Examination of Witnesses (Questions 1
- 17)
TUESDAY 6 MAY 2008
Professor Paul Ekins and Dr Neil Strachan
Q1 Chairman:
Good afternoon and welcome to you both. Many thanks for giving
up some of your time to be with us this afternoon. Welcome back
to Professor Ekins; you were a witness last time round. Welcome
for the first time to Dr Strachan. I do not know if you had in
mind saying anything by way of introduction; if you do not we
will go straight into questions.
Professor Ekins:
Perhaps I could just say one thing which is to do with the results
that come out of models. Some of the questions you addressed to
me talk about forecasts. We are experienced in two models, one
of them is a UK macro-economic model with a sub-model of the energy
system which is run and operated by Cambridge Econometrics to
whom I have been a senior consultant. That is the one to which
the forecast figures in the questions refer. Through our work
on the UK Energy Research Centre we—mainly Neil—have
been responsible for building a MARKAL model of the UK energy
system which gives much more detail about costs and so when you
come to your questions about costs I will refer you to him or
you might like to refer the questions to him because that is where
those numbers broadly come from.
Q2 Chairman:
I think you acquainted us with the MARKAL last time round.
Professor Ekins: Indeed.
Q3 Chairman:
May I start off with a general question? What do you think are
the key considerations for UK energy policy? How do and should
renewables fit into that energy policy? Is their role likely to
change between the medium term—by which I mean to 2020—and
the long term, to 2050 and beyond?
Professor Ekins: The key considerations
for UK energy policy I think were outlined in both the White Papers
which the Government has produced over the last five or so years:
the reduction in carbon emissions, energy security, competitive
markets and/or competitiveness (depending on how you want to interpret
that particular third objective), and something to do with affordability
which might or might not be expressed in terms of fuel poverty.
The balance to be accorded to those four objectives is of course
a political matter. My reading of the situation at the moment
is that the Government is giving most attention to the reduction
of carbon emissions, but energy security is coming up fast on
the inside track and may indeed overtake it at some point. I think
that the concern about competitive markets and competitiveness
is always with us, so to speak, and some commentators think that
the objective of fuel poverty—specifically its effective
abolition by 2016—has lost ground somewhat against the other
objectives. That is how I would characterise the objectives. Where
do renewables fit into this? Renewables have a role to play obviously
as a low carbon energy source. It is conventional to say that
the UK is one of the best endowed countries in Europe with regard
to our resource of renewable energy so we clearly could develop
that and that would reduce carbon emissions. It also has a role
to play in energy security because most of these renewables are
indigenous and were they to be developed to a significant degree
they would give us a stream of more or less secure energy for
the lifetime of the installations. They are relatively more expensive
than fossil fuel comparators, although if the oil price continues
to go up and to drag other prices with it that may become less
true than it has been in the past so in terms of competitiveness
issues they perhaps do not score quite so well and because they
are expensive, depending on the financing mechanisms for them,
they can push up the price of electricity and other fuels, and
that of course makes the fuels less affordable. That is broadly
what renewables can do. I think Neil has some figures off the
top of his head about the potential for renewables so I will pass
over to him.
Dr Strachan: If I was talking about the
potential for renewables theoretically you could quite easily
meet a 100 per cent of the UK's energy needs through renewable
sources alone. I will quote some numbers to you. In terms of the
UK's primary energy, before converting it to electricity or to
heat or to refined fuels, I will use the units of petajoules—although
you can use other energy units—it is roughly around 8,000
petajoules. By 2050 if we were meeting carbon targets, we would
expect people to reduce that demand as prices went up and our
model says that demand might go down to around 7,000 petajoules
by 2050 for the whole UK economy. In terms of what the UK has,
in terms of things like tidal and wave, there is around 640 petajoules.
These are very conservative estimates and there is a lot of uncertainty
about them; I am just trying to give out some medium estimates,
so that is about 10 per cent. Onshore wind is probably another
600 or so, that is another ten per cent or so. Hydro is a little
bit less, maybe only five per cent. There is an awful lot of onshore
and offshore wind, something like 16,000. In terms of biomass,
our domestic biomass and waste resource may be around 1,200 or
20 per cent. Our imports of biomass—we could import it from
other places—is a very uncertain quantity but it depends
who is going to sell it and what are the environmental consequences
of developing countries giving a lot of biomass. Certainly measures
of sustainable biomass imports could be up to another 20 per cent
of UK energy supplies. Then if you are looking at some of the
intermittent renewable resources focussed on electricity and some
of the non-intermittent resources both for transport and buildings,
theoretically you could easily meet a 100 per cent. Fundamentally
it is a question of cost and a question of system integration.
Q4 Lord Lawson:
I would like to follow up that question of cost and system integration.
I was very interested, Professor Ekins, in your saying that you
think that energy security is coming to the forefront; I think
you are probably right. If one is concerned about energy security
then the obvious answer, as far as electricity generation is concerned,
is clearly coal of which we have abundant indigenous supplies
and which is very much cheaper than renewables at the present
time and for the foreseeable future. Leaving that aside, focusing
on the question of costs I would be grateful if you could answer
this question which lies really very much at the heart of our
inquiry which we are just launching. How do the costs of generating
electricity from renewables compare to the cost of doing so from
fossil fuels and from nuclear power? Similarly how do the costs
of powering transport from renewables compare with the costs of
doing it through fossil fuels? This comes to the question of system
integration. What we are talking about now is not the cost of
an individual wind turbine but the cost of a system based on these
different sources of energy, including the costs therefore of
system integration which you referred to and the costs of backup
in the case of intermittent sources of energy. What are the true
figures of the costs of these various sources? I know they are
big questions and if you would like to follow them up with a written
reply that would be fine, but initially what is your oral reply?
Professor Ekins: I am sure we would like
to follow it up with a written reply and, if we may, I think we
will probably be submitting something which the UK Energy Research
Centre as a whole will then consider and submit to you as a response
from the UK Energy Research Centre. In line with my original remarks
perhaps I could pass straight over to Neil and if he does not
cover all the points you have raised as I would have covered them
then I may make a few supplementaries. Neil is the cost expert
around here.
Dr Strachan: Let me break down that question
into what they would cost now and what they may cost in the future
for electricity generation. When you look at what are called levelized
costs of power production—trying to put in capital and available
costs and fuel costs—typically coal, gas and nuclear are
within plus or minus five per cent of each other, they are very
close. Marketed renewables such as wind tend to be more expensive,
15 or 20 per cent more expensive in current terms. In terms of
the future, particularly looking at 2020-50, you are expecting
to have very large amounts of technological change and technological
development particularly as current niche technologies become
mainstream technologies and companies should get much better at
making economies of scale. In our modelling the uncertainties
between nuclear, coal (with carbon sequestration) or large scale
renewables (largely wind) are so great that we cannot say with
any robustness which of these three technology classes have the
lowest cost. What we can say is what happens if you start taking
out some of these technology classes or if some of these technology
classes do not work. For example, if you were trying to meet long
term carbon targets and coal carbon capture did not work, then
you would have to rely on nuclear and large scale wind and your
annual costs might go up by £500 million. If you did not
have CCS or nuclear—if you took both of those technology
classes out of the equation and were relying on electricity from
large scale renewables—your costs might go up by £5
billion. If you took all three technology classes out and you
were looking at making your carbon savings primarily in other
sectors or through biomass in the power generation sector, your
costs go up by £14 billion annually. So you can see if you
only take out one of these technology classes and you can rely
on some of the other technology classes you are fine; once you
start taking out a large number of the options then the costs
go up and they go up quite significantly.
Q5 Lord Lawson:
You have talked about generating electricity but, as Profession
Ekins points out in his very interesting paper in the Cambridge
Econometrics study, there is a big growth area which is going
to be as much as one third, I think you say, of UK CO2 emissions
and that is transport. You have not really answered my question
in terms of transport at all, you just talked about electricity
generation.
Dr Strachan: When we do our modelling
of long term, large scale carbon cuts in the UK economy, what
our modelling tends to find is that biomass resources are heavily
utilised in the transport sector. If you are going to de-carbonise
your transport sector you either use less transport or you switch
to biofuels or you switch to hydrogen (if you switch to hydrogen
you must make hydrogen from some low carbon resources). That generally
seems to be the pattern; transport tends to be the hardest sector
to de-carbonise and within transport aviation is the hardest sub-sector
to de-carbonise. Again the costs of de-carbonising the transportation
sector have the same uncertainty levels as you are projecting
out to 2050 as does electricity.
Q6 Lord Lawson:
You mentioned just now biofuels. Recent research and studies done
by the OECD and so on show that biofuels use up more or less the
same amount—maybe a little bit less—of energy to produce
as they do to generate. They also need about five gallons of water
to produce one gallon of biofuel and when there is a water shortage
in the world that is not very clever. Of course they are also
driving up the price of food, so I would like to leave biofuels
to one side. I was interested, however, in what you said about
technological developments bringing down the costs of renewables
in the future. Presumably technological developments also occur
in other fields so, for example, they may well bring down the
cost of nuclear or they may well bring down the cost of conventional
power sources. Do you take that into account as well or do you
just look at technological developments in the case of renewables
and ignore the possibility in other fields in the calculations
you make?
Dr Strachan: You are absolutely right
that all these technologies are competing in a race and if new
technologies are improving then incumbent technologies are also
improving. Our work tends to find that new technologies are improving
faster. One reason for that is that the older technologies have
already had a lot of R&D applied to them. Another reason,
particularly with these newer, smaller technologies, the number
of units you have are much larger, for example the UK only needs
10, 20, 30 nuclear power stations or large coal power stations
which last for a very long time. If you compare that to needing
many thousands of small solar or wind technologies that have a
faster turnover, then the scope of learning is relatively faster
in those sectors. An imperfect analogy would be improvements in
PCs and computers and mobile phones. These are smaller units that
turn over much faster and have much larger production quantities.
Q7 Lord MacGregor of Pulham Market:
As this is the beginning of the inquiry perhaps I could declare
an interest, as in the Register, in relation to the pension funds
of British Energy and one other interest associated with British
Foods. I no longer have an interest in biofuels; that ends at
the end of the year. I am also involved in some lobbying about
wind turbines in East Anglia. Professor Ekins, can I come back
to the Cambridge Econometrics press release that Lord Lawson referred
to. In that, only a short while ago, you forecast that Britain
would derive only five per cent of its energy consumption from
renewable sources in 2020, which is far below the 15 per cent
target. Do you think the target is realistic? What measures would
be required to get much nearer to it?
Professor Ekins: Perhaps just for the
record I can make a clear distinction between something that I
am sure is familiar to everyone here, but which sometimes fools
other people, and that is the distinction between electricity
and targets for, for example, renewable electricity which the
Government has through its renewables obligation; final energy
demand which consists broadly of electricity plus road fuels plus
heating fuels, that is what the 15 per cent refers to in the European
Union target; and primary energy demand which accounts in addition
for all the energy that essentially is lost in making electricity,
so you convert your electricity which is produced by other sources
into a primary energy demand. I think it is important to get those
percentages clear. Indeed our forecast suggests that under current
policies we will only get five per cent of final energy demand
from renewables by 2020. The way the Cambridge Econometrics forecasts
are done is only to put in them what we regard as firm government
policies, that is policies which, if they require legislation,
the legislation has gone through; if they require regulations
of some sort the regulations have indeed been promulgated. In
other words, we do not include stuff which is floated in white
papers and consultation documents and the like. At the moment
there are very few measures to increase renewables for either
transport fuels—in fact we have just had the Renewable Transport
Fuels Obligation about which there is quite a lot of discussion
now and the Cambridge Econometrics forecast does include that,
but that only applies to a relatively small proportion of road
fuels, while transport fuels as a whole are only about 25 per
cent of final energy demand, and we currently have no measures
at all for renewable heat which is about 50 per cent of final
energy demand. The predominant measures in that forecast are related
to renewable electricity and that is why the five per cent appears
quite small although that is 20 per cent of electricity which
is a much higher proportion of electricity. The Government is
currently consulting on the subject of renewable heat and has
called for evidence et cetera about mechanisms for support of
it and were it to introduce such a mechanism—either a feed
in tariff or a renewable heat obligation or a system of substantial
capital grants—from experience in other countries that might
be sufficient to pull quite a lot of renewables through into renewable
heat and that could get us towards the 15 per cent overall target
given that heat is a much larger proportion of final energy demand
than electricity is. Were we to do that with real conviction—given
that the experience of other countries, for example Austria now
has 14 per cent of its primary energy demand coming from biomass
largely in the form of renewable heat—then I think it is
possible that if we were to develop a renewable resource and develop
a renewable heat resource that we could approach the 15 per cent
EU renewables target, although I do not think anyone would deny
it is going to be challenging.
Q8 Lord Best:
You have covered the point that although we are not going to make
the five per cent target we might do much better under the heading
of electricity on its own. Can I go on from there to the costs
and benefits of the requirement that biofuels make up 2.5 per
cent of petrol and diesel in the forecourts with plans to increase
this to five per cent within two years. How much of an impact
on carbon emissions in particular will the use of biofuels on
the forecourts have?
Professor Ekins: It depends on what the
lifecycle carbon emissions of the particular source of biofuels
is and there is very considerable uncertainty about that. For
some biofuels produced in some countries the suggestion is that
their lifecycle carbon emissions are actually more than fossil
fuels because they take fossil fuels to grow them if they are
a food crop and then they take fossil fuels to process them into
biofuels, then they take fossil fuels to transport them wherever
they happen to be going (they might be coming from quite long
distances away) and then we finally burn them. Of course they
give out carbon emissions when they are burned and of course they
will have absorbed those carbon emissions when they were growing.
You have to account for the full lifecycle in order to do the
sums properly. If we were to concentrate on biofuels that were
sourced from the UK (to build on the biodiesel from waste vegetable
oils that is already a rather small part of the market) to use
the waste wood resource that is already available and if second
generation biofuel technologies were to come on stream that would
enable us to convert woody biomass to biofuels in a fuel efficient
way—there are some big "ifs" there—then
it is possible that biofuels could make a contribution to carbon
emissions reductions, probably not by 2010 it has to be said.
I rather think that the contribution to fuels that is going to
come by 2010 is much more likely to come from the kind of fuels
sourced from abroad that have been in the news quite a bit recently
about which there are legitimate concerns as to whether they are
genuinely low carbon fuels or not.
Q9 Lord Best:
If there is not really much to be said for the use of biofuels
under your heading of the objective of reducing CO2, is the Government
then setting these quite ambitious targets under one of the other
grounds, that of the energy security (although I would not have
thought so), or is it affordability? Why press for this one when
there are so many question marks over its CO2 advantages?
Professor Ekins: My own interpretation
of that is that it is different for different countries. I think
in the United States, for example, the rush towards biofuels—one
can only describe it as that—has been motivated largely
by energy security considerations; they have a lot of land, they
can produce a lot of crops and they can make a lot of biofuels.
In this country that is not really the case. Conceivably it is
more secure to import biofuels than it is to import oil, but that
is a relative judgment depending on the source of the importation.
My judgment about the whole biofuels policy, both at the UK and
at the EU level, is that it was hasty and ill-considered and that
it had not done the work that it should have done really to bottom-out
the lifecycle carbon emissions issues and indeed the other environment
issues which arise when you are converting large quantities of
biomass into fuel for vehicles. I rather hope that policy makers
will think again about both the EU biofuels directive and indeed
the Renewable Transport Fuel Obligation until we can be sure that
we are getting both low carbon benefits and other environment
benefits from that policy.
Q10 Lord Paul:
In view of the suggestion made out about the question of biofuels
being produced at the cost of food and that is causing a food
shortage, how long will biofuels remain an option?
Professor Ekins: For as long as biofuels
come from first generation technologies, in other words you are
converting food crops directly into biofuel, that is not an option
which, with six billion people moving towards nine billion people
all wanting to be fed, is going to make a great contribution to
energy supply without eating in substantially to food supplies.
If the second generation biofuel technologies come on stream which
can convert woody matter into biofuels, then of course the potential
fuel source is much greater, the areas of land on which that can
be grown are much greater and it will compete much less directly
for food and if you use a food crop then at least you will be
using the whole plant instead of only using the food part of the
plant. I think quite a lot hangs on the potential development
of this second generation technology.
Q11 Lord Kingsdown:
Could you outline for us the various forms of support which are
provided to renewable energy? Are there some methods which are
more cost effective than others?
Professor Ekins: I think there are basically
three large scale forms of support. There is a lot of tinkering
at the edges, but I will concentrate on three. We have the obligation
mechanism such as we have in this country whereby energy suppliers
are required to produce a certain proportion of renewables and
they are given a subsidy for so doing, and under our system the
subsidy is paid by electricity consumers. It only applies to electricity
at the moment although, as I said, there will be consultations
and papers commissioned about getting some similar kind of mechanism
for heat. So that is the obligation method. The feed-in tariff
method is the main competitor to that. It operates in several
European countries and it essentially guarantees a price; instead
of demanding a particular proportion it guarantees a price to
the producer for producing a certain kind of renewable and the
price typically varies across different technologies. The third
method is simple old capital grants: recognising that a lot of
these technologies are more expensive at the capital level than
their competing technologies you give a grant up front. We have
done that, for example—not terribly successfully, but nevertheless
we have done it—with offshore wind and I am quite sure that
if we are to get much more offshore wind we will have to continue
with a capital grant programme. There is also a bio-energy capital
grant scheme, again a fairly small one that has not produced an
enormous amount, but it gives the flavour of what can be done.
In terms of effectiveness I think it depends what you mean by
cost-effectiveness. How much renewables you get for your money
depends, not surprisingly, on how much money you are prepared
to put on the table. Historically people who have introduced feed-in
tariffs have been prepared to spend quite a lot of money and they
have ended up spending quite a lot of money in absolute terms—I
am talking about the Germans and the Spanish for example—but
in terms of pence per kilowatt hour of delivered electricity the
cost has been much cheaper than in the UK case. We have not been
prepared to spend so much money so the buy-out price for the obligation
has been set well below the kind of rate that they pay on the
continent in feed-in tariffs. In absolute terms we have spent
much less money but we have delivered much, much less electricity
so that the pence per kilowatt hour of the cost of our renewables
has been substantially in excess of that in Germany and Spain.
On cost effectiveness, if it is per kilowatt hour of renewable
electricity you are talking about, then the renewables obligation
has been less effective than the feed-in tariffs. If you are concerned
about limiting the overall cost of renewables support then the
renewables obligation has done that because it has worked out
much more cheaply than the continental means.
Q12 Lord Kingsdown:
It sounds to me like quite a wide range of subsidies of some sort
or another are needed to produce this form of fuel. Is that going
to be economically tolerable in the longer and middle term?
Professor Ekins: They are subsidies,
yes. Whether they are tolerable depends on two things, firstly
our degree of desire to reduce carbon emissions—which is
what they are all about, obviously—and if it is perceived
that we need to reduce carbon emissions more and more then they
will be perceived to be tolerable or might be, if that is the
political sentiment. Secondly, to come back to the issue that
Neil raised earlier, these are costs of very immature technologies.
They have not been around a long time; they have not been widely
delivered especially in the UK context by UK industries, especially
offshore which is where most of our wind resource is expected
to come from. It is widely hoped—I will not say expected—that
their costs will come down as they are implemented and delivered.
Q13 Lord Griffiths of Fforestfach:
I would like to come back to something you said in relation to
Lord Lawson's question. Could you tell us what the range of estimates
of the cost of electricity from various forms of renewable generation,
whether from official estimates or independent estimates, really
are? As I listen to you, against a background of what I see as
enormous uncertainty, for example the concept of the BRIC—Brazil,
Russia, India and China—is probably not ten years old and
you yourself talked about second generation technology and immature
technologies. We have seen in the past 18 months or so the price
of oil double and the price of steel go through the roof. If I
was to play the devil's advocate I think I might say, do you have
any idea at all what these costs might be by 2050?
Professor Ekins: I have an idea but it
would almost certainly be wrong. I am going to ask Neil to give
the best estimate in this configuration of great uncertainty which
you quite rightly allude to just so that he can say what we think
a reasonable range might be.
Dr Strachan: I would make a distinction
between what we call a levelized cost versus a total cost. A levelized
cost would be if you were to do a calculation based on the capital
costs, the operational costs and the fuel costs of a plant. Added
to that are site specific factors (some sites are cheaper than
others), public benefits and externalities and this crucial aspect
of system integration, and who pays for that and how much it costs.
If you were looking at a reasonable range for some of the major
competing technologies as of now, then as I said before coal,
gas and nuclear are probably in levelized terms within five per
cent of each other and wind is probably 15 per cent above that.
As you say, prices change very rapidly and to a large extent,
but £35 to £45 per megawatt hour is the current range
for a levelized cost. In the future you would expect the learning
of new technologies—solar technologies, wind, tidal, wave—to
drive them down close to equal or even better than current technologies.
Exactly which technology wins and when that technology wins in
this technology race is almost impossible for us to say. As academics
we would not say that because that is false security. The only
other thing I would say is that a lot of these inputs are changing—as
you pointed out, the price of steel—and sometimes that does
not impact the relative costs of technologies so much. We need
steel for a lot of technologies; if the price of wages goes up,
you need wages for a lot of different technologies. Even though
the technology prices will go up and down, the relative positioning
of those technologies, although they will change, will also go
up and down.
Q14 Lord Paul:
We have been talking about the costs but how do the costs of generating
electricity from renewables compare to fossil fuel and nuclear
generation? Are these relative costs likely to change in the future?
How robust are the estimates?
Dr Strachan: We would certainly say that
the relative costs are likely to change in the future. If you
look at short term changes in fuel price, coal is now in a better
shape compared to natural gas because the price of natural gas
has gone up to a larger extent than coal. Nuclear is looking better
than both of those fuels at the moment. That can clearly change;
the costs of all these technologies are very, very uncertain indeed.
All I can do is to reiterate the point made that we cannot choose
between the future costs of these competing technologies. In our
model when we run different runs and sensitivity cases and those
types of things, we try to think about where the different technologies
will succeed and where the different technologies will improve
better than others. Paul made the point that you support technologies
because you think that the current subsidy for these expensive
technologies will be outweighed by the future cost savings as
these technologies improve. I would support that wholeheartedly.
The other thing I would point out is that if you are supporting
a portfolio of new technologies some of those are not going to
succeed and no-one likes to subsidise a losing technology, but
any large company, any pharmaceutical company will have a portfolio
of products and some of them will win and some of them will not.
That calls for a broad-based, near-term support until you see
which technologies are improving and which technologies are offering
you cost and other advantages that other technologies are not.
Q15 Lord Macdonald of Tradeston:
At the start of the inquiry I would like to declare what is recorded
in the House of Lords Register of Interests that I have advisory
roles with both Scottish Power and Macquarie Capital, each company
having energy interests, including renewables. I was wondering
what estimates you would have for the potential costs and benefits
of using carbon capture and storage with fossil fuel generation.
Given that carbon capture and storage are yet to be introduced,
how reliable can these estimates be? How do the estimates compare
to the expected costs of renewables? How do you rank the probability
of an efficient, viable, carbon capture and storage technology
emerging in the medium term? It has been talked about for a long
time and is still not there.
Dr Strachan: To take your last point
first, you are absolutely right that this technology has never
been demonstrated in its entirety, but the component parts of
the technology have been demonstrated. We do strip out hydrogen
from fossil fuels; we do transport hydrogen over very long distances,
over 200 kilometres in the US and Canada; we do use hydrogen in
the chemical industry and we do have experience of sequestering
carbon in reservoirs (the Sleipner Project in Norway). So it is
not a case of developing this new technology, it is a case of
fitting all these pieces together. There are uncertainties in
doing that; there are huge uncertainties in scaling up a production
from demonstration to larger plants. I would argue that these
uncertainties are less than making the technology work; they are
less than making nuclear fusion work, for example, which is a
technology that also has long term potential but does not yet
work at all. Perhaps that is a little bit too blunt, but I am
trying to show the relative difference. I would argue that CCS
is a nearer term, large scale, low carbon technology than some
of its competitors. To answer your second question about the relative
costs—when I was trying to answer Lord Lawson's comment
earlier I think I already mentioned this—I can perhaps put
it in percentage terms to make it clear. In electricity you have
three main areas: nuclear, carbon capture and large scale renewable
sources. For our modeling to meet a long term 60 per cent reduction
in CO2 that is going to cost, by 2050, between one and two per
cent of GDP, maybe a little lower. If you take out one of these
key technologies prices will go up by 0.02 per cent of GDP, relatively
small; if you take out two of these technologies then prices will
up by 0.2 per cent of GDP; if you take out all three of these
technologies in the mix then prices will go up by 0.5 per cent
of GDP. My argument is that as long as two of them work well—certainly
as long as one of them works well—then that is a much better
basis than going forward if none of them work well, then the costs
of de-carbonisation will be quite high.
Professor Ekins: Perhaps I could just
add something on the Sleipner Project. This is something that
I did not know until very recently and was quite surprised about
it. This is a project in the North Sea in the Norwegian sector
and it is owned by Statoil, the Norwegian oil company. They have
already sequestered ten million tons of CO2 under that project.
Over the last seven or eight years there is no evidence that the
CO2 is going anywhere; there is no evidence of leakage. Ten million
tons of CO2 is nothing like what we would need to make a significant
impact on this problem, but nevertheless ten million tons of CO2
is not absolutely nothing. There is beginning to be evidence that
this is a viable technology and this is something that is going
on at the moment. I think what Neil said about the component bits
of actually being able to separate the CO2, being able to get
it into pipelines and being able to pump it into rocks under ground—which
is what the Sleipner Project does—at the moment that looks
feasible at the scale they are doing it.
Q16 Lord Layard:
I wanted to ask you a question about basic science. Obviously
we would not have a nuclear industry if we had not spent a lot
of public money on basic science. I would like to know whether
you think we actually can, as a world, achieve reasonable levels
of CO2 emissions by the middle of the century without a major
scientific effort. When we had our last inquiry we were told that
the International Energy Agency had made some estimate—which
I am sure could be questioned—that to get competitive non-carbon
energy within a reasonable timescale would require and could be
achieved by something like 300 billion expenditure on basic science
over, say, a 25 year period. Is it completely wrong to think of
this problem as a problem like producing an atom bomb or putting
a man on the moon, like Jeffrey Sykes was saying this morning
on the Today programme? I am thinking in particular of
the immense energy of the sun which is the main source of energy
on this planet and the harnessing of that by scientific methods.
Is it quite wrong to think of that as a central aspect of solving
this problem? Perhaps you could say something about the role of
basic science and how you think, if it is important, it would
have to be organised and financed.
Professor Ekins: No, I do not think it
is quite wrong; I think it is quite a reasonable way of looking
at that. I would emphasise something, though, that has not come
up yet which is that in all these percentage targets there is
denominator as well as a numerator, and the denominator is the
total quantity of energy that you need. Therefore the less energy
we need in order to go about our business and power our economies,
the less we have to supply in the numerator in order to reach
the target. If you are going to think of it in terms of a Manhattan
project I think we need a twin Manhattan project, one focussing
on the energy demand side to make more efficient appliances, to
make more efficient vehicles, and indeed find out ways of increasing
the thermal efficiency of the building stock which, as all estimates
suggest, is one of the cheapest ways of reducing carbon emissions
but nevertheless it is rather difficult technically and technologically.
That is the demand side. Then of course there is a whole range
of technologies on the supply side which one might like to focus
on. The difficulty is, as we have been saying, it looks as if
there are at least three possible contenders for the Manhattan
project on the supply side: large scale renewables (which would
obviously include your solar example), carbon capture and storage
from fossil fuels, and nuclear. Each one of those could be quite
expensive if you were to focus on it. If, as our advice to policy
makers is, we do not know yet which of those is going to come
through so you probably have to do all three, you can see that
there is a veritable proliferation of Manhattan projects into
these different technological areas, and we have not even started
on something like hydrogen which some people regard as being very
promising for the longer term future, or something like fusion
(which already absorbs a very large part of the basic science
budget of the Engineering and Physical Science Research Council).
I think there is the scope to spend very large sums of money in
all these areas. I think for efficiency it ought to be financed
globally in a globally cooperative effort. We know that some countries
are much more willing to spend large sums of money on technology
than others and I think the United States, for example, is already
spending considerable sums in a lot of these areas. I think it
is terribly important that we get globally the biggest bang for
our buck and have properly coordinated basic scientific research.
However, I have to say that I am also pleased, both in principle
and because I am a direct beneficiary, that the UK's own scientific
effort in this field has become much enhanced over the last few
years. The UK Energy Research Centre was set up five years ago
and I think has made significant progress with energy research
in this country. The EPSRC's energy programme, the various SUPERGEN
consortia that have been initiated are focussing on a very wide
range of the different energy technologies that may come through.
It is a large spectrum and the quantity of resource that you could
spend would be very large indeed. I think there are difficult
decisions to be made about what to spend; I think it is very important
that there are real efficiency criteria so that we do not waste
money in this area and these programmes are coordinated internationally
so that we can learn from each other.
Q17 Chairman:
Before I ask you what will be the last question, I should mention
that my entry in the list of Members' interests includes membership
of the supervisory board of Siemens AG which has interests in
power generation of various types, including renewables, transmission
and indeed transport. Has your work examined the wider impacts
of renewables, for instance through establishing a UK manufacturing
sector or the impacts on rural areas, employment, tourism and
so forth?
Professor Ekins: Not in any detail, to
be frank. There are probably other witnesses you will want to
call who are better qualified to comment on that than I am. The
Cambridge Econometrics model does look at the whole UK economy
and, not surprisingly, if you invest large sums of money in renewables
you will get a UK renewables industry. If you look into other
countries that have invested large sums of money into renewables
you find that because of the global interest in reducing carbon
once you have an effective renewables industry for the domestic
market you tend also to win exports. The wind industries of both
Denmark and Germany are now substantial export earners. I read
the other day that the wind exports of Denmark have now surpassed
those of their fabled agricultural sector; Danish bacon is no
longer the kind of quintessential Danish product, one might say
Danish wind turbines have exceeded that. It certainly can happen
that if you make effective interventions in your own industrial
system and there is demand in other countries—at the moment
I think it is very likely that there will be demand for low carbon
technologies from other countries—then I think there are
very good prospects of building up exports and of course with
exports come employment and one of the things that the German
renewables industry is always very keen to say is that they do
employ now hundreds of thousands of people in their renewables
industry for both the domestic and the export markets. While I
have not studied that in detail and clearly at the moment it is
a subsidised industry apart from the exports—assuming that
the importing countries pay the full costs—there is I think
an argument for including industrial policy considerations with
other considerations of supporting renewables at this time.
Chairman: Thank you very much indeed,
both of you, for spending time with us and answering our questions
so clearly. We look forward to your note in due course and if
you feel that there are any questions you expected us ask but
did not, feel free to answer them in your note.
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