UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 876-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

WELSH AFFAIRS COMMITTEE

 

 

energy in wales

 

 

Tuesday 31 January 2006

MR DAVID WAGSTAFF, MR RICHARD ABEL, MR GARY SHANAHAN,
MS CATHY ALLEN, MR BRIAN MORRIS and MS RUTH HENRYWOOD

Evidence heard in Public Questions 1 - 116

 

 

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Welsh Affairs Committee

on Tuesday 31 January 2006

Members present

Dr Hywel Francis, in the Chair

David T C Davies

Mrs Siân C James

Mr David Jones

Jessica Morden

Hywel Williams

Mark Williams

________________

 

Memorandum submitted by the Department of Trade and Industry

 

Examination of Witnesses

 

Witnesses: Mr David Wagstaff, Director, Energy Strategy Development and Delivery, Mr Richard Abel, Director, Domestic Energy, Mr Gary Shanahan, Assistant Director, Bioenergy and Marine Renewables, Ms Cathy Allen, Assistant Director, Consents Policy and Delivery, Mr Brian Morris, Assistant Director, Carbon Abatement Technologies, and Ms Ruth Henrywood, Deputy Director Energy Review, Department of Trade and Industry, gave evidence.

Q1 Chairman: Good morning. Welcome to the Welsh Affairs Committee. Would you please begin by introducing yourselves.

Mr Wagstaff: I am David Wagstaff. Director of Energy Strategy Development and Delivery is my full title, which basically means overall strategic direction for the Department of Trade and Industry on energy policy and also the Climate Change Programme Review.

Mr Abel: I am Richard Abel. I am the Director of Domestic Energy Policy in the Energy Markets Unit in DTI, responsible for security of supply and the regulatory framework for gas and electricity domestic markets.

Mr Shanahan: Good morning, I am Gary Shanahan from DTI's Emerging Energy Technologies Unit, responsible for biomass and marine renewable programmes and policy.

Ms Henrywood: I am Ruth Henrywood and I lead the nuclear workstream within the Energy Review.

Ms Allen: I am Cathy Allen from the Electricity Development Consents Team within DTI. We consider applications for electricity infrastructure, such as power stations.

Mr Morris: I am Brian Morris, also from DTI. I am the Head of the Carbon Abatement Technologies Unit, which includes technologies such as clean coal technology, and I am responsible for overseeing the development of those technologies.

Q2 Chairman: Thank you very much. I will begin by referring to the Government energy policy. It is aiming to cut carbon dioxide emissions by 60% by 2050, with real progress by 2020. I notice this is a matter of great controversy at the moment in the Government. I see that there is an article on the front page of the Guardian today. Will that be measured at a UK level or will it be assessed at a regional level?

Mr Wagstaff: The target is set at a UK level. Obviously, as you say, it is a Government target, not just a Department of Trade and Industry target, so it is shared by all of government. Of course each region and area in the UK will be expected to contribute, but there is not an allocation by region, it is a UK target.

Q3 Chairman: There would not be an internal market, so to speak, between the regions competing with each other.

Mr Wagstaff: The Carbon Trust has suggested, for example, that there could be a UK trading scheme, but of course there is already an EU trading scheme, so there is not at the moment any plan to have that kind of internal market you have just mentioned. As you will be aware, however, the whole issue of the target for carbon emissions is being looked at under the Climate Change Programme Review. Indeed, the article to which you have referred mentions the fact that the findings have not yet been published, so, until the findings are published, it is difficult to say what exactly will be in that document.

Q4 Jessica Morden: The topography of Wales makes it highly suitable to exploit sustainable energy production. How does Wales fit into the UK Government's plans for greener energy production?

Mr Shanahan: Wales has an abundance of natural resources in terms of green energy. There are a number of ways in which Wales can contribute to the renewable development targets which the Government has put in place (for example, 10% of renewable electricity by 2010 and the aspiration to double that by 2020), and the Welsh Assembly has also been developing its strategy for energy and renewables are a significant part of that, but certainly we see wave, tidal, biomass and PV all having the potential in Wales to contribute to those targets.

Q5 Jessica Morden: You have mentioned that the Welsh Assembly Government has its own route-map for future energy production. Do you feel it dove-tails into the UK Government's plans? If there is a difference in direction, which route do you take and who decides?

Mr Shanahan: The route-map is out for consultation at the moment, so I guess we need to see the results of that consultation before we can say how it might dove-tail into the UK policy.

Q6 Jessica Morden: Who would make the final decision if there were a difference?

Mr Shanahan: I am not sure. Certainly the Welsh Assembly will be setting their own strategy. The Sustainable Energy Policy Network and the meetings of ministers that look at the whole piece of sustainable energy policy would consider if there were any differences between the Welsh policy and the UK policy.

Ms Allen: If I may give you the statistics on the renewable energy side: the UK 10% target equates to 33.6 TwH per annum and the Welsh Assembly Government has a target of 4 TwH per annum of renewable energy production by 2010 and 7 TwH by 2020. The Welsh Assembly Government target fits underneath, as it were, the UK Government target. The Welsh Assembly Government target is about 12% of the UK Government target.

Q7 Hywel Williams: Could I go back to the very first question on carbon dioxide emissions - perhaps I did not understand or did not hear. Are the targets set for Wales separately from the UK?

Mr Wagstaff: We have just been talking about the Welsh Assembly Government target, but the target to which the Government has committed is a UK-wide target and it does not specify what contribution needs to be made by which parts of the UK to meet that target. It is quite difficult to measure carbon emissions and you will be aware that there is quite a lot of dispute about how you measure the baselines. If you tried to do that broken down into lots of regions, you would probably complicate the measurement task even more. As far as the UK Government is concerned, it is a UK-wide target.

Q8 Hywel Williams: Turning to the export of energy from Wales, North Wales exports energy and South Wales imports energy at a much higher price. Can this imbalance be rectified at an all-Wales level or could that be reflected in a UK Government energy policy?

Mr Wagstaff: Could you explain the problem that needs to be rectified.

Q9 Hywel Williams: Should it not be just on a North Wales basis or should it be a matter for the UK Government energy policy?

Mr Wagstaff: I am sorry, the market is functioning. What is the failure that you are wanting the Government to address?

Q10 Hywel Williams: It is not a failure. It is clear that North Wales produces more electricity than is used in North Wales. South Wales produces less electricity than is used in South Wales, and the price is much higher. In fact, South Wales apparently pays the highest price for electricity possibly in the UK. Is there any scope for looking at this on an all-Wales basis, given that North Wales produces a lot and South Wales produces not a lot? Presumably there are transmission costs involved, but is there any mileage in looking at this question on an all-Wales basis?

Mr Abel: We recently connected up the electricity market across GB, including Scotland joining up with the England and Wales system. It is clear that the location of generating capacity close to population centres is not always evenly distributed across GB. The market mechanisms that Ofgem have developed around transmission charging, which are regularly considered, try to reflect that. But domestic and industrial consumers obviously have scope to shop around for the best deal and I do not think that is normally - except perhaps with some very large consumers - completely constrained by geography. There are usually options of different suppliers in different areas.

Q11 Hywel Williams: We do have some very large consumers, in terms of heavy industry, in Wales. Are the price differentials significant for these large users of electricity; for example, the heavy industry in South Wales?

Mr Abel: I am not personally aware of it having been raised as a problem between North and South Wales. Obviously, prices are of concern to large industrial users, particularly at present, but I was not aware of that as a particular issue. But we will look into that and see if we have had any representations.

Q12 Hywel Williams: Looking at Wales as a whole as a net exporter of energy, are there any tangible advantages for Wales of being a net exporter?

Mr Abel: I suppose it would be true to say that if one has the generation within one's area there is a certain amount of economic activity - not huge - associated with that in terms of jobs. For individual consumers, there are issues about connecting to, say, gas - rarely to electricity - and there can be a difference between rural and urban environments. That is not peculiar to Wales; it is obviously a feature of Scotland and indeed some parts of England. From our perspective, particularly given that there is a grid going across the whole of the UK, issues are primarily around the UK becoming a net importer of energy - and already moving into that position in gas, which raises particular issues - rather than broken down into particular geographic parts of the grid.

Q13 Hywel Williams: If the electricity generation industry in Wales were developed, at perhaps some cost to the environment of Wales, that electricity would not be used in Wales but rather exported, and you cannot point to any tangible benefits for Wales because that would be considered on a UK basis.

Mr Abel: Clearly there are costs and benefits in any individual infrastructure decision around an energy product. I guess the advantage is not one that is peculiar to Wales but one that is for the UK as a whole, in the sense that if for inward investment by companies the UK is seen as a place where there are secure, reliable energy supplies, and, looking in the long-term, as a market that delivers competitive prices and there is security of supply, that has to be good thing for Wales as well as the rest of the UK.

Q14 Hywel Williams: But not directly.

Mr Abel: No, that is an indirect benefit, I agree.

Q15 Hywel Williams: I know that the UK is an importer of electricity. Is that the case at the moment?

Mr Abel: We do import electricity via the interconnector from France. We are not a net importer of electricity - there is a generating margin - but there is that connector there and, by and large, particularly in the winter, it produces and sends electricity into the UK market.

Q16 Hywel Williams: I wonder, as a matter of information, how that electricity, when it is imported, is divided up between renewable and non-renewable sources.

Mr Abel: I could not answer that question directly, but, if you look at the generation mix in France, from where it is coming, clearly there is a large nuclear component to that.

Q17 Hywel Williams: The 14% in 2000 - if I am reading these figures properly from your brief - would that be classified as renewable because it came in from France largely from nuclear production?

Mr Abel: I think that is probably a wider question. I do not know the answer as to whether one would classify that as renewable. I know there have been discussions, and this has come up in the House, about whether nuclear energy is classed as renewable or not, and I do not think it would be good for me to go into that now.

Mr Shanahan: Certainly, in terms of the EU Renewables Directive, nuclear would not be classified as renewable.

Mr Wagstaff: And it does not count under the renewables obligation.

Hywel Williams: Thank you.

Q18 Mr Jones: You have touched on the point I was about to raise as to whether, as a matter of information, nuclear energy was categorised as a renewable source. Having regard to the fact, so far as I know, that it does not produce significant quantities of greenhouse gases, do we know why it is not classed as a renewable source of energy?

Mr Shanahan: We classify our renewables in line with the EU Renewables Directive and that does not define nuclear as a renewable source.

Q19 Mr Jones: I understand that but I was wondering if you knew why the Directive did not class nuclear as a renewable source of energy.

Mr Shanahan: No, but I can clarify that in writing, if that would be helpful.

Q20 Mark Williams: I am now turning to the issue of the division between reserved and devolved powers to the National Assembly. We touched on this earlier. You have stated that the Welsh Assembly is consulted on all consent applications in Wales. I would like to know a bit more about the mechanisms by which that consultation works, and, in particular, how the National Assembly's objections would be taken into consideration.

Ms Allen: On consent applications where the proposed generating capacity is in Wales but it is the Department of Trade and Industry which is taking the decision, we would write to the Welsh Assembly Government and ask them if they would wish to put forward their views on a particular proposal. That would then be taken into account when the minister was coming to make his decision.

Q21 Mark Williams: A couple of years ago our predecessor Committee was told by Jacqui Smith (the then Minister of State in your Department) that the tripartite group considering energy consents would report to the minister by the end of the year 2004. We are now in 2006 and we have yet to have the report. I would be interested to know, firstly, why it has taken so long. Why have we still not had that report and what have been the problems behind the arrival of that report?

Ms Allen: I very much agree that it has taken much longer than expected to carry out the work of the tripartite group. The issues are rather complex, and we did not want to come to a rushed decision, so that is why it has taken longer than expected. We hope that the work of the group will be finalised as soon as possible.

Q22 Mark Williams: Could you elaborate a bit more on the problems you are trying to overcome.

Ms Allen: It is a difficult decision because you have to balance national energy policy against local democracy, I suppose, and that is not an easy decision to have to take.

Q23 Mark Williams: Can we assume some of the problems therefore are between the National Assembly and the Department in London?

Ms Allen: It is obvious that the National Assembly would wish to see consents going to the Welsh Assembly Government because that is the basis of their request to the Wales Office and to DTI, so it is a question of working through all those issues.

Q24 Mark Williams: DTI's objections to the National Assembly request are ...?

Ms Allen: As I say, it is an issue about balancing how you have a national energy policy which is required to keep the lights on, against giving local democracy to areas where the actual generating station is going to be located.

Q25 Mark Williams: Clearly you sincerely hope the conclusions are reached sooner rather than later, but when would you envisage decisions being made, given that we have now waited coming up for two years?

Ms Allen: Yes. I am afraid I cannot give you a definitive answer on that, because we are now into a situation where we have an energy review and I think that has a bearing on the issues, but we would hope some time later this year.

Q26 Mark Williams: Again, you have touched on this, the dilemma, if you like, between local democracy and wider energy policy, but could you go into a bit more depth on the impact upon UK strategies for energy production were energy consents devolved to the National Assembly. What would the impact be at the UK level were that to happen, as some people have suggested, not least the National Assembly?

Ms Allen: I am not entirely sure. I cannot give you the figures because it would depend on the number of power station proposals which were coming forward in Wales as to the contribution they would make to the overall energy situation.

Q27 Mark Williams: If we talk in very general terms, the Department would see the National Assembly's request as a negative. You have said that you would like to seek a balance, a consensus, between the three bodies involved, but the Department would see the National Assembly's request as more of a negative than a positive if we look solely in terms of energy production nationally.

Ms Allen: I am not saying that. I am saying it is an issue that needs to be looked at very carefully and the tripartite working group has not yet made a final decision on that.

Mark Williams: Thank you very much.

Q28 Mr Jones: You have mentioned the energy review, and it is clear, at least from the noises the Prime Minister has been making, that the Government is considering now the development of a new generation of nuclear power stations. At the same time, of course, the Welsh Assembly has set its face against the development of nuclear power stations; although again we have recently heard noises from their economic development minister that he may be softening his stance on the matter. If the UK Government did decide to go down the nuclear route but the Welsh Assembly maintained its opposition to nuclear power stations in Wales, how could this difference of approach be managed between the two administrations?

Mr Wagstaff: I will hand over to my colleague in a moment, but could I first say that I do now have an answer to your previous question about the renewable categorisation of nuclear. It boils down to the fact that it is a finite source of fuel. Although it shares the environmental benefits of renewable energy in that it does not emit carbon dioxide at the point of generation, because it is a finite fuel source it is not renewable in the dictionary definition.

Q29 Mr Jones: Pausing briefly there, before you answer the question I just asked, that being the case, is there not an argument for categorizing nuclear power separately from fossil fuels on the one hand and, if you like, traditional renewable sources on the other?

Mr Wagstaff: Yes. We will get on to what the Energy Review is looking at in a moment, but, certainly on that particular point, the Government is examining options to promote low carbon generation. They are not constrained by a definition of renewable; they are looking at, as one of the four key objectives, low carbon generation - but of course balancing it against the other objectives which are security of supply, competitive markets and addressing fuel poverty issues. On the question of the review and nuclear, perhaps I could ask my colleague to say something.

Ms Henrywood: It is important to stress that no decisions have been made either way on whether the Government should go for new nuclear or not. It is one aspect of a much wider energy review, as David was saying, looking at low carbon generation technologies. In terms of consents, if there were to be any proposals for new nuclear build they would have to go through the section 36 planning application, so, as we were saying earlier, under the regime now that decision would be made by the Secretary of State.

Q30 Mr Jones: That being the case, where does that leave the National Assembly's non-nuclear Wales policy?

Ms Henrywood: The consultation that we launched last week looks at nuclear amongst other things and we will be looking for contributions from across the UK on the merits or not of new nuclear. As the position stands at the moment, however, given that the consents process involves a decision by the Secretary of State rather than the Assembly and rather than Parliament, it would be the Secretary of State who would decide.

Ms Allen: Could I supplement that by delving a little bit into the section 36 consents process. If the nuclear power station were proposed for somewhere in Wales and the local planning authority objected to that development, then the Secretary of State would be obliged to hold a public inquiry into that proposal under the statutory section 36 scheme.

Q31 Mr Jones: But the ultimate decision would reside with the Secretary of State.

Ms Allen: Indeed, yes.

Q32 Mr Jones: Would it be possible for the UK to pursue a nuclear policy but not to build nuclear power stations in Wales? Is it possible that that is a course that the DTI might take, to exclude Wales from the next generation of nuclear power stations?

Ms Henrywood: I think it would depend where the proposals came from. If the review concluded that there was a future for new nuclear, we would be looking for the private sector to come up with proposals for where any new build should be sited, so we cannot pre-judge where that would be at this stage.

Mr Wagstaff: Clearly there are at least two options. One option would be to build on new sites and another option would be to build on existing sites. But, beyond that, given that the document itself was only published last week, it is a bit premature to start speculating about where there might be some nuclear power stations if the decision were taken to encourage the private sector to build them. The answer to your question is: yes, it is possible, but that is not a policy that I have heard anyone talk about.

Q33 Mr Jones: You mention existing sites and there is one very obvious existing site in Wales.

Mr Wagstaff: Indeed.

Q34 Mr Jones: If you like, the other side of the coin, is it therefore the case that the National Assembly's ambitions to pursue a nuclear-free Wales policy would very likely be frustrated by the DTI, if the DTI decided it wanted to grant consents to nuclear power stations in Wales?

Mr Wagstaff: It would be the Government that makes the decision, not just the DTI. Ultimately, energy policy at that level has not been devolved, so it remains with Whitehall to take those decisions.

Q35 Mr Jones: The answer is: yes, the National Assembly's ambitions could well be frustrated.

Mr Wagstaff: As we have just heard, the National Assembly does not make the ultimate decision, so, yes.

Q36 David Davies: Could I take you back to tangential points. On this issue of whether nuclear energy is a finite resource, it relies I think on the use of uranium. I have heard figures about the reserves of uranium. Some people have said it is likely to run out in ten years and other people on the other side of the argument have said that so little of it is used that it is pretty well finite. I have heard those two conflicting views put to me and I wonder which is more accurate.

Mr Wagstaff: It is certainly not infinite in the sense that solar or wind is. I think that is really the definition you are getting at. It relies on an input that has to be got out of the ground. On the science, I have read many articles, and I am sure you have, about oil, gas and all the other reserves as well. It is very hard to get any consensus on how much of any of these things there is left. I should also point out that I know one of the reasons we specify there is low carbon emission at the point of production is that there are of course debates about the amount of carbon emitted in getting the uranium out of the ground and getting it into this country - because of course we do not have uranium in this country.

Q37 David Davies: Although, of course, that would apply to coal, gas or virtually anything, so in some senses that is not a fair argument against nuclear.

Mr Wagstaff: No. I am sorry, I was not trying to make an argument against nuclear; I was trying to explain why the matter of carbon emissions is quite a complicated one.

Q38 David Davies: With oil and gas, which you have mentioned, I have heard figures of between 50 and 200 years, but it is likely to run out within the next 200 years. Everyone seems to be agreed on that. Someone from the Green lobby put to me that uranium could run out within ten years, to which my answer was that there would not be any point in building a nuclear power station because it would take ten years to get it through. Is that realistic or is the nuclear industry view that it is pretty infinite because so little is used. Is that the more accurate view or is it somewhere in between?

Mr Wagstaff: I would be speculating.

Ms Henrywood: I know there is an OECD study which estimates that there would be enough uranium for new nuclear build across the globe - because obviously it is not just the UK that is considering this issue. I think there is also a question of the quality of the uranium. I think there is lots there but of varying quality.

Q39 David Davies: Enough for how many years? Did the OECD say?

Ms Henrywood: I do not know the exact number. I would say that as part of the work we are doing on the Energy Review we are looking at the availability of uranium in the context of analysing the costs and the benefits of whether new nuclear is viable.

Q40 David Davies: It seems to me that this is a crucial point, and, with respect, nobody here seems to be able to supply a definitive answer. I know there is no definitive answer ----

Ms Henrywood: I would say that that is something we are looking at in the review which is ongoing, so it would be premature for me to speculate on that.

Q41 David Davies: Would it be practical or even possible for the Welsh Assembly, if it does name itself as nuclear-free, not to buy any electricity which has been produced from nuclear power stations? There are energy companies out there who will supply energy that comes only from renewable sources, so I presume that you could do something similar as a nation. Wales could say, "We are not going to have any energy that is produced from nuclear power stations." Would that be a practical proposal?

Mr Abel: I think the schemes to which you refer are primarily for individual consumers. Leaving aside the nuclear question of the different source of fuels, some companies do offer things like that now, and perhaps they might in the future. Whether it could be done on a national basis, I cannot really see how that would work because it is going to be individual consumers who are choosing which supplier to get their electricity from.

Mr Wagstaff: I do not think you could have a competitive market, which is one of the four fundamental goals of energy policy, if you were constraining the population in that way.

Q42 Hywel Williams: Could I take you back to the question of uranium supply. Of the uranium that we know is available, how much of that percentage is located in politically stable, safe countries?

Ms Henrywood: We get most of our uranium for the current generation of nuclear from Australia and Canada. There are uranium reserves in less politically stable countries, but most of it comes from Australia and Canada. I think it is about 30% but I am not sure if that is accurate.

Q43 Hywel Williams: That supply is finite. Do you have any idea as to how long it will last?

Ms Henrywood: The information I have here is that the known recoverable uranium reserves should last about 50 years.

Q44 David Davies: Is that known recoverable in Australia and Canada and stable places or across the whole globe? Is that based on the amount we currently use or projected amounts if China and other places ----

Ms Henrywood: I do not know, I am afraid.

Mr Wagstaff: We do not know. It should be pointed out that when you are working on a 50-year time scale we do not know which countries are going to be stable and which countries are not going to be stable.

Q45 Hywel Williams: Could I clear up one other point which is troubling me based on something you said earlier on. Is it the Government's target to increase energy production from low carbon at the point of production facilities, or is it also or otherwise to increase production from renewables? Which are you aiming for? Do you want more electricity production from renewables and from low carbon such as nuclear? Is this an either or?

Mr Shanahan: There are definitive renewables targets that set what the Government expects to come from renewable sources; that is, 10% by 2020 with an aspiration to double that by 2020. But in terms of the impact of other lower carbon sources of energy, they fit into the wider Climate Change Programme targets. That is the difference. Both need to contribute towards the wider Climate Change Programme targets.

Q46 David Davies: Without going into the benefits or otherwise of nuclear power, could you tell us what the practicalities or practical problems would be of extending the nuclear power station at Wylfa?

Mr Wagstaff: I do not think I can tell you what the practical problems are, but I am sure we could write to you on the point.

Q47 David Davies: Is it a fairly easy engineering process to extend the life of a nuclear power station? Is it something that is fairly straightforward, or does it involve huge amounts of rebuilding?

Mr Wagstaff: It depends which type of nuclear power station it is and it depends obviously on how near to the end of its life it is. But I am afraid I do not have the technical expertise to answer that question.

Q48 David Davies: From the memorandum which you have supplied to us, powers of commercial gas storage appear to be split between the UK and the Welsh Assembly Government. Could you tell us how that works in practice, and, in particular, with regard to the facilities in Pembrokeshire.

Mr Abel: In relation to the Milford Haven import project.

Q49 David Davies: Yes.

Mr Abel: The pipeline connecting the import facilities which are planned in Pembrokeshire is a matter that the DTI considers the consent for, as the National Grid power exempts a gas transporter from planning permission regulations and so that is done separately. The Welsh Assembly Government has a role in relation to the facilities on land in terms of the import facilities and also the planning permission that applies to gas storage facilities on land in general, whether at Pembrokeshire or indeed elsewhere.

Q50 David Davies: Who has the planning permission over pipelines, such as the one that might go through the National Park?

Mr Abel: DTI.

Ms Allen: We look at the environmental impact assessment aspect. As Richard has said, because it is a licensed gas transporter, they have - I forget what the phrase is - something like "permitted development rights" so far as the pipeline is concerned, but the Secretary of State looks at the environmental impact of the development.

Q51 David Davies: Just out of interest, would the DTI have similar planning powers over similar issues in Scotland?

Mr Abel: I will confirm this but I believe that because National Grid's exemption is by virtue of it being a gas transporter, similar considerations apply in Scotland. But I will confirm that, if I may, after this session.

Q52 David Davies: Without wanting to go back over anything else, in terms of power stations, does the DTI have similar planning powers overall in Wales as they do in Scotland? Or does Scotland have more devolved powers over planning issues?

Mr Abel: There is a difference there, I think.

Ms Allen: That is right, there is a difference. In Scotland section 36 consent powers have been devolved since 1999, shortly after the Scotland Act.

Q53 Mark Williams: I think you have already answered one of my questions in regard to Milford Haven, but how will the project there tie in with UK strategy generally on the use of gas?

Mr Abel: The two import facilities there are very important, looking forward, for the overall security of gas supplies for the whole of the national transmission system in Great Britain, because, when they are up and running, on present plans they will have the import capacity to supply about 20% of UK demand averaged out over a year. That is obviously very significant. It is important, because, as I mentioned earlier, the UK became in 2004 a net importer of gas. Along with storage facilities to deal with (the fact that we use a lot more gas in winter than we do in the summer), the ability to import the gas is very important. The Milford Haven projects are an extremely valuable contribution to that.

Mr Wagstaff: Would it be helpful if I said a bit more on Wylfa? I do have some information here. The Nuclear Decommissioning Agency is due to publish its strategy this spring and it is the NDA which has responsibility for nuclear clear-up. We understand that they will cover this issue of Magnox(?) in that strategy, so there may be some more that will be available within the next few months.

Q54 Mrs James: I am particularly interested in clean coal technology and I believe the Government has already allocated over £500 million - a significant amount of money - to the emerging renewable and low carbon technologies. Do you know how much of this money is going towards clean coal technology?

Mr Morris: I am not too sure where that £500 million has come from.

Q55 Mrs James: From between about 2002 and 2008, if you add it all up.

Mr Morris: Let me tell you what we have allocated for developing clean coal technologies and clear fossil technologies. Since 1999 we have allocated about £13.5 million on about 45 R&D projects, and that money has been spent over that period of time in the R&D work. Under the new technology strategy arrangements within the DTI, we have a share of some £20 million which can be allocated to some sustainable fossil technologies. At the moment there is a call going on for proposals for R&D projects and there are proposals in there which are being assessed. That is what we have been doing on R&D into clean fossil technologies. We also have some work we are doing with the Americans. About £3.5 million is going into that from the British side and that is looking at materials for more efficient power plant and also at a virtual demonstration plant, which is really trying to simulate a power plant in a computer system to make it easier to try to identify if a particular plant would work better in certain circumstances than in others. That is the sort of money we are putting into domestic R&D and money we are putting into some collaborative work. We have recently signed an agreement with the Chinese for some further research and development with them and we are due to have some meetings with them in April to decide how we are going to spend that money. The other element of the work is the money announced by the Chancellor back in the Budget in April last year. That was £25 million for a demonstration plant and then he announced a further £10 million in November, making it up to £35 million. At the moment we are going through the process of setting up a scheme to spend that money on a demonstration project, which quite likely will be something to do with clean coal technology as opposed to other fossil fuels, but it is very early days in that yet. We are still getting state aid clearance and we are still getting the scheme together. We were hoping for proposals to come through early in the spring. We would like to assess a project that would be worth pursuing and worth supporting.

Q56 Mrs James: You have obviously talked about the assessments that are ongoing, have you made any assessments of the potential to exploit coal technology in Wales? Do you have any time frames or any idea of any work that is going on in Wales?

Mr Morris: We are aware of activity in Wales. I know there was a proposal for a carbon capture storage project in South Wales. It has not made any real progress beyond the idea stage. A company called Progressive Energy had ideas about a particular project like that which would involve injecting carbon dioxide into an aquifer in the St George's Channel, but it has not gone beyond the ideas stage. With all these projects, Wales and England and Scotland are all taken as one. Proposals can come from any of the three countries - well, four countries, actually, including Northern Ireland - for projects which would be eligible for that support. But at the moment we do not distinguish between Wales, Scotland or England for allocating those grants.

Q57 Mrs James: The message, if you have ideas, is to come to you.

Mr Morris: Yes.

Mr Wagstaff: In the longer term, it might be worth mentioning the Energy Review will be very much focusing on the whole clean coal technology and carbon abatement technology as part of looking at potential technologies. That is looking longer term.

Q58 Mrs James: I think it is a fundamental question.

Mr Morris: In June Malcolm Wicks announced a carbon abatement technology strategy which sees how we should be developing these technologies over the next 20 or so years. That was announced in June. In fact he was also at that time able to announce the £25 million that we have been given by the Treasury. That sets our framework in developing clean fossil technologies up to 2020 and just beyond. The aim is really working through more efficient technologies - using the coal more efficiently, therefore less emissions - biomass through to carbon capture storage, where there is huge potential for large cuts in carbon emissions. But the strategy should be in the library. I can arrange copies for you.

Q59 Mr Jones: You just mentioned carbon capture, which is an area that fascinates me. Could you tell me a bit more about carbon capture and what is done with the carbon once captured. Do they remain there or are they processed?

Mr Morris: The idea of carbon capture storage is that if you are burning a fossil fuel like coal or gas you capture the carbon dioxide. Without getting too deeply into the technologies, you can either do it before you combust the gas or after combustion. Once you have the carbon dioxide, you can then transport it to a point where you can geologically store it away from the atmosphere. Some people talk of it as putting it back where it came from; that is, you have dug it out of the ground as fossil fuel and you put it back in the ground. There are a number of ideas on where you can put it. The depleted oil and gas fields in the North Sea are potential sites for disposal of the carbon dioxide. The aquifers, provided they are the right type of aquifer - and you have to be very careful here because you cannot just stick it into any old aquifer; you have to get the right sort of aquifer with the right sort of cap lock above it, so it is stored and trapped - mean you can store it underground. Once you have filled up that aquifer, you can seal it, and the theory is that it will stay down there for millennia. There are examples of it being done throughout the world now. Sleipner, the project in the Norwegian sector of the North Sea, has been going for just over nine years. They have been injecting carbon dioxide into an aquifer just above the gas field that they have been exploiting and it appears to be behaving itself and staying down there. We want to store this stuff away for basically hundreds of thousands of years, so nine years is nothing really, but the evidence suggests that it does appear to be working. There are other projects around the world, particularly in the United States and Canada, where they are storing carbon dioxide. In North America they are usually doing it to get more oil out of the oil wells. It is a very good for getting more oil out. But that is the idea, and of course one of the big issues is about managing that process properly so that it does not leak out again. That is one of the sensitive issues about the whole concept of carbon capture and storage.

Q60 Chairman: We will be taking evidence from Tower Colliery in March, we hope. We are aware that the DTI has assisted Tower Colliery to the tune of something like £3 million to "maintain access to remaining reserves". We are also aware, confirmed last week, that Tower Colliery will be closing in about two years time. What investment is being provided to develop new technology to access the 250 million tonnes of coal that remains in Wales today?

Mr Morris: The coal mining industry is not my area of competence, to be honest with you. I concur with your statement that Tower is meant to be shutting in 2008, and I understand it is shutting because it would have been exhausted by that time. I also understand there are other projects afoot to look at the potential for new coal fields in South Wales. I think there is another operating mine which is quite small and there is a potential project - but I am not sure whether that is just looking at the opportunities rather than anything being seen as a commercial concern at this stage. But this more information that I have picked up second-hand rather than being involved in it directly myself. If you wish me to find out more about it, I can go back to my colleague who is responsible for the coal mining industry and ask him for confirmation and then I can write to you later.

Q61 Chairman: You would not be able to give us any figures on the financial support you are providing for such projects.

Mr Morris: I will not be able to give you the financial information. I can ask a colleague to provide that information and send it to you.

Q62 Chairman: Tower Colliery is particularly concerned about one very scarce commodity; namely skilled labour. We are fast running out of skilled miners. Within less than a decade it is likely that we will not have any left. There is a degree of urgency about the situation in South Wales. Do you have any observations on that?

Mr Morris: Like a lot of UK mines, all the mines have been gradually shrinking. All I can say is there is a possibility of this other project which obviously could be hopeful. But we are becoming more and more dependent on imported coal nowadays throughout the United Kingdom. About half our coal now is imported, compared to domestically produced coal. I know Aberthaw takes most of its coal from Tower at the moment. When that dries up, I suspect it will be importing coal, unless the other projects start to show opportunities for fresh supplies of coal.

Q63 Chairman: Cornus has recently had the licence for the possible Margam new mine - and you may have been alluding to that.

Mr Morris: Yes.

Q64 Chairman: Would they be able to access any development funding or any time of finance?

Mr Morris: They may well be able to do so, but I would again need to go back to my colleague who is managing all that to give you a more precise answer on that. I would not want to give you a hearsay answer when I can go and talk to a colleague and write to you with a more definitive answer.

Q65 Chairman: Thank you.

Mr Wagstaff: You mentioned skills there and I wanted to make the more general point that one of the things the Energy Review will need to look at is the whole skills question in terms of not just coal but also if there were to be another generation of nuclear or indeed any of the new technologies that are being developed. I do not work on the review itself but, under any proposals or any suggested options, there will need to be issues about the people elements and the skill elements as well as the technology and funding elements.

Q66 Mark Williams: Could we now turn to wind farms. Are you as a department able to give us a breakdown of the UK's wind farms that are located within Wales?

Ms Allen: I can give you figures which come from the British Wind Energy Association website. If we are talking about operational wind farms, Wales has 22 out of a total of 113, which is 19%, and 254 megawatts out of a total of 1123 megawatts, which is 23%. That is onshore. Offshore, of course, Wales has the first offshore generating station. Two others have subsequently come along, so it is about 33% and 60 megawatts out of 214 megawatts, which, again, is about 33%.

Q67 Mark Williams: While, as you say in your briefing, the geography and the topography of Wales is a point in Wales's favour if you believe in this form of energy and the way it is being pursued; more generally, is it Government policy to achieve a more equitable spread of wind farms across the entire United Kingdom? There is a perception, I have to say, certainly in parts of mid-Wales, that there is a bias in our favour which for other reasons is not altogether satisfactory.

Ms Allen: I need to distinguish between what we call the first round of off-shore wind farms and the second round of off-shore wind farms. For the first round of off-shore wind farms the developers had the ability to choose their sites anywhere within the UK and so a number of developers chose sites in Wales. The North Hoyle project, the Rhyl Flats project and the Sky Weather Sands project are the three in Wales, and there were others dotted around the coast. For the second round of off-shore wind farms we felt it was better to focus development in what we call three strategic areas. One is the Greater Wash; the other is the Outer Thames Estuary; and the third is the North-West, going from the North Wales coast up to the Solway Firth. Really it is just that little bit of the North Wales coast which is at the moment an area for wind farm development within our second round. As you know, the Gwynt y Môr proposal is currently with the Secretary of State for eventual decision.

Q68 Mark Williams: Notwithstanding what you have said - and I appreciate the responsibility of the Department on those off-shore sites - for on-shore sites more generally - and I appreciate that there is one in my constituency in Cefn Croes, a very controversial scheme that provoked a great deal of anxiety locally - you would appreciate that there is a perception within Wales that in parts of Wales there is an over-saturation issue there.

Ms Allen: On-shore the situation is different in that it is entirely up to the developers where they choose to plan their wind farms, so we are in a sort of reactive mode. We deal with the section 36 applications for the larger wind farms when they come forward to us. So it is a matter of where the developer things the best wind resource is.

Q69 Mark Williams: You supplied us with some very useful figures on the size of, more generally, power stations within Wales and their capacity. Have there been any particular problems in the Department in providing figures on individual wind farms? I only pose that from personal experiences, having tried to ascertain the capacity of Cefn Croes, put parliamentary questions, a letter to the minister and follow-up letters to Ofgem, there seems to be a reluctance to provide some of the figures. That may not be the case, perhaps we can liaise on this through letters. Have there been any particular problems in getting individual onshore wind farms generation capacity figures?

Ms Allen: There is a slight difficulty in that the DTI only consents under section 36 generating stations which are above 50 megawatts which was the case in Cefn Croes. For those wind farms I would not have thought there is any problem at all with giving figures on the generating capacity. Where a generating station is 50 megawatts and below, the DTI does not have a role at all, it is played entirely by the local planning authorities. There we are slightly more removed from the process and we might have more difficulty in having data at our fingertips. As I said, the British Wind Energy Association tries to bring all of this information together on its website.

Q70 Mark Williams: You are right to highlight that I was specifically referring to Cefn Croes, mercifully now I have the figures. I just make the point it has taken a long time to get those figures and of course our public information should be available.

Ms Allen: There may be an issue about the difference between what the generating capacity of the wind farm is and what it produces which will be different, or can be different.

Mark Williams: Thank you. I think you have answered my next question which was in terms of the responsibility for wind farms between the National Assembly and the UK level, the dividing point is, the reserve power and the over 50 megawatts issues.

Q71 Mr Jones: If I could come back to the figures which you have just provided us with. You have indicated the percentages of wind energy that originates in Wales. It does seem to me that if you look at these figures on a per capita basis, Wales has got vastly more exposure to wind farms than the rest of the country. Is that fair to say?

Ms Allen: My perception is that in terms of wind farm developments, the place that is most attractive is Scotland rather than Wales but I do not have the figures for Scotland in front of me at the moment.

Q72 Mr Jones: Certainly, on an England and Wales basis, it seems to me that Wales is producing a lot more wind energy than England and Wales combined, is that correct, on a per capita basis?

Ms Allen: I do not have figures on that. I am sorry.

Q73 Mr Jones: It must be the case on the basis of the figures which you have given us. You indicated also that so far as onshore wind farms are concerned, it is up to the developers to decide where to develop the wind farms. Is that strictly correct having regard to TAN 8, which of course does set out a number of Strategic Search Areas in which wind farm development is positively encouraged? Whilst taking your point, is it not the case that the developers have to operate within the framework of TAN 8?

Ms Allen: I was looking at it from a UK Government perspective. TAN 8 is planning guidance which has been issued by the Welsh Assembly Government to give a steer to developers as to where we would like them to focus their projects.

Q74 Mr Jones: To that extent, an onshore wind farm developer, who wanted to put up wind farms in Wales, would work within the framework of TAN 8?

Ms Allen: That is my understanding, yes.

Q75 Mr Jones: If the UK Government has responsibility for policy and funding of renewables, including wind farms, how does that tie in with TAN 8 and the National Assembly's ability and desire to control the planning aspects of wind farms?

Ms Allen: Sorry, can you say that again?

Q76 Mr Jones: Yes. If the overall policy, in terms of wind farms and renewable energy generally resides still with the DTI how does that tie in with the National Assembly's desire and ability to control the development of wind farms in Wales through a policy document such as TAN 8?

Ms Allen: I think the issue is that the UK Government has reserved powers in relation to energy and energy policy, but that planning is a devolved issue.

Mr Wagstaff: This is really a question about investment, is not it. The UK Government is trying to facilitate investment in various different energies through various different instruments, some of which is direct grant and some of which is economic instruments or tax instruments under renewables obligations. There are lots of different ways of doing that and the review is looking at all of that. The fact that the Government is facilitating investment in something does not necessarily contradict the fact that locally, or regionally, or in Wales as a whole, there is planning control over where that investment is allowed to be made.

Q77 Mr Jones: Yes, but really TAN 8 goes beyond that, does it not? You talk in terms of planning but, of course, the consents that are granted for large scale wind farms are things that are not governed by the normal planning process because one makes an application under 36, as I understand it, directly to the DTI. What I find paradoxical is whilst on the one hand the National Assembly has set out the framework for onshore wind farm development through documents such as TAN 8, which are planning documents, nevertheless the decision as to whether and where these wind farms are developed still resides with the DTI so far as the large scale ones are concerned because of the fact that these are reserved powers. What I am finding interesting is to see whether there is any sort of liaison or, if you like, dovetailing of the two roles here.

Mr Shanahan: That is similar if one looks in England. Each of the English regions have regional planning guidance which inform the local planning authorities in their decisions on the consent process but, again, English regions fit into the national framework in the way projects come forward.

Q78 Mr Jones: I understand that also but, as I say, the problem is that this is not strictly a planning matter, this is a matter of consents for large scale wind farms which is a strategic matter which is reserved to the DTI. What I would also like to know is to what extent is there co-ordination between the UK Government on the one hand and the Assembly on the other with regard to the development of wind farms and the policies that are adopted in connection with the development of wind farms?

Mr Wagstaff: I am afraid I do not know how the TAN 8 guidance was drawn up.

Ms Allen: It was drawn up by the Welsh Assembly Government which consulted on it quite widely. We do have regular contact with the Welsh Assembly Government officials.

Q79 Mr Jones: Was there input from the DTI into the process which led to the development of TAN 8 in Wales?

Ms Allen: I am not sure whether we contributed to the consultation on TAN 8 or not, I do not know. I would make the point that as we have seen from the statistics in fact the DTI has only consented one large wind farm in Wales which is Cefn Croes. It has been the case that there have been a lot of small wind farms below 50 megawatts.

Q80 Mr Jones: That is right but TAN 8 does have the Strategic Search Areas which earmarks locations for large scale wind farm developments above 50 megawatts. On that score, do you know how close the Assembly is to asking for tenders for the development of those large scale wind farms in Wales?

Ms Allen: I do not know.

Q81 Mr Jones: Is it the case that most of the SSAs in Wales are on Forestry Commission land?

Ms Allen: Yes.

Q82 Mr Jones: Who controls the Forestry Commission in Wales? Is it the Assembly?

Ms Allen: I do not know, sorry.

Q83 Mr Jones: Is it the case, therefore, that the Forestry Commission potentially stands to make an awful lot of money out of rents for the new large-scale wind farms once the consents are granted by DTI?

Ms Allen: It is obviously the case that the landowner is able to charge a rent for the development. It is the same situation offshore where you have the Crown Estate as the owner of the territorial sea so is able to charge a commercial consideration for the use of that facility.

Q84 Mr Jones: What is the going rate of rent for a 50 megawatt onshore wind farm in this country?

Ms Allen: I do not know.

Q85 Mr Jones: Could you find that out and let us know?

Ms Allen: Certainly. It will be the case in certain instances that the developer buys the land, I would have thought that is the usual model, so it is not a question of paying rent to a landowner.

Q86 Mr Jones: Certainly rents are paid and if you could possibly let us know what the going rate is for a 50 megawatt wind farm, I am sure the Committee would be very grateful.

Mr Shanahan: Sure.

Q87 Mrs James: Your memorandum talks about the role of the Assembly re offshore generation. Can you explain to us the difference in planning applications under the Transport and Works Act 1992, which is a devolved matter, and applications under the Electricity Act, which is not a devolved matter?

Ms Allen: Yes, you are right, the Transport and Works Act is a devolved piece of legislation because it is classified as a planning piece of legislation, and planning is devolved, whereas the Electricity Act deals with energy matters and, therefore, is a reserved matter. It is the case where a developer is planning an offshore wind farm in Wales they would have a choice as to whether they wish to apply for consent under the Transport and Works Act or under the Electricity Act. We are seeing the difference in round one of offshore wind where, for example, North Hoyle development applied to the DTI under section 36 and with the Scarweather Sands project, the application was made to the Welsh Assembly Government under the Transport and Works Act. That is entirely a matter for the developer to decide. In both cases the developer needs a Food and Environmental Protection Act licence. Again there is a split there because in England those licences are handled by Defra, in Wales they are also handled by Defra but the decision is made by the Welsh Assembly so Defra is acting on behalf of the Welsh Assembly in processing those applications.

Q88 Mrs James: It is quite clearly set out that you can make an application, whichever way you believe is the correct one for your application, either to the Assembly or to the DTI?

Ms Allen: That is right. That applies in territorial waters, the Transport and Works Act does not apply outside of territorial waters.

Q89 Hywel Williams: Can I ask you about biomass and how significant is it as a producer potentially of electricity?

Mr Shanahan: As the Committee may be aware the Government commissioned a taskforce on biomass which was led by Sir Ben Gill, President of the NFU, which published a report to Government on October 25 last year which indicated a potential of around 5% of electricity production coming from biomass and gave thought as to the fact particular regard ought to be given to the nuclear biomass for heat production. The Government is currently considering its response to that response and it is expecting to publish its report by the end of April.

Q90 Hywel Williams: Would that be of significance on anything more than a local scale for production?

Mr Shanahan: Biomass can be used at quite a variety of scales and quite a variety of energy end users. For example, it can be used in coal firing in large coal-fired stations, it can be used in heat production whether on a domestic scale or as part of an industrial process. It can be used in transport production as well. There are a variety of local or more regional scales.

Q91 Hywel Williams: What resources are the UK Government investing in developing biomass?

Mr Shanahan: The Government committed £66 million towards capital grants for biomass projects around two years ago and those projects have come before a variety of timescales including, for example, one CHP project in Port Talbot that has been supported under the scheme. It supported a variety of electricity CHP or biomass scheme projects. The Government is considering what further support might be required in the context of both the climate change project and also in terms of its response to the biomass taskforce.

Q92 Hywel Williams: I saw the reference in your submission about Port Talbot, are there any other projects in Wales that you are investing in? Can you give us an idea of the proportion of the sum of money invested specifically in Wales?

Mr Shanahan: I do not have the figures to hand.

Q93 Hywel Williams: You refer, also, in your submission to us to the potential that the IGER project has in Aberystwyth. Are you aware that there have been some difficulties there recently and will that impact at all on the potential you might see?

Mr Shanahan: I was not aware of the difficulties there.

Q94 Hywel Williams: Some redundancies?

Mr Shanahan: That would be more through the Plant Breeding Programme that Defra lead on from a UK Government perspective.

Q95 Mark Williams: Are you aware of the scale of the project at IGER? As my colleague has pointed out there are a large number - 40 - redundancies in the offing and the potential for research and development is already there. Is this a direction we should be moving in? There is an obvious opening there but it is an urgent opening.

Mr Shanahan: I will write in terms of the scale of the IGER contribution and the impact that will have.

Q96 David Davies: What is the DTI's assessment of the viability of geothermal energy in Wales?

Mr Shanahan: The Government has done quite a lot of studies in terms of geothermal energy, particularly in the 1980s, both in terms of hot dry rock geothermal for which our view is that the main difficulties are both economic and technical.

Q97 David Davies: What are the cost factors?

Mr Shanahan: I do not have the figures but I understand it was well outside the margin that could operate within the legal obligation, which would indicate that it was a lot higher than £100 per megawatt hour.

Q98 David Davies: The megawatt hour is the guiding rate, is it?

Mr Shanahan: There were no significant opportunities for cost reduction. Sorry, the figure I have is £190 per megawatt hour in 1990 prices.

Q99 David Davies: Did you look at the possibility of using disused mines at all?

Mr Shanahan: I understand the Welsh Assembly Government are looking at the feasibility of using Welsh mines at the moment. Similarly in terms of geothermal aquifers the Government spent quite a lot of money, of the order of £10 million in the 1970s and 1980s. Again, although potentially it could be feasible, there were significant technical and economic difficulties in terms of that resource that made it unsuitable.

Q100 David Davies: Without going too much off on a tangent, this figure of £190 per megawatt hour, that is a figure which the DTI uses as a sort of guideline figure for the cost effective production of any electricity, or is that simply applicable to geothermal?

Mr Shanahan: The 1990 Review came up with that figure of £190 per megawatt hour as the cost of the technology at that time and it saw little opportunity for reduction. If it considers that the base cost of electricity is around £20 to £30 per megawatt hour ---

Q101 David Davies: £20 to £30 per megawatt hour?

Mr Shanahan: Yes. --- then that is a significant cost differential, and particularly if one does not see the opportunities for cost reduction despite the amount of subsidy that goes into it, then that does not appear to be good value for the taxpayers' money. Whereas if one considers a wave and tidal stream with the technologies at the moment, the Carbon Trust Report came out last week which gave a minimum cost of £120 per megawatt hour but they were seen as significant opportunities for cost reduction to enable it in the longer term to fit into the renewables market that operates, that is where we see more opportunity.

Q102 David Davies: I wonder if it would be useful if the DTI could supply us with some sort of a table showing roughly what the cost is per megawatt hour of currently used forms of electric generation, nuclear, coal, et cetera; also, the suggested costs at which alternative forms might become financially viable. It could be quite useful for the Committee to have that I would have thought.

Mr Abel: Yes, we will do that.

Q103 Mark Williams: I am interested in your submission, the wave and tidal section that there was no reference to the Severn Barrage project. It discussed a number of other schemes but the River Severn has long been considered as a potential prime site. I am wondering what is the status, if any, of that particular project which has been muted for so long?

Mr Shanahan: As you say, it is a project that has been muted for so long and there have been quite a lot of studies on it, particularly in the seventies and eighties that looked at it. This could be an 81/2 gigawatt project that could provide of the order of 5% of UK electricity demand so certainly it is being considered again in the context of the energy review, and we would expect that the proponents of the Severn Barrage would see this as an opportunity to look at it again. One has to recognise that the current cost estimates of this scheme are of the order of £10 to £15 billion. As a scheme it would, to our mind, raise strong environmental concerns, given the Severn region attracts a number of international environmental designations and the likely impact of such a scale on a sensitive eco system.

Q104 Mark Williams: It is going to be considered as part of the review so, on a scale of seriousness, what are we talking about?

Mr Shanahan: As a colleague said all options are currently open under the energy review. One also needs to consider the timescales attached to building this as well but even if you said, go tomorrow, you are unlikely to get any generation until 2020 at the earliest.

Q105 Hywel Williams: Are you still thinking in terms of the schemes muted in the seventies and eighties, I think a barrage and a head of water behind? Are there any emerging technologies which could perhaps be used to avoid some of the more extreme environmental consequences of a conventional barrage?

Mr Shanahan: I have not seen any proposals that have any real difference compared with the schemes that came forward in terms of, you are still creating a barrage across the Severn headlands. It is hard to see what real appetite for change there is in terms of the fundamental nature of the scheme.

Q106 Mark Williams: Swansea and Rhyl have been identified as viable sites for tidal power. What support is DTI giving to those projects?

Mr Shanahan: In those terms those, are tidal lagoon schemes. Our view is that these are technically feasible in terms of being the application of fairly well understood technologies and would be eligible for support as most renewables are through the renewables obligation. We have commissioned an independent assessment of this form of generation that suggests that the costs of the energy are prohibitively high and we expect to publish this work shortly. If the claims of the proponents of the schemes themselves are justified, which claims that they can operate in the £40 - £50 per megawatt area, then we would see them having no difficulties in putting forward a case that private funding would bring forward because that would fit within the level, which would fit quite comfortably under the renewables obligation framework. Then the only issue is a matter for the developer on a case by case basis and he will need to bring forward the environmental impact assessments at the same time and go through the section 36 process as appropriate.

Q107 Mrs James: Obviously as a Swansea MP this is quite a big issue locally. I was a bit surprised to hear you say that it is prohibitively high prices at the moment because obviously we are thinking long-term in the energy review and we have already heard about new technology coming on and they are individual projects. Are they part of a more coherent strategy to develop new forms of energy in Britain and in Wales? We talk a lot about what we could go with tomorrow but I am thinking 20, 30, 40 years ahead, we are going to have even more pressure for these renewables.

Mr Shanahan: I guess I can leave it to colleagues to say about the wider framework that will come forward as opposed to energy review on which the doors are open. We have put in place quite a wide suite of measures that are there to bring forward the long term technologies, both through the funding that you mentioned earlier, the order of £500 million has gone towards renewables technologies since 2002 through the work of the research councils and the Carbon Trust. We do see there is a framework in place to bring forward longer term technologies.

Mr Abel: Building on what Gary said there, clearly for the developer the economics have got to stack up from the time they expect it to commission. There are the short term and medium term issues there. That is not inconsistent, that is always going to be the case, that is a matter for commercial judgment of market participants with the wider and long range efforts to promote different suites of technologies, as Gary says, and overall looking at the energy mix and the various options will be very much part of the energy review.

Q108 Mrs James: What I would not want to happen is for us to erase something at the moment. The report could say this technology is no good and 30 or 40 years down the road we would need to look at it again because we were desperate for any form of energy production. I would not want to close the door on anything.

Mr Shanahan: What we would give in the report is our current indication of what the costs are and that would still be the case whatever the longer term market framework is.

Mrs James: That is a relief.

Q109 Mr Jones: I would like to turn to hydroelectric power. Could you tell the Committee what proposals the DTI has for the further development of hydroelectric power in the UK and to what extent is there room for further development in Wales?

Mr Shanahan: It is not my area, but in terms of the longer term and the wider renewables context, most people are fairly clear that there are limited opportunities for large scale hydroelectric development in the UK, primarily because of environmental concerns. On a micro level it is something, for example, that the Clear Skies Programme has supported and we estimate to have around 90 micro hydro sites in the UK. It is something which will be looked at in the context of the micro-generation strategy, the potential for micro and hydro which we are aiming to publish around April this year.

Q110 Mr Jones: What are the environmental concerns about large-scale hydro-electric power stations?

Mr Shanahan: It is similar in some respects to some of the issues that I talked about on tidal barrage, the fact that you will be changing what can be quite vulnerable ecosystems by changing the course of the water is what most people see.

Q111 Hywel Williams: Can I take you on to very small production of hydropower. I have had a number of cases in my constituency of individual farmers wanting to set up very small scale hydro-generation and they have been refused on environmental grounds because the level of abstraction from water courses would be too high. Is that an absolute fixed percentage or are you reviewing that in parts of your broader consideration? As I understand this it varies from place to place. In Scotland, for example, a greater amount of water is allowed to be abstracted.

Mr Shanahan: I think this is straying more into Environment Agency areas than mine. I can look into it in terms of the impact water abstraction will have on the viability of micro-hydro if that is helpful.

Q112 Hywel Williams: In your memorandum you say that the constraints are both environmental and lack of attractive sites. Is that the case, also, in respect of not only generation but of pump storage schemes, of which there is a very large one in my constituency? Are there any other sites which might lend themselves to that sort of scheme? Is the environmental impact exactly the same as abstracting from the river?

Mr Shanahan: I do not know. My first thought would be that if there were some attractive sites then the renewables obligation would have seen them come forward quite quickly.

Q113 Mr Jones: Can I ask one question on the pump storage scheme. Presumably you are familiar with that. Is it the case that all the turbines at Llanberis are not operating?

Mr Shanahan: I do not know.

Q114 Mr Jones: It was the case until fairly recently that two of them were in mothballs, as I understand it?

Mr Wagstaff: I do not think we have any information on the current state of it, I am afraid.

Q115 Mr Jones: Could you possibly obtain it?

Mr Wagstaff: Yes.

Q116 Chairman: Could I end with what might appear to be a hypothetical question. We have had a lot of discussion this morning about wind farms and planning permission. Imagine a situation where the North Wales coast would be designated as an Area of Outstanding Natural Beauty or a national park and similarly South Wales Valley is designated as a national park similar to Brecon Beacon or a World Heritage Site. How differently would those places be treated?

Mr Wagstaff: This is a bigger question than just Wales, it is really a question about to what extent do we want to have energy production located in the UK rather than imported and if we want it located in the UK what sort of energy is it going to be and what are the impacts of that which goes right across coal, nuclear, wind, everything has its impact. It is one of the reasons, and this is something I want to stress in any case to the Committee, that this review involves many different government departments and many different agencies and many different organisations, public, private, voluntary, et cetera, because, of course, the planning issue is one but only one of these many different balances. You are absolutely right, of course, that it would make a difference but I do not think we can say what sort of difference it would make. Undoubtedly it is one of the factors that gets put into the equation. I think it is a big challenge for everybody to make sure that the answer that comes out of the other end of the equation is the right one, if indeed there is a right answer.

Chairman: Thank you very much. Thank you for your evidence and thank you for your memorandum. We will write to you to prompt you on the issues which we want further collaboration on.