Memorandum submitted by the Association of Electricity Producers (NPS 91)



About AEP

1. The Association of Electricity Producers (AEP) represents the many different companies, both large and small, that make the electricity upon which the UK depends. Between them, AEP members account for more than 95 per cent of the country's electricity generation capacity and embrace all generating technologies used commercially in the UK - coal, oil, gas, nuclear power and a range of renewable energy technologies.


UK energy challenge

2. The UK faces a major energy challenge. About a quarter of our existing electricity generating capacity is scheduled to close before 2025 either because power stations are reaching the end of their operational lives or because they cannot comply with air quality legislation. Proposals for tighter limits on emissions are likely to cause a significant additional quantity of coal- and gas-fired plants to close by the early 2020s. These power stations will need to be replaced simply to keep the lights on.


3. The UK is committed to challenging climate change and renewable energy targets. The power generation sector will be central to the delivery of these and electricity producers have committed to delivering a carbon neutral electricity sector across Europe by 2050. This will require huge investment in new, low carbon forms of electricity generation, such as renewables, nuclear and fossil fuels with Carbon Capture and Storage.


4. The large expansion in renewable electricity (a six fold increase over the next ten years) will lead to overall levels of power generating capacity rising to compensate for the variable output from many of the renewables being built. In the medium term, more power generating capacity may also be needed to meet an increase in the use of low carbon electricity in applications such as electric cars.


5. Increased levels of generation capacity, some of which will be located in areas far from the existing transmission network, will also require new and upgraded electricity network infrastructure to carry the electricity from where it is generated to where it will be consumed.


6. Massive investment in new energy infrastructure is therefore essential to maintain power supplies and reduce carbon emissions. Estimates suggest that companies will have to invest about 100 billion by 2020 and up to 100 billion more in the following decade.


7. These are very large sums of money and people that would like to invest in the UK's electricity industry will not do so unless they are confident that they will get a worthwhile return on their investment. The UK must be an attractive place in which to invest in energy infrastructure - around the world, there are many other industries and countries competing for investment.


Need for reform of the planning system

8. A business-like planning system that avoids intolerable delays is crucial to the delivery of this massive investment in new power stations. The UK needs a timely, efficient and predictable planning process because if the perceived risks to project development are greater in the UK than elsewhere in the world, then necessary investment in the UK is unlikely to be forthcoming. The old way of doing things - approval for Sizewell B power station took six years from application to consent - is no longer sensible.


9. The Association therefore firmly supports the package of measures in the Planning Act 2008, which provides developers with assurance of an efficient consenting process, with decisions being taken by an independent body on the basis of clearly defined principles and on fixed timescales.


10. Energy companies that apply for planning consent would naturally like to secure it and will strive to bring forward the best possible applications in the light of community consultation and the guidance given by the new energy National Policy Statements (NPSs). However, even refusal in a timely way is much better than the old regime when the process dragged on for years and projects became too expensive to pursue.


Effectiveness of the draft National Policy Statements

11. The Association considers that NPSs are a vital and integral part of the Planning Act regime. Developers need certainty that issues of established national policy will not be opened up to review during the examination of every development proposal, increasing uncertainty and delay.


12. The suite of energy NPSs must establish a clear and stable policy framework for nationally significant energy infrastructure projects and provide the Infrastructure Planning Commission (IPC) with unambiguous guidance on the application of national energy policy in a planning context. This will allow the IPC to accept the national benefits of energy projects and focus on the assessment of their local impacts.


13. It is not just the IPC that will benefit from the new NPSs. They will also provide developers, local communities and other stakeholders with clarity on the criteria against which projects will be assessed. We consider that the energy NPSs do in general, as currently drafted, provide all parties with the necessary certainty.


14. We support the style and format of the suite of draft energy NPSs, which


set out established energy policy;

determine the need for new energy infrastructure;

provide information on the specific impacts of energy infrastructure developments, what details should be included in an application, how they should be assessed and possible means of mitigating them.


15. When they are finally approved, these documents will help make the planning process for large projects more business-like and will give more confidence to investors. We therefore consider that the draft energy NPSs should in principle be designated, avoiding alterations which could undermine their effectiveness.


16. We welcome Parliamentary scrutiny of and public consultation on the draft NPSs. Following this process, the government should designate the energy NPSs as soon as possible. For the new Planning Act regime to function as envisaged, all the parts of the package of reforms must be in place. Unnecessary delays in designating the NPSs would create further uncertainty for developers and hamper the UK's ability to meet its energy and climate change challenges.


Establishing need for new energy infrastructure

17. The Association welcomes the NPSs approach to establishing need for new power generation in the context of the UK's pressing security of supply and carbon reduction priorities. However, we consider that the need case could be further strengthened, emphasising the critical importance of investment in all new energy technologies. The NPSs should make clear that the IPC should give substantial weight to the need case for each technology.


18. The draft Overarching Energy NPS makes it clear that 'companies should be permitted to determine the individual projects to bring forward within the strategic framework set by Government'. We strongly support this approach, which reflects established energy policy, and consider that it would be deeply inappropriate for the NPSs to attempt to prescribe the electricity generation mix.


19. In a competitive market, energy companies are best placed to determine which power stations need to be built in the light of market signals and strategic policy direction from the government.


20. It is essential that the need for low carbon technologies is spelt out in the NPSs, but they must also contain sufficient flexibility to allow developers to determine exactly which projects are promoted. This flexibility is needed to allow the market to respond, given the urgency with which established technologies will need to be deployed in order to ensure security of supply, future changes in energy markets and policy, and the fact that not all projects that are consented will necessarily be built.


Non-spatial nature of the National Policy Statements

21. The Association supports the fact that the energy NPSs, with the exception of the Nuclear NPS, do not specify the locations where new power generation infrastructure can be built.


22. Decisions on where to locate plant are affected by a range of technical, economic, commercial, environmental and operational factors, which the companies bringing forward development proposals are best placed to assess. We do not consider that the NPSs could effectively establish where plant should be built and any attempt to do so would take significant resource, potentially delaying the introduction of the NPSs, and risk putting the NPSs quickly out of date.


Accounting for carbon

23. The Association considers that market mechanisms can deliver long-term, cost-effective emissions reductions, given the right framework conditions. The government should continue to press for a robust EU Emissions Trading Scheme, and take other steps as necessary to ensure that the right incentives are in place to secure investment in low carbon technologies in the UK. The Committee on Climate Change has recently been established to provide an independent check that climate objectives will be delivered. Its role is to highlight any shortcomings and recommend options for further measures for the Government to consider.


24. Within this wider framework, we therefore do not think that the IPC should need to consider the overall carbon impact of the generation mix when assessing individual project proposals. Climate change policy drivers will have been taken into account in the guidance in the Overarching and technology specific NPSs.


Making NPSs a primary consideration in local authority decision making

25. The draft NPSs set out national policy and provide the IPC with an indication of how to assess the national need for energy infrastructure and the local impacts of a project. We consider that these principles should be applied equally to projects that are classed as "nationally significant" and those that fall outside of the IPC's remit. A large proportion of renewable energy projects in particular will fall to local authorities for determination. We therefore consider that the NPSs should be a primary consideration for local planning authorities when taking decisions on energy infrastructure, as they will be for the IPC when considering larger projects.


January 2010