Select Committee on European Communities Twelfth Report


TWELFTH REPORT


29 JUNE 1999

    By the Select Committee appointed to consider Community proposals, whether in draft or otherwise, to obtain all necessary information about them, and to make reports on those which, in the opinion of the Committee, raise important questions of policy or principle, and on other questions to which the Committee considers that the special attention of the House should be drawn.

ORDERED TO REPORT

ELECTRICITY FROM RENEWABLES

PART 1: SUMMARY OF THE COMMITTEE'S RECOMMENDATIONS

1. The potential of renewable energy in the EU, with particular reference to electricity generation, is the subject of this Report. In Part 5, we consider thematically the large range of issues arising. We repeat in paragraphs 3 to 89 the key points of our conclusions.

General

2. In brief summary, those key points are as follows.

(a)  Within the global target set under the 1997 Kyoto Protocol, the EU and the UK have substantially to reduce emissions of greenhouse gases to help counter climate change. That the EU and UK targets will make only a small contribution to the required global reductions does not mean that they should be pursued with any less vigour. Proper planning for and delivery of these will give a vital lead.

(b)  The development of renewable energy sources can make a significant contribution to reducing damaging emissions. This needs to be accompanied by a range of other measures, including energy efficiency (in both generation and use) and energy conservation.

(c)  The EU-wide target of securing 12 per cent of all primary energy from renewables by 2010 is technically feasible, but the three-fold increase in the rate of expanding renewable energy provision will require a determined and sustained drive.

(d)  Similarly, the UK's targets of obtaining 5 per cent of electricity from renewables by 2003 and 10 per cent by 2010 are also technically feasible. However, we do not see them being delivered under present policies.

(e)  The UK's 2010 target will require a seven-fold increase in the rate of expanding renewable energy provision throughout the next decade. This will require urgent action by the Government to put in place the range of new policies required, together with sustained leadership to ensure that the targets are delivered through coherent action by all the relevant public bodies.

(f)  A particular need in the UK is to improve the poor success rate of renewable energy projects in securing necessary planning and other consents. The planning and consent machinery needs urgent improvement, but proposers can also help themselves by better preparation among the communities affected.

(g)  There also needs to be better public awareness of the imperatives for renewable energy within the wider climate change agenda, noting that no method of energy generation is totally benign.

(h)  Decisions on the support mechanisms to succeed the present Non-Fossil Fuel Obligation (NFFO) arrangements are now overdue. Provided these are satisfactory, private sector capital funding for the expanded renewables programme needed to meet the UK's renewable electricity targets is unlikely to be a problem. The cost of those support mechanisms could be met by a surcharge to all electricity consumers of only 0.06p a unit (kilowatt hour). This is less than a tenth of the proposed Climate Change Levy, itself at the low end of the estimated costs of pollution from fossil fuel electricity generation which are ignored in present pricing arrangements.

(i)   To help achieve the UK's targets, we recommend the establishment of a strong and pro-active new agency to bring together the fragmented responsibilities for key energy matters.

(j)  The present renewable energy targets, together with energy conservation and efficiency measures, will not solve all the problems. The climate change agenda is likely to require yet further action over coming years. Additional problems may also arise from the decommissioning of nuclear generating capacity. National and international energy policies need to integrate the handling of all these short, medium and long-term matters in both formulation and all-important delivery.

Achievement of the Targets

3. Given the commitment of the EU and Member States to the Kyoto protocol and the national targets for reducing greenhouse gas emissions, there is a clear imperative for pursuing the development of renewable energy sources. What is now needed from each EU Member State is a clear strategy to show how its target will be achieved. (Paragraph 199)

4. We endorse the consensus view that the UK has the aggregate potential to achieve the targets for electricity from renewables. However, we find it hard to see that this potential will be realised. (Paragraph 200)

5. We have difficulty sharing the Minister for Energy's confidence that the UK's 5 per cent target by 2003 will be achieved, even including the existing contribution from large hydro. (Paragraph 203)

6. It is clear that, to achieve 10 per cent of electricity from renewables by 2010 and even with the inclusion of the existing 1.3 per cent contribution from large hydro, the UK must increase the average rate of installing renewable electricity generation achieved recently by a factor of at least seven. (Paragraph 204)

7. If the targets are to be met, our view is that use of all the available renewable energy sources (notably wind energy, particularly from offshore sites) will need to be expanded at the maximum practicable rate. (Paragraph 205)

8. Given the Kyoto targets and the Government's Manifesto commitment on carbon dioxide emissions, it is important to quantify the greenhouse gas reductions from the growth of renewable energy. It was therefore disappointing not to find clear answers in the Department of Trade and Industry's (DTI) 1999 consultation document and supporting papers. Our analysis suggests that the carbon savings from meeting the 10 per cent renewable electricity target will be around 7.6 million tonnes a year. To this must be added substantial reductions of methane emissions avoided with energy from waste and landfill gas. We urge the Government to clarify the figures as soon as possible. (Paragraph 206)

9. We do not agree with the implication in the DTI's 1999 Consultation Paper that, if wind energy is exploited less rapidly, the development of other renewables can be accelerated to fill the gap. (Paragraph 207)

10. The Committee therefore shares the majority view of witnesses that the UK's renewable energy electricity targets will not be achieved within the present arrangements. The necessary rapid growth of renewable energy provision requires urgent improvements in not only the various inter-linking policies but also their implementation. (Paragraph 208)

Planning

11. The present widespread difficulties for renewable energy installations in obtaining planning permission and other necessary consents are a grave hindrance to achieving the necessary growth of renewables. (Paragraph 215)

12. The national policy for renewable energy needs to be a clear and integral part of the planning guidelines. Moreover, planning inspectors should be more clearly held accountable for decisions by reference to those expanded guidelines. (Paragraph 216)

13. We agree with the Minister for Energy and many other witnesses that, within the national objectives, regional targets for the implementation of renewable energy would provide a useful additional context for planning decisions. (Paragraph 217)

14. At the same time, those planning, designing and siting installations can help themselves and the national programme in showing greater sensitivity in their work, coupled with a pro-active approach to the communities concerned. (Paragraph 218)

Public Perception

15. Public perception is a key element of the integrated strategy we advocate for developing renewable energy. We see a serious gap between the public's generalised appreciation of the case for renewable energy and a detailed understanding of the issues. If the UK's expansion plans are to be realised, that gap needs urgently to be filled. (Paragraph 223)

16. We recommend the Government urgently to undertake an authoritative survey of public views on renewable energy matters ranging from general policies to particular types of installation. This should also cover perceptions of other aspects of the wider climate change agenda such as energy efficiency and conservation. (Paragraph 224)

17. It is vital that the Government and its various agencies, together with the promoters of renewable energy plant, take urgent steps to cultivate better public understanding of the issues and to create a more favourable climate for new proposals in the areas concerned. (Paragraph 225)

18. The size of the task should not be underestimated. Achieving the necessary development of renewable energy - not to mention the wider climate change agenda - will require substantial changes in established behaviours. Policies and strategies throughout the UK and elsewhere in Europe need fully to recognise this. (Paragraph 226)

19. The UK renewable energy targets will be met only if informed and motivated consumers demand that an improved and integrated policy and strategy framework delivers the necessary growth in renewables. (Paragraph 227)

20. Present modest initiatives need substantial development. Publicity material will not be enough. The same consistent lead should be delivered by every aspect of Government (particularly the planning authorities and numerous related agencies), by the electricity supply and distribution industry, and by all promoters of renewables. (Paragraph 230)

Individual technologies and prospects for their development

WIND

21. It is inconceivable that UK targets for electricity from renewables can be met without much fuller development of onshore and particularly offshore wind energy - though we are concerned that this will not be achieved within the present arrangements. If the UK targets for renewable energy are to be met, the contribution from wind power in each year of the next decade needs to grow at about five times the best annual rate achieved in recent years. (Paragraph 239)

22. There are inconsistencies in applying the planning guidelines which must be resolved. We would favour a general planning presumption in favour of wind farm proposals. (Paragraph 240)

23. We accept that there is strong opposition to wind farms in some quarters but note the various independent opinion surveys to the contrary. (Paragraph 241)

24. Our visits to wind farms in Northumberland and Denmark convinced us that, thanks to improvements in technology and provided suggested noise limits are met, noise is no longer the issue it was. (Paragraph 242)

25. We also felt that arguments about visual intrusion can be overstated. (Paragraph 243)

26. To avoid the further waste of promoters' efforts and frustration of the national policy for renewable energy, the DTI and Ministry of Defence (MoD) should as soon as possible resolve the latter's concerns over wind farms and codify legitimate points into general guidance. (Paragraph 244)

27. It is essential for the Government to pursue schemes of support for community wind projects as a means of actively fostering local interest and support. (Paragraph 245)

28. We welcome recent DTI initiatives to make up for lost time in the exploitation of offshore wind, and hope to see the first projects in place as soon as possible. (Paragraph 246)

29. To achieve that, we strongly encourage the various interests involved in granting consents to offshore wind installations in the simplification and integration of their procedures, so that the DTI vision of a "one-stop shop" can be realised as soon as possible. (Paragraph 247)

WASTE COMBUSTION

30. Where it is practicable to dispose of municipal solid waste and other waste by burning, it makes obvious sense to use the energy for electricity generation or heating purposes. (Paragraph 254)

31. Waste combustion is not a glamorous technology. Its image might be improved by raising public awareness of the merits, assisted by continuing work to reduce noxious emissions from the incineration plants. (Paragraph 256)

32. The planning guidelines should be strengthened to give a stronger steer in favour of waste combustion with appropriate health and environmental safeguards. (Paragraph 257)

33. We consider that the development of the resource and the associated technology must continue to be fostered under any new NFFO-style support mechanisms. (Paragraph 258)

LANDFILL GAS

34. Burning landfill gas to generate electricity makes obvious sense and should be strongly encouraged. (Paragraph 263)

35. Electricity generated from landfill gas can make a worthwhile contribution towards the UK's 10 per cent renewables target, with additional significant benefits in reducing damaging greenhouse gas emissions from landfill sites. (Paragraph 264)

36. As waste combustion and landfill gas are two sides of the same coin, we strongly encourage the development of policies which allow an integrated approach to energy from waste. (Paragraph 265)

HYDRO

37. Further development of large hydro schemes is unlikely and undesirable on environmental grounds. (Paragraph 270)

38. Small hydro does not attract the same environmental problems and, although the resource is not enormous, we consider it should be exploited more systematically, particularly as many schemes are initiated locally. (Paragraph 271)

39. We recommend that the Government review the nature and operation of the planning and consent structures for small hydro proposals, with the aim of co-ordinating and streamlining the involvement of the wide range of interested regulatory bodies. (Paragraph 272)

ENERGY CROPS

40. We see substantial problems inhibiting the development of energy crops for electricity generation. (Paragraph 277)

41. We do not see how energy crops could make a significant cost-effective contribution to renewable energy targets for 2010. While the position may improve over the longer term, it seems to us that cost of electricity from energy crops will always be towards the more expensive end of the renewables spectrum. (Paragraph ref 279)

TIDAL BARRAGES

42. Even if construction started now, the Severn Tidal Power Group's evidence is that the barrage would not produce electricity in time to contribute to the 2010 targets. There is, though, a question whether this or other barrage schemes should be planned for the longer term. The tidal resource is substantial. (Paragraph 284)

43. As the need for renewable electricity increases in future, the presently adverse initial economics and the environmental aspects of large scale barrages may look different. We recommend the Government to keep the matter under review. (Paragraph 286)

44. There may be earlier scope for exploiting the large tidal resource in smaller schemes. We recommend the Government ensure that the opportunities here are thoroughly evaluated in the light of technical developments and, as appropriate, implemented for both demonstration and energy purposes. (Paragraph 287)

 TIDAL STREAMS

45. It is surprising that exploitation of energy from tidal streams is not further advanced. We consider that there are strong arguments in favour of supporting the development, and we welcome the demonstration projects now being planned. (Paragraph 292)

46. We would also encourage those involved in tidal streams to consider with offshore wind providers the scope for sites combining their technologies. (Paragraph 293)

WAVE

47. Although the wave energy resource is undoubtedly large, the technology will not be able to make a substantial contribution to renewable energy supplies in the short and medium-term. (Paragraph 297)

48. We welcome the research into the exploitation of shoreline wave power and hope the projects find success. (Paragraph 298)

49. We doubt whether, with presently available technology, wave energy generation machinery installed offshore could long withstand the extreme forces of the sea. (Paragraph 299)

PHOTOVOLTAICS

50. The contribution of photovoltaics to UK and European electricity supplies by 2010 is likely to be small. (Paragraph 306)

51. Given the potential global importance and the rapidly expanding market, the primary aim of a continuing photovoltaics research programme is to help industry retain and expand a share of world markets. We consider that this support should continue. (Paragraph 307)

52. If costs of manufacture, construction and operation can be sufficiently reduced, there may be scope for some worthwhile UK installations, which will also help raise public awareness. (Paragraph 308)

Research and Development

53. The Committee considers that appropriate research, development and demonstration projects are vital. We therefore welcome the DTI's March 1999 announcement about increased funding levels, albeit from a low base, to around £18 million per annum in 2001/02. We also welcome the complementary Engineering and Physical Sciences Research Council's expanded programme for university research into renewable energy and the enabling technologies, with up to £3.5m per annum for new research projects. (Paragraph 312)

54. The funding criteria should be applied with a degree of flexibility to ensure that the development of technologies with real potential for the longer-term is not unduly inhibited. (Paragraph 313)

55. We do not support the idea of a dedicated research centre for marine renewables, as this could entrench divisions between the various technologies. (Paragraph 314)

56. The availability of research, development and demonstration funding from EC sources is welcome, and we encourage continuing liaison between Member States and the EC to ensure that, as far as practicable, the funding streams are complementary. (Paragraph 315)

57. We would encourage manufacturing industry to consider investing more in research and development of renewables. (Paragraph 316)

Manufacturing and Employment

58. A strong argument in favour of expanded renewable energy provision is the consequent investment, manufacturing, employment and export opportunities. Our calculations are that, to meet the 2010 target, renewable energy provision needs to be expanded by some 450 MW[1] declared net capacity (dnc) each year. At an average cost of around £1,800 per kW, this gives an investment figure of about £810 million a year for the next decade. (Paragraph 320 )

59. The manufacturing and employment opportunities have clear regional and local dimensions. They lend additional support to the arguments we have made in favour of regional planning for renewables. (Paragraph 321)

60. Given the global opportunities, we strongly encourage the Government and UK industries to ensure that Britain is, in terms of both the manufacturing base and promotion abroad, well positioned to take advantage of export opportunities. (Paragraph 322)

Electricity system issues

61. There are no insuperable problems in operating the UK electricity network with substantial amounts of renewable energy, including intermittent sources, well beyond the present 10 per cent target. (Paragraph 333)

62. We do not accept, however, that the grid and centralised generation will ever become superfluous or even the junior partner. The necessary stabilising role of the grid must remain. This means that there is a limit - albeit a high one - to the amount of embedded generation that the national and local systems can accommodate. We encourage the National Grid Company and others to do further work to establish what those limits are, and what the additional cost of adjustments might be as those limits are approached. (Paragraph 334)

63. Distribution companies should identify locations which might benefit from the installation of renewable energy plant, as precedented by the National Grid Company's "generation opportunities" for larger plant. Indeed, the fact that generation opportunities vary regionally adds further weight to the concept of regional policies for renewable energy. (Paragraph 335)

64. Some complex issues need to be resolved if renewable energy is to be assimilated within the electricity system on fair terms. To avoid either discouraging the growth of renewable electricity generation or complicating life for others, the Committee strongly encourages the parties involved to work towards devising simple solutions. The NFFO process is admirable in this respect: it guarantees supported renewables (including intermittent sources) access to electricity networks. It is vital that this simplicity is retained. (Paragraph 336)

65. OFFER has a crucial role in not only devising the rules for renewable and other generators' access to the system but also in setting the tone of dealings with the (normally smaller) renewable generators. Given the national policy and priority for developing renewable electricity sources, OFFER should take a much more pro-active role in their promotion. (Paragraph 337)

66. We understand OFFER's terms of reference are being reviewed in preparation for the proposed Utilities Bill, and urge that the wider climate change agenda be reflected in a much more positive steer on the Regulator's environmental responsibilities. (Paragraph 338)

67. We welcome the emerging "green markets" for energy. If consumer trust is to be retained in such "green energy" schemes, the need for robust certification of renewable energy is essential. In mid-July 1999, the Energy Saving Trust is launching a Government-backed accreditation scheme to brand and promote renewable energy for both domestic and business use in the UK. We welcome this initiative. (Paragraph 339)

Financial support

68. For as long as the price of electricity generated from fossil fuels ignores the external costs of pollution, we are clear that renewables are being set an unfair target. This is not special pleading for renewables, but a simple application of the "polluter pays" principle, advocated in the Government's recent White Paper on sustainable development. (Paragraph 351)

69. The Government's proposed Climate Change Levy is intended in part to reflect such external costs of pollution, but it seems to us a very crude way of doing so. In particular, it seems absurd that electricity generated from renewable sources will be taxed in this way. We urge the Government to re-examine the scheme to ensure that renewable sources receive positive encouragement. (Paragraph 352)

70. We see a strong case for encouraging community-owned renewable energy schemes as a means of fostering local interest and support. We invite the Government to consider financial incentives for this, perhaps by redirecting some of the proceeds from the proposed Climate Change Levy. (If electricity from renewables were exempt from the proposed 0.6p/kWh Levy, a substantial proportion of that electricity would then be available at competitive prices.) (Paragraph 353)

71. The cost of securing the UK's target of 10 per cent of electricity from renewables by 2010 is a key financial issue. We were very disappointed to find such a wide range of estimates in the Government's two recent consultation documents. If that really represents the present state of knowledge, it seems inexcusable. If, on the other hand, firmer figures are available, they should be presented as the basis for necessary decisions about future arrangements. (Paragraph 354)

72. In the meantime, a working figure is required. The DTI's 1999 consultation document estimated that the cost of the proposed mix of renewable generation would be 3.5p/kWh. That figure is 0.5p/kWh higher than the 3p/kWh market value of generation from small renewable energy projects. Multiplying that 0.5p/kWh by the 35 TWh needed to meet the 10 per cent target in 2010 gives £175m (at 1999 prices) as the UK extra annual cost. We offer this as the best working estimate, noting that it is the mid-range figure to which the DTI's consultation document appeared to give guarded support. (Paragraph 355)

73. That support cost needs to be put into perspective. In 1999 terms, it would add around 0.06p/kWh to the cost of all electricity or some 1 per cent to all electricity bills (£3 per annum for the average domestic user). That 0.06p/kWh is a tenth of the 0.6 p/kWh Climate Change Levy proposed for non-domestic electricity - which is itself at the low end of the estimated external costs of fossil generation. Even if the cost were, say, as much as double our working figure, we would not regard the higher support cost of 0.12p/kWh as excessive. (Paragraph 356)

74. It is also important to note that the premium paid for renewable electricity under the NFFO arrangements is incorporated into the cost of all electricity and thus met directly by the consumer. It is not a subsidy from the taxpayer - nor is that proposed for the future. (Paragraph 357)

75. Another key financial issue is the question of suitable new NFFO-style support mechanisms. Given the need to speed up renewables provision by a factor of at least seven, this is overdue. (Paragraph 358)

76. If the UK is to develop the momentum to achieve the targets, decisions on new NFFO-style support mechanisms are needed urgently. Subject to some minor caveats, we commend the model suggested by the Non-Fossil Purchasing Agency as seeming to satisfy all the key criteria without the complexity of other solutions. (Paragraph 362)

77. We recommend that steps are taken to develop and implement a general policy for "net metering". (Paragraph 363)

78. We urge the Government to ensure that the Review of Electricity Trading Arrangements properly accommodates the distinctive characteristics of renewables and that the eventual implementation takes full account of the renewable electricity targets. (Paragraph 364)

The European dimension

79. We were encouraged to find that the driving forces behind the development of renewable energy sources in Europe are the same as those in the UK. We were also interested to note the additional imperative of cutting down on fuel imports. (Paragraph 380)

80. As the necessary support schemes for renewables involve electricity consumers paying extra costs, mechanisms need to be broadly similar to avoid market distortions when electricity is traded across national borders. We therefore accept the Commission's logic in pressing for a degree of consistency in the proposed Directive. (Paragraph 381)

81. As a direct corollary, there is a need for certification of renewable energy sources, which should remain a feature of any Directive. (Paragraph 382)

82. Reaching the EU's target of 12 per cent of primary energy from renewables by 2010 will require a sustained three-fold increase in the annual rate of utilising renewable energy. Only decisive policies and determined action will enable the target to be achieved. (Paragraph 383)

83. Much of the responsibility for that will fall on individual Member States. Experience suggests that success is far from certain. We therefore positively welcome the EC stimulus on renewable energy. (Paragraph 384)

84. At the same time, the European Commission needs to be aware of the ways in which its many other policies interact with the desired progress on renewables. A particular issue is the reform of the set-aside provisions of the Common Agricultural Policy with its implications for energy crops. (Paragraph 386)

85. As for national governments, the EU's approach to renewable energy and the whole climate change agenda needs an integrated and sustained effort - with Member States - to deliver the desired outcomes. (Paragraph 387)

Leadership and Action

86. Renewable energy is only one facet of the policies needed to tackle the broad-ranging environmental issues facing the UK, Europe and the World. It is unacceptable that the UK cannot deliver an integrated policy in the renewables industry. (Paragraph 393)

87. To deliver the seven-fold acceleration in the growth of renewables required to meet the present UK targets, we recommend the Government urgently:

·  to declare unequivocally that "the target is to achieve 10 per cent of the UK's electricity supply from renewables by 2010" - and their determination to reach that target;

·  to put in place all the necessary policies to achieve that target, particularly as regards new NFFO-style support mechanisms, regionalisation of the targets, active support and incentives for community-based renewable energy proposals, and improvements in the planning and consent arrangements;

·  to communicate these policies widely, enthusing consumers and others about the importance of meeting the targets; and

·  to make all relevant public bodies clearly accountable for progress towards the targets. (Paragraph 396)

88. To help facilitate all that, the Government should examine ways in which the currently fragmented responsibilities can be brought more closely together. We recommend the establishment of a "renewable energy agency", with real teeth. (Paragraph 397)

89. In the meantime, we welcome the Minister for Energy's agreement to our suggestion of an annual report drawing together all the threads of progress on renewable energy matters. We hope that such reports will indeed chart the massive progress needed to meet the UK's targets. (Paragraph 398)


1   Units and other abbreviations used in this Report are explained in Appendix 5. Back


 
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