Examination of Witnesses (Questions 340-357)
Ms Magda Stoczkiewicz, Ms Esther Bollendorff and
Ms Frauke Thies
5 JUNE 2008
Q340 Lord Bradshaw: Yes. How can
we make the grid efficient within Europe and within the UK so
that it encourages renewable energy efficient connection to the
grid? That is what I want to know because I know very well in
the UK there are considerable obstacles to connecting the grid
up to the sources of energy.
Ms Thies: There are a couple of issues
there. The first and biggest one, which does not apply so much
to the UK but to the rest of Europe, is that we do not have a
free market regarding the grid. This is the first big step that
Europe has to take to say that the grid is fully unbundled and
separated from production and supply activities because the situation
we have in many European countries now where conventional producers
of electricity are sitting on the grid and controlling who is
connected and who is not will not lead to a proper grid system
for renewable energy. We need proper unbundling there. This is
the first and most important step. On top of that, we do believe
that we need specific rules that encourage the connection of renewable
energy right now. This is because the grid as it is now has developed
mostly under monopolistic structures to suit the conventional
practices, so what we have is a centralised grid system that is
very inflexible, that is suited to large coal-fired power stations
which produce at a very constant rate and are very centralised,
have one point of production and is then spread out. The renewable
energy system would look completely different. We would have a
decentralised system with many points of production, the power
would flow much more flexibly and the renewable energy output
would be variable so we would have a much more flexible management
system as well. For that to happen, some corrective action is
necessary now to outweigh the imbalances of the past. I would
not say they are necessarily imbalances but we have different
starting points. We have a system that has developed to suit conventional
centralised production and now we have new renewables coming into
a system that is already there and it is not suited to their needs.
We have to help them as long as they are a maturing technology
and we have to integrate rules, such as priority access for renewable
energy to the grid system.
Q341 Lord Bradshaw: So your advice
would be that the regulatory authority in Britain actually looks
at the question of the grid as well as the question of generation
of power?
Ms Thies: Indeed, a strategic grid development
is needed.
Q342 Lord Bradshaw: So you would
bring them altogether and that creates the best climate for investment
in renewables.
Ms Thies: Yes, an integrated and strategic
approach on grid development would.
Chairman: Lord Mitchell's questions follow
on naturally from Lord Bradshaw.
Q343 Lord Mitchell: Good morning.
I am quite interested in comparing different countries as well.
Part of the reason for coming here is not to take a UK perspective
on it but also a European perspective. When you look at what is
happening amongst the different countries, do you see great differences,
particularly with respect to planning and regulation? You have
already talked about Spain and Germany, but I would like to get
a feeling as to who are the good guys and who are the bad guys
and where does the UK sit in all of that. That would help us a
lot.
Ms Thies: In terms of planning, we have
very positive experiences, especially in the Scandinavian countries.
I said earlier that Denmark has changed its support system for
renewable energy, which is why not much is happening. Denmark
has very favourable conditions for authorisation procedures, for
example, for renewable energy plans and also for the grid connection.
The Scandinavian countries are places to look at. We have some
newcomers that have followed in the footsteps of Spain and Germany
and introduced similar systems, especially Portugal where we have
seen tremendous growth over the last few years which is amazing
for such a small country. In Ireland quite a lot has happened,
although we still have some grid problems there. These are the
main countries to look at at the moment. The Czech Republic is
trying hard as well.
Q344 Lord Mitchell: What is the key?
What are they doing that makes it happen?
Ms Thies: One key thing is the administrative
procedures are very simple in these countries. Many of these countries
have installed one-stop shop procedures which mean the renewable
energy investor has to apply to one authority and this authority
follows the process and co-ordinates with the other authorities
that have to give their go-ahead. There are time limits on the
authorisation procedures and the procedures are different for
different technologies, you do not have to go through the whole
process if you just want to put some photovoltaic cells on your
rooftop. This is one of the conditions. Another one is that the
technological knowledge is there, education is there for renewable
energy installers. This is a criterion for smaller technologies
than just for heating systems, but a very important one. The other
one is the grid access. There, the particularly useful rule at
the moment seems to be to say there is guaranteed grid access
for renewable energy development. Some countries are saying that
grid operators are obliged to take the renewable energy. This
has some economic logic behind it, except for biomass maybe. It
is also market logic, because when renewables produce they produce
almost zero marginal cost because when the wind blows it costs
almost nothing to feed the electricity into the grid. It is very
logical that this electricity would be taken up anyway. Therefore
the grid operators have to take this electricity because there
are apparently market failures which work against this logic and
normally the wind would be taken up anyway, so countries have
made it law and said, "You have to take up this electricity".
Q345 Lord Powell of Bayswater: Can
I just interject on this subject. You talk a lot about the support
schemes and the better ones which exist in mainland Europe, or
some countries, than in the UK, but is it not the case that the
German Government now is moving away from feed-in tariffs on the
grounds they are simply too expensive?
Ms Thies: This is not the case. The German
Government seems very proud of its feed-in tariff. I do not know
at what stage these discussions are at but, as far as I understand,
outside the German Government and in the scientific community
the idea is to adapt the feed-in system in a way that comes closer
to the market. That could be in the direction of the Spanish system,
for example. In Germany there is a full price for each kilowatt
hour of renewable energy guaranteed by law and every kilowatt
hour is at this price but in Spain it is different, they define
a premium where the electricity goes to the market as normal,
is sold at the normal market price but gets a premium on top of
that that is defined by Spanish law, and this premium is different
for different technologies. There could be ideas that in the longer
term it would make sense to introduce such a premium system in
countries that at the moment have stable feed-in systems, especially
when the technologies become more mature, to give them an incentive
to integrate better into the market and to learn how to deal with
the market price fluctuations, and so on. This could be an idea.
There is no sign at all that the German Government is moving away
from the feed-in system principle because it is hugely successful
and also there is a lot of support for the system amongst the
German public.
Ms Stoczkiewicz: If I could add something
to that. What is clear from all of these examples is there is
a need for the government to set the proper environment for renewables
to take off and until now we have not really seen that happening.
If we talk about renewables, that has not been happening across
Europe to the extent that is necessary. As Frauke said, it is
very important to look at the picture as a picture that is dominated
by the previous way of thinking and the previous way of feeding
in fossil fuels rather than taking on the renewables, and that
has to change. This is a mindset, but it is also a structural
change that needs to happen in every country. In some countries
it has happened and there are some results, but without that the
reaching of the target will be very difficult, if not impossible.
Q346 Chairman: Could I ask your advice
as to which two or three countries you believe that we in the
United Kingdom should be looking at for experience on renewable
energies and specific questions that we might ask in each country.
I am not suggesting we are going to do it. Shall we start with
your good self because you have got experience in Friends of the
Earth right across Europe, as does Greenpeace of course.
Ms Stoczkiewicz: Yes, although we have
not been working much on renewables. The examples are coming through
what Frauke was saying. I believe the UK is a country where you
can put quite demanding provisions and people will follow. From
that perspective, I would look to Germany and see how it works
in Germany. I would also look at Nordic countries, as has been
mentioned.
Q347 Chairman: Any in particular
of the Nordic countries? Would Denmark be a good exemplar?
Ms Thies: Denmark would be a good example
regarding administrative procedures and grid access, but if you
want to look at the overall picture the two countries are the
examples that have been mentioned before, the Spanish and German
cases. These are particularly interesting because they have slightly
different support systems, as I outlined before, the German one
with the fixed feed-in tariff, which has some clear advantages,
and the Spanish system with the premium which also has its own
clear advantages. Comparing these two regarding the support system,
but also regarding administrative procedures and grid access,
are the ones that are very interesting examples.
Q348 Lord James of Blackheath: Wind
and solar are relatively new and still emerging technologies and
I find it very interesting that you reiterate the performance
of Germany and Spain particularly. Germany has a longstanding
track record of always being technologically advanced in the perfection
of every new development coming in. Is it not possible that the
timetables that are now set for renewables are going to run in
conflict with the speed and perfection of the technologies and
we will not get the full benefit of them because we are going
to run too fast with an imperfect technology rather than wait
for the full development of perfection that will come from experience,
and particularly where we can learn from, say, Germany and Spain
and their experience and carry this forward for the future? In
other words, are not the timetables potentially self-defeating?
Ms Bollendorff: We do have figures from
the renewables industry from EREC, which has been working with
Greenpeace, on what is available from different types of renewable
sources. For electricity, for instance, renewables can provide
40% of the electricity demand by 2020 and in heat renewables can
provide 25% of demand. The figures are there that industry is
ready and the target, as it is set now of 20% by 2020, can be
met.
Q349 Lord James of Blackheath: Does
the EU operate any central technological monitoring or research
unit of its own so that it can decide what is best and sponsor
that or redeploy that around the rest of the community?
Ms Thies: There are several projects
and there have been attempts to monitor that. To an extent that
is always limited by the industry trying to keep their technology
for themselves, obviously, and not sharing their insights. On
the one hand there is the Intelligent Energy Europe programme,
which is running different projects. Then we have the energy technology
platforms which are different platforms the European Commission
has initiated. They have been designed especially for renewable
energy technologies and some others, for example the solar, photovoltaic
technology platform, the wind energy technology platform. These
are platforms where the scientific community and industry are
coming together trying to identify challenges and existing barriers
and bottlenecks and trying to advise the European institutions
on what needs to happen to improve the development of the environment
for these technologies.
Q350 Lord James of Blackheath: I
think you are, therefore, rather agreeing with the thrust of my
question without actually giving an answer to it, because surely
the literal interpretation of what you have said is, yes, it is
going to get a lot more competent and efficient and we should
wait.
Ms Thies: No.
Q351 Lord James of Blackheath: It
certainly sounds like it.
Ms Thies: What the technology platforms
are doing is mainly looking at not only the technological barriers
but also other barriers. I am a member of the group on policy
and environment of the wind energy technology platform where we
identify planning barriers and things like that. We can only do
that because it is in the process of development and we have experience.
The best way to develop an industry and the technology is to test
it and work on it. This is the only way it is happening. This
is how we have seen the best and highest growth rates of renewable
energy technologies and technological development in those countries
which have applied these technologies.
Q352 Lord James of Blackheath: I
think you are asking a lot of questions to make a very big investment
on imperfect technology which is going to get a lot better before
they have the advantage of the cost-effectiveness of everything
that is going to come through.
Ms Thies: I disagree for a couple of
reasons. The best technological development you get from the developers
themselves, you do not get it if you put up a research and development
programme and commit certain researchers to do something. The
best outcomes and developments we are seeing in the industry are
those that the companies themselves have done. They only make
those if they have support and invest and see a market.
Q353 Lord James of Blackheath: There
are, at the moment, three gearboxes available for wind farms on
a commercial basis. One of them is massively more technically
advanced than the other two, but because it is there is no availability
because of the supply chain block. All wind farms in ten years'
time would have been better to have started with that most perfect
of all the gearboxes, but they cannot.
Ms Thies: Indeed, you can make the same
argument for coal-fired power stations or gas-fired power stations,
which started developing centuries ago which have improved constantly
over time, but when the development started you did not say, "Let's
wait first and look into technological development and start investing".
Q354 Chairman: Do not pursue the
point any further, I think you have answered Lord James' question
very well. I have the last question and that is the consequences
for the individual, for the family who has to pay, will have to
pay more for the delivery of energy because the introduction of
renewable energy is going to cost a lot of money. We have brought
with us the statement that you are probably aware of made yesterday
by the British Government. That is a press release coming from
the Crown Estate on offshore wind farms, a very substantial programme,
and that is going to cost a lot of money, as Lord James has indicated,
in terms of investment. We recently took evidence in Bristol and
went to the houses of two families to look at their solar panels
and they said, "We wouldn't do it again if it was purely
a rational economic decision. We did it because we belong to Greenpeace",
probably Friends of the Earth as well, "and we believe in
the project". The panels were expensive and government grants
have come down. Could we start with Friends of the Earth. Do you
think the individual is going to pay for this renewable energy
revolution?
Ms Stoczkiewicz: I would rephrase the
question a little bit. If you look at it from a purely financial
point of view and do not take into account other benefits, and
the fact we do believe countries have to do this shift in their
thinking, you will impose something people will not necessarily
accept immediately. What does not happen is the calculation of
the costs which we have to pay as individuals for the fact we
are using obsolete technologies and we are using sources of energy
that are very destructive both to the environment and the climate,
but also people's health. These costs are not calculated and as
long as they are not calculated they will not appear in the payment
and as long as they do not appear in the payment the renewables
might lose on that. The other thing that is not taken into account
is the initial investment. The operation later on is much cheaper
than the initial investment. We are trying to say countries need
to make this leapfrog, this change, so they need to help with
the initial investment. I mentioned the idea of using the European
Investment Bank. The UK uses the EIB for a lot, the UK is getting
about €4 billion a year in loans, I believe. Why not use
some of this to make the initial investment that is necessary.
If you say this is all on the consumer you are going to be defeated
because you do not do that with other sources of energy, you do
not put all of the costs on the consumer that come with it. If
we are honest about the costs, including the external costs, the
discussion would be different.
Q355 Lord Powell of Bayswater: I
just wanted to add a further question. You say we do not take
account of the full costs of existing energy systems, and you
are right, but are we actually being accurate about the cost of
renewable energies? We are always quoted what is called the direct
cost of renewable energy and it is always presented as a rather
modest figure, it is 5 billion either pounds or euros, not that
there is much difference these days, as the annual cost. But that
does not include the infrastructure investment cost or the resource
cost of having to use more expensive energy in the economy. Both
ways you do not really get a very accurate cost of what renewables
will be.
Ms Stoczkiewicz: I disagree that this
is more expensive energy. I go back to my other point, that you
do not calculate the amount of money which is necessary to ensure
oil fields in Iraq are not getting into difficulty or that you
have to fit in to be able to ensure the supply of fossil fuels
and you do not calculate the costs which are related to the environmental
destruction.
Q356 Lord Powell of Bayswater: My
point is that applies both ways, it also applies to renewable
energies where we do not calculate the resource costs.
Ms Stoczkiewicz: Renewables are definitely
much lower and you do not have the same costs that you have with
the traditional fossil fuels. With solar panels, the renewable
part of it is that it is not being used and you cannot use it
again. The overall costs are lower.
Ms Thies: On the overall argument I agree
with Magda that the external costs of fossil and nuclear technologies
are massive and cannot be compared with the additional costs of
renewable energy because it is not just a few digits difference.
To quote the much quoted Stern Review, he says the cost of climate
change if we do not act is 20% of global domestic product whereas
the action to prevent is 1%. This is just one example. This only
takes into account climate change. Yes, I am with you on the costs
that renewable energy is creating on top of the direct support
mechanisms regarding grids and so on. However, the grid system
would have to be developed anyway. Looking at the UK, the grid
system is more than 100 years old and new investments are needed
no matter which technology we are connecting. We cannot fully
pass this on to renewables, any technology would require new grid
development. The difference with renewals is we have to make the
shift from a centralised system towards a more decentralised,
more flexible system. This is a one-time shift that the system
has to make. The costs are often over-estimated because they are
not compared with the costs that would occur if we wanted to maintain
the system, which are also tremendous. In that respect, these
extra costs are often over-estimated. Another thing that is often
not taken into account in the equation is the benefits that renewables
are creating, not only to climate change and security of supply
but also industrial development, job creation and these aspects.
To go to the hard economic facts in the short-term, because in
the long-term there is no doubt that renewable energy will pay
off, and I come back to the quote I gave earlier on the reduced
fuel costs compared to the renewables investment costs, the costs
of renewable energies are often over-estimated because external
factors on the price are not taken into account. One example is
a study that was made of the German market that concluded that
under ideal market conditions renewable energies at the moment
would be reducing the total electricity costs in Germany by €5.5
billion every year and that is because when renewable energies
are producing, for example when the wind blows, they go into the
market and because of the way the market operates, which I believe
you are familiar with, the last technology that enters the market
to cover demand determines the total market price. If we have
a certain demand, the first that will go in are other renewable
technologies because they produce at very low marginal cost, almost
zero, and we would probably have some nuclear and coal because
their operational costs are relatively low—if external effects
are not reflected in the prices—compared with investment
costs and other technologies, such as gas, only come in if demand
still requires them because their cost by the hour is very high.
If the demand is there the renewables come in and they throw out
the technologies that are most expensive to operate by the hour
and the total electricity market price is reduced quite significantly.
In a functioning market, for the German consumers, this would
lead to savings of €5.5 billion compared with €3.5 billion
of investment support for renewable energy, or feed-in tariffs
in that case for renewable energy. In fact, the German consumers
could already benefit from this effect today. This is very often
overlooked and not taken into consideration although this is a
very significant factor. This expands further by a factor that
comes on top, and that is the carbon price. If we have renewable
energies in the market obviously the pressure on the emissions
market is decreased because renewables have no, or almost no,
emissions and, therefore, there is a relief on the carbon price.
We all know that the carbon price is going to go up, and has to
go up, and Europe is now talking about some caps for the emissions
trading, which are a start but nowhere near where they need to
be if we believe the scientific figures, which we do because we
have to, and then the cap has to be much higher. Then we talk
about carbon prices that are way above the prices we are seeing
now and thinking about. If we take this effect into consideration
on top of it then today renewables are already a major benefit
to consumers.
Q357 Chairman: What an excellent
point to finish on. We have significantly overrun but that is
a tribute to you for the clarity of your answers and the very
effective contribution you have made to our report. We will send
you copies of our report. If, when you read the transcript, you
want to correct anything or write to us with some further information,
please do so. Incidentally, Lord Bradshaw and I were talking about
the age of the grid and I have now realised why the House of Lords
is doing this inquiry, it is because most of us are almost as
old as the grid!
Ms Thies: I hope not!
Chairman: Thank you very much indeed.
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