Examination of Witnesses (Questions 120-129)
Lord Oxburgh
21 APRIL 2008
Q120 Lord Paul: Can the existing
Renewables Obligation deliver the level expansion of renewable
electricity that the target for the UK implies?
Lord Oxburgh: The answer is no, for the
reasons I gave earlier in fact. One has to have an extension of
the system and, frankly, with an ROC system you have to aim off.
If you keep the incentives as they are at the moment, the target
of the ROC system has to be somewhat higher than that which you
actually wish to achieve, otherwise you will not get there.
Q121 Lord Paul: Is there any benefit
from using feed-in tariffs?
Lord Oxburgh: This is an entirely different
approach. This is an approach which was used in Germany and in
Spain, but I do not think it is really feasible to shift at this
stage to a feed-in tariff. We have set up our system. I am not
sure I would have set it up this way in the first instance but
it is what we have. Above all, when you are talking about people
investing very large sums in new generating capacity, you have
to maintain confidence, otherwise people find better ways of using
their money or safer ways of using their money. I think fundamentally
we have to stick by the arrangements that we have had so far.
Whether it would be possible to use feed-in tariffs at a later
stage I have not really thought through. It might be, but my gut
reaction is that it is probably better to stick with what we have,
even though it may be a less than ideal system.
Q122 Lord Walpole: What I was going
to ask you is the most reasonable way of transmitting energy.
I was brought up with a grandfather and uncle in the gas industry,
so I am rather biased, I think, but when North Sea gas was discovered,
it was definitely worthwhile piping it miles inland and I asked
my uncle why on earth they did not put up a large generator on
the coast and take it down wires and he said, "Why do you
think? Because you lose 15% down the wires, and they look dreadful
and the gas is underground." What I really want to know is
how wasteful is an electrical grid system really? I still do not
quite understand how it works.
Lord Oxburgh: No. One of the most informative
studies on this was done by the Scandinavian energy company, Vattenfall,
which works now throughout Europe. Their estimate on transmission
losses for their whole system, if I remember rightly, was something
around 7%. Those losses occur in two ways: partly in the loss
associated with heat generation down the cable, and the other
associated with the voltage transformation that you get, and probably
more is lost in transformers than in transmission. If you go to
high voltage DC transmission, you lose almost nothing over very
long lines.
Q123 Lord Walpole: Really?
Lord Oxburgh: Yes, it is very small.
When I say almost nothing, less than 1%, and that indeed in the
future—and one is not talking about 2020 now -one thinks
of concentrated solar power perhaps coming from the Sahara, that
will almost certainly come via a DC route. It would not be sensible
to do it any other way. It is simply a matter of investment analysis.
In some cases it is more sensible to move gas around but there
is another part of the economics that comes in here. Traditionally,
it has been viewed, and it probably was, most efficient to operate
big, central power stations because there are big savings of scale
there. I think those arguments may be weaker today than they were
at the time that the Central Electricity Generating Board of happy
memory was set up, but that is the thinking behind. I think you
probably could quite usefully distribute gas more widely at present
but it is not clear-cut; it is not clear that all electricity
transmission is bad. The Chinese do an awful lot of trucking of
coal, which wastes an enormous amount of energy, moving coal to
their power stations, which is almost certainly not sensible.
You really want to build your power stations on top of the coal
mines, and electrons are a lot cheaper to move than coal.
Q124 Lord Whitty: Two interrelated
questions. When you were replying to Lord Paul about the possibility
of having another system of feed-in tariffs, as he suggested,
you replied by relating this to large-scale investment and needing
certainty about the ROC system. It has been suggested that although
that may be true of large-scale investment, as far as medium and
small-scale investment in renewables is concerned, a feed-in tariff
would be rather more effective. That is my first question, and
perhaps you can try and answer my second question. Right at the
beginning you said wind is the only real contributor to the 2020
target. Given that, if the target were 2025, in your judgement,
would it be possible for significant investment in other forms
of renewable energy to make a contribution? Otherwise by choosing
the 2020 date, we may be going for a sub-optimal target.
Lord Oxburgh: I think 2025 would open
the door probably to more wave energy, maybe to tidal current
energy and maybe some solar. On the question of feed-in tariff,
perhaps I should have made clear that when I gave the answer I
did, I was really referring to large-scale generation but small-scale,
when you are talking of individual house owners or building owners
generating some electricity for their own needs and then selling
it to the grid, a feed-in tariff would be very sensible.
Q125 Lord Bradshaw: If you are going
to look for DC transmission over long distances, is it possible
to rectify that to AC at the end user point?
Lord Oxburgh: Yes. That is what is done.
It is just the long-distance transmission that is DC and locally
it is all AC.
Q126 Lord Bradshaw: Without significant
energy loss?
Lord Oxburgh: Rectification has an energy
loss associated with it. Voltage change has an energy loss associated
with it but your long-distance heating just is not so serious.
Q127 Chairman: Could I just, in the
remaining minutes, ask for your views on the planning regime,
which you touched on very briefly, the very lengthy delays. Do
you see the Government's proposal to take certain large infrastructure
projects into more central control as the way forward?
Lord Oxburgh: I see no alternative, but
I do think also one has to take the regulatory role of Ofgem,
look at that very carefully and look at the role of the grid owner
and operating companies, because at the moment these are almost
floating independent. There is obviously a degree of informal
connection between them but, frankly, without proper co-ordination
of these and, I think, a central overview of the planning questions,
we will not make it.
Q128 Chairman: Presumably, you are
not suggesting we are going to drift into Soviet state planning
systems?
Lord Oxburgh: No, not at all, but I do
think that we need to decide what our national priorities are.
I personally believe that we are in a difficult situation because
in terms of global warming, I think we are being asked to make
an investment which will be of no benefit to any of us here, I
suspect, looking around at the grey hair. What we are being faced
with is making an investment which will make the country a great
deal more liveable and the world a great deal more liveable for
our children and our grandchildren, and it is difficult for governments
to persuade people of the seriousness of this situation and to
persuade people that the kind of privation, almost, that people
must experience is comparable to that which we might experience
in war.
Q129 Chairman: Lord Oxburgh, thank
you very much indeed. I have asked the clerk to circulate to all
members of the Committee a copy of the report that you referred
to.
Lord Oxburgh: Read the conclusions and
recommendations, if nothing else. Thank you very much, Chairman.
| 
