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Memorandum submitted by the CBI (NPS 75)

1. The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. Member companies include 80 of the FTSE 100 index, some 200,000 small and medium-sized firms, more than 20,000 manufacturers, and over 150 sectoral associations. The vast majority of our members are energy users, however we also have in our membership electricity generation and distribution companies, energy technology companies and upstream oil and gas businesses.

2. The CBI welcomes the opportunity to comment on the Department for Energy and Climate Change's (DECC's) draft Energy National Policy Statements (NPSs). This submission represents our initial views on the NPSs and focuses on the overarching Energy National Policy Statement (EN-1) which sets out the government's energy strategy and explains the need for new energy infrastructure. We are continuing to consult members as we prepare a more detailed response to the DECC consultation.

3. This paper highlights that the CBI believes:

· The designation of the energy NPSs will be a major step forward in getting the UK's energy infrastructure fit for purpose

· The overall 'assessment of need' in EN-1 is broadly correct

· The sections of EN-1 on gas storage and renewables should be amended

· The guidance on assessing alternative proposals and sites could be improved

· Greater clarity is necessary on the weight given to designated and draft NPSs in other development consent regimes

· Clarity is required on which decision-makers are able to determine amendments to extant development consent orders for nationally significant infrastructure projects

 

The designation of the energy NPSs will be a major step forward in getting the UK's energy infrastructure fit for purpose

4. Given the scale of major infrastructure renewal needed, planning reform is essential to instil private sector confidence in order to attract the necessary investment and ensure timely project delivery.

5. The CBI's 2009 energy report, Decision Time[1], stated that we need to invest up to £170bn in energy alone by 2030. However, project delays can unsettle the economics of major energy investments, and if investors think that the planning system is unpredictable and will lead to delays, then the business case for investment is reduced. This can be demonstrated in the case of Canvey Island, where a CBI member, as part of a consortium, submitted an application in 2006 to develop a Liquid Natural Gas (LNG) Terminal. The member had hoped that the new facility would operational by 2010. However following difficulties in the planning process it felt the facility would be not operational until 2012, causing the company to terminate its interest in the project.

6. The CBI therefore strongly supported the Government's 2008 Planning Act which intends to streamline the planning system by separating policy-making from decision taking for nationally significant infrastructure projects, with the latter delegated to a newly established independent Infrastructure Planning Commission (IPC). The National Policy Statements (NPSs) shall therefore provide the policy justification for shaping the development of our strategic energy infrastructure.

The overall 'assessment of need' in EN-1 is broadly correct

There is significant need for new major energy infrastructure

7. The CBI believes that the overarching NPS provides a compelling case for new major energy infrastructure to be delivered by the private sector in order to meet the UK's decarbonisation and energy security policy objectives.

8. We agree with the Committee on Climate Change's (CCC's) view that to achieve our legally binding carbon reduction targets, UK electricity generation must be largely decarbonised by 2030, with substantial progress by 2020. As the CCC stated, this implies carbon intensity in power generation falling from 500g/KWh to 100g/KWh which means that the share of low-carbon generation in the energy mix must rise from 26% today to 78% by 2030. This clearly requires a major deployment of new low carbon generation infrastructure.

9. Of equal importance is retaining our security of supply during the transition to low-carbon generation. As our ageing infrastructure comes offline during this decade, we must start building new generation capacity and upgrading our transmission and distribution grid at twice the rate we are used to in order to secure supply. Further to this, appropriate infrastructure will be required to manage the transition to becoming a major gas importer as North Sea oil and gas extraction declines.

The impact of alternatives to large new energy infrastructure will be limited

10. The CBI agrees with the government's assessment that alternative measures will have a limited impact upon the need for large new energy infrastructure. While decentralised generation has a role to play and should be encouraged where cost-effective, the scale and speed with which we need to renew our energy system means that a relying mainly on small scale generation to replace retiring assets would be too risky. The section of EN-1 which covers this point could be expanded to justify this argument in more detail.

Diversity of generation and fuel supply is crucial in order to guarantee energy security

11. The CBI believes that no one technology will be able to meet both our decarbonisation and energy security policy objectives. Security is best guaranteed through a diverse range of generation technologies and fuels. The CBI therefore agrees with the argument in EN-1 that advocates a mix of renewables, nuclear and low-carbon fossil fuels in order to provide secure and flexible supply whilst achieving our extremely challenging carbon reduction targets.

Significant new nuclear build is required in the move to low carbon generation

12. We support the analysis in EN-1 demonstrating the need for new nuclear generation. We believe it would be extremely difficult to reach the CBI's goal of making 80% of electricity generation 'zero-carbon' by 2030 without the use of new nuclear power. Indeed, as a proven low-carbon technology, nuclear could make up a significant proportion of this 80%. Nuclear also contributes to energy security as the uranium fuel for nuclear plants can be easily stockpiled in the UK and can be sourced from a range of stable exporting countries.

13. Given that the UK's existing nuclear capacity is nearing retirement, we believe that around 16GW of new nuclear would be a desired and plausible outcome by 2030, and we welcome the fact that this figure is broadly reflected in the nuclear NPS.

Low-carbon fossil fuel generation will be important in the long-term

14. The CBI also supports the contention in EN-1 that fossil-fuelled electricity generation will remain an important part of the energy mix in the long-term. Unlike nuclear and wind, it is able to operate flexibly, therefore aiding energy security by providing critical back-up for the more intermittent low-carbon generation sources such as wind, and load-following to meet in-day demand fluctuations.

15. However, to enable continued use of fossil fuel, and in particular coal, compatible with our carbon targets, the demonstration and commercialisation of Carbon Capture and Storage (CCS) is very important. To this end, the CBI accepts the government's decision to prohibit the development of new unabated coal plants that do not demonstrate CCS and also supports the provision within the NPS that requires the IPC evaluates whether applicants for new fossil-fuelled power stations are Carbon Capture Ready.

Networks and supporting infrastructure are necessary

16. The CBI agrees with the government's assessment of the need to significantly expand the UK transmission and distribution network. This will be required to manage a future generation mix which includes significant intermittent and some distributed generation.

17. The CBI also believes that this statement of need should be extended to account for future shared low-carbon infrastructure. For example, the IPC should be encouraged to consider favourable applications for oversized CO2 pipes for CCS demonstration plants to enable subsequent development of CCS clusters.

The risk of not meeting energy efficiency measures must be recognised

18. In our Decision Time report the CBI strongly supported the acceleration and extension of existing energy efficiency measures in order to reduce and better manage energy demand. However, we accept that such measures which rely on collective behavioural change are difficult to deliver, therefore the planning system must allow for the flexibility to deliver greater generating capacity to address potential short-falls in policy delivery.

The sections of EN-1 on gas storage and renewables should be amended

EN 1 underestimates likely scale of gas imports

19. Paras 3.9.4 to 3.9.7 of EN-1 rightly emphasise the urgent need for more investment in gas storage and possibly import capacity. Para 3.9.7, which explains why investors may seek to construct what appears to be 'spare' storage and import capacity, is also significant and we strongly support it.

20. However, we have real concerns about the government's assumptions about future gas imports, as set out in the overarching NPS, which suggest imports will be unchanged between now and 2020. This seems to be an optimistic assessment when compared to that made by Ofgem in their Project Discovery report which indicates that, even in the most optimistic scenario, gas imports are projected to rise to over 50bcm/year in 2020.

Renewables expansion must be cost-effective

21. The CBI agrees with the need for a large expansion of renewable energy as part of a diverse electricity generation mix. EN-1 takes its estimate for likely renewable deployment from the lead scenario in the Low Carbon Transition Plan (LCTP), which estimates about one third of electricity being from renewable sources. The CBI is on record (in our Decision Time report) as arguing that a target of 25% renewables by 2020 was both more feasible and overall more cost-effective. EN-1 should acknowledge the 'stretch' that the current target involves and the risks that it may not be met.

22. In planning terms what matters is that the market has some flexibility to invest at different levels across the energy technologies, depending on cost and other factors. If progress in deploying one technology is slower than anticipated, then the NPS and the planning system must not hinder investors seeking to increase investment in another technology to ensure the overall carbon and energy security goals are met. This point, although acknowledged in the government's 'conclusion of need', para 3.1, should be emphasised.

The guidance on assessing alternative proposals and sites could be improved

23. The consideration of alternative design and locations of major development proposals is an important aspect of the planning system. Assessing alternatives is an important process to ensure developments are designed to take advantage of reasonable opportunities to limit the impacts of development on the environment, and local people and businesses. The need to consider alternatives arises across various consent regimes, however, is most stringent where an application is required to undertake an appropriate assessment under the Habitats Directive.

24. The process for identifying and assessing alternatives is resource intensive and has placed disproportionate burdens on applicants promoting infrastructure projects in the UK. The CBI therefore welcomes the Government's decision to introduce new guidance to decision-makers (and applicants) through the draft NPSs - for Ports and Energy - to provide more certainty to applicants, and remove the scope for unnecessary burdens being placed on them.

25. The guidance in the draft NPSs for Ports (see section 2.3) and Energy (see Overarching Energy NPS [EN-1] section 4.4) on this issue are, however, different. Both approaches appear to have been developed to provide more clarity, but have different styles and in places different wording. The CBI would question the appropriateness of adopting separate approaches for guiding decision-makers on how to consider alternatives: it would undermine the need to provide applicants with more certainty about their responsibilities; and may expose future applications and the activities of decision-makers to legal challenge.

26. The CBI would therefore support the development of a coherent body of text on how alternatives are identified and assessed across all sectors, based upon the following considerations (which are broadly identified in both the Ports and Energy NPSs, albeit in different styles):

· Alternatives need not be assessed where a project is not assessed to have any significant local adverse effects;

· Alternatives should only be considered that have a realistic prospect of delivering an identified compelling need for infrastructure, in terms of them being physically and/or commercially viable;

· Alternatives must be in accordance with the policies of relevant NPSs;

· Alternatives presented by third parties should not be 'vague or inchoate', with an onus on third parties to present evidence for why it should be considered a realistic alternative.

Greater clarity is necessary on the weight given to designated and draft NPSs in other development consent regimes

27. NPS policies are a consideration for other development consent regimes which may determine infrastructure schemes that fall below the thresholds established in the 2008 Planning Act. Most notable among these are the town and country planning regime and the marine licensing regime, which was established in the 2009 Marine and Coastal Access Act.

28. The department for Communities and Local Government (CLG) published a letter in the name of the Chief Planner that it sent to all local authority chief planning officers on the 9 November. This outlined the government's view that local authorities should take account of policies included in NPSs when determining planning applications for infrastructure projects that do not exceed the qualifying thresholds in the 2008 Planning Act. The weight to be given to draft policies is, however, less clear, and the letter does not have any statutory weight in the planning process. (The CBI understands that this letter constitutes the 'further information' to be published by CLG on this issue, referred to in section 1.3.3 of the overarching Energy NPS).

29. The CBI would support the inclusion of a coherent body of text for NPSs across each sector clarifying the weight of policies in both draft and designated NPSs for developments, such as smaller renewable energy projects, that fall below the thresholds including in the 2008 Planning Act. This would provide statutory weight to the government's view that NPS policies are a material consideration for other development consent regimes, and provide more certainty for applicants.

Clarity is required on which decision-makers are able to determine amendments to extant development consent orders for nationally significant infrastructure projects

30. It is possible that in some circumstances aspects of nationally significant infrastructure schemes may need changing after they have gained a development consent order under the 2008 Planning Act.

31. The CBI is currently unclear whether such alterations are possible, and whether they would necessarily have to be determined by the IPC (or by a local planning authority or another decision-making body). This may require legislative change, or the use of the powers under section 14 (3)(b) of the 2008 Planning Act, which grants the Secretary of State power to make further provision about the types of projects to be determined by the IPC.

32. The CBI would support clarity about the process, and application of NPSs policies for determining applications to amend extant development consent orders for nationally significant infrastructure projects. Such clarity could be provided through the redrafting of the draft Ports and Energy NPSs.

January 2010

 

 


[1] Decision Time: Driving the UK towards a sustainable energy future, July 2009