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 investmentnot choke it offin
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 renewableswind 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 3,233MW8.2% 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
misguidedmisspent 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 convenientbut dangerousassumption: "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 policiesthe 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 boilersand,
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 viableit does not carry the risks of Government
picking winners. It is based on clean technology cleaner than
oil, coal, and biomassand 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
2010just 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 leviesand 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
95
Paragraph 74, ibid. Back
96
Paragraph 63, ibid. Back
97
Para 4.5.20 of the UK Renewables Strategy 2008. Back
98
The UK Fuel Poverty Strategy, Sixth Annual Progress Report (October
2008), paras 2.2-2.4. Back
99
A Pragmatic Energy Policy for the UK a Fells Associates Report
(17 September 2008). Back
100
Analytical Annex, Low Carbon Transition Plan (15 July 2009), Executive
Summary, p 7. Back
101
Chart 25, p 86, ibid. Back
102
Biomass-carbon sink or carbon sinner? published by the Environment
Agency, April, 2009. Back
103
Press Release, Environment Agency, 16 April, 2009. Back
104
UK Biomass Strategy, DTI, DfT, DEFRA, May 2007, p 41. Back
105
11 September 2009 Times Online. Back
106
Impact Assessment of the UK Renewables Strategy published by HMG,
July 2009, para 170. Back
107
UK Biomass Strategy, DTI, DfT, DEFRA, May 2007, para 5.17. Back
108
Technical Guidance: Screening Assessment for Biomass Boilers AEA,
July 2008, table 4.1. Back
109
Quantification of the Effects of Air Pollution on Health in the
United Kingdom, DoH, 1998. Back
110
Written Answer, 26 March 2009 (col 695/6W). Back
111
Written Answer 2 November 2009 (col 671W). Back
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