House of Commons - Energy and Climate Change

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

Additional memorandum submitted by Calor Gas

SUMMARY

1. The cost of the renewables policy is unsustainable. The net benefit of the policy as estimated by HMG is -£56 billion over twenty years after allowing for costed climate change benefits. The RHI levies underpinning the policy will require massive increases in fossil fuel prices and could drive millions more into fuel poverty.

2. Reliance on wind and biomass to fill the energy gap is questioned. Wind targets are unlikely to be met. Biomass will cause a significant air quality problem with impacts on death and disease.

3. For both urban and rural areas, micro-CHP has the potential to meet and exceed the 2020 target of a 34% reduction in carbon emissions, while reducing household bills for heating and providing protection against electricity shortages and blackouts. Combined with solar technology and insulation measures a fuel cell boiler should be able to achieve the 2050 80% emission reduction target. Since the technology is close to market it does not require massive subsidies derived from taxing consumers.

WHO WE ARE

1.1 Calor Gas has been distributing LPG as a fuel for homes and businesses since 1935. It is mainly used as a fuel in rural areas; for urban areas natural gas would normally be the cheaper alternative. LPG is a low carbon emitting fuel available in rural areas, emitting 12% less CO₂ per kWh than oil, 34% less than anthracite and 58% less than electricity.[91]

OUR CENTRAL PROPOSITION

2.1 Moving to a greener economy will not, and should not mean shutting down the coal, gas and oil industry overnight. The UK Continental Shelf produced 30% of the corporation tax receipts in 2008, and will provide two thirds of our energy needs in 2009. The 2009 Budget contained a package of measures designed to stimulate investment—not choke it off—in the North Sea. We believe that the Government has over-emphasised the contribution that renewables can make to reducing our carbon emissions by the target dates set, and that as a result the policy is far too costly. There are other affordable solutions that are close to market. Ironically, fossil fuels by offering a bridging technology can be part of the answer to moving towards a greener economy.

PROBLEMS WITH PRESENT PLANS

3.1 The Impact Assessment of the UK Renewables Strategy[92] puts the net benefit of the policy as minus £56 billion over 20 years. The total value of carbon saved over the same period is £5 billion. The cost of the policy is 12 times its benefit.

3.2 The policy will put up electricity bills by 15% and gas prices by 30% by 2020[93] and "increases in bills will impact more on [poorer households]",[94] For industry, the picture is worse with gas prices rising up to 49%.[95] The Assessment expects, "Negative impacts on business, especially in energy intensive sectors, due to increased energy prices, driving up costs and reducing competitiveness".[96]

3.3 The key problem with the strategy is that it requires "very substantial"[97] taxes on fossil fuels to drive the take-up of otherwise inviable renewables. Fuel poverty was meant to be abolished by 2016. But, between 2005 and 2008, fuel poverty grew from affecting 2.5 million households to 4.7 million.[98] Substantial future upward pressure on fuel prices will condemn many more to fuel poverty. This is avoidable.

3.4 Government relies too heavily on the contribution from renewables—wind and biomass. Wind is likely to disappoint. Wind farms need 90% back-up to allow for windless days;[99] large increases in wind capacity exacerbate the problem of its unpredictable contribution. The Low Carbon Transition P1an[100] acknowledges the intermittency of wind and identifies the crunch time in electricity supply. In 2017, 3GWh of electricity demand goes unsupplied rising to 7GWh in 2027.[101] This means blackouts. Even these figures depend on the delivery of the wind capacity being on target to reach 26.4GW by 2020. Very few people think these targets are attainable. The total installed UK capacity of wind farms, according to the British Wind Energy Association, is 3,233MW—8.2% towards target. The Association admits: "England's regions are set to comprehensively miss their targets on generating electricity from renewables".

3.5 Governments do not have a good record of picking winning technologies. It is now generally accepted that the emphasis on "first generation" biofuels was misguided—misspent subsidies encouraged the cultivation of non-sustainable biofuels, drove deforestation, and caused rises in food prices and starvation. The danger is that biomass will follow biofuels' walk of shame.

3.6 The Environment Agency's Biomass carbon sink or carbon sinner? [102]finds that using biomass for generating electricity and heat could help meet the UK's renewable targets but "only if good practice is followed... worst practice can result in more greenhouse gas emissions overall than using gas." Tony Grayling, Head of Climate Change and Sustainable Development, at the Agency said: "We want to ensure that the sector's growth is environmentally sustainable and that the mistakes made with biofuels are avoided, where unsustainable growth has had to be curbed.[103] Biomass operators have a responsibility to ensure that biomass comes from sustainable sources, and is used efficiently to deliver the greatest greenhouse gas savings and the most renewable energy. The Government should ensure that good practice is rewarded and that biomass production and use that does more harm than good to the environment does not benefit from public support."

3.7 The UK Biomass Strategy[104] made a convenient—but dangerous—assumption: "For all biomass resources no net emissions during production assumed". All the emissions produced during planting, harvesting, sawing up and delivery of these bulky and heavy items are ignored. The Environment Agency points out, "How a fuel is produced has a major impact on emissions: transporting fuels over long distances and excessive use of nitrogen fertilisers can reduce the emissions savings made by the same fuel by between 15 and 50% compared to best practice". By equating all biomass with zero carbon, the error blights other policies—the definitions of zero carbon homes, eco-towns, sustainable homes and zero carbon hubs become suspect if biomass is invariably seen as zero carbon. Such unsound definitions could have the perverse effect of significant and continuing depletion of carbon stocks. The climate change impact of preserving a forest is not the same as burning the same forest.

3.8 In response to looming gaps in energy supply, Professor David MacKay, Special Adviser in DECC has called for "industrialising really large tranches of the countryside"[105] to supply biomass. The renewables strategy depends on doubling the land devoted to energy cropping in every year from 2010 to 2017. This looks as heroic a target as for wind. The Impact Assessment predicts that, "Prices for biomass and food [will] rise due to the increased demand for agricultural products".[106] Our need to supply feedstock for furnaces will fetter our food supply.

3.9 Some of the problems of biomass are discussed in the 2008 UK Renewable Energy Strategy in (paras. 4.6.14-4.6.25). Biomass boilers without stringent controls will cause significant pollution in urban areas. So, the resulting pollution is being directed to rural areas because of lower existing levels of pollution in the countryside. We do "not yet well" understand the effect of particulates and NOx from biomass boilers—and, as the boilers age they will pollute more. Government admits that if biomass displaces gas there will be, "Increases in emissions of all major pollutants.[107] An AEA study on biomass boilers[108] tells us that a typical domestic wood burning boiler emit over 30kg of particulates per year per household. The emission of particulates causes 8,100 early deaths a year in Great Britain and an additional 10,500 respiratory admissions to hospital.[109] Government also admits that the biomass policy would carry an extra health burden of £557m[110]—current policies will damage air quality, lungs and hearts. The current climate change strategy clashes with the air quality strategy.

3.10 On 2 November 2009 the Government admitted, "The use of biomass for heat and power can pose a significant air quality problem."[111] It also admitted that it had not undertaken any evaluation of the climate change effects of the black carbon emitted through biomass combustion. Black carbon is the second largest contributor to global warming after CO₂. Therefore, biomass could be part of the problem rather than its solution.

THE SOLUTION

4.1 "The real solution lies in reducing household electricity consumption while encouraging citizens to produce their own energy," Philip Selwood, Chief Executive, Energy Saving Trust, Total Politics, October 2009.

4.2 The solution we advance has the potential to deliver 50% reductions in carbon emissions in existing homes. It does not require great subsidies and will not place a burden on the economy. It will reduce rather than increase fuel bills, placing downward pressure on fuel poverty. The technology is practical and commercially viable—it does not carry the risks of Government picking winners. It is based on clean technology cleaner than oil, coal, and biomass—and it will not worsen air quality or harm human health. It will also provide greater stability to the power supply, providing protection against power cuts. In both urban and rural areas, gas or LPG powered micro-CHP fuel cell boilers allow us to reach the carbon output targets by low-cost, close to market solutions without the need for punitive levies.

4.3 LPG is the lowest carbon-emitting fossil fuel available in rural areas and LPG technology continues to develop quickly in response to the UK's low carbon requirements. Calor is investing with the UK company, Ceres Power to bring the next generation of boilers to market by 2012. This high efficiency condensing boiler will heat the property and also generate up to 80% of the electricity required in the property. Generating electricity locally avoids the wasted energy associated with power stations and transmission systems. It will provide a measure of black-out protection since the system can keep the power running during the predicted power cuts. This fuel cell boiler will cut carbon emissions on an average property using oil by up to 50% through an investment of only approximately £2,000 more than a modern condensing boiler. Combined with solar technology and insulation measures a fuel cell boiler should be able to achieve the 80% emission targets that government is seeking by 2050. These boilers will be able to be serviced by engineers with existing skills. Micro-CHP units can reduce total household energy bills by 25%. This fossil-fuel powered mCHP can use the current electricity and fuel supply infrastructure and will be very cost-effective per tonne of carbon saved. For urban areas on the gas mains, an equivalent technology is being developed by British Gas/Ceres that carries the same advantages as the LPG fuel cell boiler and will be available in 2011.

4.4 urthermore, mCHP units based on Stirling Engine technology will be available in the UK market from early 2010—just in time to benefit from the Government's feed-in tariffs.

4.5 To deliver the headlined policy benefits we need to revise the renewables policy. Renewables are part of the answer, but they are not THE only answer and the subsidy required to deliver the heroic targets for wind and biomass will be crippling. The International Energy Agency recently emphasized the central role in fighting climate change of reducing carbon emissions from the power sector using best available technologies.

A COMMON-SENSE POLICY

5.1 Government does not need to tax householders with fossil fuel levies—and can avoid the pain and unpopularity that will accompany them. Common-sense solutions to climate change are far more palatable, and we propose the following common-sense principles (all of which are breached by current policy).

A Climate Change Strategy should not:

— Impose massive burdens on the UK economy.

— Cost more than the value of the carbon it saves.

— Impose steep rises in fuel bills and worsen fuel poverty.

— Let Government cherry-pick winning solutions and fuels.

— Perversely drive up rather than reduce emissions of carbon.

— Damage air quality causing excess disease and death.

November 2009

91 Table 12, Draft SAP, 2008. Back

92 Impact Assessment of the UK Renewables Strategy published by HMG, July 2009. Back

93 Tables 7 and 10 ibid. Back

94 Paragraph 54, ibid. Back