Examination of Witnesses (Questions 287-299)
Malcolm Wicks, Mr Simon Virley and Mr Tim Abraham
2 JUNE 2008
Q287 Chairman:
Good afternoon, Minister. We are now in public session. May I
welcome you and thank you very much for making time available.
I understand that you might like to make an opening statement
and you have kindly agreed—so that my colleagues can keep
an eye on the clock—to finish no later than 5.15.
Malcolm Wicks: Lord Freeman,
it is good to be here. I am joined by two colleagues, Simon Virley
who is the Head of our Renewable Energy and Innovation Unit and
Tim Abraham who is the Director of European Union Energy. I am
grateful to the Committee for this opportunity to set out the
Government's views on the Commission's very important proposal
for a directive on the promotion of the use of energy from renewable
sources. We face two major energy policy challenges, one is tackling
climate change by reducing greenhouse gas emissions from energy
related sources; the second is ensuring our country's energy security.
Responding to these challenges the heads of government at the
2007 Spring European Council agreed ambitious targets to deliver
a 20% reduction in EU greenhouse gas emissions by 2020 and also
to ensure that 20% of total EU energy comes from renewable energy
sources again by the same date of 2020. The European Council also
endorsed measures to support carbon capture and storage and to
improve the functioning of the European Union Emissions Trading
Scheme which is very much the centre piece of the EU's carbon
reduction policy. The resulting climate and energy legislative
package published in January represents, I believe, a landmark
policy framework that underpins our global objectives of securing
a comprehensive international agreement ultimately to tackle climate
change. In line with the overall EU renewable energy target the
Commission has proposed individual binding national targets for
renewable energy, including a 10% minimum binding target for the
use of renewables in transport to be achieved by each Member State.
An overall 15% renewable target has been proposed for the United
Kingdom and to put this in context this compares with a current
UK figure of less than 2%. Renewable energy is already an integral
part of the UK's energy strategy however and we are taking significant
steps to drive up the level of renewable energy domestically through
a comprehensive raft of measures. The Government is fully committed
to meeting its share of the overall European target but that is
not to underestimate the ambitious and challenging nature of it.
Achieving it will require a step change increase in the proportion
of our energy coming from renewable energy resources over the
next 12 years, almost a ten-fold increase in fact. Over the summer
we will consult on the most cost effective way to meet the UK's
share and will introduce a new renewable energy strategy next
spring. We must also not lose sight that the 2020 renewable energy
target is not an end in itself; it must be considered as an important
contributor to the EU 2020 greenhouse gas targets and as a stepping
stone to meeting 2050 carbon and energy goals. Turning to the
proposal itself, because the cost effective renewable potential
for each Member State was not taken into account in the setting
of the targets and because of the significant economic implications
of the target, it is imperative that Member States are able to
deliver their targets in a way which minimises costs, and obviously
the issues of energy costs are uppermost in our minds at the present
time. It is also important that the EU can demonstrate to the
wider world that it can achieve ambitious targets in a way which
reinforce rather than hinder the competitiveness of our industry.
Cost efficiency is therefore essential to the credibility of the
targets. In practice this means that Member States must have sufficient
flexibility in how they meet their targets suited to national
circumstances. The Government therefore supports the principle
of renewable trading between Member States, supports derogations
for exceptionally large projects that are not complete by 2020,
possibly the Severn Barrage for example. We welcome the indicative
nature of the interim targets. The Government opposes, on the
other hand, a number of the mandatory administrative and regulatory
requirements proposed in the directive, including those in relation
to priority access to the grid for renewable generators and use
of renewable energy in buildings. The binding nature of the 2020
target provides, we believe, every incentive for Member States
to remove unnecessary barriers to deployment. Additional mandatory
requirements on Member States are therefore, we judge, unnecessary
and do not take account of specific Member States' circumstances.
Finally, may I say that the draft directive is currently being
considered by the Energy Council and European Parliament. The
March European Council agreed that the package should be adopted
before the European Parliament is dissolved for the 2009 elections
in order to demonstrate EU commitment in the next round of international
negotiations on a new global climate change deal.
Q288 Chairman: Thank you, that is
extremely helpful. It might be useful to you, Minister, to know
that we have had about 12 sessions so far of this Committee taking
evidence and making visits. We are hoping to produce a report
for publication in October as a contribution to informing their
Lordship's House. It might be helpful to the Committee if you
would comment as to whether you think that target date of perhaps
the end of October is going to ensure that we make a contribution—hopefully
supportive in many ways—for the work that is being done
by Her Majesty's Government and also by the Council and by the
European Parliament.
Malcolm Wicks: I think that would be
very helpful and very timely. We are consulting, as I indicated,
on our renewable energy strategy; in the coming weeks we will
be publishing a document. It is a consultation document; we are
inviting contributions. The aim, therefore, is to finalise our
strategy by the spring of next year. I think your contribution
will be timely.
Chairman: Thank you very much. If we
may we will start the questions. I am going to ask Lord James
to commence the questions.
Q289 Lord James of Blackheath: Minister,
I am afraid this is going to be rather like arriving in the middle
at Lords to be told by the umpire that you are getting a ration
of two or three bumpers an over instead of the one you were expecting
because the question is going to come with a few little extra
bits I am afraid.
Malcolm Wicks: I have not practised my
hook for a long time!
Q290 Lord James of Blackheath: I
am sure we shall find it very effective! The first part of the
question is to ask whether there is the possibility that we are
going to lead to an over-dependence on renewable technologies
as a result of choosing a commitment of 20%. Depending on perhaps
wind to the detriment of our diversity and security of supply.
I want to add to that that if we are looking at an achievable
target by 2020—and at the moment we are advised by other
experts who have come to us that wind is effectively the only
thing that can achieve it in time and we know that we are now
looking at a commitment possibly to nuclear as well but which
may not be possible to come on stream in that time—are we
going to find a situation in which we have presented ourselves
with an unachievable and impossible target deadline because we
have not put enough investment into the necessary infrastructure
required to get to 20% of wind by that time? As a Committee we
have been to see a wind farm and I think we were all unanimously
very unimpressed at the lack of equipment required to extend the
wind farm concept sufficiently through the coasts of Britain in
that time because there were only two ships with the necessary
craneage in existence at this present moment which could do the
task. Should the Government not therefore be taking a major initiative
to invest in providing those ships to drive it and therefore create
the infrastructure by which to achieve the target if we are going
to do this piece?
Malcolm Wicks: Let me comment on the
broad issue and if one of my colleagues has a contribution to
make on the supply chain ships et cetera perhaps one of them might
care to do that. The first thing to say, as I acknowledge in the
statement and as we all acknowledge, is that the renewable targets
is an extremely demanding one. I always emphasise to audiences—not
to this audience because you know it as well as I do—that
this is a target about all energy and not as hitherto electricity.
I say hitherto because the UK had its own targets for renewables
but we tended to couch them as a percentage of electricity. This
is all energy. The second thing I would say is that, as you know,
our contribution as it were to the 20% target is likely to be
15%; it is still being discussed with the Commission because it
varies from Member State to Member State, rightly so because some
traditionally are rich in hydro resources, for example; we all
start from different starting points. So it is hugely challenging.
As I said, we are somewhat below 2% of all energy coming from
renewables at the present time, so 15% in a short space of time
is very demanding. I agree with you on that, but what I would
say is that it is possible; indeed, we are determined to hit the
target. Our renewable energy strategy which we will be consulting
on quite soon shows us how we mean to get there. We need to get
there for the two reasons I have stated, one is because those
of us—the majority I think now—who are convinced about
the science of climate change (there are one or two dissenters
I think in this House, but most of us are convinced by the science
of climate change) realise that we need to do radical things to
get there. As you know, this commitment of the UK Government needs
to be seen alongside other commitments, not least our relatively
new commitment to civil nuclear energy. Going forward one can
see a circumstance not by 2020 but way after 2020 where sizeable
proportions of our electricity could come from nuclear (which
is non-carbon) and sizeable proportions of electricity (some might
say 35% or 40%) would be coming from renewables.
Q291 Lord James of Blackheath: Minister,
I have heard you say two things there which I would like to take
up particularly, the first is that you are recognising without
actually saying it, I think, that we are talking here about two
separate and parallel agendas, one is renewable energy which is
carbon efficient and the other one is a renewable source of energy
for this country which is affordable within the world economy.
We are moving at such a rate of cost per barrel at the present
moment that we have to find ways of cutting that cost which is
certainly going to happen if we can get the renewable energy within
our own indigenous resources. However, does that not imply that
a different approach should be made to the statements which were
being made by the Government last week to the effect that there
is still 26 billion barrels' worth of oil in the North Sea following
the 37 billion that have already been extracted and that has been
turned by analysts—and by government analysts as well I
believe—into an expectation of an increase of 4% in output
for the foreseeable future. Would it not be better to be aiming
at the present cost per barrel, and the advantages of extraction
costs that that would imply, to move to get that up to somewhere
around four or five times that figure in order to use that resource
for a period of time to extend the period in which to achieve
the renewable energy with more time on side and more opportunity
for effective and manageable investment to get to the higher renewable
energy afterwards living off the incremental output of the 26
billion barrels in the short term?
Malcolm Wicks: There must be a short
answer to your question but I cannot think what it is because
you have raised the whole field really of energy policy. My own
judgment about these things is that faced with the challenges
we have—and affordability of course is a crucial challenge
now—we need to be moving forward on a range of fronts, including
energy efficiency, including of course wherever possible trying
to increase the world's supply of oil and gas, although that is
not easy. Yes, we should look at our own backyard, namely the
UKCS, the North Sea, to see if we can increase production. I am
happy to give more details of that should you wish. We have a
very dynamic partnership with the oil and gas industry in the
North Sea known as the Pilot Partnership; we have an approach
there to licensing which could be summarised as "use it or
lose it", if a big player does not use a licence to extract
oil we will take it away from them and give it to a hungrier company
and so on. Last week's announcement was to say that we are very
ambitious about the North Sea but personally I do not see that
as any kind of alternative—short or long term—to moving
forward on a number of fronts, including nuclear and including
the subject of this discussion, renewables.
Q292 Lord James of Blackheath: In
agreeing with you on that, Minister, I go back to my point which
I think I heard you mostly agree with, that time and result are
not necessary in line in expectation here. It may well be that
the longer we can survive within the costs of what we have to
source for the energy needs of this nation and the costs of developing
the alternatives may be better used if they have longer in which
to be developed with confident application of the skills necessary
to extract them and we would therefore be better used to accelerate
certain extractions which are within our control like the North
Sea. I think you then said it encapsulates the issues which face
government policy. In agreeing with you on that I do not think
I have heard anything of government policy which says they are
doing anything to specifically address those points.
Malcolm Wicks: The reality about the
North Sea or the wider UKCS is that it is in decline in terms
of a source of oil and gas. I think the last figures I have seen
show it is in decline by 8% per annum, something of that order.
What we were saying last week is that we have to do everything
possible to slow that decline or to improve production. As you
know the easily hanging fruits have been picked from the North
Sea; the terrain now gets more difficult, for example we are working
with four oil companies to see what the potential—which
could be significant—might be west of Shetland, for example.
We are ambitious about the North Sea; we are at one with you there.
However, if I may say so, your remarks and your questions very
much address issues about energy supply; I do not think, with
respect, they address issues about climate change and global warming.
Of course one of the major reasons—maybe the major
reason—why we are committed to renewables is because it
will help us in our very demanding targets to reduce carbon emissions.
I do not judge myself that time is on our side. Indeed, as your
Lordships will know, the Climate Change Bill is before the Parliament
and although we have a very demanding target in the middle of
the century—60% reduction of carbon emissions against 1990
levels—we are establishing through that Bill an independent
committee to give us five yearly targets on carbon. Renewables
is a big player there.
Chairman: I think in the interests of
time we must move on now. Lord Mitchell?
Q293 Lord Mitchell: Minister, you
have touched on this point but it is a question which puzzles
us from time to time and it is basically how the formula was agreed
on by the Member States to allocate the targets? What consideration
was given to factors other than GDP?
Malcolm Wicks: The burden sharing methodology
proposed by the Commission is based on a combination of a flat
rate increase for all Member States. I guess the Commission are
saying that all Member States—even those with a relatively
healthy proportion of energy coming from renewables at the moment
maybe through hydro traditionally—have to have a flat rate
increase, so all Member States are in the same boat in that sense,
but then with the remainder weighted according to a Member State's
GDP. The methodology therefore did not take account of generating
capacity factors but did marginally take account of previous deployment
success. A cap was introduced to ensure that a target is not more
than 50% of a Member State's energy mix. I do not know whether
one of my colleagues wants to say more about that, but they are
the broad outlines of the methodology.
Mr Abraham: As you say there are essentially
three potential elements here and the Commission decided against
taking specific account of the capacity of individual countries
which makes it perhaps, as we come to later on, more important
that there is some sort of mechanism whereby across the EU as
a whole the most cost effective increases in renewable use are
facilitated through trading or something similar. The countries
that have very high levels of renewable use already were given
a cap, in particular I think it was Sweden, otherwise their figures
would have been way over 50% which they persuaded the Commission
was unacceptable.
Chairman: Lord Dykes, I think your question
follows directly on from that.
Q294 Lord Dykes: How do you envisage
the Guarantees of Origin scheme will work in practice along side
the Renewables Obligation? To what extent will the UK need to
rely on the Guarantees of Origin scheme to achieve its target?
Malcolm Wicks: I will ask my colleague
Tim Abraham to come in on this as well, but can I say that we
do feel that while the great bulk of Britain's extra renewables
will come here in Britain—I am convinced of that -it is
important to develop the notion of trading. Indeed, I have before
me an interesting estimate that the cost of achieving the final
one percentage point of the UK's target could represent approximately
25% of the total UK cost. As we indicated earlier, at a time when
I guess the big agenda item in energy is affordability and the
sheer cost of energy, I think therefore we feel that trading should
have its role to play. May I ask Mr Abraham to add more?
Mr Abraham: I think all I would add is,
as the Minister said, that this is very important in terms of
cost reduction, particularly perhaps for the United Kingdom but
for the EU as a whole. The current proposals in the directive
are actually quite complicated and there is quite a lot of discussion
within the Council at the moment over trying to make sure that
we actually have a system that works, because there are some legitimate
concerns from other Member States that the proposed system might
undermine individual Member States' own domestic support schemes
for renewable energy and might even also break some single market
legislation. The United Kingdom is in the forefront of this trying
to develop a perhaps rather simpler version but to ensure that
the main thing is that it is simple and it will be used by Member
States so that, for instance, if it is cheaper to purchase some
extra renewable energy in Romania and the Romanian government
is happy then we can have a bilateral arrangement perhaps between
the United Kingdom and Romania to reach between us the total figure
but in a more cost effective way for the EU as a whole.
Q295 Chairman: Has any work been
done on this possible scheme?
Mr Abraham: Yes indeed. We are beginning
to develop something that will work. We hope we will be sharing
this with our Member State colleagues very soon.
Q296 Lord Paul: There have been calls
for the Renewables Obligation to be replaced by a feed-in tariff.
Is there a role for feed-in tariffs? If so, what is that role?
Malcolm Wicks: Feed-in tariffs certainly
have their advocates and I would imagine this will be a discussion
when the Energy Bill comes to the Grand Committee (which is very
soon, I think) and then to report stage in the House of Lords.
These are mechanisms which we need to compare and contrast. We
have gone down the road of the Renewables Obligation, as you have
indicated; others, particularly the Germans, have had a feed-in
tariff system. I do not want to be dogmatic about one or the other
and in our new strategy which we will be consulting on we look
at both. I think one practical point I would make is that we have
had the Renewables Obligation now for a number of years; we believe
that from the low base—which was Britain's experience—we
are now moving in the right direction in terms of renewables deployment.
Indeed, we are reforming the Renewables Obligation in the Energy
Bill which is before Parliament to make it more sensitive to some
of the newer technologies. At the moment you could say it is a
blunt instrument; it has largely benefited onshore wind and we
want to do more in the future for offshore wind (which is obviously
more expensive) and do even more for some of the new marine technologies
such as wave and tidal. We are reforming the RO and we do believe
that in terms of investor confidence and general confidence in
the renewables industry to change now from the RO to a new mechanism
could be quite difficult. I am aware of the arguments. However,
could I just add that when it comes to micro-generation it is
the desire of a growing number of householders to install some
technology in their own homes or maybe on community buildings
or schools, I think there is an argument in favour of feed-in
tariffs, there is an argument in favour of other mechanisms to
try to increase support. We are weighing those as part of our
renewable energy strategy and they will be part of the discussion
which we hope our consultation document will prompt.
Q297 Lord Bradshaw: I want to talk
about the Planning Bill. This creates new procedures for onshore
projects over 50MW. This almost goes back to the last question
about feed-in tariffs. There will be many projects which do not
reach 50MW and is it sensible to exclude them or will the Planning
Bill, as well as making planning permission easier, make it easier
for people who invest in projects to sell their electricity?
Malcolm Wicks: The Planning Bill, as
you know, is trying to get the balance right between letting local
people make their judgments heard about local matters that affect
their community while trying to ensure that in the field of energy—although
not just in the field of energy—we can move towards decisions
rather more quickly than has happened in the past. Certainly when
it comes to renewable energy we have all heard of stories of projects
that are developed in a board room and do not come to fruition
for maybe eight or ten years. We will be publishing a national
policy statement about energy as a whole with specifics about
renewables with implications for the Town and Country Planning
system. Would it be possible for me to ask my colleague Simon
Virley to say more?
Mr Virley: I think the national policy
statements that we will be consulting on this autumn will be important
in setting the context for those smaller schemes that fall below
the 50MW threshold. It is the NPS that will provide the context
for local planning decisions. In addition the Department for Communities
and Local Government has initiated what they describe as an end
to end review of the planning system at a local level to see what
bureaucracy can be removed from it. There are a number of measures
and we will be consulting on further measures in the renewable
energy strategy this summer to try and speed up the planning system
at a local level whilst respecting local democracy.
Q298 Lord Bradshaw: That is a very
difficult equation to pull together because there is a resistance.
To go back to the feed-in tariff, that could produce a lot of
smaller schemes which will be less objectionable and therefore
give rise to less objection. Is that a fair point or not?
Malcolm Wicks: There can be quite a lot
of controversy actually when a humble citizen tries to put a micro
wind turbine on their roof. I think broadly speaking you must
be right, that the smaller the less controversial, but I do not
think it always applies. We obviously hope that whilst respecting
local opinion and reserving the right—perfectly properly—from
time to time to say no to projects (small projects in the case
you are talking about) that we will be able to facilitate the
development of more renewables, including onshore renewables which
is what your question is about.
Q299 Lord Bradshaw: I just think
it is going to be a very, very difficult problem. I think the
German experience is that smaller things just get through more
easily.
Malcolm Wicks: Yes, which is why we are
ambitious about micro generation. As I say, it will be part of
our renewable energy strategy and I am bound to say that it links
into another very relevant theme here which is how we facilitate
more heat, including renewable heat—ground source heat pumps
for example seem to have much going for them and there is a wider
question about not wasting heat in power stations, combined heat
and power and so on—but certainly as part of our micro generation
strategy we are conscious of issues about heat more and more and
not just electricity. Indeed, it may be—we are not sure
yet, we are doing arithmetic on this—that in terms of cost
effectiveness some renewable heat developments could be particularly
welcome.
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