Examination of Witnesses (Questions 500
- 508)
TUESDAY 15 JULY 2008
Malcolm Wicks, Mr Simon Virley and Ms Tera Allas
Q500 Chairman:
I think I must bring us back to asking questions of our witnesses
and perhaps I can lead the way by asking you a bit about renewable
heat. A number of witnesses have suggested to us that heat is
something of a poor cousin amongst renewables and not enough attention
has been paid to it. What would be the best way to boost the amount
of renewable heat? Would it be to bring fuel used in heating into
the European Emissions Trading Scheme or to create one of the
schemes described in your consultation paper, perhaps a renewable
heat incentive or indeed a renewable heat obligation?
Malcolm Wicks: May I say that I think
there is an even wider issue about heat. Many people feel, as
you have said, that it has been a poor relation, the Cinderella
that has never been invited to the ball, and it is not just about
renewable heat, there is a lot of concern in terms of power generation
where we waste the heat. There is a lot of new interest therefore
(it is an old idea) in combined heat and power. We asked the Office
of Climate Change to do a review in terms of heat strategy and
they have produced their report and now in terms of renewables
in our Renewable Energy Strategy Consultation document we have
discussed the issue. We want to see a debate and we want to see
new evidence on this. The consultation document favours tentatively
a renewable heat incentive over an obligation, so we are now looking
at mechanisms to encourage renewable heat, but my colleague Simon
Virley can add to my remarks.
Mr Virley: As the Minister says, we see
renewable heat as being a big part of helping meet these targets.
The issue we see with bringing heat into the EU ETS is essentially
one that it will not provide, as we were describing earlier, a
sufficient price incentive for the take-up of these new technologies,
and therefore we have looked at more dedicated support mechanisms
to try and incentivise the take-up by households and businesses
of renewable heating. We are favouring tentatively in the consultation
document a renewable heat incentive primarily because of the difficulties
of imposing an obligation-style system on such a fragmented market
with a large number of suppliers, so an incentive mechanism would
essentially be a subsidy for those new heat technologies, whether
it is ground source heat pumps, biomass boilers, and that subsidy
will be paid for by a levy on fossil fuels used for heating elsewhere.
That is what we are proposing but obviously we are now looking
for views as to whether in fact that is the best mechanism going
forward to incentivise a step change in renewable heat.
Q501 Chairman:
Do you think there are any other countries in Europe that have
got heat right in terms of incentives and obligations?
Mr Virley: The truth is that heat has
been a Cinderella in most countries and most countries are only
now starting to think about the policy frameworks that they need
to put in place to incentivise both low carbon and renewable sources
of heat. Whilst a number of countries have different configurations
of gas grids and so on, which gives them different policy questions,
the truth is that not many countries have moved in the direction
of producing discrete and significant incentives for heat technologies.
Germany is one country that is starting to move in recent months
in that direction but there are very few others that have done
so to date.
Q502 Chairman:
Not even heat and power together?
Mr Virley: Combined heat and power has
received incentives in some countries, yes, but obviously most
combined heat and power is still gas-fired and therefore not renewable,
so whilst we are keen to incentivise all forms of low-carbon technology,
for the purposes of meeting this target of course we would need
to focus on renewable sources of combined heat and power of which
there are some, and that is what our renewable heat incentive
would act to do.
Malcolm Wicks: Copenhagen is an interesting
example of combined heat and power on a major scale. There is
a power station there producing a lot of heat for thousands of
homes in Copenhagen and retail too but it is co-firing; they actually
have great bales of straw going as well as coal and it is not
all renewable, so in different parts of Europe there is interesting
practice.
Q503 Lord Macdonald of Tradeston:
Your consultation paper shows that the unit cost of electricity
micro-generation is roughly double that of other renewable energy
so why are you considering policies to support micro-generation
when it is such a high-cost option?
Malcolm Wicks: I understand the question
and I think given the economics of the moment, if we were just
focusing on the economics, we probably would not want to look
seriously at micro-generation, but I think there are other issues.
Personally I feel strongly that if we are to hit our climate change
targets, if we are to reduce CO2 by this enormous amount, then
this should not just be a matter for big institutions and the
G8 or the EU and government and big organisations. I think many
citizens are concerned about climate change and many citizens
are concerned about waste more generally and many concerned citizens
are asking how they can personally make a difference. They are
the recycling generation, as it were, who are now thinking about
their own dwellings and are interested in micro-generation. Much
of it is still a very expensive technology and if in suitable
ways we can enable people to become micro-generators, build some
renewables into their dwellings, I think that hits the button
in terms of active citizenship even if it does not pass a pure
economic test.
Q504 Lord Turner of Ecchinswell:
Can I ask how you see the role of renewable energy relative to
other ways that we could reduce carbon emissions, for instance
by demand reduction energy efficiency but also how you see the
potential for carbon capture and storage and when you might anticipate
that that will be available?
Malcolm Wicks: That is a question that
could lead on to an attempt to outline a comprehensive energy
strategy and we have written the book and you have seen it, sir,
so I do not need to do that. I do think any sensible energy policy
and any sensible climate policy starts with trying to reduce energy
demand, certainly in economies like the United Kingdom, and therefore
energy efficiency needs to be given a far higher priority, whether
that is about technology, whether it is about the development
of new engines for our motor cars which use fuel more efficiently,
or whether it is about how we can start to think about retrofitting
the existing housing stock with insulation and maybe renewables
in a more ambitious way than we have done hitherto. I would start
with energy demand and trying to reduce it and therefore I would
start with energy efficiency and then after that you get on to
the things we have discussed and, in no particular order, you
get on to the development of renewables, you get on to the development
of a new generation of nuclear reactors, and you certainly get
on to clean coal technology and CCS.
Q505 Lord Layard:
As a sort of follow-up I wanted to ask how you see the role of
basic research and development in tackling the problem of climate
change. This is a fairly recent challenge and I wonder if you
think that enough money is going into the basic research and development
which may find solutions which we have not even been discussing
today? There must be huge public good issues involved here. Whoever
does this, a firm cannot be sure of trapping the returns to a
basic discovery that it might make. Are you satisfied with the
international effort? Do you feel that the world of science and
technology has given sufficient priority to the climate change
challenge and do you think our community is doing enough and getting
enough support for doing it?
Malcolm Wicks: I guess you could always
argue about what we mean by `sufficient', but I think I am confident
that worldwide and certainly here in the United Kingdom, a great
deal of extra resource is now being brought to bear on this issue.
Internationally the International Energy Agency are doing very
important work. They have produced a technology handbook which
compares and contrasts the economics of different technologies.
I think that is an excellent piece of work. I am impressed that
you go around many parts of the world and there is huge development
in some of these technologies. Recent announcements on CCS in
Canada come to mind for example. Here at home we have established
the Energy Technology Institute which is now up and running. It
is public/private sector and many major companies have subscribed.
We are still looking for one or two other subscribers. The idea
is to have a budget of £1 billion over a 10-year period to
invest in energy technologies. You have also got now part of our
sister department DIUS the Technology Strategy Board, which is
funding developments in energy. I think they have done some recent
support for wind turbine technology, for example, because we should
not assume that the kind of turbines we need in the future offshore
are exact replicas of what we have onshore, to put it in rather
over-simple terms. We have a fund of money ready to fund the deployment
of marine technologies and so on. There is the Environmental Transformation
Fund that we also have. We have set these out somewhere and I
will make sure, my Lord, that you see the documentation. The research
councils too of course are very active and we are beginning to
see new developments in university departments. There is certainly
new interest in nuclear science for example in our universities.
Q506 Lord Lawson of Blaby:
A brief parting shot on carbon capture and storage which Lord
Turner asked you about. Obviously we do not have the faintest
idea at the present time of what it will cost but, leaving that
aside, more fundamentally one of your predecessors in Energy,
Mr Alistair Darling, told the House of Commons last year that
the technology needed for carbon capture and storage might never
become available. That is what he said to the House of Commons,
presumably on advice from your excellent officials. Is that still
the position? If not, can you explain to us what has happened
over the past year that has changed it?
Malcolm Wicks: I come from further south
in the country and therefore by temperament I am more—I
have to choose my words carefully—optimistic about this
technology. Whether that is the passing of a year—
Q507 Lord Lawson of Blaby:
Or wishful thinking, whatever you like?
Malcolm Wicks: No, I really do not think
so. I think what Alistair Darling was reminding the House is that
this is a new science, a new technology, new engineering and at
scale has never been tested. Of course what we are doing in the
United Kingdom is to fund this. You talked about the cost and
it is expensive and will cost hundreds of millions of pounds for
one demonstration project. We want to test CCS with a coal power
station, stripping out the CO2, transporting it and successfully
storing it almost certainly in a depleted oil or gas reservoir
under the North Sea. No-one has tested that yet, but this is not,
however, science or technology fiction because, as you know, sir,
around the world there are different practical examples of different
aspects of the CCS cycle. The Norwegians have demonstrated in
the Sleipner field that you can return CO2 successfully to a depleted
reservoir. They have been doing that now for a dozen years and
geologically it is behaving as one would expect, which I think
in plain English means it is still there. I have seen in Mississippi
myself the use of CO2 to inject into oil reservoirs for enhanced
oil recovery and so on. There are a number of practical examples
of this but, as yet, not the full demonstration. I think I would
be as confident as a mere social scientist can be that the technology
will work.
Q508 Chairman:
Thank you very much indeed, Minister, to you and your colleagues
for spending so much time with us this afternoon in answering
our questions. Although our report when it comes out will not
be a direct response to your consultative document, I hope it
will be a useful contribution in your consultative process.
Malcolm Wicks: Thank you very much indeed.
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