CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 648-iiHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFOREEnergy AND climate change COMMITTEE
LOW carbon technologies IN A GREEN economy
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Transcribed by the Official Shorthand Writers to the Houses of Parliament: W B Gurney & Sons LLP, Hope House, Telephone Number: 020 7233 1935
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Oral Evidence
Taken before the Energy and Climate Change Committee
on
Members present
Dr Alan Whitehead, in the Chair
Colin Challen
Miss Julie Kirkbride
Judy Mallaber
John Robertson
Sir Robert Smith
Dr Desmond Turner
Mr Mike Weir
________________
Memoranda submitted by Environmental Industries Commission
Examination of Witnesses
Witnesses: Mr Adrian Wilkes, Chief Executive, and Mr Danny Stevens, Policy Director, Environmental Industries Commission, gave evidence.
Q64 Chairman: Good morning and welcome to the second evidence session on Low Carbon Technologies in a Green Economy inquiry. Thank you for coming this morning. Perhaps you would like to introduce yourselves to the Committee.
Mr Wilkes: I am Adrian Wilkes, the Founder and current Chief Executive of the Environmental Industries Commission.
Mr Stevens: I am Danny Stevens, the Policy Director for the EIC.
Q65 Chairman: Perhaps I can start by asking you what you think the main objectives and priorities should be of any green stimulus.
Mr Wilkes: We have been arguing ever since we launched in 1995 that the
environmental industry per se was going to be a growth industry. When we launched, the projections from people
like the OECD were that by now this industry might be worth £500 billion. The latest figures the government released
through consultancy research puts the market at £3 trillion so some of our
predictions were cautious, shall we say.
It is clearly a growth industry.
I think it is very important to make the point that there are some very
distinct sectors to it. I know your
focus today is on low carbon technologies and I would just say that there are
these other very important sectors to the broadly defined environmental
industry namely water management (that is a very big sector) and waste
management and then you have smaller sectors like air pollution control (the
people who make the particulate traps that go on all of our London buses for
instance); the technologies that clean up dirty land so that we do not build on
green belt but build on brownfield.
There are these technologies all round the world that are going to be
used if we are going to have a quality of life, not just in this country but
globally. So you have this massive
market place; it is probably about 40 or 50 per cent low carbon and renewables
and 50 or 60 per cent of the others at the moment. Of course all countries as they aspire for
better quality life and a cleaner environment are tackling all these
problems. Low carbon is very important
and is probably now going to be the fastest growing sector so this inquiry is
very timely. To answer your question
specifically, we would encourage a green New Deal and indeed the government's
industrial activism and new industrial strategy in this area to embrace all of
these sectors and not just to focus on low carbon because the whole world is
going to need to clean up. Water management is going to be probably one of the
biggest issues in its own right but is totally interrelated with the problem of
climate change.
Q66 Chairman: Do you have a view on the size and range of such an opportunity stimulus as far as low carbon recovery is concerned?
Mr Stevens: Do you mean what the size of the stimulus should have been?
Q67 Chairman: Yes.
Mr Stevens: What we saw out of the budget was disappointing. It did not measure up to what EIC was calling
for. We were calling for an overall £10
billion stimulus, as
Mr Wilkes: I would also point out that we were criticised by some people in
government for being unrealistic when we called the budget timid and
inadequate, a headline that was picked up by The Guardian in their coverage.
However, I think we were timid in calling for £10 billion, which was
mainly in the area of energy efficiency, because you had the Sustainable
Development Commission, as you all know, who called for a £30 billion stimulus
and the TUC for a £25 billion stimulus. The figures from HSBC which compare
stimulus packages from around the world show that ours is minute compared to
Mr Stevens: I think it is also worth pointing out that a large amount of the money announced in the budget was focussed on large scale projects, the carbon capture and storage demonstration projects and big renewable energy projects which again, whilst welcome, the vast majority of the low carbon industry currently in the UK are small and medium enterprises. For example, one of the thresholds for actually receiving funding from the four billion euros through the European Investment Bank is for projects of a value of over 25 million euros. For small companies developing these new, innovative technologies - whether they are for buildings or improving the efficiency of transport - that level of funding just will not register.
Q68 Colin Challen: Can we just clarify what is mean by environmental industry? I am sure you have criteria for your membership which defines it, but the reason for my question is that in a pre-budget report last year the government said that over the next three years £50 billion from the public and private sectors will be invested in low carbon economy measures. Then you find, reading the fine print, that it includes just about anything at all which might be a bit less carbon intensive than something else, so you could include CCS if you wished, or you could even include a new coal fired power station with CCS, always provided it was a bit more efficient than the previous model. What is your definition of the low carbon stuff and the environmental stuff which is a wider definition I would imagine?
Mr Wilkes: I see the point you make; I have the same figures as you are referring to. When the government say they are spending £50 billion in the period 2008 to 2011 they include transmission and electricity infrastructure which was £7.6 billion of that total; public transport was another £23.2 billion of that total.
Q69 Colin Challen: This is not new money, is it?
Mr Wilkes: There was some new money added in the pre-budget report.
Q70 Colin Challen: Not £50 billion.
Mr Wilkes: No, absolutely not. We are here to say that the government should be doing far more in this exciting area, exciting economically as well as urgent in terms of environmental and climate protection. We published what we called a Green Jobs Growth Strategy back in January which I will let the Committee have. In that was our breakdown of the broadly defined environmental industry. We make it clear that there are three key sectors, the traditional environmental technology sectors: waste technology, water treatment technologies, air pollution control technologies. Certainly 15 years ago when we launched EIC the renewables energy industry was quite small - now it has been growing rapidly of course - and it is that sector which we calculate at about 50 per cent of the overall industry picture. Then there is also the one which is amorphously defined as the carbon management industry. When you look at the Committee on Climate Change's Report on which technologies are going to help and when you look at the UK trade and investment analysis of which markets are going to grow rapidly and where the UK has comparative advantage, you will see that the energy management in the sustainable buildings area which we defined as the carbon management industry, is about 15 per cent of the total and growing. That is a roundabout way of answering your question which is that the government's £50 billion included a lot of what I am sure many of us would not define as environment industries.
Q71 Colin
Challen: You mentioned the HSBC Green
Rebound Report which, as you correctly say, suggested that
Mr Wilkes: Not in the detail that would probably satisfy you but I would say
that that package includes money for afforestation; quite a big chunk for
that. There is also a big chunk for
water management or water pollution control which probably is not that
surprising bearing in mind that they probably do not have the advance
regulatory structure that Europe and
Q72 Colin
Challen: Since we are in the European Union
that does impact on our environmental policies.
Could you suggest how capital from the European Investment Bank could be
better used in the
Mr Stevens: As I understand it the European Investment Bank has two mechanisms of funding. One is through direct funding which is what I mentioned before, the projects are above 25 million euros which is a rather large size of project. Unfortunately for the proportion of our membership involved in the low carbon industry - energy management, carbon management - that level of funding simply will not register. Whether that funding needs to be through the European Investment Bank or another means, it does need to be directed at innovation within SMEs and not just these huge, large scale projects. Also, as I understand the second mechanism for funding through the EIB is intermediated loans through the banks. I am not an economist or expert on how bank funding works, but there is a question mark in the current climate against exactly how that is enforced and how you make sure that the proportion of the four billion euros that will be delivered through the intermediated loans will actually be appropriately delivered through the banks.
Mr Wilkes: Just to add something, Mr Challen, in light of Danny's earlier comments there is a focus there on these being massive projects - big wind energy projects and maybe support for nuclear and carbon capture and storage - and I think one of our key messages would be that in tackling climate change let us grab the low hanging fruit very, very quickly. You will be aware of the McKinsey cost curve and various other studies, all of which show that if you have £10 to spend you can get a better return by focussing on energy efficiency in the short term rather than very expensive in terms of cost per ton of carbon abatement on some of these other technologies.
Chairman: We have mentioned the question of market and demand so we now turn to the market for low carbon technologies.
Q73 Dr
Turner: For the purposes of my questions I
define environmental industry as low carbon, principally electrical
generation. The
Mr Wilkes: I ought to have made it very clear when I was defining the
environmental industry that we represent 300 companies who provide
environmental technologies and carbon management solutions. I think you will be hearing from the trade
associations who represent renewables sectors.
I have a fascinating document which I would encourage the Committee to
have a look at, it is from the German Embassy, a study commissioned on
investments for a climate friendly-Germany.
They refer to a German programme called the Meseberg Programme where the
government intervene and subsidise. I am
mentioning this because it links back to the earlier questions about the size
of the green stimulus in our budget. It
predicted that this government programme was going to create 17 billion euros
of additional demand from German climate change technologies and that would
increase their GDP by 20 billion euros a year and create 200,000 jobs. As an outsider, so to speak, looking at the
renewable sector,
Mr Stevens: I would just pick up on the point defining the low carbon industry
as just electrical or energy generation, I think that would be a mistake; it
has to be a lot broader than that.
Energy supply and decarbonising energy supply through renewable
technologies is obviously important and we would fully support that but do not
have it as part of our membership base.
The energy efficiency, carbon management, energy management has to be
the first priority with all climate change and energy policies. It is the cheapest way of meeting climate
change targets, it is the most cost effective way of doing so, it offers the
most immediate returns (whether in building, industry or transport). Energy generation should be part of the low
carbon industries but the first priority has to be the energy efficiency and
the carbon management industry. To
answer very briefly the question about why
Mr Wilkes: I missed a very important quote when I was quoting from the German report. Of course what the British Treasury will say is, "Oh well, we can't afford it in these current times". Other than talking about additional demand for their technologies in export markets, 200,000 jobs, nearly two billion euros in subsidies needed to implement the Meseberg Programme will result in a national debt lower by 180 billion euros.
Q74 Dr Turner: Let me suggest to you that a reasonable accurate re-phrasing of your answer would be that the German example is a good case of government intervention to guarantee a market for the new technologies through feed-in tariff regimes et cetera, et cetera or the provisions of the German renewable energy act. Do you think this is an example which might be followed by other countries? Do you think it would benefit us if we took similar measures?
Mr Wilkes: I think from day one we have argued in line with commentators like yourself, the OECD and experts all round the world, that first mover advantage creates a lead in these growing markets and the reason the government had to intervene of course is because the environment is not costed into our market mechanism and therefore we have to put the market right by government intervention and that is either through regulation, subsidies or taxes. I totally agree with you; thank you for rephrasing our answer.
Q75 Dr
Turner: Have you seen any sign of the
Mr Stevens: I would always pick the example of the zero carbon homes and the
zero carbon non-domestic buildings.
Depending on how you define zero carbon there is obviously an element in
terms of the energy generation, but that is a good example of government
policy, providing a long term policy framework for meeting a climate change
target and as far as I am aware no other country in the world has committed to
zero carbon homes in the timescale that the UK has done so and equally
non-domestic buildings by 2019. They are
significant challenges but they are welcome examples of government policy
making before our international competitors. If we are successful in scaling up
the house building industry to actually achieve that target then the business
opportunities domestically and also for export are absolutely huge. That was an example of big business
opportunity for the
Mr Wilkes: In terms of an overall government approach I think our answer would probably be a bit premature because of course this month the government is due to publish its Low Carbon Industrial Strategy. I hope that it will be a lot more comprehensive and more vigorous in terms of its level of government commitment and action than previous initiatives. We have been pushing for an industrial strategy to promote this industry for 15 years. The first initiative that the Labour government actually took on coming into office was to establish something called the Innovation and Growth Team which was an array of industry experts and senior businessmen. They made a number of recommendations, many of which were not really followed through. Then the Commission on Environmental Markets and Economic Performance was established. Again we have not seen a lot of actual follow-through. However, on some other key areas we have focussed today on government's role in terms of regulation and taxation but then there is public procurement. It is 40 per cent GDP; we have been pushing for 15 years for the Government procurement office - and it keeps changing its name of course - to do far more to create an initial push to some of the technologies in this area. Very, very little has happened, if anything; I think they have targeted light bulbs or something. Then on skills training, there is supposed to be a special environmental industries skills council; I have not heard what has happened, I do not believe much progress has been made in that area. As to exports, if you look at UK Trade and Investment its focus of resources in this area has been pretty minimal; their budgets have been cut in recent years. It is not just about government's role in terms of regulation, there are all these support mechanisms to help British industry seize this opportunity.
Q76 Dr Turner: So your report is that they could do far better.
Mr Wilkes: I am afraid so. Now is the
time to grab this opportunity because as we analyse what other governments are
doing with their stimulus packages, other governments have woken up to this
opportunity, even
Q77 Sir Robert Smith: I was going to comment on Mr Stevens' remark that energy efficiency is the low hanging fruit; energy efficiency does seem the obvious first target and the right strategy. We have all been espousing that for a long time, but if it is a low hanging fruit it is very firmly attached to the tree and we still have a lot of policy instruments to actually try to get it off the tree and then make full use of it.
Mr Stevens: I think that is true but there are positive examples, as I say, of
government policy that is trying to drive improvements in energy efficiency: I
come back to the zero carbon homes and non-domestic buildings example. The most important thing with that is that it
does actually drive the highest standards of energy efficiency. To draw an example from
Q78 Sir Robert Smith: One other thing that we picked up from the Danish Economic Advisory Council was that when you start to have these different instruments they can interact with each other and you can get yourself in a financial muddle. They were pointing out that Europe has gone down the road of emission trading for electricity generation, therefore if any national government now steps in with a stimulus for a low carbon electricity generation, that subsidy will leak across the whole of the European Union because in producing the lower carbon generation in your own country through a national stimulus you then alter the market in emission trading certificates which is fluid market across the whole of the European Union. We do have to be careful about where we mix and match different stimuluses.
Mr Stevens: Yes, I would agree, but again coming back to the point which I think applies to everything we are talking about is making sure that policy is ambitious enough to drive the changes that we need in all sectors of the economy. The emissions trading scheme sadly to date has not been ambitious enough to drive the emissions reductions that are required and to stimulate a high enough carbon price that encourages investment and makes investment in low carbon alternatives cost effective. It remains to be seen whether that happens in phase three which will start in 2013, but again it is coming back to that main point, it is just driving the highest possible level of ambition.
Q79 Judy Mallaber: You said a while ago that now is the time to really get going on this but we are also obviously, as you know, in the midst of recession. I know you have done a survey of your companies; can you tell us what the effect of the recession is and also which sectors have experienced the biggest impact?
Mr Wilkes: The EIC, other than being a lobby group for the industry, created
something called The EIC Environmental Investment Network which is designed to
bring investors together with companies looking for funding. The Environmental Investment Network rang up several
hundred companies and got answers from 151 companies and out of them 57 per
cent said that they were struggling to raise finance in the recession. Not surprisingly, here is a headline from the
New York Times in April: "Clean
Tech's future dims as financing drops off", and then a report from Ernst and
Young showing that Clean Tech's firm raised just $277 million, down 63 per cent
compared to 2008. So raising finance at
this point is a significant challenge. I
think that then throws back, dare I say it, a bit of onus on government. If you ask investors what they want, they
want certainty about the regulatory regime, because the regulatory regime
drives demand. If you then look at these
figures and see a decline, you can then ask questions about what government can
do and they could get the emissions trading scheme - going back to the earlier
question - working properly with a high and effective price for carbon. The British Government could follow the
example of the Irish Government which I believe, when it bailed out the banks,
insisted that the now publicly subsidised banks in
Q80 Judy Mallaber: Was your analysis then about whether they were having difficulty in getting finance or about what was happening to their production and sales?
Mr Wilkes: It was both.
Q81 Judy Mallaber: Did you analyse it by sector? Are there some sectors within the industry that are doing better than others? Are there some that are being more favoured by the banks than others?
Mr Wilkes: I do not have those figures to hand but I will ask the people who did the actual details and send them to you.
Q82 Judy
Mallaber: Thank you, that would be
helpful. Des asked the question earlier
about our exports in comparison with environmental industries exports from
other countries like
Mr Wilkes: No.
Q83 Judy Mallaber: You do not know if that is available.
Mr Wilkes: We operate on a budget of £400,000 a year and we are not in a position to do what government departments should be doing. We have asked questions of government departments about, for instance, have they done an analysis of the job creation potential in these sectors. I am not aware that any part of the British Government has done that analysis; it is a very pertinent question.
Q84 Judy Mallaber: It is not something that your members have come to you and asked why we are not able to produce stuff in this country and it is all coming in from overseas? Has that not been an issue that they have talked to you about?
Mr Wilkes: It is an underlying issue all the time which is why we argue for the British Government to put in place the regulatory framework and support for not so much R&D which is largely there but the next stage, the demonstration, taking to market stage of commercialisation and then public procurement support. That is why we go back to the fact that it would be helpful to have an overall package and we hope the low carbon industrial strategy will embrace all these different ways of supporting the industry. I would encourage you to ask government if they have got those figures on imports because we do import a lot.
Q85 Chairman: Certainly if you are able subsequently to provide the Committee with any further thoughts on that we would be grateful.
Mr Wilkes: We will have a look.
Q86 John Robertson: I know you have not done the comparison but what about cost effectiveness? Is it cheaper to import than to buy the stuff here?
Mr Wilkes: That is another good question. It reminds me slightly of how, dare I say, officials way back in 1995 in the Department of Trade of Industry - which I thought was designed to help British industry grow - would say, "We do not actually need a domestic environmental industry; we can probably buy all our technologies from abroad". To go back to our central argument that we are in a £3 trillion market place today possibly on the projections of the recent government study reaching £4.5 trillion by 2015; that is a lot of jobs, exports and a lot profits.
Q87 John Robertson: I appreciate that but you still have to be competitive. If you have a £3 trillion business then you want to get your part of it, but to get it you have to be profitable and you also have to be cost effective to people who want to buy your goods.
Mr Stevens: The most important thing is to make a good domestic industry
profitable and competitive, so that the
Q88 John Robertson: The point I am trying to make is that there are constituents who want to buy goods so they can save energy and they are not going to worry about where it is made; they are going to buy what they can afford.
Mr Wilkes: I think in a way what you are doing is setting a challenge to the
companies in this sector to be cost effective and internationally
competitive. I would refer you to this
UK Trade and Investment report from October of last year which actually lists by
sector where the
Chairman: We are going to have to move on now. We have mentioned low carbon homes and energy efficiency a little earlier. Colin, would you like to ask further questions on that?
Q89 Colin Challen: Do you agree with the definition of a zero carbon home that the government is using?
Mr Stevens: They have not actually decided on it yet. They consulted earlier this year and the responses to the consultation and final decision on exactly how you define zero carbon has not yet been decided. The proposal was that the energy efficiency requirements in Part L of the Building Regulations would be equivalent to Level 4 of the Code for Sustainable Homes. There would then be an additional bit added on; up to 70 per cent of the net carbon emissions of the home would be achieved by "carbon compliance" solutions which would be, for example, on-site generation, micro-generation technologies etc. Then the further 30 per cent would be the various proposals put forward. They have basically listed a whole range of allowable solutions of off site generation which does not necessarily have to connect to the home directly.
Q90 Colin Challen: Have you detected any signs that the building industry, despite the recession, is already shaping up to meet this as yet undefined target?
Mr Stevens: When I say that it is undefined, it is important to remember that that is the target for 2016; we will actually get to 2016 via a trajectory through improvements in Part L of the Building Regulations. The first change will come in next year which will be equivalent to Code Level 3 of the Code of Sustainable Homes. In 2013 it will go up to the equivalent of Code Level 4 and then will stay at that point in terms of energy efficiency and the actual zero carbon part between 2013 and 2016 will be achieved through the carbon compliance and allowable solutions. For obvious reasons the building industry is facing problems at the moment and it is a significant challenge for the industry to actually deliver on those improvements. We recognise that it is a significant challenge but our key message is making sure that the target and these incremental changes in 2010 and 2013 are not watered down in any way. It is a challenge but the business opportunities that it can create both in terms of a domestic industry and for export far outweigh those challenges. A point we made in our written evidence, the importance of government intervention in trying to stimulate the industry, particularly in the current times, I think we have called for all additional social housing to achieve the zero carbon standards in advance of what is required through regulation for the commercial side of the industry in order to stimulate that demand and start building up a skills base that is necessary to deliver on target.
Q91 Colin Challen: The new build from 2016 will be a tiny fraction of our existing housing stock which will be around for decades to come. Is the government really doing what it should be doing to retrofit?
Mr Stevens: No, not yet. In terms of the domestic and commercial building stock, existing buildings are certainly the biggest challenge. In terms of policy and also the size of the emissions reductions that are required, there are some examples of government policy within that space. There is the Carbon Emission Reduction Target which is an obligation on energy suppliers to meet a carbon emission reduction target within their energy supply - but it is not ambitious enough. It is very much the low hanging fruit. Whether it is through low energy light bulbs or whatever it may be, that will change through legislation to be expanded out to include, for example, smart metering to be included as part of the energy suppliers' obligation. They can install smart meters as a way of actually meeting that target which I guess is questionable because you can install a smart meter but it does not actually require any emission reductions. The Carbon Emission Reduction Targets would then evolve into the community energy saving programme and the Great British Refurb that we have heard a lot about, making our existing homes zero carbon by 2050. Those are positive examples.
Q92 Colin Challen: How positive is positive? I was reading only the other day that despite the fact that this new target for energy suppliers something like 200 million CFLs have been handed out for nothing but nobody, it seems, has actually asked the question: who is using them? Are they being used at all or are they just being put on a shelf? That is something that should be looked at very closely because it suggests that the electricity companies are saying, Here are some low hanging fruits; we are not going to bother following it up but it does get us off the hook for more difficult challenges because they can they play in the saving for all of those light bulbs as if it was actually being saved.
Mr Stevens: Yes, I absolutely agree.
Chairman: I think we will take that as a statement rather than a question. Julie Kirkbride?
Q93 Miss
Kirkbride: Can I ask a bit more what we mean
by a zero carbon home? Looking at the
brief we have this thing about PassivHaus standard in
Mr Stevens: PassivHaus in
Q94 Miss Kirkbride: Are you talking about just the construction or are you talking about the maintenance of them afterwards? Was it their construction that was carbon free or the running of them that is carbon free?
Mr Stevens: The use of the building. The Building Regulations as I understand it, will include, for example, the net carbon emissions from the home and that will cover the use of appliances and what have you within the home. How you actually regulate the use of the home after it is built in 2016 is a significant challenge but in the domestic side of the stock that is not perhaps so much of a challenge because we move into new homes and the actual use of the building does not really change significantly. The big challenge in terms of that will come with the 2019 ambition for non-domestic buildings. That is a huge challenge in terms of defining zero carbon because of the huge range of different types of non-commercial buildings that there are but also the use of the building, once it is built to a particular standard, might change significantly. It might be a non-energy intensive use for ten years and then somebody might buy it and change its use and therefore increase its emissions.
Q95 Miss Kirkbride: We have been talking about low hanging fruit for most of the morning, but what is the big gain if we were to talk about converting existing properties as well with better carbon rating stuff inside the house? What kind of energy and carbon cuts can we make from an adaptation to our housing stock? Can you give us a gradation as to what we can get at this level or that level or what we can get at the higher level if we were more serious about looking at our domestic energy consumption?
Mr Stevens: In existing homes?
Q96 Miss Kirkbride: Yes.
Mr Stevens: I do not have any exact figures to say that if you installed a low energy light bulb in every room in the house you would achieve this and if you attached a wind turbine to it you would achieve that. The challenge really is finding a way of incentivising householders to actually make those improvements. As I say, I cannot comment on exactly what you would achieve and at what level by installing whatever technology it may be. The key is that the government has to find a way of incentivising householders to actually make those energy efficiency improvements. That is a big challenge and I do not know whether you do it through regulation or financially or through tax incentives. They have to find a way of doing it.
Chairman: Can we now move to thinking about the specific low carbon technologies that will be involved? DECC's memorandum to this Committee focussed on five particular technologies: carbon capture and storage, offshore wind generation, marine energy, nuclear energy; and low carbon vehicles. We have a few questions about that particular area. Mike Weir?
Q97 Mr Weir: The first question is, do you think they are the right technologies for the government to be focussing on?
Mr Stevens: Yes and no. No because it excludes a lot of what we have been talking about in terms of the carbon and energy management industry and the building technologies as well. Buildings are a huge proportion of our emissions and one of the sub-sectors that the Government acknowledge has good growth potential but it is not picked out as one of the key technologies that will actually be supported through the Low Carbon Industrial Strategy which are the technologies highlighted in the government's Investing in a Low Carbon Britain report which picks out the areas that it sees as growth technologies, growth markets that the low carbon industrial strategy due this month will support of domestic industry. Most importantly is the carbon energy management industry. It is a glaring omission that the Government has not identified that sector as a big growth area or as an industry that does not require the same level of support as the other areas that you have identified.
Mr Wilkes: If you start looking at all these studies - which all seem to point in the same direction - if you invest in fuel efficient vehicles, fuel efficient homes, general energy efficiency of appliances you get much more carbon saving for your pound invested, going back to your cost effectiveness point, than you do if you are investing in bigger projects.
Q98 Mr Weir: One would presume that if the industry truly wants to go green it is going to invest in much of that technology on its own without government intervention. Do you think that will happen? Will they take more action in that sphere?
Mr Wilkes: I have been involved in environmental issues for 25 years and so many times I have heard the same argument. Industry was going to go green after the Euro elections of 1988 and the 1990 Environment White Paper and there are people of a certain mindset in government (it used to be the DTI but now seems to reside in the Treasury) who think that we just need to send a signal to encourage people. British industry and industry around the world will not invest in environmental protection unless government require them to do because it is not in their shareholders' interests; it is a market failure. They can offload the costs of pollution - whether that is water pollution or climate pollution - onto us, the society, free unless government intervenes whether with a regulatory standard or tax or whatever. I do not have any faith and I remember looking at the figures of one of our country's leading water companies which is incredibly environmentally sound and they marketed themselves for many years as environmental leaders. However, when you looked at how much they spent - it was probably about a billion pounds a year of our money - on environmental protection, 99.9 per cent of that was regulated expenditure. The voluntary bit was minor. I have never been a believer that voluntary initiatives in this area will overcome the imperative of satisfying the shareholder so governments have to correct the market failure.
Q99 Mr Weir: We are not going to get command economy in the next week. Can we look at some of the things the government is doing, carbon capture and storage in particular? What potential do you think it has to contribute to a low carbon economy?
Mr Wilkes: Can I just pick up on your point about command economy?
Q100 Mr Weir: Do you accept the government's view that new nuclear power stations could make a significant contribution to tackling climate change?
Mr Wilkes: This is a personal opinion rather than one from our membership. I cannot see how we can put the responsibility on generation after generation after generation to look after our waste, particularly bearing in mind the cost of that. We have seen the rising costs that are associated, about £90 billion now for cleaning up our current nuclear power stations. I think it is immoral to pass on that responsibility, until we know we have a safe way of disposing nuclear waste.
Q101 Mr Weir: I would not disagree with that but you did not really answer the question. We were talking about reducing carbon emissions. Leaving aside the question of waste, do you feel there is a sufficiently reduced carbon emission from the power stations?
Mr Wilkes: It clearly would although there are questions about the carbon input and you need to speak to experts like Dr David Lowry in terms of carbon input, in terms of constructing, the mining and the processing of the uranium, and is there not a big question about whether the world has enough uranium. I am not expert; I am voicing personal opinions.
Q102 Mr Weir: What about low carbon vehicles then. There is obviously a big push onto electric vehicles. What sort of infrastructure do we need for these? What would we need to do to our energy supplies to make truly low carbon?
Mr Wilkes: We are talking about three sorts of technologies here. There are biofuels, which are the current
focus; and there is increasing attention being paid to electric cars and fuel
cells. We never believed in picking
technologies I should say. I think we
should put in place the framework and then allow companies to come forward with
what is most cost effective and satisfies the consumers. Hydrogen is going to require an awful lot of
electricity, as are electric cars. There
is the interesting new algae based biofuel technologies that have been
researched a lot in
Q103 John Robertson: I should declare an interest in that I am chair of the Nuclear Energy Group in Parliament so you will not be surprised if I totally disagree with what you said about nuclear. From what you have been saying it appears to be energy supply versus energy efficiency here. Or is that just because that is who you represent? You are giving me the impression that you feel that that is where the government should be spending most of its finances and that supply can take care of itself.
Mr Stevens: It is not one or the other, it is both. It has to be both. Decarbonising the power sector and decarbonising our energy supply has to go hand in hand with actually reducing the energy that we use in the first instance. I think the first priority has to be energy efficiency because it is the cheapest and most cost effective way of meeting various targets. In all of these examples that we have just talked about we need a mix of different policy mechanisms and also a mix of different technologies. Going back to the low carbon vehicles, the short answer to the question about electric vehicles is that there needs to be a vast new infrastructure and it is a big challenge which again needs to be combined with decarbonising the power sector. Also that, and low carbon vehicles, has to be part of a mix of different technologies as well. It is no use trying to pick winners and saying that electric vehicles or hydrogen is the future. Let us hope we can move towards electric vehicles by 2050 but the reality is that that is not going to happen within the next couple of years and certainly the contribution it might make to our 2020 targets will increase but it is likely to be minimal. That again needs to be supported but with a mix of biofuels. That is where the immediate opportunity lies. Everything needs to be a kind of technology mix. Going back to the carbon capture and storage, just to illustrate the points that we are making and our disappointment that carbon and energy management are not actually supported as part of the low carbon industrial strategy, BERR themselves actually published figures alongside the draft provision document for the Low Carbon Industrial Strategy that suggested that carbon capture and storage was actually 17th out of 23 sub-sectors within the environmental industry for its growth potential, several places behind energy management and building technologies was third.
Mr Wilkes: Wind and alternative fuels were first and second. We certainly do not want to paint a picture that we can live without energy and therefore low carbon energy supplies are vital.
Q104 John Robertson: Would you not accept that for things like carbon capture and storage to be financially worthwhile and viable is quite a few years down the line yet and that really what you are telling us today is that we really have to start yesterday and today is an important starting point. We have technologies out there that we want to invest in.
Mr Wilkes: That is a good summary.
Q105 Chairman: Thank you very much Adrian Wilkes and Danny Stevens for you evidence this morning. We would be very grateful if the documents to which you have referred could be referred to the Committee.
Mr Wilkes: Of course. We will come back to on the question of our survey.
Memoranda submitted by British Wind Energy Association
and Renewable Energy Association
Examination of Witnesses
Witnesses: Mr Gordon Edge, Director of Economics and Markets, British Wind Energy Association, Mr Philip Wolfe, Non-Executive Director and Mr Martin Wright, Chief Executive, Marine Current Turbines, Renewable Energy Association, gave evidence.
Q106 Chairman: Welcome to our second set of witnesses this morning. Welcome to Philip Wolfe, Gordon Edge and Martin Wright. I would be grateful if you would introduce yourselves to the Committee.
Mr Edge: My name is Dr Gordon Edge; I am the Director of Economics and Markets at the British Wind Energy Association.
Mr Wolfe: I am Philip Wolfe, the recently retired Director General of the Renewable Energy Association, now a non-executive director of the Association and the REA represents renewable energy across all of the different technologies and renewable heat production, renewable power generation and renewable transport fuels.
Mr Wright: I am Martin Wright; I am the Managing Director of Marine Current Turbines Limited. I am also the Chairman of the Ocean Energy Group which is a sub-sector of the Renewable Energy Association and as such I am also on the Board of the REA.
Q107 Chairman: I will start by asking you what impact you think the government's green stimulus will have.
Mr Wolfe: We have to say to start with that we are pleased to see the
government moving in the right direction and moving towards a more coherent mix
of policies in the sector. Having said
that, my view is that it is still too half-hearted and still too
disjointed. Too many of the policy measures
do not mesh well together and there is still an insufficient understanding of
the need to develop the market, particularly here in the UK, as a pre-requisite
to achieving a good business model that the industry can mature with. By way of example perhaps and one of the
reasons for inviting Martin Wright to this is to look at the marine renewables
industry. This is an industry at the
very early stage of development. It is a
very promising industry and it is an industry where, at the moment, the
Mr Edge: From our point of view what is really important about the stimulus
in the budget is unblocking what has already been put in place and particularly
the renewables obligation which has been very successful in bringing forward
development of wind on and off shore and in that way we are very pleased with
the targeted support that was being proposed in the budget, upping the multiple
for offshore wind, trying to access more capital with the European Investment
Bank for onshore wind. If those are
successful it will have just the right kinds of effects. What we need most in building the industries
here in the
Q108 Dr
Turner: The only thing I disagree with is
that it is a very big gap. In other
areas of innovation it has long been identified as the
Mr Wright: Before coming directly to your question I would just like to add a
little bit of background to the position.
There is indeed in any technical development the knowledge that you have
the
Mr Wolfe: I think therefore there are two main things that are needed. One is help with all of these start up costs, the whole issue of consenting in a new technology; this is all unknown not only to us in the industry but also to government and there needs to be far more help with that. Secondly there needs to be a very much more visible revenue stream that investors can back and that would either mean a much higher multiple extended over a long period of time or even moving to something more like a tariff mechanism where you just know what the income stream is going to be for the life of the project.
Q109 Dr Turner: We have established that there are some very severe problems at present. What I would like to hear from you is what you think the prize is if we can solve these problems? What is the prize in terms of gigawatts of energy from tidal stream, for instance, in how many years? Also what are the industrial and economic benefits that it can bring if we can untangle the barbed wire?
Mr Wright: As far as tide is concerned you are looking at somewhere between
ten and 20 gigawatts identified that you could put in place in the
Q110 Sir
Robert Smith: You mentioned Pelamis, but
what was it that the Portuguese market had that made it sensible for them to
buy Pelamis and the
Mr Wolfe: They had this long term visibility of the income stream. They guaranteed a tariff for the output of
these devices at a level that made sense financially and they guaranteed it for
the duration of the project. They had
this long term visible revenue stream that we are now asking for in the
Mr Edge: I think it is worth bearing in mind that the Portuguese have had
that tariff for quite a long time. There
is only the one project with Pelamis.
There is actually more development work going on in the
Chairman: Let us now look at some of that potential, particularly as far as wind is concerned. Mike Weir?
Q111 Mr
Weir: Wind energy contributed 2.2 per cent
of the
Mr Edge: In the region of 25 per cent of electricity from wind; a more than ten fold increase.
Q112 Mr Weir: Do you think there is anything the government needs to do to stimulate a domestic market for wind power?
Mr Edge: It has stimulated a market for the power itself through the Renewables Obligation and that has, as I alluded to earlier, brought forward a lot of development work. Indeed, we have successfully brought forward something in the region of one-third of the projects that we need to get to the 2020 target. Onshore if you add up what is operating, in construction, with consent and a proportion of what is in the planning system, you are already talking about 11,000 megawatts of onshore wind. This has already been identified and you are talking about 14 or 15 to get to the 2020 target. Offshore, once round three has been awarded, there will be 40,000 megawatts of sites in process. We do not have a problem in terms of identified sites; it is about bringing them through the consenting system and making them happen. It is much less about providing the market and more about making sure that the obstacles to that element are removed.
Q113 Mr Weir: What particular obstacles do the industry find? Is it to do with planning? Is it to do with the grid? What are the problems?
Mr Edge: Onshore planning is a still a huge problem. We are still waiting word from the renewable energy strategy that there will be some developments on that. Under the renewable energy directive the government needs to be putting forward how it is going to be removing planning obstacles; that needs to happen. The grid also is a very big issue. We were very pleased to see the development around the ENSG report. The plan has been formulated to develop our onshore grid to accept the power both from on- and offshore wind and from nuclear. We think there is some work to be done on evolving the enduring regime for the offshore transmission; we are working with government to make that happen. All the bits are in play, we just need to drive through some of the issues.
Q114 Mr Weir: We have had conflicting evidence about the effect of transmission charges, particularly on renewables. Is that a problem that your members complain about or have a particular problem with?
Mr Edge: Some people feel that there is an issue with transmission charges
in the north of
Q115 Mr
Weir: How much of that is because that is
where the wind is, if you like, rather than because you are establishing a
particular wind farm? Maybe
Mr Edge: When you have the excellent wind resource that you have in
Q116 Mr Weir: Is there a potential similar problem with marine?
Mr Wright: There will be. To put it succinctly, the car industry did not pay for roads and that is how I see it. I think it is a question of whether we want this sort of energy or not. If we do then we have to facilitate its route to market. There is only so much that the industry itself can pay for.
Q117 Mr Weir: Are there similar consenting issues?
Mr Wright: Yes, the consenting issues are very similar at the moment. It is notable that our costs are much higher on the consenting because of the environmental issues. Those will fade in time but there still seems to be considerable lack of evidence coming out which would reduce the hurdles that you have to cross elsewhere.
Q118 Sir Robert Smith: I have a quick question on the Danish economists that we met and their theory that with the next round of emission trading for electricity generation being open across the whole of Europe, any other financial stimulus into low carbon electricity generation by a national government in effect is a subsidy to the whole of the European Union and not just to that national government because of the way you interfere with the emission trading market.
Mr Edge: That is only if you are stupid in setting your targets under the Emissions Trading Scheme. If you take into account the fact that you have renewables there and you have a target (it is set in law under the new Energy Directive), you calculate targets you need to go to under that scheme. I find that argument very bizarre.
Mr Wolfe: I feel in the short term the cost of carbon is not the primary driver for new renewables capacity. There are specifically targeted incentives for renewables which provide the primary drive and therefore the carbon factor is a second order rather than a first order factor.
Mr Edge: It is also worth pointing out that it is not just the carbon benefit. There is security of supply and developing domestic industries and rural development which are not captured by carbon price. It is important, therefore, that you target extra support on renewables because that gives you those extra benefits.
Chairman: We have mentioned a few problems, let us now look at some non-economic barriers, planning and other factors, so far as wind is concerned. Judy?
Q119 Judy Mallaber: You have already said quite firmly that planning was a problem. Do you think the new proposals, the Infrastructure Planning Commission and the National Policy Statements, will help overcome some of those problems?
Mr Edge: For onshore wind the short answer is no. The IPC will only address projects over 50
megawatts in
Q120 Judy Mallaber: Do you think that is the only way of getting over the objections that we all understand? If we have about 50 letters of objection to a wind turbine it is quite difficult for a local authority to resist that pressure. You think that a strong financial incentive link is the way forward.
Mr Edge: It is a powerful one because it then builds up a constituency in favour who are vocal about it. The point about all the letters of objection is that it is those who are against who are the ones who get up and down and shout and write letters; the people who are pro tend to be quite laid back and say, "Sure, it should happen" but they do not get out there and do so. If you actually give people good incentives to say that if they do not actually support this, they will miss out on this development. I think that is going to be really powerful.
Q121 Judy Mallaber: Are there other ways of overcoming objections, for example noise or the thought that it will be very noisy is one powerful issue that people raise? Are there things about that which you think the industry could do more on? In my area we put a lot of money into trying to restore an ancient historic windmill which is rather ironic as people do not like modern wind turbines. Is there more the industry could do to promote the cause, do you think?
Mr Edge: There is not much more we can do to provide the evidence base. What else can we do?
Mr Wolfe: It is important to pick up on a point that Gordon already made and that is the extent to which the National Policy Statements become a factor in the local planning considerations and that is still not strong enough. If the National Policy Statements became effectively binding on the local planning process and then you took out of the local planning inquiries a whole lot of issues that that have already been decided at national level and the local planning inquiry then focussed on only the local issues and did not revisit a whole lot of issues that have been resolved time and time again, that would just help speed the system up. It would not necessarily change the results but even speeding it up would be a very positive move for the industry.
Mr Edge: I think it is also important for offshore wind. The IPC have been taking projects of 100 megawatts or more into consideration. We had a very good presentation in our offshore wind conference last week by the chair designate of the IPC who came across very well and gave us a lot of confidence that they are taking on board the issues and that this will speed up the consenting process and make it simpler. That is essential if we are going to get the kind of enormous quantity of offshore wind projects through the consenting system that need to be done for the 2020 target.
Q122 Judy Mallaber: What sort of timescale in the planning process do we need to get it down to for it to be financial viable to a major offshore project?
Mr Edge: At the moment you are talking about a whole surveying and consenting process which takes in the region of five or six years. We need to halve it essentially.
Q123 Judy Mallaber: Then it becomes potentially financially attractive.
Mr Edge: It is more of a market confidence issue and becomes a bit cheaper. People can see these projects going into the system and know that in two or three years' time they will be coming out, and therefore they can plan to build factories to supply that.
Q124 Judy Mallaber: How much of the delay in achieving planning consents are a result of concerns about radar interference? How big an issue is that?
Mr Edge: We reckon that 4500 megawatts of projects are held up in the system
due to issues around aviation radar of various kinds. I think it is important to note that the
industry and government departments across the board have signed up to this
memorandum of understanding to tackle the technical issues. We feel a bit disappointed that government so
far has not stumped up money to help us drive those technical solutions. Once they are in place and proven then our
industry would be ready, I am sure, to contribute to the rollout of some of
that in order to alleviate issues around their particular projects. For instance, the Whitelee project of
Scottish Power Renewables paid for an extra radar in order to mitigate effects
on
Q125 Judy Mallaber: Is it the planning issues that are the most problematic? How much of an issue is the general recession?
Mr Edge: That is having an impact on independent developers who rely on
project finance. We surveyed our members
earlier this year for precisely this reason and we found a market of two
halves, those companies with large balance sheets that could get corporate
finance and indeed large utilities have been able to access the bond market. It is possible and they are going ahead. People who require banks to lend them money
are having a real problem. The fact that
the
Q126 Sir Robert Smith: If we get all the things right on planning, infrastructure, the grid and everything else and it really takes off, and the target that has been set for marine renewables looks like being achieved, how much of a barrier will it be to actually get the service side - the sub-sea vessels - to actually manage the cable laying and the installation? Will we have the support vessels and so on there to actually achieve that goal?
Mr Edge: The industry says that if you want something in five years, tell us you want it and we can supply it. It really is a kind of how long is a piece of string question. If there is a clear enough signal that that is the market and that is what the demand will be, then they will invest to make it happen. It is really important that that market stability and confidence is there and that will also help to bring down the costs as well because people will be investing, particularly in offshore wind, in the capacity to decouple offshore wind from the onshore wind market, from the oil and gas sector which are directly competing for things like vessels. Once you reach that critical mass then you can really concentrate on costs. Until then it is a real struggle.
Q127 Chairman: I have a vision in 400 years' time of a latter day Noel Edmonds leading a team to restore an ancient wind turbine.
Mr Edge: It would be ironic if it was Noel Edmonds.
Chairman: Perhaps we can move on to discuss other technologies now, green energy, carbon capture and storage, low carbon vehicles and other technologies. Des Turner?
Q128 Dr Turner: Do you think the government is focusing on the right areas? It is promoting carbon capture and storage, offshore wind, marine energy, nuclear and low carbon vehicles. Do you think those are the right areas to work in?
Mr Wolfe: I think it would be ill advised of the government to seek to pick a limited number of areas and assume that they are going to get to the right result through doing that, particularly in the renewables field. Clearly offshore wind has a higher medium term potential than any other individual technology, but that does not mean that just focussing on offshore wind will deliver what they need to deliver in renewables. In fact it will fall a very long way short of that. Historically government has neglected, at its peril, the whole issue of heat production and renewable heat is a very, very important sector. It is important for the areas that you were talking about with the previous witnesses, the built environment in particular, and our expectation is that actually renewable heat can achieve a very significant proportion of the 2020 targets that we now have. It is very important that that is part of the portfolio, but not one of the ones you just listed, Mr Turner. We think it would be inappropriate just to focus on a limited number of technologies. I think it is very unfortunate that all of those technologies that you listed are, if you like, energy supply side technologies. It is very important to increase the level of demand side activity; it is very important to increase the proportion of de-centralised energy within the mix, not to the exclusion of centralised of course but as an adjunct to centralised, particularly because by doing that you can also bring forward energy efficiency that we all agree is the most important aspect of sustainable energy.
Q129 Dr Turner: Staying with the supply side for the moment, we have already established from your previous answers that marine energy has the potential to be a highly significant contributor to our energy economy. It has also been established that there are barriers to its proper implementation. Would you like to comment on those barriers, and in particular what is your feeling about the consenting process for marine projects and the implications of the new consenting regime set out in the Marine and Coastal Access Bill which means that all marine projects effectively will be dealt with under that regime as opposed to large offshore wind which will go to the IPC?
Mr Wright: The answer is that anything which presents the investors with
something different and makes the investment more difficult is going to be a
barrier. It is not just the fact that
you have to get through this; it is the fact that it puts off anybody being
willing to play the game because, very simply, those who are looking at marine
energy now see the application of the technology and are willing to invest in the
technology. What they are not willing to
invest in is a
Q130 Dr Turner: Given that the lower limit for referral to the IPC is 100 megawatts and marine projects are not likely to be of that scale for some years to come, anything over a megawatt in terms of marine energy at the moment could be considered strategic. Would you rather see those projects being referred to the IPC for consenting rather than going through the Marine Bill process?
Mr Wright: Very simply yes, if it is going to move it more quickly. I did not mean that you ignore the science
around it but there are questions as to where the benefit comes in that and who
should be paying for it and where that is shared. I think there is an industry issue there
which is to get to the point where we do not have the shackles around us. To make it very simple, we have an extremely
good relationship after a long with time with the regulator in
Q131 Dr Turner: You have pointed out - I suspect quite rightly - that it is counter productive in wider environmental terms because the greatest threat to marine ecosystems is climate change and one of the greatest weapons against climate change is decarbonising energy and using the marine resource. Would you agree?
Mr Wright: I think the reality of the driver is something else which is the European directives, in particular I have to say, the precautionary principle. It was put in place for all good reason but it has a paradoxical outcome. The outcome is that if you are trying to do something new then because it is new and its effects are unknown you should not do it because that is the precautionary principle. It is incredibly difficult to get the new things moving and you have to fight extremely hard for that because of the application of it. Because that is European law the regulators have the problem that they could be infracted by the European Commission if they do not put procedures in place which absolutely give them the paper trail and the process trail which says that we have done everything to sit by the precautionary principle. That is their greatest fear and so it is much easier for those bureaucratic organisations to say no or to load up the costs et cetera than it is to cut through. I think the problem is the European law and the way that is couched.
Mr Edge: The Marine Bill has been a very long time coming and we have been engaging over the past five years. One of the key things that we, the REA and other members of the Seabed Users Development Group (the grouping of the people who are developing the seabed) is this focus that the Marine Bill should be about sustainable development and not purely about conservation. We were really pleased that the government took that on board and actually the Marine Bill, as written, going into committee has that focus. We are fearful that certain siren voices will sing and backbench MPs will line up and say that this is a conservation bill and it should be about conservation when it really needs to be about sustainable development. We are hopeful that it will be defended going through the process and that it comes out the other side still with the focus on sustainable development. The MMO with a sustainable focus should be okay for development. We did argue for the IPC taking it and we were rebuffed in that. So long as the MMO has that focus then it should be okay but we are fearful that if it is taken away it just becomes a conservation body and that would be wrong.
Q132 Dr Turner: Philip, do you think the balance of the Bill is right?
Mr Wolfe: There is always a high degree of uncertainty. In principle I would support the points that Gordon has made and I do think it is very important that it is used as a development tool rather than as an out and out conservation tool. I think in principle we are on the right track but there is still too much uncertainty really.
Chairman: The Bill is in its third session next week so it is on-going. Can we move to energy efficiency considerations? The phrase "low hanging fruit" has been a frequent metaphor employed in the Committee today. I do not know whether you want to mention low hanging fruit, Mike.
Q133 Mr Weir: I will desist from mentioning it. We have heard a lot about the low carbon building programme. Do you have a view on how it could be expanded to deliver a cumulative target of 12 million upgraded homes by 2020?
Mr Wolfe: I think our perspective is that the low carbon building programme has had an unfortunate history for a variety of reasons and in a way I think we would be happy to see it being replaced with the new renewable energy tariffs, the feed-in tariffs for electricity and the renewable heat tariffs. We think those will prove to be a far more effective mechanism than what was effectively a grant programme for some of the same reasons that we talked about in respect of other technologies, that it gives a visible income stream to the people installing the project and that should open up finance for new projects. We would see the primary mechanism for delivering these 12 million homes as being the tariff mechanism rather than the low carbon buildings programme. We would see it as being a very important way of addressing the part of the market that again you talked about in the earlier evidence session and that is the existing homes that are already there. Of course the zero carbon homes will start to impact on new build but the vast majority of the building stock that will be there in 2020 - come to that, that will be there in 2050 - is already built and it is therefore fundamentally important that policy mechanisms address the existing building environment and the tariffs can do that.
Q134 Mr Weir: Is it not also the case that greater insulation or micro-renewables or whatever in a home might also help address that and it is wrong to just go on tariffs as the only solution?
Mr Wolfe: If I gave that impression then I should not have done. It is fundamentally important that the two are addressed together and I am pleased to say that I think our industry has a very good track record of that. I have personally installed renewables in my house and I am now off the gas grid because I heat my house renewably. All the suppliers who came in and made proposals to me made it quite clear that it would be wrong to go through this without first insulating the loft adequately, without first insulating the cavity walls and all of those things. The installers in the sector are very familiar with that. I think the tariff mechanism will have incentives to ensure that one tackles energy efficiency as well. It is fundamental that the two progress hand in hand.
Q135 Mr Weir: You touched on the zero carbon homes target, do you think that could be important in driving investment, development and job creation?
Mr Wolfe: I think it could be. The uncertainty about what a zero carbon home means is very unfortunate. Some of the suggested definitions of zero carbon are effectively misnomers. Some of the definitions that have been advanced would allow one to build houses pretty much the way you build them today and then effectively offset emissions through remote energy efficiency or renewables projects and I do not think that is the spirit of what the words zero carbon home would mean to the sort of person who is buying one. If someone buys a zero carbon home I think they would rightly expect that they will not be using any net fossil fuels; they should have a net zero fossil fuel bill and if actually they find that this zero carbon home uses quite a lot of fossil fuels but has some kind of nominal share in an offshore wind farm somewhere else, I think that will not have consumer buy-in. It is very important that the definition of zero carbon homes is not drawn as loosely as some of the suggestions that have been put forward.
Q136 Sir Robert Smith: Mr Wolfe, you have been a consumer in the market of turning your house into a renewably heated home. How easy was it to get access to effective advice and information on the options available? You are probably a very informed consumer, but would the average consumer find it easy to embark on what you did?
Mr Wolfe: I had almost hoped you would not ask that question. The correct and honest answer is that it was really quite difficult. If I were not as committed as I am, I am sure I would not have gone through the process. It was really quite hard and I think it is incumbent partly on government but also on us in the industry to make that much more straightforward, to provide one-stop-shops that will hold consumers' hands all the way through the process.
Chairman: Can we finally turn to the issues of the extent to which skills and training will be an important element and the ability of those developments to either benefit or be impeded by the fact that there is a skills and training base available.
Q137 Judy Mallaber: I was interested that the BWEA evidence talked about us having considerable expertise and manufacturing capabilities from areas like aerospace and certainly one of the Aberdeen MPs, when we had a downturn that was affecting Rolls Royce, also suggested their skills could be used in the oil and gas industry. There is a suggestion that we do have a lot of capabilities and expertise, but the REA is also saying that we need to have a major investment in training and education. Is there a sufficient skills base, either transferable or skills that we currently have, to be able to develop a low carbon economy, or do we have a big gap and if so where is it?
Mr Wolfe: We think there is a substantial skills base but in many cases it will need a degree of retraining to apply people who have been used to and trained in one sector to move into renewables, in many cases a related sector. I will let Gordon speak about the large scale wind, for example, which is a very promising area, but referring back to what we have been talking about - the renewables in the built environment - that can be installed in the case of electrical systems by electricians and in the case of heating systems it will be installed by heating engineers. These are people who last week would be installing a gas boiler and next week should be installing solar panel systems and heat pumps. In principle they will need a degree of re-training to be able to do that but it can be the same people. I am not concerned about a person shortage, the important thing is to ensure that the people who are already out there now get the retraining that is necessary to enable them to support the growth in the renewable sector. Our submission was calling for that training input, not for growing an entirely new employment base.
Q138 Judy Mallaber: Would the same apply to wind?
Mr Edge: What we find in wind is a need for technical skills across the board right from lower level skills right through to PhD scale design engineering type capabilities. In the short term we need a lot of maintenance engineers. We are putting up a lot of wind turbines, we need thousands of people to be able to go out and fix them when they go wrong and maintain them.
Q139 Judy Mallaber: Those would be new people.
Mr Edge: Yes, but we are faced across the board with shortages of people with technical skills. There is a key challenge in just getting enough people into the power sector or indeed other forms of engineering technical areas. There are fewer young people going into those stem subjects - science, technology, engineering and maths - and we have a key challenge to bring people to the table to do technical subjects. If we can do that I think the renewable industries have an advantage: we are a bit sexy and we help save the planet. My members are turning away new graduates who do not have the right skills and training because they just want to get into our industry and they are really short of people who have the right skills, training and experience. We have an immediate gap there which we are hoping to fill with various training programmes. We are working very hard to bring forward an apprenticeship programme so that we can have those people to do the maintenance; we are working with higher and further education colleges to bring forward the right courses at the right level. At the end of the day we do have a very key issue around the energy workforce in existing sectors and a lack of supply of young people with the right training coming in.
Q140 Judy Mallaber: To what extent is that a job that the industry is seeking to address or is it a job for government? How do they relate together? How are the current structures working or not working to try to fill the gaps?
Mr Edge: We are working with EU skills, the sector skills council in the power sector, setting up a national skills academy for power. We are feeding in what we need and the levels that we need. We are working on the planning for the academy so that it helps bring forward the right number of people at the right level. We are working with our colleagues in the wider power sector to address common challenges. I think that needs to be done that way; we need to grow the pie for the entire electricity industry of which we are a key part.
Mr Wolfe: We are also, together with BWEA, supporting a project and IPPR just doing a study on what the skills landscape is likely to be for the next decade or two so we can answer these questions with a rather more informed background.
Mr Wright: To give you a view from the marine sector, bearing in mind it is
pretty embryonic, we can get engineers to come in and we largely train
them. We bring in the right sort to work
within our company. To support them it is
notable that they are really sitting in
Q141 Judy Mallaber: Who needs to be doing what to fill those gaps and make it happen? Are we on the right path?
Mr Wright: To my mind it all comes down to the fact that if you create the
market then it will come. That is the
evidence of German and German wind. It
is the same in
Mr Wolfe: That answer does not apply just to marine renewables; it applies across the board to all of the areas we have been talking about.
Q142 Judy Mallaber: You also talk about the importance of raising awareness of the requirements of a sustainable economy but Gordon has quite rightly said that it is potentially a sexy industry; you have a natural advantage to attract people. You have the market so you can ensure the jobs will be available. Do we still need to do a lot of work in terms of education about the importance of the requirements of the sustainable economy?
Mr Edge: It is obvious as far as I am concerned. I saw an advert that was on the television over Christmas trying to encourage young children to take up these subjects at school and they were using wind turbines as a key enticement. It is fertile ground. People know it is part of the future but the pathways in are not clear and that is to do with the training landscape. It is hideously confused; there are thousands of different bodies who have a role. I have a full time person sitting in the audience here working on this since November and she is only just getting to grips with all the different bodies that are out there and she keeps popping up with new ones every day.
Mr Wolfe: I agree with Gordon on that. I don't think we need government to be lecturing people about the importance of this. What they could and should be doing is showing them by example how important they take it to be and we would like to see government, in its own very substantial estate for example, using a far greater proportion of renewables than they do at the moment. They are lagging when they should be leading.
Mr Wright: To add to that, I actually think it is a generational thing. I think the younger generation coming through have actually got it far better than we have. They see the links. It is not just about climate change, it is about security of supply. They are well educated and looking at economic systems, they are looking at what the future geo-politics will be. You only have to be in the schools to realise that they have absolutely got it. We are the ones that are not recognising it to the same extent.
Q143 Judy Mallaber: I hesitate to ask this after what Gordon has said about how difficult it is to get in, once it is established that people reckon there will be a job in this industry are we looking at needing to put on more generalist courses so we are turning out generally trained engineers or whatever it might be, or do we actually need to have far more very specific focussed courses which are relevant to different parts of the industry.
Mr Edge: We need a bit of both. One of the things we are focussing on is those courses that take you from a general engineering degree through to something that people can take on, like MSc type courses. There is a need for that. Whether you also need to be doing degrees in renewable engineering, there is an argument for and against that. We just need more engineers at the minute. We would love to be able to work with them to bring them to the kind of skills we need specifically in our industry. We just need more engineers, full stop.
Mr Wolfe: I think renewables need to be part of the general education system. On the whole the very specific skills individuals need tend to be built up on the job. It is not something you are necessarily going to learn in a classroom.
Q144 Judy Mallaber: Are you getting women into the industry?
Mr Wolfe: Yes.
Chairman: That is a good note to finish our evidence session on this morning. Philip Wolfe, Gordon Edge and Martin Wright, thank you for your evidence to us this morning. May the wind blow on your wind farms, the tide come in on the wave machines and the sun shine on the photovoltaics. Thank you for your evidence today.