The Economics of Renewable Energy
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HOUSE OF LORDS Select Committee on Economic Affairs 4th Report of Session 2007–08 The Economics of Renewable Energy Volume II: Evidence Ordered to be printed 12 November 2008 and published 25 November 2008 Published by the Authority of the House of Lords London : The Stationery Office Limited £price HL Paper 195–II CONTENTS Page Oral Evidence Professor Paul Ekins and Dr Neil Strachan, King’s College London Oral Evidence, 6 May 2008 1 Professor AbuBakr Bahaj, Southampton University, Professor Tony Bridgwater, Aston University and Dr Simon Watson, Loughborough University Oral Evidence, 6 May 2008 8 Mr Benet Northcote, Chief Policy Adviser, Greenpeace, Dr Tim Jenkins, Economics Campaigner, Mr Dave Timms, and Ms Robin Webster, Senior Energy and Climate Campaigner, Friends of the Earth Oral Evidence, 13 May 2008 17 Mr Malcolm Keay, Senior Research Fellow, Oxford Institute for Energy Studies Oral Evidence, 13 May 2008 26 Mr Campbell Dunford, Chief Executive and Dr John Constable, Policy and Research Director, Renewable Energy Foundation Oral Evidence, 3 June 2008 36 Supplementary Written Evidence 45 Mr Philip Wolfe, Chief Executive, Renewable Energy Association; Ms Maria McCaffery, Chief Executive, British Wind Energy Association; and Mr William Heller, Chief Executive, Falck Renewables Limited Written Evidence (British Wind Energy Association) 55 Oral Evidence, 10 June 2008 63 Professor David Newbery, Cambridge University, and Professor Dieter Helm, Oxford University Written Evidence (Professor David Newbery) 71 Oral Evidence, 10 June 2008 74 Dr Keith MacLean, Head of Policy and Public Affairs, Scottish and Southern Energy plc, Mr Sarwjit Sambhi, Director, Power Business Unit, Centrica and Mr Bob Taylor, Managing Director, Generation, E.ON UK Written Evidence (Scottish and Southern Energy plc) 85 Written Evidence (Centrica) 95 Written Evidence (E.ON UK) 104 Oral Evidence, 17 June 2008 110 Supplementary Written Evidence (E.ON) 118 Professor Gordon MacKerron, Sussex University Oral Evidence, 17 June 2008 120 Mr Chris Bennett, Future Transmission Networks Manager, and Ms Nicola Pitts, Head of UK and EU Public Affairs, National Grid Written Evidence 127 Oral Evidence, 24 June 2008 137 Supplementary Written Evidence 144 Dr David Clarke, Chief Executive Officer, Energy Technologies Institute Written Evidence 146 Oral Evidence, 24 June 2008 149 Ms Vivienne Cox, Executive Vice President and CEO of Alternative Energy, BP; and Mr James Smith, Chairman, Shell UK Oral Evidence, 1 July 2008 156 Mr Neil Hirst, Director for Energy Technology and R&D, International Energy Agency Oral Evidence, 1 July 2008 165 Mr Alistair Buchanan, Chief Executive, and Mr Stephen Smith, Managing Director, Networks, Ofgem Written Evidence 171 Oral Evidence, 8 July 2008 178 Supplementary Written Evidence 188 Mr Steve Read, Investment Manager, Ms Coralie Laurencin, Associate, Climate Change Capital, and Dr Karsten Neuhoff, University of Cambridge Written Evidence (Dr Karsten Neuhoff) 191 Oral Evidence, 8 July 2008 198 Supplementary Written Evidence (Dr Karsten Neuhoff) 208 Malcolm Wicks, a Member of the House of Commons, Minister of State for Energy, Mr Simon Virley, Head of the Renewable Energy and Innovation Unit, and Ms Tera Allas, Chief Economist Energy Group, Department for Business Enterprise and Regulatory Reform (BERR) Written Evidence 210 Oral Evidence, 15 July 2008 217 Written Evidence Professor Andrew Bain 227 Ms Carolyn Barker 230 Mr Derek Birkett 231 Bishopton Village Hall Management Committee 233 Mr Philip Bratby 233 British Energy 237 British Hydropower Association 246 Campaign for Responsible Energy and Development in Tynedale (CREDIT) 248 Campaign to Protect Rural England, Devon 251 Campaign to Protect Rural England, Durham 253 Carbon Capture and Storage Association (CCSA) 255 Peter and Maureen Caswell 258 Christofferson Robb & Company 261 Jane and Julian Davis 265 EDF Energy 271 EEF 282 Energy Networks Association 285 Energy Technology for Sustainable Development Group 288 Energywatch 290 Environmental Defense Fund 297 Environmental Industries Commission 300 Environmental Research Institute 303 Dr John Etherington 306 Mrs Barbara J Frey 307 Genersys plc 311 Mr Colin Gibson 313 Christiane Golling and Marco Nicolosi, Institute of Energy Economics, Cologne 316 Grünhaus Project, Liverpool 319 Mr Peter Hadden 324 J.H.R. Hampson 335 Highlands Against Wind Farms 339 Highlands Before Pylons 339 Rear Admiral Robin Hogg and Professor Leslie Bradbury 342 Mr Robert Horler 347 House of Bishops’ Europe Panel, Church of England 348 W.J. Hyde 350 Institute of Physics 355 Institution of Engineering and Technology (IET) 361 Institution of Mechanical Engineers 372 Mrs Delia Jack 374 Professor Michael Jefferson 375 Professor Nick Jelley 378 John Muir Trust 380 Mr Neil Kermode 383 Professor Michael Laughton 387 Lawrence Graham LLP 393 Dr and Mrs J Lyne 398 Dr Rayner Mayer and Dr Roger Bentley 399 Sir Donald Miller 405 Mynydd Llansadwrn Action Group 410 Natural England 415 Mr Michael Negus 418 Mrs N Penk, Mr C Penk and Mr DPC Penk, Pitfield Farm 419 Mr Richard Phillips 420 Renewable Energy Association 424 Renewable Energy Finance-Policy Project, Chatham House 428 Renewable Energy Systems UK and Ireland Ltd 432 Research Councils UK 438 Royal Academy of Engineering 445 Royal Society of Edinburgh 453 Scientists for Global Responsibility 459 Scottish Power Limited 464 Scottish Sustainable Energy Foundation 472 Mr Alan L. Shaw 475 Professor Peter F Smith 476 Mr Paul Spare 480 Town and Country Planning Association 484 Two Moors Campaign 491 Wavegen 493 Revd. John Wylam 494 NOTE: The Report of the Committee is published in Volume I, HL Paper No. 195-I The Evidence of the Committee is published in Volume II, HL Paper No 195-II Processed: 17-11-2008 19:07:46 Page Layout: LOENEW[ex 1] PPSysB Job: 408616 Unit: PAG1 Minutes of Evidence TAKEN BEFORE THE SELECT COMMITTEE ON ECONOMIC AFFAIRS TUESDAY 6 MAY 2008 Present Best, L Macdonald of Tradeston, L Griffiths of Fforestfach, L MacGregor of Pulham Market, L Kingsdown, L Paul, L Lawson of Blaby, L Vallance of Tummel, (Chairman) Layard, L Examination of Witnesses Witnesses: Professor Paul Ekins and Dr Neil Strachan, King’s College London, examined. Q1 Chairman: Good afternoon and welcome to you interpret that particular third objective), and both. Many thanks for giving up some of your time to something to do with aVordability which might or be with us this afternoon. Welcome back to Professor might not be expressed in terms of fuel poverty. The Ekins; you were a witness last time round. Welcome balance to be accorded to those four objectives is of for the first time to Dr Strachan. I do not know if you course a political matter. My reading of the situation had in mind saying anything by way of introduction; at the moment is that the Government is giving most if you do not we will go straight into questions. attention to the reduction of carbon emissions, but Professor Ekins: Perhaps I could just say one thing energy security is coming up fast on the inside track which is to do with the results that come out of and may indeed overtake it at some point. I think that models. Some of the questions you addressed to me the concern about competitive markets and talk about forecasts. We are experienced in two competitiveness is always with us, so to speak, and models, one of them is a UK macro-economic model some commentators think that the objective of fuel with a sub-model of the energy system which is run poverty—specifically its eVective abolition by 2016— and operated by Cambridge Econometrics to whom has lost ground somewhat against the other I have been a senior consultant. That is the one to objectives. That is how I would characterise the which the forecast figures in the questions refer. objectives. Where do renewables fit into this? Through our work on the UK Energy Research Renewables have a role to play obviously as a low Centre we—mainly Neil—have been responsible for carbon energy source. It is conventional to say that building a MARKAL model of the UK energy the UK is one of the best endowed countries in system which gives much more detail about costs and Europe with regard to our resource of renewable so when you come to your questions about costs I will energy so we clearly could develop that and that refer you to him or you might like to refer the would reduce carbon emissions. It also has a role to questions to him because that is where those numbers play in energy security because most of these broadly come from. renewables are indigenous and were they to be developed to a significant degree they would give us Q2 Chairman: I think you acquainted us with the a stream of more or less secure energy for the lifetime MARKAL last time round. of the installations. They are relatively more Professor Ekins: Indeed. expensive than fossil fuel comparators, although if the oil price continues to go up and to drag other Q3 Chairman: May I start oV with a general prices with it that may become less true than it has question? What do you think are the key been in the past so in terms of competitiveness issues considerations for UK energy policy? How do and they perhaps do not score quite so well and because should renewables fit into that energy policy? Is their they are expensive, depending on the financing role likely to change between the medium term—by mechanisms for them, they can push up the price of which I mean to 2020—and the long term, to 2050 electricity and other fuels, and that of course makes and beyond? the fuels less aVordable. That is broadly what Professor Ekins: The key considerations for UK renewables can do. I think Neil has some figures oV energy policy I think were outlined in both the White the top of his head about the potential for renewables Papers which the Government has produced over the so I will pass over to him.