Examination of Witnesses (Questions 149-159)
Ms Nicola Pitts and Dr Lewis Dale
28 APRIL 2008
Q149Chairman: Thank you very much indeed for
coming. May say that, if we are interrupted by a division, which
will happen, I think, on this amendment perhaps at some time,
we will simply adjourn for ten minutes, but if you would like
to remain. It is not the fire bell going off; it is the division
bell. Would you like to introduce yourselves for the record?
Ms Pitts: I am Nicola Pitts, I am Head
of UK and EU public affairs at National Grid, and this is my colleague,
Dr Lewis Dale, who leads on renewables issues in Europe for the
company but also deals with UK issues such as transition access
reform and other grid-related regulatory matters.
Chairman: Thank you very much. We are
going to go straight into questions. Lord Mitchell.
Q150 Lord Mitchell: Good afternoon.
It is a very general question but, in your judgment, how achievable
are both the EU's general 20% and the UK's national 15% renewable
energies target and, secondly, will other EU energy policies facilitate
the EU achieving these targets?
Ms Pitts: I think it is extremely tough,
but from our perspective there are three things that need to happen
and those things need to be quite quickly aligned for us to meet
the 2020 target which in energy terms is really not that far away.
The first is planning reform—that is absolutely critical—the
second is that the whole of the market mechanisms were actually
formulated with a rather different energy-mix in mind, so there
is some work that is going on at the moment with National Grid
and BERR and also with Ofgem to review those to make sure that
there are no barriers within them and, if there are, to actually
fix them, and the other thing that we are particularly concerned
about is that usually what happens is that people will design
their projects and it is only once they have got planning permission
that they will send a full signal to us to actually start building
the networks, and given that we only have 12 years, we are quickly
coming to the realisation that we will probably need some strategic
transmission investment to take place so that the networks are
there for when they are needed and not potentially arriving late,
and that is an issue that we are in active discussions with Ofgem
about as to how we achieve that.
Q151 Lord Mitchell: How do they provide
that strategic transmission?
Ms Pitts: What we are doing is looking
at what are the areas, both on and off-shore, that we would want
to provide that we would really need to start building fairly
soon, but that would mean that we would probably have to have
a rather different framework to the one that we have at the moment,
so that is an area that we are actively pursuing. In terms of
the other EU's policy instruments and in terms of the climate
change package that they issued, I think there is general concern
that there may be a conflict between a renewables target which
is reached in a fairly short period of time and, potentially,
the sort of carbon targets and really which one is more important
than the other. There is a potential, of course, that by going
for a renewables target by 2020, we are really talking about a
wind scenario by then just because of the viabilities of the technologies,
so I think that there are some issues around this will crowd out
investment in other forms of renewables, such as wave and tidal,
or will it push the emphasis on to achieving the renewables targets
and not necessarily looking for the quickest and cheapest way
to really reduce carbon. I think that there are some issues that
need to be worked through there.
Q152 Lord Mitchell: Can I press you.
I think you are implying anticipation of demand; that the National
Grid would build capacity ahead of a firm application by a generator
or a supplier and that you would need Ofgem's co-operation to
increase your prices to finance it.
Ms Pitts: There is actually an example
of when this happened. Lewis, you were actively involved in that
work.
Dr Dale: Yes, in mid-Wales. Our regulatory
regime is set up that we get paid when we respond. The risk of
building a network in advance of firm need is that you could end
up with a network that is not needed and, then, who bears the
cost of that? Is it the transmission company or consumers? One
of the things we have been doing, though, is trying to get renewables
projects together and progress the reinforcements needed to get
them on. For example, in the centre of Wales there are a number
of small projects. Altogether they do need a transmission link
in the centre of Wales to the existing network and we have been
trying to get them together give us signal and to get some agreement
on a taking forward the network.
Q153 Lord Mitchell: That is really
co-ordination and co-operation.
Dr Dale: It is co-ordination, but once
you have got a group where there is some evidence that at least
part of them will go forward, then it is much easier to make the
case that some network reinforcement ought to be initiated at
this time.
Q154 Lord Mitchell: You referred
to planning. Do you have any suggestions to make as to how the
planning system could be changed?
Ms Pitts: The big issue for us is that
under the current system in England and Wales the actual overhead
line is consented by BERR but the individual substations are consented
by local planning authorities. So it is like being given permission
to build a motorway but you do not have any on and off ramps,
if I can put it in that way. So we are very supportive of the
Government's proposals in the Planning Bill for an Infrastructure
Planning Commission (IPC), for the national policy statements
and also, critically, this sort of single consenting authority.
The other key issue from the new planning proposals is certainty
of timetable. I think if you ask any developers, they would prefer
a certain yes or no within a particular timescale rather than
an uncertain timescale as to when they might be able to get any
sort of decision.
Q155 Lord Mitchell: The second question
is: how coherent are these proposals in the context of the EU's
energy policies in general and the Third Energy Package in particular?
Dr Dale: National Grid has been working
with our European TSO colleagues. In fact we joined something
called the European Wind Integration Study, which is funded by
the EU, in part. In general, we think the policies are coherent.
A single market should deliver the framework that is necessary
to encourage renewables, to integrate them efficiently and deal
with variability and to share the reserves and back-up that will
be necessary for variable renewables.
Q156 Lord Rowe-Beddoe: Grid access
really. Can we move to more detail? To what extent do you think
that grid access remains a significant barrier to the achievability
of our renewable targets?
Dr Dale: Just at the moment we have an
unprecedented demand for grid access. We have something like 47,000
megawatts of generation seeking access, 170 projects and, I think,
16,000 megawatts of that is wind and renewables, but all of these
projects have contracted with us for access in the future. I think
majority of them have got access dates that they are satisfied
with but there is a minority that has not. You have heard about
the GB queue, the people who have got planning permission but
have got later access in the queue; there are some others who
have got earlier positions in the queue who do not yet have planning
permission; so we are working to address this. I think we are
working in four areas. One is on the queue itself, to make sure
that people who have been granted access rights earlier do not
hoard those rights if they are not able to use them and we could
move people who are more ready use access earlier, to satisfy
the issue that I mentioned earlier. Another issue is our regime,
as Nicola mentioned, which has been set up for connecting gas
and conventional stations. Wind is more variable. It is likely
that they will want to share network capacity more with conventional
generation, and we need to adapt the access regime to allow that
sharing of access rights. The third area, I think, is off-shore
transmission. We need to sort out the processes and arrangements
for people to connect off-shore and get network infrastructure
built—there is still quite a lot of detail required on that—and
then the fourth area is the question of trying to get network
investment underway before projects are in their final position
of having firm consents and all the rest of it.
Q157 Chairman: Is the problem there
finance or just risk on National Grid that additional finances
will not be available?
Dr Dale: At the moment we are in a responsive
mode, and the issue is, if we invest without that signal from
developers, then it is very difficult for us to show why that
is an efficient investment. While there is some uncertainty about
whether projects are going to go ahead, it is a risk of stranded
investment primarily.
Ms Pitts: But there is an issue. If you
look at all of those connection applications that we have signed,
all 47 gigawatts of it, only 23% across the GB have actually got
planning permission. Obviously, that is quite a big block for
any development at the moment, which goes back to my point about
planning being a very key issue here.
Q158 Chairman: If all the planning
permissions were granted and all the finance was available, what
percentage of our target for 2020 would we meet?
Dr Dale: At the moment we have 16,000
megawatts of wind contracted. All of that has been given dates
before 2020, but to meet 20% electricity renewables by 2020 will
probably need something more like 25,000 megawatts of projects
signed up. To meet 20% renewables of all energy, we probably need
more like 40 gigawatts, 40,000 megawatts, of wind and other renewables,
and we just do not have that number of projects signed up with
us yet.
Q159 Lord Rowe-Beddoe: On this question
of access, how would you rate current situation in the UK compared
to the EU in general?
Dr Dale: Across the EU there is all sorts
of approaches, but the one that we see in Germany, Spain, Denmark,
where there are very large wind capacities already connected,
is that there they have effectively passed laws which require
the utility to buy renewable electricity at the terminals of the
wind farm at a fixed price at a fixed time, so all of the uncertainty
falls to the utility. In these cases it is often not clear whether
the utility is the network or the energy supply company. Probably
it is both. So that gives a very certain environment for renewables
to develop, and it has been very successful. In the UK, the Government
support is effectively for renewables delivered to market and
it is for individual projects to acquire connections and access
rights and get their electricity to market, and there is a key
difference.
| 
