Supplementary memorandum submitted by
Lord Hunt of Kings Heath, Department of Energy and Climate Change
DECC MINISTERIAL RESPONSIBILITIES, LOCATONAL
CHARGING, SKILLS AND PLANNING
I am writing to provide the Committee with further
information on certain points that were raised when I attended
your meeting of 17 June.
DECC Ministerial Responsibilities: I was asked
to let the Committee know what are the responsibilities of the
new DECC Ministers, following the recent Ministerial changes,
and I attach a list of the recently agreed new Ministerial responsibilities.
Locational charging and how much the consumer
has benefited from this: At the 17 June meeting we discussed network
charges and particularly the locational element. National Grid
collects Transmission Network Use of System charges (TNuoS) to
pay for installation, reinforcement, maintenance and renewal of
the National Transmission System. The level of use of system charges
in Great Britain is determined on a broadly cost reflective basis.
This means that parties (generators and electricity suppliers)
that are seeking to use the transmission system bear their appropriate
share of the costs that they impose on the transmission network.
The higher cost of transporting electricity across longer distances
(eg from the north to centres of demand further south) mean that
generators further from demand pay higher charges. Equally consumers
close to generation pay lower charges (via their supplier). The
majority of the costs of the network are, however, met by consumers
in the south.
According to National Grid the following amounts
were collected in transmission use of system charges (the revenues
for 2004-05 were for England and Wales only).
TNUoS charges are paid by generators and suppliers
on a 27/73 split—ie generators pay 27% of the total transmission
costs and demand users pay 73%. In the financial year 2007-08
transmission users in England and Wales contributed approximately
£56 million to Scottish transmission costs. In effect this
means that only 15% of total revenue is raised through locational
charges on generators.
By being cost reflective, TNu0S charges act
as an economic signal to generators and developers to work within
network capabilities and thereby limit the cost and time involved
in delivering new network infrastructure. There is also an argument
that it is better environmentally to locate generation closer
to demand and minimise the impact of transmission losses.
The Government has always supported the principle
of a charging system that treats generators and consumers fairly
and reflects the costs that network users impose on the system.
It is however for National Grid and Ofgem to consider and decide
on the most effective charging methodology and ensure that the
detailed arrangements are fair. It is also worth bearing in mind
that the nature and level of both TNuoS and other transmission
network related costs were taken into consideration when deciding
on the level of subsidies available through the Renewables Obligation.
Transmission related costs currently account
for around 3-4% of consumers' electricity bills. Regarding how
much consumers have benefited from there being a locational element
to transmission charging it is not possible to give a direct figure
because there is no way of knowing what investment decisions would
have been made since 2005 without there having been a locational
element in what generators pay to use the transmission system.
However, it is clear that there are benefits to locational charging
as well as it being a fair principle that those generators who
make the most use of the system by being located along way from
demand should pay proportionately more than those who use it less.
For example, with transmission losses accounting for up to seven
per cent of electricity generated, it makes environmental sense
to have economic signals encouraging generators to locate near
centres of demand where possible.
CROSS GOVERNMENT
WORK ON
DEVELOPING WORKFORCE
SKILLS FOR
NETWORKS
The Government recognises that meeting the renewable
energy target requires a very large increase in deployment of
renewable technologies, especially for wind energy up to 2020.
This will require major upgrades to the electricity networks,
In turn, this will require skilled people at all levels from craft
to professional engineer.
Modelling of the distribution network labour
force, undertaken by the Sector Skills Council, Energy & Utility
Skills, shows that the equivalent of around 9,000 new workers
are required to 2024, around half by re-skilling existing employees
and half from new recruits. These figures are being revised to
support detailed planning of recruitment and training programmes.
This modelling is being extended to cover the transmission systems
and the metering workforce. Numbers are not available yet but
we expect them to be significant.
DECC is working with Energy & Utility Skills
(EU Skills) and with its employer-led Power Sector Skills Strategy
Group to develop and take forward a strategy to ensure that the
electrical skills to support renewable energy are available in
the future, with clear training pathways and qualifications for
those seeking work in the sector. We are also working to help
develop the National Skills Academy for Power, which will be the
prime agent for managing the delivery of the skills and training
elements of the strategy.
We are working with the British Wind Energy
Association to help develop a skills and training strategy for
wind and marine renewables. It is planned to announce an apprenticeship
framework for the sector at the BWEA's conference in the autumn.
Working with the Devolved Administrations, we will support EU
Skills in a UK-wide review of the skills requirement for all renewable
energy systems. This will be a first step to developing a cohesive
approach to what is a very diverse sector, with a large number
of small businesses that are hard engage in the training agenda.
DECC has regular dialogue with the former BERR
and DIUS and contributes to policy development and implementation
across a range of fora. These include the sponsorship and re-licensing
of the Sector Skills Councils, the higher education strategy and
development of National Skills Academies. We plan to continue
and expand this dialogue with BIS and see opportunities in the
new Department to better integrate skills policy with the low-carbon
industrial strategy.
The Office for Renewable Energy Deployment,
which DECC will launch very soon, will seek other opportunities
to improve skills and training for renewables as part of its supply
chain development work.
Planning and the timetable for National Policy
Statements (NPS5): As you know, we are working to firm up the
dates for publication of NPSs, and I will write to you in the
near future to advise you of our plans.
I hope that this letter provides the information
that you require.
July 2009
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