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“DOES THE UK HAVE AN ENERGY POLICY?”

CAMBRENSIS SEMINAR London 24 June 2005

Senior decision makers meeting to discuss this topic at Cambrensis' seminar on 24 June 2005 came from –

Anglesey Aluminium Limited/Rio Tinto

Drax Power Limited

Greenpeace UK

NESTA

Royal Commission on Environmental Pollution

Burges Salmon

Royal Academy of Engineering

Impax Capital

Renewable Power Association

British Energy

Arthur D. Little

University College London

Marches Energy Agency

Micropower Council

Cambrensis Ltd

William Wilson, Director, Cambrensis Ltd, gave an initial presentation and introduction to the issues. He reviewed the goals of UK Energy Policy set out in the Energy White Paper, and noted the UK's declining coal production, the fact that it was becoming a net importer of oil and gas, and its ageing nuclear power stations, and the fact that in 2002 only 3% of electricity in the UK was produced by renewables and waste.

He referred to issues of transport emissions and fuel use, and bio-fuels policy, and the slow way in which the government was proceeding with the Renewable Transport Fuel Obligation. He reminded the seminar of the climate change context of energy policy. He reviewed the current policy shift on nuclear new build, and questioned how it would be financed. On renewables, he referred to obstacles to development bio-mass projects and energy from waste projects.

On energy efficiency, he criticised government lethargy in taking really meaningful action to promote such an obvious benefit. On distributed generation, he commented that one of the attractions might be its independence from government policy on energy, or the lack of it.

On hydrogen, William Wilson noted that the government last week announced as a "step change" an investment of £15 million in hydrogen fuel cells technologies, which he contrasted with a similar announced last year in the United States of an investment of US$1.5 billion.

William Wilson welcomed the statements from government last week on the funding for a Carbon Capture and Storage demonstration project. He distributed to the seminar estimates produced by the DTI at an earlier Cambrensis seminar on Carbon Sequestration in 2003 of reserve capacity for such storage, for example under the North Sea. He noted that the Norwegian government was already committing over 1 million tons of CO 2 per year to the deep saline aquifer formations under the North Sea, and noted that if similar action was not taken by the UK fairly shortly, any wind down and closure of North Sea oil installations could raise formidable practical difficulties to be able to use those structures for similar projects based from Britain. Finally, he referred to the forthcoming Carbon Capture and Storage Special Report from the IPCC, due out in September 2005.

Melville Haggard, Executive Chairman, Impax Capital spoke on fuel chains and electricity security of supply. He noted the extent of inter dependence from globalisation. He also noted the need with renewable energy for continuous generation. Renewables (waste and biomass) could make an important contribution to security of supply, which was fast coming up the government's agenda. A fragmented fuel supply in these areas undermined project economics. He stressed the importance of a credit worthy counterparty in fuel supply chain.

On SRF Fuel, this offered a diversion of waste from landfill, and created a low carbon fuel.

Dealing with energy crops, Melville Haggard said that if they were to contribute 1% per the renewable target of 10% for 2010 it could require twenty power stations of 20 to 30 MW, with fuel being grown on as many as 3,000 farms.

He said that what was needed was co-firing in existing power stations, with development of fuel chain integrity for the future.

The options included new coal fired power plant built to the specification for the Incineration of Waste Directive and purpose built SRF combustion plant. One important factor was the eligibility for renewables obligation certificates of the biodegradable portion of waste.

Dr Nigel Burdett, Head of Environment at Drax Power Limited gave an important presentation. Drax is the largest (4,000 MW), cleanest and most efficient coal fired plant in the UK supplying 7% of the UK's electricity needs. The coal burn was near 10 million tons per annum, and the plant was fitted with flue gas desulphurisation.

Drax anticipated a 60% increase in demand for electricity from gas by 2020, with a corresponding need for diversity and back-up, particularly as the older Magnox Nuclear Plant came to the end of their lives.

Dr Burdett said that the principal constraint on coal was environmental, and called for much better and more coherent integration of energy and environmental policy.

He referred to the SO 2/NOX review of the Large Combustion Plant Directive and the EU CAFE strategy which may require further SO 2/NOX reduction by 2020.

Dr Burdett also referred to biomass use at Drax. This was set to increase with co-firing starting in 2005, and an aim for use of 0.5 million tons by 2009.

On CO 2 reduction he described a review of the options and costs, from super critical boilers through to ultimate carbon capture and storage.

Gaynor Hartnell, Director of Policy, Renewable Power Association presented an overview of current renewables policies.

She thought that the UK had rather a bold Energy Policy, but perhaps did not realise it! It had actual targets and was delivering, but only in one area, wind,; and only concentrating on Power Generation. She asked what should be done about Transport, Heating, Agriculture and so on?

Electricity was popular and easy to understand (1KWh is universal). The key to its unique progress was undoubtedly the Renewables Obligation.

Many other sectors would like something similar or equivalent – but this looks increasingly hard to manage centrally. The answer was probably market mechanisms to encourage investment.

Onshore wind was a clear winner under the present regime. She questioned whether that was a result of intention or inertia.

Dave Sowden, Chief Executive Office, Micropower Councilgave an account of the potential contribution of micro-power and microgeneration to security of supply and energy production generally.

He tabled an extremely helpful set of figures, giving the relative and comparable (KHh) costs of generation, connection etc for the different forms of microgeneration, and for more conventional sources. It was even more interesting when compared with the projected costs of new nuclear (oil at $80 a barrel would also help!).

Economics was not the sole topic of his presentation. The Micropower Council saw microgeneration as a catalyst for cultural change, with major benefits such as CO2 reduction, efficiency gains and a more resilient, resourceful consumer.

He was looking for policy signals to kick start the process (encouraging investment and bringing down prices). He thought the government was only partly listening.

Chairman’s Summary: Professor David Slater CB

David Slater summarised the presentations and discussions. He thought the question “Does the UK have an Energy Policy?” seemed to have two answers – Yes, on paper, No in practice.

On paper, the commitments to CO2 reduction and renewables are impressive, particularly given the behaviour of peer nations. But, although it is clear that this government would like one (a clear policy), its manifestations are partial, half hearted and unconvincing. Indeed the observation that leaked e-mails have already revealed the real underlying policy, “wait until we run out of options and public opinion is won round and “new build” a set of nuclear base load stations”, was made more than once during the sessions.

There were a number of explanations given to show how Energy Policy is “really” –

• Environmental Policy driven by Europe (Waste, Emissions, Landfill etc)

• Carbon Dioxide Reduction driven by the European Trading System

• Extending the life of Coal, by Cleaner Technology and Carbon Sequestration

• Meeting all kinds of legal obligations

But all of these are partial policies. What seems to be missing is an overall vision giving clear, unambiguous signals – a statement of intent. This would allow a more practical focus in the discussion of –

• Drivers

• Money

• Government Preferences

Currently, Professor Slater thought that the UK had Energy “Politics”, but not much policy! This is producing uncertainty, which in turn is holding back serious investors. We need an authoritative view on future direction, and longer term goals, such as Energy Pricing, Energy security and Energy Independence; at the micro as well as the macro scale.

Next Cambrensis seminars:

‘ENERGY AND THE ENVIRONMENT IN CHINA, INDIA AND BRAZIL’

Thursday 29 th September 2005, Middle Temple Hall, London EC4

CARBON CAPTURE AND STORAGE UPDATE

Thursday 1 st December 2005, Middle Temple Hall, London EC4

All enquiries please contact us

 

 

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