Royal Commission on Environmental Pollution

The Chairman of the Royal Commission sent the following letter concerning renewable energy sources to the Secretary of State for Trade and Industry on 21 July 2000.

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Rt Hon Stephen Byers MP
Secretary of State for Trade and Industry
1 Victoria Street
LONDON SW1H 0ET

The Royal Commission's recent report, Energy - the Changing Climate, concluded that the UK must make substantial cuts in carbon dioxide emissions over the next few decades if it is to play its part in preventing global climate change from running out of control. We also concluded that action is needed now to begin to steer the UK towards a more sustainable energy system.

The Commission strongly endorses the government's target for 2010 for renewable energy as a vital initial step down this road. However, we are concerned that current policies are not sufficiently robust to deliver it.

We pointed out in our report that the proposed obligation on electricity supply companies may fail to bring forward less developed technologies such as offshore wind and energy crops. These technologies will be needed on a large scale if the government's renewable energy target for 2010 is to be achieved - especially in light of the problems that have dogged development of onshore wind and waste-to-energy plants. Moreover, the less developed renewable energy technologies will be needed on an even larger scale in the decades after 2010.

Under the current proposals for a renewables obligation it appears highly unlikely that significant capacity in offshore wind and energy crops will come forward. Both technologies are likely to be more costly, at least initially, than the proposed 'buy-out price' and suppliers will therefore have no incentive to invest in them.

Capital grants could play a vital role in bringing forward offshore wind developments, and we urge the government to use for that purpose a substantial proportion of the £50 million a year fund which is being made available from the climate change levy to support carbon-saving measures. Biomass projects however are less amenable to the capital grant approach because of the costs of producing the fuel. A more appropriate mechanism may be the allocation of sub-bands and targets for energy crops (and possibly other medium-term technologies) within the obligation on supply companies. Although the Utilities Bill has been amended to make provision for such technology bands, Ministers have said they do not expect to use this power. However, the Royal Commission sees a powerful case for providing a clear support mechanism for the less developed renewables from the outset.

Initially, support for technologies such as energy crops and offshore wind would incur some additional cost. But experience with other renewables suggests that the cost may fall significantly as the technologies mature and as economies of scale are delivered.

We share the government's concerns over fuel poverty, and our report makes strong recommendations for measures to tackle that problem. However, domestic energy prices have already fallen considerably as a result of competition and the termination of the nuclear levy, and they are expected to continue falling. In this context, the Royal Commission believes that action now to support the promising renewable technologies of the future is fully justified.

Indeed, the UK is well placed to become a world leader in offshore wind, biomass and other emerging renewable technologies such as wave power, tidal streams and solar power. These technologies are likely to present tremendous potential for exports, as the international markets respond to the threat of climate change and the need to develop diverse and secure energy sources.

There is already a danger that the UK may miss the boat. The last set of contracts under the non-fossil fuel obligation were awarded in 1998, and we are concerned that prolonged consultation on a replacement mechanism may mean that the renewables obligation does not come into force until 2002. We urge you to ensure that the momentum for a new and strong drive for renewables is restored as quickly as possible - and that the new policy gives clear and powerful support to those technologies with the greatest medium-term potential.

I am copying this letter to Helen Liddell and to John Prescott and Michael Meacher.

Sir Tom Blundell
Chairman, Royal Commission on Environmental Pollution
21 July 2000

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