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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 876-ix House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE WELSH AFFAIRS COMMITTEE
ENERGY IN WALES
TUESday 13 JUNE 2006 MALCOLM WICKS MP, MR DAVID WAGSTAFF, MR JOHN WILLIAMS and MS CLARE HARDING Evidence heard in Public Questions 817 - 934
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Welsh Affairs Committee on Tuesday 13 June 2006 Members present Dr Hywel Francis, in the Chair Nia Griffith Mrs Siān C. James Mr David Jones Mr Martyn Jones Albert Owen Hywel Williams Mark Williams ________________
Witnesses: Malcolm Wicks, Member of the House, Minister of State for Energy, Mr David Wagstaff, Director, Strategy Development and Delivery, Energy Strategy Unit, Ms Clare Harding, Assistant Director, Coal Policy and Benefits, Energy Industries and Technology Unit, Department of Trade and Industry, and Mr John Williams, Deputy to the Director and Strategic Policy Adviser, Wales Office, gave evidence. Q817 Chairman: Good afternoon. Welcome to the Welsh Affairs Committee. Please introduce yourselves for the record. Malcolm Wicks: I am Malcolm Wicks, Minister of State for Energy in the DTI, accompanied by my colleagues Clare Harding, also John Williams from the Wales Office, and my colleague David Wagstaff, who is from DTI. Q818 Chairman: Can we all raise our voices; this is probably the worst room in the whole of the Palace of Westminster for acoustics, so do not be afraid to shout rather than whisper. Malcolm Wicks: I have never heard Welsh people having to be asked to raise their voices, Chairman, but I assume that applies to those of us not in that category. Q819 Chairman: You can be an honorary Welshman for today! Malcolm Wicks: Thank you. Q820 Chairman: Minister, can you give us any information on when the Energy Review will be published, and to what extent it will reflect regional energy policy as well as national energy policy? Malcolm Wicks: The current plan is for a statement before the summer recess, with an accompanying publication. As you know, the DTI has UK responsibilities for energy strategy, and that will be reflected in the review. We are, of course, aware of differences between England, Wales and Scotland, but it will be a UK review. Q821 Chairman: Could you explain that? Will that review reflect but also take account of the views of the Scottish Parliament and the Welsh Assembly Government? Malcolm Wicks: Yes. We have been in touch with the devolved authorities - I myself at ministerial level and my colleagues have too, of course. What I was rather implying was that in terms of the overall strategy that we are developing, the policy framework in which commercial players can operate, we have taken a UK perspective. We are obviously aware within that that different parts of Great Britain have different energy resources, not least renewable energy. Obviously, we are deeply aware of that. Q822 Hywel Williams: Good afternoon, Minister. A case in point is that your Secretary of State has said that the Energy Review will be planning for reductions in energy consumption. We were in Cardiff a couple of weeks ago and the Minister there told us that the Welsh Assembly Government was planning for an increase in energy consumption. Is that the case, and, if so, how can these conflicting views be reconciled? Malcolm Wicks: What we are certainly aware of is our need to reduce dangerous emissions of carbon dioxide. We have got to reduce them very rapidly over the coming decades. Indeed, the most challenging target of all is right up to the middle of this century, where we wish to see CO2 levels reduced on 1990 levels by 60%; and we have targets in the intervening period. It in large part follows from that, in my judgment, that we do need to reduce energy demand. Obviously, however, if we can replace some of our energy, as people are doing, by renewable sources, then that is not an issue because they are not CO2 emissions, but it is sensible in some sectors to think in terms of a reduction in energy demand. How do we do that? We do it by taking seriously energy efficiency and applying that determination to the different sectors, including to the housing sector. The theory on this is not that difficult to grasp of course but putting it into practice is always a bit of a challenge. Q823 Hywel Williams: Coming back to my point, given the overall UK reducing of emissions, it would be possible therefore for them to increase in Wales even though the trajectory elsewhere was on the way down. Malcolm Wicks: In order that I can understand, Chairman, may I ask what kind of consumption you are talking about? Q824 Hywel Williams: I asked the Minister in Cardiff: "Are you expecting as a result of economic development, overall energy consumption in Wales to increase in future or decrease?" He said it would increase. I understand that your Secretary of State has said that on a UK basis the expectation was that it would decrease. Malcolm Wicks: Certainly in terms of fossil fuels, we need to get a grip on the emissions issue there. Clearly, if in some sectors energy demand is increasing, but maybe through carbon capture and storage in future you are stripping out the CO2, then the issue is not so much whether demand is going up or down; it is about emissions going up or down. There are two challenges in the United Kingdom. One, on a global level, and, clearly, the most important, is in simple terms about safeguarding our planet from CO2 emissions; and the other one is about energy supply and energy security. In large part both of those point towards more sources of energy that are cleaner and greener. Obviously, in any developing economy at different times certain components will be seeing an increase in demand. For others we need to make sure we see a reduction in demand. Q825 Hywel Williams: So in policy terms there is no difficulty at all in having different targets in Wales as we have in England and Wales or the UK in general? Malcolm Wicks: I am sure, for example, that in the housing sector the target has to be greater energy efficiency. I think probably we need to firm that up and talk about that meaning energy reduction, if we are serious about carbon emissions, as we must be. Q826 Hywel Williams: Moving to another point, the Government has a target to reduce carbon emissions and has targets to increase the amount of energy generated from renewable sources. If it is not possible to reconcile those two, which one takes priority? Malcolm Wicks: I think we see the development of renewables as a means to an end in terms of reducing carbon emissions. Unless I have misunderstood the question, do they not reconcile? Q827 Hywel Williams: Is nuclear power, for example, counted as a renewable? Malcolm Wicks: I do not consider nuclear to be a renewable. I do consider it, when it is generating electricity, to be a clean source of energy, but it is not strictly speaking a renewable because of the uranium that is required, which is not a renewable. Q828 Hywel Williams: Reducing carbon emissions by taking the nuclear option would not necessarily meet the other targets of increasing the amount of energy generated from renewables. Malcolm Wicks: That is right, because I do not consider nuclear a renewable, and our target for renewables is about the renewables which we would understand - wind, solar, tidal, et cetera. Q829 Hywel Williams: If you had to put your eggs in a particular basket, which one would it be; renewables or to reduce carbon emissions? Malcolm Wicks: If I put all my eggs in one basket I think they would be smashed sooner or later! The name of the game here is not to put all our energy eggs in one basket; the name of the game here is to maintain a diversity of supply in the United Kingdom, and that implies for example being cautious about any new dash for gas in the next few decades. We will need gas, and we will need to import a great deal of it of course, but that is one basket I do not want to put all our eggs into. Q830 Hywel Williams: So you would not foresee any conflict at all in reaching both targets? Malcolm Wicks: No, not at all. I think, Chair, that one of the things that occasionally bedevils this debate is proponents of nuclear, or proponents of wind farms or whatever, saying, "our source of energy is the only sensible one and somehow it can be almost 100% of our requirements" - or that is the implication - "and the other is a really nasty thing, and we are going to attack it". You have nuclear nutcases attacking windmills and you have advocates of renewables attacking nuclear as if this is some world cup match where we have to take sides. It really is a bit more serious than that. Q831 Hywel Williams: I am concerned about the possible conflict between policy areas or possible conflict between policy areas. Malcolm Wicks: No, I do not see any conflict at all. The fact of the matter is that we are in a very challenging time here in Great Britain. I suppose the island has always been, until recently, self-sufficient in terms of energy. Once, we would have gathered in the wood and the twigs - and then there was the arrival of King Kong. Coal was still very important, but since the mid-sixties - the early administration of Harold Wilson and the first Beatles single - we have had resources from the North Sea and the wider UK Continental Shelf in terms of gas. We have just now become a net importer of gas; 10% of our gas is now imported. By 2020, not 10% but 80% or 90% could be imported. In a "do nothing" scenario, that is what will happen. We need to ask ourselves some serious questions - not for gas because we do not have to import it - about how we can become rather more self-sufficient - not totally of course as the projections now suggest. To do that, we need to build up 100% of supply. If we can get 20% from renewables some time in future, the question mark over whether we should replace nuclear to maintain about a fifth or so, go more or go less - those issues - we have got to build to 100%. That is why I get a little frustrated - not you, but when some people suggest it is all about one source or another - lots of eggs in lots of baskets. Q832 Hywel Williams: Will the Energy Review address the possibility of introduction of options to buy only green electricity? Will that be something that you will be considering so that some people might opt to say, "whatever electricity I am buying, I would like it to be labelled 'green'"? Malcolm Wicks: At the moment the customer can buy from a green company. You can buy green energy. It must be very difficult for those people as they walk around the country and go into different buildings and so on - to be very curious about this. I do not know whether this worries you or not, but 19% of our electricity up there is coming from nuclear. I think you are all sitting in a reasonable place and I would not worry about that, but that is the reality at the moment. Some people talk about the nuclear debate as if we do not have it at the moment; we have had it for a very long time of course. It would not be for the Government, by the way, to say they were going to interfere with the commercial market so that people can buy green and some people can buy nuclear. This would be for the commercial sector. Q833 Hywel Williams: I am asking you about an option to buy only green electricity. These people, for whatever reason, might not want to buy electricity which they would ----- Malcolm Wicks: As I say, you can do that at the moment. There are some companies that will allow you to do that. I assume it means all the rest of us get rather more nuclear as a result, so there is an ethical issue there that the opponents of nuclear might wish to discuss. Q834 Mr Martyn Jones: Minister, all this talk of eggs in baskets tends to confirm that we have a very complex energy problem facing the UK. Malcolm Wicks: Yes. Q835 Mr Martyn Jones: It would demand, I suggest, a long-term strategic approach. Malcolm Wicks: Yes. Q836 Mr Martyn Jones: Probably developing new technologies and providing a stable market for newer technologies. Those new technologies may not come for many years: is the Government brave enough to make those difficult decisions now? Obviously there is a financial implication as well with new technologies. Malcolm Wicks: It would be feeble of me to reply "no", would it not - that we are not brave enough, even on this humid afternoon? There is nevertheless a quantity of courage within me to answer that question in the appropriate manner. It is a serious question. I am not renewables-neutral; I am pro-renewables. To remind us where we are at the moment, we are in a situation where maybe only 4% of our electricity this day comes from renewables. That seems a pretty paltry performance, but actually there is - no pun intended - a rising tide. We are moving in the right direction. Every year that goes by sees an increase. We have a 10% target; in other words, we would like to see 10% of our electricity coming from renewables by 2010. It is not easy to hit that target, but we are certainly moving in the right direction. At the moment we have an aspiration that it could be as much as 20% by 2020. That is where we are. As you know, with the Renewables Obligation we have quite an interesting mechanism in place to make the generating companies source so much of their electricity from renewables. That is why large companies are backing wind farms and so on. In terms of technology, where we are is that onshore wind is very close to proving itself commercially. We are seeing more of it, and we will see it on quite a significant scale. Offshore wind is the next one in the pecking order, with some difficulties commercially at the moment - prices of raw materials have increased and so on. After that - and obviously at the risk of some generalisation here - you have to nuance this answer more carefully - you have a number of technologies, many of which are still pretty expensive. It is a familiar issue, as you know. If a new technology survives the R&D stage, it then needs to prove its commercial worth. Therefore, for example, photovoltaics, which is a very important renewable technology, is still pretty expensive, although in some countries it is coming down in price. It is a very important technology and we have been backing that. It is the usual commercial issue. If the scale is there commercially, then the price will come down. The first television set was a very expensive item; they are not so expensive these days. I would not say photovoltaics is at an infant stage; it is struggling to young adulthood or something! Marine technology is a very interesting one. It seems an obvious one for these islands. Marine, tidal and wave power should surely be able to play a part? It is pretty early days. We have some very good entrepreneurs in this country developing those. They have not been tested for very long in the water, as a matter of fact. We are backing them with a new ₤50 million marine fund. Then there is a whole array of weird and wonderful (I do not mean that pejoratively) heat pumps and all sorts of ideas about renewables, which do need support. I do not think it is for the Government to back particular technologies as such; but it is for Government to have devices like the Renewables Obligation and to have the R&D funds to bring some of these things to life. A question for the review, which we seek to answer - but advice from this Committee would be helpful - is whether the Renewables Obligation is too blunt an instrument at the moment. Is it simply one that has brought on the wind farm? Is it disaggregated enough or sophisticated enough to bring on others? That is an issue that we are addressing. I am not sure what the answer will be yet. Q837 Mr Martyn Jones: We may touch on that later, Minister. I would like to move on to regional policy. The Head of Policy at the Institution of Electrical Engineers told us that the UK Government should support Welsh national initiatives to promote research, development and demonstration activity in Wales. Can you tell us what projects you are funding and the extent of that funding? Malcolm Wicks: I think that through general programmes of support for renewables there will be a number of projects. John Williams or others of my colleagues may be able to name specific ones. Mr Wagstaff: To be honest, we give the money to specific projects, but we do not categorise that by geographical location; it is more likely to be characterised by the sector or the kind of technology. It is possible, for example, that a particular technology is being developed simultaneously in various parts of the UK. We can certainly find out how much of that is going on in Wales; but it will be a geographical answer rather than a regional policy answer. Q838 Mr Martyn Jones: We know that you are helping with work in photovoltaics at Bangor University and also Technium OpTIC in St Asaph. Malcolm Wicks: Sharp Electronics is a major company in Wales which now has plans to expand, I think not least because of the extra ₤50 million that the Chancellor gave for micro-generation projects. Q839 Mr Martyn Jones: One area in Wales where we are not seeing any help given is the Centre for Alternative Technology at Machynlleth. I am sure you have heard of it, but they do vital work in science-based education in renewables, and they tell us they do not have a lot of success in getting support from the DTI. I do not know if you know about that or have any plans to support them. Malcolm Wicks: I know about the Centre but perhaps I should write to the Committee about that. Given all the excitement and interest in renewables, you would hope there would be commercial opportunities for companies to back centres of excellence. Q840 Chairman: Would you welcome the Centre for Alternative Technology and the new Welsh Energy Research Centre writing to you about their work? I am rather surprised! I understand why you gave the answer you gave in terms of the sector, but there are some interesting innovative examples in Wales which perhaps ought to be highlighted; and perhaps we should move beyond this fairly crude way of identifying innovation by sector rather than by region and nation. Malcolm Wicks: I would certainly welcome contact with them. From a DTI point of view, anything we would support would be because of the competence - and I am sure there is great competence of the sector - wherever it was in the United Kingdom. Q841 Chairman: So that we do not lose the thread of this, obviously we are talking about the UK, but, as a Select Committee, we have been very conscious of some innovation elsewhere, particularly in the United States, right across all sectors. We were particularly struck by the green policies of the Green Cities' Alliance, with Denver, Seattle and these cities. Does the DTI pick up on these innovative practices internationally? Malcolm Wicks: Yes, we do, partly because we are conscious that the challenges that face us in terms of climate change are, by definition, global; and partly because we are always on the lookout for learning more about R&D and good ideas. They are sometimes quite close to home. The Mayor's Office here in London, the GLA, for example, have been quite ambitious in relation to carbon issues and clean-energy issues. Q842 Mr David Jones: Minister, you touched earlier on the Renewables Obligation, and you conceded that it had been described as a blunt instrument. You also acknowledged that this has led to maybe a disproportionate development in wind power at the expense of other renewable technologies. What does your Department propose to remedy this and fine-tune the Renewables Obligations, so that all our renewable eggs are not going into the basket of wind power? Malcolm Wicks: Can I say that I think we need more wind power in Britain, and not less. It is still pretty early days. If we are going to hit our renewables targets, we are going to need more. Where they should be is always controversial, and there are matters of planning and so on. Blunt instruments have their uses, do they not? I think it has been very useful in bringing forward onshore wind; but I am now asking myself whether we should be slightly more sophisticated in terms of the RO, in terms of giving opportunities for other sources of renewables. Where that would lead us I am not sure at the moment, but it will be part of our report in July. Q843 Mr David Jones: Do you anticipate that the Energy Review report will come up with proposals that fine-tune the Renewable Obligation? Malcolm Wicks: What I know is that it is an issue we have taken evidence on and people have written to us about; and we are looking at it very carefully. As usual, there are arguments both ways, because, clearly, if you were in the onshore wind business you would not want too much disruption there. It is something we are looking at, but I cannot pre-judge at the moment what we will say about it in the review. Q844 Mr David Jones: You have touched on regional policy. How would you respond to the suggestion that there should be regional competition as between England, Wales and Scotland, to provide an incentive to meet carbon reduction targets? Do you think there is any scope for that? Malcolm Wicks: Competition? Q845 Mr David Jones: Yes. Malcolm Wicks: Certainly within a framework of a UK energy strategy, where many things are not devolved, this is one area where there is a UK obligation, and I think that is right and proper. Obviously, there are significant things that are devolved in Scotland for example, but it is important that we maintain a UK energy strategy for fairly obvious reasons. Within that we need a rich variety of players to help us develop the clean energy sources that we need, so in that sense interest from the Welsh Assembly, the Scottish Parliament, local authorities and NGOs is something I welcome. Q846 Mr David Jones: How do you accommodate that? If, for example, the Welsh Assembly wanted to strike its own distinctive path how would you accommodate that within the fabric of the DTI ----- Malcolm Wicks: As long as that did not, as it were, interfere with the development of the UK energy strategy and did not involve taking powers from the UK Government that properly belong here, then I think we can be very relaxed about it. I mentioned what we are doing here in this capital city of London in terms of the role of the GLA and the Mayor's Office, and their determination to try to make Greater London a greener place in terms of energy. That is something that we encourage and can readily accommodate, because it will help us with our targets and our climate-change objectives. Q847 Mr David Jones: You refer to the powers that "properly belong here": clearly, therefore, you have some sticking points. What powers would you contemplate devolving to the Welsh Assembly Government, for example? Malcolm Wicks: For example, at the moment the Welsh local authorities have planning jurisdiction for the power plants under 15 megawatts. You can argue about it, but that seems to be a reasonable cut-off point. It seems to me to be sensible that for larger power plants, that should properly belong to the UK Government. Q848 Mr David Jones: But the Assembly is pressing for more devolution of powers above 15 megawatts. Malcolm Wicks: Yes. Q849 Mr David Jones: Do you resist that? Malcolm Wicks: I would be reluctant to concede it. Our officials are in discussion about this. Mr Wagstaff: Would it be possible to make a point about the climate-change programme review, because when you are talking about the different policies in different regions and different nations of the UK there is quite a large section in the document that was published by Defra in March which does have a breakdown of devolved administrations and there is quite a lot of good information there about what is being done in Wales. It is not competition in the sense that you meant, but it is nonetheless a distinctive approach from the various devolved administrations, so there is quite a lot of information that might be helpful in there. Q850 Mark Williams: The Tripartite Group of your Department, the Wales Office and the National Assembly was expected to report on energy consents two years ago. We have still not heard of the report. Why has there been that delay? Malcolm Wicks: I do not think I was aware it was meant to be two years ago. I have certainly had one or two discussions about it, but certainly whatever - the two years thing - it is clearly ongoing. I do not know whether my colleague from the Wales Office knows more about that. Mr Williams: It is important to remember that since the Tripartite Working Group was established, the underlying landscape of energy has seen some significant changes. The UK, for the first time, has become a net importer; there has been more volatility in prices. Now, particularly, the UK Government is undertaking the Energy Review. I think that Andrew Davies, when he gave evidence to you, said that, quite sensibly, it is best to await the outcome of that review before progressing with the work of the Tripartite Working Group so that it can be fully informed of the outcome of the review. Q851 Mark Williams: So you put the delay down to that rather than to any fundamental disagreement between the National Assembly, the Wales Office or your Department? Mr Williams: I do not think there is any fundamental disagreement. The Assembly has made a bid for a transfer of functions, which it can do on anything it wants, and the UK Government is considering it in a collaborative process with the Welsh Assembly. I have been involved in a small part of the Tripartite Working Group, and I can attest that the underlying issues are indeed extremely complex and have taken a great deal of working through. That is still in train. Q852 Mark Williams: If there is a correlation between that and the Energy Review, would you anticipate that the report's findings would be subsumed into the Energy Review, or can we expect the report - or when can we expect the report if it is not to be subsumed in the Energy Review? Mr Williams: I do not think that they will be included as part of the Energy Review; it will come out after the Energy Review is done so that it is fully informed by the review's findings. I cannot give you a firm date, I am afraid. Q853 Mark Williams: Can you give me any date, given that this issue first came to light at the end of 2004, and here we are in the early summer of 2006? Mr Williams: I have personally been involved with the group for about a year now, but ----- Q854 Mark Williams: How often does this group meet? Mr Williams: I think it has met some six or seven times. Malcolm Wicks: We can send a note on that. Clearly, there is an issue here. As Energy Minister, I feel strongly that our country as a whole needs a clear energy strategy. We need to develop a framework in which the market can operate. The market is telling us it needs a long-term strategy. Within that there are some quite difficult and one or two controversial issues to settle. This is not an "any other time" energy policy; this is a time when Britain is on a cusp of just becoming a net importer, when the world out there is not getting any easier in terms of sourcing material. There is a huge global demand for energy. Not at the moment, but a year or so ago, China's energy demand was increasing by 15% per annum. On top of that energy supply and energy security issue we have major objectives in terms of planning and climate change. I just think we need some clarity about the overall UK position on this. Although I am very concerned, as I said in answer to the other question, that we have a number of players in terms of getting to where we want to move, in terms of overall objectives we need some clarity from this place. Mark Williams: I think the eagerness you display is also shared by the National Assembly, which is why the request was initiated in 2004, which I believe was widespread. Q855 Albert Owen: Good afternoon, Minister. I do not want to upset you, but I do want to ask some questions on nuclear energy, particularly the Welsh dimension. You are fully aware of the status of Wylfa nuclear power station on Anglesey, which is due to close in 2010. You are further aware that the Welsh Assembly Government and stakeholders have requested an extension. Can you tell us when a decision will be made on that? Malcolm Wicks: As you know, Mr Owen, I am pretty up to date on that issue, and I have met with you and the two companies involved. It is a very difficult situation because the aluminium company very much depends for its energy source on Wylfa; and yet Wylfa, like other power nuclear power stations of its type, needs to be decommissioned, because it is old, relatively soon, within the next few years. Although further work is being undertaken, the Nuclear Decommissioning Authority, the national body charged with this complex task - which might take fifty years or so in terms of the element of nuclear waste - will be a little loath to extend the project; and the costs involved are now really very considerable. The situation we have - and Mr Williams might correct me if I have the details wrong - is that officials from the Wales Office and my own officials are working with the companies to see a way forward. At the end of the day, what the aluminium plant needs is a source of energy, a source of electricity. It does not have to be nuclear, but obviously the economics of this are very important. Q856 Albert Owen: The NDA has told us they are going to produce a report. Some of the conclusions of that may go into the public domain. Will you make a decision after that or alongside it in regard to the extension? Malcolm Wicks: There is a sense in which I am not sure it is my decision as such, because you are talking about the NDA and private companies; but I hope we can bring this matter to a conclusion as soon as possible. I am reluctant to let this interfere with the huge strategic challenge of nuclear decommissioning, and I would also be loath to involve the NDA or anyone else in huge costs, which perhaps could not be justified. Q857 Albert Owen: I understand that. I have heard your response in relation to the decision, but is that likely to be linked with the Energy Review or are you going to decouple it? Malcolm Wicks: I think decoupled. I do not see it as an Energy Review issue. Q858 Albert Owen: You mentioned also Anglesey Aluminium, which consumes 12% of Wales's electricity. You talked about negotiations that are ongoing with your Department, the Welsh Assembly Government and the Wales Office. What are the alternative electricity supplies you are looking at collectively with the companies? Malcolm Wicks: There is a general connection of course with the National Grid. I do not know the capacity of that, whether that would mean some technological improvements, but that is one possibility. Whether there is a suggestion of a new power station being built - I do not mean nuclear - to tackle this problem - do not forget, Mr Owen, that we are not in a situation now where I sit here as the Minister for Power, and all of this stuff is nationalised, and it is kind of in my gift, as it were, to make a wise judgment. We are talking essentially about commercial contracts here, but if the Government in Wales can facilitate that, the discussions to look meaningfully at the options - that is our goal and that is what we are doing. Q859 Albert Owen: But you do accept that it is quite a unique circumstance in the Welsh economy, the Anglesey link? Malcolm Wicks: I do. I know that part of the world. I know Anglesey and I know the importance of those plants to the local economy. Q860 Albert Owen: On a more general issue, and again not wanting to upset you but just putting the question to you: many people have suggested that this Energy Review is a nuclear review. How do you respond to that? Malcolm Wicks: Partly by saying it is not a kind of 19% review - in other words, nuclear is 19% of our electricity and obviously a smaller proportion of our total energy supply in this country, when you look at oil and so on - so it would be a bit daft, would it not, to have a partial review like that? It is a 100% review within the context of climate change. Within that, given the importance of nuclear now, given that nuclear has many advantages in terms of clean sources of energy, it would be foolish for us not to look at that very seriously. The Prime Minister has charged us to do that, and you have heard recent remarks by the Prime Minister. On the other hand, there are many public concerns about nuclear. There are huge issues about decommissioning, which we were discussing in terms of the legacy and waste. There are public fears in a terrorist age about the safety of nuclear. We have got to make a judgment. There is also the economics of it. Would commercial players come forward to invest in a new generation of nuclear? How does nuclear stack up against coal or gas? All of those issues are ones that my colleagues and I have been working on. Q861 Albert Owen: So the difference between this review and a previous review with regard to nuclear is that the nuclear industry is asking for long-term stability so that private companies can invest: is that a fair analysis? Malcolm Wicks: I think what is fair is that all the major companies that we have been talking to, and potential investors, are calling for long-term clarity on energy strategy, whether it is nuclear or any other form. The fact of the matter is that a lot of our power plants at the moment, the nuclear ones certainly but many of the coal-power plants, are old, and dirty and need to be replaced. Britain needs to invest a huge amount of money in power plants over the coming years. I think 30% of the power plants need to be invested in over the next few years. The industry, wisely, is calling for long-term clarity so that they can make investment decisions. That would certainly go for nuclear, if we go that way, and it goes for renewables and clean-coal technology and so on. Q862 Mr David Jones: Minister, you mentioned that one of the issues that had to be addressed was whether commercial players would come in to build the new generation of nuclear power stations. One of the factors that they will have regard to in making that decision - probably the most important factor - is whether or not they have a guaranteed market and guaranteed price for their electricity over a sufficiently long period to make the exercise worthwhile. Would that not require some sort of government support or guarantee; and what consideration has your Department given to that? Malcolm Wicks: No, it does not require that, and the nuclear industry is not going to get that. I just do not think that is where we are. Where we are, I think, is in an intellectually quite interesting position. On the one hand, there are some clear public-policy imperatives around climate and around energy supply and security, and other ones around fuel poverty, for example - but in a situation where we have a liberalised market, a privatised market in this country. It is about the commercial players understanding the public-policy framework over a very long period so that they can make investment decisions. What is important for government to do is to find ways of encouraging and incentivising clean forms of energy. I do not think it is for us to favour nuclear as opposed to renewables or the other way round; but if we produce that framework, based on the price of carbon - and we now have the EU's Emissions Trading Scheme, which puts a price on carbon and enables players to trade - that is conceptually the way ahead in trying to incentivise clean forms of energy. It is not for us to intervene and say that nuclear energy should always have at least this price for twenty years; that would be absurd. Q863 Mr David Jones: My concern is that during the course of our inquiry we visited power stations where turbines are not turning simply because of the vagaries of the price in the electricity market. Is that not going to be a disincentive to potential developers of nuclear power stations if they do not know whether the market can rely upon a guaranteed price ---- Malcolm Wicks: Surely, that would have meant that there would have been no investment at all in the energy market because there has not been that guaranteed price, has there ----- Q864 Mr David Jones: I just wondered whether those power stations we visited would have been built had the developers in those days been aware of the fact that the market would be so volatile. Malcolm Wicks: What key players in the market place are telling us is that they do need the long-term certainty and some clarity about carbon so that we incentivise clean forms of energy that reduce emissions. They need that kind of framework, and I am confident that they will come forward and invest. Whether it is nuclear or something else will be essentially a commercial judgment. Although it would be foolish for an energy minister to predict energy prices, we are into an era of quite high prices in terms of the traditional fuels, not least gas. Therefore, the economics of nuclear doubtless look more favourable than they did a few years ago. Q865 Nia Griffith: Obviously the Welsh Assembly Government has expressed a desire to make Wales nuclear-free. In the event that the Energy Review decides to go for new nuclear build, should you or would you be able to respect that wish in any way? Malcolm Wicks: It is not where we are at the moment because my difficulty is that we are in the final weeks of the Energy Review and we need to make our final judgment on the nuclear question. It is not an easy question. It will be a judgment about what our country as a whole needs. We will make our judgment to the Prime Minister. The issue you raise is an important one, but I think it is a bit along the track. The situation at the moment is that the UK Government does have responsibility for power stations above a certain level in Wales. Q866 Nia Griffith: Following on from that, many people in Wales have raised this issue: what would be the situation if Wales was defined as a geologically suitable area for a long-term repository of nuclear waste products? How would that fit with the Welsh Assembly Government responsibilities and the DTI responsibilities? Malcolm Wicks: Our nation or nations as a whole have a duty, a very practical duty but I think an ethical duty, to finally get to grips with the legacy of nuclear waste. My own view is that governments and parliaments of different political hues and colours have dodged this issue for thirty or more years, and I think it is a disgrace. It is not taking responsibility seriously. People may not like the idea of the stuff, but it is a bit pathetic of any of us to say we do not think we should deal with the issue. We have to deal with the issue. We are awaiting a report of the expert committee known as the Corum Committee which is charged with looking at this issue of the long-term solution to nuclear waste. It is a very complex issue, and they have produced some preliminary findings already and will report by the end of July to the Secretary of State for Defra. It is a complex issue, and I do not think Government can immediately say where it is going to go; but I think Government needs to signal its absolute conviction that we need to tackle this problem, and that is what we will do. We do not know where it is going to go yet, but it has to go somewhere. With energy policy you cannot just have everyone presenting you with a series of negatives - "no, we do not like nuclear" or "no, we do not want a wind farm here" or "we do not like the idea of this or that" or "we certainly do not want to have the waste here". Some responsible people need to come forward and say "yes" to a few things; otherwise, one day the good people of Wales and London will wake up and the lights will not go on and the showers will not work. There is a need for some collective responsibility. Q867 Nia Griffith: Minister, you referred to the fact that we are in a very different situation from the time when power was decided by the government and there was government investment. Are you saying that in the event of new nuclear build it would be fully financed by the private sector and that there would be no taxpayers' money going into that initial build? Malcolm Wicks: Yes. The only qualification has to be that given that some nuclear waste lasts for a very, very, very long time, then the state would always have an ultimate responsibility for that; but there has to be means of getting the economics of nuclear right if that is what we want to do, to make sure that the investors can be paying for the final disposal of nuclear waste. Q868 Nia Griffith: So you would be including that in the initial costs. You would be asking them to include something towards waste disposal. Malcolm Wicks: One has got to look at that if that is where we are going, yes. Q869 Mark Williams: Following on from that, I appreciate this very fluid base and that the economics are ongoing and changing all the time. What costs are we talking about decommissioning-wise in the UK? What kind of figures is the Department working on at the moment? Malcolm Wicks: Something of the order of 50-60 billions over maybe 50 years; but it is set out in the NDA's strategy. I am advised that the cost of the nuclear legacy is about 63 billions, so I am roughly right, but there are certain unknowns. I doubt whether that would be the definitive figure. This, by the way, is not to be paid this year - it is over a 50-year period or something of that order. The public spending earmarked for this year might be 2 billion but again I will check on that. I would rather that these figures were absolutely accurate rather than me just trying to remember. It is of that order. It is very significant. Q870 Albert Owen: My colleague Nia Griffith asked a question about the industry paying for it and there being a level playing-field - is what you are trying to say - with renewables for the future if the Review were to come out pro-nuclear, with everything taken equal. When we talk about decommissioning, on the other side of the argument for renewables, there is a renewable obligations paid, which is £1 billion a year now, so there are costs in developing renewables as well from the state as well as from industry. Is that correct? Malcolm Wicks: I think conceptually where we need to move to - and "we" might be not just Britain but the European Union and you could see the EU Emissions Trading Scheme developing maybe - although it has hiccups and problems at the moment - into a more international emissions trading scheme. There is no particular reason why only members of the European Union need be members one day. I am not talking about next year. It is where we need to move to; a place where any technology, any scheme that reduces carbon emissions, could be similarly recognised and incentivised. As a policy goal that is where I would be at the moment. Therefore, that would be the famous level-playing field, and it would be treating the micro wind turbine on one's dwelling in the same way as maybe clean-coal technology or carbon capture and storage, or nuclear, et cetera. Conceptually I do not think that is a bad place to try and think through. Whether there are any practical impediments to that, we need to think through yes? That is where we probably want to be. Within that context I do not think it is inconsistent to say that in the early days of renewables, when you are trying to get them out of the laboratory, as it were, into testing and into the market place, that you do not do special things through Renewables Obligations and grant aid, through the Marine Fund and so on - for renewables I am talking about. I do not think that is inconsistent with the long-term objective we might want to set ourselves. Q871 Mrs James: I would like to turn to coal and clean-coal technology. When the Committee visited Tower Colliery we were told of many new potential developments for coal that were being hindered by the absence of any real investment. Why does UK coal continue to be the poor relation of energy sources? Malcolm Wicks: Obviously, one needs to distinguish - as I think you have by implication - between British indigenous coal, which is here, and coal as a fuel source. My colleague Clare Harding, who is our expert, will correct me if I get this wrong and may want to come in at the end of my answer. At the moment, maybe 30% of our electricity a year is fuelled from coal - the average annual position. In winter it is much more. Interestingly enough, this past winter, which was difficult with gas prices being so high and the tight situation we are in - I think, Clare, for a couple of months maybe 50% of electricity was coming from coal. Ms Harding: That is correct; from December 2005 through to March 2006 coal contributed an average of 50% of the generating ... Malcolm Wicks: Most of our coal is imported. Ms Harding: The majority of the coal is imported, including the generating .... Malcolm Wicks: Yes, my colleague is confirming that so far I am getting a B-plus and not necessarily a very competent A‑minus! Most of our coal is imported. There is the conundrum, if you like. I have asked myself this question several times of colleagues and experts because it does not seem to make sense that importing coal often from as far away as Australia is economically more sensible than exploiting our natural resources - but that does seem to be the situation. Can I ask Clare Harding to deal with the point about the relative costs of imports as opposed to indigenous? Q872 Chairman: Can we make sure that we raise our voices because some people are having difficulty in hearing. Malcolm Wicks: And at this end actually as well - but I heard that, Chairman. Ms Harding: With regard to the price of coal for generating, I have had some figures before me this morning which suggest that the price of imports over 2005 were in the order of ₤1.60 per gigajoule, which is how coal for generating is priced. It was even higher than that in 2004. The price that is being paid for UK coal is in the order of ₤1.30 per gigajoule. Q873 Chairman: You are getting quieter! Ms Harding: That is where my Welsh blood does not come in! At present UK coal is earning prices which are significantly below what it costs to bring imported coal in. This is a reaction to recent changes particularly in gas prices, which have upset the energy markets world-wide; and also the increase in demand for coal in China and India, which have driven coal prices upwards. Q874 Mrs James: Is it sensible to turn our back on this source of energy really, Minister? We have millions of tonnes of coal here in Britain. We know where it is and how to get at it; and in a long-term energy strategy should we be finding ways of using it? Malcolm Wicks: That would seem to be common sense, and the lay person would say just what you have said; that there is all this stuff still under the ground, and surely, it is a British resource, and with clean-coal technology - because we need to bring that into the story here - surely there must be a future! The hard-headed people in the commercial world will say: "We have a duty to the customer in terms of price and at the moment the price is not right and it is cheaper to import." That is the difficulty. I would hope that there could be some future for British coal by bringing into play clean-coal technology. I would hope that, but I suppose the less Romanic person would turn your question around and ask if it is really sensible to buy one source of coal that is more expensive than another; and who should pay that cost? Government has done quite a lot with Coal Investment Aid to support certain pits and so on. It does not seem to have worked in terms of a long-term viable strategy - and who would pay the cost; should it be the customer? Q875 Mrs James: Sorry, I might have misunderstood Ms Harding's figures. She quoted £1.60 per gigajoule. Is it not £1.30 per gigajoule of British coal? Ms Harding: I can confirm that is indeed the way around it is. It is the conundrum that faces particularly the deep mine sector at present, that they are tied into contracts at prices which are below world prices. If they were able to get more for their coal, they would be better able to invest and continue to produce coal for the future. The open cast sector's production cost is in the order of £1.24 or £1.28 per gigajoule, that is a very average price, so they are cheaper than the world market consistently. There is a considerable supply of shallow coal that could be mined in this country if there were access to it. Q876 Mrs James: I am very hesitant about that because of the environmental issues. Malcolm Wicks: Perhaps, Chairman, it might be helpful if we send you a note to clarify that because the detailed arithmetic is important both in terms of the costs of British coal as opposed to other sources. The trend is quite interesting in the last ten years and the issue we have said around long‑term contracts which is a particular problem at the moment. Q877 Nia Griffith: Minister, as you said, certainly in our journeys around Wales, the installations that we saw were ageing and had not received significant investment since the 1960s and 1970s. As far as the issue of coal is concerned, in my own constituency, the Glapwell seam was prepared for exploitation because there was an enormous amount of money invested just before the Thatcher Government decided to close down the mines altogether. It just seems to me if this price differential is now in favour of UK coal and what is against our coal is the fact that there are contracts which have to be worked through, then is there not a case for some investment and development of this coal? The people from Tower Colliery were quite clear that if there were financial assistance for exploration and identification and getting the start-up cost, if you like, then really coal is a winner. Given on the world market coal is not going to go down in price, it seems it is a win-win situation if we were to exploit the coal. Malcolm Wicks: The question would be, who would fund that? As I say, there has been quite significant coal investment aid. Clare, how much, if I can ask through the Chairman? Ms Harding: Three million has been awarded to Tower itself to keep it in operation despite the fact that it will reach exhaustion in 2007 or 2008. We felt it was important that the remaining coal should be worked if at all possible. Q878 Nia Griffith: That is a very important point. Supposing they got £1.50 a gigajoule instead of £1.30, then they would have money over for investment. Given they have not got that at the minute, the crucial thing I think from the point of view of the future of our industry is we should develop new seams before the skills disappear and the workforce should be trained up so we can exploit new seams. Malcolm Wicks: It seems to me the future for British indigenous coal has to be about whether by developing, making use of clean coal technology and by doing the right deals with the generating companies - it is not for Government to do that - there can be a future on its own merits. I do not think the future can be continuous public subsidies for certain pits. Q879 Nia Griffith: Would you not agree, given the specific situation we are in, a subsidy at this stage might possibly then have payback in the future? Ms Harding: If I may, I would quote the example of Aberpergwm Colliery which was prepared for investment but then stopped, I think, in the late 1980s but the same aid package, the coal investment aid, has been given to Aberpergwm; £3.5 million was given to support the reopening of that colliery. As a result of the seed capital that represented, it has paid up to 30% reimbursement of the investment as it goes forward. Having supported the initial stages of that investment, the company has now attracted significant new financing which should enable that project to go forward and should enable that mine to come into full production within the next 12 to 18 months. That will be an opportunity for people to move possibly from Tower into another deep mine with good long‑term prospects. There is also the Margam coking coal prospect adjacent to the steel works in Margam for which I understand Corus have been awarded a licence in principle, and the project is currently in planning with the local authorities. Again, it is a project which could result in a new deep mine and a continuation of deep mining in south Wales. In that case, it is coking coal and the likely developer will be the end-user and, therefore, there is not a case for any intervention in investing in a project. Q880 Mrs James: It is very interesting because earlier in your answer to me, Minister, you mentioned the huge amount of investment that you have already made. Surely to goodness, with the situation with energy in the world, all the problems we are all facing and the huge demands of North America, India and China, we have already started supporting coal and we need to continue the support. Andrew Davies told this Committee that in broad policy terms we have supported the development of deep mining and now we must keep the faith and continue with that. Malcolm Wicks: I want to see a future for indigenous coal, Welsh coal, English coal and Scottish coal, of course I do. I think I would be reluctant to imply that has to be a new public spending programme. I think it has to be about trying to create the right framework in terms of incentivising carbon‑free energy sources and, therefore, clean coal technology. It has to be about the companies recognising that at a time when energy prices are really very high in Britain and around the world that there could be a new future for Welsh, English and Scottish coal. It has to be more that than, in a sense, to keep on trying through coal investment aid to keep this pit or that pit open. We are at a very interesting time in terms of coal in Britain. We had the sad news yesterday that Haworth Colliery elsewhere in Britain, not in Wales of course, has been mothballed. That was sad news. There are other signs, I think, with some companies, of a kind of new entrepreneurship and new hope, so we are at a critical point. I would caution against an idea that another £50 million here or whatever is the answer to this problem. I think we have to look for other solutions. Q881 Chairman: At the risk of being provocative on this, there are two things that occur to me. This Government has made a commitment to support the British car industry. It may have economic, political or commercial reasons behind that, but it occurs to me that when you answered the question about the long‑term future of the coal industry, you answered it entirely in terms of commercial reasons rather than putting it into the context of long‑term energy supplies. We are now facing a situation, as you acknowledge, that most of our coal is coming from abroad. It is quite conceivable those prices, because of the global situation, could rise whereas we have a security of supply here in south Wales, but we may not be able to access it. If the investment does not occur in significant amounts now, then we lose the skilled labour force. Why is it that you are not treating coal in the same way as the other sectors which are measured in terms of security of supply? You quite rightly point out that we do not want to be over-supplied with oil and gas; the same argument surely applies to coal? Malcolm Wicks: Yes, but with indigenous oil and gas there was no direct government subsidy. As I say, I think part of the answer lies in issues around putting a price on carbon and developing clean coal technology. Q882 Chairman: Previously, the governments in the 1970s pioneered; the British coal industry was a world leader. We are now trading behind in terms of clean coal technology. The Labour governments of the 1970s encouraged it. We are not exactly pioneers in this field any longer. Malcolm Wicks: We have £35 million for a carbon abatement programme which will be sponsoring a number of quite small-scale projects to develop this kind of technology. There are now one or two commercial plans to exploit clean coal technology in this country. One of the companies, Eon for example, has aspirations in this area, so I think it is quite a lively time in this area. I am just reluctant to go with what might seem to be the easy but expensive option of saying a new public spending programme is the answer to the British coal industry. I personally do not think it is. I think it is more complex and challenging than that. If you were calling for more public spending, and I do not think your Committee will, you would have to balance that against public spending maybe on other forms of renewables which might also hit some of these topics. Q883 Nia Griffith: Excuse me, Minister, could I take up the point of Ms Harding, your senior adviser. There does seem to be a good return now, given the way the prices and money markets are going on this one. That investment in Aberpergwm now seems to be bearing fruit and, therefore, it may not be just a bottomless pit of public money, it may be that you are getting a return on that public money? Malcolm Wicks: Yes. I guess some people would say that is a strategy that has been tried now for a number of years and so far does not seem to have been producing results. I think I would return to the idea that if we can get the framework right, then commercial operators can make commercial judgments about this. Q884 Chairman: Tower, with respect, has been a remarkable success. I do not think this Government would deny that or the previous Conservative Government. They supported Tower as being in its time a remarkable achievement, did they not? Why do you not reflect on this Government's commitment to public‑private partnership in other sectors such as health and transport and so on? Why do you not experiment a little more in coal? Malcolm Wicks: We will reflect on all these issues with the Energy Review drawing to a conclusion, but I wonder whether your Committee would urge us to put our public money there rather than in, I do not know, marine renewables, biomass or heat pumps? If we are looking to the future, where would the priorities lie? Chairman: We are coming to that now. Q885 Mr David Jones: I think, Minister, to answer your last rhetorical question, this Committee is probably more concerned about security of supply than almost anything else. As you rightly said, we are now entering an age where we are increasingly reliant on imported coal and imported gas from countries such as Russia, which had no compunction at all about turning off the taps to Ukraine last winter, and from the Persian Gulf, which is not exactly the most stable corner of the world. When we visited the United States we found a very buoyant coal industry, very optimistic, which was having enormous government funding for clean coal technology. You mentioned a figure of £35 million, which frankly pales into almost nothing compared with the investment in the United States. To reiterate the point that the Chairman has made, would you not regard putting more money of that sort, some pump priming money, into the coal technology industry as something that would be beneficial in the long term if only to do something to secure security of supply? Malcolm Wicks: I do remember the recent history of coal and politics, Mr Jones, and, of course, we are now where we are because of actions taken by a previous Conservative government. Q886 Mr David Jones: I have to tell you, Minister, that the evidence we had from the National Union of Mine Workers indicated that the witness accepted that Arthur Scargill was no longer General Secretary. We are now 20 years on, so political points can operate in both directions. We are now here in 2006. Malcolm Wicks: We are where we are because of the actions of a previous Conservative Government and many pits closing down and, in a sense, what we are all struggling with is whether we can usefully see a revival of the British coal industry. I have said I hope that we can by using clean coal technology. I think it does come back to this issue we have discussed that if we can get the carbon signals right, if we can make sure that people who produce clean sources of energy - whether it is nuclear, if we want to go there, renewables or clean coal - are financially encouraged to do that. I do not mean by direct subsidy but because it is cheaper for them than producing dirty energy. I think that is the way we need to go. Q887 Mr David Jones: The Bush regime in America is not exactly known for its socialist credentials, nevertheless it is prepared to put money into pump priming operations in terms of clean coal. Malcolm Wicks: Yes. Q888 Mr David Jones: Why would this left of centre Labour Government not emulate that? Malcolm Wicks: We do have a fund of £35 million for technology on carbon abatement and we are enthusiastic supporters of the European Union Emissions Trading Scheme ‑ I am sure you are too - which is one way of incentivising this kind of technology. The EU ETS is a very substantial mechanism, if it can develop in an appropriate way, of incentivising just this kind of thing. Q889 Mr David Jones: But it is not happening here, whereas it is happening in America. Malcolm Wicks: I have seen some of the developments myself in America. I visited the clean, not fully clean because it was not capturing the CO2, coal technology plant in Tampa in Florida, for example, and I was very encouraged by that. I am also encouraged by the fact that one or two commercial players are now looking to invest in clean coal technology in this country because they see that the signals are right. Q890 Hywel Williams: Can I return to the matter of coal imports. It is a very straightforward case, though I am sure the answer is much more complicated. We went to a power station called Aberthaw outside Cardiff and they told us they were burning lots of imported coal, but that they would prefer to use the coal on their doorstep. We also visited Tower Colliery and we spoke to the NUM who told us the coal industry in south Wales and elsewhere would be very keen to supply Aberthaw. Given that coal, as your colleagues told us, is now cheaper, can you explain to myself, as a lay person, to perhaps people on the Committee and perhaps to people who might be listening to us here today, why can the Government not do something about that, or is your choice to allow the markets to rule? Could you give us an answer? Are you in favour of letting the markets rule - it seems to me to be what you are saying - or can the Government do anything at all about that? Apparently, it is simple situation: there is cheap coal on the doorstep and people want to burn it. That is what is happening. Malcolm Wicks: Obviously not terribly adequately, and you can nod at this stage, but I am trying to give four or five answers to very similar questions that have been put to me. I have been trying to put forward the argument that we have had coal investment aid and that has helped Tower Colliery and so on. I guess the objective commentator would say it has not, nevertheless, secured the long‑term future that we are all looking for. What I am arguing now is we probably should not be looking at, even if we could afford it, another public expenditure programme. We should look at producing the right framework for all forms of clean energy, which would allow commercial judgments to be made. Q891 Hywel Williams: When we visited Aberthaw, they also told us that they used to burn tallow, but apparently the regulations have changed and they are no longer allowed to burn tallow. Is there any prospect that they might be allowed to use it, if it was a fuel they wanted to burn? Secondly, they told us that the agricultural industry can, in fact, burn tallow. Could you clear that up? Malcolm Wicks: I do not think we can at the moment. We will have to come back to you on that one, I am afraid. Q892 Mark Williams: Turning now to the issue of biomass, I am interested in how the recommendations of the Biomass Taskforce under Sir Ben Gill are being addressed and delivered in Wales? Malcolm Wicks: There has been a
government response to the Biomass Taskforce which, Q893 Mark Williams: In the Taskforce report they envisage a million hectares, eight million tons of energy crop or your 5% figure. Where are we on those figures now? Are we meeting those targets? How far have we got to go to achieve it? On the targets that the Taskforce envisages, they talked in terms of one million hectares or producing eight million tons of energy crop. Malcolm Wicks: The Taskforce has only recently reported, yes? Q894 Mark Williams: Where are we, though, as a starting point then? Malcolm Wicks: I mentioned where we are on biofuels, not where we are but where we hope to be. In terms of the rest of the Taskforce's proposals, it is obviously very early days. Mr Wagstaff: I have got a figure here, which I think comes from the report itself, which said in 2003 in terms of heat generation biomass energy was about 1%. As the Minister said, there is much more detail in Ben Gill's report itself. Malcolm Wicks: There is an issue also in terms of the power stations, DRAX I think it is, in terms of co-firing using biomass. There are arguments about what would be an appropriate percentage for co-firing, given other issues around the Renewables Obligation. I have recently asked colleagues to review that to see whether or not we are in the right place on that. Q895 Mark Williams: We took evidence from the Institute of Grassland and Environmental Research which is in my constituency. Dr Valentine, who has done a great deal of work on biomass there, felt very strongly that biomass was not reaching its full potential because of, and I quote his words, "ignorance of the potential, it was perceived as complex or high risk, a lack of policy clarity and a fragmented approach from Government" on biomass. How would you respond that that criticism? Malcolm Wicks: I think I would respond to that criticism by acknowledging that, although some of these ideas have been around for a very long time, in terms of government this is still very early days. We are committed to it, hence we established the Taskforce after all. We have issued our own response to the Taskforce and in the Energy Review we are looking at some of those issues. It may be helpful, Chairman, if my colleague, David Wagstaff, could mention some specific developments in Wales. Q896 Mark Williams: That was my next question, so yes, please. Mr Wagstaff: This is not an exhaustive answer, but certainly there are one or two things we are supporting in Wales. Our capital grants scheme has supported the western bioenergy development which is at Port Talbot, I think, and that is to the tune of about £4.6 million. There is also the Wales biocluster heat project which is just under half a million. There are a couple of things there. I am sure if you want to know more detail, we can provide it for you. Q897 Mr Martyn Jones: When we were at Aberthaw, Minister, we saw the Renewables Obligation was skewing the use of clean sawdust there. I know you are aware of the issue, that is also a feedstock in the chipboard and wood panel industry. Given that we are talking about biomass, which Mr Williams has asked questions about, how can we use the Renewables Obligation Certificate or some other method or mechanism to make sure that what we are using is genuinely renewable biomass grown specifically for the purpose? I am sure that is what is intended in the first place, but we have an unintended consequence in the wood panel industry at the moment. Malcolm Wicks: As I have said, because I work with complexities here, although every week that passes, I am aware of more complexities, I have asked my colleagues to do a relatively quick review on the co-firing issue because, on the one hand, you will get power plants saying, "We would like to increase and benefit from the Renewables Obligation the amount of biomass that we can use", bits of products from timber manufacturing for example, so some of it points that way. You have other people saying, "No, this will skew the Renewables Obligation. This was not meant to support traditional power plants, it was meant for all sorts of other things, marine technology and so on". Then, of course, more recently I have been introduced to the very important perspective about the implications for some of those producing furniture and so on who now feel they cannot use that material because it is being used for biomass. It is not an easy place to be which is why we are looking at it. No doubt we will do our best to make a wise judgment, which will please at least one-third of the audience and a fewer proportion of MPs. Q898 Mark Williams: The Chancellor has talked in a project statement of the creation of a development of a national institute for energy technology. Following on from our earlier questions about research capacity, would you envisage institutions like the Institute of Grassland and Environmental Research in my area, which has done a lot of pioneering work into biomass, to be part of that national institute? They have recently had some serious job losses. There is a huge amount of potential there which they are very keen to capitalise, they have got the expertise and, in my experience, are part of the national UK bioresearch picture as well. Malcolm Wicks: Certainly, given the richness of this field, yes, but also for some of the complexities and diversities, which this Committee hearing has detailed and no doubt in the next couple of hours will go into further detail, we need more research and innovation not just around renewables and carbon capture storage and all these things. The Chancellor's announcement is very key to this. This will be a public‑private sector research institute. It will not be one institute with one building, it will be more like a virtual institute and there will be scope for all key players in the research world to play their part. I will not comment on any one particular centre. I would have thought this is a good time to be a scientist, technologist or researcher in the field of energy. Chairman: I do not think we are going to keep you for a couple of hours, but we can do our best. Q899 Mrs James: I am now coming to something else I am particularly interested in, wave and tidal power. Representatives from the Welsh Energy Research Centre agreed that while the UK could be a world leader in developing wave and tidal technologies, that we were "in danger of missing the boat again" unless we take the lead now. How will you avoid this danger? Malcolm Wicks: I will not repeat the phrase "missing the boat". As I said earlier, this is an example of one of those technologies which is more the other end of the continuum from, say, onshore wind. It certainly is a technology that has enormous potential that needs encouragement and not just pats on the back; it needs financial support. DTI have been providing financial support in the past and recently we have announced £50 million for, I think what we call, the "Marine Development Fund" for this very purpose. I am aware within Great Britain there are a number of centres of excellence and certainly great innovation and entrepreneurship at different stages of development. In Fife Ocean Power has very advanced technology which has been tested in the water for a number of hours or a number of days but not yet been fully tested. I think that is where we are. I do not think at the moment you can necessarily say, "Yes, in the next few years this will prove its commercial worth". I think what you can say is there is a lot of excitement, a lot of interest, huge amounts of skill and technological brilliance. We have just got to try and ensure we will do our very best to help bring these things into the commercial market because obviously it is right that if Britain can become a world leader on marine renewables, that would be the right ambition for us to have. I think at the moment, yes, we have got the Renewables Obligation but also this grant aid and I think we are doing our best. Q900 Mrs James: Witnesses identified several areas where the Government needs to act in order to effectively harness wave and tidal energies, not least in providing a clear lead addressing ambiguities around offshore planning and promoting long-term investment. What steps is the Government taking to address both these issues? Malcolm Wicks: Defra, our colleague department, are addressing some of the issues around planning, for example, with the Marine Bill and the concept of marine spatial planning. The idea that just as we had onshore planning for a number of generations, or a century or more, we now need to look at the traffic of different kinds and different uses of our seas. Ben Bradshaw of Defra is leading on those issues and we need to make sure that as the voice of renewables of different kinds, offshore wind, that what we are talking about now, the marine technologies, are part of that planning issue because there is a lot of competition out there for the use of the seas. All sorts of interest groups have beaten a path to my door to plead their case, and not just to plead their case but also the case against others who want to use the seas. Q901 Mrs James: One of my particular interests is tidal lagoon schemes, and previous witnesses have highlighted the fact that, in spite of the technical feasibility of tidal lagoon schemes and a combination of misunderstandings and comparing apples and pears of the costs et cetera, saying that the technology is too expensive at this moment in time, it has significantly delayed any government approval or support them for them. Having finally completed a correct appraisal of schemes, such as the tidal lagoon in Swansea, what is the Government planning to do to make up to for lost time? How will the DTI help restore investor confidence in those people who would have been happy to invest but hearing it was too expensive and the technology was untried have now backed off? Malcolm Wicks: I look at my note here, I would not pretend to be an expert on tidal lagoons. It is one of those ideas that seems sound. I think the difficulty, as ever I am afraid, is that independent assessments that have been commissioned by both my Department and the Welsh Assembly suggest the economics of lagoon schemes are not favourable. However, if claims favouring the economics of the scheme by tidal electric are correct and the project is sound, we would, of course, expect the commercial sector to come forward. If something is feasible economically, then you would expect the investment to flow from that. The other thing I would say is that we have worked closely with the Welsh Assembly Government to review the economics of the Swansea Bay scheme, which I am advised do not appear favourable at the moment. I think that is where we are. Again, Chairman, if it would be helpful for us to send you a fuller note on this, I will. All of these things, in my experience, are always heavily contested of course; someone will do one analysis, and someone will then say, "No, the arithmetic is wrong" and so on and it should be given a fair chance. In the framework within which we are operating, if something appears to the advocates of the scheme to be favourable, you would expect the investment to be there in the marketplace. Q902 Mrs James: My understanding was the investment was there, that there was significant evaluation, and that evaluation was undertaken by respected and well-known organisations? Malcolm Wicks: Which scheme are you talking about? Q903 Mrs James: This is the Tidal Electric scheme which has created a huge amount of interest locally in Swansea. Malcolm Wicks: I think I had better write on that one. I know it is an important idea, but I think I had better write on that one. Q904 Nia Griffith: If I could thank you, Minister, because you have agreed to meet with Siān and me on Monday on this very issue. Could you perhaps confirm that if there is a company such as Tidal Electric, who can give us assurances that they are doing this on private money, then would it be something that the DTI would look favourably on? Malcolm Wicks: I just need to be cautious here because of planning issues, do I not? I think it is right that I am. I am favourable towards renewable energy and I am struck by the fact that there are a range of schemes, ideas and technologies that are now coming forward and I am terribly encouraged by that. It is for others really to look at the economics of it. In terms of a particular scheme, then there is our old friend, planning law, and decisions around that and public opinion and so on. The particular issues in Wales, the devolved administrations, some issues in England, so I do not think it would be sensible for me to say, "In the right circumstances I support scheme X" because one might need to be involved in a judgment about that later. Q905 Mr David Jones: I am grateful to you for your offer of a note, Minister, and when you submit your note, possibly you could consider the proposal that has been made recently for a larger scheme off the coast of north Wales which would be for a tidal power station that would generate over 400 megawatts which, of course, would be entirely within your Department's competence. Possibly, when you address the Swansea Bay issue, you could ask your officials to consider the north Wales proposal as well? Malcolm Wicks: I will try to touch on that. Again, I should make it clear in terms of where we are, the respective roles of government and the commercial sector, it is not for me, as Energy Minister particularly, to say "Someone has told me about a new offshore wind thing or a new heat pump, are you in favour of it or not?" That is not where we are. Q906 Mr David Jones: I think that the proponents of that proposal fully accept that. I think that their concern was that there was a DTI report that was very unfavourable, in fact dismissive, of tidal power which has to a certain extent been rectified now and taken on board the report of W S Atkins. If you are preparing your note, possibly you could incorporate a note on the Swansea Bay proposals. Malcolm Wicks: I will see what I can say on that. Chairman: We are gradually moving around the course and now to the Severn Barrage. Q907 Albert Owen: An exciting project that stirred up a lot of interest in Wales and proponents of it suggest that it could contribute some 5% of the UK's energy needs. It is carbon-neutral, totally renewable and the kind of scheme the Government is looking for in its review. Has there been an official submission from the Welsh Assembly Government and will you be making a decision in the written review? Malcolm Wicks: I have had a meeting with some of the key players, very much for me simply to inform myself about an idea which, I understand, has been around for some while that has been controversial, and probably still is, but which now has some quite powerful players supporting it. Yes, the review team is looking at it, but again, at the risk of repeating myself rather, it would not be in any case for us to say "Yes, that is great and here is a cheque", rather a large one, or "No, we do not like it". It is not like that. It is a question of whether in the right circumstances the thing would be acceptable in terms of planning law. There are environmental considerations. I think possibly different environmentalists will argue it both ways: some would say it will enable a greater sort of diversity of species to blossom, or whatever that species do, and some say "No, it would be a threat to existing bird life", maybe. So obviously, as ever, these things are controversial, but I am interested in it because 5% is a very considerable proportion in terms of what we are about, but I think I need to be a bit cautious at this stage. Q908 Albert Owen: I fully understand the reasons you have given but, all things being equal, this is the kind of scheme you are looking for for the future energy needs of the United Kingdom, a barrage that can produce 5%. Secondly, going back over some of the questions you were asked, this is an idea from the Welsh Assembly Government that has regional implications. What I am trying to ask you is (a) is this the type of scheme that you would think is acceptable for the future in the green Energy Review, and (b) the fact that the Welsh Assembly Government's proposal adds a bit of weight? Malcolm Wicks: Certainly, the representations I have had add weight, yes, because, as I say, some powerful players are really very interested in this. I do think, Mr Owen, through you, Chairman, we are going to need some boldness about both energy supply and climate change. To hit our targets does not involve a series of very cautious steps, it needs some major step changes in terms of how we use and stop abusing energy and in terms of the investments we need to make. I am encouraged when people come forward with ambitious ideas. Whether they are acceptable to local public opinions is another matter, their environmental impact is something I do not have the expertise to judge on, but the fact that interesting and sometimes exciting ideas now are coming forward either in terms of small-scale micro-generation or the larger-scale projects is something I find encouraging, of course I do. Q909 Chairman: You are in the home straight now, you will be pleased to know. We want to move on to wind energy, and Dr Constable of the Renewable Energy Foundation expressed some concern about the fact that UK energy policy seemed to be regionally tailored and he said this: "[energy policy] tends to regard renewable energy resources ... in Scotland and Wales for example, as common UK properties to be exploited at will. While we accept of course that the overall national good may be seen as having weight in this context, we are concerned that particularly in relation to renewable energy resources, this breaches what we take as a golden rule of sustainable development, which is that a development should benefit all parties at the relevant proximate level; and that distal benefits ... should not be invoked ... carelessly". How would you respond to that criticism? Malcolm Wicks: Is he or she arguing that essentially the wind turbine should simply fuel the electricity for the immediate community? Is that the gist of that argument? Q910 Chairman: It could be. Malcolm Wicks: Yes. Two kinds of answers really that maybe point in either direction, but that is all right. One side is we need a UK energy strategy. We need to think about our countries together. We have grid networks that reflect that and also, of course, one is aware that, take the contentious issue of existing nuclear power stations, they are often in communities which do not have around them large urban areas using all the electricity that is produced and they feed in perfectly properly to the national grid. There are particular issues I think in northern Scotland and the islands, the Western Isles and the other islands, the Shetlands that have a huge wind resource but, of course, much of the demand for energy, increasing demand, is coming from around here in southern England. We need to think through the implications of that for transmission. I think the only other thing I would say that points in the other direction is that we are going to see quite often small‑scale local generation in the future, micro-generation. In the next 20 years or so, we are going to see thousands of energy flowers blossom in terms of micro-wind turbines on our dwellings and, I hope, on our schools, maybe as a way of educating our children about their relationship to energy, and energy's relationship to the planet, on village halls and so on. That development of local generation, often on quite a small-scale level, raises interesting issues about the grid system and local wiring systems that we need, so I understand that but I think these two things are complementary. In other words, we need to produce power to feed into the National Grid, but we also need more forms of local generation using micro-wind turbines, photovoltaics, heat pumps and the rest. Q911 Chairman: I think you may have answered the next question, but could we have your observation on this question of broad strategic terms and the balance between overall national good and principles of sustainable development, in particular with regard to wind energy in Wales? There seems to be a sense in Wales amongst certain people that wind power seems to be the only way forward in terms of renewables. In renewables in particular, it was described to us by one witness as why is it we seem to have gone for wind energy, and the answer was it is low-hanging fruit and it is easily accessible because the development has been undertaken. Malcolm Wicks: Yes. I think why onshore wind is proving itself is because it has now got a reasonable history behind it, there has been a quite a lot of investment in other countries, in Scandinavia and so on and it is a proven technology. It is, therefore, an obvious one for the developers to look towards. I will not repeat the earlier discussion, but the challenge now is to make sure we can incentivise other forms of renewables that have a chance of proving themselves. I do not see the future of renewables as simply about windmills, I see it as about encouraging biomass and these other technologies. I do not see the climate change challenge as one which we face up to simply through renewables, frankly. I know there is a school of thought that thinks with lots of nice renewables and more energy efficiency that solves the energy problem. Well, no, sir, that is not the only way to solve the energy problem, it will not fully do it, which is why we have to take nuclear seriously as an option, it is why we need a lot of investment in carbon capture and storage - another select committee of this House has produced a very useful report on that - it is clean coal technology and the rest. There a whole menu of issues we need to grapple with if we are to meet the challenge of global warming. Q912 Mark Williams: Large wind farms such as the Rhyl Flats area come under your authority as they are schemes over 50 megawatts. When we were in north Wales, we came up against significant opposition to that development. Do you feel arrangements are adequate for consultation with local people on such large schemes and ultimately come forward in your authority? Malcolm Wicks: I am just looking at my note on this, but I am aware of this. Maybe I have been in correspondence with you, Mr Williams, on this and other people. I am aware of concern, as you say, opponents claiming that the consent for the project should be revoked because the consultation process was flawed. We have rejected such claims. We granted the consent after a full and proper consideration of all the issues brought to the attention of the Secretary of State during a consultation process. That is our position on that one. We do not think there is any scope for reopening that particular argument. Q913 Mark Williams: Do you feel the avenues for local residents to make their views are robust enough? Malcolm Wicks: I do, but there is no point in being complacent about things. If there is room for improvement, we will want to discuss those possibilities. Q914 Mr David Jones: Actually, Minister, I am the chap you have been in correspondence with over the Rhyl Flats. You will recall that one of the concerns I expressed on behalf of my constituents was in connection with the statutory notice that appeared in local newspapers, which described the development as being on the Rhyl Flats whereas, in fact, it is not on the Rhyl Flats, it is on another identified area of the seabed called the Constable Bank. In fact, it is not only described as that by me, but it is also described by RWE npower website as being on the Constable Bank. The concern, of course, was that residents were misled into thinking that the development was in an entirely different location from where it is. In fact, it is a few miles off the coast of Rhos-on-Sea in my constituency and quite a long way from Rhyl. You indicated that the co‑ordinates of the scheme would have been apparent to anybody who had inspected the application, but would you not accept the criticism that in the case of large-scale windfarm developments such as this, it is essential that the statutory notice that appears in the local newspaper should, as far as possible, accurately identify the location of the development? Would you not accept the criticism that in this particular case it was not a sufficient indication of its location? Malcolm Wicks: I do not think I will accept that criticism and, to be honest, I think at this stage it is not very sensible for me as the minister who was not there at the time to make judgments about the precise details of this. What I will say, and I repeat what I said earlier, is if there is room for improvement in terms of future developments, I will take those suggestions seriously. Q915 Mr David Jones: The question was do you think that the statutory notice should, so far as possible, accurately identify the location of the proposed development? Malcolm Wicks: Yes, of course. Q916 Mr David Jones: Would you accept that in this particular case it did not? Malcolm Wicks: No, I will not accept that. Q917 Mr David Jones: You will not accept that? Malcolm Wicks: I do not think I can add usefully to the correspondence we have had on this matter. Q918 Mr David Jones: You would not consider a review of the consent application? Malcolm Wicks: No. Q919 Mr David Jones: Would you agree that to give misleading information in statutory notices does nothing to improve the confidence of the public in the consent process? Malcolm Wicks: I am aware that there was a consultation process. As with all these things some people will be pleased by the outcome, some not pleased, and you are ably representing those who did not like the result. Q920 Mr David Jones: You are not listening to me. Malcolm Wicks: That is your argument, I know. Q921 Chairman: Could we come back to the wider picture of wind energy. Malcolm Wicks: Yes. Q922 Chairman: Would it be a useful suggestion that some of the heat could be taken out of the arguments or the public feeling if DTI ---- Malcolm Wicks: It sounds like a combined heat and power project you are suggesting, Chairman! We can discuss that if you like. Q923 Chairman: You have not lost your humour at this late stage. Can you provide some facts and figures about the contribution that wind energy can make and put it into a more sober context? Malcolm Wicks: I suppose in principle it can make a huge percentage contribution. At the moment we are trying to hit a target of 10% by the end of this decade. At the moment, I think I am right in saying that of the new developments coming forward, most will be wind energy. To hit that 10% target, you will mainly do it through wind energy, but if I can be more specific in writing, I will be. After that, up to 2020 when we would like maybe a fifth of our electricity to come from renewables, I am not sure it would be very sensible for me to try to produce a proportion out of the air. Q924 Chairman: It would be helpful if you could write to us and also write to us with some facts and figures on the distinction between base load provision of energy and other provision of energy, and also the difference between capacity and output. Malcolm Wicks: Yes. Q925 Hywel Williams: Can you tell us broadly what considerations are given to the visual impact of large-scale of developments offshore. There is a proposal at Gwynt y Mor, for example, and it has been alleged that would have a detrimental effect on tourism. How heavy does that sort of consideration weigh, do you think, when planning consents are considered? Malcolm Wicks: I am satisfied that there is a very rigorous process of consultation in terms of planning law which looks at all the things you would expect to be looked at: the environmental considerations, some of these considerations about other users of the sea, shipping, some of the shippers sometimes have concerns about particular projects, all of those issues and then, of course, the general visual impact will obviously be taken into account. Q926 Hywel Williams: This is a comment really. We did meet some people from the tourism industry who are extremely unhappy with the potential visual impact and felt their particular industry, which is a key local industry in Mr Jones' constituency, and mine for that matter, was affected by a windfarm. They felt locally they were not being taken proper account of. I am telling you that as a comment. That is where that particular question comes from. Malcolm Wicks: I know from decisions I have had to take about England, if I can introduce that foreign country into our considerations here, when I agreed with the inspector there should be a windfarm at Romney Marsh, many people applauded the decision but other commentators called me a vandal. I had no reason to second‑guess the inspector on that, I looked at it carefully. Again, I agreed with the inspector for Winash near the Lake District in the Yorkshire Dales, I agreed it should go ahead. Some so-called environmental groups thought I was being totally irresponsible. You cannot get these things right except, it seems to me, it is possible to maintain the stance to say we are pro-renewables but we will judge each one on its merits. Q927 Hywel Williams: Certainly, that is the stance that I take, being very much in favour of renewables but wanting to carry the population's views. Malcolm Wicks: All the time remembering, Mr Williams, the obvious point I made earlier which is not just a rhetorical point, it is a rather serious point. I am not talking about your scheme, because I do not want to make a judgment about that one, but those people looking offshore who are onshore, saying they do not like that will be living in homes and staying in hotels where they will want hot showers in the morning and want the lights to go on. All of us, as Members of Parliament, cannot find ourselves in a position where we will oppose any development that is going to secure our energy in the future. From time to time, we have got to say "yes" to things. Q928 Hywel Williams: Just to refer back to the question that the Chairman asked you earlier on about publishing or providing full information. Again, perhaps this as a comment. As much information about facts and figures before planning consent is considered would seem to me to be a very good way forward. Is that the stance that you and your Government take, that full information, as full as possible, should be provided beforehand? Malcolm Wicks: During the planning inquiry? Q929 Hywel Williams: Yes. Malcolm Wicks: Yes, of course. Q930 Mr David Jones: One concern, Minister, on the question of offshore windfarms is that, as you know, the Scarlet Sands Programme for south Wales is not being pursued because of economic difficulties, developers have decided it is not economically viable in the current climate. Do you think it wise to continue issuing consents under the Electricity Act for further applications when the current stock of consent is not being utilised when proposals such as Scarlet Sands are not being pursued by the developers because of those economic reasons? Malcolm Wicks: I am certainly concerned and interested in why a number of schemes are not being forwarded at the present time. In terms of offshore wind, some of the economics have moved in a wrong direction, partly because of tax credit policies in the United States putting a lot of resource into the development of offshore wind in the United States. In any case, the prices of some component steel have gone up at the present time, so I am obviously concerned about that, but I do not think that would lead me to the conclusion that we need to look at the whole consents issue and queuing. Q931 Mr David Jones: I am wondering whether you ought to allow the current stock of consents or granted consents to be used up before you grant any more consents for other projects? Malcolm Wicks: I will think that through, but I think not probably because, given some do not proceed to fruition, you probably need other people coming along behind them. Q932 Mr David Jones: There is an extant consent there that has not been exploited? Malcolm Wicks: I will think through what you are saying. We need to give consent to some things, Chairman, and I look forward to your Committee's recommendation on what you do support as well as the individual concerns of constituencies about what you are going to oppose. Q933 Chairman: I hope you do not think we are being negative. Malcolm Wicks: Not at all, after two hours I was not implying that. Q934 Chairman: After scrutinising the process, we are almost at an end. Could I thank you very much, Minster, and your officials and Mr Williams from the Wales Office for the comprehensive way in which you have answered our questions and, I should add, with patience and good humour. I suppose, as you said, with the combination of heat and power! Malcolm Wicks: I hope the loud voice was appropriate, Chairman. Thank you very much indeed. |