House of Commons - The proposals for national policy statements on energy

The proposals for national policy statements on energy - Energy and Climate Change Contents

2 GOVERNMENT POLICY AND THE NEED FOR NEW ENERGY INFRASTRUCTURE

9. The overarching energy NPS (EN-1) sets out national policy on, and seeks to establish the need for, new energy infrastructure. Together with the relevant technology-specific NPS, it will provide the primary basis for decisions taken by the Infrastructure Planning Commission (IPC). By establishing Government policy and the need for new infrastructure in advance, the intention is that the IPC should be able to focus on the details of individual planning applications thus reducing the time required to reach a decision. It is, therefore, important that the NPS is clear and unambiguous in its guidance. In this Chapter we first examine the statement of Government policy within EN-1. We then analyse the case for need for new energy infrastructure, and in particular the IPC's role in influencing the future electricity mix and hence the sector's carbon profile.

Government policy on energy and climate change

10. Part 2 of EN-1 provides a summary of the Government's energy and climate change objectives for the power sector. It highlights the UK's obligation to reduce greenhouse gas emissions by 80% by 2050, and the need to work within the carbon budgets arising from the Climate Change Act 2008. Alongside this is the objective to ensure investment provides "security of supply through a diverse and reliable mix of fuels and low carbon technologies".[6] There are also objectives on ensuring timely development of the electricity grid; minimising the impact on fuel poverty through cost-effective investment in infrastructure; and contributing to sustainable development by minimising negative impacts on the local environment.

11. We received both specific and general concerns about the expression of Government policy in EN-1. Specific concerns related to the current text in the draft NPS. For example, Prof Dieter Helm highlighted the assertion on electricity generation that "we need sufficient capacity [...] to meet demand at all times".[7] He noted that no energy system was capable of providing 100% reliability, and to try to do so would necessitate considerable over-investment. Rather, it would be more sensible to refer to a desirable security of supply margin. He told us: "That is the sort of incoherence [...] which has to be sorted out in the drafting if it is to give a clear instruction to the IPC".[8] Elsewhere in Part 2 of EN-1, there is reference to the UK facing security of supply challenges as a result of increasing reliance on imports of oil and gas as North Sea reserves decline. However, in para 3.9.3 the NPS states that net gas imports will remain broadly constant over the next 10 years. We return to the issue of gas supply infrastructure later in this Chapter. We were also told by the IPC that, while policy is set out in the draft NPSs, it is not always as clearly highlighted as it could be. The Commission thought that distinguishing statements of policy from contextual discussion, perhaps by means of a highlighted text box in each chapter or major section, would aid the accessibility of the NPSs for all users.[9]

12. The Government's energy and climate change targets and objectives influence crucially the level of need for new energy infrastructure. It is therefore vital that the overarching energy NPS states clearly what those objectives are, especially with regard to carbon emission reductions, energy security and affordability; how performance against those objectives is to be measured; and that it sets out more explicitly the link between those objectives and the need for new infrastructure. We recommend the Government reconsiders the current expression of policy in the draft NPS with this concern in mind. It would be wholly undesirable for sloppy or unclear drafting to result in unintended outcomes.

13. A number of witnesses raised more general criticisms with regard to the current statement of energy policy within Part 2 of EN-1. One such concern was that it focuses on the power generating sector and makes little reference to the contribution that transport and heating will need to make in achieving the Government's 2050 target for carbon dioxide emissions.[10] The Institution of Civil Engineers (ICE) noted that heating accounts for almost half of primary energy consumption in the UK.[11] Indeed, electricity currently accounts for only a fifth of the UK's emissions.[12] Electrification of the heating and transport sectors is seen as a necessary part of the transition to a low-carbon economy. This is acknowledged in Chapter 3 of EN-1 under the conclusions on alternatives to new large-scale electricity generation. ICE believed this long-term objective could be reflected better in the overarching NPS, thus taking a more holistic view of the energy sector.[13]

14. A linked concern was the absence of a longer-term view on how the Government expects the energy sector to develop beyond the next decade. EN-1 refers to the UK Low Carbon Transition Plan, which sets out the Government's energy and climate change strategy for the next decade, but it does not look beyond this. The UK Business Council for Sustainable Energy (UKBCSE) told us the NPSs needed to recognise that investment will be required beyond the Statements' current time horizon of 2020.[14] RWE Npower, for example, said: "the NPS should be looking to go beyond 2020/25 [...] towards 2050".[15] E.ON UK suggested one response to this concern would be for the Government to adopt formally the Committee on Climate Change's recommendation that the power sector should be fully decarbonised by 2030.[16] It said this would provide "a clearer framework within which the IPC could consider projects".[17] The Environment Agency also took this view, noting that at present "there is not a sufficiently strong long-term vision".[18]

15. The Government's draft overarching energy NPS focuses primarily on power generation and does not take a sufficiently holistic view of the energy sector. We believe the statement of policy in EN-1 should make more explicit reference to transport and heating, especially as the electrification of these sectors will be crucial in achieving a low-carbon economy and will impact on the need for new generating capacity. Furthermore, although this would constitute an addition to Government policy, we recommend the incorporation of the Committee on Climate Change's proposal that the electricity sector should be fully decarbonised by 2030 if the UK is to be on course to meet its 2050 target for greenhouse gas emissions. This would provide a long-term view of the UK's energy requirements that would better inform the IPC's decision-making on new generating capacity.

Establishing the need for new energy infrastructure

16. Part 3 of the draft overarching energy NPS seeks to establish the need for new energy infrastructure. It focuses both on the need for new generating capacity as well as new oil and gas supply infrastructure. The Planning and Environment Bar Association emphasised the importance of a robust evidence base to support the Government's conclusions on need to reduce the risk of subsequent legal challenge.[19] We heard a range of views on whether EN-1 adequately expresses need. For example, the Town and Country Planning Association (TCPA) believed the need for new large-scale infrastructure may be exaggerated.[20] WWF were critical of the lack of quantification of the potential for demand management through energy efficiency measures, which could further reduce the need for new generating capacity.[21] The Association of Electricity Producers (AEP), on the other hand, argued that the wording of the need case should be further strengthened, "emphasising the critical importance of investment in all new energy technologies".[22] The UK Business Council for Sustainable Energy also took this view, though National Grid told us the current expression of need in EN-1 was "appropriate".[23] The following three sections examine in more depth the need case for renewables, conventional generation, and gas supply infrastructure as set out in the draft overarching energy NPS.

RENEWABLES

17. EN-1 highlights the UK's obligation under the European Directive on renewable energy (EU/2009/28) to source 15% of total energy from renewable sources, such as wind and biomass, by 2020. To meet this target the Government's lead scenario suggests renewables could contribute 30% of the electricity mix by the end of the decade, compared to 5.5% today.[24] Paragraph 3.3.14 sets out a potential scenario for new generating capacity over the next 10 and 15 years. This is summarised in Figure 1, below. It assumes a broadly constant level of demand over time. The large requirement for new generating capacity reflects the expected closure of a number of nuclear and coal-fired power stations over the next decade. A large proportion of the capacity built to replace this will need to be renewables if the Government is to meet its 2020 target.

Figure 1: Generating capacity requirements in the next 10 and 15 years

	By 2020	By 2025
Total generating capacity required	100 GW	110 GW
Total new capacity required	43 GW	60 GW
Of which renewables	26 GW	35 GW
Of which other generating capacity	17 GW	25 GW

Source: Draft Overarching National Policy Statement for Energy (EN-1)

18. From these figures, the Government concludes that: "there is a significant need for new major energy infrastructure" and that "the IPC should start its assessment of applications [...] on the basis that need has been demonstrated".[25] Given the requirement for a large amount of new renewable capacity to meet the 2020 target, it is clear that the case for need is demonstrated in EN-1. However, both the Renewable Energy Association (REA) and the British Wind Energy Association (BWEA) believed the need case should be strengthened further.[26] BWEA told us: "the detail of the Government's ambitions on renewable energy might be better expressed", whilst the REA said: "It should be far more robustly expressed".[27] Ways in which the associations suggested EN-1 could be improved included: referring to the consequences of the UK failing to deliver new renewable capacity; contrasting the UK's proportion of renewables in the electricity mix with that of other EU Member States; and acknowledging that in the past the UK has struggled to meet its renewables targets. BWEA summarised the situation, stating: "We do not feel that all existing policy that is out there is currently within these documents".[28] Some of the large energy companies also shared this view.[29] E.ON UK told us: "the need for new coal and CCS capacity and for renewable energy sources should be given more emphasis".[30]

19. Some witnesses sought to qualify the need case for new large-scale renewable generating capacity presented in EN-1. Friends of the Earth and the TCPA both criticised the Department's current assumption under the lead scenario for the UK Renewable Energy Strategy that small-scale renewable generation will only contribute 4 GW to the electricity mix in the next decade.[31] They highlighted analysis conducted by the energy consultants Poyry for the Department in 2009 that suggested a sufficiently strong incentive through the Government's new feed-in tariffs (FITs) for small-scale renewables under 5 MW could result in almost four times more generating capacity than the current proposals. At this stage, it is not possible to say how successful the FITs will be, though the level of take-up will to some extent impact on the need case for larger-scale renewables.

20. Prof Dieter Helm raised a more fundamental concern by questioning the credibility of the Government's legally binding target for 15% renewable energy by 2020, and its belief that this will require 30% of electricity from renewables. He noted that the joined-up development of new energy infrastructure required the Government to have in place targets that were achievable and a framework in which they could be met. However, he told us the sheer scale of the challenge meant: "most of the key players do not in their heart of hearts think that the outcome is going to be delivered".[32]

21. The 2020 target for renewable energy means there is a clear and unambiguous need for new large-scale renewable generating capacity in the next decade, regardless of the level of expansion in small-scale renewables. The Department should examine whether this need is expressed adequately in EN-1. Moreover, we are concerned that there are perceived doubts over the credibility of the target for renewable generation. In the next Parliament the Government should evaluate whether its policy levers are commensurate with its stated objectives. A lack of buy-in to the achievability of the Government's targets will otherwise undermine the role of the NPS.

OTHER GENERATING CAPACITY

22. Other generating capacity includes nuclear, gas and coal-fired power generation. In 2009 the Government announced that all new gas plant (300 MW or above) would need to be built ready to install carbon capture and storage (CCS). No new coal plant will be permitted unless at least 300 MW of the proposed capacity has CCS installed. We discuss this further in Chapter 3. As noted in the previous section, the Government's analysis suggests 17 GW of other new generating capacity could be necessary by 2020 and a further 8 GW by 2025. National Grid supported the view that EN-1 demonstrated the need for new non-renewable as well as renewable capacity, stating: "the answer very clearly in the analysis is that we need every bit of nuclear that can come forward in the next decade or so and every bit of offshore wind [...]".[33] However, the Nuclear Industry Association told us the draft overarching NPS could be "more emphatic" on the need for new nuclear.[34]

23. Other organisations were more sceptical of the analysis presented in EN-1. Friends of the Earth, for example, highlighted the fact that in paragraph 3.3.12 of EN-1 the Department quotes National Grid's projection that over 20 GW of new investment is already in the pipeline—2 GW of recently completed construction; 8 GW of capacity currently under construction; and an additional 10.5 GW that already has planning consent and an agreement to connect to the grid, but which has not yet started construction. Indeed, figures released by the Department since publication of the draft NPSs suggest 21.6 GW of new generating capacity is now in development.[35] 7.3 GW of this is renewables. The TCPA told us it believed the remaining 14.3 GW was predominantly gas-fired.[36] Furthermore, Friends of the Earth noted there is a further 7 GW of gas-fired capacity already in the planning system that will be dealt with under the old planning regime.[37] These figures contrast with the assertion in EN-1 that 17 GW of non-renewable capacity will be necessary by 2020 and a further 8 GW by 2025. Therefore, if all the plant that is under construction or has received planning consent is built, the level of further need could be just 2.7 GW in the next decade. If all the new capacity currently in the planning system is built this would more than meet the need up to 2020, and contribute significantly to the need to 2025.

24. The TCPA told us: "there could in fact be very little 'need' for non renewables to be consented by the IPC".[38] Friends of the Earth noted: "the Government's argument for need seems to be at variance with its figures".[39] Indeed, WWF highlighted a recent report conducted by Poyry last year which showed that if the Government met its targets for renewable energy and energy efficiency, this in itself would be sufficient to "keep the lights on until the mid 2020s".[40] However, in evidence one of the 'Big 6' energy companies cautioned that consented generating capacity did not necessarily equate to built capacity—planning permission was not a guarantee that projects would be built.[41]

25. It is worth noting that while EN-1 sets out the Government's analysis of the level of renewable and non-renewable capacity commensurate with meeting its 2020 targets and ensuring security of supply, DECC does not intend for these to act as quotas for the IPC. In other words, a greater level of non-renewable capacity could be developed than the current draft NPS suggests is needed.

26. The draft overarching energy NPS states: "there is a significant need for new major energy infrastructure". However, the Government's own analysis for non-renewable generating capacity suggests the anticipated need over the next decade could be largely met already through projects that are either under construction or have received planning consent under the existing regime. If the Government accepts this, but maintains there is still a need for significant levels of non-renewable capacity, the implication is that it either believes its targets for renewable energy will be missed, or that nuclear or CCS infrastructure will not come forward in sufficient quantities to meet requirements. The Department should look again at the evidence put forward in EN-1. Furthermore, the current assertion of the need for new conventional generating capacity reduces the likelihood that the renewables target will be met.

GAS SUPPLY INFRASTRUCTURE AND PIPELINES

27. EN-1 notes that in 2009 Britain imported around 30% of its annual gas demand. It suggests that the Low Carbon Transition Plan will bring about a 30% reduction in gas demand by 2020 and that this means the absolute level of net gas imports will remain broadly constant during the next decade.[42] However, the draft NPS states an increasingly diverse range of gas sources is desirable to enhance security of supply, and that meeting peak gas demand can be more challenging than meeting average annual demand. On this basis, EN-1 concludes: "the IPC should expect to receive a small number of significant applications for supply, storage and transmission of gas and start its assessment from the basis that as the North Sea supplies decline there is a significant need for this infrastructure to be provided".[43]

28. The Department's analysis of gas demand over the next decade contrasts with evidence we received from National Grid. Its projections suggest net gas imports will more than double by 2020, reflecting the fact that the proportion of gas in the electricity mix is likely to increase significantly as nuclear and coal-fired power stations close in the next few years. The firm, therefore, concludes that: "the 'need' for new gas infrastructure is much stronger than the case currently presented in the NPS".[44] Its Executive Director described the discrepancy between his company's estimates and the Department's as "puzzling".[45] Furthermore, both Centrica and E.ON UK argued that the draft overarching energy NPS should be strengthened regarding the future need for gas storage.[46]

29. National Grid believes gas imports will be much greater in the next 10 years than the Department's own analysis in EN-1 suggests. We recommend the Government looks again at its predictions for gas demand and adjusts its assessment of the need for new gas supply infrastructure accordingly. If it remains content with its assessment, it should explain why it differs so substantially to National Grid's analysis.

CUMULATIVE CARBON EMISSIONS

30. The decisions taken by the IPC on planning applications will have a crucial impact on the future carbon profile of the electricity sector. However, EN-1 states that: "Given that the Government policies that underlie NPSs have been set in accordance with the Transition Plan and carbon budgets, the IPC does not need to assess individual applications in terms of carbon emissions against the budgets".[47] Various witnesses, including the Sustainable Development Commission (SDC), expressed concern that the absence of any consideration of cumulative impacts could lead to the IPC giving planning consent to a number of gas-fired power stations in the future that would potentially lock the UK into a high-carbon electricity infrastructure and lead to a future breach in the carbon budgets.[48] This is primarily because there is little faith in the ability of the EU Emissions Trading Scheme (ETS) as the main policy driver for achieving long-term carbon reductions.[49] For example, Friends of the Earth highlighted recent findings by the Committee on Climate Change, which show the EU ETS 2020 cap could be met simply through coal to gas switching without any significant investment in low-carbon plant. Under this scenario, however, the long-term nature of investment in new gas-fired plant would make further decarbonisation of the electricity sector beyond 2020 much more difficult.[50]

31. Several witnesses argued that, in the first instance, the Government's energy and climate change policy should be strengthened to ensure the UK remains on course to achieve its long-term carbon reduction targets. Friends of the Earth were in favour of the overarching energy NPS setting out a range of acceptable electricity mixes for 2020, 2030 and 2050 that would guide the IPC's decision-making. This could be combined with safeguards such as a limit on the quantity of new gas-fired capacity.[51] Natural England also argued for the IPC to be given a greater steer on the desired energy mix.[52] Elsewhere, the Institution of Civil Engineers and the TCPA supported the idea of a hierarchy of preferred technologies in the NPS that could inform the IPC.[53] However, those likely to be building new generating capacity expressed concern at any potential move away from the current market-led approach. Even the British Wind Energy Association (BWEA), whose sector would be most likely to benefit from a hierarchy of technologies, believed: "it is not the role of the IPC to pick technologies".[54] Elsewhere, Scottish and Southern Energy said it did "not think [...] that the planning process is the right way for Government to have policy determined on what the mix should be".[55] The Minister also indicated his wariness of such an approach: "The IPC has to take each planning application on its merits and not [...] make value judgements about whether a particular energy technology is deemed to be better than another".[56]

32. In addition to criticism of the effectiveness of the policy levers for delivering low-carbon infrastructure, witnesses were also concerned generally that EN-1 directs the IPC not to consider carbon impacts. The SDC noted there is no requirement for individual projects to carry out life-cycle carbon assessments and that the IPC would be effectively "carbon blind".[57] Greenpeace believed this created a disconnect between the Government's carbon reduction targets and the decision-making of the Commission.[58] As the TCPA put it: "The assessment principles section of the draft overarching energy NPS includes insect infestation but not carbon or other greenhouse gas emissions".[59]

33. Few witnesses advocated an explicit responsibility for the IPC to monitor the cumulative carbon emissions arising from its decisions and to ensure they were consistent with the carbon budgets. The Association of Electricity Producers, for example, told us: "The IPC's role in the new Planning Act process is clear and should not be extended to cover climate change policy and analysis".[60] However, organisations including the Sustainable Development Commission, Friends of the Earth and the WWF argued there should be a requirement for planning applicants to conduct an assessment of the life-cycle carbon emissions of their proposals.[61] They also argued for a more explicit role for the Committee on Climate Change (CCC), which is responsible for assessing progress against the carbon budgets. This could entail the CCC monitoring the carbon emissions arising from the IPC's planning decisions on an annual basis and, taking account of progress across the economy in reducing emissions, making recommendations to the Commission on whether it should give consent to future carbon-intensive infrastructure.[62]

34. Despite the current drafting of EN-1, in its written evidence the IPC said: "Consideration of climate change impacts is likely to form an important part of the IPC's examination of proposed energy Nationally Significant Infrastructure Projects (NSIPs), and Commissioners must consider all relevant evidence submitted". It goes on to say: "it is assumed that the wider carbon footprint of an NSIP, including impacts along the supply chain and over the whole life of the installation, would be a relevant factor in IPC decision making. Further clarification in the NPSs, on this area would be welcome".[63] In oral evidence, the Commission confirmed that it could not be "the book-keepers in terms of the carbon budgets", but that it would nevertheless be "taking account of commentary [...] about the question of carbon budgets in relation to individual projects".[64] Its Chair told us: "We will take each application on its merits individually and if one of our statutory consultees changes their advice [...] because perhaps there are changes in their own assessments, then that [...] will be material to the applications in front of us at that time".[65] Although the CCC is not a statutory consultee for individual planning applications, it told us it: "would be well placed to advise periodically on the consistency of decisions with the required path for power sector decarbonisation. This would relate very closely to our ongoing work assessing progress in reducing emissions on the basis of leading indicators including planning decisions for major infrastructure projects".[66]

35. The IPC also noted that over time it could envisage a situation where there was a conflict between Government policy regarding its carbon targets, and the expression of policy within the NPS. Its Chair told us the Commission would not hesitate to highlight any such issues in its annual report to Parliament and to the relevant secretaries of state.[67]

36. There is significant concern that decision-making by the IPC could give rise to an energy infrastructure that risks breaching the UK's carbon budgets, making it more difficult to decarbonise the electricity sector in the longer term. In the first instance, the Government must look again at the policy levers that give rise to this concern—particularly its reliance on the EU Emissions Trading Scheme as the main means of delivering low-carbon infrastructure. The Government's policy must ensure that projects would not come forward that threatened the achievability of its carbon reduction targets—otherwise this undermines the credibility of these targets.

37. In the event that planning applications may still come forward that threaten a breach of the carbon budgets, we believe there should be a role for the IPC in acting as a safeguard by considering the life-cycle carbon emissions of proposed new plant. However, we accept it is not the role of the IPC to monitor whether its decisions are in accordance with the carbon budgets. Accordingly, we recommend:

The inclusion of a specific requirement within the overarching energy NPS on applicants to conduct a full life-cycle carbon assessment of their proposals, including that of the supply chain;
The Committee on Climate Change be made a statutory consultee for planning applications. To avoid delaying the application process, we would expect it to take a risk-based approach in determining which applications to comment on—for example, further new gas-fired power stations. The CCC and the IPC should then agree a memorandum of understanding that would set out a protocol covering the sharing of information on applicants' carbon assessments;
The IPC should take account of any evidence the CCC chooses to submit with respect to particular applications; and
The CCC should be required to report annually on the cumulative emissions arising from developments consented by the IPC as part of its overall monitoring of progress against the carbon budgets, which would flag up to Ministers the need for action if the Commission was at risk of locking the UK into a high-carbon energy mix.

38. These measures would exist as safeguards, though we believe an intervention by the CCC would constitute a failure of Government policy. In this instance the Government should consider revising the NPS better to enable the achievement of its long-term targets. A potential future option could be the introduction of a hierarchy of preferred generation technologies to guide more directly the IPC's decision-making.

Weighing need against impacts

39. As noted earlier in this Chapter the establishment of the need for new energy infrastructure is the raison d'être for the overarching NPS—the objective being to obviate the need to discuss whether a proposal is necessary and to focus attention on the detail of a planning application. Part 4 of EN-1 outlines the assessment principles and generic impacts that the IPC will have to consider. These range from landscape and visual impacts to the ability of a developer to manage the impacts of climate change on a site, such as greater flood risk. For each of these EN-1 provides guidance for the IPC.

40. There was unease among many of our witnesses as to what role the question of need would play in determining planning applications. For example, the Sustainable Development Commission said there was "a lack of clarity over the weighting of different impacts and objectives".[68] E.ON UK also expressed concern that EN-1, whilst making the case for need, does not give the IPC sufficient guidance on the weighting this should be given against potential adverse impacts.[69] Indeed, the Planning and Environment Bar Association believed it would be difficult for the IPC to avoid considering the need case, for example, when confronted by a proposal that would have significant detrimental impacts on a site protected by European habitat regulations.[70] In evidence, the IPC appeared to agree with this view, noting that it could not rule out evidence and submissions made to it, although the Commission would still have regard to the overarching NPS as the primary statement on need.[71]

41. In evidence, the IPC also raised concerns about the inconsistent use of language in the draft overarching NPS. Examples it gave of complex forms of words in EN-1 included: "the IPC should have regard to the possibility that [...]"; "it should/may be reasonable for the IPC to"; and "these [considerations] should not be used in themselves to refuse consent".[72] The Commission told us that while this did not render the draft NPS unfit for purpose, "it may help to limit unproductive debate about the nuances of meaning in different turns of phrase if [DECC] was able to introduce a greater degree of consistency".[73]

42. The IPC's decision-making will be informed by weighing the assessment of need set out in the NPSs against the potential impacts of developments. It is important, therefore, that the NPSs provide sufficient guidance to inform this balancing of factors. We recommend the Department reviews the draft NPSs to ensure consistency of language throughout the six main Statements and their supporting documents. We note too that, although a key role of the overarching energy NPS is to establish the case for need, the IPC should still expect to receive evidence on this issue in particular cases, for example when a proposal presents significant potential adverse impacts.

6 EN-1, para 2.1 Back

7 EN-1, para 2.1.14 Back

8 Q 390 (Prof Dieter Helm, University of Oxford) Back

9 Ev 373 (Infrastructure Planning Commission) Back

10 For example, DECC consultation response 0281 (DONG Energy) Back

11 Ev 375 (Institution of Civil Engineers) Back

12 HM Government, Meeting the Energy Challenge-White Paper on Energy, May 2007 Back

13 Q 38 (Institution of Civil Engineers) Back

14 Ev 538 (UK Business Council for Sustainable Energy) Back

15 Q 445 (RWE Npower) Back

16 Ev 312 (E.ON UK) Back

17 Q 446 (E.ON UK) Back