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SERA's Vision for a Progressive Energy Policy

Submission to the DTI Energy Review 2006

SERA Scotland's submission

SUMMARY

Labour's energy policy must be progressive. It must be based on principles of fairness, responsibility and community using a reformed market framework to deliver real solutions to the complexities of modern day energy needs.

The twelve steps to a progressive energy policy are:

Clarity of our Aims

Developing energy supply that fulfils our aims

Decisions about energy use and power generation raise complex social, environmental and political questions. They also raise important questions of principle which have yet to be properly addressed. Competing visions for the energy mix of the future have been laid out for debate. Technology enthusiasts argue for their preferred solutions. Amidst this rush to a solution, SERA has sought to identify the principles that must underlie a progressive energy policy and to model a vision of our energy future so that we solve the right problem.

Labour's energy policy must be based on principles grounded in progressive values that include fairness, responsibility and community. It must reflect the stark realities of dangerous climate change, while responding to the sensitive geopolitics of energy. It must balance economic needs with social justice. The Left must demonstrate that it can set out a practicable vision for energy policy, grounded in reformist principles whilst offering real solutions to the complexities of modern day energy needs.

This submission calls upon the Labour movement to begin a debate; one that engages our Party and movement in a wider discussion about resources and energy. The Government has announced a wide scale review of energy policy. SERA asks why such a root and branch policy review is necessary. The 2003 Energy White Paper's strategy remains valid and sensible, and the measures suggested remain the best and most positive ways to deal with the issues of climate change and Britain's carbon output. The current problems have arisen because of difficulties in implementation and delivery. SERA believes that this further review should focus on an implementation strategy of the 2003 White Paper's recommendations as well as moving further on the issues of decentralised energy and micro generation - particularly on renewables and energy efficiency.

This submission is based upon the views of SERA as an organisation and from the views of our members, many of whom are acknowledged experts in the fields of energy policy and the environment. More detailed background papers to this submission can be found on the SERA website at http://www.sera.org.uk/

So let us use the energy review to take this implementation planning forward - now is the time to contribute.

The problems we face

Energy is a resource. To the extent that we rely principally on non renewable sources, energy is a limited resource, which can only mean that energy from non renewable sources will get more and more expensive. Energy use contributes overwhelmingly to climate change, the threat of which is increasing. Climate change has the potential to affect all of us - whether rich or poor, in the UK or abroad, our generation and future generations.

Over half of the UK's traditional energy sources are in decline or coming to the end of their working life. There is increasing concern about the future security of UK energy supply. The UK already imports nearly half the coal it uses and most of our presently mined coal is likely to be exhausted by 2013. All but one of our nuclear reactors are expected to close over the next 20 years. By 2020 the UK could be dependent on imported energy for 75% of its total primary energy needs.

What should the UK do to meet the challenges of climate change and to mitigate the concerns for energy security? This is the joint question the Government is committed to addressing in its review of energy policy.

The principles of a progressive energy policy

A new vision for a progressive energy policy must be based on the following principles:

Fairness and equity

A fair energy policy is one that provides energy services to all, at prices and by means of delivery we can all afford. Such a policy should respect the interests of all in the community, and actively promote a diverse range of sustainable energy opportunities. It is one that seeks to avoid the unfairness where poorer communities pay a disproportionate environmental and health price for the benefit of the rest of the country, and the richer parts of the globe.

It must also be an energy policy that does not deliver energy today at the cost of future generations. Equity between generations may not have featured in traditional left thinking. However, it was only in the 1970s that the finite nature of the earth's resources was properly recognised. Since then, inter-generational equity has assumed the importance it has today. The only fair energy policy is a sustainable one.

Community and responsibility

Energy is a shared public good. Energy use is a common public need. Along with a right to energy comes a shared responsibility to recognise the limited nature of the resource and to use it judiciously. We must all face up to the potential energy shortage and our present energy wastage.

A progressive market

The Government is committed to achieving its energy goals by means of a market framework reinforced by long term policy measures to give investors, business and consumers the right incentives to find the balance that most effectively meets the overall goals. Equal access to power and heat is at present addressed by a centralised market aimed primarily at producing competitive electricity i.e. at low prices.

A market for energy is a relatively recent development in the UK and is in an even more embryonic form across Europe. Energy markets can never be truly liberalised because they service a public good. Therefore the market and its rules must be shaped to ensure it operates for the broader public good. Such a market would take account of the need for investment signals to ensure supply, now and in the future and consider price in the medium term (given it is a signal in itself). Such a market would also need to consider minimum entitlement to energy as a public good.

Twelve steps to a progressive energy policy

In order to deliver a progressive Labour energy policy we need to be clear about our aims (1 - 5), the use of the market mechanism to balance demand and supply with these aims in mind (6) and only then the right supply mix to deliver these aims now and into the future (7 - 12).

The Clarity of our Aims

1) Climate change at the heart of energy policy

Climate change raises issues of fairness, equity and responsibility. Climate change threatens us all, whether rich or poor, in the UK or abroad. It is however likely to disproportionately affect the poor (who lack the means to mitigate its effects) and future generations. The state must protect us all. In turn we have a responsibility to protect the poor of our generation and future generations.

In 2003 the Government rightly recognised the need to put climate change at the heart of energy policy. The 2003 Energy White Paper committed the UK to aim to cut our carbon dioxide emissions by 60% by 2050 with real progress by 2020. The Government must not abandon these bold targets even though the targets will be tough. Although targets expose governments to criticism when they fail to meet them, they are a vital step to real change.

2) Managing demand for fairness and sustainability

Entitlement to a fair share of a common good brings with it a responsibility to think and act beyond our self-interest. Managing demand is an issue the Government refuses to tackle. Yet a continued failure to do so looks likely to increase the effects of climate change, unless we can be sure that future developments in technology will provide a solution. Demand management will be much easier to achieve if we switch to community based energy generation and use (see below). This is because people will feel, and have been shown to be, incentivised to manage their use of heat and power. The Government must also be prepared to tackle other problems like cheap air flights however challenging this might be.

3) Embedding efficient use of energy

Integral to managing demand is reducing energy wastage. Using energy efficiently is part of our responsibility to others - including future generations - to take steps to conserve resources. Energy efficiency is a win-win solution; tackling climate change while keeping fuel bills down. Half of all carbon dioxide emissions come from buildings. Enhanced powers are now available to legislate for improved energy performance. Current legislation must be used to implement tougher and bolder minimum standards for energy efficiency. Even the minimum standards are failing to be met by house-builders. The Building Inspectorate must be given greater sanctioning powers and resources for monitoring. Through fiscal incentives, and public awareness, the state must inform our energy choices so that we no longer use energy inefficiently out of ignorance.

4)An End to Fuel Poverty

Fuel poverty where people, particularly on low-incomes, pay a disproportionate amount of their income on meeting their energy needs, or where people suffer through lack of access to supply, must be eradicated. The Labour Government is committed to meeting this goal, and matched this commitment with considerable funding and unprecedented effort. However, the scale of the challenge is considerable. Ambitious and imaginative new policies need to be considered which should include an entitlement to energy.

Inefficient housing is often at the route of fuel poverty. The problem is particularly severe in the private rented sector. Tenants need greater powers to force landlords to properly insulate houses. Lack of proper insulation should be seen as a building defect. Winter Fuel Payments are an important mechanism but need to be modernised, if we are to ensure more sustainable and targeted support. The focus should be on incentivising insulation measures and providing access to on-site renewable energy, not providing money to continue to heat houses inefficiently. The Government may need to intervene and require all those in the energy chain to support the right to fuel.

5) a) Driving Up Energy Employment

In addition to the primary aims stated above energy policy should also consider its impact upon the wider economy in terms of employment, given many energy jobs have the potential to be skilled, well paid and UK based.

Employment in the energy sector is at present a relatively small and concentrated source of employment, driven as it is by the staffing needs of large scale plants situated at a limited number of sites across the country. Future generation policy has the potential to significantly change the number and distribution of those working in the energy industry. Decentralised and community based energy, and renewables offer skilled opportunities in many more locations, a wider range of skills and greater numbers. For example, studies show that between two and five farming jobs could be created (or sustained where crops substitute for other cultivation) for each 100 tonnes of biofuel created in the UK. This will help improve employment and the long term sustainability of our rural communities.

We can also look to the German example where there are currently five jobs in the renewables sector to every one previously created by the nuclear industry. The amount of people working in renewables is also set to double, bring this figure to ten jobs in renewables for every one in nuclear.

Sufficient investment in renewables will increase and diversify employment, creating and helping to maintain sustainable communities.

b) A Just Transition Programme

SERA, as part of the Labour movement, argues that while no one has a job for life anymore, workers should be supported in the shift towards a sustainable society. If a decision is made not to build a new generation of nuclear power stations, there is a responsibility to support workers through the period of transition to a sustainable energy future. Workers are highly skilled and many skills are transferable: for instance, from generation to decommissioning and from nuclear generation to biomass.

The GMB union has stated while discussing "sustainable development in the workplace" that 'while tackling climate change will lead to job losses in some industries, [they] believe that switching to sustainable development has the potential to create new jobs especially in the renewable energy, transport and recycling sectors given the right level of Government investment in start-up support, skills and training.'

Reconfiguring the Tools to Match Supply to Demand

6)Appropriate Intervention in the Energy Market to Ensure it Operates Within a Progressive Framework

There are problems with the current market structure. It is designed for large scale generation (the bulk of the UK market is now controlled by six major players). Small scale generation struggles to compete. The current market structure has proved particularly ineffective in promoting energy efficiency and demand management. Suppliers are not made liable for the social consequences of failure to supply. The balance between signals for competition, price, investment and future supply needs to be reviewed for fitness for purpose as presently they are disproportionately about competition in the short term.

The Government already intervenes in the market to give effect to policy drivers. It has set a target for the proportion of electricity that must be generated from renewable sources thereby creating a substantial market incentive for all eligible forms of renewable energy. The environmental restrictions on coal fired generation and the role of Government in tackling fuel poverty are other examples of restrictions in the market. The Government must continue to intervene in the market. Key to the market framework is providing a long-term pricing framework for carbon and the other greenhouse gases. The Government must ensure that the costs of using carbon and, in time, the other greenhouse gases, continue to increase over the long-term in order to encourage investment in abatement. As the Government recognised in the 2003 Energy White Paper, clarity and consistency of signals will reduce market uncertainty and risk and reduce the cost of investment. Similarly, the Government should level the playing field for the development of new technologies which satisfy reformist principles, ensuring an appropriate energy infrastructure. There is a clear need to rebalance the levels of state sponsored research and development. Targets may need to be set for the fuel mix.

Another vital tool for determining energy delivery is the planning and regulatory system. Making it easier for renewable projects (both on a small and large scale) to get planning permission is vital to the development of this industry and the future of the uptake of this technology in the UK. Simplifying the planning requirements for domestic and community based energy projects will also enable local regulatory bodies, such as local and county councils to actively encourage the take up of community energy projects without the fear of excessive red tape. Appropriate changes to community and domestic export of excess community/domestic energy to the National Grid will also need to be considered.

Finally, the Government must use one of the strongest tools at its disposal for the encouragement of this market, its procurement budget. Following on from the 2005 UK development Sustainability Strategy, the Government must ensure that all government led or financed projects are carbon neutral and use locally sourced energy where ever possible.

Developing Energy Supply that Fulfils Our Aims

On the supply side there are a number of elements that are important to the successful achievement of the aims of a progressive energy policy. Within this we would emphasise the need to maximise 'home grown' energy production (micro generation and UK renewables), minimise energy wastage and only then determine the level of waste from larger scale energy producing plants.

7) An Enhanced Role for Renewable Energy

Generating power and creating heat from renewable sources is at the heart of a progressive vision for energy policy.

Renewable sources do not deplete the earth's limited resources. The Government must continue to guarantee the existence of the Renewables Obligation, to the benefit of stakeholders in all renewable technologies. It is essential that, while retaining support for onshore wind, the diverse range of renewable technologies such as off-shore, wave, tidal, solar and biomass are able to make a full contribution to our energy mix.

Specifically, the Government needs to empower the planning framework to assist renewable energy projects and the associated grid infrastructure. This would include specific support to local authorities when considering applications for projects, thus limiting unnecessary delays in decision-making. Arrangements for offshore wind need to be resolved urgently. New policies to promote renewable heat, including a renewable heat obligation, need to be brought forward (see below). Finally, a wide-range of fiscal incentives to support renewable energy must be implemented, including a reversal of the proposal to increase the business rates for renewable power generators. Enhanced Capital Allowances must be extended to a broad range of renewable energy investments. Fiscal incentives, including fair metering arrangements, should be used to encourage household based renewable projects.

8) Decentralised and Community Based Power Generation

Electricity generation in the UK tends to be centralised, large-scale, inefficient and remote from the point of use. A large proportion of the primary energy from large power stations is lost as heat - in fact, sufficient heat is lost to heat the entire country for free. There are further losses of power as electricity leaks on its way to buildings.

Distributed generation avoids these problems. In addition, low carbon power generation technologies work best if they are distributed locally across communities, or even within individual households. Since electricity generation is one of the key sources of green house gas emissions, the Government must do more to encourage distributed generation (sometimes called micro or embedded generation). Recent work has shown that adjusting the electricity distribution system to accommodate a big increase in distributed generation will not be complex or hugely expensive, and that distributed generation potentially offers large net cost benefits . There has never been - and will not be for some time in the future - a better time to establish distributed generation, as the National Grid is due for considerable renewal work.

A decentralised energy system will also bring energy generation closer to people and help forge the link between concern about climate change and energy consumption in the home. Many studies have shown the environmental and social benefits of just such an approach . A centralised energy system assumes a one-way flow, with electricity generated at large power stations and sent through the wires to a passive consumer. Yet if we are to tackle climate change effectively we need to give people a more active stake in their energy system. Rather than bolting on yet more policies to try to encourage low-carbon choices, we need to rethink the structures that lie behind them. The Energy Review must seriously consider the possibility of transforming our energy system from a centralised model to a "multi-way web" linking a wider spectrum of different sized power plants and sources of energy supply and demand.

Some wind farm projects are already pioneering local and co-operatively owned power generation. Government must encourage these developments. Rooftop wind turbines and solar panels on people's roofs, community level woodchip boilers combined heat and power (CHP), biomass (energy from plant and animal waste) and private networks for electricity and gas must become the new energy infrastructure. Micro generation will generate enough to meet onsite needs and lead to buying and selling of surplus from neighbouring buildings, communities and cities. The role of energy companies will change from simply selling us units of gas or electricity; they will provide us with a service as well as a resource, as they help us to meet our own heat and lighting needs.

The benefits of distributed and community based generation include the re-emergence of the rural economy through the promotion of biomass and energy crops. Jobs are created by new energy technologies. Security of supply is enhanced by a diverse range of technology types.

9) Expansion of Combined Heat and Power

The scale of energy wastage is staggering. In 2000, the overall energy loss in the UK amounted to 31% of total primary energy consumption . About two thirds of this was the waste heat dumped into the sea, rivers or blasted into the sky from power stations. A programme of large scale Combined Heat and Power (CHP) has enormous potential for energy and carbon savings as well as generating employment

The government has a CHP target of ten GW by 2010. Progress towards this has almost ceased and we will be lucky to get six GW by 2010. To support the expansion of CHP, the Government must enable a meaningful shift towards supporting heat as well as electricity based renewable schemes. Similarly, CHP needs to receive preferential treatment in the second phase of the European wide Emissions Trading Scheme (ETS), an extension of the current exemption from the Climate Change Levy, and the wide scale deployment of community energy schemes.

10) A Transport Strategy to Reduce Energy Use

Transport must be a vital component of the Energy Review. As the consultation paper notes, around 70% of our oil goes to transport, and energy use in transport is growing: Consumption in the transport sector in 2004 was 2.5% higher than in 2003 and 4% higher than in 2002 .

Within the transport sector, aviation is increasingly contributing to climate change, noise, and energy use. The Government must begin to tackle this issue. We welcome the Government's commitment to working to bring aviation into the European Emission Trading Scheme. However on its own this measure is insufficient. The Government should urge the European Commission to impose a tax on kerosene fuel on European flights, and the UK and other Member States, must seek to retain the flexibility to impose charges for greenhouse gas emissions to reflect the environmental impacts of flights.

The Government must also act to reduce energy use and carbon emissions in the road transport sector. Lower-carbon road transport fuels should be encouraged. The announcement of the Renewable Transport Fuels Obligation is very welcome, but this mechanism should be structured to encourage the most carbon-efficient and environmentally sustainable production. Also important is the promotion of more energy-efficient road vehicles. Recent changes in Vehicle Excise Duty (VED) are a good first step, but VED rates for Band G cars should be gradually increased over time, to reflect their higher carbon emissions. The Government should provide more information to the public on low-carbon vehicle options to encourage market transformation.

Along with lower-carbon fuels and vehicles, it is vital to encourage a shift to lower-carbon mode of transport. Recent commitments to grow the railways are very welcome - these commitments must now be followed up and delivered. Bus services must also be improved. London shows what can be done with the right regulatory structure combined with adequate funding. Both rail and bus services should be made accessible to all users to ensure that social inclusion benefits are maximised. The London model should be rolled out in major cities in the UK, and local authorities should be able to re-regulate bus services. The Government must also commit to a step-change in the promotion of demand management in transport. The commitment to every school having a travel plan by 2010 must be delivered, and a similar ambitious commitment made for all major businesses in the UK. Much more must be done to promote walking and cycling, and to facilitate the development of Car Clubs. Finally, we applaud the Government's steps toward regional and national road pricing. London's congestion charge has shown that pricing can bring about significant reductions in car traffic, delivering substantial environmental benefits.

Also, much more must be done to promote walking and cycling. At present both are little more than an afterthought in terms of planning and engineering. There needs to be a major review of traffic management law and practice in order to tilt the balance in favour of vulnerable road users and achieve real modal shift.

11) A Role for Clean Coal

There will be a need for some centralised generation of power, both as a transitional fuel source and as back-up. If carbon capture and storage can be developed in sufficient time, clean coal may be a key transitional technology. The advantages of new clean coal power stations include greater efficiency, thus contributing to an emissions reduction of 10-30% over present coal powered production. Additionally switching to lower carbon alternatives, such as co-firing with biomass. This can deliver additional emissions reductions of 5-10%. Carbon capture and storage itself can reduce emissions by up to 85%, depending on the type of non-capture plant displaced. Even higher levels can be attained by combining capture and storage with co-firing biomass .

The Government must continue its support of carbon capture and storage, as outlined in the recent Carbon Abatement Strategy. In particular, it must lead the development of these new technologies so that our experience and expertise can be shared with other countries such as China and India with their ever increasing numbers of coal-fired plant.

12)No New Nuclear Power Stations

By way of contrast, nuclear power cannot be part of a progressive energy policy.

New nuclear build is not compatible with a sustainable energy future which has renewables, energy efficiency and micro generation at its heart. Investment in nuclear power (either by Government, or triggered by government support of the industry) will lock us into a centralised large scale, inefficient system of electricity generation. It is likely to divert focus and resources away from renewables and decentralised community energy based energy generation. This decline in both take up of, and investment in, environmentally sustainable generation has been the experience of Finland following its commitment to new nuclear generation.

The reason for the resurgence of interest in nuclear energy is the misguided belief that it provides an answer to climate change because it is thought to have low carbon emissions, is relatively cheap and is required for future baseline supply in a low carbon energy economy. However, none of these alleged merits are true.

Contrary to popular belief, production of nuclear electricity has hidden carbon emissions associated with uranium production, fuel enrichment and waste disposal. Taken as a whole, nuclear generation can produce about a third as much carbon dioxide as gas-fired electricity generation.

Whilst electrical energy produced from nuclear power costs about the same as clean coal it is more expensive than energy efficiency, wind power, combined cycle gas turbines and coal gasification. The costs of constructing a new generation of nuclear power stations are unlikely to be met by the market: one way or another, new build would require substantial support from public funds, either through direct subsidy for construction or through price guarantees through a future fixed market for low carbon energy.. This position would, of course be made far worse if the true costs of insurance and decommissioning were to be taken into account.

If anything nuclear power can be portrayed as an inflexible fuel for the future because nuclear power stations can ONLY provide baseline energy - they cannot be switched off once running. Other forms of large power plant such as clean coal and gas could certainly provide adequate baseline supply, in addition to the aggregate and forecast able supply of distributed generation.

Radioactive waste and the cost of dismantling old nuclear power stations mean that new nuclear build should not be part of our energy future. On the Government's own estimate, the cost of decommissioning existing nuclear power stations is £85 billion and rising almost daily . The long term management of radioactive waste has proved politically intractable and technically challenging for over thirty years. The waste remains radioactive for thousands of years. It is clearly unsustainable and unfair to future generations to consider further nuclear waste generation from new facilities when we have so conspicuously failed to address the waste we have already generated.

SERA

April 2006

1.The information in this paragraph is taken from the Government's 2003 Energy White Paper - Our energy future creating a low carbon economy. Cm 5761.

2.GMB Bargaining Briefing 57, January 2006

3.DTI Energy Flowchart 2004 http://www.dti.gov.uk/energy/inform/flowchart.pdf

4.A Micro-Generation Manifesto, Green Alliance, September 2004, page 10, quoting research carried out by Mott-Macdonald for the DTI on the Systems Impacts of Additional Micro-generation.

5.Sustainable Consumption Roundtable (2005) Seeing the light: the impact of micro generation on the way we use energy

6.DTI Energy Flow Chart 2004 http://www.dti.gov.uk/energy/inform/flowchart.pdf

7.This was due to higher usage for air transport in 2004 compared to 2003 (up 10%) and higher consumption of road fuels (up 1%) (Digest of UK Energy Statistics 2005).

8.Carbon Abatement Strategy, DTI & DEFRA, June 2005, p.5

9.To date, the most comprehensive life cycle analyses ( LCA) models have been created by the Öko Institut,( www.oeko.de/service/gemis/files/info/nuke_co2_en.pdf)which advises the German environment ministry on nuclear decisions, and by Professors Smith and van Leeuwen at the Dutch University of Groningen. (www.oprit.rug.nl/deenen/Technical.html) Both studies conclude that the nuclear fuel cycle can emit relatively large amounts of CO2. Using sensible assumptions, Professors Smith and Van Leeuwen determined that nuclear generation produced about a third as much CO2 per kWh as conventional mid-sized gas-fired electricity generation.

10.Evidence from the Prime Minister's own Performance and Innovation Unit preparation of the 2003 Energy White Paper. Energy efficiency costs a negligible amount. Onshore windpower is the cheapest (1.5 - 2.5 p/kWh), followed by offshore wind (2-3 p/kWh). Combined cycle gas turbines (2-2.3) and coal gasification (3- 3.5) follow. Nuclear power (3-4 P/KwH) costs about the same as burning fossil fuels and then capturing and storing the carbon dioxide generated (3-4.5 P/kWh).

11.'Fresh analysis shows mushrooming cost of Nuclear clean-up ' Independent on Sunday 2nd April 2006. See also Nuclear Decommissioning Agency first year plan.