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Renewable Energy (S&T Report)

My Lords, I thank the noble Baroness for making that point, because I want to cover a lot of issues. The Government welcome the Science and Technology Committee’s report on the practicalities of meeting the Government’s environmental and renewable targets. I thank all speakers in the debate, particularly the right reverend Prelate the Bishop of Liverpool and the noble Lord, Lord Oxburgh, for their constructive contributions on energy efficiency and renewable energy. The report rightly challenged us on some key issues of our energy policies and gave us a lot to think about. We could debate many issues this evening, but I thought it would be most useful to concentrate my remarks not on the overall issue—I think we agree on that—but on where the Government and the committee have different viewpoints. First, I shall deal with the question of energy crops, a point raised by the noble Baroness, Lady Miller of Hendon. The committee considered that the Government’s projections for the contribution of energy crops were overoptimistic. We have asked the consultants to re-examine the numbers, and it is clear that the committee’s report is right. We will write to the committee to set out the position as we now see it. Next I shall take the question of the generating costs. The committee called on the Government to commission independent and authoritative research to provide comprehensive costs for generating technologies. The Government have properly published a number of major studies of different generating technology costs. Inevitably, they change as a result of many factors, including developments. However, we will look at the evolving work on the issue and keep generating costs under review. A small but important point raised by the report was   on tidal lagoons. The committee urged the Government to publish the report on tidal lagoons, to promote greater public debate on the advantages and disadvantages of such schemes. The Government are persuaded by the merits of the committee’s argument. We will undertake to review the available information and, if we can get the permission of the people who compiled it and on whom it was gathered, we will look at publishing the report so that people can see it. However, I should make it clear that there is no question of reconsidering the scheme. The figures in the report were clear that it was a highly expensive scheme. We feel that it makes no sense to invest in technologies when the costs remain extremely high. It must be sensible to invest in technologies when they begin to make some commercial sense. The noble Lord, Lord Oxburgh, raised an important question on priorities and the security of supply. The committee’s report raised concerns about security of the UK’s electricity supplies, which is an issue that invokes strong opinions. Noble Lords will be aware that the maintenance of secure energy supplies is a fundamental goal of the Government’s energy policy, as we made clear in the energy White Paper. The committee would like it to be the main goal of our energy policy, but we believe that we should not give priority to any one goal. We wish to achieve all four goals set out in the White Paper. Noble Lords will also recognise that my right honourable friend the Secretary of State for Trade and Industry and the independent regulator Ofgem have statutory responsibility for ensuring the security of our electricity supplies. I totally agree with the noble Lord, Lord Oxburgh, that the lights cannot be allowed to go out. However, I cannot agree with his rather frivolous comment that you could let baked beans go out of supply in stores. Some of us regard that as an equally serious issue. Capacity margin is a further question. Your Lordships have expressed the view that the Government should prescribe a level for the capacity margin, technically defined as the proportion by which available generating capacity exceeds expected peak demand. We are not convinced that anything would be gained by the Government doing so. We believe that the key issue here is the market framework which the Government and Ofgem have put in place to ensure that market participants have every commercial incentive to make that calculation and to get it right. Under market rules, if an electricity or indeed a gas supplier finds himself unable to put into the national distribution networks as much as his customers take out, he faces severe financial penalties. Consultation is also now under way on a proposal to make those penalties even more onerous. That is a strong lever to ensure that market participants make sure they are able to provide the supplies for which they have contracted. It is clear that renewable energy has an important role to play in reducing carbon dioxide emissions and the committee expressed concern about the ability of industry to deliver the Government’s target of 10 per cent of electricity supplies from renewable sources of energy by 2010. But there is now enough evidence of investors coming forward to enable us to achieve our targets, provided the barriers to renewables—that is, grid supply, capacity, planning issues and the barriers of the MoD—can be addressed in time. As has already been mentioned in the debate, the DTI has created a dedicated 2010 target team which is responsible for ensuring that the key barriers can be addressed. I can however assure the noble Lord, Lord Haworth, that there is no question of steamrolling the opponents. That is not the way of the British Civil Service. Recent successes include acceptance by the MoD of the recommendations of the Eskdalemuir study, which should enable objections to more than 1 gigawatt of renewable projects to be lifted. In addition, as the Government highlighted in their response to the committee, the National Audit Office report looked at our plans and concluded that the Government might well achieve 9.9 per cent of electricity supply from renewable sources of energy by 2010. That is very close to the 10 per cent target which I believe is attainable if we can remove the barriers. Last year was a record year for wind generation, with 240 megawatts being built. We expect to double that in 2005 and to see a continuing trend upwards, which means it is very likely that we can meet the target. I am particularly pleased that in the debate the noble Lord, Lord Haworth, made what is to me one of the key points. That is simply that if we run down nuclear by 2020, we will have certainly gone back on CO2 emissions over the first 20 years of the programme. There is no way in which we can achieve more than 20 per cent renewables by 2020. If at the same time we lose 25 per cent of nuclear energy over the first 20 years of the programme, we will have gone back on CO2 emissions. That is not a satisfactory position. That is why we must   be looking at other ways of improving our performance. Also, as the noble Lord, Lord Methuen, rightly pointed out, it would leave us dependent probably on imported gas for 70 per cent of our needs. That, too, must be seen as a vulnerability. The extent of that vulnerability is to be debated, but that there is a vulnerability is unarguable. Noble Lords will be aware that the Government’s main mechanism for supporting industry’s delivery of a 10 per cent target is the renewables obligation. While the committee had concerns that the obligation would act as a cap on renewables because of the potential cliff-edge on renewable obligation certificates, the Government have been addressing this issue in the context of the review of the obligation. We expect to publish the statutory consultation paper on the review of the 2005 renewables obligation in September in concluding our proposals on future levels of the obligation. The noble Lord, Lord Oxburgh, raised a new version of the scheme, which we will certainly consider. I shall briefly describe what the Government are doing on energy efficiency. The right reverend Prelate the Bishop of Liverpool will see that we are doing a great deal. He implied that we are doing very little but, in fact, we have a very substantial programme. The bill for supporting renewables will soon run at about £1   billion. That is a sign of the great commitment of the Government to renewables. Of course, research, which we are ramping up, is only one of the costs. We should also bear in mind the very substantial investment—the key investment—which is being put   in by the private sector; Centrica plans, for example, to invest £750 million in renewables. We also recognise that increased energy efficiency must make an important contribution if we are to achieve our energy policy goals. The energy White Paper made it clear that energy efficiency is likely to   be the cheapest and safest way of addressing all four of our energy policy objectives. The Energy Efficiency Action Plan, published in April 2004, estimated that annual carbon savings of 12 million tonnes could be made by 2010, and suggested that energy efficiency could contribute around half of the additional 15 million to 20 million tonnes of carbon savings likely to be needed by 2020. The action plan set out and described a challenging set of detailed policies and measures to improve energy efficiency to an unprecedented level across the economy. Through the EU Emissions Trading Scheme, climate change agreements, climate change levy, and other targeted tax allowances, including those for combined heat and power, our most energy intensive industries and the power generation sector have strong incentives to reduce their emissions in the most cost-effective way. We are working in partnership with business to deliver the 8 million tonnes of carbon savings by 2010 that were targeted from that sector. In the household sector, building regulations and the energy efficiency commitment are leading the way, as part of a broader package of polices, to improve residential energy efficiency. There has already been significant progress: for example, improvements in the housing stock between 1997 and 2001 have resulted in   annual carbon savings of 1.7 million tonnes. In 2002, through the building regulations, we raised the minimum standard for the energy performance of new buildings by 25 per cent. By the end of this year, we aim to raise the standard again with the introduction of a further revision to the building regulations and the implementation of the EU energy performance of buildings directive. We have not been idle since publishing the Energy Efficiency Action Plan. It has been reinforced by further measures and commitments, including ongoing   work to encourage innovation in building design and construction through a code for sustainable buildings,   which, from April 2006, will be a requirement on all new homes funded by government or their agencies, including through relevant public/private partnerships; an additional £10 million for the community energy programme, which is helping to overcome the barriers to and encouraging the uptake of community heating schemes across the UK; an additional £10 million to the Energy Saving Trust to support the development of its new sustainable energy network, which will provide advice and promote the take-up of sustainable and efficient use of energy in the home; increased funding to the Carbon Trust to ramp up their work with business on delivering a low-carbon economy; a £12 million climate change communication initiative to change public attitudes to climate change; and a £20 million fund to support technological innovation in energy efficiency. I now turn to a number of specific points raised by   noble Lords during the debate. The noble Lord, Lord   Oxburgh, raised the issue of bioethanol and my noble friend Lord Whitty mentioned the transport dimension. The Department for Transport is taking forward work on a biofuels strategy to deliver carbon savings in the transport sector. Among the options being considered is a road transport fuel obligation which could promote the use of biodiesel and bioethanol for transport. The noble Earl, Lord Selborne, raised the difficulties of biomass. I remind noble Lords again that Sir Ben Gill is leading the Biomass Task Force which, in its one-year study, will seek to stimulate biomass supply and demand in a bid to help to meet renewable energy targets and to boost farming, forestry and the rural economy. The task force is expected to submit a final report to the Government in the autumn. If there is anyone who is suitable to take on all the bureaucratic rules that inevitably surround these schemes, it is Sir Ben Gill, who has the right experience to do that. The noble Baroness, Lady Sharp, asked whether with wind power we are putting all our eggs in one basket. The answer is that, at the moment, it is the one source of renewable energy that makes commercial sense to invest in. At this point, we should be putting most of our efforts on renewables into wind power. As far as research is concerned, there are a number of other technologies in which we ought to invest in demonstrators and research. However, to put money into them at a stage when, in many cases, they are way out of court as far as commercial considerations are concerned would be an obvious mistake. The noble Lords, Lord Jenkin and Lord Chorley, raised the question of the intermittency of wind power. We accept that intermittency must be managed, but surplus capacity has to be maintained because of plant failure. That applies to all technologies. As the noble Lord said, the 2010 target can be met with limited changes to the operation of the grid. In the longer term, the geographical dispersal of wind farms, shifts to more farms offshore where there is greater wind. The development of storage techniques and demand management should help to deal with the problem. The noble Lord, Lord Whitty, raised the question of the machinery of government. This issue always comes up. I think that we should not keep changing the structure of government and should make certain that the processes work. The noble Lord, Lord Cameron of Dillington, raised the issue of energy from waste. The Government recognise the benefits of energy derived from waste. Indeed, it is an issue covered by the review of the renewables obligation. The noble Lord, Lord Winston, made the point that we need the participation of the public. I think that there is not quite as much growing distrust of technology as he implied. There is a growing understanding that many of our environmental problems will be solved only by science, technology and innovation. But I entirely agree with him that we need to bring the public into this debate. We have a series of schemes under the Sciencewise project, which is developing public participation. We will make certain that the public will be able to particulate fully in the energy debate in the next couple of years. Despite what the noble Lord, Lord Tombs, said, I do not think that we are showing a lack of leadership on this subject. As the right reverend Prelate the Bishop of Liverpool made clear, this is a major issue. It is not a quixotic gesture to put extra funds into this area. We need to look at all sources of energy, including nuclear, on the basis of what they can contribute to our three goals, and not take any of them believing that it can solve the whole problem. The noble Lord, Lord Moynihan, raised some important questions. I think that he is wrong to feel that there is a crisis and that we might run out of energy. As one can see from this debate, it is not a question of running out of energy. If we do not go ahead on nuclear, or if we do not reach our targets on renewables, we will see what we are seeing at the moment. The generators will go on building on the basis of energy from coal and gas, and we will see, as we saw in 2003, emissions go up because of the way that the generators solve the problem. Finally, I thank noble Lords for an interesting debate on the future of the UK’s energy policy, and particularly on energy efficiency and renewable sources of energy. The report by the Science and Technology Select Committee and the debate today have provided much food for thought. I know that my honourable friend the Minister with responsibility for energy will reflect long and hard on the views expressed by your Lordships.