The Economics of Renewable Energy - Economic Affairs Committee - Contents


The Economic Affairs Committee has decided to conduct an inquiry into 'The Economics of Renewable Energy'.

Evidence is invited by 16 June 2008. The Committee will welcome written submissions on any or all of the issues set out below.

Amid concerns over climate change the Government aims to increase the use of renewable energy sources, such as wind, tidal, biomass, biofuels and solar power, alongside other measures to reduce greenhouse gas emissions such as promoting greater energy efficiency.

Under EU targets, 15% of energy consumed in the UK should come from renewable sources by 2020. Yet Government figures show only 1.8% of Britain's energy came from renewables in 2006. Electricity generation, as opposed to heating and transport, is widely thought to have the most potential for greater use of renewable sources. But while the share of renewables in electricity generation has been growing, it was still only 4.5% in 2006.

This inquiry aims to set out the costs and benefits of renewable energy and establish how they compare with other sources of energy. It will also examine the Government's policy towards renewable energy.

Among the issues being examined in the inquiry are:

    (1)  How do and should renewables fit into Britain's overall energy policy? How does the UK's policy compare with the United States, Australia, Canada, and other EU countries?

    (2)  What are the barriers to greater deployment of renewable energy? Are there technical limits to the amount of renewable energy that the UK can absorb?

    (3)  Are there likely to be technological advances that would make renewable energy cheaper and viable without Government support in the future? Should, and how could, policy be designed to promote such technological advances?

    (4)  Has Government support been effective in leading to more renewable energy? What have been the most cost-effective forms of support in the UK and other countries and what should the balance be between subsidies, guaranteed prices, quotas, carbon taxes and other forms of support? Should such support favour any particular form of renewable energy over the others? For instance, what are the relative merits of feed-in tariffs versus the UK's present Renewables Obligation Certificate (ROC) regime?

    (5)  On top of the costs of building and running the different types of electricity generators, how much investment in Britain's transmission and distribution networks will different renewable energy sources require compared to other forms of generation? Are the current transmission and distribution systems capable of managing a large share of intermittent renewable electricity generation and, if not, how should they be changed? Are the rules about how we connect capacity to the grid supportive of renewables?

    (6)  How do the external costs of renewable generation of electricity—such as concerns in many affected rural areas that wind farms and extra pylons spoil areas of natural beauty—compare with those of fossil fuels and nuclear power? How should these be measured and compared? Is the planning system striking the right balance between all the different considerations?

    (7)  How do the costs of generating electricity from renewables compare to fossil fuel and nuclear generation? What are the current estimates for the costs of "greener" fossil fuel generation with carbon capture and storage and how do these costs compare to renewable generation? What impact do these various forms of electricity generation have on carbon emissions?

    (8)  How do the costs and benefits of renewable electricity generation compare to renewables in the other key forms of energy consumption—transport and heating?

    (9)  If the UK is to meet the EU target that by 2020 15% of energy consumed will come from renewables, will most of this come from greater use of renewable sources in electricity generation? If so, why? Should British support for renewables in other countries be allowed to contribute towards meeting the target for the UK?

    (10)How would changes in the cost of carbon—under the European emissions trading scheme—affect the relative costs of renewables and other sources of energy? Would a more effective carbon emissions trading scheme remove the need for special support of renewable energy?

    (11)What are the costs and benefits of the present generation of biofuels? Will there be a second generation of biofuels and, if so, what are the estimated costs? What are, or are likely to be, the carbon emission impacts of first and second generation biofuels, and what are the other relevant environmental effects?

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