Examination of Witnesses (Questions 20
- 32)
WEDNESDAY 24 FEBRUARY 2010
MR RODDY
MONROE, MR
TED SANGSTER,
MR JOE
HULM AND
DR JEFF
CHAPMAN
Q20 John Mann: Yes. What would the
difference be? Quantify it in some way.
Mr Monroe: In terms of efficiency,
it is more a question of will the projects go ahead or will they
not, and if the projects do go ahead then we will have the sort
of energy mix and infrastructure to cope with the uncertainty
of future energy supplies.
Q21 John Mann: So it is about energy
security?
Mr Monroe: It is about energy
security.
Mr Hulm: My three headline points
are carbon reduction, energy security and green jobs. On the latter,
we hold the lead as a country in terms of technical devices. The
area where those devices are deployed at demonstration scale is
likely to be the area where they are rolled out at commercial
scale, 100MW and beyond. Now, with that comes manufacturing jobs.
The Crown Estate has an opportunity, along with other arms of
government, particularly the Department for Energy and Climate
Change, to get this right.
Q22 John Mann: I understand that,
but what I am trying to get from Dr Chapman is you are all coming
here saying this is of mega importance. I have not heard from
any of you before, you certainly have not written to me about
The Crown Estate, so this is an inquiry into The Crown Estate.
What difference, if The Crown Estate did what they could be doing,
would it make to CCS?
Dr Chapman: I think CCS is in
such an early position it is difficult to criticise at the moment.
All we can say is that The Crown Estate are being as helpful as
they possibly can.
Q23 John Mann: So you have no problems
with them?
Dr Chapman: We have no problems
with them. I just want to make this Committee aware of the fact
that there is no parallel so I cannot see a way of actually knowing
whether the lease will be a commercial rate or not because it
does not happen anywhere else. This is a unique situation. So
we wait and see how that is going to be handled.
Mr Monroe: I think it is important
to note that carbon capture and storage is a few years behind
gas storage. We had no problem with The Crown Estate before we
started to talk about numbers and terms and conditions. That is
where we had the problems.
Mr Hulm: I think the risk for
the marine renewable sector is that collectively the UK loses
this industry to overseas competitors.
Q24 Nick Ainger: What you are telling
us, certainly Roddy, Joe and Jeff, is that you are dealing with
three areas which are in the national interest, and we could argue
it is actually in the global interest, certainly in terms of carbon
storage and renewables, and yet at the same time we have got a
body which funds the state, or helps to fund the state, which
is actually getting in the way of that national interest. That
is what you are telling us, are you not, Roddy?
Mr Monroe: Yes.
Q25 Nick Ainger: Is it purely the
rents that they are demanding that is posing a problem? You have
submitted evidence which says it is three times what you think
is a reasonable fee, but what about in terms of renewables? I
know we do not know yet with carbon storage, but what about renewables?
Mr Hulm: I would reiterate that
The Crown Estate should be commended for their drive and ambition
to help deliver this industry. They sought to kick-start it by
starting the leasing round. I feel, and the views of the REA are
that this is very different to offshore wind. Offshore wind is
a mature industry and requires a different approach. The industry
needs to be nurtured, as you say, in the national interest. If
it is not got right early these global companies—and they
are global companies, including the one I work for—will
go and do business where it is most profitable, including both
device manufacturers and project developers.
Q26 Nick Ainger: Okay. So what you
are saying is that they are refusing to consider pilot projects,
smaller development projects rather than the larger ones, but
are you also saying that the rents they want to charge actually
prevent a development going ahead?
Mr Hulm: I would not be so specific
regarding the rents preventing development going ahead, but I
feel that the approach, as I say, is very different to that required
of offshore wind with round three and the importance of getting
demonstration projects going should be categorised far higher
than leasing commercial scale seabed areas. We need as a country—and
I think it is in The Crown Estate's interest as well as the rest
of the UK—to enable this demonstration of technology (I
am not talking about one device, I mean five, 10 devices) to be
successfully proven as technically and commercially viable before
rollout with debt financing at a commercial scale.
Q27 Nick Ainger: Okay. Can we move
on then to the licensing? For offshore operations you need a licence
as well as a lease?
Mr Hulm: Yes.
Q28 Nick Ainger: Does that lead to
any further unnecessary delays which again cause problems for
a development going ahead?
Mr Hulm: I believe that licensing
is beyond 12 nautical miles so for wave and tidal power in general
at the moment it is not an issue.
Dr Chapman: In CCS we are in the
process of developing terms for licensing with DECC. I have to
commend The Crown Estate for its good communication with DECC
over this because there is an interface. You cannot get a licence
without having a lease and you cannot get a lease without having
a licence, so there has to be good communication.
Q29 Nick Ainger: Right, and the experience
so far in terms of gas storage?
Mr Monroe: Unfortunately, The
Crown Estate are only willing to share their lease arrangements
with one company, so I am not up to speed on how they dovetail
into the licence, but I am led to believe that there is a lot
of duplication of requirements in The Crown Estate's lease that
traditionally would have sat with DECC and can potentially lead
to conflict, so things like extension to the exploration period.
I think with the provisions in the Energy Act the intention was
that it would be the minister of state who would decide in the
country's interest whether there should be an extension or not.
The Crown Estate have said they want to have a veto right over
that. So there are conflicts between The Crown—
Q30 Nick Ainger: So the current arrangements
could be improved, in your view?
Mr Monroe: The current arrangements
could be improved by The Crown Estate retreating from some of
the area that was traditionally DECC's area.
Q31 John McFall: From what I can
gather you are here to lobby The Crown Estate and you have taken
advantage of this hearing to do that, so when The Crown Estate
come to us what is your message to The Crown Estate so that we
can say to them what you, as a commercial trade body, organisation,
have said? Give us a simple message for us to put to The Crown
Estate.
Mr Monroe: For me, what I find
surprising is that I understand under the 1961 Crown Estate Act
there is the right for, I believe, the Treasury to direct The
Crown Estate if it thinks they are not acting in a way for the
national interest. That direction has not been given. I am not
here to lobby The Crown Estate. I am here to raise the serious
issue that the current approach which The Crown Estate are taking
towards offshore development is purely focused on revenue generation
and will be of huge detriment, potential huge detriment to other
government policy. It was to make you around here aware that unless
something happens the wider government agenda may not be achieved
because of this.
Mr Sangster: The situation with
ports and The Crown Estate has improved significantly over the
past 10 years and that is very positive. We also, however, have
experienced this potential clash between abstracting as much revenue
as possible and long-term sustainability and many opportunities
are perhaps not being maximised by the views taken by The Crown
Estate in extracting as much as they can at the moment. They speak
and they talk about their preparedness to invest and to work in
partnership, which is great and there has been a change in that,
very positive, over the past two or three years, but there have
not been many instances of such delivery, which we would encourage
them to do.
Mr Hulm: I would say The Crown
Estate will need to consider the balance between revenue generation
and what is in the national interest. I think in order to deliver
for the national interest with wave and tidal power greater consultation
should take place with government agencies and departments, and
indeed industry.
Dr Chapman: When they come to
setting lease fees for carbon storage, be open, transparent and
fair. Be prepared to justify the level of fee, because it will
be very difficult to justify, and be prepared to be scrutinised
on that. I would not like to see a propensity of regulators, but
I do agree with Roddy that this is unusual in that it is an unregulated
monopoly.
Q32 Nick Ainger: Can I just come
back quickly? We were talking about the arrangements which currently
exist and you think there could be improvements. Do you have any
experience of what other countries have in terms of their offshore
arrangements? Can we learn from continental countries, or the
US? Are there better arrangements elsewhere? Has anybody got a
view?
Mr Hulm: I am aware that there
is acreage of seabed in Canada which has been acquired, leased
by energy development companies, so there are comparisons to be
made. I would think that may be of interest.
Dr Chapman: There are CCS projects
elsewhere, but there is no parallel with The Crown Estate at home.
Chairman: Okay. We are going to have
to leave it there because we have other witnesses and we are slightly
behind time, but I would like to thank each of you for coming
today. Thank you very much.
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