Written evidence to be reported to the House
Energy Bill

EN 01 Barnardo’s and Save the Children

EN 02 Greenpeace

EN 03 Friends of the Earth

EN 04 Energy Networks Association

EN 05 Energy Retail Association

EN 06 energywatch

The Committee deliberated in private.

On resuming—

Nick Winser: I am Nick Winser, director of transmission at National Grid.

David Smith: I am David Smith, acting chief executive for the Energy Networks Association.

Alistair Buchanan: I am Alistair Buchanan, chief executive at Ofgem.

Allan Asher: I am Allan Asher, from energywatch.

Q 81

Alistair Buchanan: I am happy to start by picking up the point raised by the Minister with regard to comparisons with Europe. Certainly, at the wholesale end of the market, we have seen a very exciting development in the last three to four years, particularly in gas infrastructure. We have seen 21 companies from around the world invest £10 billion in our liquefied natural gas storage pipeline infrastructure, thereby taking the UK from around 105 BCMs of demand and 105 BCMs of supply to potentially 180 BCMs of supply by the end of this year. With regard to Europe, we still see profound delays in the development of some of their LNG facilities, such as in Wilhelmshaven in Germany and Rotterdam in the Netherlands.

Perhaps what matters more to consumers is what is happening in prices and in terms of choice. With regard to choice, the experience of the UK—I would expand this comparison beyond Europe—is that about 50 per cent. of customers have taken the opportunity to choose their supplier. We are clearly very keen to access the 50 per cent. who have not. By contrast, in Germany that figure has been about 4.5 per cent. The best country to compare us with would be Spain, which has hit levels of around 20 per cent. of choice, and the Nordic region, which has around 10 to 15 per cent. There is genuinely no other country that provides the degree of choice or has encouraged and led customers to feel confident enough to choose. As far as price is concerned, on domestic gas prices today, we remain among the lowest of the 27 member states, and on electricity prices, we are around the average.

To answer your question, Minister, with regard to investment coming into the UK, domestic choice and prices and industrial benefits, which for the decade between 1994 and 2004 were extraordinary by contrast to European industrial counterparts, we think that the market works and has been very good for the UK.

Allan Asher: There are some really good features of the competitive market in Great Britain, and energywatch is keen to make them work even better. That includes switching and things like that. However, I think that it is too much to think that it is as good as it could and should be. With regard to some of these key metrics, such as prices, I was looking just yesterday at the Department for Business, Enterprise and Regulatory Reform’s website, which publishes very detailed statistics on European prices every quarter. Complicated 80-page reports are published every quarter, and many of the comparisons are quite favourable. However, what really leapt out at me was that the Department’s figures show that domestic electricity consumers around Great Britain are currently paying 15 per cent. above the EU average price, and on this report, we are the seventh cheapest out of 15 countries in Europe. I use that to show that this is with a market that is most vigorously competitive, yet in Europe they are not; Governments still use their utilities as secret stealth tax officers and things like that.

On prices and on switching, as Alastair rightly says, just over 50 per cent. of people have switched—I think it is 52 per cent., which is great—but 48 per cent. have not. The efforts that we have gone to over seven years have been drawing less and less fruit. Only a third of people over 60 have switched, and our efforts to get more are not going anywhere. Many features of the market are just not working. Six million consumers on prepayment meters are paying £200 a year more than they could get on the same company’s direct debit tariff. It goes up worst of all in the north; it is £480 more if you have a direct debit in the north than on the company’s best tariffs.

I guess that, with some of those elements, there are some features of the market—not all, but some—that are clearly not working for consumers, and we should understand that and be prepared in the Bill to do something about it.

Q 82

Alistair Buchanan: Yes, I can take that further. You probably do not want to hear this, but I think that broadly there are five models that you might want to look at. I should say at the outset that we feel that we can do our job with the remit that we were given in 2003. In that year, we were given social and environmental guidance by Ministers. Importantly, however, remember that any significant financial matter has to be dealt with by the Secretary of State—by the Department for Environment, Food and Rural Affairs or the Department for Business, Enterprise and Regulatory Reform. We were given guidance in 2003. In 2004, Parliament gave us a sustainability duty. Helpfully, under the Lazarowicz Bill last year, there were significant improvements in administration—for example, of the renewables obligation certificates scheme.

The five options that have been raised over the past few months are these. The first route is a sustainability duty, which is primary to an economic duty. The second route is the concept that Ofcom has, which is that you have a citizens duty, as well as your consumer one. Ofcom appears to manage that very well; it appears to understand how it would handle conflicts between the citizen and the consumer, and it has a route march setting out how conflicts should be resolved. The third route would be to use additional guidance. That may be something that the Government may want to consider.

The fourth route would be to look at our secondary duties. Currently, our primary duty is to promote and protect the consumer effectively wherever possible, through competition in the markets. Our secondary duty tells us that that we have to be mindful of a  certain group of consumers—vulnerable consumers. Particularly highlighted are the elderly and those who live in rural areas. Perhaps you want to revisit that—for example, by considering whether children should be included in that category. When I was speaking to the Scottish Affairs Committee on fuel poverty in Scotland, that certainly seemed to concern them. Finally, you have the reinstatement as a secondary duty of sustainability.

I think those are your five models. I believe that Ofgem currently can carry out its functions with the duties and roles that you have given us; but clearly, it is going to be something that you want to debate quite actively in the next few months.

Nick Winser: Our view is that the current provisions are probably there or thereabouts. There might be a question about interpretation of them. Certainly, Ofgem has moved towards taking forward the responsibilities for sustainability, and we applaud that. That may have a bit to go, considering the scale of the task ahead of us.

There is also a question about the interpretation in terms of time. Looking a long way ahead, we would quite like to see Ofgem—we are working closely with Alistair’s people on this—take a long view and think about where the carbon and renewables targets might be leading us and ensure that we are together and making the right regulatory changes to ensure that we can get to those targets in the long term. It is about looking a long way ahead.

Q 83

Alan Asher: From my point of view, I should like to praise companies such as British Energy—Scottish Energy, as it trades as in Scotland—and EDF Energy that are doing some really excellent things in social tariffs. Scottish Power has announced that it is introducing a social tariff, although, sadly, it is for only those over 60, but the rest of the companies are doing not very much at all. Some are spending a tiny sum: npower, for example, is spending less than 4 per cent. of all the money that is going into social tariffs. It has said plainly and publicly that it just will not do it unless it is required to.

Indeed, until now, even British Gas and EDF have said, “We just can’t stick at these voluntary contributions. If the other companies are going to undercut us in the market, we will have to withdraw these really good social tariffs.” I fear that for the Committee, this is one of the last chances. If Parliament says to suppliers, “We think that two doing something and one doing a little bit is enough”, the good social tariffs that we see in the market will soon disappear. Companies will get the view that all is okay, and they can go home until next time. However, if the Committee were to insert just an enabling power—not to impose anything, but just so  that Parliament has the power if the companies start to pull out and leave consumers in the lurch—that would make all the difference.

Q 84

Alistair Buchanan: There were two parts to the question. We are very keen to take the switching message to Scotland, and I know that Allan is as well. Switching in Scotland tends to run 2 to 3 per cent. below the 18 per cent. churn that there was last year in England. One of the substantial problems there is the housing issue. Housing renovation typically costs 10 times more with some of the poorly insulated housing in Scotland.

Looking at fuel poverty, there are three elements to it—50 per cent. is income, 15 per cent. is housing and 35 per cent. is the fuel bill. I am not trying to belittle the fuel bill, but it must be taken holistically. We are representing what we can do. We want to facilitate the opportunity to switch on the fuel price side. Clearly, housing and income sit with the Government and the instruments that they have. Taking Government as a lead into the targeting issue, it is extremely difficult to target the fuel poor.

The Warm Front programme ensures that one third of the fuel poor do not have access to it, which is an alarming statistic. With that in mind, Ofgem has launched a very good initiative with Citizens Advice—I have some of the guff with me—to ensure that its staff are well trained, so that they can ensure that they get people to get the best deal. Part of the problem is the confusion about what is the best deal. We have also funded research with Bristol university, ward by ward throughout the country, to try to analyse, through what we call our find and fix programme, who the fuel poor are.

Some practical issues could be addressed, such as returning to the days when a Department for Work and Pensions secondee would visit a fuel-poor person with the local company. Some macro issues, such as smart metering, can be addressed, and I hope that they will be. There will be a debate about social tariffs; but holistically, if you consider equalising the tariff, or setting a particular tariff for the fuel poor, it will be worth inquiring into how many people that might tip into fuel poverty. If you add a certain amount, assuming you do not expect the companies to pay for it, in which case I am sure that you spoke to them this morning and asked them to do so, it will be worth inquiring into how much more it will cost everybody else and what implications it will have for fuel poverty.

Q 85

Alistair Buchanan: I am very happy to do so. You may have noticed that we were invited to see the Chancellor a few weeks ago, and the letter that was sent to us invited us to address what we called a shopping list of ideas on fuel poverty, so it is encouraging that the Chancellor wants to consider those issues. Among our shopping list were to get smart metering rolling, to examine the DWP’s work with companies on the ground, to get the Minister to join Ofgem when it hosts a fuel poor summit—we are delighted that he will join us in April—and finally, an idea that was not new.

We published the idea in April 2006 at the time of the energy White Paper. I was invited to offer ideas, and we took the idea that we offered in April 2006, which was that if the companies have been given a vast amount of free hand-out because of the EU ETS free hand-out scheme—and they have been—is there any opportunity for the Government to use some of it for fuel poverty? The answer may be no. I do not know whether the Government can do it; there may be issues about hypothecation, but that is not my problem. We gave an idea. We are not a lobby group, but a statutory organisation, and I am not lobbying for that idea. However, it is an idea, and it was part of the shopping list that we gave the Chancellor a few weeks ago.

Allan Asher: Ten seconds on that question, and then I shall turn to the question that you asked me. The £9 billion is not the companies’ money but consumers’ money. That is where it comes from. In a highly competitive market, the companies should be investing that £9 billion on low-carbon infrastructure, as intended, and nobody would complain if they did that. However, it is obvious that some companies are returning material portions of the money to shareholders. That should not be happening. The money should be competed away, and in an efficient market they would not have to claw it back, because competition would force them to lower their prices. In a competitive market, companies would not be able to get away with giving shareholders sums of money above the long-term average cost of production of the power.

The second question, which is on social tariffs, is an important one. Again, the companies are not spending billions on energy efficiency. The money comes from consumers. It is part of the energy efficiency commitment, which is a sum levied on everyone in this room who pays gas and electricity bills, and it is going up to around £60 per consumer. It will come from us, and the companies will direct it more or less to energy efficiency measures.

The scheme has been really good. It has saved a huge amount of carbon, but do not for a moment think that the money is company money—it is consumers’ money. Until now, there has been a target requirement that about half of it should be spent on measures for fuel poor customers: insulation, light globes and so on. There will be a bit of a change in the future. The  money—not all of it—plays an important part in poverty alleviation. It is highly complementary to social tariffs, not in competition with them.

There are many ways in which we currently levy consumers for various things. Consumer prices, the climate change levy, the energy efficiency commitment and the European energy trading scheme—all of those come from consumers. Why is it only when we talk about some direct sum to the most grindingly poor in society that we find it offensive that money should be directed to them? I am puzzled by that.

Q 86

Nick Winser: On the offshore transmission regime, we do have concerns about the approach that is laid out in the Bill, which is to auction the provision of offshore transmission. That has not been done before. It seems to us that it is a complex, innovative and uncertain way of approaching this task, which is very significant, as the Committee will have discussed. Getting to the sort of level of renewable deployment that we need to get to by 2020 needs some quick and certain action. There has been talk of 33 GW of renewables offshore. Twelve years is a blink of an eye against such a challenge.

In National Grid’s view, we need to deploy simple, co-ordinated, well tried and tested, regulated transmission build. In short, we do not think that the proposed approach to auction transmission offshore is going to be quick, certain or in customers’ best interests. We do not think that it will help us to get to the carbon targets. We think that it will introduce delay. It would be better merely to extend the regulated transmission provision offshore for ourselves and for the Scottish transmission companies.

Alistair Buchanan: May I start with an overview in respect of your concern about whether Ofgem can handle the new challenges? Over the past five years, we have shown in our price control decisions that we are very minded to the renewable task. In the price control review of 2004, on the local electricity network, we increased capital expenditure by 50 per cent. In the transmission price-control review—National Grid’s review, two years ago—we increased capital expenditure by nearly 100 per cent. The renewable elements within that have been clearly identified, and if they are such a large sum, we actually set the sums of money aside for that  project. So there are four projects, effectively all in Scotland, under the banner of transmission of renewable projects, for which the consumer is going to provide £560 million in addition to our normal five-year price control review. So we are extremely minded to it.

Crudely, I believe that Ofgem, as an organisation, has been able to evolve because we have gone from the privatisation compact of “RPI minus x equals save” to “RPI minus x equals spend” to ensure that we have a reliable, trustworthy and renewable connected network that the consumers want. I feel confident about that.

On the specifics of the offshore regime, the Minister put his stamp on the non-exclusive competitive approach in March last year. The structure is now in place.

To answer your excellent questions as a business manager, yes, I am pleased that we have got the powers that we need to be able to do our job as set out in the Bill, which means that we will be able to push this forward quickly. I am also pleased that it is going to be paid for, so there will be no worry about administration costs dragging down the process.

David Smith: I should just like to make a couple of points about what happens when the transmission hits shore and becomes part of the distribution system. The build will be in remote places. We will, at the same time, have to look at our distribution network and whether we need to beef up the network or put new networks in place.

I had a conversation in this room a couple of weeks ago on the Planning Bill. These things need to sit hand in hand, because we cannot end up with wholesale pieces of the network sitting in planning for long periods. We also have a major skills shortage, and we need to address it. It is all about considering a series of stacking issues, rather than just focusing on one level of investment.

Q 87

Alistair Buchanan: I am happy to start the answer to that question.

A few weeks ago in Parliament, Paddy Tipping hosted a meeting on smart metering. The reason I start by referring to that meeting is that I might have been unhappy at the lack of smart metering in the Bill had I not gone to that meeting. At the meeting, the director general of energy at the Department for Business,  Enterprise and Regulatory Reform made it quite clear that the Government will make a statement on smart metering in the near future. Therefore, I am excited by the fact that a statement will be made on smart metering at some stage in the near future.

Ofgem has an open position on this issue. We favour the introduction of smart metering. There are two models that have been put on the table; what is called the franchise model, and the market mandate model. We favour the market mandate model, but we are particularly keen to see a decision made on this issue. Clearly, to an extent the decision and the timing of the decision might be confused by the two-year pilot scheme that Ofgem is currently running, but I was very encouraged by the announcement at that meeting.

To answer your switching question, and I am sure that Allan has even more up-to-date data than I have, you are absolutely right; around that central figure, there is a range of very interesting issues. One such issue is that, on gas pre-payment meters, the level is down at about 36 per cent. We must think about how we address that.

In terms of vulnerable and fuel-poor people, you get quite an interesting range around that figure. On the latest data that I looked at before coming out here this afternoon, single mothers with dependent children are switching above that level, whereas elderly people are switching below that level. So, it is difficult to make generalisations once you start to break the data down to see which part of the vulnerable customer group does not appear to be taking advantage of this opportunity. We have to look at the breakdown of that data and see how we can access those people who are not doing so.

Allan Asher: We say “smarter metering” rather than “smart meters”, because we are not referring to a lump of technology. Instead, smarter metering is the process of equipping consumers with much better and much deeper information about the services that they acquire, with up-to-date information on prices and quantity, the ability to have time-of-day tariffs, accurate bills and all of that. Most likely, it will be provided by a lump of hardware somewhere, but the point is the services offered by smarter metering and not the machine.

The key for us, though, is that smarter metering allows us to do two hugely important things. First, we will at last be able to get rid of what I think are these dreaded “poor pay more”, or PPM, meters; you might know them as pre-payment meters, but we know them as the “poor pay more” meters. I gave you the example in the north of people having to pay £486 a year more if they happen to be trapped with a PPM rather than being able to get somebody’s internet tariffs. That would disappear overnight; you would be able to switch from one tariff form to another.

There would be lots of other switching blocks as well. At the moment, if you are in debt you cannot switch and there are millions of consumers in that situation, especially if you are in Scotland. If you have a telemeter, that is a technology whereby hundreds of thousands of people simply cannot switch. We know that the elderly do not switch, and we know that anybody on a pre-payment meter cannot switch using the website. Six million people are prevented from effective switching. Smarter metering solutions will tend to make a lot of that switching easier.

There is also what I consider to be the clearly emerging evidence from around the world that shows that, if consumers get this accurate, timely information about their consumption and their options, they will use less energy. People respond positively. At the moment, however, one in three of our current bills are wrong, because they are based on an estimate of consumption and not on an accurate read.

How can people make the market work, or how can they conserve energy, if the information is so poor? I received my own bill yesterday. The last four bills that I have had for gas were based on estimates, even though I have an outside meter. I have no idea what my actual expenditure was. Smarter metering would almost immediately eliminate that as long as there is also a preference for eliminating pre-payment meters.

Q 88

Allan Asher: I just observe that the data that the EDD gives you is only about electricity. It does not have current prices and it cannot give you access to new prices or energy-saving tariffs. It can be costly and it certainly will be a big diversion on suppliers. I think that consumers who want EDDs should be able to buy them. But why should there be a tax on consumers to install in all homes devices that do not meet any of the tests when there is a roll-out of meters? It is a huge waste of money and, I fear, a huge diversion in the debate when we should be focusing on getting things right and making the market work.

Q 89

Allan Asher: The current sum is more like £30, and it comes from what is called the energy efficiency commitment. We are just finishing the last phase of that and then it will change into a new scheme in which the commitment will double to £60 per customer for two fuels. As part of their licences to operate, the companies are required to commit a certain sum, averaged out at that, on measures for home insulation, energy efficiency, advice and various other things. It is not disclosed separately. Perhaps there is a case for that, but currently it is not.

Q 90

Alistair Buchanan: There are a number of issues there. Let me start with our administration role. We administer the energy efficiency commitment, the carbon emissions reduction target scheme and the renewables  scheme. That is not what you would regard as a regulator’s job because it is more like an auditor’s job but I believe that we do it very well. On behalf of consumers, we have to ensure that those markets are administered fairly and according to the law. We also have to ensure, as best we can, that there is no fraud in those markets because large sums of money are involved. That is a very important act that we do on behalf of the consumer. We are also keen to ensure that the consumer has that information. One of the issues with regard to the price increases that consumers had to endure in January is that perhaps for the first time they are having to address the fact that they are paying for renewable environmental schemes. Some £80 of roughly £1,000 dual fuel average household bill is now a combination of ROC, which is about £10, your energy efficiency, which is about £35 to £36, and your European Union Greenhouse Gas Emission Trading Scheme (EU ETS), which is around £30. So, it is very much part of your bill, and there is only one way that that is going, and that is up. The ROC will go from £10 today to £21 by 2019 or 2020. I am not saying whether it is a good or bad thing. This is Government policy. I believe that consumers are starting to address what they are paying for. Allan raises a very reasonable issue, which is whether the companies start to put that on the Bill. As an aside, in my previous job, when I used to be involved with and follow German events, there was a German company called EnBW—one of Germany’s big four companies. It tried to put environmental taxes on to its bill and the Government passed an action to make sure that it could not. At that time, in 2001, it was an uncomfortable, high profile issue that the German Government did not want on the bill. Maybe its time has come, however.

Q 91

Alistair Buchanan: If these schemes operate, we are effectively acting as a middle man between the company that has a ROC certificate and the supplier that has been penalised. So we act to ensure that the moneys transfer across. We effectively act as an auditor and we stress-test that, as you would expect, through both external and internal audit programmes. It is a very big issue for us to keep control of.

Q 92

Alistair Buchanan: No, the regulations are set down by the Government. Therefore, the Energy Bill with the ROC banding, for example, will merely be administered by us. That is not our policy.

Q 93

Alistair Buchanan: Sorry, I do not quite follow you.

Q 94

Alistair Buchanan: That is absolutely correct and it is a very good question from my perspective, by way of looking at the market dynamic, because a way of being competitive might be that you say, “We will take some of the EU ETS charge, for example. Our shareholders will take that because we are going to win customers by offering a lower product and that will be part of our sales pitch.”

Q 95

Nick Winser: From a transmission perspective, we would expect to see a substantial increase in flows from the north of the country to the south coming out of the encouragement of renewables, in particular wind power and offshore wind. We are projecting a very substantial increase in flows north to south. That is the predominant flow and has been for many decades. The demand centres are in the south and a large number of the renewables will be very remote from that. We are projecting those increases and we are working with Ofgem with regard to which projects should go ahead now to reinforce the transmissions systems to carry those flows. We are also going to work with Alistair’s people on what other project should be built ahead of the demand to make sure that renewables can come on quickly.

A large number of renewables are held up in planning—about 70 per cent.—and hopefully the Planning Bill will address that. The next problem will be getting enough transmission capacity to get them to the load centres.

David Smith: The other interesting challenge that we face—to a greater extent than the rest of Europe due to our large population growth—is that large population centres have grown up. That has a knock-on effect for the distribution network. The transmission system is pushing south. There are large new centres coming on line, particularly in east Anglia, which has not got large amounts of wire. We have remote energy generation in terms of offshore, and possibly nuclear. We have the North sea coast, the Teesside wind farm and so on, so a lot of work will have to happen to strengthen the existing network or to put in new build. If we take the example of Beauly, we know that it can take an awfully long time. That started in 2001, but will not come on until at least 2012, so the plans are long term.

Q 96

David Smith: No. There are a couple of things that we talked about. The Planning Bill is important, and there is still a big skills issue that we must address. We need people who can build the network. The majority of it was built during the 1950s and 1960s, and those people are retired or coming up to retirement. We have a big plan, and we are already doing a lot of work on building the skills and getting the right people.

There is an issue with the price of copper, and ensuring that we have the necessary plant and equipment because 30 or 40 years ago, we probably had three, four or five manufacturers in the UK, but they are no longer based here, so we need long-term plans for 10, 15 or 20 years out to ensure that we have the right equipment, the right people and the right profiling to get everything in place.

Q 97

Allan Asher: Yes, we receive thousands of complaints a year about such issues. There are requirements in the rules that if someone has built up a credit, they should be able to get it back within, I think, seven days. Some companies have been rather tardy about that.

The bigger problem was—it is now reducing—that some people did not get a bill for two, three or four and on one occasion seven years, and but then got a demand for immediate payment. I am pleased that Ofgem has now outlawed that, and if a bill has not been sent out for more than a year, that is too bad and the company cannot recover the money. That has led to huge improvements, but there is, sadly, still the administrative problem of tardiness in paying money back. However, it is a reducing a problem.

Q 98

Allan Asher: Absolutely. If you have overpaid for something in any other marketplace, you would expect an immediate refund. There is no reason why you should not expect that here. Some people are happy to build up a credit, because it is a bit of a cushion into the winter months, but that should be at the wish of the consumer. If someone wants to do that, they should be allowed to do so; if they want their money back, they should get it back promptly and without fuss.

Q 99

Alistair Buchanan: It is worth following this through. If there is a serious complaint by a consumer, and it is not handled properly by the company on the  prompting of energywatch, which we then follow through, there is an ombudsman in place, and has been for two years now, through whom the consumer can seek redress.

Q 100

Alistair Buchanan: There is a route there.

Q 101

Nick Winser: I am not sure that I can address the point about secondary legislation, but the 2020 target is certainly challenging from an engineering perspective. There is an awful lot to do. We will need the Planning Bill and strong incentives. We will need simple, clean structures and organisational models to get it done. It is an incredibly challenging target for 12 years.

Q 102

Alistair Buchanan: In terms of our working relationship with the CAB, I believe, from all the comments I have had from my team, that the relationship is working very well on both sides. For us and energywatch, the key is to ensure that we can help to get information to consumers. The CAB has to deal with those issues. As for the extent to which its staff are trained to a level at which they feel confident and comfortable with handling these issues, ultimately anything that we can do to help must be a good idea. Clearly, energywatch does a lot on that, as will the new National Consumer Council.

On transmission costs, yes, there is a range of transmission costs. As you know, throughout the past 20 years, the system has been based on the concept of locational charging. The further from demand you are, the higher the cost will be. There are issues regarding how the methodology works and how it is explained to potential builders of and investors in wind farms. For example, I spent an interesting week in the Hebrides in September, when there was a lot of discussion about the connection to the Orkneys. The charge for connection to Skye—I am going to use figures to give an example—was around £24 a kW. The charge for  connection to Orkney changed while I was there from £114, which no one could really understand in relation to the price on Skye, to £76. It changed again, because of the question about what kind of standard is needed—N1 or N2. Those are technical standards from the grid company. The price might be a lot lower depending on what standard is used.

Part of the issue—we have discussed this with National Grid—is the degree of confusion about how the system works and whether the methodology is clear enough. On the back of that, we announced a major corporate governance review at the end of last year, which is to open up the rules and regulations within this sector. We are currently receiving feedback from that, and when we have a chance to digest it, we will have to work out how to take the project forward. The national grid will be very important in that regard. You have put your finger on an area of great concern, not only about the charge, but about how we get there. What does it mean? When will it change? Those are the things that we need to address going forward.

Nick Winser: I was just going to add that, yes, additional transmission infrastructure will be needed. It sort of depends on where the renewables are, especially if a lot of them are up around the north of England, or Scotland and above. It is worth bearing in mind that the part of the bill that constitutes transmission is only about 3 per cent. of consumers’ bills. Even though we will do quite a lot of work to reinforce the system, it is spread quite thinly across the charging base, at about 3 per cent., so I do not think that it will make a material difference to customers.

Dr. Ian Roxburgh: I am chief executive of the Nuclear Decommissioning Authority.

Dr. Mike Weightman: I am Her Majesty’s chief inspector at the Nuclear Installations Inspectorate and a director of the Health and Safety Executive.

Keith Parker: I am chief executive of the Nuclear Industry Association.

Paul Spence: I am head of strategy at British Energy.

Q 103

Dr. Mike Weightman: I would use slightly different terminology. From a regulatory point of view, the industry must earn the public’s trust, as too must the  regulator in its regulatory arrangements and its fulfilment of them. We have been pushing the industry to do more on that, particularly in relation to new build. Indeed, over the last few months, we have arranged with them to put their safety cases into the public domain, to invite comments from the public and to answer them. We are overseeing that process. When we come to our views about the various steps that we are looking at under the generic design assessment, we will take account of its approach when putting forward our independent view. For me it is not only about informing the public; we also have to earn their trust. I think that that is a crucial component of our thinking, as regulators.

Keith Parker: On behalf of the NIA, which represents companies throughout the industry, I think that what the Minister says is broadly correct. In the past, there has been a degree of public suspicion of the industry. It has not been entirely trusted and has had a reputation for secrecy for reasons that I think are broadly historical. It came from its sort of military background. There were instances of apparent cover-ups in the past. I think that the perception of the industry has changed quite significantly in the past few years, and certainly the industry itself is going out of its way to engage much more readily with the public and moving away from a situation in which it just spoke to itself because it felt very comfortable doing that. We are going out and debating the issues, putting our case in public forums. That willingness to engage has improved people’s perception of the industry and their understanding of the case for nuclear.

Dr. Ian Roxburgh: May I add one small comment? As the Minister will know, it is part of the NDA’s remit that we are bound to be open and transparent. We were meant to represent a break with the past, and I think that in large part that has been achieved. It is also fair to say that the communities that we work in are actually quite comfortable with matters nuclear as a general rule. We have two Members on the Committee here today, Jamie Reed and Albert Owen, who represent constituencies that are lobbying the NDA quite hard that they should not be left out of the possibility of site review for new nuclear plants, so there is another side to it.

Q 104

Paul Spence: The question of life extension is clearly one that I should respond to, as we operate the gas-cooled reactors and pressurised water reactor. We have made our corporate strategy clear: to seek to  life-extend those stations as long as we can, provided that we can convince ourselves that it is safe, technically feasible and economic to do so. Since our restructuring we have reviewed the options for life extension for Dungeness and, mostly recently, for Hinkley and Hunterston. In the case of Dungeness, we extended it from 2008 to 2018. For Hinkley and Hunterston, which were scheduled to close in 2011, we have announced a further five-year extension to 2016. We expect to review the position for the next two stations that are due to close, Hartlepool and Heysham 1, which are due to close in 2014. We expect to review that three years before closure date and form a view at that point about whether there is further possible life extension of those stations.

To pick up your second question, about standardisation, one feature of our current fleet is that, although they are all called advanced gas-cooled reactors, they are all subtly different, or in some cases markedly different. We are on record in a number of places as saying that we think it will be extremely desirable for the UK to adopt designs that are like international designs and drive, as far as we possibly can, for those stations to be built to a standard, accepted international design. We believe that that offers the greatest margin of safety and the greatest prospect of attractive economics.

Dr. Mike Weightman: If I may answer from a nuclear regulatory perspective, clearly the operators will have to demonstrate that the life extension that they propose is safe. There will be some technical limitations on issues such as graphite cores, which we will have to consider very carefully to ensure that we have the confidence on those life extensions. I need to be sure that Members are aware that there are various steps to go through to secure approval, so that we protect the people of the UK. Similarly, on taking forward standardised designs—I shall not comment on the commercial aspects of that, but merely on nuclear safety—clearly, if you have a replicated fleet then you can learn more from events that occur across that fleet, because they will be equally applicable to all the stations. So there are some safety benefits from that.

In terms of the design approval process, it is clear under international conventions—and, indeed, under the International Atomic Energy Agency safety standards— that nuclear safety is a national responsibility. We are set up to protect the people and society in the UK, and we have to fulfil that duty.

That does not mean to say that we do not take account of other nuclear regulators worldwide. Indeed, we have good relationships on a bilateral basis and a multilateral basis, and more is being done at international level to secure greater co-operation. However, some of the changes in design that occur from country to country reflect some of those national concerns. We know that the Finns have different concerns to the French, but also some of those changes reflect different operators. Some of the changes in Finland in the finished design of the European pressurised reactor compared with the French design are to do with the operator wanting to gain access to some of the areas, which meant that they had to be reassessed. Indeed, there will be a third variant of that design which has gone into the US system as well.

It is a more complex picture than just a regulator being imposed on some things. Clearly in the UK we have looked at our safety standards recently, reviewing them against the IAEA safety standards themselves, so that we have an international underpinning of ours. Perhaps we can go forward on a more firm basis than just looking at our own standards.

Q 105

Dr. Ian Roxburgh: I am prepared to be brave—probably braver than I should. The first point is that the Government have made it clear that they are establishing what I understand to be an advisory group, which is to work through the very important issues that you have enumerated. We already have significant experience. We have just heard from Mr. Hendry about life extensions. The Nuclear Decommissioning Authority has a duty to the Government to police those extensions, in the sense that when approving an extension you must still be able to meet the extra liabilities that accrue through the lifetime of that extension. It must make good business sense, and the regulator has made the point that it also has to make good safety sense.

I personally am content. We have a system that has already proven itself to be robust. We have the nuclear liabilities fund. I have read these documents a couple of times before, and I have skimmed them again; they ask the right questions. I personally believe that it is a good approach that can work.

Dr. Mike Weightman: May I make a general comment, and then try to answer the individual questions? We welcome the proposals in the Bill. We feel that they make much more transparent and robust the assurances on corporate finance, for instance, and matters that the Department for Business, Enterprise and Regulatory Reform considers at present before granting a licence. So we think that they are a good step forward.

On whether clause 41 provides enough areas or is sufficient, I think that generally it is, without having looked at it in great detail. We have a simple licence condition around decommissioning—licence condition 35—that predominantly says that the licensee shall have adequate arrangements for decommissioning, which embraces much of this. We then look to them to  develop around that. The Bill puts more structure into that, so it is a good step forward. Generally, it makes the assurances that we seek more transparent and robust.

Is a costed programme robust? Well, things can change. The areas of the Bill that provide for modification are very important. There are sometimes unexpected events at plants, and that has to be taken into account when you are thinking about decommissioning and the funding of it. Clearly, there might be times when we would want to enforce something on the site from a safety point of view, which might change the approved decommissioning programme and the funding arrangements for it. I am sure that BERR Ministers will ensure that safety and security remain paramount in such circumstances and that the present robust, independent regulatory system is not undermined or fettered in any way.

If we were asked to enforce some of these aspects—we already enforce some of them under the nuclear licensing conditions—what would the impact be on the limited resources that we have at present? It all depends on how we go about it. There would be areas where there would be some synergies with what we do now. When we inspect a site to ensure that it is in line with the technical safety case, that is similar to a technical case for decommissioning. We already cover issues such as whether records are needed on the site. In some areas, we could have synergies of approach. Resourcing would need to be addressed, but we need to address it anyway. Perhaps the problem would not be as large as one might otherwise think.

If we were asked to look at financial aspects, clearly that is not something that we have dealt with recently, although we did engage in 1995-96 when British Energy was privatised with decommissioning and segregated funds and assurances about financial standing.

I do not know whether I have answered all four questions, but I have tried to answer various aspects of them.

Q 106

Dr. Mike Weightman: Do you want me to discuss the monitoring question first?

Keith Parker: No, I was going to address the skills point. We agree with the White Paper’s analysis that there is a challenge in recruiting people and developing  the necessary skills for new build, decommissioning, waste management—the whole gamut of nuclear activities. In relation to new build in particular, we are making good progress. A couple of years ago, my organisation undertook a study of the UK’s—

Q 107

Keith Parker: Yes, and Ian might want to talk about this as well. A number of initiatives are going on to improve the skills availability in decommissioning. Last week we saw the launch of the national skills academy for nuclear. There are a number of initiatives, in which the NDA is involved, to develop the skills that we need for decommissioning our existing stations. I am sure that those skills will also be available for the new build at the time when that is happening.

Dr. Ian Roxburgh: As you say, the NDA, along with others, has facilitated the nuclear skills academy, which deals with NVQs and HNDs up to basic degree level. Below that, we have also put in place a reinforced apprentice training programme, and below that we have engaged, to the tune of £750,000, with the energy foresight programme, which is a programme across 420 schools designed to encourage children to take the necessary O and A-levels to make them capable of taking advantage of training in the industry for decommissioning and other aspects of engineering across the United Kingdom. Talking about schoolchildren might seem strange, but given that the programme has quite a long lead-in time and quite a long time to go, it is very relevant.

At the other extreme, we have arranged a partnership with the university of Manchester—with £10 million from it and £10 million from us—to establish a new nuclear institute this year to deal with postgraduate qualifications. We have also endowed two chairs. We thought it proper to endow them, because then there can be no question of the NDA exercising undue influence beyond the establishment of the two chairs, one in nuclear materials science and the other in decommissioning engineering.

We have two other initiatives running. One is to start our own graduate scheme. We have just put out the first adverts and we have had more than 1,000 applications for 10 places, which suggests that young people see the industry as having a future now. Perhaps a few years ago we would have been hard pressed to muster a decent cohort of applicants.

We are also looking to facilitate across the industry all the existing schemes to make sure that all graduates coming out from wherever have a basic standard of proficiency, so that we can have mobility between schemes. The Committee can be assured that a lot is going on and that there is a lot of demand. The point about demand is important, because we are determined that all the courses that we are helping to facilitate should be demand led; they should be market led.

Q 108

Dr. Mike Weightman: I would not be doing the decommissioning; I would be regulating.

Dr. Mike Weightman: It depends. If I was, with some trepidation, to advise the Minister on this matter—

Dr. Mike Weightman: I would ask, first, whether you were going for a prescriptive or a goal-setting regime, because it matters greatly how you go about monitoring and it also matters greatly what sort of people do that monitoring. You can do it in various ways. If you go for detailed prescriptive regulation, with a lot of guidance saying what they must do at each stage, clearly you need a lot of people to monitor adherence to that. Perhaps you do not need the same calibre of people if you take a higher-level approach to looking at the management arrangements and various programme aspects they put in place. That is the way that we operate the nuclear regulatory system now. It is a goal-setting regime. We use highly experienced and high-calibre people—mid-career normally; very well qualified engineers or scientists—who understand how projects run and can ask the really penetrating questions about that.

It depends on how the Minister wants to approach it, but there might be synergies with the way in which we consider decommissioning programmes, because there are legal requirements to follow decommissioning programmes, too.

Q 109

Dr. Ian Roxburgh: I am not going to answer it; I shall refer to something that I said earlier. That issue is readily addressed in the White Paper, where the Government recognise that they must provide that assurance, hence the advisory group, which would consider the minutiae of that warranty—for want of a better expression—that you rightly require. I am comfortable that there is enough skill in the marketplace for that committee to be well advised and to come up with practical, deliverable solutions.

Dr. Mike Weightman: One principle that you might need to secure is openness and transparency in the monitoring function, so that there is a wider view on it, too. That would provide some of the assurance that you seek.

Q 110

Paul Spence: In summary, the balance is about right, provided we work through the regulations efficiently and effectively. If I look back to the experience of Sizewell and project it forward to where we might be today if we tried to go through a programme for it without the changes that are laid out in the White Paper, I would be very worried about the timetable. The proposals give me the clarity, which I look for as an investor, about what we need to do, the order in which we need to do it and the hurdles that we need to go over, and it allows me to see a way in which I am asked once about national need, rather than being re-asked in several places—similarly, on the questions about siting. So, from our perspective, it looks a sensible and appropriate approach that can fill the gap appropriately, rather than miss the boat.

Q 111

Dr. Mike Weightman: Our duty is to protect people in society in the UK. We will not shortcut the process if it means that we will not deliver that. We have reviewed our approach and we now have the generic design assessment. We have decided to go ahead with that and believe that it will deliver safe reactors on a fleet basis across the UK. We are not about rubber-stamping things or shortcutting to meet a programme; we must ensure that things are seen and demonstrated to be safe. We would be failing in our duty were we not to do so.

That is not to say that we do not look to be more efficient and effective, and we look for ways in which we can better serve the public. However, we will ensure that the public have confidence in the safe future of any new reactor programme. That means that we must work hard, as we are doing, and that we intend to resource appropriately going forward.

It is not about shortcutting things and doing things in a slapdash fashion, but it is also not about not learning from nuclear regulators around the world and acting in co-ordination with them. We are active with that at the moment. Indeed, we have done some inspection with colleagues in France, Canada and the  US, to look at their design organisations. Interestingly, they did not do things that way in any of those countries, but ensuring that designers of reactors have appropriate quality management systems and systems for securing long-term resources, and that they have good control over changes in design, is obvious for us. We work with others, but there are things that we must do to ensure that the programme is safe for UK people and society.

Q 112

Dr. Ian Roxburgh: Sorry, could you rephrase that last question?

Dr. Ian Roxburgh: As I understand the White Paper, it intends that the advisory body will include the cost of waste disposal along with the cost of decommissioning, so the complete life cycle cost would have to be recovered.

Q 113

Dr. Ian Roxburgh: In the sense that once waste is placed in a deep geological repository, I assume that it becomes a property of the Government, or at least that it is on some sort of lease. That issue is yet to be addressed, but the reality is that once the waste is in a repository, it should be in a passive, safe form. I will not say that age is immaterial, but that is the point about the repository: age can be accommodated there.

Q 114

Dr. Ian Roxburgh: You will have to ask the Government about that.

Dr. Ian Roxburgh: In terms of the recovery of costs, that is an interesting perspective. I do not know whether the advisory committee will be asked to consider that. If it is, naturally we would respond to any request for information that it made to us.

Q 115

Dr. Mike Weightman: There are provisions already for insurance requirements under those conventions and treaties. Under current nuclear installation legislation, BERR has to ensure that sufficient insurance provision is available to meet those treaties. There are some limitations to those insurance requirements, which is an issue that perhaps the Minister might answer, as you say.

Keith Parker: On a general point about insurance, the operators are obliged to secure insurance to cover against third-party liability from accidents under those international conventions.

Keith Parker: No, the limits are about to be raised under amendments to the convention.

Q 116

Paul Spence: As I understand the Bill, there are terms in there to cover a situation in which there was insolvency and to ensure that the funds that have been set aside for decommissioning and management of waste are protected from the other creditors. I would, therefore, see them as being secure.

Q 117

Paul Spence: The requirement is to put them there during or at the start of the operation of the station to ensure that they are.

Q 118

Paul Spence: The component that would be put there during subsequent operation would be to cover the increasing amount of waste generated and potentially grow to cover the decommissioning liabilities as required, so replacing insurance with cash over time.

Q 119

Paul Spence: May I take the last part of those questions first? Dr. Roxburgh talked about what is being done to ensure sufficient skills for decommissioning and waste management. I could have echoed that by talking about what we are doing as a company and as an operator of existing stations to ensure that we have the graduate skills and craft skills available to operate the current fleet of stations and be ready to operate new build. We have recruited something of the order of 1,000 additional people into British Energy in the past three years. Within that there are at least 150 apprentices whom we are bringing in from around our stations, because we know that we need those skills for existing operation and to allow us to be ready when we need them for new build.

As a company, we are looking forward and asking what skills we believe will be needed and how many of those skills will be needed as construction programmes start to happen, we hope, over the coming decade. We are looking to build that pipeline to ensure that the local colleges are gearing up and that GCSE courses in engineering at local schools are starting to happen. Like the NDA, we are also building links to universities. From where I am, we are laying the right foundations. There is still more to be done, but there is time to do it as well.

Dr. Ian Roxburgh: Can I add a small point to that on skills? I mentioned that we wanted everything that we were involved in to be demand-led. If there were more demand, I would like to think that those institutions that I just described would be flexible enough to accommodate that new demand.

On the other questions, you first asked whether it should be separate from the legacy wastes. By definition, given what is set out in the White Paper, it would be for a period, because the planning presumption is that it would be stored on site for a significant period. There would be no question of mixing it back with the legacy waste, either theoretically or in fact.

You talked about retrieving waste. One decision that would need to be made about a geological repository is what element of retrieval would be appropriate. That might well be one issue that a community considering volunteering would want to reflect upon.

You then asked about reprocessing, and I think that that ties back into the point that I have just made—that you do not need to decide on reprocessing in advance. If the fuel is stored and kept in good order, at any stage, provided that it is retrievable, you can come back and see it as a national resource at some time in the future. From the NDA’s point of view—I suspect that the question is mine because we are the only part of the UK that carries out reprocessing—our clear understanding has always been that any new initiatives for reprocessing would be a matter for the Government, and the Government in turn have made it clear that they would want to consult widely on any such proposal.

Keith Parker: On the separating of new build from the legacy, I think that the industry very much agrees with the Government’s view that if a deep geological  repository is built, it should accommodate new build waste as well as legacy waste. I think that that makes sense. We agree with the NDA’s view that reprocessing would be subject to another round of consultation, but we advocate keeping the option open, which I think is what is stated in the White Paper. It should not be foreclosed as an option for the future.

Q 120

Paul Spence: I am not sure that it makes sense for me to voice frustration. As well as operating nuclear power stations, we operate a coal station, and I hope that in future we will be a generator of more than just electricity from nuclear stations. It is appropriate in considering new build that we can show that we can cover the costs of what we are producing, and those costs should include any waste that we produce. That is an appropriate principle to start from and I am pleased to be part of the industry that steps up to that principle at the moment.

Keith Parker: I agree that the principle about the polluter paying should be evenly distributed across the sectors, but the nuclear sector is confident that it pays for its waste, decommissioning and other pollution.

Q 121

Dr. Ian Roxburgh: That is a good question, but is probably two months too early. I understand that the Government intend to publish a White Paper towards the end of April, following on from the Corum debate, to set out how they will define a community, how they would expect a community to volunteer, and how they might define compensation. So, the question is just a little early.

However, if you are thinking about the technicalities rather than the politics—the difficult issues of arriving at a community that has volunteered and has the right technology—I do not believe that the technical aspects need delay it over-long. Thinking back—Mr. Tipping might appreciate this—it took just more than four years to sink the Asfordby mine to what would be a similar depth, through some of the most difficult hydro-geological material in the country, so there is good experience. It should not take too long.

Q 122

Keith Parker: I do not believe there should be delay to the new build programme for that reason, but if there were, it could have a damaging effect. One difficulty for nuclear vendors—actually, it is not a difficulty; it is a luxury—is that there is worldwide demand for new nuclear power stations. If there were difficulties with the UK moving forward with new build, they would not have any difficulty in going elsewhere. That may well push the UK further back in the queue for new reactors, which could have an impact on our ability to meet the climate change and energy security challenges that are set out so graphically in the White Paper.

Q 123

Paul Spence: On the first question, it is for us as a private company to ask ourselves whether we are sufficiently confident today to spend the money that we need to spend today on early-stage work on our sites. The answer to that is yes. Today, I look at where things are with the European emissions trading scheme and with the market price for alternative fuels, and I say that it looks like a good proposition for our shareholders to take forward and to spend the not trivial but not huge amount of cash at this stage to develop the option for new build. I expect that over the next three or four years, we will need to examine how the carbon market has evolved and the costs that the reactor vendors quote, once we have decided on the vendors that we wish to go for, and ask whether there is a sensible investment proposition. If it looks sensible for us as a company, having considered the rest of the framework, including the back-end liabilities, I suspect and am confident that funding sources will be available either from company balance sheets or from the financial markets to allow us to fund what we want to do.

Q 124

Keith Parker: Yes, it is. If you consider the public statements of other potential investors, they have all said that given greater clarity about planning, licensing, the carbon price and the cost of waste and decommissioning, they would be prepared to invest. The Government, in their White Paper, have gone a long way to delivering that clarity, and it will encourage investors to move forward on new build.

Q 125

Paul Spence: For Dungeness, which was the station that had a 10-year extension, it was the first time that we had assessed its life. The other stations have already had an extension to their original accounting lives, so I am hopeful and expect that when we examine the other stations, we will consider the prospect of further 10-year extensions. However, we will be dealing with a slightly different situation at that point. Could we do it now? Part of what we must consider is the real-world experience and results of our inspection work on those stations, as components are irradiated and age. We believe that the best time is as near as possible to the point at which we must make a decision. That allows us to take those decisions on the basis of best understanding, knowledge and data. That is why we do it three years in advance of closure. To return to what Dr. Weightman said, that fits with the programme of periodic safety reviews required to confirm that it continues to be safe to operate those stations.

Q 126

Paul Spence: If I can respond on that one, from our perspective competition is very attractive. It helps both to create innovation and to ensure that the vendors do not extract rent that you do not want. So, in our view, you have a trade-off: whether the UK is a sufficiently large market to support competition among reactor designs as against the benefits that come from economies of scale and the safety benefits associated with having one standard design. That is a truth in respect of pretty much every market, from office buildings through to motorcars: it is a question of how many the market can sustain.

Q 127

Paul Spence: On balance, one or two, rather than multiple.

Dr. Mike Weightman: May I add that, for us, we are not getting into the commercial, availability or diversity of electricity supply routes argument? It is just about concentrating on how we secure safety in the most effective way. That was the issue.

Clearly, if you went for two different designs, you might have a fleet of both, for instance, which would give some of that commonality and would provide learning opportunities. Also, from our point of view, it would be looked at on a worldwide basis, because we do not just look at the UK aspects, but at what can be  learned from similar designs internationally. Unfortunately, with the advanced gas-cooled reactors and the old Magnox reactors we do not have that luxury. For whatever reason, every power reactor seemed to be designed differently in some way or another.

Q 128

Paul Spence: I will answer for our company. We have eight sites around the country adjacent, in most cases, to our existing stations and, in one case, next to a decommissioned Magnox station. We believe that, from a technical standpoint, all those sites are suitable for new build. The factors we look at in considering which become the most desirable sites include grid connections, access to cooling, the engineering specifics of the particular sites and, in some cases, the politics around the acceptability of nuclear north of the border. They will all be factors that we will need to take into account. We will also need to see what the Government identify as the criteria as part of their strategic siting process. That will allow us to identify which of those sites look good.

Keith Parker: From the industry’s point of view, we have made the assumption that the new build is likely to take place adjacent to existing sites, for all sorts of reasons that Paul has already described.

Q 129

Keith Parker: I understand that there will be more detailed guidance coming out about the way in which both the funded decommissioning programme and the funding arrangements for it will need to be taken forward. But in general the proposals in the Bill for an independent segregated fund controlled by an independent body provide for a sensible way forward and should ensure that the moneys are dedicated to the purpose of decommissioning and waste management. We certainly advocated that in our responses to the various consultations and believe that it is the correct way forward.

Russell Marsh: I am Russell Marsh, head of policy at Green Alliance.

Robin Webster: I am Robin Webster, head of the energy and climate team at Friends of the Earth.

Benet Northcote: I am Benet Northcote, chief policy adviser at Greenpeace.

Tom Burke: I am Tom Burke. I have a wide range of affiliations with non-governmental organisations, academic bodies, commercial companies and public authorities. I am not representing any of them. I would like to make it very clear that I am here in my own right. I am not speaking for any of the organisations with which I have an affiliation.

Q 130

Tom Burke: It is certainly not my stance. I do not know how you can take a fundamental stance on technology. What matters is how relevant the technology is to the problems that it seeks to address. Therefore, my stance is evidence-based. I would like to say—and my colleagues can speak for themselves—that the proposition that any addition to nuclear power in Britain can contribute significantly either to our energy or climate security is not supported by the evidence.

Benet Northcote: I would agree with that. There are clear and evident dangers to nuclear power. There are great risks and massive issues of cost associated with waste and potential risks to future generations. I would agree with Tom that essentially the argument is pragmatic. Here is a technology that will do nothing, or very little, to reduce our CO2 emissions at vast cost, and which will not help us to meet our renewable energy targets.

Q 131

Tom Burke: Yes, as a matter of practice—either globally or in this country—it contributes very little. Let me take you through the rationale for that. The Chinese have the world’s most ambitious nuclear power programme. They propose to build 40 reactors by 2030 and, being the Chinese, there is some good prospect that they will do that. If they succeed, nuclear power will contribute 4 per cent. to China’s electricity production by 2030. The rest will come from coal. The point that we both made is that it cannot contribute significantly at that scale. If you take the broader global picture, and you look at the number of reactors that have to be built between now and 2030 in order to keep the current level of nuclear contribution, you have to build 42 GW between now and 2015 and 168 GW in the 10 years after that. That is what you have to do to maintain the current contribution of nuclear power. If you look at our current rate of build, which is about 1 GW a year, even if you scale that up dramatically—and there are good reasons to believe that that might be quite difficult—the best that you can hope for is a slow decline in the contribution of nuclear power to meeting our emissions reductions targets. Meanwhile, a large  number of coal-fired power stations will be constructed. If they operate over their 50-year lifetime, they will make it extremely difficult for us to meet global and national goals for reducing our emissions to the point at which the climate is secure and stable. There is a strong evidence base that nuclear power cannot contribute very much.

Were you magically to overcome all the extraordinary difficulties of rate and magnitude of building new nuclear power stations, of course they could contribute. In the specific context of the United Kingdom, there is a need to replace existing nuclear and some coal-fired power stations that are coming offline, as I think you, Minister, and others have pointed out. The emerging problem arises some time in the period between 2012 and 2015—estimates vary—but the most optimistic assessment of when new nuclear can contribute to meeting the generation gap is 2017, and that is EDF’s estimate. I think that the Government’s own consultation paper suggested that it might actually be a bit later than that, at around 2020.

In the meantime, we will fill the gap with fossil fuels, so the issue becomes one of priorities. What do you think it is most important to concentrate public policy on doing? I suspect that my view is shared by my colleagues, although they will speak for themselves. It is that it is most important to concentrate on the fact that if we do not do something very quickly to make fossil-fuel-fired electricity generation carbon neutral, we will have made commitments that will be extremely expensive and possibly impossible to unravel.

Robin Webster: Yes, certainly. The question is an extremely good one, because nuclear power is not an article of faith. Climate change represents such an overwhelming challenge to us that we should consider all options. It is something that should frighten us all, but the evidence is that nuclear power will not provide the answer.

I certainly back up everything that my colleague said. We can look at how Minister Hutton presented the Bill, so much of which is about nuclear power, in the House of Commons. He spoke for some 12 minutes about nuclear and for about two or three minutes about renewables. Our fear is that nuclear power provides a political distraction. Political energy, political debate, and the minds of our civil servants and engineers go down one route, and that does not give us a chance to think about the root-and-branch change to our energy system that might be needed, and how that will be achieved. That is our real fear.

Benet Northcote: I think that that is exactly right. The only thing that I would add in terms of the actual impacts that a domestic new-build programme would have, is the figures from the Sustainable Development Commission, the Government’s own advisory body on climate change. It says that if Britain built 10 new reactors, nuclear power could deliver only a 4 per cent. cut in CO2 emissions some time after 2025. That is the most optimistic build programme, which, as we all know, is very optimistic indeed.

Again, it is essentially pragmatic to say that, in the short term, we have a real problem. Nuclear power at present contributes just 3.6 per cent. of our total  energy usage. We need a policy right now that looks at a heat strategy, and how we will deliver on the EU renewable energy target, which takes us to something like 40 per cent. of our electricity generation coming from renewable sources. Frankly, nuclear just does not factor into the equation at all.

Russell Marsh: I want only to say two quick things. One is that I fully support everything that my colleagues have said. The other is to highlight the focus on nuclear. There is a focus on nuclear to the detriment of other technologies, but if we are to get to where we need to be by 2015 or 2020, we need other technologies. At the moment, our sense is that the focus is very much on nuclear, which is not part of the solution. We need to focus on other solutions.

Q 132

Russell Marsh: If I pick that up first, in terms of heat we have a market with no support for renewable or low-carbon heat. There is a renewable electricity obligation and a renewable transport fuel obligation, but there is not the same support for renewable heat, let alone low-carbon heat. We want the Energy Bill to have a power that enables the introduction of a feed-in-type mechanism, particularly for heat, although we also need a feed-in-type mechanism for smaller-scale electricity.

Benet Northcote: I think that is right. The importance of heat to climate change and to our energy security cannot be underestimated. Something like 47 per cent. of our total emissions come from heat. We talk about gas security. I do not know about you, but my most immediate relationship with gas is in my boiler at home, which is where the gas is being burned. The idea that you can somehow have a coherent energy policy and not have a heat policy beggars belief. The current energy White Paper has a mere four pages on heat; I cannot remember how many pages there were, but I attempted to read them all. That is a key part of the matter, and the Bill does very little or nothing to address it.

To reiterate on feed-in tariffs, they are also tremendously important. You must look at the success of countries that have adopted feed-in tariffs, notably Germany, where they are massively outstripping our delivery of renewables in terms of solar power and wind. It is acknowledged that the changes that the Bill makes to the ROCs and the current framework will not get us to the necessary targets. The Government admit that a new renewables Bill will be needed in about 2009 to meet the EU target. There is a lot that the Bill does not do that it needs to do.

Q 133

Benet Northcote: It is easy to overstate energy efficiency, and to make it out to be a simple, single bullet. We see it as a culture of energy efficiency that runs all the way through the supply chain. Traditional power stations throw away two thirds of the energy before it gets to your house to be wasted at home in the form of wasted heat. The culture should run through to appliances and ensure that we have the most energy-efficient appliances. Waste avoidance needs to go all the way through the system from generation to domestic light bulbs.

Q 134

Benet Northcote: We drew attention to the comments of the former Secretary of State, now Chancellor Darling, and his views on the role of coal. He said when giving evidence to, I think, the Business, Enterprise and Regulatory Reform Committee, that

“it is commercially untried and untested. It is not being developed anywhere else in the world.”—[Official Report, 6 June 2007; Vol. 461, c. 338.]

Whether that is BERR’s view of the potential for CCSs is a valid question.

The way in which we will tackle climate changes is about trajectories, so it is not about saying that we can bet the house on a technology that may deliver commercially in 20 or 30 years. We need to explore the potentials, and if CCS has the potential to deliver, we should push it as hard as we can at every opportunity, notably the application that is sitting on the Secretary of State’s desk for a new coal-fired power station at Kingsnorth in Kent, which may be built without any carbon capture technology whatever specified. We believe firmly that if it is to be built, it should be built with carbon capture installed and working from the outset.

The issue is about trajectories, and what we can do between now and 2020. I do not think anyone credibly thinks that CCS will be there between now and 2020. We must get ourselves into an energy system that can deliver what we need by 2020, and see us on to 2050.

Tom Burke: I do not agree. Whether we have CCS by 2020 is entirely a function of how much effort we want to put into it. If we put enough effort in, we can have it much sooner than that. We are not currently putting enough effort in, and the Bill does not do very much to increase it.

To set that in context, CCS is an imperative, not an option, if you want to avoid even more dangerous climate change. The reason for that is that, although you can come up with all kinds of theoretical trajectories that are both economically and technologically available to arrive at a carbon-neutral energy system by the middle of the century that does not involve coal, I have not seen anybody come up with a politically deliverable system. You have to face up to that reality. The coal is there, and for perfectly legitimate energy security reasons it will be burned, so we have to deal with CCS as an  existential problem, not as an optional problem. If we do not solve that problem, we will be in considerable trouble on the climate.

I do not know what the Bill really does to make a difference to nuclear power, because anybody who wanted to could have applied for a facility anyway. A really tough decision—this is the one Benet did mention—would have been to spend the money needed to make Kingsnorth carbon neutral whatever that cost us, as a way of demonstrating to the world two things. First, that it can be done, which we know technically but not operationally, and secondly that we are serious when we say that is the way the western world has to go, because if they do not believe we are serious, why should they do it, and if they do not do it, we cannot deliver for 60 million Britons a stable climate.

Robin Webster: I have just one thing to add. The Bill provides certainty through the Government’s competition on CCS, which is a good thing, but the competition on CCS will be testing only the least efficient way of doing CCS—post-combustion. It is not testing pre-combustion. We are seeing permission being given to build coal stations—we are seeing Kingsnorth. We are seeing them go ahead under the moniker of capture ready; they are going to be clean coal. We do not yet know what clean coal is and we are testing the least efficient form of clean coal. We do not know when that testing will finish or when CCS will be in place. That needs to happen pretty fast.

Q 135

Tom Burke: I do not think that there will be a high enough price for carbon to deliver the technology changes that we need. It is extremely important to have a price for carbon—it has a role to play—but are you talking about the kind of technology shift that we must make to arrive at what is essentially a carbon-neutral energy system globally by 2050? That is what a 60 or 80 per cent. cut means. Because of the nature of the climate system, a cut in total emissions of 60 to 80 per cent. is in effect a carbon-neutral energy system because of emissions from deforestation, agriculture and so on. If you want to arrive at that, you will certainly have to use the carbon price, but in terms of both magnitude and time, we are going to have to think much more about both the regulatory and the fiscal measures.

In particular, the idea that the infrastructure for CCS—the pipelines, the storage facilities and so on—any more than the infrastructure for offshore wind that we need to bring onshore, will be built by the market responding to some signal that is pretty imprecise with the volatile price of carbon is, frankly, a fantasy. Building that infrastructure is the equivalent, for a competitive low-carbon economy in the 21st century, of building the motorways in the 20th century. Nobody would have suggested that we leave the building of the motorways to the wisdom of the market.

Q 136

Robin Webster: I think that the question of political tension is not as ephemeral as it may seem, having seen with my own eyes the leaked Government document that said we are not sure whether we want to hit the renewables target at EU level because it might not give us enough space to develop nuclear. You could see there was some political thinking behind that. On the question about the political thinking that is going on inside our Ministries, I think that quite a lot of us recognise that within DBERR there is an attitude of “grown-ups build power stations”. We see the Government coming out with quite a lot of iconic announcements, saying, “We going to have nuclear power. We're going to do the Severn barrage. It's all going to be fine. Please stop presenting us with this problem.” Actually, what they are not doing is looking at the energy system.

We are looking at whether we can make a more decentralised energy system, what kind of mechanisms can exist to develop renewable power and what barriers there are to renewable power within the UK. These are the kinds of questions that need to be answered. The question of political attention is a key one.

I think that Benet is probably better qualified than me to speak on the finances and the financial fears that there might be around nuclear, but that could be another very large part of that equation.

Tom Burke: We have to solve the problem exactly because it is there. It does not make very much difference adding an extra cost and I do not think that that is a core issue. There is obviously an issue about the balance of risk that falls to the private and public sectors that needs to be properly debated and worked out. However, I'm much more worried about the fact that, this year, we will spend £2.8 billion on cleaning up the problem with radioactive waste from the past, but nothing, effectively, on carbon capture and storage, which is really important to the future prosperity and security of 60 million Britons.

I cannot see how it makes any sense to argue that we should create more of a problem—we are already having to spend too much money on solving the problems of the past—when we are not spending enough on the problem we have really got to address, which is guaranteeing the well-being of our citizens. That is a hard argument to make.

Personally, I do not think that waste is the core issue. I think that the core issue is what is going to contribute to energy security and climate security.

Benet Northcote: I am not sure that I agree with anything that Tom says on the waste issue. There is a substantive difference between legacy and new-build waste. We do not need to create new-build waste. We have to deal with the legacy waste. There is an essential ethical difference between the two bits of waste, which has been clearly identified by CoRWM—the Committee on Radioactive Waste Management. The new chairman of CoRWM has been very clear that all of its recommendations and proposals are for legacy waste and absolutely cannot be applied to new-build waste, and that a new process would need to be undertaken for new-build waste.

There are many issues associated with a repository for new build and the associated costs for that. For example, there are issues as simple as how the cost for the repository for new build is apportioned or whether all the transport links and the infrastructure links will be properly apportioned into new build? How do you do that when you do not know how many power stations there are going to be, if the market is coming into things? Will it be four or 10? How do you apportion costs to one? Will the first one take all the costs, as opposed to all 10 of them? There are an awful lot of issues here.

Our primary concern, just to talk about the detail for a second, is that we see the Bill in terms of back-end costs. I agree with everything that Tom says about up-front costs and all the up-front subsidies. British Energy was not prepared to say that it was prepared to invest immediately; it wants to wait for yet more years, because the subsidies right now are not there. In terms of back-end costs, the Bill essentially cedes power for protecting the taxpayer from Parliament and gives it to the Secretary of State. So the Secretary of State has complete power to set up all the funding mechanisms and all the requirements on the new-build companies, leaving absolutely no way for Parliament to come in and check that. That is our reading of the Bill. There is massively undue haste in respect of new power stations when there is massive uncertainty about what these costs might be. So why not wait until the base-case consultation is finished and, at least, wait until there is clarity on where the repository will be, what are the geological criteria and what are the costs associated with making it work, and then look at how you might put together the financing programme?

Russell Marsh: I just want to pick up on the crowding-out point and to highlight the fact that the evidence is already there to show that, at the moment, we are seeing a lot of attention and almost all the focus on nuclear and much less attention is being paid to some of the other single reactors, particularly CCS, to which Tom referred. We will have one demonstration project in the UK that may or may not have CCS fitted at some point in future and at the moment we may get nothing else. There is a lot of focus on nuclear to deliver 20 per cent. of our electricity. However, although we have to get 40 per cent. from renewables, there is a lot less attention paid to that. We can already see that the nuclear debate is crowding out the time for a debate and a policy discussion about how we bring on all the other technologies at the same time.

Q 137

Tom Burke: Is it better for us to burn fossil fuels? Provided that we can do that in a carbon-neutral way, absolutely. I think that I said that extremely clearly; to protect the security and prosperity of 60 million Britons, we have got to solve the coal problem, irrespective of what we do, because of what others will almost certainly do. Also, we are going to use coal, as has been demonstrated by the Kingsnorth application. Therefore, we need to show that we will walk our talk on climate change. We will need to move very rapidly to the mobility for ourselves and for everybody else to use coal in a carbon-neutral way. I think that that is technologically possible; I also think that it will be very expensive. There are some technological problems and other problems to solve, but they are all inside the bounds of our technical and economic competence to solve. I think that we should just get on with that.

I am not advocating using more energy of any kind. As others have said—I think most people would agree—improving energy efficiency is by far and away the fastest and cheapest way to guarantee both energy and climate security. So I was slightly trapped by the word that you were using there, “advocating”. I do not want to “advocate” more use of energy per se, but I want to advocate that we solve the coal problem first.

I am also somewhat sceptical of a rather interesting reversal, where we have an environmentalist arguing for the prioritisation and the business world arguing for “let’s do a bit of everything”. We usually get accused of wanting to do everything and not being willing to prioritise. I suspect that the idea that we can do a bit of everything will lead us into a situation where we do not get very much of anything done.

Benet Northcote: You asked your question in a provocative way. The answer, of course, is that we will be burning fossil fuels, as Tom quite rightly says, and the question is this: what is the right way to take us to the 80 per cent. emission cuts that we need by 2050? Our point is that nuclear is not the right way and that there are better ways to do that. So, you put your question in a particular way and I think that that is not particularly constructive or realistic within the framework of how you discuss energy policy going forward.

Q 138

Benet Northcote: Yes.

Q 139

Tom Burke: I do not think that we were. That was why we objected to, and had some difficulty with, the term “advocating”. We were not advocating burning oil. I am completely in favour of ensuring as long an availability of fossil fuels to future generations as is possible. [Interruption.] If you will forgive me, my  point is that I do not think that nuclear can help you to get off that hook, and I laid out some of the reasons why I think that. That is all. It is not a question of saying, “I want people to use up all the fossil fuels instead”.

Q 140

Benet Northcote: I disagree with the premise of the question.

Robin Webster: I am not giving you a yes or no either. I do not think that it is an either/or proposition.

Russell Marsh: I do not agree with the proposition, but if I was pushed, I would have to agree with Tom that I would rather see CCS than nuclear. So I would advocate CCS more than nuclear.

Q 141

Benet Northcote: There are large amounts of hydro in all those countries.

Q 142

Tom Burke: In the past, that is right; they have sustained that. However, we are not talking about the past. We are talking about what will happen in the future. The point that I did not make before about crowding out is this; what is the view that investors take? If the view that investors take is that the Government will support a nuclear programme to the point where they might even change their mind about whether to subsidise it—and Mr. de Rivas and others made it quite clear that they think it extremely unlikely that there will be nuclear build unless there is some sort of revenue support— and if investors think that that is where it is going to go, of course they will think that there is less room for them, so they will be less willing to take the risk. That is perfectly normal.

That is my sense of what the crowding-out argument is about—what view will investors take of the political probabilities? As we have seen over the last few months, in a somewhat disturbing way, investors do not always get it right; they, too, make mistakes. What all the energy industry is looking for—it is true of the electricity utilities and of the renewables investors; it is true of pretty well everybody—is a sense of the clear political direction and what the Government are really going to drive for. This debate is about whether nuclear is the right priority.

Q 143

Benet Northcote: On marine renewables, the answer is that we have the best wind and tidal resources in the whole of Europe, yet we have the lowest renewable energy of pretty much anyone in Europe. We have been hugely supportive of the need to exploit marine and tidal resources, and very little has been done to date on that. That is why we need to have mechanisms that incentivise the R and D, and growth in these areas. The figures quoted earlier were essentially due to hydro power, which was giving a lot of countries a boost in their renewables.

Q 144

Benet Northcote: Absolutely, in this country. I think it is something that we need to exploit far more in all ways. I do not think it is as simple as reaching for the big ticket items and saying, “Here’s the Severn barrage” as an answer, and that does it. It is about looking at how to exploit the whole of tidal and marine resources.

Robin Webster: I had hoped just to say yes. Generally, when something gets thrown at us as environmentalists, given the kind of work that we do, it is that we advocate technologies that might raise fuel prices, and that would have an impact on those that find it more difficult to afford them. That is something that has to be considered in the development of the Bill. For example, we advocate the use of a feed-in tariff for renewable energy development, something that has been incredibly successful in other European countries, as it is a way in which renewable energy can be developed on a community level and on an individual level very successfully.

However, in developing such a mechanism, you have think what kind of impact it will have on electricity prices and what impact it will have on the fuel poor. I think that that is such a key point that mechanisms could be introduced to find ways in which the fuel poor have get-out clauses on rises in electricity prices. Feed-in tariffs, for example, can be brought in for technologies on a more social housing level, so there are ways in which the Bill should consider the impact on the fuel poor, and that is something that needs to be considered very carefully.

Russell Marsh: Perhaps I can pick on the point about smart metering. As Robin said, the short answer is yes. It is clear that the debate about smart metering has been around for years. It is not necessarily a technology problem; it is more how to get the technology out there. It is clear that the current framework is not going to deliver a roll-out of smart meters to every house in the country. We need to see the Government taking a lead and mandating it to happen, and the Energy Bill is an opportunity to start laying down a timetable to get smart meters out as widely as we can and as quickly as we can.

Tom Burke: To answer your last question about future assets, there are several hundred tonnes of separated plutonium and uranium sitting around at Sellafield at the moment. They are a bit of a problem for the people running the site. They are said to have some sort of notional asset value, but they are actually a liability. I do not see anything—not even the construction of more nuclear reactors—altering the situation. It is a theoretical possibility, but it remains pretty speculative as an asset and I would be hard pressed to put a value on it.

Q 145

Tom Burke: Yes, and people were making exactly that promise about 30 or 40 years ago. Funnily enough, the person who punctured that prospect was Mrs. Thatcher. She asked a very important question about whether the research was based on science or technology. The answer came back pretty emphatically—

Tom Burke: His predecessors made that point 30 years ago.

Q 146

Tom Burke: Yes.

Q 147

Tom Burke: No.

Tom Burke: It is not a closed mind. It is somebody who has actually looked at the evidence. The European Parliament did an exemplary study on that some 10 years ago.

Q 148

Tom Burke: I would not use the phrase clean coal. What I am saying about carbon capture and storage is that it is an imperative. In other words, if we do not find a way to make that work, it is not possible to  maintain a safe climate for the people of Britain and the rest of the world. I am saying that we have no choice. That is what the science is telling us. What I am saying about fusion is that it is an option that might be worth considering at a lower rate. We are spending a lot more on fusion than we are on CCS. I do not mind us looking at that option and keeping going on it, but I do not think that it has anything relevant to do with maintaining the future prosperity and security of the people of this country.

Q 149

Tom Burke: The issue of ensuring Britain’s energy security is as important as securing its climate security. I do not think that you can trade off between the two; you have to do both together. My underlying point, which will take rather longer than we have to explain it in detail—though I have done so to a Select Committee not long ago—is that the contribution that nuclear can make even to our energy security is very small. That is because our primary energy security problems are oil, which nuclear cannot help with, gas, of which there is only a tiny proportion—

Q 150

Tom Burke: Yes, but as I explained earlier, the generation gap, as it were—I am a bit reluctant to use that phrase—that we have because of the phasing out of existing provision must be filled long before new nuclear can come in, even under the most optimistic assumptions. If we have a carbon-neutral coal option—

Q 151

Tom Burke: This country is talking about—

Tom Burke: If you let me finish, there is a lot a of talk about a nuclear renaissance. Looking around the world at what people are actually doing gives you a slightly different picture. There are not a lot of real commitments. I noticed as I was listening to the previous panel that not many people are actually putting in orders to Japan Steel Works, which is the only place at the moment that can produce the forgings for new reactor vessels. Not many people are actually paying up the 30 per cent. that Japan Steel Works is asking for to get into the queue. That is what I am looking at—what Governments are doing. Mr. Bush offered the nuclear industry in the United States essentially to pay for the first six reactors that —

Q 152

Tom Burke: I am in favour of extending the life of existing nuclear reactors for as long as we can. I do not want to stop that. I think that—

Benet Northcote: In one of your exchanges you said “Let’s stick to electricity, please, if we can, as opposed to energy, because that is important for industry”. I agree that it is. Clearly it is essential, but you cannot decouple electricity from energy, which all the debate is framed on. That is the misreading that is going on. You cannot say, “Oh, I just want to focus on the electricity gap” and then talk about energy security, gas prices and oil prices. Those things are integrally linked. How do we have a sustainable economy that moves forward and continues to employ people and provide what we need for our quality of life without trashing the planet? We need to do that by solving all those things together. That is why we talk about a solution in a positive way—an achievable solution built on decentralised energy, renewable energy and energy efficiency. Those three things come together.

Q 153

Benet Northcote: Extending the life of existing power stations?

Benet Northcote: We are talking, what, five years max? Five or ten years. It is not something that will solve our energy problems as an issue going forward.

Robin Webster: I was just frowning to myself, because I was trying to work out how many questions you have asked me. On one of them, Benet has just said it: the Government have rather presented nuclear as winning an argument, saying “We are presenting a package that is just one of many solutions.” The idea of a package is important, and Benet has just said it; they teach us to say it on our line manager’s knee or whatever, and to  think about what solutions are out there: decentralisation, energy efficiency, renewables. Those are the three solutions that we have to be thinking about in the energy system. Decentralisation is thinking about fossil fuel and more efficient use of the fossil fuel resource that we are currently using in a completely profligate way.

On the Severn barrage, I slightly misunderstood what you said. Did you say that communities are seeing the Severn barrage as a structure of wind farms?

Q 154

Robin Webster: We are opposed to it not in principle but for pragmatism. Again, it is on the same sort of principle as nuclear: what is going to work best? We have considered tidal lagoons and think that they would have a far less negative environmental impact.

Q 155

Robin Webster: Yes.

Russell Marsh: On the nuclear question, there is a lot of evidence to show that the electricity generation gap that we have is not actually as big as we may think it will be. We were looking at some numbers recently and if you include our renewable electricity target, which could be about 40 per cent. of our electricity by 2020, and everything currently coming through, we will not have an electricity gap, so nuclear does not come into that equation. We need to look at the numbers and get a good sense of what is out there and what we mean by an electricity gap, which I think was the only question that you directed to me about the crowding out.

Q 156

Benet Northcote: On trajectory, we are calling for a fundamental change in our energy system. Be in no doubt about the ambition that we are calling for. The analogy that I use is with electricity privatisation—the second time we have talked about Margaret Thatcher in the Committee. If you had walked into the CEGB in 1983 and said, “I have this great idea. We should privatise the electricity system and hand it over to a small bunch of oligarchic companies in a market operating a little like an oligopoly of largely foreign-owned companies,” people would have told you that you were completely barmy. But that is what happened, and I think that we are looking at a similar transition in our energy system. When I talk about trajectory—

Q 157

Benet Northcote: No, I am saying that people would have said in 1983 that the prospect of a privatised electricity system was barmy, but it did not turn out that way and is now being defended vehemently by DBERR. My point is that we need to go through another transformation, starting now, to take us up to 2020 and beyond, as opposed to sticking with the system that we have got and looking for technical fixes.

You asked about figures and hardcore numbers. I shall point you towards two documents: the work coming out of DBERR right now on heat, which I have referred to already, and the Office of Climate Change report on the potential of heat and a heat strategy. We could go through the numbers, but I am not sure that that is the best use of the Committee’s time. However, I am happy to cheerfully circulate the latest figures to you.

For ease of reference, I point you to the White Paper on the future of nuclear power, which is a useful document to look at every now and then. I could talk to you about some of the alternative scenarios proposed by DBERR if we did not have nuclear. Paragraph A20, on the market allocation model—I have been waiting to use this quote—states that

“when new nuclear power stations are excluded, electricity generated from renewable sources would have to play a significant role in electricity generation, constituting over 40 per cent. of the generation mix by 2050.”

Stop me if I am wrong, but we are committed to about that generation mix from renewables under the EU target by 2020. The very models that the Government are using in their market allocations show that we can do this.

Q 158

Benet Northcote: Well, I think that I have answered that. As I see it, we will meet our EU 2020 target of roughly 40 per cent. of electricity generation coming from renewable sources. It is such a shame that we cannot ask the Minister his opinion on whether the EU targets are achievable. There is no doubt that the Prime Minister thinks that they are because he is on the record as saying so. He said very clearly that he thinks the targets are achievable. In saying that you do not think that they are achievable, you have to challenge the word of the Prime Minister.

Q 159

Tom Burke: Let me add more to your problem before answering it. If we want to arrive at a carbon-neutral global energy system by 2050, which is what the scientists are telling us we will need to do if we are to avoid not just the 2°, but the 3° and more that are predicted, we will have to move to electricity for all of our heat, cooling, power, communication and mobility needs. Essentially, that is what a carbon-neutral energy system will mean.

Whatever forecasts there currently are for electricity demand, they will go up if we are to move in a direction that will really solve the climate change problem. We might not go in that direction. Just to be clear about this point: there will need to be a lot more electricity in the system. A scenario that does not take you in that direction is not taking you towards a stable-climate world.

Let me illustrate that point. If you want to have a carbon-neutral energy system, you cannot use gas for all domestic boilers. You cannot have hundreds of millions of domestic gas boilers. One thing that the Bill could do that would be very helpful would be to make regulations so that you do not put gas supplies into the 10 new eco-towns and the 3 million new houses. You  will then not have to pay all over again to take them out. That would be a way of getting ahead of the curve on that issue.

I will move on to how best to meet the electricity demand that will be created if you increasingly move to electrify your system. I have been trying to offer you an answer about renewable sources. As Benet said, the renewables target of about 40 per cent. will be difficult and expensive to achieve. There will have to be a fair amount of public money in the infrastructure—not necessarily in the deployable technology—to get access to that potential. The rest of it will come from centralised and essentially largish gas and coal-fired power stations with carbon sequestration and storage. That is it—about 40-odd per cent. from renewables and a bit more over time as we go towards the 2050 thing, but the bulk coming from carbon-neutral gas and coal. We need to get on with that very fast because it is 42 years away and, as we all know, the life cycle of energy investments is very long. The danger with things like Kingsnorth, as we lock ourselves into a way of using coal for electricity, is that we will have to go back later and pay a lot to make it carbon neutral. It is better that we realise now the kind of world we will be living in in the next 40 years, and start now with what we have to do.

Q 160

Tom Burke: I agree that there are real issues about CCS.

Q 161

Tom Burke: I agree with that too. All I am saying is that because of what will go on in the rest of the world, if we do not have a solution for CCS—if we do not have it available and deployable very rapidly—we cannot guarantee the security and prosperity of our 60 million Britons or of everyone else. If we want the rest of the world, particularly China and India, to move in that direction, we had better show that we are serious. Right now we are not showing that. We are showing that we think this is an option among other options to be considered. My underlying argument is that it is imperative. I do not want to make this choice, but I consider what the science says we have to do, and we have to solve that problem. In that sense, nuclear is a distraction. That is what I meant about it being a distraction. It diverts our attention away from a problem that we have no choice about.

People have argued that we could do other things—we could do more renewables and lots of other things—but that is not the argument I was making. In an ideal world, you would end up with a big improvement in energy efficiency, a lot of renewables and a lot of gas and coal for your electricity supply, which would be much bigger than it is now, not least because you would have to go for something that would take you through hybrids towards a hydrogen mobility with some biofuels in there, but I think that there are real constraints with them. You have probably heard some of the discussions about that; they can make a contribution, but they cannot be a substitute for oil.

Q 162

Robin Webster: I would like to respond to this one. Actually, I think the fact that you reeled off a series of solutions that we were all proposing shows that there are not silver-bullet solutions. That is quite difficult for us, because when campaigning it is difficult to say, “This is the one solution. You are going to win this.” Actually, this is about a package solution: it is about energy efficiency, decentralisation and renewables.

I have worked in other areas with environmental NGOs, but I have worked in no other area where there is such an agreement within the major NGOs about what we want to see. If you are still seeing us as the no people, that means that we are not getting that across enough. Really, we are in almost unanimous agreement as to what we do not regard as the solution: we do not see nuclear as the solution and we do not see the Severn barrage as a solution. What we do see as the solution is energy efficiency, decentralisation, heat capture and renewables expansion. We are all saying that. We all believe it. We all know what we say yes to and we all know what we are saying no to.

Benet Northcote: I was going to say the same as you.

Tom Burke: My point about carbon sequestration and storage is about what you have to do if you want to achieve the goal of a stable climate while delivering energy security for growth, which another Committee member referred to. I think you have got to do that to meet the development needs. Then, because of the political dynamics—not because we could not work out theoretical solutions—you are going to have to solve the coal problem. I think it is going to be expensive. I think we have to face up to that being expensive. I suspect we will find that, as things go on—partly in respect of what Benet mentioned about trajectories—the renewables piece is going to become  somewhat easier. I have only said about 40-odd per cent.

Last year, the addition to the world’s nuclear capacity was about 2 GW. However, the addition to the world’s photovoltaic capacity, which is regarded as one of the less attractive options, was 2.6 GW. The addition of wind to the global mix was about 15 GW. What I do not like about nuclear is that I do not think that, in practice, for lots of practical judgements, it will actually deliver. The nuclear industry has, for 50 years of my lifetime, always been promising jam tomorrow and, by and large, it has not delivered on that. It would be foolish to make the same mistake when what is at stake now is not just our comfort but the prosperity and security of everybody, including not just the 60 million Britons, but the other 6 billion people that we share the planet with.

Q 163

Tom Burke: I support what is in the Bill about CCS, but it just does not go far enough.

Benet Northcote: I am jovially tempted to say the measures on gas storage. This Energy Bill should be delayed, because it is being introduced with undue haste.

Robin Webster: Benet just took it from me. I was also going to say branding, which I agree with. The Bill should be delayed. It is not delivering what it needs to deliver.

Q 164

Russell Marsh: The change to the renewables obligation and the pieces on CCS. But they are not enough to get us to where we need to get to.