Examination of Witnesses (Questions 402-419)
Mr Hans Van Steen and Mr Jean-Arnold Vinois
5 JUNE 2008
Chairman: Thank you for coming. We will
send you a copy of the transcript, please feel free to make any
corrections. We will go round the table and introduce ourselves.
It would be helpful if you could make some opening statements
principally about procedure and timetabling, what is actually
going on in terms of renewables. We know in the United Kingdom
there will be a consultation procedure during the course of the
summer and we had evidence from the Minister that agreement is
possible within the Council of Ministers on the final details
towards the end of the year. Your comments on that would be helpful.
Lord Powell of Bayswater:
I am an Independent member of the House of Lords. I come from
first a Civil Service background and later business.
Lord Paul: I am Swaraj Paul, a Labour
member of the House of Lords. My background is the manufacturing
industry.
Lord James of Blackheath: David James,
Conservative.
Lord Mitchell: Parry Mitchell, Labour.
I am a high-tech entrepreneur.
Lord Bradshaw: Bill Bradshaw, Liberal
Democrat. I have a background in transport.
Lord Walpole: Robin Walpole, environmentalist,
Independent, farmer and landowner.
Q402 Chairman: I am a Conservative
former minister, Conservative member of the House of Lords and
Chairman of Sub-Committee B. This is our specialist adviser to
this particular inquiry who is an academic at Imperial College.
It would be helpful if both of you could very kindly brief us
on procedure and the timetable.
Mr van Steen: Jean, maybe you want to
start with the overall policy.
Mr Vinois: Maybe if I could quickly set
the background. The origin of this is to be found first of all
in the UK Presidency in the second semester of 2005 when there
was a summit at Hampton Court where your Prime Minister at the
time was keen to develop the concept of European energy policy.
This led to the production of a Green Paper by the Commission
on secure, competitive and sustainable energy in March 2006, which
in turn led to the so-called First Strategic Energy Review by
the Commission in January 2007 with a number of other papers,
such as the progress report on electricity production from renewables
and biofuels, but also on the internal market for energy, that
is gas and electricity. This work by the Commission in January
2007 was quite substantial, looking at the whole energy mix of
the EU and all the aspects which had to be dealt with. This paper
was processed very quickly at the time by the Ministers of the
Environment and the Ministers of Energy to pave the way for a
decision by the European Council and Heads of State and Government
in March 2007. An annex to the Conclusions of the Presidency of
the European Council enshrined an Action Plan for an Energy Policy
for Europe 2007-09 where you will find all the targets of the
energy policy for Europe as stated at the time and the main elements
of the Internal Market Package, which will be discussed tomorrow
in the Energy Council, which the Commission tabled in September
2007. Also, it announced the Climate and Energy Packages of January
2008 which include the Renewables Directive, and the Emission
Trading Scheme in revision. It is a process in which we are now
engaged and we continue to produce a number of proposals as a
result of the Energy Action Plan of March 2007. We are now preparing,
and it may be important for you to know, a Second Strategic Energy
Review which will focus a bit more on the security of supply.
The first one was mainly led by climate change. This is planned
for the end of October 2008. That will be processed by the French
Presidency who wants to discuss at the European Council of December
2008, the issue of security of supply or energy security, which
is the word that is mostly used now, and the external energy policy
which has not been properly defined up to now. Although for two
years the Heads of State and Government have said the EU should
speak with one voice with third countries, the reality, if you
think about the gas pipelines discussions in recent months, particularly
with Russia, is a bit different. We have very intense activity
at this stage on all the issues of the energy policy and it is
very important to understand the targets which have been set.
I would like to say that when the Commission came with the First
Strategic Energy Review in January 2007, the analysis was quite
clear; it had already been said by the International Energy Agency
in Paris at that time that our energy development was not sustainable.
With the business as usual scenario in mind between 2005 and 2030,
it would increase significantly our consumption of energy, we
would be more dependent on third countries and on a limited number
of suppliers for oil, gas and other fuels, and we would continue
to increase greenhouse gas emissions. That was not felt to be
sustainable. The debate we had at the time, and it was confirmed
by all the reactions we had received on the Green Paper of March
2006, was on the need to show decisions are needed to change our
energy pattern because it would leave us in a situation that we
would not manage. Of course, at the time we were helped by all
the work done in the framework of the post-Kyoto Protocol, the
preparation for the new negotiations there, and the Stern report
saying it will cost less to act now than to wait for more natural
catastrophes that will cost much more. All of this has been feeding
the process. The idea was to say we need to take action. We found
a consensus very quickly on energy efficiency actions that had
been identified in October 2006 by the Energy Efficiency Action
Plan. It was well received by Member States as energy efficiency
would be something to work on very strongly. Then the renewables
came as a way of saying to a certain extent it is a response to
increasing dependency on third country suppliers. It is also to
work much more on local production and to use the indigenous resources
to try to cope with the demand for energy. That was clearly understood
at the time. It was felt that the best common driver for action
would be to work on the reduction of greenhouse gas emissions.
The paper was structured in a way where it said we have a problem
with energy, we have a problem with the climate, so we put climate
protection and energy together and it was the first time we did
it in a very integrated way. The strategic objective set by the
Commission was to say we would go for a unilateral reduction of
greenhouse gas emissions of 20% by 2020 and 30% in case we reach
international agreement, much needed because Europe only emits
15% of the greenhouse gas at the moment in the world. It is for
Europe to show the lead in this field as it is a major polluter
and has to show an example. If we want to bring the others on
board, we need to show that we are ready to act on this first.
We had the driver of the 20%/ 30% reduction of greenhouse gas
with the additional target of 20% of renewables and also a target
not seen as binding but an objective, which was 20% energy efficiency
improvement by 2020. We said we have three times 20% by 2020,
easy to understand and to defend. It was based on a number of
studies and impact assessment work to see whether these targets
could be realistically reached. Two months later the European
Council accepted this approach under the German Presidency. Chancellor
Angela Merkel was pushing for this approach to be accepted and
it went through. Once you have a decision in principle by Heads
of State and Government as the European Council has no binding
power and does not make legislation, all this has to be translated
into hard legislation and that is how the Directives have been
proposed by the Commission, such as the Directive on Renewables
in January 2008. That is the background. When we are talking about
renewables we are talking about one element of a much broader
policy which has the ambition to cover all the issues of the energy
sector combined with climate change. We had a lot of discussion
on the targets, because that was seen as a top-down approach which
could distort the market and lead to picking certain technologies
rather than others, but at the same time it was widely accepted.
To change the mentality, which was that energy was cheap, easy
to access and so on, you need to focus on binding disciplines
to change the pattern. 18 months later, progress made will be
reflected in the Commission's paper on the Second Strategic Review.
History gives us much more comfort in relation to what was proposed
in January 2008 when we saw a barrel of oil at $130. It makes
all renewables more competitive with oil at that price than in
January 2007. In the meantime, the International Energy Agency
has said there will be a supply crunch for oil. We have investigations
also on gas supply from Russia. The quicker we move towards relying
on our own resources, that is saving energy and developing local
resources in renewables or local production of electricity, the
better we will be. That lets you understand the background of
the new energy policy for Europe.
Q403 Chairman: An excellent tour
d'horizon.
Mr van Steen: Just to add specifically
as far as the renewables are concerned, as Jean said we had a
particular emphasis on renewables in March 2007 in the First Strategic
Review because we included in that package the so-called renewable
energy roadmap which was where the Commission proposed a 20% target
for the EU as a whole for renewable energy. It is important to
understand that this is a share of renewable energy in overall
energy consumption. This was proposed by the Commission in 2007.
There was an impact assessment that went with that proposal, and
we can go into that in more detail later on if you want. As Jean
explained, that target was accepted by the European Heads of State
and Government a few months later. What we are doing right now,
at the request of the Heads of State and Government, is to translate
that political commitment for the EU as a whole, of the 20%, into
legislation. Essentially this is done via a proposal for a Directive,
which the Commission came out with in January of this year which
we are now negotiating in the Council in different working groups
and we are beginning the process in the European Parliament. Hopefully
we can come to a conclusion on that process by the end of this
year. The importance of a rather rapid timetable is that this
is an important element of the overall climate and energy strategy
of the EU which feeds into the wider international climate negotiations
which will hopefully culminate in Copenhagen in 2009 with the
successor to the Kyoto Agreement. I think it is widely recognised
that the negotiation position of the EU as a whole will be so
much stronger if we can come not just with agreed targets at an
overall EU level but also with a clearly agreed plan on how this
is going to happen, what is going to be the contribution of each
and every Member State, for example, in terms of renewable energy.
That is the purpose of the Directive, to fix the national targets
that come from the overall 20% target, and we can come back to
how we made that translation from the 20% at EU level to the individual
targets at national level. Essentially, this is what this Directive
does, plus it creates the whole framework for how the renewables
policy should develop between now and 2020, which is our target
date.
Chairman: That is excellent, thank you
very much. We are two-thirds of the way through our inquiry and
we have taken evidence in about 10 different sessions, including
two travelling within the United Kingdom, so we are nearing the
end of taking evidence and hope to produce our report in October,
which I hope will be a contribution certainly to the House of
Lords Chamber for possibly a debate, we hope, and also prior to
the final agreement. I have six colleagues and I am suggesting
five minutes for each colleague because we will aim to finish
at four o'clock because we know you are busy.
Q404 Lord Powell of Bayswater: Can
we start on the targets, which will be my area of questioning.
Tell us a little more about how you arrived at the 20%? Was it
plucked from the air? Was it a political target? Was it deeply
scientific?
Mr van Steen: It was neither. It was
not deeply scientific. In the impact assessment we did conduct
a sensitivity analysis where we looked at an 18% target and a
22% target. What we did see with the 22% target was the cost,
because we all have to recognise that renewables are more expensive
than energy, would start to increase more steeply than the benefits
whereas the opposite was the case if we went for 18% by 2020.
Of course, we are also in a political environment and have to
recognise that. For some time the European Parliament has called
for a target of 25% for 2020 which the Commission has always said
is high, and we continue to believe it would be very high. We
had that in mind but wanted something at the same time that was
ambitious and feasible. We thought the 20% was that, and the impact
assessment confirmed that is indeed feasible, especially from
two points of view. One is the availability of biomass resources
because a very large part of the 20% will have to come from increased
use of biomass, so the question is, is this biomass going to be
available, do we have enough land, and the reply was yes. The
second was a feasibility criteria we had which was the ability
of the grid to absorb the amount of variable power that comes
from renewables, especially from wind but also solar, and would
this create issues of grid stability. The conclusion we came to
in the impact assessment was that 20% would not lead to such difficulties.
Apart from the fact that the 20% fits nicely into the slogan of
20% by 2020, and goes well with the greenhouse gases, it is not
like some have suggested, that it was just a slogan and the right
target would have been 17½ or 21, there was some analysis
behind it and we thought it was the right target to set.
Q405 Lord Powell of Bayswater: Obviously
you would not have suggested it if you did not think it was achievable,
although I have to say not all our witnesses believe it is achievable
in the UK. But do you think you have left Member States enough
flexibility in choosing how they get there or do you think you
are being too prescriptive? To some of us it seems very prescriptive
with this talk of sanctions, penalties and so on.
Mr van Steen: We think there is quite
a lot of flexibility built into the Commission's proposal. First
of all, we are talking about renewables generally. In the current
legislation we have indicative targets for renewable electricity,
they are not binding. This will no longer be the case, we will
leave it entirely to Member States to decide whether they think
it would be best to focus on electricity, heating, cooling or
even transport suitable to their conditions. I understand biofuels
is the subject of a separate inquiry so we will not have to go
into too much of that, it is a fascinating subject on its own.
There is flexibility there for Member States to choose what they
want. Secondly, we have the trajectory from now until 2020. It
is important not to leave everything until 2020. In our view,
it would not be the right thing to do to simply set the target
for 2020, say, "Okay, that's it", and wait until the
end of 2019 to see how well we are doing. There has to be a trajectory.
But we have specifically proposed a trajectory which is indicative
so that leaves Member States some flexibility in terms of whether
they want to undershoot or slightly underachieve, and that is
okay as long as Member States are still making efforts towards
that trajectory. You mentioned penalties, the Commission has not
proposed penalties. There is a proposal from the rapporteur in
the European Parliament to propose penalties, but we have not
proposed penalties.
Q406 Lord Powell of Bayswater: You
are absolutely right.
Mr van Steen: We believe that the traditional
infringement procedures at EU level are sufficient. We would not
be able to legally pursue Member States which are not on their
trajectory. We would be able to legally pursue Member States which
are not making an effort to make progress towards their trajectory,
and that is an important difference. There is some flexibility
built in there but, of course, there is a balance to be struck.
We cannot give complete flexibility because then we know we will
continue with the current situation which is that some Member
States are making very good progress whereas others are making
practically no progress towards increased use of renewables. There
is a balance to be struck and we believe that we have more or
less the right balance.
Q407 Lord Powell of Bayswater: One
last question on flexibility. There is a view in some quarters
in the United Kingdom that the target could not be reached without
renewables trading. Is that a view you accept?
Mr van Steen: Yes, but we could get very
close to the target without trading. There would be a few Member
States that would have difficulties meeting their targets entirely
through domestic production because the way we have set the national
targets is not taking into account the potential for renewables
in every Member State but rather a complicated formula, which
I am happy to explain, which essentially takes into account the
ability to invest in renewables because we have a large component
in the methodology, which is GDP per capita, as a measure of ability
to invest. Some Member States have a high GDP per capita but perhaps
not so much potential for renewables. Small, densely-populated
landlocked countries, for example, might have difficulties and
they would need the trading. Our analysis showed that all Member
States, with one or two exceptions, would be able to meet their
targets entirely through domestic action. But the important thing
is the cost of doing so without trading would be higher. The trading
is essentially there to bring down overall costs and to focus
investment and action on renewable energy in those Member States
where there is a lot of potential which perhaps has not been harnessed
so far.
Q408 Lord Mitchell: We are in 2008
now and there are 12 years to go. Sitting where you are sitting,
what degree of confidence do you have that number will be achieved
by 2020 on a European basis?
Mr van Steen: We believe that it is certainly
feasible. A lot of it will depend on international oil price developments
because we are in an area where competitiveness plays a role and
the higher the oil price the more competitive renewables become
in relative terms and the less you need specific support schemes,
support measures, financial support, to make the renewables take
off. If we are going to be in a world of higher oil prices, I
have absolutely no doubt that we will meet the target. If, for
some reason, there are different developments and the oil price
starts to go down, if there are other major developments in terms
of other types of energy sources becoming more competitive or
for other reasons play a bigger role, then it might be a different
story. From where I sit, I cannot really imagine that we would
have great, great difficulty meeting the 20%. From our point of
view, it is feasible. In the overall impact assessment that came
out with the proposal we assessed the cost of this operation and
came to the conclusion that the GDP by 2020 would be something
like half a percentage point lower than it would be had we not
decided on meeting these targets, and that is really a relatively
small price to pay compared with the costs which are associated
with very severe greenhouse gas emissions or climate change.
Q409 Lord Mitchell: When we have
been taking evidence and looking at our own country, I have to
say we have had a very mixed bag of reports. Just regarding how
the UK is going to go, some people are pessimistic, some are optimistic
but say we require tremendous political will that has not quite
been show yet to get there. We are trying to balance, even in
the UK, how it is going to go and I wonder if that is true in
other countries or is it just a UK issue?
Mr van Steen: It is certainly true generally
that it will require some political will to get there. In fact,
this is what we have seen and demonstrated in our progress reports
on renewable energy so far. We have two different Directives in
place at the moment, one on Renewable Electricity, one specifically
on biofuels, and both of these require the Commission to report
regularly on progress towards the indicative targets that we have.
What we see is that some Member States, and we give them two positive
smileys in our report, are on track towards meeting their targets
for 2020. Those are the Member States where you can see that there
have been a lot of positive policies put in place to encourage
renewables where the support schemes have been developed in such
a way that they actually facilitate the higher uptake of renewable
energy, whereas Member States that do very little and just rely
on these things happening by themselves are the ones that are
trailing behind their indicative targets. Policy has a very big
role to play here. It is policy both in terms of putting in place
support schemes, but it is also policy in terms of providing access
to the grid and providing information to the energy users. A lot
of this will have to happen at a relatively low level in the sense
that these are decisions sometimes by individual households even,
"Am I going to replace my boiler with something renewable
or am I going to have another gas boiler?", that sort of
thing. If the consumers are not aware of other opportunities they
will go for what they have had so far. If the man who comes to
them when they ring up the guy who is going to give them an offer
for a replacement is not going to tell them there are these different
options then clearly it will not happen. There is a policy to
be put in place in terms of informing, training installers of
renewable energy, and in our proposal we have put specific requirements
for Member States to do these sorts of things as well.
Q410 Lord Bradshaw: In previous questions
we have satisfied ourselves that grid access and the unbundling
are all very central. I know it is not the job of the Commission,
but what steps are necessary in your view in Britain to enable
us to meet more easily the targets?
Mr van Steen: I think you have put two
important issues there on the table, the issue of grid access
and the removing of barriers to renewables more generally in terms
of administrative procedures for getting licences, for going ahead
with planning and things like that. On the grid access, current
EU legislation does not include an obligation for Member States
to provide priority access. We are saying that it would be useful
to do it but we still have the word "may" in the Directive,
so there is no requirement for this to be the case. In the new
Directive we are proposing we have changed that to "shall",
so "Member States shall provide grid access". We did
that because the experience we had was that many renewable developers
said, "This is absolutely essential, we need to have that
assurance that we will have access to the grid and we need to
have it at an early stage in the planning process". We believe
that is an important point. On the issue of administrative procedures,
again the situation is very different in the different Member
States. Quite regularly we have complaints from renewable energy
developers saying, "We have now been in talks with our authorities
for several years and every time we think we are coming towards
the end of the process and we can go ahead, there is a new procedure
that has to be fulfilled. There is no clear deadline set for this,
so once you submit your application you cannot be sure when you
will get a reply" and so on. Here, again, we think there
is a need for Member States to do more and we have strengthened
that particular requirement with the new proposal. Whereas in
the old proposal there was a requirement for evaluating to what
extent these barriers should be removed, now we have a specific
requirement for Member States to remove such barriers. We believe
it will make a difference because when you have the word "shall",
that means we can more easily justify legal action. What we have
been doing so far when we have been getting these complaints is
we have analysed them, we have checked to the best of our ability
in the Commission what the situation is, is it this particular
developer who is very difficult or not presenting the plans in
the right way, or is there a genuine problem of processing these
from the authorities. If it is the second then we write to the
authorities saying that we are concerned, can they please explain,
and that is the first step in an infringement process. Normally
from that point it gets better, we see things starting to move.
We will have the ability to do that in a better way once we have
an even clearer text on that point in the Directive.
Q411 Lord Bradshaw: You mentioned
specifically the question of training and we have heard in one
or two other places that there are not sufficient people who are
trained and equipped to actually install renewable sources of
energy. Is that common in Europe or is it particularly bad in
Britain?
Mr van Steen: In our view it is common
probably in the whole of the energy sector, especially on renewables
where it is so important to build confidence in technologies which
are not widely known and where there is a general perception that
renewables are good for the environment but are they good for
me in my house. There is a need to build up confidence and the
way you can do that is to ensure the people who are dealing with
these at a professional level are professionally trained to do
that. We have proposed that Member States should have a certification
scheme in place whereby they certify that installers have the
right type of training, that this is updated regularly as the
technology develops, and so on. We believe that will be very useful.
Q412 Lord Paul: You said you were
Danish, and Denmark has had great experience in renewable energy
and they were almost the pioneers. How have they been able to
achieve that and others are struggling?
Mr van Steen: It is true that the Danes
have been pioneers, especially when it comes to wind. In certain
other areas, especially when it comes to biofuels, they have not
been pioneers, they have been rather reluctant, but this is changing
now. In wind it is true and they still have the highest proportion
of wind in their electricity consumption, somewhere close to 20%.
The way this has been achieved has been through support schemes
essentially, priority access combined with a feed-in support scheme
which provided the developer with a guaranteed price for the energy
produced from his installation throughout certainly a big part
of its lifetime. That has worked extremely well. That led to an
industry being built up, especially with the company Vestas, which
is now the world's biggest wind turbine manufacturer. It created
lots of employment and so on. That was encouragement for the government
to continue with support schemes for renewables. I would say it
is essentially these two things, plus a lot of interest in low
carbon energy technology solutions. In fact it is not just renewables,
it is also energy efficiency, and that has been achieved especially
through support schemes and high taxation.
Q413 Lord Paul: On the question of
Guarantees of Origin scheme, how do you think they are likely
to help the EU in the markets and what will be the benefits?
Mr van Steen: This part of the proposal
is very much linked to the way in which we have decided to propose
the targets. If we had been able to propose the targets 100% in
accordance with where the potential was we would not really need
such a scheme, but since we do not think we have all this information
we feared it would always be disputed if we tried to go down that
road. Therefore we distributed the targets in a different way
essentially with the so-called flat rate plus a large element
of GDP per capita. It means it is not the most cost-effective
way of achieving the 20% at an EU level. In order to bring back
the cost-effectiveness we then need to enable those Member States
that have a relatively high target, but perhaps not such cost-effective
potential, to be able to achieve their target through production
and consumption in other Member States. The Guarantees of Origin
scheme is essentially there as a vehicle for making that happen.
For example, let us take a country like Luxembourg, a small country
with a relatively limited potential but a high target because
they are lucky enough to be rich. They might want to achieve their
target through investments in countries like Bulgaria, Romania
or, indeed, other Member States where there is big potential,
for example, for biomass. They then make these investments, they
make the arrangements for the Guarantees of Origin which certify
that a certain amount of renewables has been produced, and these
are transferred back, but not necessarily the energy itself. It
is a type of virtual trading scheme for renewable energy, which
can complement the physical trade that we imagine will take place
in biomass, for example wood pellets, or in biofuels, which are
things that can be easily transported. But when it comes to electricity
obviously we know there are infrastructure bottlenecks and if
the purpose is only to meet the target there is no need to transfer
the energy but we need this guarantee that investments have been
made and the renewable has been produced.
Q414 Lord Paul: We have got some
evidence, some is completely negative about it and some very lukewarm.
Is this not a scheme that will be self-defeating and take people's
attention away from the targets they should be achieving?
Mr van Steen: It is true that it is a
part of the proposal which has provoked a lot of debate. Some
say that it is not enough, this does not provide enough flexibility.
We believe there is enough flexibility because, in fact, we are
proposing that Guarantees of Origin can both be transferred between
Member States but also between operators, so we have two levels
of flexibility. We cannot see how it could be made much more effective
without making it a European-wide support scheme for renewables
and this is clearly not the intention of the Commission. Our analysis
shows that it is not yet the moment to go down that road. There
are others who say this is going too far, that transfers of Guarantees
of Origin will not enable us to carry on with our successful support
schemes as we have them today. This has been the view expressed
by Germany, but also Spain. There we say we do not understand
how they feel this is going to be such a problem because there
is the possibility of Member States limiting the transfer of Guarantees
of Origin for a number of reasons and thereby in a way can ring-fence
their national support schemes and avoid the need to increase
fixed tariffs. We still feel this is a good balance between those
two views, but we also know there is lots of discussion going
on and we understand there are Member States talking to each other
and trying to come up with an alternative scheme. Commissioner
Piebalgs has been very open on this point and said that from the
Commission's side we feel what we have proposed a workable scheme,
but that we are open to look at any other schemes that might be
put on the table that will achieve the same objectives. The objective
is to bring down the cost and in the impact assessment we did
we said that the cost reductions resulting from Guarantees of
Origin could be up to 8 billion € annually in 2020, which
is quite significant, and we should not miss the opportunity to
harvest such cost reductions if at all possible.
Q415 Lord James of Blackheath: When
you answered Lord Bradshaw's question I think you chose to answer
it from the point of view rather more of the consumer and the
ability of the market to be trained adequately to deal with the
consumer at the domestic end. The question we have been trying
to develop this morning with the others we have spoken to has
been the sufficiency of the infrastructure to provide the industrial
establishment of the means of generating renewable energy from
wind farms, hydro and solar. When you said that training was a
problem, did you also include the professional end of the means
of achieving adequate installation of infrastructure?
Mr van Steen: Not specifically. We do
not see that as a major problem. Of course there is an issue about
infrastructure reinforcement, which is a requirement, because
you include more renewables into the grid.
Q416 Lord James of Blackheath: What
about supporting the supply chain to provide the necessary equipment
for these installations?
Mr van Steen: The bottlenecks in terms
of wind turbine manufacturers and things like that, for example?
Q417 Lord James of Blackheath: That
seems to us to be a big problem too from what we have seen. We
were asking those we met earlier today whether these factors contribute
towards the possibility that the timetable is too tight to achieve
a cost-effective creation of the entire infrastructure which is
needed and whether, in fact, the technology itself is not going
to advance so rapidly with the experiences we are having that
we shall look back in ten to 20 years' time and feel we have not
got the best because we went too fast too soon before the technology
had reached its optimum conditions. Could you comment on that?
Mr van Steen: We have heard those views,
but we do not necessarily agree with them. The cost of renewables
will come down but they will also come down because of mass production.
This is what we have seen in solar photovoltaics. The level is
still far higher than traditional electricity production, but
the cost curves are declining very rapidly and are very much linked
to the increase in production of these types of technologies.
Q418 Lord James of Blackheath: Will
the units which have come down in price have the optimum performance
that would be achieved with the advancement of development in
technology which must happen with experience as we go forward?
Will we not have the cost of having to replace them all over again
long before we are through to the end of the timetable?
Mr van Steen: You can never know these
things. There is always the question whether it would be better
to wait for additional research to be undertaken, new development,
more demonstration of the technologies. On the other hand, what
we see is a lot of the price development of renewables comes from
mass production as far as we can see, for example on wind as well.
The reason why wind in certain locations is competitive now is
because it is possible to produce much more effective wind turbines,
which is clearly something that has happened because we have seen
a huge improvement in wind turbine technology.
Q419 Lord James of Blackheath: I
made the point earlier this morning that the major supply chain
hiccough at the present moment is in wind farms, that we have
not got adequate boats with sufficient cranage to be able to do
the installations. In the United Kingdom there are only two boats
with adequate cranage which can do it. When we started off on
the North Sea there were 78 boats in the North Sea which had the
cranage to do it. Should this not be something which is the subject
of government direct investment and should there not be some form
of EU approved subsidy or tax concession allowed to provide this
impetus?
Mr van Steen: To put in place those sorts
of incentives or schemes is certainly a possibility. On the specific
issue of offshore, we know there are clear bottlenecks. First
of all, there are very few manufacturers at the moment that produce
offshore turbines, but there are more looking to go into this.
We are planning to come out with an Offshore Wind Action Plan
as part of the Second Strategic Review in the autumn of this year.
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