Low carbon technologies in a green economy - Energy and Climate Change Contents

Examination of Witnesses (Questions 449-547)

MR DAVID KIDNEY MP, MR PHIL WYNN OWEN AND PROFESSOR DAVID MACKAY

16 DECEMBER 2009

  Q449 Chairman: Good morning. David, thank you very much for coming to join us. As you know, we have been looking at the notion of a low carbon economy and how we get there and how we can create new jobs and you are our final witness, and I am sure everything will fall into place during this session. So, thank you very much for coming and thank you for bringing Professor MacKay and Mr Wynn Owen with you. We are going to go away and write the report and hope to publish mid-February. Can I start by asking you about the notion of a green stimulus? All over the world governments have been injecting money into the economy. We have done it. How do you think we compare against other countries?

  Mr Kidney: It is important to start with two thoughts in your minds. The first one is that you must get the idea into your head that we are going to move irrevocably to a low carbon future—it is nothing less than a second industrial revolution. It has to happen and not just here but around the world, just like the first industrial revolution did. In terms of having the right kind of policy framework in this country we are certainly world leading in what we have done and we certainly have a plan that is coherent, from the Climate Change Act with a legally binding target for reducing emissions through to the carbon budgeting process with the first three five-year budgets announced. The independent Climate Change Committee reporting to Parliament and of course to the public about how we are doing against the budgets and the Act. Then the final piece in that jigsaw was the UK Low Carbon Transition Plan published in July, and alongside it at the same time the plans for renewable energy, transport and industry. So it is that coherent thing that says that really in the future, as somebody put it to me, every job will be a shade of green. So when we talk about a green economy and green jobs we really have to have our minds open to the fact that every aspect of work and life is changing and changing fast. So that is the big thing to say. The second thing about green jobs is that we finally settled this year on a definition of what we mean by specifically green jobs and that is the work that the company Innovas did for us that resulted in the report that was published in March, for low carbon and environmental goods and services, and it is from their definitions of how you get to green jobs that we now give this figure of 880,000 green jobs in this country and an income from it of over £106 billion. So I ask you to have those two things in mind when I answer this question, which I am now going to do—honest!

  Q450  Chairman: On your terms!

  Mr Kidney: The whole economy is going green and we have this particular definition that we use for convenience, consistency and for clarity. So now we come to green stimuli. What I ask you to take into account is that there are wider policies that make a difference. To give a very general one, doubling the science budget in the last 10 years makes a difference to what we are talking about today. But you are after the actual figures that we have spent and in the last 12 months we have had the Pre-Budget Report 2008, the Budget 2009 and now the Pre-Budget Report 2009. Between them over £2 billion for this area that we are talking about, the green area, as per the Innovas report, and I think that that compares reasonably well with other parts of the world as long as you have in mind those bigger issues that you take along with it. So, for example, the work that we did in Budget 2009, building on the Pre-Budget Report of the year before, on moving renewable obligations to a banded system is going to be an injection by 2014 of £2 billion or £3 billion more on top of that £2 billion I have just described to you. For example, the CERT obligation on the energy companies for the three years 2008—2011 is over £3 billion, so when we are compared with other countries beware of not being compared on an even basis in this country of what we are doing compared with what they account for in their country.

  Q451  Chairman: You hear this as well as us—we have had witnesses who have said, "This is not comparing with what they are doing in the States; the efforts of the UK Government are pretty minimal." What is your response to that?

  Mr Kidney: My response is absolute rot. You can take a specific figure that we have spent in a particular budget and compare it with somebody else's budget the same year and say, "Look, they spent a lot more," but that coherence that we start from that I described to you, the direction which we are going towards in this low carbon future, the speed at which we are going and the plans that we have put in place to get there I think is world leading and I think we are entitled in this country to be optimistic about how we retain that world lead in some specific areas of our economy, which we will discuss I am sure during this session, where I genuinely believe that we will continue to be world leading and people will look to us for the technologies and the skills and for the products that we in this country develop.

  Q452  Chairman: That is a pretty confident position to be in. What more do you want to do to sketch out?

  Mr Kidney: Let us just look at those areas that we identified for that green stimulus in Budget 2009. Offshore wind—we are the leaders in the world in connected up electricity from offshore wind to this country. Our Round 3 Licence round that is going to happen by the end of this year has attracted enormous global interest. I have met with companies from around the world who are interested in getting a piece of the action in that offshore wind development. We will certainly continue to be world leading on that one. Marine—wave and tide—we have very positive stories to tell in terms of the expertise of our scientists and our entrepreneurs in trying to get to market workable solutions that will produce energy in sufficient volumes for them to be worthwhile. We have the best testing arrangements in the world, again, with NaREC, the new and renewable energy centre in Blyth; EMEC, the European Marine Energy Centre in the Orkneys; and now the commitment we have made to the wave hub in Cornwall where construction has now started. Between them that suite of testing facilities is the best in the world and we have the products like SeaGen and Pelamis, which are probably at the forefront of getting to that commercialisation of marine energy, so we are ahead there. On civil nuclear it ought to be remembered that we were actually the first country in the world to develop in any kind of scale civil nuclear. We have now made that decision in the Nuclear Energy White Paper in 2008 to have the next generation of nuclear power stations in this country, which will lead to a veritable renaissance in nuclear in this country. Low carbon vehicles—certainly we are as far ahead as any other country in the world and I think building on the work we have done with the northeast, with its low carbon economic area and the decision Nissan made in the context of our low carbon economic area there really gives us quite a good position on electric cars. I have been to Loughborough myself to see some of the work that has been done on hydrogen fuel cells that may be an alternative future low carbon power source for cars. There was another one I wanted to mention and that is clean coal—carbon capture and storage—where the position in which we have put ourselves with the legislative position, the policy position, the financing mechanisms that we are putting in place, gives us the opportunity to be first in the world on getting CCS to work from end to end on a commercial scale in Britain, and the market for that, as you know, is enormous around the world. So those are the five sectors we identified in that Budget 2009 in the financial stimulus. The one that I would like to add that is not in that list is the technologies we will need to complete that whole house retro fit insulation of all our domestic buildings, and alongside that the urgent need for all our commercial buildings to do better than they have in the past. There is huge work to be had there in terms of the technologies that will meet the need for us to be able to do that work. Those are the areas where I think in this country we are and can continue to be world leading.

  Chairman: That is a big list and we are going to come to them, Mr Wynn Owen, so we will work our way through them. You have brought us on to renewables, so we will start with Robert Smith.

  Q453  Sir Robert Smith: For the record I must declare my registered Member's interest as a shareholder in Shell and having made a visit to Total's carbon capture and storage plan in South West France, paid for by Total, and as Vice President of Energy Action Scotland, a fuel poverty charity. In that long list you mentioned something that ministers use quite a lot, that we are world leaders in offshore wind, but I think you put the definition in a bit there, in the sense that we have the most connected; but I wonder how we were doing in terms of the actual green jobs that go with offshore wind and how much of that connected capacity was providing jobs abroad and how much of the jobs were actually in the UK. Because in the northeast of Scotland we have a lot of potential with sub-sea engineering to diversify into that sector.

  Mr Kidney: I have met companies in oil and gas who do construction work for that sector, who see big opportunities in this sector, so they might presently be jobs in oil and gas that in the future will be jobs in offshore wind; so there are big numbers to be had there. As I say, I have personally had talks with international manufacturers looking at setting up manufacturing services in this country because of the opportunity that Round 3 gives them and they want to be near to the markets, which makes sense, and that would be a huge boost. You saw the Carbon Trust estimate of 40,000 to 70,000 jobs could be created in offshore wind. Today the narrow figure is about 5000 jobs in offshore wind.

  Q454  Sir Robert Smith: I must go on the record to say that you mentioned the product, the Pelamis, which all the high end engineering is manufactured in my constituency.

  Mr Kidney: Great!

  Q455  Sir Robert Smith: So again that was an oil and a gas company diversifying into that engineering skill.

  Mr Kidney: Scotland has some good stories to tell on the renewable energy side and I am pleased and proud of them.

  Q456  Charles Hendry: Just to look at that in a different perspective, if I may, if you look across the EU in terms of the proportion of our electricity which comes from renewable sources we are 25th out of 27—only Malta and Luxembourg are behind us. That does not quite tie in with my definition of "world leading". If we look at some of the technology about which you have spoken, Pelamis is looking to develop further in Portugal because the financial support system is better than it is in Britain. Aquamarine, a similar company doing good work, is looking to develop it in Oregon rather than Britain because they get greater support mechanisms coming through there. The Marine Renewable Deployment Fund has £50 million in it and £42 million of that is to support new technologies but not one penny of that has been used—the £8 million for environmental work has but the £42 million has not been touched. We have with the ROCs one of the most generous support systems in Europe—only Italy and Belgium have a more generous support system—yet we have not delivered the same investment. It may be that we have world leading potential but it is not true to say that we are world leading at the moment.

  Mr Kidney: Look back 20 years ago when onshore wind started to become a big industry—and I notice that one of your witnesses said how we missed the boat then in this country in capturing a share of that market. You tell me, Charles, as a Conservative, why the government of the day did not capture a share of that market for this country? We are determined to learn the lessons of why the manufacturer of onshore wind turbines is now in Denmark, Germany and America, and to try to capture a decent share of that market in the UK for offshore; so we do not want to repeat the mistakes of not having the right stable framework for people to make decisions, not having the right financial mechanisms in place and not willing even to give the grants that would secure the business for this country. All of those things today we are willing to do and have done in terms of the stable policy framework and the financial incentives through the renewables obligation with its new banding; and even the additional flexibility of having said 1.5 ROCs for offshore wind we have said that because of the particular difficulties that the industry has brought to us that we will make it 2 ROCs from 2010 to 2014, coinciding with that massive explosion in the work because of Round 3 licences. So I would dispute your suggestion that we are not world leading on offshore wind. On marine, Pelamis did have a session of trials off the coast of Portugal, but it is now booked back in at EMEC, as you probably know, prior to becoming a commercialised product. The fact that it returns to our world leading testing and accreditation facilities in the Orkney Islands shows that the true place to be is here. You mentioned the Marine Renewables Deployment Fund where we did provide indeed £60 million, in consultation with the sector as to what they needed, and we were as surprised as anyone when then no developer stepped forward and asked for any money from the Deployment Fund. When we said, "How has this happened? Why have you not asked for the money from the fund that you and we designed together?" they said, "Minister, perhaps we were a little bit optimistic about the stage we had reached in the development of our products; we are not quite at the deployment stage yet." So in consultation with them we then devised a marine renewables proving fund—£22 million. Applications were opened in September and closed in November. There have been more than enough applications that eat up all of that money and we fully expect to be making announcements early in the New Year about who has that money. Pelamis' developers in fact think that they will be the first to ask for the deployment fund money. So in marine we are genuinely world leading. So I take your point about the percentage of our energy from renewable sources in this country compared to others in Europe. I think that they started a lot earlier than we did and again that comes back to a government that was a different hue in this country than mine; but we are catching up very, very fast.

  Q457  Charles Hendry: To try a different aspect in that case. If you look at the nuclear programme the government has a target and has a very clear roadmap and we know each month who should be doing what and who is responsible for getting us back on track if we slip behind. For renewables we have an incredibly ambitious programme and there are some people out there, particularly in business and CBI, who question whether the 2020 objectives are achievable. It is very hard to realise whether they are achievable without the roadmap. I know a roadmap is coming but would it not have been more sensible to have a roadmap to go alongside the target from the outset, so that everybody knows how exactly we are going to reach that 2020 target?

  Mr Kidney: Charles, I have heard you several times give this praise to the nuclear sector—and rightly so, it has really got its act together. Bear in mind that in this country the nuclear industry was looking at a gentle decline and closure back as recently as 2007. It was our 2008 White Paper that said, "No, there is a future for a new generation of nuclear power stations in this country" that has completely changed the landscape and ambition of the sector. Your own party very strongly now supports that position, so it does look as if there is consensus that there is going to be new build of nuclear power stations in this country. So the sector has pulled itself together; it has a brilliant set of industry leaders; it has a really good Sector Skills Council in Cogent, the new National Skills Academy for Nuclear. And I think you have praised in the past our Office for Nuclear Development, which we established in DECC and between them in the last 12 months, as you say, they have this tremendously good plan of where they will be month by month from now to 2018 when hopefully the first of the new generation of power stations is delivering energy to our National Grid; and specifically they have a really good plan in terms of finding the skilled workforce that they will need for that new generation of nuclear power stations. I agree that we are slightly behind that situation in renewables and I think the reason for that is mainly that the nuclear industry is small, focused and well-defined, whereas renewable energy sources are extremely diverse, a lot of companies are very, very small and to corral them altogether is more difficult. We have now established an Office for Renewable Energy Deployment in the Department to do the same for renewables that we have done with the Office for Nuclear Development for nuclear. They are also catching up fast in terms of having an Academy, so the National Skills Academy for Power has now found all of its funding for its expanded business plan and goes through the approval system in January to see whether it gets passed for its business case with BIS. I think that people have got their act together. In advance of the Academy seven Sector Skills Councils, all of which have a hand in one aspect or another of renewable energies, and the ECITB, the Engineering and Construction Industry Training Board, have come together as eight bodies to establish a renewable energy skills strategy for the sector. So the signs are getting better and the main reason for the difference is this dispersed industry with lots of small players compared to one well defined and mature industry that is nuclear.

  Q458  Dr Whitehead: Why have we forgotten about solar?

  Mr Kidney: How have we forgotten about solar?

  Q459  Dr Whitehead: Why have we forgotten about solar is what I was asking.

  Mr Kidney: I ask how you can ask why we have forgotten about solar. Why do you say that we have forgotten about solar?

  Q460  Dr Whitehead: For example, the 2020 Renewable Energy Strategy produces a pie chart with a likely contribution made by various technologies to renewable penetration of the overall energy market. Something like 10% of that is represented by renewable heat, solar thermal heat, which presumably can only be achieved by a much greater penetration of solar thermal on domestic properties, particularly, or perhaps by air source and ground source heat pumps installation. We show no signs of supporting, certainly in our priority list, any of those technologies or arrangements and at the moment it looks quite fanciful that the sort of level of insulation that would be necessary to achieve that proportion of the renewables penetration is going to be achieved. That strikes me as ignoring solar.

  Mr Kidney: The very fact that you can see a pie chart that has a solar element contribution to renewable energy sources in the future shows that we have not forgotten it.

  Q461  Dr Whitehead: You just have not worked it out.

  Mr Kidney: What your question really is: why do we not give it a higher priority? I am going to ask David MacKay in a moment to say something about the contribution that solar can make in the UK. But just to say that we definitely have not forgotten it. If you take the Low Carbon Building Programme of grants for people to install renewable energy technologies of £131 million, £50 million of that has been spent on solar insulations. In addition to that £50 million another £55 million was spent on the Major Demonstrations Programme for Solar. Of course, next April feed-in tariffs arrive in the UK—hurrah!—and the solar industry is gearing itself up for what they expect to be a massive increase in demand for their products. The man from Solarcentury, who came to see me last week, pointed out that two years ago in France there were 100 solar technology industry businesses in France. They introduced the feed-in tariff that year and today, two years later, there are 2000 such businesses in France, and he is anticipating a similar kind of response by the market in this country. So I would not accept that we have ignored or forgotten about solar, but David would like to say something about the contribution of solar.

  Professor MacKay: Thank you, Minister. So there are solar photovoltaics and there is solar thermal making hot water. I believe it is right to say that solar photovoltaics do receive support already under the renewable obligation—I think 2 ROCs per megawatt hour—and, as the Minister said, they will receive support under the feed-in tariff. Solar thermal, my guess is that that will receive support under the new ...

  Q462  Dr Whitehead: Renewable Heat Incentive.

  Professor MacKay: Thank you. Under the RHI. Your question is, in the lead scenario in the Renewable Energy Strategy why does solar make a relatively small contribution in spite of those planned incentives? I guess the answer is that that lead scenario, which is not a prescription of what will happen—it is not describing policy, it is just a projection, a possible outcome—that projection is based on the estimated economic costs. Solar photovoltaics are still really quite an expensive way to generate electricity. Hopefully those costs are going to come down and it could be that the lead scenario is going to be wrong and maybe photovoltaics will go further. One justification for not anticipating the huge growth of photovoltaics is that we are one of the cloudiest countries in the world and it is not the best place to site solar photovoltaic panels. They do work but they will actually generate more electricity and do more good for the planet in other countries.

  Q463  Dr Whitehead: But solar thermal, which is a well established technology, air source heat pumps which are getting on for being a well established technology—and I think that you personally think that air source heat pumps could play a substantial role in renewable technologies—in terms of the ambition as far as the Renewable Energy Strategy is concerned do you not think particularly in that area that they are worthy of rather more support than appears to be the case at the moment?

  Professor MacKay: Yes. I have been in my job for two months and one of the tasks I was given early on was to scrutinise our lead scenario for renewables and I completely agree with you; I think that we could anticipate a greater outcome with air source heat pumps in particular. I think that they have a great potential to make a really large contribution to our renewable target. I think the reason that air source heat pumps came up again at a relatively small projection in the lead scenario is an assumption that the installed base today is so small and it would be hard to imagine growth reaching a higher level than was indicated in that lead scenario. I actually agree with you; I think we already have a lot of the necessary skills in the air conditioning installing industries—the same device and air conditioner is a heat pump, it is just working the other way around. So I think we are actually starting from a higher base and I think you are absolutely right that air source heat pumps could play a really large contribution. As for solar thermal panels I agree with you; they do work, even in Britain. I think they are a good investment. There are some ways of doing the economics where it sounds like they have a very large payback time, but you could say the same about many things we buy. If we make an extension to our house what is the payback time of the extension? We do not think in those terms. Similarly I think that solar thermal panels can be viewed as a very good investment—they add value to a house, and I think that solar thermal is a good thing and does deserve support.

  Q464  Chairman: We have already talked a bit about carbon capture and storage. I have taken quite an interest in this because I represent an area that is still a coalmining community and I am keen to see us go forward there. You have a competition running.

  Mr Kidney: We have.

  Q465  Chairman: The timetable has slipped quite a lot. Are you suggesting to assure me that we are going to have a new CCS plant up and running by 2015?

  Mr Kidney: You want 2015, do you! In the original invitation to bid for that competition we set 17 outcomes that we wanted to achieve, one of which was that this demonstration would be up and running by 2014. You may know that at the last stage of the short listing one of the bidders dropped out and another one, E.ON, with their Kingsnorth project publicly announced that for reasons to do with the recession they did not fancy making the investment in a new coal plant before 2016. So they stayed in the competition, telling us that they will not be able to meet that outcome of 2014. So I can see your concern that we might not hit 2014, so that is a possibility. But all I can say at the present time is that there are still two competitors in the competition who have now gone on to the next for which we have provided £90 million in Budget 2009 for their front end loaded engineering and design phase of the competition, which will be carried out during 2010. At the end of that we then make the decision of who has won the competition for that first demonstration plant and we would like it to be demonstrating in 2014 but if E.ON were the winner then I am afraid I could not even promise you your 2015 because they say 2016. But good news in terms of the Academy that has come along since is that we have marshalled the resources in order to move on to another three demonstration projects and we will be working out the details of the competition for those three during 2010, and at this stage I cannot tell you whether they will meet 2014 or 2015 or some other date. So we will need to know in 2010 what the timescales are likely to be for those three.

  Q466  Chairman: You and I and others will have the opportunity to talk about carbon capture and storage next month.

  Mr Kidney: On the Energy Bill, indeed.

  Chairman: So I will pass over to Robert Smith on this.

  Q467  Sir Robert Smith: So why have the international competition been able to act more quickly?

  Mr Kidney: Like?

  Q468  Sir Robert Smith: According to the Carbon Capture Storage Association when they gave evidence Canada took 11 months between announcing that they would finance three demonstration projects to choosing the three projects from quite a long list. Projects are being committed also in the USA and in Australia. The first power project with CCS may well be in China and the second may well be in Abu Dhabi. Are they right or not?

  Mr Kidney: I have no way of judging that. I can tell you now that there are some projects that are up and running in the world but they are 20 megawatts. We are talking about 400 megawatts gross, 300 net and that is a real, proper commercial demonstration. Whilst we are grateful for any evidence from around the world that shows the technology working, on whatever scale, the fact is that commercialisation of the process and the products is what is going to make a difference to the world's environment and to somebody's economy and I would like it to be ours.

  Q469  Sir Robert Smith: A lot of the processes are pre-combustion that have been looked at around the world and why exactly was post-combustion the target for a big government strategy?

  Mr Kidney: We always said that we wanted four projects in order to test the whole range of technologies. So the two pre-combustion possibilities and the post-combustion. Now that we have the go ahead in the Pre-Budget Report to say that there will be four projects for sure financed in this country—and let us remember they are all very expensive at this stage—we will be able to test all of the technologies.

  Q470  Sir Robert Smith: What is the strategy for the public understanding of what is being done? When we saw this project in southwest France the pipeline running through the area, the houses near it had posters up saying, "No to CCS; we do not want that carbon dioxide going past our house." For 30 years they had had natural gas with H2S, a very poisonous gas, going past the house in the opposite direction, but because of the novelty—even though it was less dangerous. So how do you see us taking the public along that CO2 can be safely stored and that there are not dangers involved in it?

  Mr Kidney: It is a really good point. If you look at the past history of planning to build a new nuclear power station the objections were enormous in the immediate area. If you look today about the difficulty in getting planning permission for onshore wind farms the local campaigns against can be quite powerful. So it is important as part of our strategy that we educate the public about the importance of this, its safety and why it really matters to ourselves and to the planet's well being, and we will do that. I do not want to rush into that now when, as we have just been discussing, people are not actually going to see building work for a little while yet. But in due course those huge networks of pipes to enable clusters to develop and to then transport the carbon that is captured to their storage places, initially probably under the North Sea somewhere, will require a major public education campaign, and we are mindful that we will need to do that.

  Q471  Sir Robert Smith: One of the other concerns from some witnesses is that the amount of energy used in the process means that our energy security will be undermined by the fact that we will need even more energy for the same electrical output. Is that a concern you share?

  Mr Kidney: One of the points about demonstration of these technologies is to get some facts rather than theories about these things. You can see, especially for pre-combustion, that there are other processes that need to be undertaken which do involve energy. As the Minister in the Department responsible for innovation I have been looking at other processes like gasification of coal underground, which, again, is remarkably energy hungry in the process itself. Again, if we move all our vehicles from petrol and diesel to electric in the future there will be a big demand on our electricity supply in the future. So there are these scenarios that we well understand that there could be increases in demand for energy and the whole point of carbon capture and storage is to enable us to use a fuel source that is comparatively plentiful and comparatively affordable in the world today and is likely to be used for decades ahead all around the world as a source of energy, and to try to reduce its harmful effects on the environment. So there are other factors to weigh in as well as the total amount of energy consumed, including the carbon emissions.

  Q472  Sir Robert Smith: The Secretary of State in the Energy Bill was saying how he wanted to see carbon capture storage extended to gas generation. What mechanisms or procedures are there in place from the government to actually achieve that goal?

  Mr Kidney: That is a little bit distant if you are asking me about the legislative changes that would be needed. They are certainly not in the Energy Bill as we have already debated at Second Reading, and it may be that there would be a requirement for further legislation. But that is something a little way in the distance. You can also think of other industrial processes that would benefit from a commercialised carbon capture and storage that would also gain and that might also need legislation.

  Q473  Sir Robert Smith: The Secretary of State having ruled the end will have to rule the means.

  Mr Kidney: Of course.

  Q474 Sir Robert Smith: It just seems that given how dominant gas is in our market and with Shell gas from the USA how much gas is going to possibly play for quite some time in the market that we could be maybe world leaders in that gas area; and given that we still have our own North Sea oil and gas industry it would seem quite important that the government sees urgency in gas CCS.

  Mr Kidney: I am glad that you appreciate the need to put all the building blocks in place because when some people criticise us for the speed of our progress on carbon capture and storage it is as well to remember that we have legislated for the liability about the long term storage of the carbon and we have conducted the consultation about the licenses for storing the carbon captured under the North Sea. You are right; we need to do the same process for gas. But since we are talking about a demonstration project for the first coal fired power station of 2014, 2015, 2016 we do have time in the next Parliament to pass the legislation that you are talking about.

  Chairman: We have talked a bit about nuclear so let us spend a few minutes talking about nuclear.

  Q475  John Robertson: One of the big things that the general public have problems with is what we are doing with the waste and various groups have said that the government has not finalised what it wants to do. We were told that we were going to get the paper regarding what they were going to do with waste in the autumn; then it was late autumn and now into winter. Are we likely to get the policy statement on waste in time so as the general public can have its fears allayed?

  Mr Kidney: That is a very important issue, obviously. I mentioned that we were world leaders in the first generation of civil nuclear power stations in the UK but at that time we did not have a plan for what to do with the waste and this is the first government in the history of nuclear power in Britain to actually grasp the nettle and settle our policy. In the end, after a very exhausting and extensive investigation of the options we have come back to the conclusion that a geological disposal facility is the answer. When we consulted after the White Paper on our policy people said to me, "You are asking communities to volunteer to be the site of storage of nuclear waste; do not be silly, nobody will volunteer." But actually so far three local authorities have come forward expressing an interest in being a host for such a facility. So I think the policy is clear. You are right that there is some detail still to be worked out and that is why for the time being waste will continued to be stored on the sites where it is produced. But one thing that is very important about the new generation of nuclear power stations is that there will be no public subsidy and the business plans of the various consortia, the men stepping forward with proposals for the next generation of nuclear power stations in this country, know that part of their cost is that they will have to contribute to paying for that long term storage of waste.

  Q476  John Robertson: The Sustainable Development Commission has concerns on the long term impacts of the risk, the cost and obviously the waste that you have mentioned. In relation to cost if we look at the lifetime of a nuclear power plant and, shall we say, the afterlife as well, are you satisfied that the cost will be met by the companies who are going to do the power stations and, in effect, the long term outlook is that the waste will be safely stored? I assume that you have looked at places like Oesthammer in Sweden and talked to your counterparts in Canada who have also been down the road of deep geological storage. Is that the case? Also, have you looked at whether you want to retrieve the waste when you store it or whether you want to store it and basically bury it forever?

  Mr Kidney: On the cost, obviously we do have decades of experience of the cost of keeping waste safe, which have informed our calculations going forward on the figures to give to the developers. Am I confident? We have the best minds working on how to make those calculations, so I would like to say that I have confidence in the people advising me that we have the costs right and those have been shared with the consortia in order for them to be able to insert them into their business case. That specific question about whether the storage will be indefinitely inaccessible or whether it might want to be retrieved is one on which I am not aware we have made a final decision, unless David, my scientist, is now going to tell me differently.

  Professor MacKay: That is right, Minister.

  Chairman: To be decided.

  Q477  John Robertson: My last question is on the skills which you mentioned earlier. I find it hard to believe that the government will not have to put some kind of extra financing into universities and schools in particular for engineering purposes and also if we are going to meet skills shortages not just in nuclear but in CCS, as you mentioned earlier, and also in renewables, engineering is obviously an area where we have, I believe, taken our eye off the ball over the last few decades and it is time we got it back on. Can you tell me what kinds of plans the government has to try and resurrect engineering to the position it needs to be and covering it with new technologies—not just nuclear but other technologies—so that we actually fulfil the skills shortages ourselves and not have to import it in from other countries?

  Mr Kidney: First of all, our colleague, Paul Flynn, is not afraid to say that the government is already subsidising the nuclear industry by paying exactly the kinds of services that you describe in terms of enhancing the ability of the universities to provide students of physics and engineering for the nuclear sector. Obviously there is a public sector contribution to the National Skills Academy for nuclear, and we recently made the announcement about the Centre of Excellence for advanced nuclear manufacturing for the future, with Sheffield and Manchester sharing the venue for that. So there is certainly public money going towards meeting the skills needs of these low carbon industries of the future already. But you rightly say that this must go much wider than the nuclear sector and we did publish recently the National Skills Strategy, which recognises this. I think it is fair to say that the way our economy has been going in terms of graduates choosing subjects other than stem subjects in the past was recognised several years ago, and we are currently in a phase where the number of stem graduates is rising each year at the present time. So I think that the message has already got through. But what is good about the National Skills Strategy is that it reinforces these opportunities in our economy for the future in low carbon and environmental goods and services in the transition to a low carbon economy in the future, and therefore the obvious bigger need in the future than in the past for these kinds of engineering and related skills. So you see, for example, in the National Skills Strategy an intention to expand the number of advanced apprentices. You see the intention to restore a good cadre of technician class workers in this country; and you still see the emphasis on graduate recruitment with the right skills for these sectors. So I think that we have recognised your point. It would make sense, would it not, in a national intention to move to a low carbon future to recognise that that involves some changes to people's skill sets and to make sure that we have put in place the skills' providers and provision in time for people to have those skills when we have the jobs that they want to take up. So we are on that case.

  Q478  Chairman: That is helpful and we are going to come back to skills later on in our discussions. Can I ask you about the argument I hear from some environmental NGOs and in particular another source, the Sustainable Development Commission, that the focus on nuclear, the government's interest in nuclear and private sector investment in nuclear is going to be, in a sense, to push renewables into the background. Clearly you have heard this argument as well and how do you counter it?

  Mr Kidney: I think there is an understandable strength of feeling amongst the public and people with an interest in this subject for and against nuclear power, which makes its focus a public debate. The government's public policy is not focused especially on nuclear; we have said very clearly that the future of our energy supply in this country in terms of tackling emissions and having security of supply is based on this trinity of renewables, on nuclear and on clean fossil fuels and we need to develop all three of them. Our judgment is that if we were to say no, we want to put all our eggs in one basket or in two of the three we would not meet our future energy needs in this country. So we think that they are all very, very important. We certainly do not pick out nuclear as especially deserving our support and, as we have said, there will be no public subsidy for the development of the next generation of nuclear power stations.

  Q479  Charles Hendry: You rightly praised the Office for Nuclear Development for the work which they have done in removing some of the obstacles to development of potential new nuclear. When the companies concerned make their investment decisions in the next year or so it is going to come down primarily to one issue, which is whether they think they will get a return on their investment over time, and they are pushing for a certainty in the price of carbon. We have seen the French Government, President Sarkozy, announcing a floor price which will start at a lower level and gradually rise up. We have seen other European countries start to go down that route. The government here appears to have said that it does not wish to go down the route of a floor price. How will you otherwise give certainty to the investors that that they will get a return on the money which they put in?

  Mr Kidney: That is a really important question, Charles. Just by way of introduction I did praise the Office for Nuclear Development but I also praised the industry itself and Cogent and the National Skills Academy for Nuclear because I think they have all together done a great job; but you are right that that bringing everybody together and giving impetus to the work that the Office for Nuclear Development has done has been very, very valuable. Again, this public focus on nuclear means that there were headlines in the Guardian that the government is going to do something to increase the carbon price in order to make the figures stack up for nuclear, but in fact of course we do want a good robust price for carbon to drive the changes that need to be made to make that transition, starting first and foremost with energy efficiency and some of the energy efficiency measures that we need to take cost money, and if carbon is properly priced that becomes a better deal to spend that money on energy efficiency. The same goes for renewable energy—all those new emerging renewable energy technologies could do with a good robust price for carbon in order to make it worthwhile investing in them. Then the same applies to nuclear and the same applies to carbon capture storage. So you are right that there is issue about the carbon price is very, very important. In this country we take the view that if politicians start interfering in the market of carbon trading the people who are going to make a killing out of that are the speculators and our view is that we must make the market in carbon trading effective, and our view is that in the European Emissions Trading Scheme one way we can do that is to give a credible cap and an effectively working Emissions Trading Scheme. So we want to see phase 3, to have a very tight cap; we want to see the Copenhagen Agreement reach a deal that does lead to higher commitments by the developed world to make carbon emission reductions, as a part of which the European Union will move its offer up from 20% reduction by 2020 to 30%, and we think then that if the cap in phase 3 represents that tighter position that we will start to see a decent and meaningful price for carbon that is reliable. So our view is that it is that kind of market mechanism that gets the price of carbon to where we need it to be, not artificial interference by politicians.

  Q480  Chairman: What if you are wrong? We are in the early days of carbon trading and the market is immature. We will see what happens at Copenhagen this week. If you want to bring any new technology on, whether it is nuclear, CCS or renewables, a robust and high price of carbon into the future is going to drive that investment. If the market does not deliver—and there is a possibility—what are you going to do?

  Mr Kidney: We have said even in the Transition Plan that if the market does not deliver the robust price for carbon we will have to consider other interventions, like taxation, as a means of getting to that position, so we alert to the possibility, in the way we suggested.

  Chairman: I thought you were ignoring it for a minute!

  Q481  Charles Hendry: But you will not know that in the timescale. The companies have to make these investment decisions in the next year or so and we will not have the robustness in the EU ETS for certain in that timescale, so something has to be done to provide them with a security of investment that by 2020 the carbon price will be at a certain level. So it cannot simply be left for some years to come to see how the EU ETS performs—it has to be done at an earlier timescale, surely?

  Mr Kidney: I cannot think of an earlier timescale than on Friday we ought to know the result in Copenhagen, and if we have a positive outcome in Copenhagen we know that the European Union has said that it will raise its target to 30% carbon emissions reductions by 2020, and the cap will have to be timed in order to fit with that. So within two days of our meeting today talking about this the markets ought to have some kind of reassurance about what is going to happen. If it does not then you are right, we need to be talking about other measures about taxation. I agree that we cannot put that off forever, but at the moment Copenhagen is a very, very important part of the equation.

  Mr Wynn Owen: Just to add that the Minister is absolutely right; the best way to secure a higher carbon price is by the EU ETS working. The third phase, already there are plans for tightening of the cap; we know that is going to happen and of course if there is a successful outcome to Copenhagen, which we all very much hope and expect there will be, then we would expect the cap to tighten further. But I should also add that in the PBR documentation it did note that following on from our low carbon transition plan and the call for evidence that DECC and the Treasury will be making an assessment of the energy market, and this will explore how we can ensure that we get the low carbon investment we need, whilst ensuring a fair deal for consumers. That is due to deliver its initial findings for Budget 2010. So that will be able to take into account the assessment that DECC and Treasury officials will do now urgently over the coming three or four months and will also be able to take into account what actually is the outcome of Copenhagen and where that leads us.

  Q482  Sir Robert Smith: Just on this exchange about the price of carbon, I think I agree with you that all low carbon industries would benefit.

  Mr Kidney: Yes.

  Q483  Sir Robert Smith: I have two worries—and you should never ask a question if you do not know the answer, but I do not know the answer—that given the European Trading System and the open market in Europe can any one country in the EU do anything to influence the price of carbon only within their national boundaries, or in effect will anything they do benefit the whole EU?

  Mr Kidney: I had that discussion yesterday on a slightly different aspect of this. You are right, that as long as we are all 27 Member States in the same scheme there is a limit to what individual action can do to change the price of carbon across the whole of the 27 States. Much better to look at linking our system with others around the world as they develop in the way in which Mark Lazarowicz's report points out, and trying to make a success of the trading aspect.

  Q484  Dr Whitehead: Can I go a little further on that one? If indeed certain Member States of the EU decide that there is going to be a carbon price, whereas others are trading, does not actually wreck the trading system about which you are speaking?

  Mr Kidney: When you say a carbon price? Charles was asking me about some thoughts in some countries about a floor. It is not necessarily the same thing.

  Q485  Dr Whitehead: Let us say that two or three EU Member States decide that there is going to be a floor price for carbon and everyone else is trading as if there is no floor price, does that not actually mean that effectively the trading gravitates towards certain aspects of EU trading and frees other aspects of EU trading?

  Mr Kidney: It does contain within it the seeds of potential destruction of the whole because, as you say, people would be for artificial reasons buying and selling in one place rather than another, so it would be extremely dangerous for individual Member States to go down that road. I do not know how far the States that Charles mentioned have gone with their ideas that they want there to be a carbon floor. Certainly in terms of negotiations in the European Council that has been raised as a subject for discussion, but dismissed as a solution.

  Q486  Dr Whitehead: Bearing that in mind, bearing in mind the UK position on this, would we not anticipate the representations that may be made to tell people not to be so silly.

  Mr Kidney: Our views are very robust in the European Council debate and in the corridors of Brussels.

  Q487  Chairman: David, I do not know whether you would do this for us, but Mr Miliband, Secretary of State, calls an agreement at Copenhagen and a robust carbon price Plan A and does not want at this stage to discuss Plan B. Would you write to us after you have had a chance to look at whatever comes out of Copenhagen about this whole nature of a carbon price and a floor on the price of carbon? And the issue that Alan has been raising is could there be a dual system, a market and a floor at the same time?

  Mr Kidney: Can I suggest first of all that there is bound to be a statement to the House on the outcome of the Copenhagen negotiations when we all get back after Christmas. So there will be some answers given then. Can I suggest that we correspond after that statement if you still have queries that you want me to answer with detail?

  Chairman: Yes.

  Q488  Sir Robert Smith: One other thing raised by witnesses is that conundrum of the carbon life cycle of projects and the argument put by the New Economics Foundation that the whole life cycle of nuclear is actually all the energy is in its production and handling, and so on, and it means you end up with no benefit because the energy that it produces in its lifetime is always used up. Do you have something you could send to us on the different green energy low carbon strategies: What is the life cycle? Other people say that wind farms never pay for themselves in carbon terms, but it would be very useful if the Department gave us their carbon life cycle analysis?

  Mr Kidney: If David could respond to that now.

  Professor MacKay: I would be happy to write to you about that. I have seen about eight life cycle analyses of both nuclear and wind and all eight of them agreed that the life cycle analysis in terms of carbon emissions per unit of electricity, that they are very low for both of them and are both in the ballpark of 30 grams per kilowatt hour or lower.

  Mr Kidney: I know that I have given answers to parliamentary questions using those kinds of analyses and figures. Would you still like a letter?

  Q489  Sir Robert Smith: It would be handy to get it so that it is there in the final round.

  Mr Kidney: David has volunteered to write that one.

  Q490  Chairman: Let us turn to an area that ought to be easier than carbon pricing, which is energy efficiency and I know that you have a long history of campaigning around fuel poverty issues. Are you satisfied with where we are at at the moment on our energy efficiency programmes?

  Mr Kidney: I am now the minister responsible for eradicating fuel poverty in this country and I am not going to be satisfied until we have eradicated fuel poverty. Given that I recently published figures that show I am a long way from achieving that situation, no, I am not satisfied. We must do more as a country. We will be producing our Household Energy Management Strategy in January to show the next step in terms of what we intend to do to try to get back on track, and anyway to make sure that buildings contribute to those savings in carbon emissions that we need from them in order to hit our carbon budgets and our target for 2020.

  Q491  Chairman: Can you give us a bit of a trailer for January. What are the issues that might be in the document?

  Mr Kidney: Bear in mind that this is the Household Energy Management Strategy and I never want to lose sight of the gains to be had from commercial buildings, which I would like us to talk about as well, but just to add to this point for you. First of all, the main mechanisms that we have used until now in terms of delivering energy efficiency in people's homes where there is a public policy involvement is, first of all, the obligation on the suppliers of energy to insulate their customers' homes. That used to be called EEC and now CERT. We estimate that over six million homes have received energy efficiency measures through those programmes up to now. Then our main one for delivery directly from government is Warm Front, so an entire energy efficiency package of measures to people on qualifying benefit. We estimate that we have delivered that solution to over two million homes. Then the Decent Homes Standards of social housing, whilst they have been much more to do with decent standards of kitchens and bathrooms in people homes, have had some energy efficiency measures in some of them, and we estimate that about a million homes have received some kind of element of energy efficiency from that as well. So that is six, two and one—nine million homes so far have had something done to them. Then last year the Prime Minister announced this Great British Refurb, the first element of which was to have six million homes insulated between 2008 and 2011. So be careful of the bit of double counting because I am estimating what has gone on before today up until now, so it covers a bit of the time that the Prime Minister said. But we have so far got a third of the way of hitting his requirement of six million homes being insulated by 2011. Of course, the other announcements of his Great British Refurb were that we would have every loft and every cavity wall insulated by 2015 where the owner and occupier had allowed us to make sure that it was done, and that we would start this whole house approach now, which we have done since September with the Community Energy Saving Programme, CESP, such that by 2020 seven million homes will have had a whole house approach and that is particularly important to those properties that do not have cavity walls, the so-called hard to treat solid wall properties, where the solutions are much more expensive. What we have at the moment is that Warm Front has funding until 2011. We have announced our intention that the CERT that is running to 2011 will be extended to 2012; and we have announced that the CESP will run from now until 2012. So what you have is this watershed of 2012 where we can start to do things differently. So I anticipate that the Household Energy Management Strategy, which we will announce next month, will say that from 2012 onwards we will move to this whole house approach on a much more progressive and substantial basis; and that we will find the mechanisms, taking the best parts of CERT, CESP and Warm Front, to be able to fund it so that it is a meaningful programme. Obviously, the details are yet to be determined, so I cannot go into more detail yet.

  Q492  Chairman: But some of us note that we are going to start rolling smart meters out fairly soon, and we will talk about smart meters and the smart grid in a while, but there is some value in a notion of a house-by-house, street-by-street approach to rolling out smart meters, using CESP as a pilot to achieve the Great British refurb and at the same time giving people advice about tariffs and so on.

  Mr Kidney: We see that programme of the smart meter in every home and business by 2020, electric and gas, so about 46 million meters to be replaced between now and 2020, as a very important part of the whole energy efficiency programme because, as we empower people to make positive choices about when they heat their homes, for example, and when they turn it off because the tariffs are higher, how they make energy efficiency measures and see the difference on their real-time display in their home and that they are actually saving money is really quite valuable. When you add into that the feed-in tariff and the renewable heat incentive and people being able to see the gains that they are making both from getting rewards for their renewable sources of energy and also if they are able to export the price they are being paid for putting something back into the grid, it is really kind of empowering for individuals and, instead of energy being something that is done to them, they are actually actively involved in managing their energy. Obviously, the energy companies, to turn the picture round, are very excited by the opportunities for them in making cost-savings, no more meter-readings, accuracy of information, more effective billing for their customers and, hopefully, a better exchange of information between the two, and then, if you add that to smart grids, you start getting round to being able to actively manage demand and being confident that we can cope with more intermittency in the national energy mix.

  Q493  Chairman: Another approach, and one which is being canvassed heavily at the moment, is to say to householders, "We'll lend you the money, £6,500, and you'll pay it back in your bills over a period of time". What is your view on that?

  Mr Kidney: I think it is a really important part of the mix, and that is because there is a bit of a conundrum. If I say to somebody, "If you spend £99 insulating your loft, you'll recover that within the first year and then you'll be making savings every year afterwards", why does everybody not rush down to have done that work? For some, it is because they could never afford it, and that is why CERT and Warm Front have been very important because we provide the works for people, but for some there is a kind of inertia. Is it that they cannot be bothered, or is it that they would prefer to keep the £99 in their bank, but, if somebody else were to lend it to them and they only have to repay the money at the savings that they make in the future, so it is painless, maybe that will tempt them. This month, we launched the Pay As You Save pilots with the Energy Saving Trust in five locations with five different partners to try the whole range from the local council to retailer, B&Q are involved, for example, to community group to see which models work best in making that kind of option available to people, so in the end I would like to think that we will have measures where people should simply do things for themselves because of the information and education we give to them, others get it done because there is a "pay as you save" option and others have it done for them at somebody else's expense, including the taxpayers', because they qualify in the ways that we think are fair in our society.

  Q494  Sir Robert Smith: For all these schemes, having seen some of the horrendous jobs done by some of the central heating installers in Scotland on the scheme there to provide free central heating, it is very important, the quality control on the installation, when the installer realises that somebody else maybe actually handing over the cash and the customer is the person who is living in the house and how their house is left after the installation, but the word must not get round the street, "Look at the mess they made of my loft" and so on, so it is very important that quality standards are maintained.

  Mr Kidney: Just to be clear on that question, who are the people who gave bad quality workmanship in Scotland?

  Q495  Sir Robert Smith: Some of the central heating—I went into one lady's house and there were pipes coming out of the walls.

  Mr Kidney: Just some of the contractors?

  Q496  Sir Robert Smith: Yes, the contractors, and the view of the contractors seems to be, "You're getting it free, therefore ... "

  Mr Kidney: Obviously, if you had said Warm Front, I would have been concerned because I am also responsible for Warm Front, so we have renegotiated the contract with EAGA this year to give a much better focus to responding to any complaints about poor work to the extent that we can sack people off the scheme now if they get bad scores from the customers' ratings of how they did, so I think that is very important. Last week, I spoke at the annual conference of the National Insulation Association, stressing to them how important it is that we build up the public's trust so that they will let us into their homes. What, I think, we will find under CESP is that we all think it is a brilliant idea to go round and into everybody's house, but I have got a feeling that there is going to be some consumer resistance to letting us in their homes, and the more we can do to reassure people, that is where, I think, local authorities and community groups are really important partners in this whole process. The last thing we want is stories in newspapers of terrible abuse and bad workmanship in people's homes because that will put everybody else off, so, I agree with you, that is a very, very important focus.

  Q497  John Robertson: Can we not introduce something like the kitemark for renewables and the people who work in these industries to ensure that they have already been checked to a certain standard and that the only people who have this registration, or whatever we want to call it, who meet the criteria of a company that can do the work can do it? That would allow councils, particularly, with the amount of work that is being done in Glasgow, in particular, in poor housing over the years, and it is millions of pounds which have been spent in Glasgow to date, but what we have is the cowboy firms coming in who are sub-contracted by a contractor and, as soon as they hit a problem, they go out of business, but of course they come back in another guise somewhere else, so, if we had something where you have to have a certain qualification or a certain recognition mark, then these kinds of companies and these kinds of cowboys could not come back in and they would have to be registered in the first place.

  Mr Kidney: That is a very good point, John, and I will give you a couple of examples where that applies already. For example, for installation of microgeneration technologies, there is an MCS standard, the Microgeneration Certification Scheme standard, and we just announced in the Pre-Budget Report this boiler scrappage scheme and that will be linked to the Gas Safe standard for people to have the work done for replacing their boiler under that scheme. I think standards exist, like ISO and the British Standard, which we could link this to and, if we add it to what I have said about the skills provision for the future, I think we ought to be able to make a much more comprehensive offer to people that, "You can be sure of this contractor because this contractor's business meets the appropriate standard".

  Q498  John Robertson: But it is not the contractors who are the problem, it is the sub-contractors who are the problem, and these people who get the work in the first place then give it out to other areas who do not have the qualifications, and it is a check-up for these sub-contractors that needs to be done which is not being done.

  Mr Kidney: But under the change in its contract, EAGA, on Warm Front that we have just negotiated, that is precisely the approach that we take, and there is no reason why that cannot be industry-wide.

  Chairman: Can we move on and talk about smart meters and smart grids.

  Q499  Dr Whitehead: You mentioned just a moment ago the roll-out of smart meters and the announcement on 2 December about the programme and what you think it will achieve. What, do you think, are the barriers now to that roll-out programme and how might they best be overcome?

  Mr Kidney: Well, I have got the document with me today that we have just produced for the smart meters and it tells us the stage that we have reached and the other decisions that now need to be made. One of them is simply the programme of how we do the works, shall we go area by area or group of people by group of people or company by company, what is the best solution. We have said that we are minded to make it an area-by-area basis and co-ordinate the different companies to do all their works together in the same place at the same time, but we are seeking people's views on that before we finalise the implementation plan.

  Q500  Dr Whitehead: If you have a complete roll-out of smart meters into everyone's home, if we assume that will happen by 2020, but you do not have a very smart grid to connect all the smart meters up, is that not a very substantial barrier, ie, might that not mean that we would have installed the technology to regulate the grid into people's homes, but actually the connections to enable that regulation to take place would rather invalidate the roll-out of the meters in the first place?

  Mr Kidney: David is going to come in on this in a moment, but we are alert to that. Although I am holding up the Government's response to the consultation on the smart meters, in the same week, I do not think it was the same day, we also published our prospectus for the smart grid that my colleague Lord Hunt launched, and we have done the work with Ofgem before we did that launch on the amount of money that is going to be needed and the kinds of investments that are going to be needed to ensure that we have the smart grid that goes with smart meters. In my answer to the earlier question from the Chairman, I did kind of speak enthusiastically about both, so, you are right, they do go together and it is important that they go together.

  Professor MacKay: There are some values that a smart meter in a home will have independent of a smart grid. My experience is that I emulated a smart meter by reading my own meter under the stairs every week, keeping track of my meter readings, and it had a remarkable effect on my behaviour, and it saved me money and it saved me energy. If smart meters are done well so that they are engaging and comprehensible so that the occupant can actually become a scientist and do experiments and try out, "What happens if I switch off the DVD player, the stereo and so forth?", all of these things that are on all the time, but are not actually being used, they can do the experiment, see the difference it makes within a week, and in my case it led to a lifestyle change of a halving of my electricity consumption. I have got a similar story to tell about my gas readings as well, so, if smart meters can engage people with understanding their heating consumption as well, I think there is a big opportunity for money-saving and energy-saving, even without the smart grid.

  Q501  Dr Whitehead: There have been some suggestions with the roll-out of smart meters that they could come to something like, what, £350 per smart meter installation, which would be then recovered under the methods which are being suggested on the roll-out by the energy companies installing them from the consumer. Does that suggest that perhaps there is some over-engineering going on in that roll-out, and are you confident that what is defined as a "smart meter" is not a meter which actually is far too smart for what is required?

  Professor MacKay: I would have to look at that to be sure if over-engineering is being suggested. The connection between smart meters and the smart grid which I see being essential in the future, what is really exciting and important about the smart grid is the possibility in the future of having new, very large pieces of demand which could be automatically switched on and off in order to help out the grid and save the occupant money. In particular, with electric vehicles, which are projected to be a big part of our low-carbon future, the charging time of your electric vehicle, you do not care when it is charged up as long as it is ready to go at eight in the morning, and with your air-source heat pump, again if you have a well-insulated house, you do not care when the heat pump is running and topping up the heat in your hot water tank and in the thermal stores in your home, so those are two very big pieces of demand that could be very rapidly turned on and off in a way to help out a grid that could be heavily dominated by nuclear and renewables in the future.

  Q502  Dr Whitehead: You have touched on the link between the roll-out of smart meters and what, we hope, will be the roll-out of the increasing use of electric vehicles. One of the stated problems of a substantial roll-out of electric vehicles and, quite possibly, a roll-out on a patchy basis, that is, far more ownership and use of electric vehicles in some parts of the country than in others, if everybody comes home and decides that they wish to charge their electric vehicle as soon as they have sat down and had their tea, then the distinct possibility is that the district network system would collapse without very substantial management of that charging pattern. Are you able to say, with a combination of re-engineering of the grid to make the grid itself smarter and smart meters being able to accommodate that sort of pattern of charging, that actually things such as electric vehicles putting a heavy demand load on to the system will not actually overturn it and, thereby, perhaps mess up the projections for the utility of electric vehicles which, we are thinking, will be the case?

  Professor MacKay: Well, here is how I am imaging this might work: people will have a choice, you have a choice when you go home to switch on whatever appliances you want, but with a smart grid you could be given another choice which is to tell your car, "Get yourself charged by eight in the morning", and the car will be in charge of talking to the grid, figuring out when is a good time to save you money and get that charging done, so people will understand, "I'm on this special contract", pay as you drive or whatever it may be called, "I know I get a better deal if I just make sure that I've charged the car in that way rather than demanding that it should be charged at a particular time. I'm providing a service to the grid and I'm getting a cheaper deal by doing that".

  Mr Kidney: That makes your point that it has got to be in place on both sides, which is right. Phil just wants to say a bit about the cost.

  Mr Wynn Owen: Just a little bit more on the cost. I was not clear where your figures came from, but our figures suggest that the cost of each smart electricity meter, excluding installation and the communications infrastructure, could be no more than £43 and each gas smart meter is estimated to cost a little bit more, about £56, and it is anticipated that these costs would be recouped in some way by consumers through bills rather than upfront payments. Our overall cost:benefit calculations suggest that households with both electricity and gas will, on average, save £28 a year on their bills by 2020, which is not insignificant. This is based on, in my view, a relatively modest estimate of average savings of 2% of gas consumption and 2.8% of electricity consumption. Actually, ministers announced that smart meters would be accompanied by real-time displays, which are the things you get in your kitchen or your living room which tell you what you are using, and some of the survey data we have suggests that the figures of savings by households, once they are using those real-time displays proactively to understand and manage their consumption, rather like David did under the stairs with his meter, the savings could be substantially larger, so we will have to wait and see.

  Q503  Sir Robert Smith: The real-time display, I have certainly seen with my mother-in-law the dramatic impact it has had on anything being left on in the house, but last week we met in California with SilverSpring Networks, a Silicon Valley company involved in the rolling out of smart meters in other countries, and they have a concern that for smart meters and smart grids to work, they have to talk to each other and there has to be a means of communication as part of the roll-out for smart meters. Wireless mesh technology seems to be the preferred solution for the industry and for most of the countries they work in, but their concern is the lack of spectrum available in the UK to make this possible to actually deliver it in the UK, and they see a window of opportunity with a couple of spectrums, the 872-876MHz and the 917-921MHz, where Ofcom are currently consulting on its future. Has there been any contact between the Department or Ofgem and Ofcom on the availability of spectrum to make the actual practical communication part of smart meters work?

  Mr Kidney: The thing I want to ask is: when you went to California, did you take Simon Hughes' advice and travel by train! The answer is yes, our officials who are in charge of the scheme for smart meters, having now settled the issue in this document about the central communications system for the roll-out, have been in talks with Ofcom about the technology needs that we will have for that communication system. We are aware of the wireless option that you have mentioned from California, but there are other options as well in the whole system, third-generation broadband lines and even GPS-type solutions, so they are all still on the table, but the point is that we are discussing them all with Ofcom as well as with the industry as we go forward.

  Q504  Sir Robert Smith: Obviously, this is a company which specialises in one solution, so it was probably giving us quite a strong steer towards that solution, but they did show all the weaknesses of the other options. You are saying they are all on the table, but I think their worry is that wireless mesh is not on the table for much longer, depending what Ofcom decide in the spring with that spectrum, so in terms of joined-up regulation, is there any way to ensure that, if wireless mesh turns out to be the right solution and then we say, "Oh, but we haven't got any spectrum left", do we lose out on that operability?

  Mr Kidney: I think that is a really good warning for you to make which is very useful. If I say that I will take that back to the officials and get that specific point discussed with Ofcom, then maybe I will be able to report back to you after that.

  Q505  Sir Robert Smith: That would be useful. The one other thing that did come out of it also is another worry. How universal is smart metering going to be? For someone in the Highlands in a granite house which has no mobile phone reception, no GPS and no broadband, is it the vision of the Department that everyone in the country who has an electrical or gas supply gets a smart meter, and is it universal in cost?

  Mr Kidney: It is our vision that everybody will be included. It is our vision that there will be unit costs for the equipment installed that is added to people's bills so that it will not be extra because you are in a remote location, but there might be some issues about enhancing the method of communication because of the remoteness, and what I had not thought of until you just asked that question is whether that cost would be added on to people's bills individually or whether actually, because it is a national scheme, it is the same for everyone, and I just need to double-check that point rather than give you an answer I am not sure about.

  Q506  Sir Robert Smith: You would hope it is universal.

  Mr Kidney: Of course you would.

  Q507  Charles Hendry: Minister, in your opening comments, you were saying how world-leading we are in these areas.

  Mr Kidney: Yes, I am glad you remembered!

  Q508  Charles Hendry: I did remember because it was quite relevant on smart metering because we have got a target here for 2020. Sweden has every single house smart-metered, Italy has every single house smart-metered, Holland has every single house smart-metered, and there are different issues there because we have got gas and electricity, so different challenges, but we have a continual consultation programme. Do you pick up the frustration of business and those who want to do this programme that they could be rolling it out much smarter if the right decisions were made? We are still installing 10,000 "dumb" meters a day rather than installing any smart meters at all, so we are not actually seeing the progress which is made, and the consultation programme which has just finished took a year and has now resulted in a whole raft of new consultations, not an implementation plan, but a consultation about implementation and in some stages they have double-staged consultation to consult about what should be consulted about. Do you not pick up from business their real frustration that we could have the whole country or 99.5% smart-metered by 2016-17 and we just need more ambition in this?

  Mr Kidney: If you want to claim that a Conservative Government would be quicker because it can do it all by 2016 for most of the country, but not all, then I think you should be explicit about who does not get the smart meter under your scenario. Our intent is that every single home and business in the country gets their smart meters for their electricity and their gas. When you say other countries have got smart meters, like Italy, there are meters and there are meters when it comes to their levels of smartness. I think it is important that we get the implementation right before we set off on this road, though there is this issue that we are constantly building new houses today and installing meters in them and should they not be to the right standard, and that will be something that gets very early attention in terms of the implementation plan. Of course I can understand companies, and there is one in my own constituency, Elster Meters, who lobby ministers to make early decisions because they would like it to be their products that everybody buys to install in people's homes, so there is that kind of conflict between suppliers to say, "Just make the decision and make it our meter or make it a functionality that suits us". Clearly, once you make that decision, you are going to upset some other people and it seems to me right that we involve people at the beginning to make the decisions rather than announce it and find that some of them are extremely unhappy about it.

  Q509  Miss Kirkbride: When D-Day actually arrives and we start installing these meters, is it going to be something that is done to us by the energy companies, "It's your road this week", or, "You might have to wait until 2016 or 2020 because we haven't got round to your road", or are households and businesses and everybody else going to say, "Right, I want one of these. I will get in my own contractor and get on with it now" so that we can push it all a lot faster?

  Mr Kidney: Well, once we have got the implementation in place, there is no reason why people should not be able to take the initiative and say, "I'm having a smart meter put in my property and have it connected to the new system", so that is fine. In terms of people who are going to have it done to them because they are not going to get round to doing it for themselves, what we have said as a result of the consultation is that we are minded for it to be area by area, so, just like the digital switchover that is sweeping the country at the present time, you would have these meters kind of sweeping the country, and that is quite an undertaking bearing in mind that it will be the energy supply companies coming to your home and replacing your meters and obviously in a street there could be myriad different suppliers and we want them all to come to the same street at the same time. Part of the implementation plan is, when you have decided that—

  Q510  Miss Kirkbride: Why do they have to come to the same street at the same time?

  Mr Kidney: Sorry?

  Q511  Miss Kirkbride: I am being told it is more efficient, but why is it more efficient that they all come at the same time?

  Mr Kidney: To go area by area is certainly most efficient in terms of concentrating resources.

  Q512  Miss Kirkbride: But, if it is a company that is doing it and there are five companies in one street, why can just one company not come and do theirs when they want to do it and the other companies come and do theirs when they want to?

  Mr Kidney: Well, you have just taken the words right out of my mouth. One of the points about the consultation about the implementation is that we would expect the industry themselves to want to have efficient arrangements where they kind of share out the work between themselves so that they do not all turn up at the same time.

  Q513  Miss Kirkbride: So that there are five companies, but one company does it?

  Mr Kidney: Indeed.

  Q514  Miss Kirkbride: But households would be able to do it themselves if they want to because I think there will be a lot of people who will want to press ahead?

  Mr Kidney: Of course.

  Q515  Miss Kirkbride: Therefore, what is the point in being forced ahead? If they did that, would they then find that they are subsidising the bills of others who waited, or will the cost that the companies are going to pass on in bills be a cost that applies to everybody and it is just divvied up with the number of customers, or will it apply to the customer? If I go ahead, will I find I subsidise other people's because I did not wait for my turn?

  Mr Kidney: I have said in answer to an earlier question that there will be a unit cost, so you will not be penalised by being a first mover to subsidise other people.

  Q516  Chairman: We have talked a lot about transport and we will not dwell on it for long, apart from one question which is about the scrappage scheme. It does not have any incentives in it really for cleaning up vehicles. Should it not have had?

  Mr Kidney: To be absolutely clear, the scheme was announced to help at a very difficult time in the recession a very important sector in this country, the car industry, and it was a business support measure and it was a job support measure to keep people in jobs. It was not designed to be an environmental measure at all. It turns out in the analysis that it has had environmental benefits because people have been trading in their old, dirty cars and they have been choosing very fuel-efficient cars, so they have chosen vehicles that are 10% more efficient than the average new car and they have saved something like just short of 30% on their emissions, on average, compared to the cars that they have scrapped and got off the roads, so it turns out that there are good environmental benefits from the scheme which has possibly influenced the Chancellor's mind in choosing this boiler scrappage as the next step.

  Q517  Chairman: In a sense, we were lucky, were we not? The scheme could have been designed to ensure that happened and have got greater dividends.

  Mr Kidney: Yes, given that it was the worst recession in my lifetime and we were responding positively and as quickly as possible to the real danger of people losing their jobs, I can understand why there was not a huge amount of consultation, as Charles said about consultations, to design an environmental aspect to it as well, but do not forget in terms of the car sector itself that we do have quite challenging requirements on emissions from new cars and at a European level the screw is tightening all the time to make them more and more efficient, and I think that is the right way to go across the entire board in terms of getting emissions down from motor vehicles.

  Chairman: Let us move on and talk about market mechanisms for stimulating renewables.

  Q518  Dr Whitehead: We know the feed-in tariff is going to come in in April 2010.

  Mr Kidney: April 2010.

  Q519  Dr Whitehead: How is the progress to getting to that starting point going, in your view?

  Mr Kidney: It has been going fine. We had a consultation on proposed tariffs with huge interest and lots of responses. We have analysed those responses and next month we will report on our conclusions, having taken into account people's representations.

  Q520  Dr Whitehead: Some of those representations have said that the overall tariff structure, both the upper limit of the tariff and the amount, as it happens, for solar PV, will not be sufficient actually to carry out one of the aims of feed-in tariffs which is obviously to overcome a number of the issues on implementation of different devices and, as we have previously discussed, overcome the barrier of the capital cost of introduction and the extent to which that can be calculated as being offset by the sort of feed-in tariff that one will achieve. How do you respond to the criticisms that actually the whole system is weighted too far down the scale in terms of rewards to actually achieve that outcome?

  Mr Kidney: Well, I would expect the people who want to sell the technology to push me to give more and more incentives to people to buy their technology. That is a kind of given and I understand that and I respect them for having a go. There is a balance of course in the additional amounts that we are going to put up everybody's electricity bill in order to ensure that the people who receive the clean energy cashback get a sufficient amount of money from their efforts, and that is my job, as the politician, to get that public policy balance right. What we did do in terms of working out the tariffs is that we looked at international practice and we came to the conclusion that roughly the rate of return that people ought to be able to expect is between 5 and 8%, and we calculated the tariffs on that basis. We calculated on the basis that we expected the income to be tax-free, and then during the consultation this question came up of could we guarantee that it was tax-free and we had to ask the Chancellor to give that guarantee and, happily, he did do in the Pre-Budget Report. I think that has been quite reassuring to the sector. Of course they would like the rates to be higher than the ones we have consulted upon and we got that message from their responses to the consultation. What our decision is on that you will see next month.

  Q521  Dr Whitehead: In the original document that went out for consultation on the feed-in tariffs, some mention was made of intentions on the renewable heat incentive and rather striking was the aim that, even though the feed-in tariff stops at 50 megawatts' production, the renewable heat incentive has no ceiling on its production. Is that a firm intention, or is that perhaps a hostage to fortune?

  Mr Kidney: Well, we are yet to put our cards on the table about the design of our renewable heat incentive. If people ask why can that not come in in April 2010, the answer is that, whilst there are feed-in tariffs in many countries around the world and we are able to learn from their experiences, we are not aware of a scheme in the world for a renewable heat incentive like this, so we are designing this one from scratch, so we gave ourselves an extra year to do the design and we have committed ourselves to commit on our design as soon as possible, and in the next month you will see our consultation which will include issues like the one you have just raised.

  Q522  Chairman: It sounds to me like you are going to have a busy Christmas!

  Mr Kidney: I love my work, so do not worry about me!

  Chairman: The 25th, put it in your diary!

  Q523  Dr Whitehead: Talking about a busy Christmas, one of the busy Christmas aims that you have set out is "expanding and extending the Renewables Obligation to enable it to deliver close to 30% renewable electricity or more by 2020". How do you intend to do that? Are there further plans for looking further at the banding of the RO or further proposals in the pipeline for looking at the reliability over a period of time of the RO, or are you satisfied that the present structure after the feed-in tariff has come in will achieve the aim you have set out?

  Mr Kidney: Could you just remind me of which document you are quoting from because I cannot remember my commitment about expanding the RO further? Where has that come from?

  Q524  Dr Whitehead: You did not actually commit yourself to specifically extending the RO further, but you said "expanding and extending the Renewables Obligation" in general.

  Mr Kidney: Where is that from though?

  Dr Whitehead: It is from this piece of paper I have got in front of me!

  Q525  Chairman: It is the Renewable Energy Strategy.

  Mr Kidney: I think specifically that was when we were having the discussions with the offshore wind industry about the difficulties they were having. Bear in mind, we had only just announced the 1.5 ROCs for them and they came back to us and said, "We're really, really in a difficult position at the moment. It needs to be more than 1.5", so we were at the stage in the Renewable Energy Strategy considering making it more and we subsequently did announce the two which start next April. In the meantime, just to add to this, in Scotland they have been very imaginative with their offer of ROCs for wave and tide. In this country, we are at two ROCs for wave and tide at the present time, and the industry is making representations that it should be more, so we at the current time have got this working group involved in the industry, chaired by Lord Hunt, to devise a Marine Action Plan, and one of the issues they are discussing is precisely that one, so, as we have shown, we can be flexible and open-minded about changing the design, but the important thing is to give stability over time and that is why in the Budget we set out the Renewables Obligation from 2027 to 2037 to reassure people that it is going to be there for the long haul.

  Q526  Dr Whitehead: In terms of that statement being in the Renewable Energy Strategy and the changes that have already been made to the Renewables Obligation subsequent to that statement being made, would you say that, therefore, represents a settled picture as far as the RO is concerned going forward, or do you think further considerations ought to be had of how the RO can actually engage with larger renewable energy?

  Mr Kidney: It is settled with that mechanism of the Renewables Obligation for the long haul, and it is very important for the industry to know that and we are not going to start chopping and changing the mechanisms, but, as we have shown with offshore wind and the number of ROCs, we do have the flexibility to respond to changing circumstances if the need arises and we are convinced of that. Even in the Renewable Energy Strategy, we did announce some other work that we are doing, for example, on the headroom for the Renewables Obligation post-2016 and this idea about a kind of a stabiliser price for the Renewables Obligation certificates as well, so in terms of the design we are not saying it is a shiny, wonderful piece of design and it cannot possibly be improved, but we are always open-minded and listening to suggestions for improvement.

  Q527  Dr Whitehead: You have expanded the headroom, as you say, over a longer period. Do you have mechanisms for actually looking to see whether those arrangements actually work, ie, are you tracking how those sorts of signals to the market, in particular, will continue to stimulate investment, and do you have mechanisms for changing those particular indicators within the RO should you consider they are not having the desired effect in the fairly early stage?

  Mr Kidney: Yes, we track the effects all the time. Just to pick up on what you said, I have not extended the headroom out for a longer period, I have extended the Renewables Obligation out for a longer period to 2037, and we have discussed the idea that the headroom that we presently give, which I think is about 8%, might not be for the longer term sufficient headroom and we have discussed the possibility of making a bigger amount of headroom than 8%.

  Q528  Dr Whitehead: But you would have to keep the headroom going on with the extent of the RO?

  Mr Kidney: Of course.

  Q529  Dr Whitehead: And you are happy with that?

  Mr Kidney: Well, I am happy with the fact that we are open-minded, listening to arguments and willing to make changes if they are justified.

  Q530  Dr Whitehead: Have you considered the proposal that has been put to us by the Sustainable Development Commission that there should be serious investigation and implementation of green bonds in order to stimulate investment in renewable energy?

  Mr Kidney: Yes, definitely; we like green bonds and we think the market should be delivering green bonds now. We do not think everybody has to wait for us to give them permission or for us to do it for them.

  Q531  Dr Whitehead: So do you not think that maybe some framework for developing green bonds which actually ties into some of the arrangements that are being made for the development of green energy by Government would be helpful in terms of getting the market to introduce such bonds?

  Mr Kidney: Because there was a time when I could have said, and you would not have fallen about with laughter, that we have a very well-developed financial sector in this country and we can trust them to get the design right, but today that is perhaps not the right thing to claim for them. That is an interesting idea. We do consider this all the time. We have not at the moment got a proposal that we would give guidance to the market about the design of a green bond, but I will take it away and give some more thought to it.

  Q532  Sir Robert Smith: All of these strategies of course do put the bill up for the consumer.

  Mr Kidney: Yes.

  Q533  Sir Robert Smith: In your Fuel Poverty Strategy, have you built in the reality that we are going to be facing higher bills as part of achieving our renewables?

  Mr Kidney: The obvious answer to that question is that, if prices are going to get higher, that is one of the three factors that affects fuel poverty. Given that we are going to accept that the price does have to go up to do this work because it is so important for other reasons, tackling environmental damage and giving energy security for the country, that third element then is very important to us. It does mean that we have to do more work on the other two of the three legs of fuel poverty, so energy efficiency, hence the Household Energy Management Strategy next month, and people's incomes, and that is where issues like the winter fuel allowance and generally people's incomes are important issues for us. We know all of those things. I cannot point to a line in a document at the present time which tells you what the solution is in each of those, but what I can say is that we started the work of the Forum for a Just Transition last week, which was set out in the Low Carbon Transition Plan, and one of the issues there where we bring together all the stakeholders, so the consumer groups, industry, trade unions, the public sector and so on, will be to make sure that no one is left behind or disadvantaged by making the change.

  Mr Wynn Owen: If I could just add to that, we were very pleased that in the Pre-Budget Report the Chancellor was able to make a further announcement on the social price support which will help more than one million more vulnerable households with energy bill discounts by increasing energy company support from the 150 million they do at present to 300 million by 2013-14. We also have a fuel poverty review currently under way, its terms of reference can be found on our website, and of course we monitor the effects of all policies and their likely incidence on households, so we made clear, for instance, in our July Low Carbon Transition Plan what the likely effects on household prices were going to be of all the policies in that document and we keep that continuously under review.

  Mr Kidney: Just to add to that one thing which is useful, next year we finally start the first data-matching trial where we try to identify much more accurately the people who are likely to be in fuel poverty and deliver directly to them the benefit that they need and, if that data-matching trial next year works, I can see longer term that we would expand the ability of the State and the energy companies to share information for the benefit of customers who might otherwise be in fuel poverty and not just then deliver social price support for them, but the energy efficiency package as well, and that better targeting is something that previous committees have called for and the Audit Office have called for.

  Q534  Chairman: We are coming towards the end of our discussion, you will be pleased to know because you have worked really hard—

  Mr Kidney: I am quite enjoying this!

  Chairman: Well, we will extend it for a bit longer! We have spoken at various points about skills and new green jobs and how you diversify, so let us just focus on that for a moment or two.

  Q535  Judy Mallaber: The social returns of jobs and other areas in moving towards a greener economy appear huge, and we all keep talking them up. Is the Department doing any work to try to quantify those gains, and could that then be used as further justification for a larger stimulus to a low-carbon economy?

  Mr Kidney: Yes, whereas the kind of estimates for growth in the economy at large are reasonably modest in the next couple of years and then return to trend, we estimate that the growth potential in the low-carbon and environmental goods and services sector is going to be over 4% a year between now and 2015, and that is very, very strong growth. I think you were not here at the time, but I mentioned that in the low-carbon and environmental goods and services sector in this country we have got about 880,000 jobs dependent on that sector at the present time and we estimate that by the middle of the next decade that will be somewhere around 1.2 million, so there are good gains to be made directly in that part of the economy. The other thing I stressed before you came was that really lots and lots of other jobs that are strictly low-carbon and environmental goods and services across the economy, as we go low-carbon, will change in terms of the content of their jobs and the skills that are needed to meet them, so there is a kind of green element in most people's jobs and we do need to get the provision of skills training, the qualifications and the expertise ready now because we can see that is a big expansion that is going to happen quite soon.

  Q536  Judy Mallaber: Are you quantifying the other social benefits, like reduced congestion, road traffic, reduced pollution, et cetera? What attempt is being made to actually quantify that and put it on paper? We are talking about trying to give greater reassurance to people in terms of going further down this path and that would obviously help.

  Mr Kidney: Well, I think people ask why are we making all this effort, and it is one thing to say that there is a scary future out there if we do not make this change because of very catastrophic climate change, but another much more positive message is that we can have a clean, green and prosperous future, and the prosperity bit is the jobs in these sectors of the economy and the clean and green is clearly better-quality air, fewer unpleasant surprises in weather incidents and, hopefully, better protection from rising sea levels, so there are some very clear, positive benefits for people. In terms of quantifying them, given that things like unforeseen serious weather incidents, which we think will get more and more common, but still unforeseeable under some of the climate change scenarios we are looking at, would be averted, it is very difficult to kind of quantify how much you have averted, but we certainly want to give that message to people, that there are entirely good, positive reasons why we should make the change to a low-carbon economy.

  Q537  Judy Mallaber: You just quoted figures on the jobs, going back to the jobs front, which were 880,000 and 1.2 million. Which years were those for?

  Mr Kidney: Today it is 880,000.

  Q538  Judy Mallaber: And that is specifically? How do you define that sector of jobs?

  Mr Kidney: Again before you were here, we talked about a report that we commissioned from a company, Innovas, which reported in March of this year which set out their definition of what they mean by "low-carbon and environmental goods and services", and we now adopt that as what we mean by specifically these green sectors that we are talking about today, but I did stress that most jobs in the country will have a shade of green in them by 2020, but that one, their qualification involves the renewable energy sector, the environmental sector and, what they call, the emerging low-carbon sector.

  Q539  Judy Mallaber: And the 1.2 million is a 2020 figure?

  Mr Kidney: No, 2015.

  Q540  Judy Mallaber: Yes, I was thinking that I would have expected it to have risen more by 2020. Do you have a 2020 estimate?

  Mr Kidney: Not directly for that particular area. I heard our Prime Minister on the television this morning, talking about half a million new jobs in this sector if there is a good deal at Copenhagen, but beyond 2015 there is a huge potential range and I think it becomes meaningless to give a very wide range.

  Q541  Judy Mallaber: You have already responded to John to some extent on the way in which we are ensuring we have the appropriate skills in the future. When we saw Energy & Utility Skills, they specifically highlighted the ageing workforce we have in the power industries, so we know we have a difficulty in ensuring that we can deliver the low-carbon economy. How much money is going into that area of work from Government to enhancing the skills that we need and bringing people forward to being able to ensure that we have a skilled workforce for the low-carbon economy? What kinds of levels of funding are we talking about?

  Mr Kidney: That is quite difficult to answer. Every school in the country, every FE college and every university will be delivering this and equipping people with the skills for this low-carbon economy of the future, so I would need to add up all the money we are spending on schools, colleges and universities to give you that figure. What I can say is that specifically for power the EU Skills Council has successfully persuaded the Government that there should be a national skills academy for power. They gave us an expression of interest several months ago with one particular figure for the likely cost of setting it up. We said that was okay, "Bring forward your proposal". By the time we got the business case, it was double the figure they gave us at the expression of interest stage which caused us quite some difficulty in Government in finding the other 100% of our contribution, but, by some dint of hard work by ministers, myself included, in DBIS and DECC, we have found the extra money to pay for that, so there will be a public-private contribution to setting up this national skills academy for power as long as they get through the business case approval with DBIS in January next year, so there is a specific example of Government being determined to make sure that money is not the obstacle in terms of delivering the right skills, but it is such a big issue in terms of delivering in schools, in colleges, in universities and in the workplace through apprenticeships, for example, and the new technician class that the National Skills Strategy, launched last month by Peter Mandelson, talks about, which all need to be funded by a combination of public funds and employers.

  Q542  Judy Mallaber: It obviously creates a good opportunity to potentially diversify the workforce and to enable them to get opportunities to enter that whole exciting, new area of work in the economy. You talked about increasing opportunities for people going into STEM areas of training and jobs, and that is something that has been very much highlighted in relation to trying to get more girls and women into those areas and also diversifying the workforce in other ways. Is that an area that you are consciously looking at in terms of the work of the Department and the other departments you work with and, if so, how are you going to progress that?

  Mr Kidney: Well, on the back of the National Skills Strategy, my Department fully intends in the coming months to stress the exciting opportunities in this new low-carbon economy that we have got coming towards us very quickly for every member of our society. It is right that in some parts of the energy sector it is male-dominated at the present time and there is no reason why that should be, so we will be stressing diversity of recruitment and trying to capture the imagination of young people to go for jobs in this sector because they will be doing something extremely valuable for the future of the planet, they will be very satisfying jobs, they will be well-respected in our society and they will be well-paid, so I think there is a really good offer to be made to people in the kinds of areas we are talking about.

  Q543  Judy Mallaber: Some companies, like Rolls-Royce locally to me, have a very good programme and do try to get a range of people, men and women, going into those areas. Are there specific ways in which you can work with business to try to encourage that as well of course as trying to highlight the importance within schools?

  Mr Kidney: Indeed, I have plans in the coming year to work with ministers across Government, with the providers of education and training directly, with the people who give careers advice, with the employers who need this pool for recruitment and with the various institutions, the professional institutions, in order to give this positive message to as wide an audience as possible.

  Q544  Judy Mallaber: You have obviously mentioned a number of other departments and organisations that you work with and you are bound to tell me that you all work together completely harmoniously, all very co-ordinated, proper joined-up government, but what are the barriers that you have found to working with other government departments to co-ordinate the areas of work you have been talking about? There must have been problems, so would you like to tell us about them?

  Mr Kidney: I think the barriers are the practical ones that people are very busy in their day jobs and to get them to lift up their eyes from the immediate jobs in front of them to think of ones that kind of tangentially affect their department because they have come from another department is quite a challenge, but I can tell you that I have had very harmonious relations, for example, in the run-up to the production of the National Skills Strategy, myself and Kevin Brennan of DBIS worked very well together on the work that was needed for that, and in other areas of this sector, I have had very good relations with ministers in other departments who are crucial to the success of this, so I think getting over the practical problems of the busy lives of ministers and civil servants with their day jobs to concentrate on things which really matter to the country.

  Q545  Judy Mallaber: Are there any organisations or sectors in the field that you are having difficulty with or are a bit disappointed at their lack of commitment?

  Mr Kidney: No, if we are talking still about skills, the vision that we have got is that nationally Government's advice will come through the UK Commission on Employment and Skills and that in delivery terms we will be relying on the sector skills councils and on the regional development agencies to be the deliverers. We find that everybody is completely up for this and we have seen some very innovative working between both the private sector and sector skills councils and regional development agencies, and a very good example would be the South West of England, which is one of the low-carbon economic areas, where they have all come together to get their skills map done for the marine sector. In your own region, the East Midlands, we have seen some really good work from sector skills councils and EMDA, your development agency, in developing the skills for energy kind of brand which they have got a number of employers and FE colleges working collaboratively on. I mentioned earlier the seven sector skills councils and the ECITB who came together to develop a renewable energy skills strategy between them, so I am pleased and proud when people work together for the benefit of the country in those ways and that is what I encourage.

  Q546  Chairman: We are going to wind up now, but there is just one final question. You said at the Committee on Climate Change that, in a sense, the challenge is to police your bit and in their October report, a good report, they said that there needed to be a step-change to achieve your carbon budgets. Is that a fair comment?

  Mr Kidney: It is definitely a fair comment that the country needs a step-change to get to where we need to be in 2020 and in 2050. I would say that the UK Low Carbon Transition Plan actually already set out a step-change and I would say that the Climate Change Committee is reinforcing that message and certainly pushing us to make sure that the policies are put in place so that the kind of fine words of the Act, the low-carbon budgets and the Transition Plan are all converted into the action that is needed to make the changes, but, just to add to my workload over Christmas, we will be responding, as we are required to do, to the report of the Climate Change Committee next month.

  Q547  Chairman: Phil, Professor David and Minister David, thank you all very much. It has been a very useful discussion and I am conscious that there is a lot of work to do, but I am also reminded that you promised one or two bits of paper for us, so thank you for coming, all of you; it has been a good meeting.

  Mr Kidney: You are welcome. Thank you very much.

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Prepared 28 March 2010