Energy and Climate Change Committee - Draft Energy Bill: Pre-legislitive ScrutinyWritten evidence submitted by the Campaign to Protect Rural England (CPRE)

Introduction and Summary

1. We welcome the opportunity to submit evidence to the Energy and Climate Change Committee on pre-legislative scrutiny of the draft Energy Bill. As a leading environmental charity, the Campaign to Protect Rural England (CPRE) has worked to promote and protect the beauty, tranquillity and diversity of rural England since our formation in 1926. Climate change poses a major threat to the countryside which is why we support the Government’s commitment to largely decarbonise the power sector by 2030 and reduce its greenhouse gas emissions by 80% by 2050. Low-cost and low environmental impact options for achieving these targets should be prioritised including reducing energy demand, increasing energy efficiency and improving interconnection between the UK and mainland Europe.1 We recognise that these measures alone will not go far enough which is why we support the sensitive development of renewable and low-carbon energy with low environmental impacts.

2. CPRE recognises that unlocking low-carbon investment will require changing market conditions to allow new technologies to compete alongside fossil fuels. These changes will not only affect the economics of renewable technologies but also the quantity, mix and broad location of new infrastructure. We are concerned to ensure, therefore, that the draft Energy Bill enables the Government to achieve its ambition of providing secure and affordable low-carbon energy while minimising impact to the wider environment by focusing not only on the quantity, but the quality, of development. Our comments are focused primarily on those parts of the Bill which cause greatest concern in this regard. We are particularly concerned that there is a lack of attention given to:

wider environmental issues;

demand reduction measures; and

reducing the need for grid infrastructure.

3. In order to maintain and enhance the beauty, tranquillity and diversity of England’s land, coast and sea, we believe that mechanisms enshrined within the draft Energy Bill should aim to minimise the environmental impact of the development of renewable and low-carbon energy and associated infrastructure.

Wider Environmental Issues

4. Electricity market reform (EMR) mechanisms outlined in the draft Energy Bill will not only change market conditions for sustainable energy sources they will also determine the quantity, mix and broad location of a great deal of the large infrastructure required to achieve decarbonisation of our energy supply. Current proposals for the Feed-in Tariff Contracts-for-Difference (FIT CfD), for example, pose risks insofar as they may incentivise oversupply of energy infrastructure which might increase pressure to site energy generation infrastructure in inappropriate locations. We believe that it is imperative, therefore, that the draft Energy Bill incorporates wider environmental sustainability criteria, as well as greenhouse gas emissions reductions, into the outcomes it delivers. If FIT CfDs, for example, are able to specify plant location and the location of supply,2 we want the Government to ensure that the criteria for siting new generation is guided by strict environmental standards, including those enshrined within the planning system, with the aim of minimising the impact on the landscape, seascape and wildlife.

Demand Reduction Measures

5. In our initial submission to the EMR consultation in 2011 we urged the Government to place demand-side measures—including short term demand response to assist with short term balancing, long term managed energy reduction to reduce total energy consumption, and distributed generation (D3)—at the heart of EMR. At that time it was clear that EMR proposals were heavily biased in favour of supply-side measures. This was a concern for CPRE because failing to reduce consumption dramatically would mean much more infrastructure would be required to decarbonise,3 increasing pressure on the extent, beauty and tranquillity of the natural environment. Moreover, there is a growing body of evidence to suggest that the Government is unlikely to reach its climate change targets if it focuses solely on supply-side and dismisses demand-side measures. Deployment rates for supply-side measures are often exaggerated because in reality there are multiple factors which slow down expected delivery rates. Demand-side measures by contrast can offer a quicker and cheaper solution to reducing emissions. This would require greater coordination across Government departments because energy saving measures cut across several sectors.4

6. It is clear that the draft Energy Bill’s focus is still heavily biased in favour of supply-side measures. In the four stages of EMR set out in the Bill the Government sees demand-side responses, additional storage and interconnection playing a role in managing supply and demand during the 2020s. We believe that these demand-side measures need greater focus now so that they can make a significant contribution sooner. In order to do this we urge the Government to:

actively support newer D3 technologies through direct support (eg FITs) and more established D3 technologies by pricing the carbon and energy system-service benefits they create into the market to put D3 technologies on a level playing field with generation technologies. The development of D3 technologies has the potential to save significant amounts of energy at less cost than new generation.5

ensure the proposed Capacity Market gives equal treatment to demand-side responses and storage alongside supply-side alternatives. This will help balance the grid on both short- and long-term timescales. It will encourage demand reduction in the long-term and allow the government to target those sectors which the Green Deal will not reach.

Reducing the Need for New Grid Infrastructure

7. CPRE is concerned about the potential impact which could arise from the system operator acting as the delivery body EMR. At present the regulated income of system operators through the transmission price control review is a function of the value of their asset base. This incentivises them to grow their asset base by building as much transmission capacity as they can justify, rather then actively looking for alternatives.6 With National Grid acting as the delivery body for EMR, demand-side measures might not be pursued. To avoid this conflict of interest we want the system operator to pursue, proactively and equally, demand as well as supply-side opportunities—both reduction and responses—on a long-term “best value” basis. This should be based on DECC’s diversification and cost-reduction strategies for new and low-carbon technologies and should happen in a way which is transparent both in process and outcome.

8. CPRE is concerned about the Government’s intention to introduce a “generator build model”. This will see additional flexibility in the regulatory regime for offshore electricity transmission by enabling offshore wind farm developers to build their own transmission infrastructure back to shore. CPRE is part of an alliance of countryside campaigners which has been calling for the development of a “smart grid” which argues for taking the development of the on- and offshore grid forward in an environmentally sensitive way which protects the character and beauty of landscapes and seascapes. Taking a system-wide perspective, and developing a strategically planned approach, to grid development will result in several benefits including reducing long-term costs of the grid, environmental impact and planning uncertainty. Using existing infrastructure more effectively and reducing the need for new substations and associated overhead power cables will reduce conflict over public acceptability and could therefore reduce the chance of delays and associated costs. The generator build model, however, has the potential to weaken incentives for a coordinated grid because it does not promote a network which reduces the need for infrastructure. The desire for generation owners to connect their offshore developments to the grid as quickly as possible will potentially create more intrusive onshore infrastructure and result in a system which makes less efficient use of both cables and substations compared to a system-wide design.

Conclusion

9. While the Energy Bill will make important market interventions to incentivise low-carbon and renewable energy, CPRE believes that it should not come at the expense of the beauty, tranquillity and diversity of the countryside. We believe that the draft Energy Bill should focus not just on the quantity, but also the quality, of low-carbon and renewable energy and associated infrastructure. To do this the Bill would take greater account of wider environmental impacts, increase focus on demand reduction measures and minimise impact on landscapes and seascapes of the offshore gird as it develops.

June 2012