winter some of the gas storage which we have
being tunnelled out through the Interconnector and so being sold
off cheap to the Continent rather than being used for domestic
use? Second, the list of 17 which you have—and I have it
in front of me—looking at the largest projects on that list,
Saltfleetby planning has been rejected; Albury planning has not
been sought—it is not being taken forward; Bletchingley
and Gainsborough have dropped off the radar and are not being
pursued; Portland is on hold because the financing is an issue;
and Fleetwood has been rejected by the Secretary of State personally—which
I think it was your predecessor rather than you. That is several
billion cubic metres of the projects which you have talked about.
It is fine to have a long list of projects, but as one drills
down into it one sees an enormous amount of it simply will not
go forward because of the financing, because of the concerns about
the cushion gas and the tax regime on that, and the planning opportunities.
Edward Miliband: Some of those
projects may be less likely to go ahead than others, but I can
read you a longer list of other projects that are still being
planned to go ahead. In a way, I do not think there is much point
in getting into that. The basic point that we need more gas storage
is correct. I said in my opening statement that when we produce
our carbon budgets report in the summer we will also be looking
at questions around security of supply, and we are looking again,
as it is right for a new department to do, at issues around gas
storage. The only thing I would caution the Committee on about
this gas storage issue is that we operate in a dynamic markets
system with a role for government. We must not come up with proposals
which are going to crowd out the private investment that is being
made in gas storage., because there are incentives in the system
to invest in gas storage. There are pretty big penalties for companies
if they fail to meet their obligations in terms of their winter
obligations. I think it is right to look again at some of the
issues around gas storage, really for the future to make sure
that we have sufficient gas storage in the future. But, as I say,
I would caution about doing things which might deter investors
because I think the investment climate is obviously difficult,
given the credit crunch, which would deter some investors from
coming in to gas storage. You raised Portland. I do not want to
get into specific issues, but we are conscious of the challenges—we
are going to come on to this Chairman—around the energy
sector and the credit crunch. We are talking to the European Investment
Bank about how they can get much needed investment into the energy
sector in Britain and elsewhere and I think that could indeed
help with gas storage. Willy, you have more experience on these
issues. Do you want to add anything?
Mr Rickett: I think you have summed
up the position very well. The only comment I would make is in
relation to your comment that we were somehow selling our stored
gas cheaply into Europe. The reason the Interconnector went into
export mode was because prices in Europe were higher than in the
UK, and when prices in the UK are higher because demand is tight,
the Interconnector goes into import mode, as, indeed, we have
the Bacton pipeline and Langeled. It is not, in a sense, selling
stored gas cheaply into Europe. We were selling gas into Europe
because Europe was in a severe crisis because it was not getting
gas out of Russia and the price in Europe was correspondingly
high. In a sense, we were doing our bit for Europe and it was
the market working. I am not disagreeing with the overall point
that we need to remove the obstacles to the development of these
gas storage projects which have the potential to more than double—potentially,
if they all went ahead, to raise five times—our level of
storage. Clearly they are not all necessarily going to go ahead,
but we need to make sure that a substantial majority of them do.
Edward Miliband: Compare this
to 2006, when we also had a Russia-Ukraine dispute, although admittedly
a shorter one, since then we have had the Langeled pipeline, which
on cold days is supplying I think 60 million cubic metres a day
to Britain, we have had the BBL pipeline from the Netherlands,
which is supplying another 25 million or 30 million cubic metres,
and we have had investment in LLG. It adds up to about 100 million
cubic metres out of an average winter demand of something in the
300s. Storage is not important. I do not want to underestimate
the importance of it, but it is also important to have diversity
of supply. The relationship and the investment there has been
in Langeled and in BBL has been incredibly important and in a
way shows that the system has responded to some of the challenges
that we face.
Q25 Paddy Tipping: I have a specific
question to begin with and a more conceptual question afterwards.
What is the volume of Rough at the moment? You have said that
this year has been a really tough winter. Have there not been
concerns that Rough would run out by the end of this month. The
second issue Mr Rickett introduced himself. Do we really understand
the workings of the European energy market when it comes to gas
and electricity? Is it really open and transparent? This has been
promised for ten years. Are you going to achieve it, Secretary
of State?
Edward Miliband: Let me deal with
your second question first. On the sort of conceptual question,
I think that liberalisation and transparency is very important.
One of the first things I did when I came into office was to go
to the Energy Council and agree the third liberalisation package.
This has obviously, as you say, been a long-running story. I think
it is important to get behind the sort of rhetoric of this. Why
is it important? Because, talking to my European colleagues during
this crisis, if we had had greater transparency it would have
helped, particularly for those countries that were in difficulty,
to work out where the gas was and where it could go. I will be
honest with you, I think this has been a wake-up call to Europe,
because I d not think that adequate preparation was made following
2006 for this crisis. I think that transparency is important.
The other thing I would say, though—and again the Commission's
Strategic Energy Review is looking at this—is that it is
not just about transparency in liberalisation—important
though that is. Part of the problem we found during the Russia-Ukraine
crisis was that gas could flow from east to west but not the other
way. That was a sort of massive challenge. One of the things in
the European recovery package is how can we get investment in
gas so that it can flow back the other way. In terms of Rough,
I will give you a percentage. I think it is in the low 20% in
terms of its capacity. That is a little lower than we would expect
it to be at this time of year. It follows a challenging winter,
both Russia-Ukraine wise and in terms of the weather. As I say,
we are very much in regular contact with Grid. They think the
position is satisfactory for the rest of this winter, and so that
is their advice.
Q26 Sir Robert Smith: I think you
should reinforce the need for that transparency, because Mr Rickett
said that when the price is high in Europe gas flows from here
to Europe but European gas storage does not tend to flow back
to us when our prices are high, and I think we do need to open
up the European more. I must declare my interest here as a shareholder
in Shell and as Vice-Chairman of the All-Party Oil and Gas Group
which also visited Overseas North Seas in Norway exhibition and
conference funded by the oil industry. The Secretary of State,
while talking about decline in the North Sea, recognises obviously
that our first chance of security is to make sure that decline
is as slow as possible. Is he fully appraised of that? Specifically,
does he recognise that the supplemental taxes on the North Sea
justification was the high price of oil and gas? Now that the
price of oil is much lower than it was when that tax came in,
is it time to look at the tax regime, to incentivise future investment?
Edward Miliband: You are tempting
me into Treasury business, Sir Robert. I am joking. I will come
on to your question. It is a two-part question really. Absolutely
we understand the importance of oil and gas. By the way, for members
of the Committee who are interested, the National Grid have an
excellent website which can tell you everything you need to know.
It is the world-leading website about gas flows, gas storage,
et cetera. Anyway, anyone who looks at what has been happening
this winter is reminded of the importance of the North Sea to
this country. I also have the pleasure of chairing the PILOT Group
with the oil and gas industry, and, indeed, I attended a dinner
the night before with members of PILOT, talking about the situation
in the oil and gas industry. I would make a couple of points,
coming on to your point about the Treasury—or maybe I would
make three points. The first point is that I think there is a
real danger in us thinking that we have all of $40 a barrel and
this will continue now and into the future. We know that the pressures
on prices from demand in China, India and elsewhere are upwards,
and we know we need the investment into the North Sea in order
to keep those prices from going up in the way that they have done
in the past. That investment is incredibly important. Secondly,
there is clearly an issue about the banks in general in relation
to the economy and no sector is immune, and it is having an impact
on the oil and gas industry. Colleagues in government were talking
with the industry and the banks yesterday. Out of the PILOT meeting
we have agreed to set up a small group that is looking at those
issues around bank lending to the oil and gas sector, which is
what the sector was wanting, because it is important to get to
the bottom of what are the issues in the sector in terms of bank
lending. Is it just general lack of available credit? Are there
specific risk aversion issues? Anything we can do to help the
sector we must try to do. I very much recognise that. That goes
to the point that we are in a transition economy in terms of oil
and gas but it is a long transition and in the meantime we need
oil and gas. The third point I would make on your Treasury point
is that we are consulting on the value allowance, as you know,
and that consultation ended earlier this month. That clearly shows
an interest in the Treasury in the question of how we can get
the right kind of investment in the North Sea. The Chancellor
is someone who is very much aware of these issues and we are in
discussion with the Treasury about all kinds of issues, including
the oil and gas industry, and no doubt that is something you will
be taking into account when he makes his budget judgment.
Q27 Sir Robert Smith: One of the
important things to reinforce to the Treasury is that one of the
jewels in the crown of what has happened in the North Sea is a
great body of expertise and experience, and in my constituency
of West Hill, a place known as Surf Sister, where there is a cluster
of sub-sea engineering expertise, that not just supports the North
Sea but has a major export potential. Does your department have
a role in seeing the export potential of the skills base within
the industry?
Edward Miliband: Yes, we support
other Departments on this. The North Sea sustains something like
500,000 jobs throughout the United Kingdom and it is very important.
One of the points that was made at the PILOT meeting was the anxieties
people had, understandable anxieties, not just about a pause in
investment for this year and next year but what that would do
to the skills base. I think that is a concern that we should take
very seriously. That is why we need to do all we can to get the
investor in. I would say that part of the issue here is not the
credit crunch or any other issue but a simple issue of the impact
on cash flow of an oil price at $40 a barrel. I am making a rather
obvious point, but in a way that is a very important direct effect
on this industry. The other thing that did come up at the meeting—and
I think it is important to recognise this—is that there
is an issue about the cost base in the industry and the costs
in the industry, because they have been going up at a very significant
rate. I think there was an understanding of that, that part of
what needs to be done is to keep those costs under control.
Chairman: Can we now have a look at the
security of electricity.
Q28 John Robertson: During the winter
we were very fortune in that the gas usage in the UK was depressed
at the time. Had it been at its usual output, then we would have
been in danger of not having enough energy to supply the needs
of the country. I wonder if you could tell me where we are going
to be in the future, round about the 2015 mark, if the usage is
back to normal? Even Turkey is now asking for 17% more gas than
it used to; although ours is still quite a low increase, probably
about 1.3% over that time. Will there be enough gas to go around?
If there is not enough gas to go around, we are talking about
by 2017 there will be 76% gas usage for electricity, so where
are we going to be for security of supply for electricity for
the country?
Edward Miliband: I think you raise
an important issue which people are aware of about the future
prospects around security of supply. I think it is worth drilling
down into these figures, just to be clear about what the nature
of the challenge is. If you look at the figures, about 16 GW of
plant is due to close by the end of 2016—that is 8.4 GW
of coal, 3.6 GW of oil, and 4 GW of nuclear. If you look at what
is under construction at the moment, that is 10 GW under construction—and
that is not simply in planning but under construction—and
there is about 10.5 GW consented but not yet constructed. Of that
20 GW that I am describing to you, about 14 or 15 GW I think is
gas-fired, CCGT, power stations. I think there is a security of
supply challenge. I am confident that we can meet it but I would
reframe the challenge slightly. I think the challenge is one of
diversity. In other words, can we ensure that we not only have
gas-fired power stations but we also have renewables, we also
have nuclear—which I know is an interest of yours—and
nuclear is obviously going to be slightly further down the road
than 2016, more like 2017/2018—and can we ensure that we
have clean fossil fuel, clean coal plants as well? I think we
can meet a supply crunch, a supply challenge in 2015-16. I think
it is challenging but I think that the plans that are already
in place take us some way towards doing that, but I think we need
not only to meet the supply challenge but to do so in a way that
we ensure there is diversity. One thing we learn in this energy
sector is that diversity is an incredibly important guarantee
of security.
Q29 John Robertson: I accept what
you are saying about diversity and it is important that we do
not put all of our eggs in one basket, but we are heading towards
doing that very thing, with putting such reliance on gas. We also
had the period during the dispute between Russia and Ukraine where
the wind was not blowing, it was very cold, and on some days there
was absolutely zero from renewables. If we are going to rely on
this as a back-up to help our baseload which keeps business running,
are we not putting ourselves in a vulnerable position?
Edward Miliband: If we were really
relying on renewables, then we would be putting ourselves in a
vulnerable position, but I think renewables can play an important
part in the energy mix. When we make our calculations about security
of supply, we take account of the intermittency of renewables,
and you need that baseload capacity as well, and some of that
will come from gas, some, in my view, has to come from clean coal,
carbon capture and storage, some of it will come from nuclear.
I think it is absolutely right what my predecessor did to open
the way to new nuclear. I recently chaired the Nuclear Development
Forum precisely looking at driving forward new nuclear. I think
that you are right, you need that diversity. I think renewables
can play its role in the energy mix, but I think it is one of
a number of technologies.
Q30 John Robertson: I am concerned
that you are talking about a nuclear which will not come on line
until 2018-20. We are talking about carbon capture and storage.
At a conference I was at last week, an expert was telling me 2025
before we can guarantee to have proper output, so more and more
reliance on gas at times when other countries are coming on line.
I have mentioned Turkey, with a 17% increase in the use of gas,
but they will not be alone. There will be other countries which
come along, and everybody has to compete for that amount of gas.
Will there be enough to ensure that we will not get to the stage
of having to cut back and power cuts?
Edward Miliband: Yes, I think
there will be enough, as I have said. If you think about what
we are doing in relation to Milford Haven, for example, we are
building two enormous LNG terminals which I think can supply about
20% of our total gas needs. I think it is two sites of 10 billion
cubic metres each. We are talking about very significant investment
which is part of our partnership with Qatar. I think it does,
though, place an emphasis on two things. First, diversity in your
gas supplies. Why did the countries in Eastern Europe that had
real trouble in the Russia-Ukraine dispute get into such trouble?
It is because they were only relying on one source. That is why,
for example, the southern corridor through Turkmenistan is very
important. It is very important for future development that we
get gas from others. Second—and it goes back to this point
that I made and which I think you agree with, that you need diversity—you
need gas, but you need a range of other technologies as well.
That is perhaps something we are going to come on to.
Q31 Dr Whitehead: It is true that
we do, indeed, need a diverse range of different technologies
in order to fill the potential gap in electricity generation.
You have mentioned the amount of renewable capacity that has been
built and also what is awaiting construction. With quite a proportion
of that renewable capacity, however, particularly onshore and
offshore wind, even if that capacity is built and completed it
will in large measure await slots for connection to the grid,
in some instances slots as far away as 2015 for farms that are
being built right now. Is it your intention to tackle that question
of rather distant connections, which rather disrupts the idea
that renewables can make the contribution to filling the gap by
being able to put their supply on to the grid?
Edward Miliband: I think you raise
a very important question, Alan, which is about connection to
the grid. There are three important things that we are doing to
tackle this. The first is that National Grid have taken forward
offers of 450 MW in relation to renewable technology that needs
to come on-stream. It is ready to come on to the grid and they
are in the process of making specific offers on that. Second,
we cannot just have an ad hoc response to this. We need a different
system than the current queuing system that we have, because the
current queuing system is not, in my view, an adequate system.
Industry and Ofgem and the Grid are in discussions about this.
I take the powers in the Energy Act, which basically say that
if they do not sort it out we are going to have to sort it out
ourselves. I think it would be better if they came to a solution
which was an agreed solution. One of the systems that they are
talking about is the so-called Connect and Manage system, which
gets away from this queuing system and accepts some of the limitations
of the grid but gets people connected more quickly. I am expecting
by the end of next month to get a final set of recommendations
from them. If they do not act, I will have to do it myself, but
we want this new system to come in from April 2010. Thirdly, there
is the Electricity Networks Strategy Group which is looking at
the grid going forward—so supergrid and how we can upgrade
the grid going forward. That is going to be coming out with a
vision for how the grid needs to develop, but I am totally aware
of the urgency of this situation and it is something the department
is taking very seriously.
Mr Rickett: The long-term solution
is investment in the grid to give us the capacity to enable people
to be connected. The Electricity Network Strategy Group has been
looking at that and developing a green vision for that which is
going to involve £10 billion to £15 billion of investment
or so. That then needs to be translated into reality and the price
controls and regulation of the grid by Ofgem, and they are looking
at their future investment regime. That is, in a sense, the longer-term
solution to it, and then we have to have a connection regime which
fits with that. As the Secretary of State has said, there are
proposals being developed for the enduring connection regime,
which might include a Connect and Manage option, and then there
is the short-term issue about whether we can speed up the queue.
We have over 50 GW of plant seeking connection to the grid by
2020, which is a measure of the interest in filling the capacity
gap that we have just been talking about but also creates the
problem about how do you prioritise this and get a handle on when
people are really going to be ready to be put on to the grid.
That work is ongoing and we are hoping that National Grid and
Ofgem will be able to announce some progress in the next month
or two.
Q32 Mr Weir: Whatever the mix of
energy for the future, obviously there is going to be a great
deal of investment required in new generating capacity. Given
that most of that is going to come from the energy companies,
given that government also wants some green energy, given there
are also pressures to reduce prices, is there a contradiction
at the heart of the policy in asking energy companies to do all
three things at once?
Edward Miliband: I do not think
there is a contradiction. There is a dilemma that needs to be
sort of resolved. The energy companies need to make sufficient
profits in order to invest in the future but at the same time
it has to be at prices that are fair to people. I think this is
a really important point and it is a point I have made to them
ever since I got this job. It is not just about the overall level
of prices, as this Committee knows; it is about some of the specific
practices which people really object to, which may not make a
huge difference to their balance sheets overall but are the things
that people really find objectionable for reasons that I fully
understand and concur with; for example, around the overcharging
of people on pre-payment meters. I do not think there is a contradiction.
I think there needs to be a recognition that energy companies
need to make profits in order to invest. We are relying on them
to make something like £100 billion of investment, but I
think at the same time that is not an excuse and must not be an
excuse for sharp practices in relation to specific groups of customers.
Q33 Mr Weir: Do you believe in the
current recession and credit crunch that they are going to be
able to make that investment in time?
Edward Miliband: I do. I think
that the credit crunch poses challenges to it. The way I would
describe it is that for the larger companies, the `big six' energy
companies, for example, which have pretty healthy balance sheets,
let us be honest, I think it poses fewer challenges than for medium-sized
and smaller companies that will have a lot more difficulty getting
access to credit. I do not say there are not challenges for the
bigger energy companies, but I think the challenges are less extreme.
They need the right framework going forward from government and
I think it is possible for them to make the investments, but I
do not think that that need, as I say, is an excuse for some of
the things that we have seen in relation to groups of customers.
Q34 Dr Turner: The effects of the
credit crunch is bad enough already, but would you agree that
there is a risk—and I do not know what the department's
view of this is, that it may affect the diversity of the energy
sources in which we invest? Gas is easy, because it is cheapest
and has less grid problems, but if we are looking into real security
of supply for the future, the marine technologies have an enormous
capacity to deliver within about the next ten years but, inevitably,
because of their state of development they are expensive, so there
is a clear investment hurdle to overcome there, and the credit
crunch is undoubtedly making that even more difficult than it
already was. Do you think the Government is doing enough in its
support of emerging technologies in order to overcome that problem?
If we really want security of supply, get tidal power. There is
nothing—nothing—that could be more secure so long
as the earth and the moon are still together.
Edward Miliband: I know this is
a very big interest of yours and I think it is a very important
area. I know Lord Hunt, who is the Minister in charge of this
Department, has been working with you. First of all, the banding
of the Renewables Obligation is precisely designed to reward the
more expensive, more challenging technologies. So it is 1.5 ROCs
for offshore wind and I think it is a higher number for more adventurous
newer technologies. I think we have taken action on that. I think
it is right that we look not just at the general re-capitalisation
of the banks that has happened, which I think is very important,
and not just at the specific schemes, some of which are still
getting going, from DBERR around working capital and around some
of the smaller firms, which should help the different parts of
the jigsaw. I think it is right we look to see whether there is
further specific action that is required either in the sector
you are talking about or more generally and that is something
that we are looking at and I think it is right that we are looking
at it. In a way intelligence is coming in all the time about the
specific and differential impacts of the credit crunch because
it is having differential impacts not simply in this sector, not
simply by the size of company, which I have already mentioned,
but in different areas. I think there are challenges in renewables,
for example. Marine is obviously also a challenging area. This
is something we are very much looking at.
Q35 Dr Turner: We have always looked
in this country at different generation technologies and the two
implications in terms of encouraging through ROCs for renewables
and non-CO2 production producing technologies. Would you agree
that we have done rather less or less effectively in providing
a disincentive to produce carbon in terms of the carbon price,
because the ETS so far has had virtually no impact on generation
companies as far as the cost of CO2 emissions is concerned and
does not look likely to have a very high impact in the future?
Do you think we should consider more, even a direct carbon taxation
on carbon emitting generation, in order to help try and direct
investment to produce the diverse mix that we want?
Edward Miliband: The answer is
no. It is right to stick with the cap and trade system because
I do think that is the way in which you can get the changes that
you need at least cost and I think there is a general recognition
of that. I think what we are discovering inevitably is that in
the middle of a recession the carbon price falls because people
have significantly less need for allowances. We will learn as
we go along about the EU ETS and how it should be structured.
We have got Phrase 3 coming up in 2012 and it relies on having
the right level of allowances structured in a way that will have
a reasonable level of the carbon price. I also think that what
we have said about 100 per cent auctions in the power sector,
which is one of the aspects of the scheme that has been agreed
as part of the 2020 package in Europe, is also important. It is
worth remembering that the Climate Change Levy itself by 2010
will have saved about 13 million tonnes a year of carbon. We also
have the Carbon Reduction Commitment coming in in 2010 and that
will mean that for businesses and public sector organisations
that have over £1 million of gas and electricity they will
also have to enter into a trading scheme. I think a trading scheme
is the right way to go. It is obviously challenging when the carbon
price falls to €8 a tonne or whatever it is at at the moment.
We need to structure it as best we can to have a proper level
of the carbon price.
Q36 Anne Main: I would like to press
you on energy through waste because it does seem to be remarkably
absent when we are talking about a renewables policy. Do you believe
you can get a buy-in to having energy through waste within local
communities? What are you doing to explore education and public
perception about the need or possibility of energy through waste?
Edward Miliband: Energy through
waste can certainly play an important role. When you look at our
Renewable Energy Strategy that was published last year, it looks
at a range of different ways in which we can get renewable energy,
not just onshore and offshore wind, but also heat. We can make
a real difference in this country through renewable heat. Currently
it is 0.6 per cent of the heat market. We are looking for it at
the moment to go to 14 per cent. That is a very significant increase.
I think there is a lot more we can do.
Mr Virley: We will be saying more
about this in our final renewables strategy this summer. As the
Minister says, increasing the use of energy from waste is going
to be an important part of that, not least the incentives that
we are going to be introducing in the Renewable Heat Incentive,
but also the increase in the landfill tax which is obviously discouraging
waste going to landfill.
Q37 Anne Main: Are you going to be
designating energy through waste plants as strategic parts of
infrastructure?
Mr Virley: The national policy
statements will be consulting later this year. We will be saying
more at that stage about the treatment of those plants.
Q38 Anne Main: Can I press the Secretary
of State to say whether or not he believes this would be something
that will be led by the Government to be saying this is a part
of strategic infrastructure? I am not asking you to divulge what
might be in the Planning Policy Statement. Do you believe that
is the drift?
Edward Miliband: I think you are
right about energy through waste, I think it can make a big difference,
but I do think the consent of local communities on this is very
important and I think one needs to respect that, but we will obviously
be saying more about it in the coming months.
Q39 Dr Turner: Ed, I realise that
energy from waste is a slightly difficult area for you because
responsibility for it is actually not just in your Department
but in DCLG and Defra. Are we getting the most that we can from
energy from waste possibilities? We are certainly not getting
the amount of biogas which we could produce potentially from anaerobic
digestion. We are still heavily dependent on large-scale municipal
waste incinerators which are deeply unpopular with the public
and produce vast quantities of ash which can only be disposed
of by landfill. There are other technologies, such as advanced
gas plasma, which now exist, which could be vastly more efficient
in terms of energy from waste. Do you have any comments on our
energy from waste policy? Do you think it could be uprated?
Edward Miliband: It is good that
you have asked this, Des. It is worth saying that in the Renewable
Energy Strategy we talked about biogas heat, for example, as providing
five per cent of their transition to a 15 per cent renewable energy
target by 2020, which is quite challenging. I think generally
in the area of heat in particular we need to make more progress
because, as I said to Anne when she asked her question, that is
an area where we need to do more and have not done as much as
we might have done. I actually think thinking about biogas in
relation to heat, for example, is important and I think the Renewable
Heat Incentive will help in this because it does provide for the
first time a proper incentive for renewable heat. It is also the
case that we are working with Defra on a vision in terms of anaerobic
digestion and what that can do and how we take those plans forward.
Mr Virley: There is an industry
and government working group at the moment on the future of anaerobic
digestion. We are also working with National Grid on the injection
of biogas back into the grid network. We will be saying more about
our plans on that in the final renewable strategy in the summer.
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