The Economics of Renewable Energy - Economic Affairs Committee - Contents


Examination of Witnesses (Questions 266 - 279)

TUESDAY 24 JUNE 2008

Mr Chris Bennett and Ms Nicola Pitts

  Q266  Chairman: Welcome to Mr Bennett and Ms Pitts; thank you for giving up some of your time this afternoon to be here and thank you too for the written evidence which you let us have in advance. Just to make it easier for the recording of the proceedings, if you can speak reasonably slowly and reasonably firmly, that would be great, and if you can speak reasonably briefly that will also be excellent. I do not know if there is anything you want to say by way of introduction or whether your written report stands as it is.

  Ms Pitts: We just wanted to say that the figures contained in that are obviously our preliminary view; we are expecting the Government's renewable energy strategy to come out later this week so obviously we will need to look at that and refine our thinking accordingly, but this is our estimate at the moment.

  Q267  Chairman: As of today. Perhaps I could start the questioning; you have estimated that to meet the UK's target for renewable extra energy an investment in the onshore transmission system of about £3.5 billion will be required. How much renewable capacity would that accommodate and are you aware of estimates of the additional investment needed in the distribution networks as well as in the national grid?

  Mr Bennett: Preliminary studies suggest that that £3.5 billion, which as Nicola said is our initial estimate, would enable the connection of 30 gigawatts of renewable wind which in our scenario would suggest 11 gigawatts of onshore wind and 19 gigawatts of offshore wind. So the £3.5 billion would facilitate the connection of 30 gigawatts of wind; broadly that reinforcement would be in three areas: in Scotland we would be anticipating 10 gigawatts of renewables, associated reinforcement costs around about £2 billion; in England with the facilitation of the offshore regime we would be anticipating up to 19 gigawatts of offshore wind connecting on the east coast of England. That would probably cost in the region of £1.3 billion of onshore reinforcement. The other area where we are expecting wind to connect is Mid Wales and we have anticipated for a gigawatt of generation perhaps up to £200 million for the Mid Wales connection. That is our initial estimate: 30 gigawatts. As Nicola said we have recently commissioned a joint study with the Scottish transmission owners and have committed in the next six months to really delving into looking at the investment and the deliverability issues so we will be producing a report that firms up on those numbers. As far as the distribution network side of things is concerned, our studies have concentrated on 30 gigawatts connected to the transmission system. That onshore reinforcement is to facilitate the bulk transfer of generation to the centres of demand. At the moment our studies have not looked into the impacts on the distribution networks.

  Ms Pitts: It also does not look at the connections from an offshore windmill to shore as well, it is only the onshore connections.

  Q268  Chairman: But it would include in Scotland the Beauly to Denny line.

  Mr Bennett: Absolutely.

  Q269  Lord MacGregor of Pulham Market: Could I just follow up on that? You mention in paragraph 13 and in your appendices the three you have just mentioned for the £3.5 billion; do you also have issues about onshore wind apart from Wales and how much will that cost?

  Mr Bennett: The onshore element assumes one gigawatt in Wales and the associated reinforcement there; ten gigawatts of renewables in Scotland is all onshore, so the onshore elements are primarily Scotland and Wales. There is a major offshore reinforcement required off the east coast of England for the offshore elements and the onshore element to connect the offshore would be estimated at £1.3 billion.

  Q270  Lord Lawson of Blaby: Just to clarify what you said a moment ago before going on to another question, there was one element in the cost which you said was not included in this. Can you explain that because I did not quite understand what that element is and what you think that would add to the cost?

  Ms Pitts: The element that is not included in that is, if you like, the single connection from an offshore station, an offshore wind farm onshore if you like, so that connection is not covered. What we are talking about is the onshore costs and associated reinforcement—I think I am right in saying that the potential for those additional costs could be—

  Q271  Lord Lawson of Blaby: I understand now, thank you for clarifying it. Of course, the connection from offshore to onshore has to be done. Have you made a provisional estimate of what that would cost?

  Mr Bennett: We have looked into it and the offshore regime, the rules as currently applied, would have a competitive tendering arrangement for it. If you look at the numbers at the moment for the Round 2 wind farms, the number that is being quoted for seven gigawatts of offshore renewables is in the region of £2 billion. If you extrapolated the Round 2 offshore costs, £2 billion for seven gigawatts, in our scenario to hit the 2020 targets you might need up to 20 gigawatts offshore so you could be talking in the region of £6-£10 billion for the offshore investment.

  Q272  Lord Lawson of Blaby: Plus the onshore.

  Mr Bennett: Plus the onshore element.

  Q273  Lord Lawson of Blaby: The offshore, although it probably does not have so many difficulties with planning permission, is actually quite considerably more expensive for a gigawatt coming from offshore than a gigawatt from onshore.

  Mr Bennett: That would be the case.

  Q274  Lord Lawson of Blaby: One further question if I may, obviously this is only to 2020 when you would have something like 40 per cent of electricity generation coming from this, but the plan is that that is an intermediate staging post and it goes on increasing right up to 2050 anyway and possibly beyond that for all we know. When you extend it further will the cost per extra gigawatt come down—can we assume that if you were to double the amount of the electricity generated from this source it would double the connection cost or would it less than double it or more than double it?

  Mr Bennett: That is an interesting question and one of the challenges that we face at the moment is do you build a network that assumes the final position and try and build capacity with the full endgame in mind, or do you take a more incremental approach to the investment? That is one of the challenges that we face in terms of the sizing of the network and how you size that network in the first place.

  Ms Pitts: The other issue of course is if you are talking about reducing carbon emissions, heat for example represents almost half of those carbon emissions so the further that you go past 2020 and on towards 2050 then you do have to tackle some of these other areas such as heat and transport and their contribution.

  Q275  Lord Lawson of Blaby: Finally, I am not an engineer at all but this is quite a substantial engineering challenge is it not?

  Mr Bennett: It is. As far as the offshore networks in particular are concerned we are looking at trying to push the boundaries as far as technologies are concerned, so there are engineering issues associated with delivering the infrastructure but we think those are challenges that the industry can rise to and be able to deliver to.

  Q276  Lord MacGregor of Pulham Market: I would like to ask you a question about planning permission. You refer in paragraph 18 to the problems of planning consents and the preliminary question is I was not quite clear when you talked about contracted wind projects in Scotland the 17 per cent of consents across Great Britain and the 23 per cent, is that in relation to your planning requirements or is that in relation to the projects as a whole? The main question I want to ask you is how much of this investment in transmission would be likely to require planning permission and how long would you expect to be needed to complete the investment?

  Ms Pitts: Just on the first point, the figures are that those generating stations have not got planning permission.

  Q277  Lord MacGregor of Pulham Market: It is the generating stations, not your bit.

  Ms Pitts: That is right. Just to explain why planning permission is critical, what happens at the moment is that we need a fairly strong signal from a generator in order to trigger the transmission investment. Generally people will only want to do that once they have got their own planning permission and their financing in place. They then trigger the transmission investments and what tends to happen is that the generator is semi-ready to start building but they then may have to wait for the transmission investment to go through planning itself, so it happens in series rather than in parallel at the moment. The other factor that we have in the current planning arrangements are that BERR will consent the overhead line but substations are consented by local planning authorities so it is potentially like getting authority from BERR to build a motorway but then having to go to each of the local authorities to get the planning permission for the on and off ramps if you like, so we think that under the planning reform arrangements having that within one body is a very sensible way forward. There is also a big issue around the uncertainty and I will give you an example. The last time that we attempted some large scale electricity transmission investment it was a project called the Second Yorkshire Line and from start to finish that took 13 years to complete; much of that was in planning inquiries so we are very supportive of the planning reforms that will put some time scales around this for us having a certain yes or no within four years is a lot better than having an uncertain yes or no within seven or eight years. Going back to the issue that I spoke about, that transmission investment happens after the generators are ready, what we have proposed to the regulator is the potential for us to undertake strategic investment so we will look at the generality of what needs to be built and we are talking about how regulation might incentivise us rather than dissuade us from doing that. As far as we are concerned 2020 is not that far away in terms of planning horizon so the quicker we can get on with that investment the better. I have spoken about how long it can sometimes take to get planning permission and building after that will really depend on the type of project, how long that project is and whether there are lines there in the future, but we do expect that pretty much all of the investment that we need to do will require planning permission.

  Q278  Lord MacGregor of Pulham Market: If you went along the existing lines of the 13 years you spoke about, you would not really have very much in place by 2020, would you?

  Ms Pitts: We really need traffic lights to be on green.

  Q279  Lord Best: My Lord Chairman, I wonder if I could ask a supplementary relating to planning and indeed therefore to cost? In the Planning Bill which is shortly to arrive in this House an amendment from this House is about ensuring that power lines do not travel too close to people's residential accommodation for fear of leukaemia for children and other health risks. Have you costed in the additional cost that you would have to incur if you had to underground your power lines in built-up areas where it is possible that there will be a prohibition on taking the power lines too close to the inhabitants of those places?

  Ms Pitts: To underground lines is more costly. I am afraid I do not have the figures in my head but it is a factor of five to ten on current costings so it would add to the cost quite significantly. We do have rules that are in place already around the distance that you have power lines from dwellings so there are some rules that are there and I am very happy to write to you and set out those rules if that would be helpful.

  Chairman: If you could let the clerk have a note on that and anything that you do have in terms of the costs of putting things underground would be useful to clarify.


 
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