Examination of Witnesses (Questions 387
- 399)
WEDNESDAY 20 JANUARY 2010 (afternoon)
PROFESSOR DIETER
HELM CBE
Q387 Chairman:
I am very pleased to welcome Professor Dieter Helm to the Committee.
Thank you very much for your written note and I am sorry we kept
you waiting. Most of our witnesses so far, not quite without exception
but almost without exception, have been very positive about NPSs
and believe the Government should move quickly to adopt them.
That is not your view?
Professor Helm: It is not my view.
I would not want it to be taken that I am not supportive of a
process by which such guidance is provided, but it would be surprising
if you recommended that they are adopted as they stand, and the
reasons for that are various. On one level this is about the only
democratic process of scrutinising what is here in a massive amount
of detail and were you to find nothing that you thought could
be improved upon that would in itself be surprising. Secondly,
it seems to me—and we may come on to it—really rather
important that at least for some of these statements your power
to recommend that these are debated on the floor of the House
of Commons would seem to me extremely appropriate. Finally, parts
of them are incoherent, parts of them are very badly written,
some of the English is simply wrong, and since these are quasi
legal documents the minimum that is required is to get the ducks
in a row. So apart from some sort of core problems with their
content, just as part of the process, it would give me much greater
confidence in the overall approach to planning were the scrutiny
to naturally suggest quite a lot of things that might change.
Q388 Chairman:
Tell us about the policy being incoherent. There is an overarching
NPS. What do you make of that?
Professor Helm: The idea here
is an extremely good and clear one, which is that the Government
will have an energy policy and an energy policy is only as good
as the extent to which it is consistent, coherent, credible and
deliverable, and given it has got that policy expressed in white
papers, and so on, and bills of Parliament, this will be written
up in the overarching NPS and then the satellite NPSs will take
bits of that and say what they mean for everything from soft tiling
for offshore wind to a number of other areas, and these will instruct
the IPC, independent of any further political process or check,
to carry out its assessment of planning on the basis that those
NPSs are there. So it is a very coherent framework but only as
good as the first bit, because if you do not have a coherent energy
policy, if it is not credible—and I give you a clear example:
it is not credible to produce 30 per cent wind by 2020 and virtually
nobody independent thinks it is going to happen—that is
just an example, but if it is not credible then what you are doing
is pile driving through to a planning commission instructions
on the basis of a set of things which do not add together, and
that seems to me to be quite serious. You can think of major consequences
for the British economy which end up with some bits of infrastructure
in place, other bits not, when they are complementary to each
other. So that is the kind of starting point. It really puts the
Government on its mettle because it has got to say what its energy
policy is and therefore what is up for grabs here is, is it an
energy policy which meets both criteria?
Q389 Chairman:
Talk to us a little bit more about the concept in your paper about
"complimentarity". There is an issue of needs and then
complimentarity. That presumably means that the policies fit together?
Professor Helm: It is not just
that the policies fit together, it is the investments. What is
the point of building a nuclear power station if we have, say,
50 per cent wind and at times of the day needs are rationed off?
What is the point of building a transmission grid to bring offshore
wind onshore scaled up to the 30 per cent requirement if those
wind farms are not built? At another level, what is the point
of having a policy in respect of CCS or nuclear if unconventional
gas means that we will have a very low price of gas and there
is no carbon tax or carbon price in between? Indeed, at one point
in the documentation it says the EU ETS is the core mechanism
for establishing that price. Well, it is unlikely to do that job.
So both from the point of view of individual investments they
have to mash together. It is a system and unless you have a coherent
need in respect of the system, then which particular bits of Lego
you want to put onto that system, their economics depends on all
the other bits. It drives even further. In the overarching statement
and in Government's energy policy overall rather than have a coherent
policy, we have a separate policy for each technology, so we have
an RO for renewables but we do not have an RO equivalent for nuclear
or CCS. We have a CCS levy in the bill but no carbon tax in respect
of nuclear or renewables. This process of driving through each
particular technology with its own specific policy opens that
wide open to the possibility that this thing does not add up and
it clearly, in my view, does not.
Q390 Colin Challen:
I am just trying to get to the bottom of this. You are saying
that the NPSs are, let us say, sloppy because the policies that
predate them are themselves sloppy and not joined up. That leads
me to wonder whether the NPSs could actually be put right, or
whether indeed the NPSs could put right pre-existing policies
by actually bringing a bit of order to the system. Do you see
any hope at the end of this tunnel or should we just write these
things off?
Professor Helm: No. I hope I stressed
at the beginning that this idea of specifying out need through
the process of designing policy is in principle a pretty good
one. When it comes to sloppiness, there are different dimensions
to this. At one level it is just in the document itself. There
are bits where, as I say, the English does not even add up. It
is not well written and in a legal document that is the minimum
kind of requirement. Then there are statements which the IPC is
supposed to take seriously. Let me give you an example. It says,
under security of energy supplies: "We need sufficient energy
to meet demand at all times." How could that be a Government
policy? At all times, in all circumstances? How does the IPC interpret
that, one in a 30 year winter? One in a hundred year winter? Nobody
has ever had an energy policy which says that we must always at
all times meet energy demand. A proper energy policy says, "The
security of supply margin we have in mind is the following,"
but a blanket like that translated into a need—it says that
anything that is needed up to a more than one in a hundred winter.
That is the sort of incoherence that is in here which has to be
sorted out in the drafting if it is to give a clear instruction
to the IPC—and the word is "instruction"—as
to how it should interpret "need" in respect of particular
investments. I could find for you lots of other examples and that,
when you are drafting something with a purpose for specifying
need is, with respect, much better worked out in things like the
dreaded Sizewell Inquiry where people were actually examined as
to what "need" meant in that context: "What was
the margin? Why was it justified ? In what form?" Here it
is just a blanket statement.
Q391 Colin Challen:
Perhaps if we are trying to speed up developments that kind of
detailed analysis does not really matter? It is the overall outcome.
Professor Helm: On the contrary,
if you wanted to speed up development you could have just implemented
a guillotine on existing regime. There is nothing in this regime
which in itself is required to speed up the process. A guillotine
on decision timetable with existing planning regime would have
achieved exactly what is required here. On the contrary, the problem
with this is that these sorts of statements—I am not a lawyer,
but it would seem to me they are wide open to judicial challenge,
wide open, and that is before we come to the point that if you
are trying to make something predictable you want to have something
where there is sufficient agreement that it is not going to be
easily changed. We will probably come on to this point, but it
is trivial for an incoming Secretary of State to withdraw one
of these statements. I do not know if it takes five minutes, but
it cannot take many days to do it, and then of course the policy
is changed. Now, again if the documentation, if the supporting
policy had the degree of incoherence within it and it has bland
statements like this, "At all times we must have sufficient
capacity," then it would be unsurprising to me if this thing
is not changed—many of these documents changed—pretty
quickly and extremely regularly, and that is not what people wanted
when they went for a planning reform.
Q392 Dr Turner:
I would just like to take you up on your assertion that the great
weakness is a lack of coherent energy policy. I have been one
of those making stringent criticism of energy policy for years,
however your statement that 30 per cent of renewable energy by
2020 is highly unlikely, surely that is in the context of business
as usual and the whole point about evolving energy policy is to
change from business as usual to a different scenario and these
NPSs are part of that process. So do you wish to see us move to
the realistic possibility of 30 per cent renewable energy by 2020
or not, because if you do we need instruments like this? What
would you do instead?
Professor Helm: I think the starting
point of this is that if you are going to have joined up development
of energy infrastructure you have to have targets which people
can in principle achieve—not existing business as usual
but can in principle achieve. You may have seen some evidence
to suggest that there is in place a framework within which (including
this NPS) that target is going to be achieved. I have not. Let
me give you some examples if we are talking about 30 per cent.
Having competitive networks offshore, having a lack of joined-upness
between the Regulator and five year periodic reviews of the transmission
system, and the timetable of the requirement of the transmission
system offshore and its integration with onshore in order to meet
that target. Think of how many wind turbines you would have to
put up a day to meet that objective. What I would say is when
we think about practically trying to deal with these low carbon
issues if it turns out that most of the key players do not in
their heart of hearts think that the outcome is going to be delivered,
with or without these NPSs, it probably will not. That is before
I add the credit crunch and various other things in the frame.
So from my perspective if I was really interested in decarbonising
the economy—as an aside, I would not spent £100 billion
on wind farms in ten years, but that is an aside—if I was
seriously intent upon doing that I would want to put in place
a set of targets which were stretching but "achievable"
and the point I make in this particular regard is that I do not
think they are achievable, but if you push in one direction to
build the infrastructure as fast as possible for, say, transmission
but you do not do the other components, then you want a compacted
regime with respect to networks, think about a compacted regime
for networks offshore, think about all the negotiations, all the
companies. Imagine if Helm Energy had one of these transmission
networks and went bust. How would that work out? The target is
really like thinking about—and I think this is the right
analogy—if you were in 1935 or 1936 and you had a peacetime
economy and you wanted to have a wartime economy and fight the
Battle of Britain by 1940, you would not go about it like this.
It would be a matter of national urgency and what I am saying
is taking the policy framework we have got at the moment, we are
in no position to imagine that that is going to develop to produce
that particular answer. Now, a more pragmatic thing is to say,
"Well, supposing we produced, say, half of that target and
did it in a coherent, timed, dare I say planned way." There
would be a coherent National Policy Statement that goes with that,
there would be investments that fit together in a coherent way,
UK plc would be well suited and, by the way, we would do quite
a lot more for achieving our CO2 targets. That is really my point.
Q393 Dr Turner:
Let me put the question another way then, Dieter, because it is
clearly desirable from a climate change perspective that we should
meet these targets. Do you think these targets could be achieved
with the right energy policy instruments, and if so what would
those be that are different from what we have?
Professor Helm: Okay. Let me very
carefully give a reply to the first part of that. I do not think
this is either a good or a necessary way of achieving the CO2
reductions that were set up. This is not how I would spend £100
billion to get to that particular outcome of maximising the reduction
of CO2 or to make a contribution to climate change. I would do
some wind, but this seems to me to be actually quite damaging
overall. However, it is not for me to make that choice, it is
for democratically elected people like yourselves to decide what
it is that our climate change targets are. If a democratic process
leads to the idea that we wished to achieve this objective in
ten years. That is the instruction. It is a bit like my analogy
of making a wartime economy for a peacetime economy. You would
take many more directional powers. There would be no messing about
of Ofgem and periodic reviews. There would be no competitive tenderings
offshore, there would be no competitions for CCS, you would simply
get on with it. That is not what is going on here. We are supposed
to have, on the one hand, a liberalised competitive market. Then
we are supposed to have a separate policy for each of the technologies.
We have a number of overarching institutions, a Regulator who
engages in policy activity, we have got policy delegated to various
parts of the institutional structure. We have not got much of
the architecture in place if you really want to achieve that objective.
I personally do not think you should try and achieve that renewable
wind objective, but I bow, hopefully rightly, to democratically
elected people who have that choice to make.
Chairman: Okay. You made some points
in your paper and again this afternoon about revising and replacing
NPSs. Mike, are you going to pursue that?
Q394 Mr Weir:
Yes. You made the point that an incoming Government could change
the NPS. Do we accept there might be a need for them to be able
to change it in the light of changing circumstances?
Professor Helm: Oh, yes, of course.
I mean, to give you an example, in paragraph 2.6.98 it says: "Soft
start procedures during pile driving may be implemented. This
enables marine mammals in the area disturbed by the sound levels
to move away from the piling before significant adverse impacts
are caused." Now, of course we may discover there is a new
form of piling. I have no idea what piling means, by the way,
but that is just an aside. Of course you have to revise this stuff.
Okay. The question is whether you should be giving directions
from the Secretary of State via the NPS to the IPC about whether
soft start procedures should be used. It seems to me that is a
nonsense. That is not what you want the Secretary of State to
go around revising. You want a process which is probably the IPC
doing that kind of stuff.
Q395 Mr Weir:
on that basis, you are objecting in a way to the detail that in
the NPS there. Would you prefer to see a planning statement or
framework that is less detailed and perhaps just somewhere to
go or a process to go through rather than lay down the energy
policy?
Professor Helm: Let us remember
why this is detailed. This is detailed because it is an instruction
to the IPC because the IPC, which is unelected, makes the decision.
There is no democratic check at the end of this process whatsoever,
okay, and the worry is that you give to an unelected body discretion.
Okay—you do not mind giving—I say "you"—one
might not mind giving discretion to unelected quangos if there
if a check upon that discretion, for which the obvious one is
a final democratic stamp on the decision, and this matters extraordinarily
because in the planning process you are getting planning permission
to build assets which might last 50, 60 years. It is absolutely
vital that those people who lose by the decision—and the
fact that it is controversial means there are gainers and losers—accept
the process was fair. So what are they going to do, given this
level of detail in here? They cannot simply say, "We want
to bear down and lobby the IPC to take a slightly different line."
They might make submissions. They are going to go back to the
political process and that is why it makes this a revision-prone
procedure. So I am quite happy to delegate these things to the
IPC, but only in the context that the IPC's major decisions are
subject to some form of democratic endorsement.
Q396 Mr Weir:
But what form of democratic endorsement? Do you see it being done
at a local level, something akin to the current process, or do
you see it being done at a parliamentary level?
Professor Helm: It depends on
what kind of decision is being made and I know that the existing
planning system comes into much abuse, but we manage that reasonably
well at the moment. The losers do not generally go around disputing
the process that got to the outcome. In this they will. Now, that
leads to the revision issue. I would rather a world in which the
overarching NPS is the thing that politicians and governments
and elected people focus on, what is the framework, and from time
to time we will need to change that. I will give you two examples.
The first is, if it is true that non-conventional gas or unconventional
gas is going to radically change the energy market in a way that
nothing else has done for about 50 years, that we are going to
have abundant and cheap gas for the next 30, 40, 50 years, including
in Europe, in the UK, in Poland as well as the US, that world,
that datum is very different from a world in which many people
currently assume the oil price is going to go to 200 and the gas
price will follow it. In such circumstances it would be pretty
crazy not to reassess this. This is like Sizewell. At Sizewell
we discussed a coal station versus a nuke. That was the debate.
Gas stations were not even considered, yet within three years
gas stations were the technology of choice. So there are going
to have to be things of that ilk. The bits that I am less keen
on being changed from a day to day basis are bits about the soft
start procedures for pile driving, the detail. Now, you would
want politicians, I would hope, if you are making investments
lasting over a long period of time, not to change these things
very often and there are two ways of achieving that. One is clearly
to have cross-party endorsement of the major components of these
and we have experimented that with the Climate Change Committee
Bill, and so on. The second thing is—and this is where the
parliamentary accountability becomes very important—things
that are voted through in the House of Commons or approved by
elected politicians have a status in respect of the property rights
that are thereby created, which is much greater than things created
by these statements. I can change this tomorrow morning if I was,
God forbid, Secretary of State. If someone had had a parliamentary
debate, I cannot rip up someone's property rights so easily. If
I was an investor in a new nuclear power station, in a CCS plant,
or a big wind farm, I would like in my documentations for my borrowing
and my financing a line which said, "and this was approved
by the House of Commons," or "by elected officials."
That is my property right. Here it is just easy, really easy.
Maybe I have misunderstood it, I am not an expert on these things,
but you just suspend the statement. Could you do that on May 7th,
all of them? Somebody ought to notice the implication of that
for investment decisions.
Q397 Mr Weir:
But a cynic could also say that a Government with an absolute
majority could easily push through a change as well by the parliamentary
route?
Professor Helm: Absolutely, but
there is a difference in our democracy between things that are
pushed through by a parliamentary vote and things that are simply
done by administration. I do not know precisely how you do this,
but do you arrive as the new Secretary of State on May 7th and
say, "I've scribbled a note here. Please withdraw six statements"?
Is that what you do? That is very different from going to the
House of Commons and on Hansard explaining, criticised by the
Opposition in our democracy, your decision for doing that. I do
not know if I have understood this properly as to how easy it
is to revise, but I am not a procedural person and not a lawyer,
but it seemed to me pretty trivial from these documents.
Q398 Chairman:
We have talked quite a lot about a debate and I suspect there
will be a debate about the policy statement. Whether there will
be a vote I think is a different matter, but you would advocate
a vote?
Professor Helm: Yes.
Chairman: Okay. Alan, are you going to
talk about need?
Q399 Dr Whitehead:
I am going to talk about the coverage of NPSs, yes. Forgive me,
but you seem to be saying two essential things. Firstly, a sort
of paraphrase of the joke about the person asking the person at
the side of the road for directions as to where they go to and
the answer is, "Well, firstly I wouldn't have started out
from here in the first place." Secondly, you appear to be
suggesting apropos of not starting out from here in the first
place that a command economy, given the emergencies that we are
thought to face in energy, is likely to be the only way to reach
any of these kinds of targets, if one wishes to meet those targets?
Professor Helm: Okay, let me unpack
it into the two component parts. Would I re-write the overarching
NPS? Yes. First of all, I would make it coherent within itself.
I quoted to you the example of the statement on security of supply.
I would make it meaningful, but obviously there is scope to tighten
that up considerably. So I might tell your person at the side
of the road I would not start from here, but I would say, "Actually,
I would start from here and, by the way, you would find it much
easier to get to where you want to if you did start from here,
and here's the practical ways you can do it." So that is
the first point. On the planning, I am not in favour of planning,
I am in favour of markets. I am in favour of things like carbon
taxes, carbon prices, capacity markets, capacity payments, low
carbon obligations. I am not in favour of technology for specific
kinds of policies. All I said was, if you really want to pursue
a technology specific policy and you want to do it in ten years
flat from start—remember we have a lower renewables target
because only Malta and Cyprus have achieved less renewables than
we have so far—if you want to achieve that in ten years
you have no option but to take directional powers, and hopefully
you will not do that, so Government will not do that. That is
why I think the outcome will not be achieved. Do I think it is
a good thing that the outcome will not be achieved? Yes, because
it does not address the £100 billion on wind farms, it does
not address the climate change problem very coherently at all,
and there are much better ways in which, if you are serious about
climate change, you could spend that money. But that is not for
me to decide, that is for you to decide. I am simply saying that
if that is what you want to do and you want to achieve it in that
timetable, then you have to take the powers to do that, and my
view is, particularly in a credit crunch, you have to start directing
people to do things. I hope you do not do it.
|
