Select Committee on Environmental Audit Appendices to the Minutes of Evidence


Annex A

WWF-UK ANALYSIS OF THE ENERGY REVIEW

INTRODUCTION

  The Energy Review (the Review) was formally published in February 2002 and was the result of a six month study by the Performance and Innovation Unit (PIU) of the Cabinet Office. It is a report to Government and the Government will respond to its recommendations in due course with a White Paper expected towards the end of 2002.

  The aim of the Review was to examine the key trends, challenges and objectives faced by the energy system out to 2050 and develop a strategy to respond to the key influences on energy policy. A particular objective was to look at the prospects for making long term greenhouse gas emission reductions reflecting the Royal Commission on Environmental Pollution's (RCEP) report on "Energy—The Changing Climate" and it's recommendation that the UK should look to reduce Carbon Dioxide (CO2) emissions by 60 per cent by 2050.

  Whilst the report looks at issues to do with energy security and the implications of increasing use of imported fuels, especially gas, the bulk of the report and accompanying working papers focus on the options for a low carbon energy system. It is this aspect of the report which is of most interest to WWF and on which this analysis focuses.

THE REVIEW

  The Review reinforces the need for dramatic changes in the economy if the UK is to respond to more stringent environmental targets particularly greenhouse gas emission reduction. Given that the energy system accounts for 80 per cent of the UK's emissions of greenhouse gases and 95 per cent of the emissions of CO2 it is here that much of the change is going to have to take place.

  The Review concludes that a 60 per cent reduction in carbon emissions is possible by 2050 but only with action across the whole energy economy, a zero carbon electricity system will not alone be enough. There will also need to be major progress towards a low carbon road transport sector and managed growth in air travel.

  Although the Review looks at options to 2050 it only makes detailed policy recommendations for the period to 2020. For the period to 2020 the Review provides a detailed analysis of a number of low carbon options—energy efficiency (including CHP), renewables, nuclear and carbon capture and storage. The analysis is summarised in the following table and discussed below.

Energy Efficiency

  The Review estimates that energy demand across the economy could be reduced by 30 per cent saving £12 billion annually. The domestic sector is identified as being the area where most attention is needed and they suggest a target of a 20 per cent improvement in energy efficiency by 2010 and a further 20 per cent by 2020. A number of suggestions are made as to how this target could be achieved—expanding the Energy Efficiency Commitment (EEC); tightening building and product standards (and using fiscal instruments to promote the most energy efficient buildings and products); improving the market for energy services (removing the 28-day rule);

WWF Response

  WWF welcomes the importance placed on energy efficiency in reducing emissions and the need to focus attention on domestic consumers.

Combined Heat and Power (CHP)

  There is no detailed analysis of the prospects for CHP in the Review, it is included under energy efficiency. This may be due to the fact that there was no recognised CHP expert on the PIU team. The Review recognises that CHP has a role to play in improving the energy efficiency of energy production and therefore contributing to emission reductions but points out that it is not emission free. They do not advocate specific support for industrial CHP but do suggest policy support in the form of more favourable treatment for CHP under the Climate Change Levy and a requirement for proposals for new power stations to show they have considered sites with heat loads. The Review does recognise the specific problems that micro-CHP faces and recommends that Ofgem ensures that the connection procedures and processes for micro-CHP are simple and standardised.

WWF Response

  WWF is disappointed by the lack of attention given to CHP by the Review. It as a key technology in the drive to reduce emissions and is in need of more specific support. It is highly unlikely that the CHP target of 10 GW by 2010 will be achieved without additional measures and the government must address this urgently.

Renewable Energy

  The Review recognises that renewable energy technologies will need to make a substantial contribution to a low carbon energy system but they need to become more commercial to reduce the costs to acceptable levels. They suggest that a target should be set to supply an additional 39 TWh of renewable electricity by 2020, over and above the current target of 10 per cent by 2010 (the current 10 per cent target is expected to deliver around 39 TWh of renewable electricity by 2010 based on an estimated total supply of 390 TWh in 2010). This will be in the region of 20 per cent of the total electricity supplied in 2020 (depending on the exact energy demand). The Review indicates that this will raise household electricity prices by about 5-6 per cent (the 10 per cent by 2010 target is expected to raise prices about 4 per cent).

  The Review does not go into detail as to how this target might be achieved as it is unclear how successful the current instrument, the Renewables Obligation (RO), will be. The Review recommends that the consideration of any new mechanisms waits until after the 2007 review of the RO. The Review does however highlight that the network problems, specifically NETA, and planning issues currently restricting the development of renewables must be solved urgently.

WWF Response

  WWF welcomes the 39 TWh target as a good start but it does not go far enough. There is plenty of evidence to show that renewable energy could provide over 200 TWh way above the figure suggested by the Review. The government must set a target that reflects the real potential for renewable energy. The analysis of the network issues facing renewable energy development and possible solutions (particularly true cost reflective pricing) is a useful addition to the debate which the government should take forward as a matter of urgency.

Nuclear Power

  The Review recognises that nuclear power is a large scale zero carbon electricity source and that it may have a role to play if other low carbon options prove difficult to develop. It suggests that the nuclear option should be kept open and that actions are taken to maintain a UK presence in the international nuclear industry. These include—contributing to the international process of developing new reactor designs and processes; and ensuring that there are adequate skills in the UK to take forward any future proposals.

  It also recommends that the nuclear industry should be treated fairly in the market by ensuring that any new or "substantially raised" existing nuclear capacity benefit from methods used to value carbon and internalise the externalities of fossil fuel use . The nuclear industry should also fully internalise its external costs, including risks such as waste escalation. The Review highlights public acceptance as key to the future development of nuclear power and calls for a public debate focussing on the trade-offs between the risks and benefits of nuclear power.

WWF Response

  WWF does not agree with the conclusion to "keep the nuclear option open." WWF believes the risks to the environment and human health far out weigh any of the benefits of nuclear power and the option of nuclear power should be ruled out completely. The focus should be on ensuring that energy efficiency, renewables and CHP are developed to their full potential removing any need to consider the nuclear option.

Carbon Dioxide Capture and Storage

  The Review see's this as a way of preserving fuel diversity through enabling the continued use of high carbon fuels such as coal whilst at the same time meeting the need to reduce emissions of carbon dioxide. The Review supports the findings of the DTI Review of the "Case for a Cleaner Coal Demonstration Plant" which ran concurrently to the Energy Review. The DTI review endorsed the case for supporting the development of carbon capture and storage mechanisms recognising that more work was needed into many technical, legal and other aspects. It also suggests that if carbon capture develops it should be able to benefit from market regimes etc, which reward low or zero carbon options.

WWF Response

  WWF does not support the further development of carbon capture and storage technologies. There are many unknowns involved and there will always be the risk that the carbon will not stay securely "locked" away.

CONCLUSION

  WWF believes the Energy Review is a useful addition to the debate on the future of the UK's energy supply and gives a good overview of the challenges facing the energy industry in the next 20-50 years. WWF welcomes the recognition that energy efficiency, particularly in the domestic sector, is the key to moving to a low carbon energy system but are concerned at the lack of long term vision and support for renewables and CHP. WWF is particularly concerned about the support given by the Review to nuclear power and carbon capture and storage. These technologies have no place in a truly sustainable energy system and WWF believes that focussing on the rapid development of energy efficiency, renewables and CHP will more than meet the UK's energy demands without the need to resort to technical fixes' or rely on unsustainable generation technologies.


 
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Prepared 22 July 2002