Select Committee on European Communities Twelfth Report


General background

90. The oil crises of the 1970s were a major shock. For the first time in a generation, countries had to reassess their energy strategies. However, the extreme pressure for change was relatively short-lived and European energy consumption continued the general upward trend.

91. More recently, concerns about climate change have re-awoken energy concerns. Nevertheless, use of both primary energy and of electricity in the EU have increased by about 1 per cent per annum since 1990[2]. Most of the developed world continues to take for granted the ready availability of energy, particularly in its most convenient form of electricity[3].

92. The 1997 Climate Change Conference in Kyoto was the culmination of several years' national and international discussions. The Kyoto protocol, agreed in December 1997, set a global target for reducing greenhouse gases by 5 per cent between 1990 and the target date window of 2008 - 2012.

93. The European Union has undertaken to reduce emissions by 8 per cent over that period. In the agreed share-out of targets amongst Member States, the UK is committed to a 12.5 per cent reduction. The present UK Government is also committed, in its Manifesto[4] for the 1997 General Election, to a reduction of 20 per cent in carbon dioxide (CO2) emissions by 2010. For the global targets to be met, all countries need to pursue similar strategies in parallel. The fact that the planned reductions in UK and EU-wide emissions will make only a small contribution to the global reduction required does not mean that the targets should be pursued with any less vigour. Proper planning for and delivery of these will give a vital lead.

94. The Kyoto protocol set the scene for a round of reappraising energy strategies. Part of that reappraisal means taking a fresh look at the extent to which our energy needs might be met from alternative sources - generally referred to as "renewables" - that, particularly with regard to emissions of greenhouse gases, are more environmentally benign than traditional fossil-fuel sources.


95. In 1996, EU Member States consumed over 1,400 million tonnes of oil equivalent (Mtoe) - 16 per cent of the world's total - and generated 878 million tonnes of energy-related carbon emissions (MtC) - 14.5 per cent of the world's total. Oil is the dominant fuel, accounting for over 40 per cent of 1996 total energy consumption in the region, followed by gas and coal. EU members collectively accounted for over 18 per cent of the oil, 16.5 per cent of the natural gas, and nearly 12 per cent of the coal consumed world-wide during 1996[5].

96. Renewables supply just over 5 per cent[6] of the EU's primary energy[7]. Renewable energy use is not evenly spread throughout Europe. This reflects partly the distribution of renewable resources (particularly the siting of large-scale hydroelectricity capacity which is the present main source of European renewable energy) and the amount of wood and agricultural waste used for heat and electricity production. It also reflects the present wide variety of national policies.

97. This enquiry has concentrated on the potential of renewable energy sources, with particular emphasis on their use in generating electricity and the access of that energy to the electricity network. The stimulus for this came from moves within the European Commission to set a framework for good practice among Member States in such generation and access matters. We make no apology for studying this particular area: as our conclusions show, it gives rise to some important issues. At the same time, we recognise renewable energy as only one part of a much wider scene.

98. Greater use of renewable energy in place of energy derived from fossil fuels will certainly reduce CO2 and other greenhouse gas emissions, but it is not the only solution - nor could it be. Within the wider energy scene, there is a range of other matters needed to complement the growth of renewable energy - some of which, indeed, may well be more cost-effective components of the post-Kyoto agenda.


99. The UK Government's recent White Paper on sustainable development[8] made clear the need for an integrated approach. Other areas where action is essential include better energy efficiency[9], not only through conservation measures but also by simply using less.

100. Within the electricity sector, there is scope for improvements in generating efficiency; greater use of combined heat and power; cleaner burning of coal and further switching from coal to less-polluting gas. Electricity generation accounts for about a quarter of the UK's CO2 emissions[10]. Three quarters thus comes from other sources[11]. The UK's medium-term target for emissions (see paragraph 92) is about equivalent to shifting all electricity generation to renewables.

101. Important as the present targets are, it seems likely that the climate change agenda will require further action over coming years. Moreover, there may be problems ahead as present nuclear capacity is decommissioned. Replacing it by fossil fuel generation would add to emissions. To be effective, the energy policies at national and international levels need to integrate the handling of all these short, medium and long-term matters in both formulation and delivery.

Policy background


102. General EU energy policy was set out in a European Commission White Paper published in 1995[12]. This recognised that renewable energy sources were an important factor in the aims of the three key energy policy objectives of improved competitiveness, security of supply and protection of the environment. The Paper therefore proposed a strategy for developing renewables.


103. The European Commission White Paper Energy for the Future: Renewable Sources of Energy was published in November 1997[13], just before the December 1997 Kyoto conference on Climate Change, and anticipated the introduction of targets for reducing greenhouse gas emissions. It called for an increase in renewables' contribution to the EU's primary energy to rise from almost 5.4 per cent in 1995 to 12 per cent by 2010. It also proposed the strengthening of co-operation between Member States to ensure that national energy policies included the commitment to increase renewable energy provision. Provisional targets for different renewable energy sources within the overall target were also given. Tables 1 and 2 below show, for primary energy and for electricity respectively, the contribution of different renewable energy sources towards total EU provision in 1995, their projected contribution in 2010, and the growth required.

104. The White Paper itself was not a proposal for legislation although it did envisage a number of proposals. These included a Directive for "fair access for renewable energy sources to the electricity market". The draft of that Directive was the initial basis of this enquiry.





2010 as multiple of 1995

Biomass 44.8   1353.01
electricity6.8   608.82
heat38   751.97
Hydro26.4   30.551.16
  large (10 MW plus) 23.2  25.8 1.11
  small (under 10 MW) 3.2  4.75 1.48
Geothermal 2.5   5.22.08
electricity2.1   4.22
heat (incl heat pumps) 0.4  1 2.5
Wind0.35   6.919.71
Solar0.262   4.2616.26
thermal collectors 0.26  4 15.38
photovoltaics0.002   0.02613
Total Renewables 74.31  181.68 2.44
Total primary energy use 1366  1583 1.16
Renewables contribution, % 5.4  11.5 2.13





2010 as multiple of 1995
Hydro 307   3551.16
  large (10 MW plus) 270  300 1.11
  small (under 10 MW) 37  55 1.49
Biomass 22.5   23020.2
Wind4   8020
Geothermal 3.5   72
Photovoltaics0.03   3100
Total Renewables 337.03  675 2
Total electricity use2366   28701.21
Renewables contribution, % 14.2  23.5 1.65


105. A draft of the Directive foreshadowed in the 1997 European White Paper was produced by the European Commission in late 1998[16]. The general purpose of this draft Directive of the European Parliament and of the Council on access of electricity from renewable energy sources to the internal market in electricity was described as:

"the promotion of electricity from renewable sources of energy… outlined in the White Paper on Renewable Energy Sources, not only for reasons of environmental protection, but also for reasons of safety and diversification of supply, and for reasons of social and economic cohesion"

Promotion of renewables was also seen as:

"an important part of the packages of measures needed to reduce the emissions of greenhouse gases, as first laid down in the Kyoto protocol signed by the European Community and its Member States".

106. The key proposals in the draft Directive were as follows.

·  Support mechanisms for electricity from renewables to allow trading between Member States on fair terms, with a movement towards competitive systems.

·  Certification of electricity generated from renewable sources so that, in the interests of fair trade, it could be properly identified.

·  Minimum levels of consumption requiring each Member State to ensure that electricity from renewable energy sources (excluding large hydro[17]) accounted for at least five per cent of annual consumption by the end of 2005. Member States already at or above that proportion of electricity from renewable energy were required to increase the percentage share by at least three points. Unspecified higher targets were envisaged for later years.

·  Clear grid connection rules in each Member State setting out the costs of and arrangements for connecting new renewable energy generators to grid systems.

107. The proposed requirements for competitive support systems and, to a lesser extent, the minimum levels of consumption proved to be controversial. Renewable generators in some Member States with fixed price support systems lobbied hard for the retention of such favourable arrangements. It is believed that this controversy had a bearing on the Commission's decision not to pursue the draft Directive to publication, leaving something of a policy vacuum in early 1999.


108. Some momentum was regained by the publication in April 1999 of a European Commission Working Paper on Electricity from Renewable Sources and the Internal Electricity Market[18]. This was a less formal document, which reviewed the development of renewable energy policy in Europe and discussed policy options for the future. It restated the need to move towards price support mechanisms compatible with the internal market and set out several options. It noted the need to reward renewable generators if, due to proximity to final users[19], their electricity output had a higher value than centralised generation. However, it did not endorse payment of grid connection costs by electricity utilities - except in cases where the system would benefit from the installation of renewable energy plant. There was no mention of the national targets for electricity consumption from renewable energy sources as proposed in the draft Directive.

109. This Working Paper was discussed at the EU Ministers' Energy Council on 11 May 1999. It was agreed that work should resume on preparation of a draft Directive on renewable energy, though without setting national quantitative targets. (This did not affect the EU-wide target of 12 per cent of primary energy from renewables by 2010 set in the 1997 European White Paper.)


110. In the meantime, the European Commission launched a "Campaign for Take-off" for renewable energy in April 1999[20], giving more substance to concepts originally discussed in the 1997 European White Paper. It was intended to "kick-start the implementation of the strategy and is expected to have reached its goals by 2003".

111. Three key sectors were identified, involving mature technologies "considered crucial in achieving the 12% goal[21] but which need an initial stimulus". The key electricity sector targets proposed for promotion during the campaign are listed in Table 3 below.

SectorAction Installed capacity, MW Estimated investment, ?M
Wind energyInstall wind turbines   10,000  10,100
BiomassInstall biomass CHP plant   10,000  (*)  5,500
Solar PV650,000 systems in EU

350,000 systems exported

  1,000  5,300
TOTAL   20,900
* thermal capacity - electrical output not quoted

112. In addition to the key technologies, it was intended to identify a hundred communities whose energy needs could be fully met by renewable energy sources.

113. The Commission recognised that implementation of the campaign would require partnerships across the spectrum of local and national governments, planning authorities, utilities, financial institutions, trade associations and other bodies.


114. In 1993, the then UK Government set a target[22] to secure 1,500 MW dnc[23] of renewable energy by the year 2000. In 1994, they set out a 10-year strategy for increasing the use of new and renewable energy sources[24] in order to contribute to diverse, secure and sustainable energy supplies, reduction in the emission of pollutants and encouragement of internationally competitive industries. The aim was to stimulate the development of new and renewable energy sources wherever they had prospects of being economically attractive and environmentally acceptable.

115. To help meet these targets, the market stimulation policies provided for in the NFFO provisions of the Electricity Act 1989 were used, enabling the Secretary of State to make Orders requiring the Public Electricity Suppliers to secure a certain amount of renewable energy capacity[25]. There have been five orders in England and Wales (NFFOs 1-5), three in Scotland (Scottish Renewables Orders or SROs 1-3) and two in Northern Ireland (NI-NFFOs 1 and 2).

116. Support under the NFFO mechanisms[26] aims to bridge the gap between the cost of renewables and the market price for electricity. A vital attribute of a NFFO-type contract is that it guarantees the generator access to the electricity network. Competition in the allocation of NFFO contracts provide a stimulus for driving the cost downward, thus helping those renewable technologies close to becoming competitive to achieve commercial viability.

117. NFFO, SRO and NI-NFFO contracts have now been let for a total of around 2,400 MW of plant. Around 650 MW had been commissioned by Spring 1999[27].


118. During its first year in office, the present UK Government reviewed energy policy. The October 1998 White Paper Energy Sources for Power Generation[28] confirmed that the central policy objective was "to ensure secure, diverse and sustainable supplies of energy at competitive prices".

119. The Government recognised that energy from renewable sources would be an important element in securing both the diversity and sustainability objectives. To carry matters forward, the DTI[29] published in March 1999 a Government consultation document on renewable energy, New & Renewable Energy: prospects for the 21st Century[30]. The consultation period ended just before the publication of this Report. The document made the following key points.

·  The Government was committed to a new and strong drive to develop renewable energy.

·  Renewables had a key role in contributing to secure, diverse and sustainable energy supply both now and increasingly into the future.

·  The Government was working towards renewable energy providing 10 per cent of electricity supplies cost effectively as soon as possible. It hoped to achieve this by 2010.

·  The Government was already on target to achieve 5 per cent of electricity from renewables by 2003[31].

·  When renewables became competitive, they would be able to take their place alongside fossil-fuelled sources in the open market for electricity.

·  The annual DTI budget for the New and Renewable Energy Support Programme was set to rise from £11.1m to £18m over three years.

·  The Government would use Utilities legislation to ensure that embedded generation was fairly treated within the regulatory framework for distribution.


120. In October 1998, the Department for the Environment, Transport and the Regions (DETR)[32] issued a consultation paper on climate change, UK Climate Change Programme[33] which discussed the various ways in which greenhouse gas emissions might be reduced. This suggested that a 10 per cent contribution to electricity supplies from renewables might deliver carbon savings around 7.4 million tonnes (MtC). This represents about 25 per cent of the carbon savings needed to meet the Government's Manifesto commitment. A more detailed assessment of renewables' contribution to emissions savings is in paragraphs 174 to 182 below.

121. The DETR's 1998 consultation paper brought together most of the key issues relating to the reduction of greenhouse gas emissions. Other measures which would result in carbon savings were a new combined heat and power (CHP) target for 2010 (around 6 MtC saving potential), and energy efficiency measures in the business (3-10 MtC) and the domestic (3-7 MtC) sectors. A discussion of the accuracy or feasibility of these estimates is outside the scope of this Report, as is any assessment of the impact of the closure of the early nuclear power stations. However, the most recent assessment of trends in emissions[34] shows UK levels in 2010 ranging from three per cent below to six per cent above 1990 levels. Given the large expansions in housing which are planned, it has been suggested that emissions may be higher than this[35].

122. Even on the DTI estimates, it is clear that urgent action is needed to meet the emissions targets. All the measures listed in the DETR's 1998 climate change consultation paper, including the development of renewable energy, therefore need to be implemented.


123. The Climate Change Levy was announced in the March 1999 Budget. (Consultations[36] by the Treasury and HM Customs and Excise had just been completed as we finished our Report.) The proposed levy of 0.6p/kWh on both fuels and electricity used by business and industry was aimed at damping down energy use, and hence carbon dioxide emissions. Although the great bulk of the projected £1.75 billion annual yield of the Climate Change Levy would be recycled through reduced employers' National Insurance Contributions, businesses would also benefit from an additional £50m a year for schemes to promote energy efficiency and to stimulate the take-up of renewable sources of energy - though no exemptions had been proposed for renewable energy itself.


124. When launching the renewable energy consultation document in March 1999, the Minister for Energy confirmed the UK's greenhouse gas and CO2 reduction targets. These are summarised in Table 4 below, together with related EU targets. While the EU definition of renewable energy excluded large hydro plant, the UK Government's target included the 0.8 per cent from this source.


Target UKEU
Greenhouse gas reductions 1990-2010Minus 12.5% Minus 8%
CO2 target for 2010Minus 20% None formulated
Primary energy from renewablesNone formulated 12% by 2010 (3)
Electricity from renewables by 20035% (1) -
Electricity from renewables by 20055% (2) 18% (2)(4)
Electricity from renewables by 201010% (1) "higher" (2)

1. Target set by DTI

2. Target proposed in withdrawn EU Directive

3. Target set in the 1997 European White Paper

4. Estimate of aggregated proposed targets

2   1998 - Annual energy review. Energy in Europe, DG XVII European Commission 1999. Back

3   Electricity is widely perceived as a clean source of energy. While "clean" at the point of use, however, there is normally pollution arising from its generation elsewhere. Back

4   New Labour: because Britain deserves better, The Labour Party 1997. Back

5   Energy Information Administration website, US Department of Energy. Back

6   See Table 1 on p 19 of this Volume. Back

7   Primary energy is the total energy contained in all the original fuel sources used. This discounts inefficiencies in converting those primary sources into electricity, heat or mechanical power. Back

8   A better quality of life: a strategy for sustainable development for the UK, Cm 4345. Back

9   The House of Commons Environmental Audit Committee will shortly be publishing a Report on energy efficiency (HC 159, 1998-99). Back

10   Digest of UK Energy Statistics 1998, DTI, The Stationery Office 1998. Back

11   Specifically: industry and commerce 38%; transport 20%; and domestic use 15%. Back

12   An Energy Policy for the European Union, COM(95) 682. Back

13   European Commission, COM(97)599. Referred to subsequently as "the 1997 European White Paper". Back

14   The 1997 European White Paper. Back

15   The 1997 European White Paper. Back

16   As noted in paragraph 107, the draft Directive was never formally published, though the text was made available on the German Wind Energy Association's web site. Back

17   Defined, for EU purposes, as installations of at least 10 MW. Back

18   European Commission, SEC(99)470. Back

19   Otherwise known as "embedded generation". Back

20   Campaign for Take-Off, EC Services Paper SEC(99)504, April 1999.  Back

21   That is, 12 per cent of EU primary energy from the renewables by 2010. Back

22   The Prospects for Coal - Conclusions of the Government's Coal Review, Cm 2235, 1993. Back

23   See the discussion of rating issues in paragraphs 172 and 173. Back

24   New & Renewable Energy: future prospects in the UK, Energy Paper 62, DTI 1994. Back

25   In the case of Northern Ireland, the powers flow from The Electricity (Northern Ireland) Order 1992. Back

26   Unless indicated otherwise, references to NFFO in this Report include the SRO and NI-NFFO arrangements. Back

27   R-122, ETSU 1999. Back

28   Cm 4071. Back

29   Which has lead responsibility for energy generation policy. Back

30   DTI publication URN 99/744. Referred to subsequently as "the DTI's 1999 consultation document". Back

31   In the targets for both 2003 and 2010, the Government includes all large-scale hydro (defined for UK purposes as installations of at least 5 MW). As noted in paragraph 106, the proposed EU target of 5 per cent of electricity from renewables by 2003 excluded provision from hydro installations over 10 MW. Back

32   Which has lead responsibility for policies on reducing greenhouse gas emissions as well as the energy efficiency programme, the promotion of combined heat and power (CHP) schemes and the planning framework. Back

33   DETR publication 98EP0136. Referred to subsequently as "the DETR's 1998 consultation paper". Back

34   Energy Projections for the UK: Energy Use and Energy-Related Emissions of Carbon Dioxide in the UK 1995-2020, DTI Energy Paper 65, March 1995. Back

35   Making sense of sustainable development, article by D Helm in Electrical Power Engineer, April 1999. Back

36   Consultation on a Climate Change Levy, HM Customs and Excise, November 1998. Back

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