Examination of Witnesses (Questions 300-319)|
TUESDAY 20 NOVEMBER 2001
300. Where is the technical side at? My understanding
is on that side of the country the rock is extremely hard and
that if you dangle a cable across a lot of rocks and the tide
and waves move it about a bit it gets cut up by the rocks. Is
there something which has happened which makes you more optimistic?
(Mr Wilson) I hope if what you say is right it is
something the study will reveal in advance.
301. Is this very much speculative?
(Mr Wilson) Is it very much speculative? Of course
it is speculative in the sense that we have to test its technical
feasibility and also its economic feasibility. We certainly would
not have taken it to this stage if there had been any prima
facie evidence that it was simply not a runner.
302. Is it not the case that previous wave power
experiments have been questioned on the fact that the normal cable,
which in these instances would have been about five kilometres
long, was vulnerable to the wave power rubbing against rock and
that it has been suggested to us that the more predominant rock
form in the West Coast of the UK is gneiss. That rock is of a
kind which is particularly sharp and inhospitable and if you are
going to have 400 miles of this as distinct from five kilometres
it could present dangers. It may be that in the intervening period
since wind technology was rejected, the old wave power experiments
and the introduction of new means that there have been heavy duty
cables of an order hitherto never considered before. Has this
been fed in? This seems to be fairly substantial prima facie
evidence, to use your expression, Minister.
(Mr Wilson) There are subsea cables on the West Coast
so obviously in these instances the problems you refer to have
not been insuperable. The point of doing this is to answer these
questions and we would not have got this far if it was thought
the rock was incapable of being cabled, and that is very basic.
I think the question is very well worth asking.
303. We look forward to your answer.
(Mr Wilson) Indeed.
304. All I am saying is that british energysmall
"b", small "e"the history of it is
littered with ideas from the bright ideas box that come out prematurely
and raise expectations and cost money and very often never actually
produce the goods at the end of the day. If this one is of a different
character then we will hold our breath and wait and see.
(Mr Wilson) If I can use another method. Better to
light one candle than to forever curse the darkness. If you do
not ask the questions you do not get the answers.
305. This is a question which maybe should have
been asked before the match was even taken out of the box to light
the candle, with respect.
(Mr Wilson) If it is common ground that much of the
renewables potential in the UK is on the Western seaboard, if
it is common ground that the transmission problems at present
are severe and if it is common ground that it will be environmentally
very difficult to address that problem on a land based solution
then I would have thought it could equally be common ground that
it is not a bad idea to see if a subsea cable provides an alternative
Sir Robert Smith
306. Is there only one danger that if the land
based solution really is the only solution it takes your eye off
the ball and stops the preparation work eventually having to come
to terms with that?
(Mr Wilson) I do not think it does at all. We are
going to have a preliminary view by the end of the year on whether
this is worth taking forward to a further more detailed study.
I would not expect that further study to be in a timescale that
would delay anything else.
307. Can I just say, Minister, as an MP whose
constituency has three sides fronting the western seaboard, and
we are hoping to have a gas pipeline come ashore there soon, I
really hold great store by hoping that plan does go ahead. Some
of those giving evidence to us have suggested that both renewables
and CHP will never reach their full potential and your targets
because of difficulties with transmitting to the infrastructure
on two levels. One is the technical one, which to some degree
you have gone into there, but also commercial. Technical in the
sense that the infrastructure as it exists at the moment is geared
up to large power stations to feed in to the grid and the second
one is the commercial costs for small renewable generators to
connect to the grid. How can we ensure that the infrastructure
is made more flexible to counter both of those potential difficulties?
(Mr Wilson) I thank you for your comments incidentally
on the subsea cable concept. Can I say to reinforce your point,
there is one commercial wave power station in the world just now
which is on the island of Islay. It is one megawatt. It cannot
send its full output to the grid because the infrastructure is
too weak to carry it. If we are serious here about talking about
renewables then that seems to me to be a problem which has to
be addressed because we are not going to light up Islay, never
mind the United Kingdom, from renewables unless we can overcome
the infrastructural difficulties. I am slightly surprised by the
negativity, Mrs Lawrence being an honourable exception, to investigating
308. Realism not negativity.
(Mr Wilson) Time will tell.
(Mr Hirst) This is something the Department has put
a lot of effort into. As you probably know there was the report
of the Embedded Generation Working Group and now we have set up
a group jointly with Ofgem to take forward its recommendation.
This is exactly the point we are addressing, that we have an electricity
network which was designed on the basis of large power stations
feeding through the strong British network and then through into
the distribution network and increasingly in future we expect
smaller scale generation, including particularly renewables, will
be embedded in the sense that it feeds directly into the distribution
network, in some cases directly maybe into people's homes, if
you are talking about micro CHP. There are a whole range of issues,
some of them are physical configuration but they are also the
codes and requirements for when you first connect to the system
which are designed for some larger scale stations. There is a
question of how you distribute the costs of sometimes reinforcing
the system locally and also the question of what credit people
who are contributing electricity much closer to the demand should
have for the fact that they are in some respects enhancing the
flexibility of the system. All of those issues we are taking forward
as fast as we can through this joint group. They are all very
important, I agree.
309. Can I just ask you something very specific.
I know of an incident within my own constituency, for example,
where a photovoltaic system was set up.
(Mr Wilson) Yes.
310. The difficulties experienced by the Western
Energy Centre to get that connected into the grid almost put them
off despite their commitment to renewables. Are things as small
and practical as that being fully addressed?
(Mr Hirst) We are certainly hoping to move to a system
where if you have a very small scale generation system, CHP or
micro CHP, you would be able to connect up quickly provided it
conforms, of course, to the safety requirements. Everyone realises
you have to have that. Provided it conforms to the type codes
and, therefore, the safety requirements you should be able to
connect that up very quickly with absolutely minimum fuss, yes.
311. The DTI and DEFRA have overseen over the
last about 20 years a number of schemes and programmes to encourage
efficiency gains and efficiency in both the industrial and domestic
sectors. What success do you think that those have had?
(Mr Wilson) I think frankly limited success, particularly
in the domestic sector, because not enough people are already
persuaded that when they have to make choices about domestic expenditure
the measures which they would need to take as individuals to reduce
their energy needs are sufficiently high priority. I think in
the industrial sector that because there are more pressing requirements
to reduce energy costs there has been substantial success. We
would certainly start from the premise that there is maybe a 20
per cent potential for domestic consumers to reduce their energy
needs. I believe that once again the PIU Report, if it gives priority
to energy efficiency, hopefully can help stimulate a new priority
being given to addressing that problem.
312. If you say there has been limited success
in the domestic side, if prices fall then people will be less
keen to go around switching lights off as I have done for many
years. That is obviously a small thing but there are other larger
contributions to savings on energy on our domestic side. Would
that not be difficult if prices are falling because there is less
reason to conserve energy?
(Mr Wilson) I think that a lot of the savings which
can be made can come from the greater efficiency of household
equipment. We should certainly be seeing greater efficiency in
all the tools which we all use in our homes. I think there is
a combination of it being consumer led and also being producer
led which will hopefully lead increasingly to energy efficient
surroundings. When I say there has been limited success, I do
not want to underestimate what has been achieved and of course
local authorities and others have led very successful energy efficiency
programmes, by no means negligible, but there is still a long
way to go.
313. One of the questions we asked the Department
related to industrial competitiveness and in your memorandum you
made it clear that you recognised that some industries had a higher
demand for energy, they were relative intensive users of energy.
As things stand at the moment what estimate do you make of the
relative impact of costs on those energy intensive industries
in this country compared with their competitors and hence their
(Mr Hirst) One of the Department's formal targets
is to try to ensure that energy costs in the UK are maintained
at below the average level of countries in the European Union
and the G7 which is a rather rough proxy for saying that they
should be competitive. Our energy using industries should be competitive.
At the moment the picture is quite complicated but I would say
that we are actually in conformity with that. Across the board
generally our energy prices if you look both at electricity and
gas, I have to say generally because of course you look at particular
companies and particular deals, are below the average, yes, of
the prices faced by competitors in other countries in the European
314. When you look forward now to the issue
of enhanced security or security of energy supply in the future,
would you treat that target of maintaining our competitiveness
as entirely compatible with securing our energy supplies in the
future? Let me put it in two parts. Number one, is it compatible
in your view and, if not, would you make it an overriding consideration
to try and continue to achieve such a target?
(Mr Wilson) If I can just elaborate. Security of supply
is the overriding objective and the overriding responsibility
of Government but competitiveness is obviously an extremely high
priority and, therefore, we try to reconcile the two. Ultimately
security of supply has to be the highest priority.
(Mr Hirst) It remains a key objective of the Department.
315. In your memorandum you take the view that
there may be no reason for these two objectives to be brought
into conflict depending on the measures which are chosen. Why
do you assume that if we are to take measures to promote security
of supply and those implied additional costs of realising our
energy sources inside the United Kingdom as compared with importing
them, why do you take the view that measures would be able to
offset that cost without it having an impact on competitiveness
(Mr Wilson) We recognise that in promoting renewables,
for instance, that there is a cost, that the cost by 2010, I think,
is put at 4.4 per cent. As in anything in Government there are
a range of objectives which have to be reconciled. We have environmental
obligations to meet, therefore we promote renewables. We want
to create a manufacturing industry based on renewables, therefore
we promote renewables. We have a security of supply imperative,
therefore we want to stimulate domestic production of electricity.
If you put these alongside the competitiveness issue all I can
say isand to reinforce what Neil has saidcompetitiveness
is an extremely high priority but obviously Government policy
is always going to be a synthesis of a range of objectives and
I have named three of them.
316. I suppose the point I am making is that
at the end of the day if we place a premium on security, and we
may have to pay a cost for that premium, your memorandum seems
finessed away so the measures one adopts if they are marketplace
measures will promote energy efficiency but those costs will be
finessed away. Have you actually done any modelling to see what
those costs may be and how that can happen? It seems to me unlikely
that the costs will be wholly finessed away but they do have to
be met and we may have to acknowledge such a premium before embarking
down a particular path of securing our own supply.
(Mr Wilson) I just acknowledged one such cost and
I do not think there is any attempt to finesse them away. I think
what we constantly have to do is to call on other interests to
balance the considerations in the same way that we are trying
to do. Anybody who takes an absolutist position, for instance,
on renewables, everything should come from renewables, has to
recognise that the costs will be very much higher than we are
talking about and that is in conflict with our competitiveness
objectives. Certainly on my part I have no wish to deny that there
are trade-offs or, indeed, any reluctance to quantify them as
far as possible but, as we were discussing earlier, we have already
seen the beneficial effects of NETA in reducing wholesale electricity
prices by 25 per cent so that is good for competitiveness. I can
only come back to the point that we have a range of obligations
and imperatives which may ostensibly be in conflict with one another
but which come together in what I hope is a balanced energy policy.
Could I say, Chairman, further to what Mrs Perham was asking about:
when I said the domestic success had been less great, I think
the statistics are worth putting on the record. In the industrial
sector energy intensity fell 62 per cent in the last 30 years,
in the service sector by 43 per cent but in the domestic sector
only six per cent, so clearly there is a huge amount to be done.
317. Does the industrial figure take account
of the collapse in the manufacturing industry as well?
(Mr Wilson) The industrial figure is based on the
consumption per unit of industrial output.
318. Can I just say NETA and the Climate Change
Levy started on the same day. I presume you have been monitoring
the impact on industry of both of these. Have you got any figures
you can share with us, that is to say the cost to industry after
discounting of up to 80 per cent as against the fallen prices
or is it too early to say this?
(Mr Hirst) I think it is quite early to say. We would
have to follow up with what numbers we might have.
319. Would it be correct to say that the CCL
is a Treasury driven measure?
(Mr Wilson) It is an environment driven measure.