Memorandum from the Environment Agency
Environment Agency submission following publication
of the Performance and Innovation Unit Review
The Environment Agency welcomes this opportunity
to provide a submission to the Environmental Audit Committee.
The Agency regulates power stations and on-shore gas production
facilities and it is this interface with the energy markets, together
with our interest in and responsibilities for climate change issues,
which form the basis of our close interest in energy related activities.
The Environment Agency is intending to contribute to the current
debate and support the process of tackling change.
Publication of the PIU review and the Government's
forthcoming consultation and commitment to legislation provide
a rare moment to achieve major policy shifts and expedite action.
The scenarios out forward in the PIU report
show that it will be possible to deliver a 60 per cent reduction
in carbon dioxide emissions by 2050. The Agency calls on the Government
to adopt this as an aspirational goal, acknowledging that the
environmental objective will tend to take precedence in energy
The Agency calls for a long-term 2050 target
for renewable energy to supply 50 per cent of the UK's non-transport
The major focus of future energy policy should
be to reduce demand and increase the use of renewable energy and
The Agency supports a high profile energy productivity
programme to deliver the 40 per cent improvement in domestic energy
efficiency recommended by the PIU.
Sustainable energy will require more than supply
changes in the energy sources of our energy systemit will
require a total change in the way the energy system operates.
An improved approach to planning for renewables
is required which cascades down from regional targets to community
level with increased public participation.
2. THE ENVIRONMENTAL
2.1 It is vital that the UK develops a clear
energy policy that makes transparent our objectives for the future.
We note that one major conclusion in the IPCC'S Third Assessment
Synthesis Report is that early action to reduce emissions is needed:
the lower the level of stabilisation of greenhouse gases the greater
the benefits in terms of avoided damages associated with climate
2.2 We welcome the recasting of government
energy policy objectives proposed by the PIU Energy Review and
strongly support their conclusion that "where energy policy
decisions involve trade-offs between environmental and other objective,
then environmental objectives will tend to take preference."
It will be important to devise mechanisms whereby the environmental
objective can take precedence. Until now this has been impeded
by the difficulties in capturing external costs and other routes
have not always been deployed. The Agency intends to support the
implementation of this objective.
2.3 In addressing the environmental impacts
of our current energy systems, whilst maintaining a secure energy
supply, we need to have a clearly defined vision of future energy
production and consumption. The scenarios set out in the Energy
Review help to achieve a holistic and integrated view of the phase-out
of fossil fuels and the scope for their replacement by renewables,
or other low-carbon energy technologies. Furthermore they demonstrate
that it is possible to provide an energy system which can achieve
the 60 per cent reduction in carbon dioxide emissions by 2050,
recommended by the Royal Commission on Environmental Pollution
and endorsed by the Environment Agency.
2.4 We support the view put forward in the
Energy Review that any shift towards renewable energy must be
in the context of an overall reduction in energy demand. The priority
of Government energy policy should be a high profile energy productivity
programme to deliver the 40 per cent improvement in domestic energy
efficiency recommended by the PIU, together with medium and long-term
targets to reduce fuel and electricity consumption from business
and transport sectors. As the Review affirms, energy efficiency
can make a very large contribution, has very low (or negative)
net costs, has no conflicts with other policy objectives and is
3.1 Achieving switches to sustainable energy
will need to overcome inertia in systems and the overcoming of
barriers. The Energy Review sets out a coherent policy framework
that covers these issues so that in the longer term higher levels
of renewable energy supplies are achieved. We will be looking
internally to see how a major scaling up of the renewable energy
technologies will interact with our responsibilities and will
work with new partners on this area.
3.2 The Environment Agency supports the
Government's target to source 10 per cent of UK electricity from
renewable sources by 2010 and the target proposed by the PIU of
20 per cent by 2020. We would argue that energy recovery from
non-renewable components of waste streams or from mixed waste
incineration should be excluded from both targets. The 10 per
cent target is challenging but achievable, given the low base
of installed renewable energy from which the UK starts. It will
give a much-needed boost to the UK renewables industry. As the
Government recognises, renewable energy is a substantial new industrial
driver, which needs fostering. With stimuli, it may well be possible
for the 2020 target to be exceeded, as such targets have regularly
in countries such as Denmark.
3.3 For renewable energy to succeed in the
longer-term it will be necessary to make changes to the UK electricity
system so that it will be able to accommodate an increased contribution
from embedded generation and intermittent sources. Whilst some
renewable energy sources produce electricity on an intermittent
basis, a substantial amount can be predicted reliably. To achieve
renewables penetration beyond 10 per cent or 20 per cent, we will
need to adjust our transmission and distributions networks, and
utilise versatile storage technologies such as regenerative fuel
3.4 Even longer-term targets would help
to send the right directional signals to energy markets. We recommend
a target for renewable energy to supply 50 per cent of the UK's
non-transport energy needs by 2050. This would place renewable
energy policy within a longer-term framework for substantially
reducing carbon dioxide emissions and transforming our energy
3.5 Some renewable energy could become highly
decentralised with individual consumers generating their own power
through photovoltaics or micro-wind turbines. It is important
for the financial viability of these micro-generators that they
are allowed to participate in the electricity market. "Net
metering", or even "premium metering", should be
compulsory so that they can sell electricity back to the network
when they are not in need of the power themselves. We were disappointed
that there is no facility in the Utilities Act to facilitate the
introduction of two-way metering of electricity. The extra cost
at time of replacement is minimal and we urge the Government to
rethink this option as a way of introducing an enabling technology
and sending a clear signal.
3.6 Some renewable sources, for example
biomass and solar, are capable of generating both electricity
and heat, and their overall energy efficiency is greatly enhanced
by doing so. This does require a more holistic approach but is
worth including in forward planning as it will have a mutual benefit
in environmental and economic terms.
3.7 We urge the Government and OFGEM to
implement the recommendations of the Embedded Generation Working
Group in as short a time period as is possible. Removal of the
market barriers to embedded generators is a prerequisite to the
delivery of long term renewables and CHP targets.
4. LEVELS OF
4.1 The Agency is concerned by the low installation
rate of renewable energy over recent years and recognises that
the annual rate of installing renewables capacity will need to
increase by seven fold in order to meet even the 10 per cent renewable
electricity target. There is therefore an imperative to use every
opportunity to remove barriers and shape policies in such a way
that enable a higher rate of uptake. The operation of OFGEM may
need to be considered to see how it might contribute to the removal
4.2 Official statistics show that renewable
energy contributed 2.8 per cent of electricity generation in 1999.
This figure includes energy from landfill gas and waste combustion.
Much of the content of waste is from non-renewable sources and
should not be promoted as a renewable energy source, or included
as a contribution to Government renewable targets. Landfill gas
should decline over time as organic matter is excluded from waste
streams going to landfill nevertheless, whilst it is being produced
its use as an energy source has a double environmental dividend.
It not only converts the methane into a less harmful greenhouse
gas (carbon dioxide), but also offsets the carbon dioxide emissions
that would have been generated elsewhere if a fossil fuel plant
had been used to generate the electricity.
4.3 The figure of 2.8 per cent disguises
the true rate of long term expansion. The majority of the existing
"renewable" electricity comes from large-scale hydropower
landfill gas and refuse combustion; many of these have no further
expansion potential. Those sources that have a larger contribution
to make in the future, such as off-shore wind, energy crops, PV,
wave and tidal power produce a minuscule fraction or nothing yet.
This reinforces the challenges ahead and the need for a more pro-active
approach in shaping the energy future for the UK for which there
is a large competitive advantage.
5. FUTURE EXPECTATIONS
5.1 We understand the Government's desire
to reduce energy prices through improvements in the efficiency
of the energy industry as this leads to economic benefits for
the country. However, cutting costs for consumers should focus
on reducing demand as well as lowering the price, as there are
substantial economic costs associated with the inefficient use
of energy in the UK, and the decreasing price of energy tends
to perpetuate inefficient use. The environmental costs of electricity
generation are not currently reflected in the price and we believe
that the domestic sector should also be brought within the carbon
levy in the longer term. We acknowledge Government policy in this
area, such as the Climate Change Levy and the energy efficiency
initiatives of the Energy Saving Trust, but we feel that more
effort and resources need to be allocated towards encouraging
energy efficiency. We support the proposal of the PIU that energy
efficiency in the domestic sector should be improved by 40 per
cent by 2020.
5.2 It would be unacceptable to allow high
energy prices to have a negative impact upon low-income households.
This committee has voiced its opinion on fuel poverty very clearly,
which we share as it prevents us from meeting our duties in a
different way. However, we feel that such fuel poverty is best
alleviated by directly tackling low incomes and poor quality housing
rather than lowering fuel prices for all. We recognise and commend
the Government's intentions to increase their support in this
area through expanding their Home Energy Efficiency Scheme and
Energy Efficiency Standards of Performance programmes and would
urge that it remains a priority for additional resources until
the problem of fuel poverty is fully turned around.
5.3 Government research has shown that the
impacts on energy prices of delivering a low carbon economy are
likely to be small. The Energy Review estimated that the 20 per
cent renewables target by 2020 could be achieved with an increase
of electricity prices of 5 to 6 per cent. The Inter-departmental
Analysts Group (IAG) report into Long-Term Reductions in Greenhouse
Gas Emissions, concluded that moving to a carbon-free generation
system by 2050 could result in anything between a 20 per cent
increase to a slight fall in electricity prices.
The Group, which included economists from DTI, the Treasury, DEFRA
and the PIU, also estimated the overall effect on the economy
of delivering carbon-free electricity would be between +0.1 per
cent to -0.2 per cent of GDP (with GDP having grown three-fold
by then). These are very small effects, which may even be beneficial
to the economy as a whole.
6. THE LEVEL
6.1 We urge Government to encourage and
enable research into how electricity networks can be modified
to accommodate increasing contributions from CHP and renewable
energy sources whilst maintaining quality of supply.
6.2 The Agency believes that the Government
must be bold in its support for new and renewable energy whilst
acknowledging the issues that they raise. The process of enabling
an energy transition from a fossil fuel based economy to a non-carbon
alternative will take a very long time to engineer, whereas the
threat of climate change is severe and potentially close at hand.
Therefore we must act quickly to stimulate the development and
expansion of renewable technologies within the UK economy. Potentially,
renewable energy is a vast global industry.
6.3 Government should implement measures
that encourage the deployment of renewables at the domestic scale.
For example, improved support for energy insulation materials
coupled with a future levy on domestic fuel with exemptions for
low-income households, would increase the financial favourability
of small-scale renewables. Solar heating systems for house roofs,
small wind turbines and other new technologies, such as fuel cells,
have the potential to play a huge role in meeting household energy
demand (and thereby indirectly reducing household primary energy
demand) in the future. Two-way metering with a fair price for
small scale generated electricity as a way of enabling small but
vital step changes should be encouraged.
7. THE INTERACTION
7.1 We encourage the involvement of local
and regional communities in the development of renewable energy
and suggest that their participation, and acceptance of their
responsibility to deliver local contribution to national targets,
is vital to success.
7.2 There is a long way to go in raising
public acceptability of the high profile renewables, such as onshore
wind, to necessary levels. We feel that there needs to be far
greater public involvement in a proactive decision-making process
regarding renewable energy developments and their environmental
and economic benefits. We welcome the new assessment of regional
targets for renewable energy recently announced by the Government
and the Community Renewables initiative. These are practical steps
towards increasing renewable energy output bringing the generating
infrastructure closer to the consumer through an increasing number
of smaller, local generating units. The traditional centralised
electricity system relies upon a relatively small number of large
generating units dotted around the country which takes electricity
production (and its environmental impacts) out of sight and out
of mind for most people. Thus the development of renewable energy
will force the issue of how and where electricity is being produced
and the corresponding environmental and social costs. It is for
this reason that a new approach to planning and public participation
is required for the successful development of renewable energy.
8. JOINED UP
8.1 Sustainable energy has been neglected
in previous energy policy, and we believe that if the Energy Review
is implemented in full the Government will have gone a long way
to properly integrating environmental priorities into energy policy.
We support the recommendation that the central energy policy objective
of the Government should be amended to be "the pursuit of
secure and competitively priced means of meeting our energy needs,
subject to the achievement of an environmentally sustainable energy
8.2 We also welcome the proposal for a Sustainable
Energy Policy Unit to be established by May 2002 to implement
the findings of the PIU Review. Some aspects of energy policy
and regulation, notably the recent introduction of New Electricity
Trading Arrangements (NETA), have clearly placed sustainable energy
at a disadvantage. These contradictions in Government policy need
to be addressed urgently if we are to deliver our targets for
renewable energy and CHP.
9. PUBLIC CONSENSUS
An assessment of the role, if any, to be played
by nuclear power must take full account of the financial and economic
costs of the management and storage of radioactive waste and the
regulatory framework. The Agency would, in any case, question
the commissioning of new nuclear generating capacity in the absence
of a sustainable long-term strategy for radioactive waste management.
It will also be vital to take account of the need to secure the
consensus of the general public if a longer-term role for nuclear
power is envisaged.
10 IPCC 2001, Climate Change 2001. Synthesis Report
Contribution of Working Group I, II, III to the Third Assessment
Report of the Intergovernmental Panel on Climate Change. Back
Performance and Innovation Unit (2002) The Energy Review. Cabinet
Royal Commission on Environmental Pollution (2000) Energy-the
changing climate. 22nd Report. TSO. Back
DTI (2001). Embedded Generation Working Group Report on Network
Access Issues. DTI/OFGEM/DETR. Back
IAG (2002) Long-term Reductions in Greenhouse Gas Emissions in
the UK. Report by an Inter-departmental Analysts Group. DTI. Back