Select Committee on Environmental Audit Appendices to the Minutes of Evidence


Memorandum from British Energy Plc


  1.  British Energy welcomes the opportunity to contribute to the Environment Audit Committee's renewable energy inquiry.

  2.  British Energy is the largest power generator in the UK, supplying about a fifth of UK electricity demand. It is currently the only major source of carbon free generation, avoiding the emissions of around 40Mt CO2 (equivalent to around half of all cars on UK roads).

  3.  As a company with a keen interest in developing renewable energy as a growing part of our UK and international portfolio, we welcome government support for renewable energy development. British Energy is currently engaged in a project to create Europe's largest wind farm on Lewis off the West coast of Scotland with partners AMEC. The development would ultimately see the construction of 300 wind turbines delivering at least 600 MW of electrical power via a cable link to the UK mainland. Other projects in prospect include an offshore windfarm at Skegness and an on-land windfarm in Canada by Lake Huron.

  4.  Given the major challenges in delivering secure low carbon electricity in the UK, government support is justified—however, we believe it should be extended to all carbon-free technologies including nuclear power.

  5.  Developing renewables to reduce overall carbon emissions will eventually lead to an increase in electricity prices to the consumer as a result of the renewables obligation. In principle carbon savings from replacement nuclear plant could be achieved at a third of the cost.


  6.  The level of the renewables obligation is expected to be sufficient to encourage the rapid growth of renewables generation in the UK market. However, the resulting cost to consumers is significant at about £1 billion by 2010. As far as emissions reductions are concerned the costs of the obligation equate to about £310/tC which is substantially more expensive than other low carbon alternatives. Carbon savings from nuclear could be secured at about a third of the £30/MWh of the renewable obligation. It is important that the cost of supplying carbon free generation remains acceptable to the consumer.

  7.  The RO will, however, not be enough to bring about the development of all renewable technologies, the more expensive of which will not be commercially viable even with the obligation. In the near future, this is likely to lead to a response based largely on wind generation. The Government will need to consider whether there is a case for R&D support to enable these other technologies to reach market at a later date.

  8.  Excluding large hydro and ineligible waste generation leaves the UK with a tiny proportion of "new" renewables as a baseline. Whilst the RO will provide a significant incentive to generators and developers the government targets are very demanding in terms of required rate of commissioning.

  9.  The required rate of growth in building and commissioning renewables in order to meet the 10 per cent target will place a significant strain on UK industry, although with appropriate policy and incentives this challenge could be met. However, given the ongoing difficulties with planning and infrastructure this will be far from easy. To extend the target at this time to a higher percentage in the following decade as proposed by the PIU Energy Review would seem premature. There should be no rush to set firm targets beyond 2010.


  10.  The existing UK Climate Change Programme mechanisms, to reduce emissions and promote generation from renewables are complex, ineffective and inconsistent. Energy policy needs to embrace simple and effective carbon valuation mechanisms if it is to succeed in the abatement of emissions and the promotion of carbon free carriers.

  11.  Capital grants for renewables are focused on those technologies (other than onshore wind) that are closest to market, with a view to accelerating the development of offshore wind and biomass plant development. At the levels available the capital grants will help the development of a handful of projects, but in British Energy's view, are unlikely to go far in the push towards meeting the renewables target.

  12.  We agree that as a carbon free generation source renewables should be exempted from the Climate Change Levy. However, we believe that since the Levy is aimed at achieving carbon reductions through penalising the business use of energy, all sources of carbon free generation should be made exempt.

  13.  Publicly funded R&D for renewables has been growing in recent years and should continue to do so to stimulate innovation and the development of new and existing technologies. We believe research should now focus on the technologies that cannot currently compete in the market even with the RO.

  14.  It is important that there is a level playing field and that any support arrangements for particular technologies are explicit and do not distort the market.


  15.  With a variety of often conflicting energy policy objectives and the need for a robust approach to the integration of renewables into the UK energy supply industry, it is critical that government departments, regulators and other stakeholders work in a coherent and consistent manner.

  16.  Mechanisms need to be simple and focused in order to achieve the desired goal, reduce conflicts and minimise cost to the taxpayer. If mechanisms are to be effective in tackling the UK's greenhouse gas emissions they need to focus on carbon valuation. Care also needs to be taken to ensure undue cost or burden is not placed on particular sectors.


  17.  We recognise that the Energy Review marks an important step by government. In recent times, the conventional wisdom has, broadly, been to leave energy decisions to the market and regulators, with Government minimising its direct intervention. However, political pressures to address the decline of certain sectors including coal, to promote renewable technologies, and to act on concerns about the environment have prompted a gradual shift in government attitude.

  18.  British Energy believes the PIU Report and the Government's forthcoming consultation must lead to decisions about how the UK should prioritise important yet often conflicting objectives like security of supply, competitiveness, response to climate change, and sustainable development. Compromise seems inevitable, but BE believes the first priority must be security of supply. The PIU report was remarkably complacent on this issue, however we believe there will be a strong message to the Government that this remains an area of great concern.

  19.  The report proposed the expansion of the current 10 per cent by 2010 target for renewables to 20 per cent by 2020. Whilst we fully support the need to make progress with renewables build, we believe that targets beyond 2010 should be set on the basis of sound practical experience. It seems hard to justify extending the target even before the Renewables Obligation has come into effect. Through manufacture, installation and operation of large amounts of renewables, the UK will learn what is practically possible over the coming years.

  20.  British Energy believes that the targets for renewables will be extremely challenging and impose significant additional costs on consumers. There are a large number of serious technical and non technical barriers that will need to be overcome if renewables are to be installed on the scale required to meet the target, not least very significant investment in infrastructure and standby generation to compensate for a large amount of intermittent generation.

  21.  In terms of carbon emissions mitigation, there has been a tendency to see renewable sources and energy efficiency as providing an alternative to the carbon-free energy from nuclear. However, in our view it is more logical to treat nuclear and renewables as complementary carbon-free energy sources and in the campaign to meet increasingly tough climate change targets beyond Kyoto both will be required.

March 2002

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 22 July 2002