Examination of Witnesses (Questions 424
- 439)
WEDNESDAY 27 JANUARY 2010 (morning)
MR BRIAN
SEABOURNE, MR
PAUL SPENCE,
MR SIMON
WELLS AND
MR DAVID
PORTER
Q424 Paddy Tipping:
Welcome to everybody. We have a full house. Welcome to Brian Seabourne
from E.ON, Paul Spence from EDF Energy, Simon Wells from RWE Npower
and David Porter from the Association of Electricity Producers.
We have one hour. I know most of the witnesses and also that you
have a lot of experience and knowledge and, dare I say, a lot
of history too. Do not answer all the questions individually but
share them out amongst yourselves. Thank you very much for coming.
Let us start with the NPSs that have been published. At this stage
are they in a form that you think that the Government could adopt
them?
Mr Porter: Broadly, of course
we are very strongly in favour of the NPSs and we want to see
the Infrastructure Planning Commission work successfully because
we have a vast programme of investment to enter into and it is
probably true to say that unless the planning system is seen as
robust, business like and operating in a timely way, it could
even be the case that some people are put off actually seeking
planning consent. There is not a good record of dealing with planning
in the UK and that is really where we are coming from. We want
to see this work. The national policy statements meet with broad
approval but it is fair to say that there are aspects of them
that I think we might like to see tightened up.
Q425 Paddy Tipping:
We have the written evidence. Some of you have raised issues,
particularly about the need for CCS. We will come back to those.
In broad terms do you think it is in the right area?
Mr Wells: Yes, they provide us
with a clear and practical policy framework. We think it would
give confidence to investors to invest and, as David has said,
all of us are looking at some fairly hefty sums to invest in order
to meet the targets. Equally, it gives the IPC the opportunity
really to consider the issues which are important on each application.
It gives them the basis for considering the local impact and the
involvement with the local community.
Q426 Paddy Tipping:
Are you confident that there is enough material and guidance for
the IPC to make informed decisions?
Mr Spence: I think our view is
that they are substantially correct; that there is sufficient.
It is a well-considered set of policy statements. It lays out
the position on the policy effectively, and, given the urgency
of the need to get on with the investment programme, we think
that they provide a good basis for the next step in the process.
Q427 Paddy Tipping:
Some witnesses have said that really there is not an awful lot
in the overarching statement, that there is nothing new; it is
a restatement of policy where it is at the moment. Is that a fair
comment?
Mr Seabourne: In a sense, it is
not necessarily intended to provide statements of new policy.
It is intended to set out really the Government's energy policy
objectives and its climate change goals, which include the reduction
of carbon emissions by 80 per cent by 2050 and that is the right
context for the IPC to be making its decisions, against the impacts
which would arise in the case of individual projects.
Mr Wells: We found it quite a
helpful document in the sense that it actually consolidates a
lot of policy and information that is out there and that has not
been consolidated in once place before. From that point of view,
we find it useful. Clearly the NPS itself is not there to set
policy. We also find it useful because it is addressing all the
impacts and how those impacts have to be assessed, how they are
to be mitigated, and, if need be, how the IPC is to address them.
I believe it is quite a strong document.
Paddy Tipping: Can I turn directly to
the question of need, which some of you have written to us about?
Q428 Dr Turner:
There seems to be some degree almost of unanimity amongst witnesses
that need is not adequately expressed in the NPS as it is currently
drafted. Would you like to comment on your view on that?
Mr Seabourne: Our view was that
the overarching NPS does set out the need; it describes the need
adequately for new low carbon capacity and generation, the need
to maintain security of supply. What it does not really do is
say to the IPC what weight the IPC should give to that need when
it is making a judgment about balancing the need against adverse
impacts. For example, in the nuclear NPS there is a clear statement
that the IPC should give substantial weight to the need for nuclear,
and we think a similar statement should be made in the case of
renewables, coal and CSS, and indeed for gas storage, for example
where we feel the statements on the need for new gas storage are
not strong enough.
Q429 Dr Turner:
That is helpful. Another question is that by DECC's own figures
in the overarching NPS there is not a lot of need for new conventional
generating capacity in the next 15 years over and above that which
has already been consented, particularly principally gas, which
of course your companies will be responsible for, by and large.
How do you respond to that?
Mr Spence: The NPS makes clear
that by 2025 there will be a need for around 60 GW of new capacity
and a substantial proportion of that needs to come from conventional
generation, potentially 25 plus gigawatts. That in itself is a
substantial gap. If you look further, if you start looking to
about 2050, we have an objective to reduce our carbon output as
a country by 80 per cent. To get there, the Climate Change Committee
has said that we need substantially to have eliminated carbon
from the electricity system by 2030. When you look at it in that
context, the NPSs provide a clear framework for the need for the
investment and we would like the IPC to be able to take account
of that in the long-term future as well.
Q430 Dr Turner:
As the statements are drafted, the worry which several witnesses
have expressed is that some of the future gaps may be filled not
by low carbon or renewable energy but by further gas, which clearly
would go against the principles that you have just set out. Do
you think that the statements give an adequate defence against
that happening?
Mr Spence: They move us in the
right direction and they give the IPC and articulate a policy
that does make clear the need for low carbon generation. That
could be strengthened by allowing the IPC to make reference to
the longer term targets.
Mr Wells: Could I add to that
that? Cearly consented capacity does not equate to built capacity.
The consents may be going through the system or may have been
provided. That does not necessarily mean that all that capacity
will be built.
Q431 Dr Turner:
What percentage of that capacity do you think will be built? Given
the fact that it is the lowest capital expenditure, you would
think there is a probability that a high proportion of it will
actually be built.
Mr Seabourne: The thing is that
the conventional policy framework put in place by government build
to incentivise renewables and nuclear and coal and CCS. If that
is successful, then there will be less gas plant built and we
will have a more diverse mix of generating capacity. So the onus
really is on the policy framework to deliver that capacity. We
do not see it as the role of the IPC to act as a sort of last
ditch climate change regulator, if you see what I mean.
Q432 Sir Robert Smith:
On this establishing of need, one of the statements talks about
sufficient generating capacity needs to be available to meet demand
at all times. Surely even in the most robust state planned system
you would have a bit of demand-side management as well built into
the system? You would not gold plate to the point of having the
ability to meet in all exceptional circumstances.
Mr Porter: Even in a Stalinist
system you probably could not guarantee that demand would be met.
Q433 Paddy Tipping:
Stalin was a good manager!
Mr Porter: He probably had somewhat
unorthodox methods for dealing with people that failed to meet
the demand. Our process is probably rather more likely to deliver
what is wanted.
Q434 Sir Robert Smith:
It is not overstating the case of need there, though, in the sense
of saying "meet demand at all times".
Mr Porter: You cannot actually
have that, so in one sense it is a slight over-statement. Of course
the industry strives at all times to meet demand but everyone
involved knows that there are occasions when that might not be
possible. It was true in the days of the Central Electricity Generating
Board and it is true in the more liberalised market today.
Q435 Sir Robert Smith:
On an earlier point you made about the gas storage and CCS maybe
not getting a strong enough hint or drive within the statements,
what are the consequences of not giving them a strong enough drive?
Mr Seabourne: The consequence
would be that the IPC would not give sufficient weight to the
need for new gas storage projects when they came forward and we
might have less gas storage than we would otherwise have had.
I think the Government is projecting that overall gas demand will
fall between now and 2020 because of more renewables and energy
efficiency measures, but we still think there is a need for additional
gas storage as the UK becomes more dependent on more external
sources of gas. I think the Secretary of State, after a rather
difficult 2005-06 winter, when we were all asking ourselves whether
we have enough storage, made a rather strong statement in favour
of the need for gas storage, and we would quite like to see that
reiterated in the NPS.
Q436 Sir Robert Smith:
There would be quite a lot of objection pressure against gas storage
that would need to be weighed against that more strategic need?
Mr Seabourne: Yes.
Q437 Charles Hendry:
With the need for energy security and also the move towards a
low carbon economy, do you think that we actually need to see
new nuclear facilities being built on all of the sites which have
been identified in the NPS?
Mr Spence: Certainly our view
is that at this stage the list of sites that are able to be considered
for new build should be as long as possible. We would certainly
make the case that it is inappropriate at this stage to omit Dungeness
from that list of sites, or premature to omit it at this stage.
Once we are clear on the scale of the need and the precise local
impact on that site, but on each of the sites, then we would expect
the IPC to take that judgment and decide. Whether all of the sites
come through that will be fore the IPC to decide at that point.
Q438 Paddy Tipping:
It will be the market that decides.
Mr Spence: The market will propose
the projects. Whether or not all the projects achieve consent
is where the benefit outweighs the impact.
Q439 Charles Hendry:
In terms of your ability to deliver that investment, would you
be looking to build more than one plant at once or would you build
one plant and then start on the next one? That has a very significant
impact in terms of what the delivery of new nuclear could be,
say, by 2025.
Mr Spence: Certainly my own company's
proposal at the moment or plan is to construct four reactors on
two sites, so that is two twin projects, which would be running
in a step-by-step sequence with some space between each of those
being completed to allow us to learn the lessons and be as efficient
as possible.
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