Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 199 - 219)




  199. Welcome, gentlemen. Thank you very much indeed for the memorandum which the Renewable Power Association put in. Mr Byers, thank you very much indeed for coming and your colleagues. Perhaps you would introduce your colleagues, we would like to know who they represent and so forth, and then we can begin questioning you on your memorandum.

  (Mr Byers) Certainly. It is very pleasurable to be here. I will just introduce myself and invite my colleagues to do so also. I am Chief Executive of the Renewable Power Association, which is generally pan-technology and attempts to progress the relevance of renewable generation in the UK. If I can start with Max, on my left, he will introduce himself.
  (Mr Carcas) I am Max Carcas. I am the Business Development Director for Ocean Power Delivery. We are a developer of wave power technology in Scotland. We are currently developing a machine called Pelamis, the full scale version of which will be tested at the beginning of next year at the Marine Energy Test Centre in Orkney.
  (Mr Wolfe) I am Philip Wolfe. I am the Chairman of Intersolar Group. We are the only existing UK manufacturer of solar cells and our company is the seventh largest producer of the new generation thin film solar cells.
  (Dr Pitcher) I am Keith Pitcher and I work for First Renewables. We are a developer and operator of wind farms and biomass projects, including the Arbre Project in North Yorkshire.

  Chairman: Thank you very much indeed all four of you, we are very grateful for your attendance here this afternoon. We will start with Mr Challen.

Mr Challen

  200. Good afternoon, gentlemen. As I understand it, currently about three per cent of our energy, electricity, is supplied by renewables and much of that is through hydro electrics. There seems to be a lot of scepticism about 2010, that we are going to get to ten per cent. Do you share that scepticism and would you like to comment on it?
  (Mr Byers) Yes. I think your figure is approximately accurate, it is largely dominated by large hydro which will not increase and, indeed, there is a fair proportion of landfill gas in that figure which will probably decline by 2010. I think the community as a whole is very optimistic that we can deliver as an industry but only after certain barriers to development and deployment of the technology are eradicated. The longer that eradication takes, the less likely the ten per cent target shall be. There are clear technologies which are now economic and those very close to being economic which can contribute to that ten per cent but we should be realistic about investing as a nation in those technologies which will not come to large scale fruition by 2010 and, therefore, if the 20 per cent target is required by 2020 we should be investing as a nation now, not just for domestic consumption but also for export.

  201. I know it is very difficult, it is like asking the question who is going to win the Cup, but what would be your best guess for 2010 on how much we will be producing percentage-wise?
  (Mr Byers) Again, I would have to answer parametrically with how many obstacles there are. The obstacles at the moment are clearly known to the Committee. NETA is a problem. Planning is a problem. Bankability is a problem. Connection to the network system is a major issue. If you remove them all I would say ten per cent is extremely pessimistic. If it stayed as it is today if we get to six per cent—that is a personal view—we would be doing quite well.

  202. I understand the DTI has given some understanding of what the share of renewables might be between on-shore and off-shore wind, energy from waste and biomass etc. They imagine that will be about a quarter each. Do you think that is a realistic assumption, that it will be divided equally between those? We have heard a bit about tidal and so on. What is the mix going to be?
  (Mr Byers) As you said, it is very difficult to answer. It is clear that on-shore wind should have a large growth. Biomass in this country should work but at the moment has certain barriers: agricultural planning and, indeed, economic price. At the moment I would say a quarter each is probably being optimistic for certain technologies.


  203. Could you elaborate on that. When you say "optimistic for certain technologies", what do you have in mind?
  (Mr Byers) It is difficult to see confidence in huge energy crop development in the current economic climate.

  204. Agriculture.
  (Mr Byers) Agricultural crops for energy production.
  (Dr Pitcher) If I could add to the last point. As I mentioned before, one of our projects is the Arbre Project and farmers have grown 1,400 hectares of short rotation energy crops for that project, however for the future with the price cap which has been set by the Renewables Obligation biomass is unique amongst renewables in that it has a fuel cost and there are many benefits that come with growing those energy crops but currently all of the pricing of that has to fit within the financial constraints of the Obligation. So in order to make this work we have to have a mechanism that supports the farmers who are growing this which is called Agricultural Certificates or Rural Development Certificates. This is an item which has been raised both with the DTI and with DEFRA who understand the principle of it but we have to now work out how existing programmes, like the set-aside arrangements and so on, can be structured to make this economically viable both for the farmers and to get within the numbers within the Obligation. Providing that happens, I have to say, there is definitely an appetite there for farmers to grow these crops. We demonstrated this with our first project and we are seeing people come to us on a daily basis wishing to do it. There is a lot of confidence around providing we can get the financial mechanisms in place for this next generation of projects.

Mr Challen

  205. This is a final two-pronged question. What do you see as the main obstacle to developing renewables? Secondly, what is the most immediate thing the Government needs to address to remove that obstacle?
  (Mr Byers) I think I mentioned briefly the four challenges, three of which are largely under the control of Government and local government. The trading arrangements I am sure you have been bored to death with but they are extremely prejudicial for small embedded generation at the moment. That is in the hand of Government. Secondly, the planning arrangements are well discussed in terms of review of what should be done to allow a more positive attitude to renewable generation at sites throughout Britain, not just in remote parts. Thirdly, a rather antiquated network connection regime which discourages the connection of useful, small, local renewable generation to a grid designed to survive the Luftwaffe rather than renewable energy. Fourthly, more or less as a consequence of this we have moved to a market based support system after five years of consultation, which the Renewable Power Association welcomes, but it should be recognised that the risks have increased in the eyes of bankers. Therefore, if you wish to encourage diversity and not just one or two champions of major oil companies coming to the rescue, bankability needs to be considered pragmatically in the Government support network because most bankers are still awaiting 1 April and they like to wait for two years to see what happens. Small developers need to start now and certainly in the agricultural sector it takes five years to grow sustainable crops and we are talking about eight or nine years to 2010. If I were to pick one thing to fix, fix NETA.

Mr Thomas

  206. I do not know about predicting who will win the Cup but could I tempt you to think of a league table. You represent all perspectives of renewable energy and you mentioned in your opening remarks about the fact that some are economic now, some are close to being economic and some cannot possibly happen unless there is a huge change in support systems and the other systems that you have just mentioned. Where are we in terms of getting this done? Who are the frontrunners at the moment in terms of technology? If we are serious, not just as a Government obviously but as a nation and the United Kingdom, about getting to that ten per cent and then 20 per cent target, who should we be backing now?
  (Mr Byers) The Government has taken the position that they do not want to back winners.

  207. Who would you back?
  (Mr Byers) If I can just finish the second part of the sentence. De facto they have, not only because they have pitched a one price support mechanism but also they have identified-sub-sectors of capital grants which are only available to certain technologies. To get to the answer, if you ignore planning and business development barriers, on-shore wind is extremely economic now, landfill gas is extremely economic now, a variety of small scale biofuel generation and agricultural use is economic. If we move generally into the agricultural crop and the biogas generation then perhaps further down the line—I will defer to my friends on the left—photovoltaics, wave, various marine power. An essential fact from history needs to be recognised, and certainly the Germans, the Japanese and the Americans have recognised it, that volume production reduces costs exponentially. I think Philip will certainly add weight to that. By putting turbines on the ground for wind power the cost of wind power has dramatically fallen over the last decade. So the challenge for the industry and Government is to decide whether you want to back BP, to use an analogy, to deliver all your oil exploration or whether you want a balanced programme over 20 years to support technologies with market forces certainly but also with kick-start and a hope to get volume into certain technologies. I would like my colleagues, who are more aware than I, to comment on certain technologies.
  (Mr Wolfe) Just to pick up on a part of your question. As an Association we are not suggesting that the Government should be supporting technologies which will never be economic or should bridge some kind of funding gap to technologies that will never be economic, but certainly the different renewable technologies are at different stages of development and some of them are uneconomic today but will be economic in the future. Our perception is that rather than necessarily seeking to prescribe exactly how much of the ten per cent, or whatever the target is, should go to different technologies, the intention should be to identify technologies that can become economic and create the environment where that is possible and then allow each to find its own level, broadly speaking, on economic grounds. If you take photovoltaic technology, for example, which is basically a solid state semi-conductor technology, just like the transistor was, that has massive potential for cost reduction as production volumes build. The major support for that, therefore, will be creating a market environment where the market is to some extent underwritten and the industry will then be entirely happy to invest in the capacity that is needed to build production and take it to the stage where it is economic. We are not looking for any sort of long-term subsidy situation, what we are looking for is, firstly, an elimination of barriers and, secondly, a degree of pump priming to enable these technologies which are at an earlier stage to break through the volume barrier and, therefore, establish themselves on economic grounds.

  208. Can I just come back on that. You said, Mr Byers, that the Government said they would not back winners but they de facto were and you have also mentioned how the volume can change the winners, if you like, and we have certainly seen that ourselves as a Committee in Germany looking at the Thousand Roofs Programme there. Surely, in a sense, if the Government is absolutely fixated, and that is the question at the moment, on getting the ten per cent and then the 20 per cent target that has been suggested, are they not right to back winners? Do they need to invest in more off-the-wall esoteric renewables, if I can put it that way? Should they not be just plumping for wind, which you said yourself is cheap, accessible and relatively predictable, at least in historic terms? Is that not a reasonable way forward for the next ten years?
  (Mr Byers) I would certainly advocate a large expansion in wind power in this country because we have an ample resource. I also believe in democracy taking its course. If you can remove the planning barriers then on-shore wind will provide a large proportion of the ten per cent. I am reminded of a programme that I watched yesterday where the Americans ignored jet engine development in the Second World War because they thought they had enough turboprops to win the war. Is that a typical analogy? If we are looking at carbon, about energy efficiency to 2050, there is a huge potential for wind, and I am here to advocate wind development. I have also worked in gas, electricity and oil and I do advocate a more balanced investing approach in order to encourage employment, agricultural diversity, development and export potential across a multitude of technologies. That does not mean that you need to invest customers' money in white elephants. I agree that wind is a major potential winner if you can get the community to accept it. Its off-shore costs are yet to be proven but the potential wave energy density in this country is phenomenal. We abandoned funding in 1979 and we lost a major commercial opportunity but also threw away some white elephants 20 years ago. I am trying to give a balanced answer here. Picking one winner—I would advocate the Government is more diverse than that—but certainly if we do not develop wind in this country we are missing a major opportunity.
  (Mr Wolfe) There is a technological aspect to this as well, of course. Some of the renewables are by their nature intermittent and, therefore, if you plump for just one of those you are really multiplying the effects of intermittence whereas if you spread it better you will get a better match. Wind typically produces about three times as much power in the winter as in the summer. Solar typically produces about eight times more in the summer than the winter. If you have a good match of those you can basically even things out. If you go for just one you are multiplying the effects of the non-continuous nature of some of these forms of generation.
  (Mr Byers) A final point might be that wind tends to be where the demand is not.


  209. That is a good point.
  (Mr Carcas) The Performance Innovation Unit considered three things in their energy review: economic, social and environmental criteria. Certainly there is a case, I think, for looking at which technologies have the greatest potential for real social and economic benefits to the UK in terms of creating an indigenous renewables manufacturing industry. The Danish example is well known. Ten to 15 years ago wind power was producing electricity at perhaps 12 to 15 pence per kilowatt hour. The Danish gave a very clear and unambiguous market pull mechanism as opposed to what has traditionally been our approach here, which is a technology push mechanism, and that led to deployment of technology and really that is the best way of getting costs down over time. Germany is currently offering 30 pence per kilowatt hour for solar power and they are clearly staking a claim on that technology. Portugal is proposing 22½ euro cents per kilowatt hour for wave power and they are clearly making a stake for that technology. In terms of the support mechanisms, the capital grants are technology specific but the mechanism by which you access those does not—

Mr Thomas

  210. Is that the Green Technology Challenge?
  (Mr Carcas) No, the capital grant is allocated, for example, for the support of off-shore wind. That is £74 million and the Performance Innovation Unit have estimated 15 per cent of that going to support eight individual projects around the UK. The mechanism for doing that is still very unclear.
  (Dr Pitcher) Can I add one final comment. One thing which I think is important not to lose sight of are the resource assessments which have been carried out in this country and those show where if we put development in and we can see there is a way of getting the cost down to a level which is a good number then we do not want to have a very small amount of energy coming from those areas. For instance, wind is a classic example where there is a major resource potential. Also biomass as well. All the studies which have been carried out, both at UK and European level, have said in all scenarios a number of these technologies have to feature at scale, not only to meet the 2010 target but the targets beyond. We believe that it is very important to take a pragmatic look at those technologies which have a great potential and ways of unlocking those to meet not only the interim targets but targets beyond so in the long run we could get those costs down a lot faster than we would do by just going on a piecemeal approach.

Mr Jones

  211. In response to a question from my colleague, Mr Challen, about targets, you mentioned export. I assume that you mentioned export as the potential of the United Kingdom to develop renewables is perhaps greater than any other European Union country, including Germany, which might wish to buy renewables from us. Is that not a widely optimistic view for the medium term given the problems that we have got in meeting the targets we have set for domestic use?
  (Mr Byers) If I understand the question, we may be talking about different exports. I was not talking about export of physical electricity, I was talking about export of expertise, manufacturing, service, maintenance. Yes, I think you are absolutely right, it is hugely optimistic to imagine that we can export a great deal at the moment because we are second to bottom of the European table in terms of everything from recycling to renewables but we have had expertise in this country in a large number of areas in this sector and we have not allowed them to develop, so we are importing Danish turbines, German PV. My colleague on the left will comment about his position as a manufacturer. It was not the physical export of green electricity that I was referring to, it was a labour base and a capital base which we could export to other countries.
  (Mr Carcas) If I could come in there just to say that the Danes currently employ 20,000 people in the manufacture of wind turbines.


  212. In that sector alone?
  (Mr Carcas) In that sector alone it supports 20,000 jobs, which is comparable to that directly employed in the off-shore oil sector in the UK.

Mrs Clark

  213. I want to take us back to wind and biomass to carry on from your point about the fact that we are enjoying a comfortable position of propping up the rest of Europe, second to bottom. We are talking about wind and we have said if a winner is going to be picked, wind is the one. My constituency is in East Anglia and I picked up my local newspaper a couple of days ago to find that Brian Wilson was saying that East Anglia is going to be the UK capital for wind energy. Do you think the Government is doing anything at all apart from verbally, empty wind if you like, because certainly having represented the constituency since 1997 I have seen no energy into utilising that great resource of wind in East Anglia at all by this Government?
  (Mr Byers) Mrs Clark, I have to say that if we are not careful East Anglia will be a marine environment and, therefore, we will be looking at different technology or maybe off-shore wind. The Minister is speaking a lot and I have a lot of time for his officials who I believe are genuinely and professionally trying to put policy into action. However, occasionally one stumbles into quagmires of rhetoric. We would advocate a more integrated approach. No particular ministry, no particular government, is to blame but we do stumble across situations, particularly as a pan-technology group, whereby one minister does not feel that is in his or her remit, it does not overlap with another minister and, therefore, a particularly obvious point is unaddressed in terms of developing—I hate to use the word—joined-up policy, whether it be transport, agriculture, energy, environment. As to East Anglia, I am not an expert. You clearly will not be looking at tidal power in the middle of Leicestershire, therefore geography determines quite a lot in terms of what is feasible, but I do have a problem with picking a single winner if it is off the Orkneys because the demand centres tend to be rather closer to this building.

  214. Could I just follow on about biomass in that case. I believe Dr Pitcher was talking about it. The Government is anticipating 25 per cent of the 2010 target coming from biomass. We know what biomass is but the Government seems to be doing so little to actually advertise it that I would say the vast majority of my constituents do not even know what it is. Is this realistic?
  (Dr Pitcher) As I said before, the encouragement we are getting from the farming community in this country has changed dramatically for a number of reasons because of all the troubles they have had over the past five or six years. However, we are seeing a move towards the environmental aspect of agriculture in the Second Pillar starting to happen, so the rhetoric is definitely there. In terms of Yorkshire and Yorkshire men, the definition of them as people from north of the border with the generosity wrung out is sometimes the case, if they are putting their money into growing biomass, which they are, I think that is a very good encouragement for the rest of the country to say "we have done it there, there is no reason in principle why we should not do it elsewhere". Biomass plants can be moved to sites where they are environmentally acceptable, where they can connect into the grid and so on, so there is a lot of flexibility in where they are located. The two principal activities that are in this are to have the Rural Development Certificates in place to recognise the environmental and other values that come with growing energy crops, and the second one is the efficiency with which we use that biomass in the technologies. Our project is an example of this where the overall efficiency of ten megawatts is greater than the large 1,000 megawatt power stations are achieving and the next generation of those will be even better than the first. There is a technological programme under way which has started to prove that and that must continue. I would like to say that is based on UK know-how. That is what we have done in our project, for example, with Alstom, who are based in Lincolnshire, who have designed and developed the gas turbines for this work. That is a very positive message there. There are two things in terms of the technology and the fuel and if we can get those together, if we can get the barriers taken down that David mentioned earlier, then I think there is a very healthy opportunity for that to occur throughout the UK.

Mr Francois

  215. Mr Byers, Denmark is probably the most obvious example of a country that has invested particularly heavily in wind technology. We now hear that the Danes are beginning to scale back to some degree on their wind turbine programme. Do you or your colleagues, briefly, have any explanation for why that is?
  (Mr Byers) What Denmark has done is just elect a new government, so the last government is always to blame. From what I understood last week, it is a little bit to do with scaling back from introducing what is called a Renewable Energy Certificate, which is a tradeable instrument. I would not like to comment in great depth but it may be to the advantage of certain Danish companies to scale back in that area for purely commercial reasons. What they are certainly not doing if you look at the market capitalisation of a company like Vestas is scaling back on production because they are exporting it to us.
  (Mr Carcas) If I can add there as well that, of course, the Danish have certainly exceeded the ten per cent target that we have already set so to a certain extent they are allowed to rest a little bit.

  216. Are you saying that in that area they have essentially done enough?
  (Mr Carcas) No, but in comparison to the other European countries they are obviously streets ahead.
  (Mr Byers) And they have not suffered any system insecurity or great disruption by reaching a very high level of renewable component.

Mr Savidge

  217. Would you like to comment on the report to the Scottish Parliament suggesting that wind energy in Scotland could actually supply a very high percentage of our energy needs?
  (Mr Byers) I have absolutely no doubt that Scotland could provide England with an awful lot, whether it be commonsense, porridge oats or wind power. The difficulty is transmission and perhaps the Scots' resistance to having their hillsides and their coastlines covered in English windmills. Being of Scots origin myself I cannot predict the inter-company tensions there but quite clearly because of the wave climate, because of the wind climate, Scotland has probably higher energy density and accessible areas, if the population will allow development , of certain technologies. Transmission costs money and at the moment there is a limit on the amount of Scottish hydro power that can come south. Arguably you should actually put embedded generation embedded where the demand is. I have no doubt that the Scottish climate effectively and its land mass, which is relatively unpopulated, could provide England with a great deal of renewable energy but at some cost. We have heard of schemes for the cable down the west coast of Scotland. I question not the validity of putting that in as a piece of British infrastructure, but who pays for it is a very fundamental question. Whether it is state aid or whether the commercial projects have to pay for it themselves is a question of optimisation. What I am advocating on behalf of the RPA is balanced broad technology confrontation of the next 20 to 30 years. Pick winners by all means and if you can play your aces in a game of cards then play them to win the tricks you need to. Picking geographies, which is what you are suggesting, is clearly driven to some extent by planning, by availability of resource and by transmission to demand centres.
  (Mr Carcas) As a Scottish company we obviously very much welcome the resource assessments carried out in Scotland. To just describe what was actually involved, they looked at the resource, both technically and economically, constrained at prices up to seven pence per kilowatt hour by 2010 and from memory I think the conclusion was that 60 gigawatts of total renewable energy could be accessed under those limiting criteria by that time. It was not saying that that would be accessed by then but what could be accessed by then with the big exception of grid capacity. Within that 60 gigawatts, again from memory, I think 14 gigawatts were from wave power.

Joan Walley

  218. In respect of the reasons which are preventing you from meeting the targets, what would you say to those people who, in response to the proposals for wind, have concerns about possible environmental damage to birds and wildlife?
  (Dr Pitcher) On our second project at Ovenden Moor in the Yorkshire Pennines, as part of the planning we have developed with English Nature to carry out a widespread improvement on a moorland area and to monitor the effects on flora and fauna in that area. We will be publishing the report later this year when the final survey is carried out. It was due last year but because of foot and mouth it was not able to be completed. All of the work carried out to date since the operation which started in 1993 has concluded that there are no changes whatsoever on that moor versus the birds in particular on an adjacent moorland which is a SSSI. We are seeing the patterns going up and down as predators and climatic factors are there, so from that we can conclude the effect of the wind farm, both during its construction and in its subsequent operation since 1993, has had no effect whatsoever on that wildlife at all.

  219. It would be very helpful if you could perhaps let the Committee have some additional information on that, particularly in respect of skylarks, kestrels, sparrowhawks.
  (Dr Pitcher) We have interim studies carried out which are not currently in the public domain but I can see if I can get those released and send those to the Committee, if that would be of help. When the final report is produced later this year I will make that available to you as well.

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