Select Committee on European Union First Report


Annex 1

Government Response to Electricity from Renewables, the 12th Report (1998-99 Session) of The House of Lords Select Committee on the European Communities

For convenience the Select Committee's summary of its recommendations is repeated in the numbered paragraphs one to 89 below. The Government's response is set out in bold type.

  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 three 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.

  The Government is committed to a new and strong drive to develop renewable sources of energy and welcomes the Committee's report on Electricity from Renewables. Proper planning is of course essential to the efficient and effective delivery of all policy objectives, not least those related to sustainable development and climate change. The Government also attaches great importance to developing an inclusive approach to these issues, one that can command broad and continuing support across the wider community. It has therefore sought to develop that concensus through consultation.

  Since coming to Office the Government has issued a series of consultation papers on the UK Sustainable Development Strategy and Climate Change Programme through the Department for Environment, Transport and the Regions (DETR). It has also consulted on proposals for a Climate Change Levy and in March issued a consultation paper, "New and Renewable Energy: Prospects for the 21st Century" on support for renewables, through the Department of Trade and Industry (DTI). The Government aims to publish a draft climate change programme for the UK towards the end of this year and a statement on renewable energy policy will also follow. The Government will also continue to promote public awareness of climate changes issues, for example through the "are you doing your bit?" campaign. We will seek to ensure that the role of renewable energy is being addressed in our promotional activity.

  There is widespread acceptance that, both in the UK and in the EU as a whole, renewable energy has the potential to provide a significantly higher proportion of energy needs than it does now. It seems likely that further deployment will be needed as climate change policy develops but inevitably there are considerable uncertainties attached to estimates of both the rate of development which will be needed and the cost of securing that development. The Kyoto target is only the first step. Much more significant reductions will be needed over time in order to tackle the long term threat of climate change. Renewables will therefore have a key role to play in the move to a low carbon economy. What is clear is that achievement of both the European Commission's renewables target and the Government's own domestic renewables aim will require coherent policy action and a sustained drive and leadership. The Government intends to provide that drive and leadership.

  Development of renewable energy, along with promotion of improved energy efficiency and CHP, is an essential component of any cost-effective climate change strategy. A combination of all these factors will be needed. The Government has announced its intention of working towards the aim of achieving 10 per cent of the UK's electricity supply from renewable sources as soon as possible. We hope to achieve this by 2010 but the key role of renewables will be in the longer term. The priority therefore is to establish the right framework now so that momentum can be maintained and, even after 2010, the share of renewables can continue to rise in response to the need to limit greenhouse gas emissions to sustainable levels.

  The Government believes that contracts already in place under the existing Non Fossil Fuel Obligation (NFFO) arrangements including those in Scotland and Northern Ireland, should secure its target of 5 per cent electricity supplies from renewable energy sources in 2003. Many projects, particularly those awarded contracts under NFFO 5 in 1998 and the 3rd Scottish Renewable Order in 1999 (SRO  3) are still at the development stage. This is however critically dependent on maintaining the integrity of the existing contracts through the reform process currently underway in the electricity market. The Government is committed to achieving the 5 per cent target and therefore to taking the necessary steps to protect the integrity of the existing contracts.

  In the UK, policies to promote renewable energy and to take us towards the 10 per cent target need to be developed in the context of the Government's wider economic, environmental and energy policies. Restructuring of the electricity industry and the New Electricity Trading Arrangements which are to be put in place mean that continuing with NFFO, the current support mechanism for renewables, in its current form is not an option. But this need for change is also an opportunity to put in place the mechanisms needed to underpin the Government's Manifesto commitment to a new and strong drive to develop renewable energy. The Government intends to take the broad powers to establish that mechanism in the Utilities Bill, which it hopes to announce this autumn.

  The Government sees the planning system as having an important role in helping to deliver the Government's targets and goals for renewable energy and climate change. A positive, strategic approach to planning for renewable energy is essential. There needs to be an open and constructive dialogue between prospective operators, local planning authorities and local people about identifying suitable sites with sensitivity and care. The Government is building on these themes in considering what further practical steps may be needed to ensure that the planning system enables renewable energy provision to contribute to the UK's sustainable energy needs while continuing to protect the countryside.

  The Government welcomes the Committee's view, which it shares, that it should be possible to access private sector capital to secure its policy aims for future renewable energy development. Such an approach is consistent with the wider objective of ensuring the continued development of competitive energy markets within an effective regulatory framework. In developing a future support mechanism for renewable energy the Government therefore wishes to work with the grain of the market. The cost of that support mechanism is however sensitive to a wide range of factors and assumptions. These include: rate at which costs continue to fall with further development and deployment; the future price of electricity (which the Government expects to fall as a result of its proposals to reform the electricity market); and the extent to which longer term and more costly technologies are brought forward. Early offshore wind developments, for example, are expected to generate at around 5-6p/kWh. The choice of support mechanism also has implications for the distribution of costs and risks which in turn have implications for the overall effect on electricity prices.

  The Government always keeps under review the distribution of functions for developing and implementing its policy. However energy policy covers a wide range of areas and involves a wide range of officials within Government, for example those involved in energy efficiency, energy policy, sustainable development, housing, planning, health and taxation. It would be impossible for a single agency to be able to successfully cover all of these areas. Moreover it is important to recognise the cost and disruption resulting from organisational change. Government Departments would remain responsible for policy areas and would need to continue to work together to develop policy and monitor its operation. Effective liaison has developed as officials work together very closely, enabling Government to develop and carry forward its policy on energy matters. In particular, Ministers in DTI and DETR meet regularly to consider energy issues of common interest and to report on the progress of current initiatives.

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)

  All Member States are developing new climate change programmes to ensure that they can deliver their Kyoto targets. Action on renewable energy is likely to be a key element of such programmes. Their progress will be kept under review through the EU monitoring mechanism on emissions of greenhouse gases. We have also led by example, through our proposals for the UK Sustainable Development Strategy and UK Climate Change Programme, through our proposals for a Climate Change Levy and through the consultation paper on support for new and renewable energy.

  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)

  The resource estimates summarised in the Government's consultation paper published earlier this year support the Committee's view on the aggregate potential of renewable energy in the UK. Uncertainty remains however as to the rate at which these resources can be developed, and at what cost.

  Renewable generation accounted for 2.5 per cent of UK electricity supplies in 1998 compared to 2 per cent in 1997, due both to a recovery in output from large hydro plant and to further NFFO projects coming on stream. Overall renewable energy use has doubled since 1990. Monitoring of the progress of projects through the planning consent process suggests that the proportion of electricity generated from renewable energy sources should continue rising towards 5 per cent by 2003 provided the completion rates seen so far can be maintained. This will, however, depend crucially on maintaining the integrity of the existing contracts through the reform process currently underway in the electricity market and the Government has already announced its commitment to this outcome.

  The Government agrees that achieving a 10 per cent contribution to electricity supplies by 2010 implies a significant increase in the rate of deployment achieved to date. Contributions can be expected from the fifth, and largest ever, Non Fossil Fuel Obligation, announced by the Government last September and from the third Scottish Renewables Order, announced earlier this year. But further support will be required and the Government's consultation paper, "New and Renewable Energy: Prospects for the 21st Century", issued in March this year, sought views on the balance of measures and the precise form of support for renewables at the next stage of their development. An announcement of the Government's policy, which will have to be formed in the context of a number of broader environmental, energy and economic policies, will follow as soon as possible.

  The Government agrees that achievement of the 10 per cent figure will require contributions from a wide range of sources. These are likely to include energy crops as well as both onshore and offshore wind.

  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)

  Uncertainties in both the future mix of renewable energy technologies and the future mix of conventional energy technologies limit the accuracy with which future emission reduction benefits can be quantified. These issues have been addressed in a report "The Environmental Implications of Renewables in the UK" (AEAT-2945) but it is a complex subject in which there are no definitive answers. In the climate change consultation paper, published last October, the Government estimated that the additional carbon saving from delivering 10 per cent of electricity demand from renewable sources in 2010 could be up to 5.4 MtC. Revised estimates will be published in the draft climate change programme towards the end of this year. In the case of methane emissions from landfill sites, regulations already require gas collection at new sites and the generation of electricity from the gas collected therefore only contributes further reductions in methane emissions to the extent that it encourages more effective collection.

  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)

  Uncertainties certainly exist concerning the rate at which different renewable energy technologies can be deployed. There is limited data on deployment rates of the more established renewables technologies such as energy from waste and onshore wind energy. There is a marked lack of data on the maximum deployment rate of the technologies currently at the demonstration stage such as offshore wind energy and energy crops. Accordingly, there is considerable uncertainty about the contribution from individual technologies that might be achieved at any particular time. The Government believes that a range of technologies will need to be deployed.

  The Government also accepts that further support for renewables will be required if its aim of a 10 per cent renewables contribution to electricity supply is to be achieved. Arrangements put in place so far have been effective but changes are required to reflect changes taking place in the electricity market. This provides an opportunity to consider future support for renewables against wider policy and market developments, such as the proposed Climate Change Levy. These issues were addressed in the Government's consultation paper earlier this year. That paper also addressed institutional and other issues that might need to be tackled. Some 260 responses were received and these are now being considered.

  The Government is confident that the strategy it is developing will enable the contribution of renewables to continue rising well beyond 2010 in response to the need to limit future greenhouse gas emissions to a sustainable level. Progress is already being made, for example through the Government's proposals for regional sustainable development frameworks (see below), the increased funding for R&D already announced and the measures being put in place to ensure a level playing field for renewables in the competitive energy markets.

PLANNING

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

  The latest figures available indicate that many renewable energy projects are successful in obtaining planning permission at the local authority level. These are:

    —  of the contracted NFFO-3 projects, some 56 per cent have either obtained planning permission, or do not require express consent by virtue of the Town and Country Planning General Permitted Development Order (GPDO). Planning applications have still to be submitted for 18 per cent of the projects. Only 11 per cent of the total number of schemes have been refused planning permission; and formal appeals to the Secretary of State of the Environment, Trasnport and the Regions have been lodged against some of those decisions. Any future refusals of planning permission would also carry with them the same statutory right of appeal;

    —  similar information for NFFO-4 projects shows that planning applications have yet to be submitted for nearly half (46 per cent) of the projects. Of the rest, some 37 per cent have either obtained planning permission, or do not require express consent by virtue of the GPDO. Only 6 per cent of the total number of schemes have been refused planning permission. Again, appeals have been lodged against some of those decisions and any future refusals of planning permission would also carry with them the statutory right of appeal;

    —  the fifth NFFO Order was made in September 1998. As at 31 March 1999, three NFFO-5 projects were operational.

    —  NB—These figures on NFF-3 and 4 were previously given to the Committee in Richard Caborn's (then DETR Planning Minister) supplementary letter following his appearance on 31 March.

  It is unrealistic to expect that all NFFO projects will obtain planning permission, particularly as the current scheme has been criticised for not addressing environmental issues sufficiently effectively. Respondents to the "New and Renewable Energy" document called for "greening" any future support mechanism to give more emphasis to potential environmental impacts. This is currently being considered.

  The Government agrees, however, that the planning system should not unduly hinder suitable schemes from coming to fruition. The "New and Renewable Energy" consultation document, issued by DTI in March this year, acknowledged the need to see what more may need to be done to help. The Government has therefore been reviewing the contribution that the planning system can make in the delivery of renewable energy targets. It will ensure that Regional Planning Guidance and development plans play a key role in fostering a strategic approach to renewable energy provision. DETR' "Planning for Sustainable Development" Guide, published in October 1998, has already underlined the importance of this approach. Further action is discussed in response to Recommendation 13.

  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) National policy for renewable energy is already part of the planning process through Planning Policy Guidance note 22 (PPG 22), "Renewable Energy", PPG 22 makes clear that, in formulating development plans, local authorities should take account of Government policy for renewable energy (in Wales, Planning Policy Guidance (Wales), Technical Advice Note 8: Renewable Energy applies). Local authorities must have regard to this.

  Planning Inspectors are already fully accountable for their decisions. For example, if Inspectors fail to take proper account of a material consideration, such as published Government policy, or come to decisions that are perverse, their decisions are vulnerable to challenge in the High Court. The Planning Inspectorate has a well established, and deserved, reputation for fairness, openness and impartiality. The Government rejects the criticism of Inspectors' performances in relation to planning applications for renewable energy projects as being unjustified. An Inspector has to test all the evidence submitted and our view remains that the quality of Inspectors' decisions and reports is high. Inspectors know they must weigh the environmental impact of wind farms against the need to develop renewable sources of energy and the wider environmental benefits.

  The Planning Inspectorate has a regular programme of Inspector training. Indeed, a course for Inspectors that will re-iterate the Government's policy on renewable energy will be run soon.

  The Government will consider, in the light inter alia of responses to the "New and Renewable Energy" consultation document, whether any further national guidance on land-use planning and renewable energy might be needed. Other action is in hand as explained below.

  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)

  The Government welcomes the Committee's support. Richard Caborn, then DETR Planning Minister, in his statement on 15 June emphasised that "we need a positive strategic approach to planning for renewable energy from regional level downwards." Many respondents to the "New and Renewable Energy" consultation document also favoured the setting of regional targets. In Scotland the promotion of renewables is executively devolved to the Scottish Executive and is an issue of considerable interest to the Scottish Parliament.

  In order to facilitate the setting of regional targets we have asked the Government Offices for the Regions to set in motion the process of preparation of regional assessments and targets for renewable energy provision drawing upon and, where necessary, updating, existing resources studies. This will provide a backdrop to a more positive approach to renewable energy development in Regional Planning Guidance and local authorities' development plans. As part of this approach, Government Offices will be encouraging local planning authorities to make positive proposals in their plans for renewable energy provision in their areas. It is likely that the issue of renewable targets and associated planning and agricultural policies in Wales will be a matter of debate in the National Assembly for Wales.

  We intend to develop this more strategic approach through the regional sustainable development frameworks mentioned in the UK Sustainable Development Strategy, published on 17 May 1999. Guidance on those frameworks is currently being developed for issue this autumn with a view to all frameworks being in place by the end of 2000. However, the frameworks will not be statutory nor Government documents and the regional stakeholders will determine their content.

  The Government envisages that the frameworks will include broad statements about how each region will take forward the Government's policies on renewable energy and contribute to achievement of the national target by 2010 and longer-term, having regard to the region's potential capacity across the range of renewable energy sources. The frameworks should, therefore, include targets for each region, reflecting the contributions proposed from each energy source. The Government will encourage the frameworks to set targets that draw upon the regional resource studies which represent an assessment of the potential capacity of each region to generate electricity from renewables, rather than a straight translation of the national 10 per cent figure.

  The key role for the Government Office will be to initiate the process and ensure that key regional stakeholders are involved in making assessments of regional capacity so that there is clear ownership of the targets that feed in to the frameworks. This will need to include the Regional Development Agencies (RDAs), regional planning bodies and local authorities as well as representatives of industry and countryside and amenity interests.

  By their nature, the regional frameworks will help to set the context for the preparation of RDA strategies and RPG. Thus we see future RPG taking forward in land-use terms a region's strategy for delivering renewable energy targets by defining broad locations for renewable energy development and setting criteria to help local authorities select suitable sites in their plans. We would encourage regional planning bodies to set targets in RPG, where sensible to do so, for the structure plan and UDP areas within the region consistent with the regional target provided by the regional framework. Advice on this will be in the final version of PPG 11, due to be issued later this year.

  The whole process of preparing RPG in the future, including arrangements for testing it in draft at public examinations, is itself designed to promote greater ownership of regional policies and increased commitment to their implementation through the statutory planning processes. RPG will provide a more strategic framework for policies and proposals for renewable energy development in development plans, including the identification in those plans of suitable sites. This, in turn, will feed through in to decisions on individual planning applications.

  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)

  The Government agrees with this Recommendation. There must be an open and constructive dialogue between prospective operators, local planning authorities and local people about identifying suitable sites with sensitivity and care.

  There needs to be greater public familiarity with, and acceptance of, prospective renewable energy developments. More positive planning at regional and local levels will contribute to this. However, it is also important that operators prepare the ground with local authorities and local people before formal planning applications are submitted. Proposals should be developed in consultation with them, with operators ensuring that they accurately set out the issues, including the contribution to local sustainable energy supplies. Informal discussions on siting and design and the local benefits of schemes, for example, involving local meetings and exhibitions, will increase mutual understanding, and help win hearts and minds.

  The Local Agenda 21 process can help too. Whilst Local Agenda 21 strategies have no formal planning role they can form part of a process of promoting a more receptive climate for specific developments at the local level.

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 develoment 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)

  The Government agrees that, in responding to the challenge of climate change etc, all countries, including the UK, will need to pursue substantial changes in established behaviour. The Government therefore concurs with the Committee's view of the importance of public perception. The Government will continue to promote public awareness of climate change issues, for example through the "are you doing your bit?" campaign. We will seek to ensure that the role of renewable energy is amongst the issues being addressed in our promotional activity.

  The Government also accepts the Committee's recommendation that it should undertake an authoritative public attitude survey and hopes to commission this in collaboration with the full range of interests involved, including countryside interest groups and environmental NGOs. Understanding of the wider benefits of renewable energy is particularly important when contemplating developments that bring local impacts. Work is at an early stage but is expected to lead to advice to developers of renewable energy projects and others on how to cultivate better public understanding of the issues. The Government believes that this would help those concerned to take legitimate concerns into account at an early stage in the project development process and help to create a more favourable climate for new proposals.

  The Government is also working to develop policies that enable an informed balance to be struck between the global and regional benefits of renewables and their local impacts. This is complemented by support for the accreditation of green electricity tariffs that can provide the foundation for informed consumer demand.

  The Government intends to build on these foundations in its future strategy which will need to address the interests of all stakeholders.

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)

  The Government concurs with the Committee's view that substantial contributions from both onshore and offshore wind energy will be needed and that this implies a significant increase in growth rate.

  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)

  The Government does not accept the need for a presumption in favour of wind farm proposals. The Government's response to paragraphs 11-14 above explains how appropriate "building blocks" can be put in place within the planning system through national and regional planning guidance and development plans.

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

  The approach to the consideration of planning applications is set out in sections 70(2) and 54A of the Town and Country Planning Act 1990 (the latter being inserted by section 26 of the Planning and Compensation Act 1991). Section 70(2) requires local planning authorities to have regard to the development plan, so far as it is material to the application, and to any other material considerations. Where the development plan is material to the development proposal, and must therefore be taken into account, section 54A requires the application or appeal to be determined in accordance with the plan, unless material considerations indicate otherwise. In effect, this introduces a presumption in favour of development proposals that are in accordance with the development plan. Local planning authorities prepare their development plans within the framework of national policies and regional policy guidance. Development plans provide the basis for decisions on specific development proposals. This is the plan-led system of development control, which should ensure that planning decisions are not arbitrary and that developers will have a measure of certainty about what development will be allowed.

  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)

  The Government welcomes the Committee's view that technology development has assuaged concerns over the noise levels from wind turbines but believes that concerns over visual intrusion need to be addressed in conjunction with other stakeholders. Work is in hand to codify measures to mitigate the impact of wind farms on radar reception.

  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)

  The Government has actively supported a number of community wind initiatives and small wind farms have had a separate band in the last three NFFO obligations.

  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)

  The Government welcomes the Committee's support. Offshore wind energy will be required on a substantial scale if the target of 10 per cent is to be achieved. The Government is working to clarify the development consent process required and is working with other stakeholders to ensure that the necessary building blocks are in place.

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)

  The Government supports this view. With a few exceptions, all exising municipal solid waste incinerators recover value from waste through electricity generation. Where suitable loads exist there is the opportunity for generators to consider the potential for incorporating combined heat and power facilities to use the available heat as efficiently as possible.

  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)

  The Government agrees that it is important to improve public information in this area. If we are to achieve a sustainable waste management system, then incineration with energy recovery will be an important element of the local and regional solutions developed in the next few years. Increasingly, in order to develop new facilities, the waste management industry will need to work with local communities, businesses, and other bodies. The Government notes that the industry is beginning to take action to improve its poor image, and welcomes its efforts to identify and encourage best practice in this area. The setting and enforcing of high environmental standards for incineration is a priority for the Government.

  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)

  Planning Guidance for waste management was published in PPG 10 on 14 September. Its purpose is to provide advice about how the planning system can assist in the provision of waste management facilities in England and to explain how this provision is regulated under planning law and by legislation on waste management. It sets out the general policy context and contains advice on the criteria for siting facilities including waste to energy plants. However it does not set out preferences between different waste management options and cannot therefore give a steer towards any particular option. The approach is to set out the best practicable environmental option (BPEO) for each location and each waste stream, taking all relevant circumstances into account. DETR is currently carrying out research on the land-use planning aspects of BPEO. These matters are set out in the draft waste strategy for England and Wales ("A way with waste"), which was published on 30 June 1999. The BEPO is dealt with in Chapter 2 of Part One of the strategy in paragraphs 2.3 to 2.7. Chapter 4 of Part Two of the strategy discusses the various options for managing waste. Energy recovery from waste is specifically dealt with in paragraphs 4.33 to 4.53. PPG 10 provides advice to waste planning authorities, the waste industry and others on the land use planning issues that should be considered, when waste planning/disposal authorities are faced with a choice between, or mix of, different waste options, in order to manage particular waste streams. Decisions should be made in accordance with the best practicable environmental option and all relevant planning considerations.

  The Environment Agency will have an important role to play in authorising any waste to energy facilities, and it will be their responsibility to ensure that appropriate health and environmental safeguards are maintained, and relevant EU directives are complied with.

  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)

  The Government agrees that its strategy for promoting moves towards more sustainable forms of energy generation will need to continue encouraging energy recovery from waste combustion. Decisions on support for individual technologies will be taken at the appropriate time. It is interesting to note that there is already some evidence of energy from waste projects being financed outside the current NFFO arrangements.

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)

  The Government welcomes these views from the Committee and the support that they lend to current Government policy and initiatives on the subject of landfill gases. The Committee will however wish to note the potential impact of the EC Directive on Landfill—the aims of which are: to ensure high waste disposal standards; and to reduce emissions of the powerful greenhouse gas, methane. Whilst helping to maximise landfill gas recovery at sites, the Directive also lays down binding targets to reduce levels of biodegradable municipal waste going to landfill and in turn, reduce the amount of methane generated. In order to achieve these targets it will be necessary to divert such waste to alternatives, such as energy recovery, recycling and composting, which should impact on the amount of landfill gas available as an energy source.

  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)

  The Government welcomes this view. Government policies and targets for growth in renewable energy, along with the adoption of the EC Landfill Directive and the approach to waste management laid out in "A way with waste" (see response to paragraph 32) demonstrate that the Government is developing policies which will form the integrated approach sought by the Committee.

  In March of this year the DETR published a report which was completed by AEA Technology. One of its objectives was to assess the effect and effectiveness of existing and proposed waste management policies on methane emissions from landfills. The results suggest that methane emissions were lower than previously estimated, and that they are expected to reduce until 2010, taking into account the effect of planned measures, such as the EC Directive on Landfill. This again highlights that the potential of landfill gas as an energy source may be limited to an extent in future years. These results are being considered within the overall framework of the Government's policy of sustainable development.

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)

  The Government notes the Committee's views and shares its views on the likelihood of further development of large-scale hydro schemes. The Government is working with the Environment Agency in England and Wales and Scottish Natural Heritage in Scotland with a view to assisting developers to develop the small-scale resource on a more systematic basis.

  The Government recognises however that all forms of power generation, including renewable energy, have some environmental impacts. As with other developments, these have to be carefully assessed, in individual cases, through control systems—not just through the planning system, but also through pollution controls, environmental impact assessment etc.

  The Environment Agency is a statutory consultee on planning applications, and is also responsible for operating a range of environmental controls, in particular Integrated Pollution Control. For example, hydro schemes will require the Agency's consideration of impacts on river flows and ecosystems, and are likely to be covered by abstraction licensing. As with the planning system, decisions made by organisations such as the Environment Agency will need to take account of the climate change and sustainable energy policy context, in balancing any local environmental impacts against wider environmental benefits.

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 279)

  Electricity generation from energy crops is, along with offshore wind energy, at the demonstration stage of its development cycle with prices that reflect this. There is however scope for yield improvements and cost reductions in crop production and scope for performance improvements and capital cost reductions in the conversion technology. Though it is not clear what particular problems the Committee foresees, the Government accepts that there are barriers to overcome. The Government hopes that the industry will be able to build on the success of early projects but accepts that there is uncertainty around the rate at which price reductions will feed through and the rate at which growth in new capacity can be achieved.

  Short rotation coppice, and to a lesser degree miscanthus, is ready for commercial exploitation, and has the potential to make a significant contribution to climate change and renewable energy targets. As volume planting of energy crops is achieved the cost of planting these crops will fall. Research and development work is trialling alternative planting methods aimed at reducing the establishment costs of short rotation coppice.

  The need to transport fuel to the point of utilisation is a limiting factor but there is no reason why it should not be grown within a reasonable distance of the generation or conversion plant. Project Arbre, the UK's first significant power plant to be fuelled by energy crops, is viewed as a demonstration project showing farmers and others that the technology is feasible. In addition to the gasification technology at Arbre other advanced technologies, such as pyrolysis, are being developed.

  The main barrier to the planting of energy crops by farmers is the high cost of establishment, which makes them unattractive compared with more traditional agricultural activities which receive support under the Common Agricultural Policy. Planting grants have therefore been made available through the Forestry Commission for demonstration projects currently under development. The Government is also considering what future support might be needed to underpin larger scale deployment, particularly in the context of the EU Rural Development.

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)

  The Government is keeping developments in tidal barrages under review but has currently categorised this as a very long term technology unlikely to be worth pursuing at this time.

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)

  The Government is also keeping the progress of tidal stream demonstrations under review in case further advancement of this technology proves attractive.

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)

  The Government notes the Committee's views and agrees that wave energy is unlikely to make a significant contribution to energy supplies in the short to medium term. Further research and development will be needed before large scale deployment can take place and in March of this year John Battle, then Minister for Energy and Industry, announced the Government's intention to establish a new wave energy programme for that purpose. A strategy is now being developed and the Government expects to offer support to initial projects later this year.

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)

  The Government agrees that the contribution of photovoltaics (PV) to UK and European electricity supplies by 2010 is likely to be small. Currently the main opportunities for PV are in non-grid connected applications including consumer products, remote communications and solar home systems in developing countries. The market for building integrated PV will begin to grow during this period but significant market penetration is unlikely before 2010. The DTI's R&D programme aims both to encourage increased competitiveness and to stimulate development of the skills, knowledge, experience and technology needed for more widespread adoption of building integrated PV in the longer term.

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 £3.5 million 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)

  The Government welcomes the Committee's support for the additional resources it has made available for research and development. The Government also wishes to encourage industry to invest more in research and development and welcomes the Committee's encouragement of this.

  Responses to the Government's recent consultation paper on renewable energy echoed the Committee's view on the need for Government support for research and development to focus on new, immature and longer-term technologies in particular. The Government accepts this recommendation and will take this into account in the future development of its programme.

  The Government notes the Committee's view on proposals for dedicated marine renewables research centre. The need and value for money of such a centre would certainly need careful justification. The Government would however welcome industry based initiatives to improve the interface between the science base and commercial development more generally.

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)

  The Government recognises that employment benefits will result from growth of the renewable energy industry. It is working with the industry to nurture exporting knowledge and skills and to raise the profile of the industry in key overseas markets. The Government also acknowledges the regional and local dimension of this issue and its strategy for regional development frameworks (outlined in its response to recommendation 13) recognises the links between planning and development through the involvement of RDA'S.

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)

  The Government concurs with the Committee's view that there are no insuperable problems in operating the UK electricity network with substantial amounts of renewable energy, although the connection of large amounts of generation with intermittent output will raise particular problems which will need to be addressed. The Government also agrees that the transmission system will continue to play a major role despite the widespread connection of renewable generation.

  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)

  The Government agrees that there is a range of complex issues that need to be addressed if we are to ensure that renewable generation has access to the electricity system on a fair and equitable basis. The Office of Gas and Electricity Markets (OFGEM—formerly OFFER and OFGAS) will have an important part to play, as will the industry itself. To this end, the Government has established an Official Working Group to consider all relevant issues. The Working Group includes representatives from the DTI, DETR and OFGEM and is in the process of consulting with interested parties.

  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)

  In July 1998, the Government confirmed in the document "A Fair Deal for Consumers: Modernising the Framework for Utility Regulation—The Response to Consultation" that it intends to introduce legislation under which Ministers will issue statutory guidance on social and environmental issues. Regulators will be under a duty to have regard to such guidance. The guidance will be subject to full consultation, including with Parliament, and it is intended to last for a set duration of a number of years.

  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)

  The Government concurs with the Committee's views on the importance of a robust certification scheme and welcomes its support for the Energy Saving Trust's initiative.

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)

  The Government supports the "polluter pays" principle but considers that the application of this principle must take account of other relevant considerations such as the need to avoid damaging industrial competitiveness or aggravating fuel poverty.

  The climate change levy will make a significant contribution towards the UK's climate change targets. The price effect of the levy is expected to lead to carbon savings of 1.5 million tonnes per annum by 2010. Significant further carbon savings are expected from those sectors which enter into negotiated agreements to improve their energy efficiency. The Government is working hard to ensure that the levy is implemented effectively and in a way which complements other instruments such as regulation, negotiated agreements and emissions trading.

  The UK is not alone in introducing a tax. Seven other EU states have already announced or implemented energy or carbon dioxide taxes as a means of encouraging energy users to reduce emissions, and two others are believed to be considering the possibility.

  The Government recognises that many people feel that the environmental objective of the levy will be enhanced if the amount of levy is shown on invoices. However, there may be contrary views and so the point has been included in the consultation exercise being carried out by Customs and Excise.

  The Government recognises the need for special consideration to be given to the position of energy intensive industries given their energy usage, the separate Integrated Pollution Prevention and Control regulation, and their exposure to international competition. The Chancellor has therefore offered the prospect of significantly lower rates of levy for energy intensive sectors of industry which enter into agreements meeting the Government's criteria.

  The treatment of renewable energy was covered in the consultation document on the levy published by HM Customs & Excise on 9 March. The consultation document noted the Government's view that excluding electricity generated from nuclear power or large scale hydro-electric schemes from the levy, even when supplied direct to the final consumer, could not be justified as a means of developing renewable generation capacity. However, many respondents expressed the view that renewable energy should be exempt. The Government is currently considering the responses to the Customs and Excise consultation, inter alia, in the light of the need to ensure that if any exemption scheme were put in place, it would need to be legally robust, and take account of the need to provide for equal treatment of imported electricity.

  It is proposed that an additional £50 million in the first year of the Levy should be used to promote energy efficiency and renewable energy. This will provide a step change from current levels of funding. It is proposed that this funding will be used to provide information and advice for companies on cost-effective energy efficiency measures; to support the development of low-carbon technologies through a "carbon trust"; and to support renewable sources of energy such as solar and wind power. Proposals are currently being developed for these schemes. These will be assessed for their relative effectiveness and costs. The efficacy of the selected schemes will be monitored once they take effect. The Treasury is considering representations from industry in support of additional incentives for energy efficiency investment.

  The Government is committed to supporting the development of emissions trading schemes. The CBI and the Advisory Committee on Business and the Environment are currently developing proposals for a business-led scheme, with support from Government Departments. The negotiated agreements for energy intensive sectors of industry will also provide scope for trading between individual participants. Trading with other approved schemes will be allowed once these are established. The link between emissions trading and other economic instruments will be kept under review.

  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)

  The Government has actively supported a number of community wind initiatives and published material intended to stimulate interest in community owned projects. Although good examples do exist interest in developing such projects has, unfortunately, been limited. More recently the Energy Saving Trust has accredited a number of renewable energy funds established by electricity suppliers for investment in new renewable energy capacity. This initiative is expected to promote renewed interest in community ownership.

  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 35TWh needed to meet the 10 per cent target in 2010 gives £175 million (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 0.6p/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)

  The Government agrees that the cost of achieving its aim of a 10 per cent renewables contribution to electricity supplies is a key financial issue. It does not accept that such estimates, which are sensitive to a wide range of factors and assumptions, can be produced with a high degree of accuracy. Assumptions required include: the rate at which costs continue to fall with further development and deployment; the future price of electricity (which the Government expects to fall as a result of its proposals to reform the electricity market); and the extent to which longer term and more costly technologies are brought forward. Early offshore wind developments for example are expected to generate at around 5-6p/kWH. The choice of support mechanism also has implications for the distribution of costs and risk which also has implications for the overall effect on electricity prices.

  The costs of the current NFFO arrangements are met by a levy on suppliers and thus passed through to consumers. The Committee is not entirely correct however in its assumption that this is not a subsidy from the taxpayer. Technically, expenditure on support for renewables through the NFFO is classified as public expenditure and the Fossil Fuel Levy is a tax.

  Decisions on future support measures to promote renewable energy need to be developed in the context of the Government's wider economic, environmental and energy policies. Restructuring of the electricity industry and the New Electricity Trading Arrangements which are to be put in place mean that continuing with NFFO, the current support mechanism for renewables, in its current form is not an option. But this need for change is also an opportunity to put in place the mechanisms needed to underpin the Government's Manifesto commitment to a new and strong drive to develop renewable energy.

  The Government's consultation paper, "New and Renewable Energy: Prospects for the 21st Century", published last March, contained a wide ranging discussion of possible market stimulation measures and the options for a future support scheme to replace the current NFFO arrangements. The Government received around 260 responses to the consultation paper half of which, including that from the Non Fossil Purchasing Agency (NFPA), gave specific consideration to the options for supporting electricity generation from renewable sources. A summary of responses, which contained a wide range of views on the issues raised, was published in July. The Government is considering these responses carefully.

  The Government intends to take the broad powers to establish a new support mechanism in the Utilities Bill, which it hopes to announce this autumn.

  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 Government is in discussion with the industry on a number of issues concerning the connection to the grid of small renewable energy generators, including the charging and remuneration regimes. It is important that prices in the reformed electricity market, and therefore in the New Electricity Trading Arrangements currently under discussion, reflect the overall economics properly so that renewable and other embedded generators can compete fairly on a level playing field. It is not clear however that such a regime would support the introduction of net metering arrangements.

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)

  The Government notes the Committee's views and agrees the importance of avoiding market distortions when trading across national borders within the liberalised energy markets. This is one of the issues which we expect the proposed EU Fair Access Directive to tackle and the Government is encouraging the Commission to address this issue as a matter of urgency.

  The contribution renewables can make to meeting the Kyoto targets is widely recognised by other Member States and the Commission. In addition, renewable energy sources are indigenous and so can also have an important role in reducing the level of energy imports and increasing security of supply. These factors provide a strong incentive for co-operation between Member States with a view to co-ordinating policy so as to obtain the optimum synergy from national policies and measures.

  The Government therefore agrees there is a strong case for consistency of approach, but any harmonisation of support mechanisms must be based on market principles and encourage competition. Without this, there will be no incentive to reduce the costs of renewables and so reduce the level of subsidy needed. The relative costs of renewables must be reduced to allow them to compete with other energy sources with a view to increasing their market penetration. The UK will continue to work with the European Commission and other EU Member States in promoting the greater use of renewables.

  The Government welcomes the Committee's support for a system of certification for renewable electricity and believes that this will help to build and maintain industry, investor and consumer confidence in renewables at a UK and European level. Certification may also facilitate cross border trade. The UK is already well advanced in setting up a certification scheme to be operated by the Energy Saving Trust. In developing this scheme, there has been close co-operation with our European partners, especially Denmark and the Netherlands, who are developing similar schemes.

  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.  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)

  85.  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)

  The European Commission's White Paper for a Community Strategy and Action Plan "Energy for the Future: Renewable Sources of Energy", proposed an indicative objective of 12 per cent for the contribution of renewable sources of energy to the European Union's gross inland energy consumption by 2010. The Government welcomed the White Paper and agrees that only decisive policies and determined action by Member States will enable such a target to be met. The UK is playing its part to the full and the Government has strongly endorsed the need for all Member States to develop policies and strategies appropriate to their own circumstances.

  The Commission's "Campaign for Take-Off", designed to facilitate the success of the strategy as a whole, was launched in May and will run for five years (1999-2003). The Commission believes this will act as a catalyst for the development of key renewables sectors, sending a clear signal for greater use of renewables and encourage public and private funding. The objectives for the key sectors are:

    —  1,000,000 PV systems

    —  15 million m2 solar collectors

    —  10,000 MW of wind turbine generators

    —  10,000 MWth of combined heat and power biomass installations

    —  1,000,000 dwellings heated by biomass

    —  1,000 MW of biogas installations

    —  5 million tonnes of liquid biofuels

    —  100 Communities aiming at 100 per cent of RES supply

  The Government agrees that full account needs to be taken of the interactions between renewable energy and other policies and concurs with the Committee's view of the importance of CAP reforms for energy crops. On the latter, following "Agenda 2000", the compulsory set-aside provisions will be retained at the default rate for 2000-2006, fixed at 10 per cent. Voluntary set-aside provisions are maintained. Set-aside payments may be granted on a multi-annual basis for a period of up to five years. Farmers can put all of their arable land into set-aside if it is used for multi-annual biomass production. Member States are also free to exploit the Rural Development Regulation to develop the energy crops sector and MAFF is consulting on the content of plans.

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 target. (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)

  The Government is committed to encouraging sustainable development; to developing policies and encouraging behaviour which combine economic, social and environmental objectives to ensure a better quality of life for everyone. Further development of renewable energy, along with promotion of improved energy efficiency and CHP, is an essential component of any cost-effective climate change strategy and the Government is committed to a new and strong drive to develop renewable sources of energy. The Government has announced its intention of working towards the aim of achieving 10 per cent of the UK's electricity supply from renewable sources as soon as possible. We hope to achieve this by 2010 but the key role of renewables will be in the longer term. The priority therefore is to establish the right framework now so that momentum can be maintained and, even after 2010, the share of renewables can continue to rise in response to the need to limit greenhouse gas emissions to sustainable levels.

  Policies to promote renewable energy and take us towards the 10 per cent target need to be developed in the context of the Government's wider economic, environmental and energy policies. Since coming to Office the Government has taken forward a raft of initiatives that will give a significant boost to the further development of renewables. These include: announcement of the largest ever Order under the current NFFO arrangements, covering 261 projects and 1,177 MW of capacity, and of the third Scottish Renewables Order; reversing the downward trend in expenditure on the renewables research and development programme; initiation of a new wave energy programme; pressing ahead with reforms which will improve the operation of energy markets and enable renewables to compete more effectively and proposals for developing a more strategic approach to planning through regional development frameworks. It has also announced proposals for a Climate Change Levy, undertaken a review of renewable energy policy, leading to publication of a consultation paper, "New and Renewable Energy: Prospects for the 21st Century" in March.

  Restructuring of the electricity industry and the New Electricity Trading Arrangements which are to be put in place mean that continuing with NFFO, the current support mechanism for renewables, in its current form is not an option. But this need for change is also an opportunity to put in place the mechanisms needed to underpin the Government's Manifesto commitment. The Government intend to take powers for implementing a new mechanism in the proposed Utilities Bill.

  The Government will continue to promote public awareness of climate change issues. Public Service Agreements between individual Departments and the Treasury provide a vehicle for making them accountable for the delivery of the Government's targets and the DTI's formal targets include delivery of a 5 per cent renewable contribution to electricity supplies by 2003. The Government expects to update these targets in due course.

  The Government always keeps under review the distribution of functions for developing and implementing its policy. However energy policy covers a wide range of areas and involves a wide range of officials within Government, for example those involved in energy efficiency, energy policy, sustainable development, housing, planning, health and taxation. It would be impossible for a single agency to be able to successfully cover all of these areas. Moreover it is important to recognise the cost and disruption resulting from organisational change. Government Departments would remain responsible for policy areas and would need to continue to work together to develop policy and monitor its operation. Effective liaison has developed as officials work together very closely, enabling Government to develop and carry forward its policy on energy matters. In particular, Ministers in DTI and DETR meet regularly to consider energy issues of common interest and to report on the progress of current initiatives.

  The Government fully intends to continue monitoring and reporting progress on renewables, as it has for other Manifesto commitments and policy objectives. Electricity from renewable sources is one of the Government's chosen sustainable development for monitoring implementation of the UK sustainable Development Strategy. The annual report of the Government's independent Energy Advisory Panel will continue to address all aspects of energy policy, including renewables. The Digest of UK Energy Statistics already includes a special section on renewable energy. In addition, the DTI's annual report will report progress against the Department's agreed objectives. The Government will however continue to examine the need for additional reports.

October 1999


 
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