Memorandum submitted by InterGen
EXECUTIVE SUMMARY
1. InterGen welcomes the opportunity to
respond to the Energy and Climate Change Select Committee's enquiry
into low carbon technologies in a green economy. As a leading
UK developer and operator of modern high efficiency thermal generation
InterGen supports the Government's long-term vision for a low
carbon economy and efforts to position the UK as a market leader
in the development of renewable technologies.
2. InterGen believes that whilst it is important
that the current economic climate should not diminish these objectives,
the UK's energy security—both in the short and long term—should
also be at the heart of Government policy.
3. Renewable generation will undoubtedly
play a large part in meeting Britain's climate change objectives,
however, the Government must ensure that new thermal generation
development receives continued support. Currently, the operating
characteristics of renewable generation are difficult to predict
and a wide geographical spread means that it lacks the certainty
and flexibility of modern thermal generation. Where high efficiency
gas generation replaces old coal plants on a like for like output
basis the carbon savings are significant and ultimately more dependable.
4. Consequently, the construction of new
thermal generation is essential to maintain a stable electricity
network, ensuring reliable domestic and industrial supplies. Modern,
clean thermal generation can deliver carbon savings with respect
to older, less efficient coal plants in the UK. In particular
a modern CCGT would reduce the carbon emitted per unit of electricity
by 60% through displacing an older coal plant. InterGen sees diversity
of fuel source as a critical factor in ensuring security of supply
in Britain for the next decade and beyond.
5. Clarity from the Government on long-term
energy policies for both new thermal and renewable generation
technologies is essential. This will help secure much needed,
continued, longterm investment in the power generation sector.
A stable regulatory environment that supports development of low
carbon technologies with minimum market distortion is paramount
in order to secure a low carbon future and alleviate security
of supply concerns.
ABOUT INTERGEN
6. InterGen is the UK's largest independent
gas-fired power producer—providing 6% of the UK's average
electricity demand (2.4GW of efficient CCGT). Our three UK power
stations (Coryton, Rocksavage, Spalding) are amongst the cleanest
and most efficient gas fired plants in the world. InterGen has
developed one third of the UK's newly installed electricity generating
capacity in the last 10 years, investing £1.4 billion, and
supplies enough power for over three million UK households.
How realistic are the Committee on Climate Change's
projections for the use of different types of new technologies?
What is needed to achieve the development and deployment of them?
7. Uncertainty about the future of Carbon
Capture and Storage (CCS) is currently an obstacle for investors
and power plant developers. Planning requirements for new gas
and coal fired generation specify a requirement to be "ready"
for CCS technology at new generation sites; however this technology
is as yet untested and unproven. It is therefore particularly
difficult to plan for CCS and more importantly, to secure finance
for CCS.
8. InterGen are supportive of the possible
merits of CCS in the long term, but remain concerned that this
technology is as yet unproven on a large scale. Full scale environmental
and economic testing of CCS will be required, which InterGen forecasts
as being long way off. Government needs to ensure that investment
in new renewable and clean thermal generation receives continued
support in order to reduce carbon emissions in the near term and
secure energy supply into the coming decade.
9. InterGen believes that it is essential
that the Government's current energy objectives—security
of supply, competitive prices and a reduction in carbon emissions—are
cohesive and not at odds with each other. Government and Parliament
need to develop a clearer strategy with obvious priorities for
each of the UK's energy objectives. Security of supply in the
near term could be threatened if the investment environment for
new renewable and thermal generation is not attractive enough.
How important is it to the UK economy that it
becomes a leading developer and exporter of low carbon technologies?
What Government policy needs to be in place to do this?
10. InterGen believes that the Government's
vision should be the development of an integrated programme to
reduce carbon emissions across the board; one that includes electricity
generation and transmission, industry, transport and energy efficiency
savings right down to domestic level.
11. The recent Budget announcements that
the Government will implement a new funding mechanism to fund
at least two, and potentially four, CCS demonstration projects
is vitally important to securing the UK's future success in this
area. It is therefore essential to have cross-party political
consensus on this issue.
12. InterGen is concerned that the large
investment in CCS demonstration projects does not indicate that
the Government has a safety net if CCS technology does not prove
to be the solution for long-term reduction of carbon emissions.
Any policy developed to support new CCS technology needs also
to continue to support development of renewable and thermal generation
if security of supply concerns are to be addressed.
13. InterGen believes that a stable, regulatory
framework in the UK is paramount. This will help preserve the
value of current generating projects and networks, and ensure
that future investment is secured. Uncertainty around future CCS
requirements and the nature of ongoing. renewable generation support
will make investors more cautious. The UK has a real opportunity
to champion the development of certain types of low carbon technologies,
and the Government should ensure that the investment environment
remains attractive enough to permit this to happen.
14. InterGen is aware of the sizeable level
of funding that is required to develop CCS technology and is mindful
that whilst the UK should strive to be a champion of this technology,
this is achieved with minimum distortion to the power markets.
Demonstration projects will already be fully funded and any further
subsidies to companies developing these projects should be kept
to a minimum. This will help ensure that there is continued investment
in thermal generation and safeguard security of supply.
Are we seeing impacts of a downturn on demand
and investment in low carbon technologies? If so, how can this
be addressed given the need to meet long term targets? What obstacles
to investment are there?
15. InterGen believes that, given the current
economic climate, greater clarity and guidance from the Government
on its long term energy priorities is essential in order to ensure
that both its ambitious carbon reduction targets and the UK's
energy needs are met. The current tight credit situation will
undoubtedly impact upon investment in low carbon generation, future
technologies, and traditional thermal generation projects.
16. Delivering a low carbon future will
require significant investment in renewable generation. Alongside
this, thermal plants will need to be built to provide the flexibility
needed to back up more intermittent generation such as wind. Encouraging
investment in both types of generation should be a priority for
the Government, assisted by the creation of a stable regulatory
environment, Government should ensure that those technologies
already receiving direct support (eg through the renewable obligation)
are not further subsidised to the detriment of investment in reliable
thermal generation.
17. Current proposals sitting with the European
Commission to help reduce carbon emissions across the EU will
have a substantial impact on existing thermal generating assets
in the UK. The proposed Integrated Pollution Prevention and Control
Directive (IPPC) could result in limitations on the NOx emissions
from both coal and gas fired power plants. This is in addition
to the restrictions already imposed under the LCPD which will
result in the closure of an estimated 12GW of UK coal plant capacity
before 2015. The EU is still unclear on its long-term plans for
pricing C02 emissions from power stations. These will be critical
to secure new investment in cleaner, thermal technologies (gas
and coal with CCS) and also for nuclear power.
18. In addition, the Planning Act 2008 will
bring into force a number of National Policy Statements (NPSs)
which will inform the decision-making of large new power stations
in the UK. Failure to produce NPS's in line with delivering the
objectives of security of supply and a low carbon future could
threaten investment in specific generation types-ultimately jeopardising
both policy aims.
19. Current policies and consultations concerning
transmission access, the Community Energy Savings Programme (CESP),
Carbon Emissions Reduction Target (CERT) and the Carbon Reduction
Commitment are placing increasing financial and administrative
burdens on generators. Long term uncertainty on the above policies
will reinforce concerns and reduce generators' confidence about
investing in the UK.
CONCLUSION
20. InterGen acknowledges that many challenges
exist for both the Government and the industry in order to secure
a low carbon future and meet security of supply targets. It is
essential that these issues are not viewed as mutually exclusive-any
change to the regulatory framework must be flexible enough to
support both objectives. InterGen would be happy to provide further
written evidence or oral evidence to support the views expressed
here.
May 2009
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