Our energy future - creating a low carbon economy ENERGY WHITE PAPER

Our energy future - creating a low carbon economy ENERGY WHITE PAPER
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ENERGY WHITE PAPER
ENERGY WHITE PAPER
Our energy future creating a low
carbon economy
Our energy future - creating a low carbon economy
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The DTI drives our ambition of
‘prosperity for all’ by working to
create the best environment for
business success in the UK.
We help people and companies
become more productive by
promoting enterprise, innovation
and creativity. We champion UK
business at home and abroad.
We invest heavily in world-class
science and technology. We protect
the rights of working people and
consumers. And we stand up for fair
and open markets in the UK, Europe
and the world.
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Our energy future creating a low
carbon economy
Presented to Parliament by the
Secretary of State for Trade and Industry by
Command of Her Majesty
February 2003
Cm 5761
£18.60
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© Crown Copyright 2003
The text in this document (excluding the Royal Arms and departmental logos) may be
reproduced free of charge in any format or medium providing that it is reproduced
accurately and not used in a misleading context. The material must be acknowledged
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Fax: 01603 723000 or e-mail: [email protected]
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Contents
Foreword .................................................................................................................................................3
Section One
Overview .................................................................................................................................................5
Chapter 1 Cleaner, smarter energy ....................................................................................................6
Section Two
The low carbon economy .......................................................................................................21
Chapter 2 The Environment ...............................................................................................................22
Chapter 3 Energy Efficiency ...............................................................................................................32
Chapter 4 Low carbon generation ....................................................................................................44
Chapter 5 Clean Low Carbon Transport .........................................................................................63
Section Three
Reliable, competitive and affordable supplies .......................................................75
Chapter 6 Energy reliability .................................................................................................................76
Chapter 7 Productivity, competitiveness and innovation..........................................................95
Chapter 8 Energy and the vulnerable ............................................................................................107
Section Four
Delivery through partnership ..............................................................................................111
Chapter 9..................................................................................................................................................112
Annexes......................................................................................................................................121
Annex A Glossary.................................................................................................................................122
Annex B References ...........................................................................................................................134
ENERGY WHITE PAPER Our energy future - creating a low carbon economy
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ENERGY WHITE PAPER Our energy future - creating a low carbon economy
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Foreword
Energy is vital to a modern economy. We need energy to heat and light
our homes, to help us travel and to power our businesses. Our economy
has also benefited hugely from our country’s resources of fossil fuels coal, oil and gas.
However, our energy system faces new challenges. Energy can no
longer be thought of as a short-term domestic issue. Climate change largely caused by burning fossil fuels - threatens major consequences
in the UK and worldwide, most seriously for the poorest countries who
are least able to cope. Our energy supplies will increasingly depend
on imported gas and oil from Europe and beyond. At the same time,
we need competitive markets to keep down costs and keep energy
affordable for our businesses, industries, and households.
This white paper addresses those challenges. It gives a new direction
for energy policy. We need urgent global action to tackle climate change.
We are showing leadership by putting the UK on a path to a 60%
reduction in its carbon dioxide emissions by 2050. And, because this
country cannot solve this problem alone, we will work internationally to
secure the major cuts in emissions that will be needed worldwide.
Our analysis suggests that, by working with others, the costs of action
will be acceptable - and the costs of inaction are potentially much
greater. And as we move to a new, low carbon economy, there are major
opportunities for our businesses to become world leaders in the
technologies we will need for the future - such as fuel cells, offshore
wind and tidal power. Science and technology are vital, and we will be
supporting further research and development in these areas.
In parallel, we need access to a wide range of energy sources and
technologies and a robust infrastructure to bring the energy to where we
want to use it. We will maintain competitive markets in the UK and press
for further liberalisation in Europe. And we renew our commitment that
no household in Britain should be living in fuel poverty by 2016-18.
This white paper is a milestone in energy policy. It is based on the four pillars
of the environment, energy reliability, affordable energy for the poorest,
and competitive markets for our businesses, industries and households.
This white paper sets out a strategy for the long term, to give industry
the confidence to invest to help us deliver our goals - a truly sustainable
energy policy.
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Section
One
Overview
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Chapter 1 Cleaner, smarter energy
1.1 Our country needs a new energy policy.
Despite the improvements we have made over
the last five years, today’s policy will not meet
tomorrow’s challenges. We need to address
the threat of climate change. We must deal
with the implications of reduced UK oil, gas
and coal production, which will make us a net
energy importer instead of an energy
exporter. And over the next twenty years or
so we will need to replace or update much of
our energy infrastructure.
1.2 With these challenges, however, come new
opportunities. The opportunity to shift the UK
decisively towards becoming a low carbon
economy where higher resource productivity
- producing more with fewer natural
resources and less pollution - will contribute
to higher living standards and a better quality
of life. The opportunity to develop, apply and
export leading-edge technologies, creating
new businesses and jobs. And the
opportunity to lead the way, in Europe and
internationally, in developing environmentally
sustainable, reliable and competitive energy
markets that will support economic growth in
every part of the world.
1.3 From heating and lighting to transport,
industry and communications, energy is
fundamental to almost everything we do.
We expect it to be available whenever we
want it, to be affordable, safe and
environmentally sustainable. It is only when
something goes wrong - for instance, when
families are left without heating and light
after severe storms or when the lights go out
in California - that we realise how much
modern industrialised countries depend upon
extremely complicated energy systems.
1.4 Until the 1990s the energy system in the UK
- as in most other countries - was largely
owned and controlled by Government. Today
the UK has one of the most open energy
markets in the world. Open and competitive
markets will remain vital to delivering the
energy we need. But it is Government’s
responsibility to set the overall goals for UK
energy policy and to ensure that our energy
markets and other policies deliver those
goals. Energy producers, investors, business
and consumers need a clear, settled, longterm framework within which they can plan
and make decisions with confidence.
1.5 The new energy policy that we set out in
this white paper is designed to provide this.
It reflects, and will reinforce, our wider
commitment to sustainable development1
which challenges us to find ways to achieve
economic, social and environmental
objectives at the same time.
The challenges we face...
1.6 The first challenge we face is environmental.
Climate change is real. Levels of carbon
dioxide (CO2) in the atmosphere, one of the
main causes of climate change, have risen
by more than a third since the industrial
revolution and are now rising faster than ever
before. This has led to rising temperatures:
over the 20th century, the earth warmed
up by about 0.6˚C largely due to increased
greenhouse gas emissions from human
activities. The 1990s were the warmest
decade since records began.
1
6
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Our sustainable development policy is set out in A better quality of life:
a strategy for sustainable development for the UK, May 1999.
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Section One
Overview
Chapter 1: Cleaner, smarter energy
Chart 1.1
Variations of the Earth’s Surface
Temperature: Years 1000 to 2100
1.7 The rise in temperatures has been
accompanied by changes in the world
around us:
Variations in the earth’s surface temperature
from year 1000 to 2000. Line shows 50-year
2
average. “SRES envelope” refers to the
range of emission scenarios used as a basis
for the climate change projections in the
IPCC Working Group I contribution to the
Third Assessment Report.
Chart 1.2
Carbon Dioxide Levels over
the last 60,000 Years
Source: University of Berne and National Oceanic
and Atmosphere Administration.
Source: IPCC 2001. Climate change 2001: Synthesis Report. A contribution
of Working Groups I, II and III to the Third Assessment Report of the
Intergovernmental Panel on Climate Change (IPCC).
ice caps are retreating from many
mountain peaks like Kilimanjaro;
global mean sea level rose by an average
of 1-2mm a year during the 20th century;
summer and autumn arctic sea ice has
thinned by 40% in recent decades;
global snow cover has decreased by 10%
since the 1960s;
El Nino events3 have become more frequent
and intense during the last 20-30 years;
usage of the Thames Barrier has increased
from once every two years in the 1980s
to an average six times a year over the past
5 years; and
weather-related economic losses to
communities and businesses have
increased ten-fold over the last 40 years.
1.8 In this century, without action to reduce
emissions, the earth’s temperature is likely to
rise at a faster rate than any time in the last
10,000 years or more. In the UK, the risks of
droughts and flooding are likely to increase.
Sea levels will rise, so that extreme high
water levels could be 10 to 20 times more
frequent at some parts of the east coast by
the end of the century. Worldwide, the
consequences could be devastating,
especially in the developing world where
many millions more people are likely to be
exposed to the risk of disease, hunger and
flooding. In addition, there is a risk of large
scale changes such as the shut-down of the
3
2
El Nino events change the weather patterns experienced in the regions
around the tropical Pacific. This can affect rainfall patterns, and people
living in the region can find themselves having to deal with unusually wet
or dry conditions.
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Gulf Stream or melting of the West Antarctic
ice sheet, which although they may have a
very low probability of occurring, would have
dramatic consequences.
1.9 We cannot escape some climate change.
But the worst effects can be avoided if
greenhouse gases in the atmosphere are
stabilised instead of being allowed to go on
increasing. The UNFCCC3 and its Kyoto
Protocol demonstrate that it is possible to
reach global agreement on action, but far
more needs to be done. The UK will continue
to show leadership but it cannot solve this
problem alone. UK emissions of carbon
dioxide currently account for only about 2%
of the global total. Our own actions will have
no impact on climate change unless they
are part of a concerted international effort.
A wider effort is also necessary, for example
in bringing forward technological changes,
to keep down costs to the UK and to avoid
compromising our competitiveness.
We will therefore continue to work with
other countries to establish both a
consensus around the need for change and
firm commitments to take action to reduce
carbon emissions world wide within the
framework of the UNFCCC. A key objective
of the UK’s foreign policy in future will be
to secure international commitment to this
ambition. We also need to continue to
develop our understanding of climate
change, so that we can forecast with
greater precision the effects which must
be mitigated. We are investing in climate
change research and recognise that this
is a crucial underpinning of the knowledge
base which informs our energy policies.
4
United Nations Framework Convention on Climate Change.
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1.10 Our ambition is for the world’s developed
economies to cut emissions of greenhouse
gases by 60% by around 2050. We therefore
accept the Royal Commission on
Environmental Pollution’s (RCEP’s)
recommendation that the UK should put
itself on a path towards a reduction in
carbon dioxide emissions of some 60%
5
from current levels by about 2050 .
Until now the UK’s energy policy has not paid
enough attention to environmental problems.
Our new energy policy will ensure that
energy, the environment and economic
growth are properly and sustainably
integrated. In this white paper, we set out
the first steps to achieving this goal.
1.11 We can get to a 60% cut in emissions by 2050
in a number of ways. But leaving action until
the last minute is not a serious option. If we
do not begin now, more dramatic, more
disruptive and more expensive change will be
needed later on. We need early, well-planned
action to provide a framework within which
businesses and the economy generally,
including the jobs and skills base, can adjust
to the need for change. This will for example
allow business to plan to act in the course of
normal capital replacement cycles. It will also
encourage new technologies to come forward
to help to meet the challenges we face.
1.12 We have analysed carefully the likely impacts
on the UK economy of cutting emissions by
60% by 2050. A good deal of caution is
needed in looking at economic changes over
such a long period and given the sensitivity
5
RCEP’s recommendation of putting the UK on a path to ‘reducing carbon
dioxide emissions by some 60% from current levels by about 2050’ was
based on a more detailed calculation of 58% reductions from 1997 levels.
This would lead to 2050 emissions of 64 million tonnes of carbon (MtC).
The Kyoto Protocol, and the UK’s current domestic targets, use 1990 as a
baseline. A precise reduction of 60% in emissions from 1990 would result
in emissions of 65.8 MtC in 2050. As the RCEP recommendation implies,
absolute precision five decades before 2050 is not possible. This white
paper uses ‘around 65 million tonnes’ to describe the level of carbon
emissions which a 60% cut would deliver by 2050.
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Section One
Overview
Chapter 1: Cleaner, smarter energy
of the analysis to the assumptions made.
But an extensive review by the
Intergovernmental Panel on Climate Change
suggests that action aimed at stabilising
carbon dioxide atmospheric concentrations
at no more than 550ppm would lead to an
average GDP loss for developed countries
6
of around 1% in 2050 . This figure should,
however, be more than offset by the reduction
in the risks, eg of flooding, associated with
climate change. The outcome of our UK
analysis is consistent with that review,
assuming that the world’s leading industrial
nations act together. It suggests that the cost
impact of effectively tackling climate change
would be very small - equivalent in 2050 to
just a small fraction (0.5-2%) of the nation’s
wealth, as measured by GDP, which by then
will have tripled as compared to now.
Chart 1.3
Primary Energy Demand in 2002, UK
Nuclear
9%
6
Report of Working Group III of Intergovernmental Panel on Climate Change,
Mitigation, 2001.
Coal
15%
Gas
39%
Oil
35%
Source: DTI provisional 2002 data based on
Digest of UK Energy Statistics, table 1.1
necessarily make it harder to achieve energy
7
reliability . Of the world’s leading industrial
nations only two - Canada and the UK - are
net energy exporters. The others have all
achieved economic growth as energy
importers. We will be able to do the same just as we did before North Sea oil and gas.
The best way of maintaining energy reliability
will be through energy diversity. We need
many sources of energy, many suppliers and
many supply routes. Renewables and
smaller-scale, distributed energy sources - eg
micro-CHP8 and fuel cells - will help us avoid
over-dependence on imports and can make
us less vulnerable to security threats.
1.13 The second challenge is the decline of the
UK’s indigenous energy supplies - oil, gas,
nuclear and coal. Our current demand for
primary energy (ie before transformation, eg
into electricity) is shown below. Already we
import nearly half the coal we use. Much of
the UK’s economically viable deep mined coal
is likely to be exhausted within ten years.
By around 2006 we will also be a net
importer of gas and by around 2010 of oil.
By 2020 we could be dependent on imported
energy for three quarters of our total primary
energy needs.
1.14 As we shift from being a net energy exporter
to being once again a net energy importer we
may become potentially more vulnerable to
price fluctuations and interruptions to supply
caused by regulatory failures, political
instability or conflict in other parts of the
world. But being an energy importer does not
Other
2%
1.15 Norway will be a major source of our gas
imports over the next decade. But we will
also need to look for supplies from elsewhere
eg from Russia, the Middle East, North Africa
and Latin America. This trade in energy will
involve relationships of mutual dependence -
7
The phrase energy reliability is used in this white paper to encompass all
aspects of energy security of supply.
8
Combined Heat and Power plant.
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their energy being as important to us as their
income from us is to them. Our growing
interdependence also means that securing
reliable energy supplies will need to be an
increasingly important part of our European
and foreign policy. We will work
internationally to promote regional stability,
economic reform, open and competitive
markets and appropriate environmental
policies in the regions that supply most of the
world’s oil and gas - Russia, the Middle East,
North Africa and Latin America. We have
already secured a commitment to energy
liberalisation in the European Union for
industrial customers by 2004 and overall by
2007. This is vital not only to improve our
own access to diverse sources of supply but
also to allow UK companies to compete in
wider markets.
1.16 Our third challenge is the need to update
much of the UK’s energy infrastructure over
the next two decades. During the 1990s
there was significant new investment in
generating capacity, especially for gas-fired
plant. This was a response to the high
electricity prices and market structure of the
time. Some generating capacity has since
been mothballed and interest in building new
plant, other than renewables, has declined.
But looking ahead, there are further changes
in prospect. European measures to limit
carbon emissions and to improve air quality
are likely to force the modernisation or
closure of most older coal-fired plant. In the
absence of new build or life extensions,
nuclear power’s share of electricity production
will shrink from its current level: there would
be only one plant still operating by 2025.
And renewables will become a more
significant source of electricity as we seek to
tackle climate change. Our current generation
mix is shown in chart 1.4 below.
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Chart 1.4
Electricity Generation in 2002, UK
Renewables
3%
Nuclear
23%
Gas
38%
Coal
32%
Oil and
Other
4%
Source: DTI estimates for 2002 on gross supplied basis,
based on Digest of UK Energy Statistics, table 5.6.
1.17 Over the coming years, substantial
investment will also be required in other
parts of our energy infrastructure. The
electricity distribution networks - designed for
one-way transmission from large, centralised
power stations to consumers - will need to
adapt to more renewables often in peripheral
parts of the country or offshore and to smallscale, decentralised power generation in
homes and businesses, sometimes drawing
from the grid, sometimes contributing to it.
As we adapt to becoming a net gas importer
we will need additional connections to
supplies of both piped and liquefied natural
gas (LNG) from a range of sources. In the
longer-term, as we potentially move to
different fuels for vehicles (eg compressed
natural gas or hydrogen), major investments
will be needed in the fuel delivery
infrastructure.
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Section One
Overview
Chapter 1: Cleaner, smarter energy
The goals of our
new energy policy...
1.18 As we address these three challenges, we
will have four goals for our energy policy:
to put ourselves on a path to cut the UK’s
carbon dioxide emissions - the main
contributor to global warming - by some
60% by about 2050, as recommended
by the RCEP, with real progress by 2020;
to maintain the reliability of energy
supplies;
to promote competitive markets in the
UK and beyond, helping to raise the rate
of sustainable economic growth and to
improve our productivity; and
determining the relative ‘weights’ of differing
objectives. But our approach is guided by the
following considerations:
significant damaging climate change is an
environmental limit that should not be
breached. We need to keep the UK on a
path to 60% cuts in carbon dioxide
emissions by 2050;
reliable energy supplies are fundamental to
the economy as a whole and to sustainable
development. An adequate level of energy
security must be satisfied at all times in
both the short and longer term;
liberalised and competitive markets will
continue to be a cornerstone of energy
policy. Where the market alone cannot
create the right signals (for example on
the environment) we will take steps that
encourage business to innovate and
develop new opportunities to deliver the
outcomes we are seeking; and
our policies should take account of impacts
on all sectors of society. Specific measures
will be needed for particular groups of people
(for example to support those for whom
energy bills form a disproportionate burden).
to ensure that every home is adequately
and affordably heated.
1.19 We believe these four goals can be achieved
together. As far as possible we will ensure
that the market framework and policy
instruments reinforce each other to achieve
our goals. Energy efficiency is likely to be
the cheapest and safest way of addressing
all four objectives. Renewable energy will
also play an important part in reducing carbon
emissions, while also strengthening energy
security and improving our industrial
competitiveness as we develop cleaner
technologies, products and processes.
1.20 There will inevitably from time to time be
tensions between different objectives.
For example, extremely high energy prices
would undoubtedly promote energy efficiency
and thereby help to reduce carbon emissions.
But they would also have a negative effect
on people on low incomes and on business.
There is no simple mechanism for
The fuel mix...
1.21 We do not propose to set targets for the
share of total energy or electricity supply to
be met from different fuels. We do not
believe Government is equipped to decide
the composition of the fuel mix. We prefer
to create a market framework, reinforced by
long-term policy measures, which will give
investors, business and consumers the right
incentives to find the balance that will most
effectively meet our overall goals.
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1.22 We recognise, however, that this approach is
not enough on its own. In particular, specific
measures are needed to stimulate the
growth in renewable energy that will allow it
to achieve the economies of scale and
maturity that will significantly reduce its
costs. In January 2000 we announced our
aim for renewables to supply 10% of UK
electricity in 2010, subject to the costs being
acceptable to the consumer. We introduced
the Renewables Obligation (which requires
suppliers in England and Wales to obtain an
increasing proportion of electricity from
renewables year on year) in April last year.
We also exempted renewable generation
from the Climate Change Levy. By 2010
these measures will provide the renewables
industry with support worth around £1 billion
a year. This is designed to deliver the
required expansion in renewables by then.
In this white paper we set the ambition of
doubling renewables’ share of electricity
generation in the decade after that. In order
to achieve this and to ensure that renewables
make a growing contribution to the fuel mix
in the longer term it will be essential to
maintain a healthy research base.
1.23 In reducing carbon dioxide emissions, our
priority is to strengthen the contribution of
energy efficiency and renewable energy
sources. This white paper sets out the
policies we believe are necessary to achieve
that. They mean energy efficiency and
renewables will have to achieve far more in
the next 20 years than they have until now.
We believe that such ambitious progress is
achievable. But it is uncertain.
1.24 Nuclear power is currently an important
source of carbon-free electricity. However, its
current economics make it an unattractive
option for new, carbon-free generating
capacity and there are also important issues
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of nuclear waste to be resolved. These issues
include our legacy waste and continued waste
arising from other sources. This white paper
does not contain specific proposals for building
new nuclear power stations. However we do
not rule out the possibility that at some point
in the future new nuclear build might be
necessary if we are to meet our carbon
targets. Before any decision to proceed with
the building of new nuclear power stations,
there will need to be the fullest public
consultation and the publication of a further
white paper setting out our proposals.
1.25 Coal fired generation will also have an
important part to play in widening the
diversity of the energy mix provided ways
can be found materially to reduce its carbon
emissions. We will continue to support
relevant research projects, including
internationally, to develop options for cleaner
coal technologies and for carbon capture and
storage. Domestic coal production is likely to
continue to decline as existing pits reach the
ends of their geological and economic lives.
1.26 However, where there is the potential for coal
companies to make worthwhile investments,
they have to date been prevented by EU
rules from seeking government help in doing
so. In 2002 we negotiated the flexibility we
require at an EU level to correct this anomaly.
We now propose to introduce an investment
aid scheme to help existing pits develop new
reserves, where they are economically viable
and help safeguard jobs.
How we will
achieve our goals...
1.27 To achieve our goal of reducing carbon
emissions we need to continue to decouple
economic growth from energy use and
pollution. Since 1970, overall energy
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consumption in the UK has increased by
around 15%, while the size of the economy
has doubled. In future we need to continue
and accelerate this trend.
1.28 Discussions under the UNFCCC to tackle
climate change beyond 2008-12 will start soon.
On the basis of existing policies, including
the full effect of our current Climate Change
Programme, we would expect UK carbon
dioxide emissions of some 135 million tonnes
of carbon (MtC) in 2020. To be consistent with
demonstrating leadership in the international
process, we expect to aim for cuts in carbon
of 15-25 MtC below that by 2020.
Chart 1.5
Final Energy Consumption in 2002, UK
BY SECTOR
Other
13%
Industry
21%
Domestic
30%
Transport
36%
BY END USE
1.29 We believe it is possible to achieve this goal
by reducing the amount of energy we
consume, together with a substantial
increase in renewable energy. Our current
energy use is illustrated in chart 1.5 below.
By making our intentions clear we aim to
provide the signals needed for firms to invest
- and to help British manufacturers to be
ahead of the game in developing the green
technologies that we expect to play a large
part in the world’s future prosperity. In this
white paper, we set out measures to
implement the objectives for 2010 set out in
the existing Climate Change Programme, and
to provide a foundation for the further carbon
cuts we will need by 2020.
1.30 Central to the future market and policy
framework will be a carbon emissions trading
scheme. We have already launched our own
voluntary trading scheme in the UK. But from
2005 electricity generators, oil refineries and
other industry sectors are expected to be
part of a much larger Europe-wide scheme.
By setting caps on emissions the scheme
will provide clear incentives for investment
in energy efficiency and cleaner technologies
Transport
35%
Hot water
8%
Lighting and
appliances
6%
Process use
10%
Space
heating
26%
Other
15%
Source: DTI, provisional, data for 2000. End use data for 2000.
at the lowest cost. We will be encouraging
expanded opportunities for emissions trading
at all levels. In particular, we will work with
our European partners to extend where
appropriate the coverage of the EU scheme
in due course. We will consider the issues
involved in the linkages between tax and
tradeable permit schemes further as the
position on the EU emissions trading scheme
becomes clearer.
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1.31 On its own emissions trading will not be enough
to deliver our environmental goals. We will
need additional measures, for example to
stimulate further energy efficiency in business,
in the public sector and in households. Policies
to raise the energy efficiency of products and
buildings will have an important role. We will
develop the present energy efficiency
commitment, which requires electricity and
gas suppliers to encourage their domestic
customers to invest in energy efficiency
measures such as cavity wall insulation. We will
aim to bring forward to 2005 the next revision
of the Building Regulations to raise standards
for energy efficiency in new buildings and
refurbishments. We will push in Europe for
higher energy efficiency standards in tradeable
goods such as fridges and personal computers.
We will encourage improvements in efficiency
and lower carbon fuels in transport. We will
provide further encouragement for renewable
energy and infrastructure investment through
measures such as capital grants and a more
supportive approach to planning. To this end, we
are increasing the funding for renewables capital
grants by £60 million, additional to the £38
million of extra funding announced in the 2002
Spending Review. And we will set an example
throughout the public sector by improving
energy efficiency in buildings and procurement.
1.32 Our second goal is to maintain the reliability
of our energy supplies. This requires action on
many fronts. We need the right infrastructure
and regulatory system at home and liberalised
energy markets within the European Union.
We will also pursue closer international
relationships to promote regional stability and
economic reform in key producing areas, mutual
understanding of the functioning of markets,
and conditions for foreign direct investment
to facilitate further infrastructure investment
in the world’s diverse gas and oil regions.
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1.33 In liberalised markets, forward prices will send
signals about the need for future investment.
Suppliers will act on these signals, and on
their own assessments of risk and opportunity,
to innovate and plan to meet those needs.
For example, in response to current market
signals some companies are already planning
to increase the amount of gas we can import
through our existing pipeline to Belgium;
others are exploring options for gas storage
and new LNG importing facilities.
1.34 These developments help to provide
reassurance that the market will invest in the
capacity we need to provide reliable energy
supplies - in particular to meet peak demand
in exceptionally cold weather. Our market is
not like the market in California in 2000, where
overregulation undermined the ability of
suppliers to respond effectively to market
signals. However, a totally unregulated energy
market would be unlikely to deliver sufficient
security. So the Secretary of State and the
regulator - OFGEM9 - both have duties to
ensure that reasonable demands for electricity
and gas are met. These duties are in turn
carried forward into a number of conditions
in the licences held by generators, suppliers,
electricity transmission and distribution
operators and gas transporters. We look to
OFGEM to enforce these conditions in a
manner consistent with their duties. With
OFGEM we will continue and expand our
monitoring of energy security. We will also
continue to improve our contingency planning
and resilience in dealing with major incidents,
including terrorism, which could affect critical
energy infrastructure.
9
The Office of Gas and Electricity Markets.
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Section One
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Chapter 1: Cleaner, smarter energy
1.35 Thirdly, we are determined to promote
competitive energy markets, in the UK and
beyond. This will help to raise the sustainable
rate of economic growth and support our
industrial and business competitiveness
through reliable and affordable energy.
Energy makes a significant contribution to the
economy, and represents a key input into all
other sectors. A competitive energy sector is
therefore important to the whole economy’s
competitiveness and productivity. We need
greater resource productivity in business so
that our firms use energy more efficiently,
reduce carbon dioxide emissions and cut
costs at the same time. To do that we will
encourage firms to innovate and minimise
costs and to deliver better quality goods and
services. We will continue our commitment
to competitive energy markets and use
market-based instruments to deliver our
wider energy policy goals. And we will work
with business to help them prepare for the
low carbon economy of the future and to
seize the opportunities that it provides.
Through our new sector skills network we
will work with the energy industry to develop
the skills that industry needs.
1.36 Our final goal is to ensure that every home
is adequately and affordably heated.
In 1996, 51⁄2 million households had to spend
more than 10% of their income on heating
their homes adequately (the normal definition
of fuel poverty). Already, falling prices and
higher social security benefits have helped
reduce this number to around 3 million.
1.37 And alongside our policies to cut poverty we
also need to tackle the problem of old, poorly
insulated, draughty homes, where much
spending on energy is simply wasted. In 2001
our fuel poverty strategy set out policies to
end fuel poverty in vulnerable households in
England by 2010. We further aim that as far
as reasonably practical nobody in Britain
should be living in fuel poverty by 2016-18.
Grant schemes and the energy efficiency
commitment are already improving homes
through better insulation, more efficient
heating systems and minimising draughts.
Later this year we will review the results of
these policies and decide what more needs to
be done to achieve our fuel poverty objectives.
Innovation is fundamental...
1.38 Technological innovation will have a key part
to play in underpinning all our goals and in
delivering a low carbon economy costeffectively. We will support research,
development and innovation both to
encourage the development of new, longerterm options (for example in respect of the
hydrogen economy) and where necessary to
enable emerging technologies (such as
renewables and new energy efficiency
technologies) to demonstrate their potential.
A new national energy research centre will
be established by the Research Councils,
targeted at research and development in the
appropriate physical, environmental and
biological sciences and including social and
economic studies. Through the EU we are
strongly backing the international
development of fusion power for electricity
generation. We will promote the
development of homes and communities that
combine energy efficient technologies and
renewable energy to reduce radically their
demand for energy from the grid. More
widely, we will encourage UK business to
make the most of the opportunities
presented both here and overseas by moves
towards a low carbon economy.
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1.39 In all of this we will work both through our own
national programmes and through a range of
international collaborations and multilateral
programmes which will enable us to
maximise the return on our participation. We
will work actively with partners in the G8 and
the EU to develop climate change
technologies which will be of benefit not only
in helping us meet our own carbon reduction
ambitions but also in helping others,
especially in the developing world, to meet
theirs. Capacity building programmes in
appropriate areas of science, engineering and
technology will be increasingly important in
this process.
because a well-designed, transparent and
open energy market is the best way of
achieving efficient outcomes, we will
wherever possible use market instruments
to achieve our goals. In particular,
emissions trading will be at the centre of
our energy markets from 2005 onwards;
we will need to continue to use trading as
well as other measures to reduce carbon,
in particular for the millions of domestic
and smaller business consumers not
covered by trading, along with measures to
drive up energy efficiency in homes,
products and transport;
the nationwide and local electricity grids,
metering systems and regulatory
arrangements that were created for a
world of large-scale, centralised power
stations will need restructuring over the
next 20 years to support the emergence of
far more renewables and small-scale,
distributed electricity generation;
the future energy system will require
greater involvement from English regions
and from local communities, complemented
by a planning system that is more helpful
to investment in infrastructure and new
electricity generation, particularly
renewables. Strong links with the
Devolved Administrations, who are already
fully engaged on a wide range of energy
issues, will continue to be essential;
diversity is the best way of protecting
ourselves against interruptions of supply,
sudden price rises, terrorism or other threats
to reliability of supply. As the UK becomes
a net importer of energy we will need
many sources, many suppliers and many
routes. International relations in Europe and
worldwide will be increasingly important to
achieving our overall energy aims;
Looking to the future...
1.40 It will be clear from this white paper that we
believe we need to prepare for an energy
system that is likely to be quite different from
today. It will be for the market to develop and
invest in this. But we need to set clear goals
and a strategy within which the market has
the confidence, ability and sense of long-term
commitment to do so. This white paper sets
the way forward. In particular it is based on
the following key principles:
16
energy investments are generally longterm. Energy companies, industry and
business and domestic consumers need us
to set clear goals and a strategy that
supports them in making the long-term
investments they need to make in energy
efficiency and supply;
the cheapest, cleanest and safest way of
addressing all our goals is to use less
energy. We have to improve energy
efficiency far more in the next 20 years than
in the last 20;
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Section One
Overview
Chapter 1: Cleaner, smarter energy
we will seek out the best ways to
influence outcomes in line with the
principles of better regulation, maximising
use of market based and/or voluntary
mechanisms, promoting regulations only
where they are clearly necessary and well
designed. Where regulation is required we
will work to make sure it takes account of
the impact on key stakeholders to
minimise the burdens particularly on
smaller and medium sized enterprises; and
when designing new energy policies, we
will consider their impact on all of our
energy policy objectives, in line with our
overall approach to sustainable development.
1.41 We have applied these principles throughout
this white paper.
Working with others...
1.42 We will need to work with others to deliver
the ambitious goals we have set in this white
paper. We will depend on businesses,
supported by the research community, to
adapt and innovate to deliver a low carbon
future. We will rely on local authorities and
regional bodies, working with the private
sector and voluntary groups, to help to deliver
real change on the ground, reflecting the
needs of their different communities.
the Devolved Administrations to address the
energy challenges that we face.
1.44 Many of the challenges are international in
scope and will need to be addressed through
international collaboration. Addressing climate
change and securing access to energy requires
concerted international effort. The innovation
necessary to address the long-term challenge
of shifting to a low carbon economy also
requires greater international collaboration.
We will ensure that our domestic energy
strategy is fully consistent with our
international energy strategy and other
international Government objectives.
What sort of energy
system might we envisage
in 2020 and beyond?
1.45 A broad vision of the energy system of
2020 is described below. This is a scenario.
It draws on several sources, including
modelling work for the white paper, the DTI’s
Foresight programme and other scenarios.
It does not in any way close off options
for the future. Innovation will give us options
that we cannot even imagine now. The
scenario will need to be updated in the light
of experience.
1.43 Many policies in this white paper cover the
UK as a whole. But significant aspects of
energy policy in Northern Ireland, Scotland
and Wales are the responsibility of the
Devolved Administrations, so that decisions
are made in the light of each country’s
particular circumstances. Where matters are
devolved, the distinctions in responsibilities
are made clear. We will be keen to work with
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The energy system in 2020...
We envisage the energy system in 2020 being
much more diverse than today. At its heart will
be a much greater mix of energy, especially
electricity sources and technologies, affecting
both the means of supply and the control and
management of demand. For example:
Much of our energy will be imported, either
from or through a single European market
embracing more than 25 countries.
The backbone of the electricity system will still
be a market-based grid, balancing the supply of
large power stations. But some of those large
power stations will be offshore marine plants,
including wave, tidal and windfarms.
Generally smaller onshore windfarms will also
be generating. The market will need to be able
to handle intermittent generation by using
backup capacity when weather conditions
reduce or cut off these sources.
There will be much more local generation, in
part from medium to small local/community
power plant, fuelled by locally grown biomass,
from locally generated waste, from local wind
sources, or possibly from local wave and tidal
generators. These will feed local distributed
networks, which can sell excess capacity into
the grid. Plant will also increasingly generate
heat for local use.
A strategy for the long term...
1.46 In this white paper we set out a long-term
framework to deliver our environmental,
security of supply, competitiveness and social
goals. Because energy requires very long-term
investment we look ahead to 2050 to set the
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ENERGY WHITE PAPER Our energy future - creating a low carbon economy
There will be much more micro-generation, for
example from CHP plant, fuel cells in buildings,
or photovoltaics. This will also generate
excess capacity from time to time, which will
be sold back into the local distributed network.
Energy efficiency improvements will reduce
demand overall, despite new demand for
electricity, for example as homes move to
digital television and as computers further
penetrate the domestic market. Air conditioning
may become more widespread.
New homes will be designed to need very little
energy and will perhaps even achieve zero
carbon emissions. The existing building stock
will increasingly adopt energy efficiency
measures. Many buildings will have the
capacity at least to reduce their demand on
the grid, for example by using solar heating
systems to provide some of their water heating
needs, if not to generate electricity to sell back
into the local network.
Gas will form a large part of the energy mix as
the savings from more efficient boiler
technologies are offset by demand for gas for
CHP (which in turn displaces electricity demand).
Coal fired generation will either play a smaller
part than today in the energy mix or be linked
to CO2 capture and storage (if that proves
technically, environmentally and economically
feasible).
overall context. We review what we will need
to have achieved by 2020 if we are to be
confident we are moving in the right direction,
fast enough, to deliver our aims for 2050.
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Section One
Overview
Chapter 1: Cleaner, smarter energy
The existing fleet of nuclear power stations
will almost all have reached the end of their
working lives. If new nuclear power plant
is needed to help meet the UK’s carbon aims,
this will be subject to later decision.
Fuel cells will be playing a greater part in the
economy, initially in static form in industry
or as a means of storing energy, for example
to back up intermittent renewables, but
increasingly in transport. The hydrogen will be
generated primarily by non-carbon electricity.
In transport, hybrid (internal combustion/electric)
vehicles will be commonplace in the car and
light goods sectors, delivering significant
efficiency savings. There will be substantial and
increasing use of low carbon biofuels.
Hydrogen will be increasingly fuelling the public
service vehicle fleet (for example buses) and
utility vehicles. It could also be breaking into
the car market.
Nuclear fusion will be at an advanced stage
of research and development.
People generally will be much more aware of
the challenge of climate change and of the
part they can play in reducing carbon
emissions. Carbon content will increasingly
become a commercial differentiator as the
cost of carbon is reflected in prices and people
choose lower carbon options.
seek to define every detail of the policies we
need to pursue over the next twenty years
and beyond. That would simply not be
realistic. We need to be prepared, within a firm
and clear strategic context, to review the
impact of policy changes and to update and
amend our detailed policy measures in the
light of experience. We believe, for example,
that technological innovation will have an
important contribution to make in helping to
deliver our long term vision.
This will bring new opportunities and possibly
new challenges that we cannot imagine now.
We have to be prepared to adapt and evolve
our policies in the light of those opportunities
and wider changes in society.
1.48 In recognition of this, we set out at the end
of this white paper arrangements for
strengthening our capabilities in the field
of energy policy. These new arrangements
will include annual public reports both on
progress towards the aims we set out in
this white paper and the steps we are taking
to ensure we remain on track. This will not
be the last major strategic statement on
energy policy. But it sets a new direction,
and a new determination, to deliver very
significant changes in both the short and
longer terms. It is a massive challenge.
But it is one that has to be met. And one
we believe we can meet.
1.47 This white paper seeks to define a long-term
strategic vision for energy policy. We set out
long-term strategies and, against that
background, shorter-term policies to put us
on the path we need to be on. In particular,
renewables and energy efficiency are and will
remain high priorities. We do not, however,
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Inputs to the white paper...
Many of the policies set out in this white paper
take as their starting point the Energy Review
published by the Cabinet Office’s Performance
and Innovation Unit (now the Strategy Unit) in
February 2002. In publishing the review, the
Prime Minister said that he wanted to launch a
thorough debate on the issues it raised. In
February 2002 the Trade and Industry Committee
published a report on Security of Energy Supply
and the House of Lords Select Committee on the
European Union published a report on European
energy issues (Energy Supply: how secure are
we?). The Committees’ recommendations have
been taken into account in drawing together our
conclusions in this white paper.
1.49 This white paper is based on a large amount
of analysis and modelling. We are publishing
separately documents which form part of that
work, on estimates of the cost and potential
for various long term low carbon options;
on the background outlook for energy demand
and emissions between 2000 and 2050; an
initial assessment of the impact of the
policies as set out in this white paper; and
background calculations to achieving carbon
cuts of between 15-25 million tonnes of
carbon in 2020.11
Following the PIU report, we launched a major
stakeholder and public consultation in May 2002.
This:
stimulated a wide range of workshops,
meetings, conferences and seminars, some run
by stakeholders, some run by Government
departments and other public bodies;
prompted over 2500 written submissions to the
team working on the white paper;
launched a wide-reaching and innovative public
consultation process commissioned by the DTI,
involving focus groups, deliberative workshops,
outreach to school students and a web-based
questionnaire; and
provided the basis of a web-based stakeholder
debate.
In total over 6500 individuals and groups have had
input to the consultation. This represents the most
significant consultation on energy policy ever
undertaken in the UK. It has provided an immensely
rich source of views and information to help guide
the development of policy options. We are very
grateful to all those who participated in the
10
consultation. In the future, outreach to stakeholders
and the wider public will continue to be an
important part of the follow up to the white paper.
10 Most of the material submitted to the white paper team can be found on
the DTI’s website at www.dti.gov.uk/energy/developep, except where
those submitting information asked for it not to be made publicly available.
The website also includes reports on meetings held during the consultation.
11 This work is available at www.dti.gov.uk/energy/whitepaper/
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Section
Two
The Low Carbon Economy
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Chapter 2 The Environment
Climate change is happening...
2.1 There is now strong scientific evidence
that climate change is happening and that
it is being accelerated by human activity.
The world is getting warmer. The earth’s
temperature rose by 0.6˚C during the last
century and is forecast to rise by between
1.4 and 5.8˚C during this century. Globally the
1990s was the warmest decade and 2002
the second warmest year since records began.
Chart 2.1
Number of additional people at risk of
flooding each year by the 2080s,
assuming no action to cut green house
gas emissions1
2.2 There is increasing evidence that this is the
result of an increase in atmospheric
concentrations of greenhouse gases - notably
carbon dioxide released by burning fossil
fuels such as coal, oil and gas. By absorbing
heat these gases keep the earth’s
temperature warmer than it otherwise would
be. As greenhouse gas concentrations rise
well above their natural levels, the additional
warming that will occur could threaten
human society.
2.3 Climate change research has looked at how
far changes in temperature over the past
century are due to human activities.
Natural effects, such as variations in the
sun’s output and volcanoes, are insufficient
to account for the observed warming, which
can only be explained by greenhouse gases
from human activities.
2.4 The rate at which the climate is changing will
affect the world in extreme and unpredictable
ways. Its impacts could include:
many millions more people being exposed
to the risks of hunger, water stress,
flooding and diseases like malaria. Poor
people in developing countries are likely to
be most vulnerable;
1
22
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low-lying areas, wetlands and small islands
will be especially at risk from sea-level rise.
Globally, an extra 80 million people could
be exposed to flood risk by the 2080s,
60% of whom are likely to be in the
poorest parts of South East Asia. In one
of the most vulnerable areas, Bangladesh,
a 45cm rise in sea level could result in
10% of the total land area being lost and
51⁄2 million people being put at risk;
irreversible losses of biodiversity could be
accelerated. Expected impacts include
bleaching of coral reefs, loss of mangrove
swamps and impacts on fish populations.
Changes in the polar regions are expected
to be the largest and most rapid, leading to
thawing of permafrost, melting of ice sheets
and changes in species distribution; and
the UK will also be affected. Rising sea
levels could threaten our coastal communities
and environment. Storms and extreme
events could have the most costly impacts
- the autumn 2000 floods cost the UK £1bn.
Source: Defra
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Section Two
The Low Carbon Economy
Chapter 2: The Environment
The costs of climate change
A Government Economic Service working paper2
has suggested £70/tC (within a range of £35 to
£140/tC) as an illustrative estimate for the
damage cost of carbon emissions. It also
suggested that this figure should be raised in real
terms by £1/tC per year as the costs of climate
change are likely to increase over time.
changes to the Gulf Stream), of social impacts
such as famine or mass migration, or of impacts
after 2100. Nor does it include other benefits of
reducing emissions, such as improved air quality.
These could increase the social cost of carbon
considerably. Impacts will also vary significantly
across sectors and regions.
These values are under review in light of
developments in the academic literature and in
the Government’s economic appraisal guidance.
Currently the estimate only represents a subset of
damage costs, and the review will also consider
issues of coverage. While the suggested range
covers impacts such as effects on agriculture,
wildlife and health, sea level rise and some
extreme weather effects, it does not include the
possible impacts of ‘climate catastrophes’ (e.g.
melting of the West Antarctic ice sheet or
These values do not set a limit on the acceptable
costs of reducing emissions. Wider impacts on
other energy policy objectives are also relevant.
Costs which initially look high may also be
reduced by economies of scale and innovation.
Nevertheless, in looking at measures to reduce
carbon it is important to consider abatement
costs. Most of the carbon savings we are looking
at pre-2020 can, we believe, be delivered at costs
lower than, or in line with, the illustrative range
for damage costs.
Chart 2.2
Changes in summer and winter
temperatures3
2.5 We will have to adapt to some degree of
climate change. Greenhouse gases that have
already built up in the atmosphere mean that
some temperature rise is inevitable. In the
UK, we are already taking steps to adapt the
way we manage flood risk, water and other
natural resources, but there is still more to
do, and there will be challenges for the
transport, construction and business sectors
too. For developing countries, climate change
increases the urgency of finding more
sustainable pathways to development.
2
Estimating the Social Cost of Carbon Emissions, Government Economic
Service Working Paper 140, www.hm-treasury.gov.uk
3
Changes in average summer and winter temperatures (with respect to
Hadley Centre model - simulated 1961-1990 baseline climate) for a 30-year
period centred on 2080 for high and low greenhouse gas emissions
scenarios. UK Climate Impacts Programme, 2002.
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Action to limit emissions
is under way...
2.6 But the worst effects of climate change can
be avoided if concentrations of greenhouse
gases in the atmosphere are stabilised, rather
than increasing as they are now. There is as
yet no international consensus on the level at
which concentrations of greenhouse gases
should be stabilised. But in 1997 the EU
member states agreed that we should be
aiming for a global average temperature
increase of no more than 2˚C above the preindustrial level and therefore a concentration
below 550 parts per million (ppm) of carbon
dioxide - about twice the pre-industrial
concentration - to prevent the most damaging
effects of climate change.
2.7 Even at this level, there will be negative
impacts4. The majority of the world’s population
is likely to experience some consequences.
At the upper end of the possible temperature
rises there would be severe impacts on
natural systems and on all sectors of society,
a significant increase in extreme climatic
events and a high risk of major geographical
changes in ice sheets or in ocean currents.
Higher concentrations would be likely to pose
even greater and more unpredictable risks.
2.8. Against this background we take the view
that the potential consequences of climate
change are so severe that, within a policy
framework that keeps costs to a minimum,
we should take steps ourselves and work
closely with other countries to reduce our
greenhouse gas emissions. If we are to
stabilise carbon dioxide concentrations in
4
24
Based on conclusions of the Third Assessment Report of the
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ENERGY WHITE PAPER Our energy future - creating a low carbon economy
the atmosphere at no more than 550ppm,
global emissions will need to drop well below
current levels.
2.9 Already policy-makers around the world have
begun to respond to these challenges.
The UN Framework Convention on Climate
Change (UNFCCC) and its Kyoto Protocol are
the starting point for international efforts to
cut emissions.
The UN Framework Convention on
Climate Change and Kyoto Protocol
The UNFCCC aims to prevent dangerous manmade climate change and commits developed
countries to taking the lead in tackling climate
change. The Kyoto Protocol set legal targets for
them to reduce greenhouse gas emissions by
around 5% of 1990 levels in the period 20082012. The US and Australia have withdrawn from
the Protocol, though Australia has said that it still
intends to limit its emissions as if it had decided
to ratify. It seems likely that the effect of the
Protocol in the period 2008-2012 will be a reduction
in projected global emissions of at best 2%. To
help meet targets, countries can use international
emissions trading or receive credits for reductions
achieved by supporting projects in other
countries. Discussions on action beyond 2008-12
must begin by 2005. In the long term, developing
countries are most at risk from climate change
and need to be helped to become a part of the
global response to it. Developing countries
currently account for around 40% of global CO2
emissions from fossil fuels, and their emissions
may exceed those of developed countries by
2020, although per capita emissions in most
developing countries are still relatively low.
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Section Two
The Low Carbon Economy
Chapter 2: The Environment
But more needs to be done...
2.10 Climate change is a global problem. It has
to be tackled globally. The UK will continue
to show leadership but it cannot solve this
problem alone. The UNFCCC and its Kyoto
Protocol demonstrate that it is possible
to reach global agreement on action, but far
more needs to be done. UK emissions of
carbon dioxide currently account for only
about 2% of the global total. Our own actions
will have no impact on climate change unless
they are part of a concerted international
effort. A wider effort is also necessary, for
example in bringing forward technological
changes, to keep down costs to the UK and
to avoid compromising our competitiveness.
We will therefore continue to work with
other countries to establish both a
consensus around the need for change and
firm commitments to take action to reduce
carbon emissions world-wide within the
framework of the UNFCCC.
2.11 Some countries, including some of our
European partners, are already moving in this
direction. We need, with them, to lead others
internationally. It is clear that substantial cuts
are needed in the longer term. Delay will only
compound the problem. We therefore believe
that the time is now right to reinforce our
commitment to the achievement of significant
long-term cuts in emissions in the UK.
2.12 Our ambition is for the world’s developed
economies to cut emissions of greenhouse
gases by 60% by around 2050. We therefore
accept the RCEP’s recommendation that the
UK should put itself on a path to a
reduction in carbon dioxide emissions of
some 60% from current levels by about
20505. In this white paper, we therefore set
out the first steps to achieving this goal.
And we set as a key objective of the
UK’s foreign policy securing international
commitment to this ambition.
2.13 We can get to a 60% cut in emissions by
2050 in a number of ways. But leaving action
until the last minute is not a serious option.
If we do not begin now, more dramatic and
more disruptive change will be needed later
on. We need early, well-planned action to
provide a framework within which
businesses and the economy generally can
adjust to the need for change. This will for
example allow business to plan to act in the
course of normal capital replacement cycles.
It will also encourage new technologies to
come forward to meet the challenges we face.
2.14 The UK already has a Kyoto Protocol
commitment to reduce greenhouse gas
emissions by 12.5% below 1990 levels by
2008-12 and a national goal to move towards
a 20% reduction in carbon dioxide emissions
below 1990 levels by 2010. The measures in
this white paper keep us on track for both
6
goals , and represent a significant departure
from the level that emissions would
otherwise be under ‘business as usual’.
5
A reduction in carbon dioxide emissions of 60% by 2050 is consistent with
the level of reduction likely to be needed by developed countries in order
to move towards stabilisation of carbon dioxide concentrations in the
atmosphere at no more than 550 ppm, taking account of a realistic
assessment of emissions growth in developing countries. This is set out in
more detail in the Defra paper The scientific case for setting a long term
emission reduction target, available at
www.defra.gov.uk/environment/climatechange. RCEP’s recommendation
of putting the UK on a path to ‘reducing carbon dioxide emissions by some
60% from current levels by about 2050’ was based on a more detailed
calculation of 58% reductions from 1997 levels. This would lead to 2050
emissions of 64 MtC. The Kyoto Protocol, and the UK’s current domestic
targets, use 1990 as a baseline. A precise reduction of 60% in emissions
from 1990 would result in emissions of 65.8 MtC in 2050. As the RCEP
recommendation implies, absolute precision five decades before 2050 is
not possible. This white paper uses ‘around 65 million tonnes’ to describe
the level of carbon emissions which a 60% cut would deliver by 2050.
6
The UK’s carbon dioxide emissions increased for the second year running in
2001 and were some 5.2% below the 1990 level, having been 8.1% below
in 1999 and 7.3% below in 2000. This upward trend is expected to have
been reversed in 2002 when emissions are likely to have decreased
slightly. The measures in this white paper should allow the domestic goal to
be achieved. We are also committed to reviewing the Climate Change
Programme in 2004. This will provide an opportunity to review progress and
to strengthen measures if it is thought necessary to keep us on track
towards the domestic goal.
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2.15 Discussions under the UNFCCC to tackle
climate change beyond 2008-12 will start
soon. On the basis of our current policies,
including the full impact of the Climate
Change Programme, our carbon dioxide
emissions might amount to some 135 MtC in
20207. To be consistent with demonstrating
leadership in the international process, we
will aim for cuts in carbon of 15-25 MtC
below that by 2020. This would also put us
on course to reduce our carbon dioxide
emissions by some 60% by about 2050.
2.17 In order to achieve our aims we must
accelerate this trend. If the UK economy
were to grow at an average of 2.25% a year
between now and 2050 it would be three
times as large then as it is now. Reducing
carbon emissions to around 65MtC (see
footnote 5) in the same period would require
an improvement in the ratio between
emissions and economic output of around
seven-fold. We will achieve this by raising the
resource productivity of our economy producing more with less pollution.
2.16 If we are to cut emissions this much we will
need to achieve a fundamental long-term
shift in the way energy is supplied and used.
Already we have decoupled economic growth
from energy use and carbon emissions.
Overall energy consumption in the UK has
risen by around 15% since 1970, while the
economy has doubled.
2.18 The table below illustrates how cuts of 15-25
MtC could be achieved by 2020. The exact
target figure will be determined in the light of
international negotiations, and the actual
mix of measures needed to reach it will be
shaped by economic and technological
developments. We will put in hand
measures now to ensure we are well placed
to deliver on our commitments.
Chart 2.1
GDP, primary energy consumption
and emissions
Table 2.1
How cuts of 15-25MtC could
be achieved by 2020
220
200
Estimated MtC
8
reductions
Index (1970=100)
180
160
Energy efficiency in households
4-6
Energy efficiency in industry, commerce
and the public sector
4-6
Transport: continuing voluntary agreements
on vehicles; use of biofuels for road transport
2-4
Increasing renewables
3-5
EU carbon trading scheme
2-4
140
120
100
80
60
1970
1975
1980
1985
1990
1995
2000
GDP
Primary energy consumption (Mtoe)
Mt Carbon
8
7
26
See material referred to in paragraph 1.49.
ENERGY WHITE PAPER Our energy future - creating a low carbon economy
The figures represent reductions below the baseline of 135 MtC
discussed in paragraph 2.15.
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Section Two
The Low Carbon Economy
Chapter 2: The Environment
2.19 The Kyoto Protocol’s project mechanisms
provide for credits from international
emissions trading, including from projects
under the Clean Development Mechanism
and Joint Implementation, to contribute
towards emission reduction commitments.
They will provide another possible route to
savings, although it is not yet possible to
judge the scale of any contribution that they
may make.
Maintaining our competitiveness
at the same time...
2.20 We have analysed carefully the likely impacts
on the UK economy of cutting emissions by
60% by 2050. A good deal of caution is
needed in looking at economic changes over
such a long period and given the sensitivity to
the assumptions made. But analysis of data
assessed by the Intergovernmental Panel on
Climate Change suggests that action aimed
at stabilising carbon dioxide atmospheric
concentrations at no more than 550ppm
would lead to a loss of around 1% in
projected GDP9. The outcome of our UK
analysis is consistent with that review,
assuming that the world’s leading nations all
act together. It suggests that the cost impact
of effectively tackling climate change would
be very small - equivalent in 2050 to just a
small fraction (0.5 - 2%) of the nation’s
wealth, as measured by GDP, which by then
will have tripled as compared to now.
And this figure takes no account of the costs
avoided by tackling climate change.
9
2.21 Modelling work shows that higher transition
costs would occur if there were very tight
reduction targets in too short a time scale,
if policies such as emissions trading or other
economic instruments were not used or if
energy efficiency was not exploited. In the
medium term, transition costs would also
increase if other countries did not take action
to reduce emissions. But the more other
countries commit to move in the same
direction, the less direct impact there will be
on the UK. These impacts need to be
monitored and managed, both across the
economy and sector by sector. And there will
also be some economic benefits, for example
through increasing energy efficiency or
through enabling UK firms to benefit from
new opportunities in manufacturing, servicing
and exporting lower-carbon and renewable
energy technologies. We will ensure that we
continue to work closely with businesses to
develop strategies to enable them to adapt
to these changes and exploit them as
appropriate.
Report of Working Group III of Intergovernmental Panel in Climate Change,
Mitigation, 2001.
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Analysis and modelling work
A wide range of analytical work has supported the
white paper. This included work by the
Government’s interdepartmental analysts group
on long-term reductions in greenhouse gas
emissions, following which the DTI commissioned
Future Energy Solutions to use the MARKAL
modelling approach to look at the costs and
options for a substantial CO2 reduction by 205010.
MARKAL uses a ‘bottom-up’ model of the UK
energy system, which selects the least cost
technologies to meet specified energy demands,
subject to constraints imposed on emissions.
The results depend on the assumptions - on
technology availability and costs - that are made in
the model. However, the assumptions used
reflected expert opinion, informed by workshops
with industry experts.
The work was not intended to create a single
view or forecast. Instead a wide range of
sensitivity analyses was carried out to assess
which technologies and measures might be
crucial to minimising the costs of emissions
A clear long-term
policy framework...
2.22 To deliver these outcomes, our aim will be
to provide industry and investors with a clear
and stable policy framework. In practice,
we need a mix of measures in order to shape
the market to achieve our goals, including
economic instruments and regulation. But we
are seeking a framework which, as far as
possible, simplifies the mix of measures and
takes account of the cost of environmental
damage from carbon emissions. We will also
10 Full details of this work are at
www.dti.gov.uk/energy/greenhousegas/index.shtml
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ENERGY WHITE PAPER Our energy future - creating a low carbon economy
reduction and to assess how costs change if
assumptions are varied. The analyses covered
business as usual cases as well as reductions
in CO2 of 45%, 60% and 70% by 2050.
The analysis suggests that for many of the
assumptions tested the cost of reducing CO2
emissions by 60% by 2050 was in the range
£200-300 per tonne of carbon. GDP in 2050 was
reduced by 0.5-2.0%, equivalent to an average
annual reduction of between 0.01 and 0.02
percentage points from a business as usual GDP
growth rate of 2.25% per annum.
Higher costs were indicated if innovation in lowcarbon technologies was limited, if energy
efficiency improved only in line with past trends,
or if both new nuclear build and carbon capture
and storage were completely excluded in the
longer term.
To be on track for the 15-25 MtC reduction
beyond current baselines that we are aiming at,
MARKAL indicates costs of reducing carbon in
2020 in the range £10-80 per tonne of carbon.
aim to use the price mechanism as far as we
can to give clear signals about these costs.
This will give the market the flexibility to
determine the best way to reduce carbon
emissions, and drive action on both the
demand and supply sides of the economy.
It will also give business a dynamic incentive
to find new and innovative ways to reduce
emissions. Environmental taxes and tradable
permit schemes can both help to achieve
these objectives.
2.23 The UK has already made significant progress
through the climate change levy and the
voluntary UK emissions trading scheme.
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Section Two
The Low Carbon Economy
Chapter 2: The Environment
The levy is a tax which applies to business
and public sector use of gas, coal, electricity
and liquefied petroleum gas (LPG). It gives
those sectors an incentive to improve energy
efficiency and thereby to reduce greenhouse
gas emissions. It also involves 80%
discounts for energy-intensive sectors which
enter into climate change agreements to
improve energy efficiency or meet emissions
targets. Following the recommendations
of Lord Marshall, the levy was designed as
11
a ‘downstream’ energy tax, which makes it
possible to avoid impacting on domestic
energy users, and therefore avoid adding to
the problem of fuel poverty.
2.24 The first phase of the UK emissions trading
scheme has involved a range of organisations
from the private and public sectors agreeing
to meet emissions caps in return for a share
of a financial incentive. Emissions trading has
expanded recently through the participation
of firms covered by climate change
agreements, seeking to deliver their targets.
2.25 The development of emissions trading in the
next few years will primarily be dependent on
developments at EU level. On 9 December
2002, the European Union Council of
Ministers reached initial agreement on a new
European carbon emissions trading scheme.
12
This is expected to begin in 2005.
Installations which are covered by other
equivalent arrangements may not need to
join the scheme until 2008. In the scheme,
each participant will be set a cap - a target
level of emissions. Each will then receive
11 In report Economic Instruments and the Business Use of Energy, November
1998 http://archive.treasury.gov.uk/pub/html/prebudgetNOV98/marshall.pdf
12 From the outset, it is proposed that it should cover CO2 emissions from
combustion installations exceeding 20MW, oil refineries, coke ovens, and
ferrous metal industries, mineral industries and pulp and paper plants (over
certain size thresholds).
tradable allowances equal to its cap. To comply
with the scheme, each participant must hold
allowances at least equal to its emissions.
Participants will therefore have three choices:
meet their cap by reducing their own
emissions;
reduce emissions below their cap and sell
or bank the excess allowances; or
let their emissions remain above their cap
and buy allowances from other participants.
2.26 The best strategy for each participant will
depend on the price of allowances in the
market compared to the costs of reducing
their own emissions. In this way, emission
reductions from the participating sectors will
be achieved at minimum cost across the
European Union.
2.27 We will make the new trading scheme a
central plank of our future emissions
reduction policies, through which the traded
carbon market can set a signal for the value
of carbon reductions in the economy. It will
be a mechanism for delivering part of the
carbon savings we need to make, helping
to save around a further 2-4MtC by 2020.
We will continue to work proactively with
the European Commission, European
Parliament and other member states to
secure detailed plans for the implementation
of the scheme to help deliver this aim.
We will also work with them to extend,
where appropriate, the coverage of the EU
scheme in due course.
2.28 The inclusion of the electricity industry within
the scope of the EU emissions trading
scheme will further change the incentives on
electricity generators and suppliers, as it will
begin to give a direct incentive to electricity
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generators to reduce emissions. To the
extent that the scheme leads to an increase
in electricity prices, this will add to costs for
electricity users. The scale of such impacts
is currently uncertain, but will be driven by
the price of carbon in the European market.
2.29 We aim to have a coherent approach to
carbon valuation and energy use, so that
environmental costs can be internalised as
efficiently as possible, irrespective of
whether the instruments are international or
domestic. The linkages between tax and
tradable permit schemes will be carefully
considered in the light of the emerging EU
emissions trading scheme. As the box below
shows, emissions trading is unlikely to cover
all emissions from all sectors of business for
the foreseeable future, and there will
continue to be a role for a tax if a price signal
is to be given to other areas of business.
2.30 The issues involved in linking the two
mechanisms are not entirely new. The UK
has already made links between the sectors
covered by the climate change agreements
and the voluntary emissions trading scheme.
Some changes might be needed, for
example, to ensure that the sectors of
manufacturing industry which are covered by
the EU emissions trading scheme are not
subject to unnecessary burdens. The views
of manufacturers would be welcome. We will
now consider the impact of the proposed EU
emissions trading scheme on the climate
change levy, while bearing in mind that this
will ultimately depend on the precise nature
of the future emissions trading scheme
which has yet to be agreed. Any tax changes
will be a matter for future Budgets.
30
ENERGY WHITE PAPER Our energy future - creating a low carbon economy
Emissions trading - potential
development
The political agreement on the proposed EU
trading scheme outlines its design, together with
procedures for expansion. How the scheme will
develop in the UK will depend on further work on
proposals to manage the transition from the current
UK policy mix to the new EU scheme, as well as
on decisions by the European Commission and
member states. But a possible scenario might be:
January 2005 - First phase of the EU scheme
starts, covering CO2 from electricity generation, oil
refineries and some other sectors of heavy industry.
Temporary exclusions allowed for heavy industry
during this first phase, with caps on generator
emissions adjusted to take account of measures
for renewables and energy efficiency.
January 2007 - Current phase of UK emissions
trading scheme for ‘direct participants’ ends.
All of the direct participants in the UK scheme
that are covered by the EU scheme transfer their
CO2 emissions to the EU scheme.
January 2008 - Second phase of EU scheme starts.
Scheme covers CO2 emissions from other sectors
of industry as required by the directive and relevant
changes made as necessary to the arrangements
for the climate change agreements.
Coverage could be extended by unilaterally opting
in other activities and greenhouse gases, or by
harmonised EU-wide expansion. The EU scheme
might expand to include other energy intensive
sectors of industry or other industrial and
commercial sectors where the size of installation
makes this cost-effective.
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2.31 The European Union is also close to agreeing
a directive on the taxation of energy
products. This would require all member
states to introduce taxes on the business use
of energy to encourage energy efficiency,
such as the climate change levy. Once
agreement on the emissions trading directive
has been reached, the Commission is
planning to bring forward proposals to modify
the rules on taxation of energy products in
the light of the agreement on communitywide emissions trading, to ensure that the
two schemes are complementary. We will
consider these proposals as part of our own
approach to linking the two measures.
also has binding international commitments
to meet targets for emissions of air pollution
and for local and regional air quality, including
cuts of 50% in sulphur dioxide and 20% in
oxides of nitrogen from current levels by
2010. Meeting these will require significant
reductions in emissions from electricity
generation, in particular current coal fired
generation. Energy infrastructure, including
renewable energy, has effects on the
environment. Future analysis of energy policy
choices will continue to bear all these
impacts in mind.
2.32 Wherever possible, we will also link the other
measures described in this white paper to
the carbon emissions trading scheme. This
will help enable a common Europe-wide
value to emerge for carbon savings, enabling
business and consumers to choose
themselves how best to achieve their
economic and commercial aims against that
background. We will now be taking forward
work to consider how best to make such
linkages and will come forward with
appropriate proposals when the relevant
policy positions are more firmly established.
Considering other
environmental impacts too...
2.33 There are other important environmental
issues to be borne in mind as well as climate
change. Measures to reduce carbon
emissions can also have other benefits, such
13
as improved air quality. For example, the UK
13 Air quality is set out in The Air Quality Strategy for England, Scotland,
Wales and Northern Ireland, Cm4548, January 2000.
www.defra.gov.uk/environment/airquality
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Chapter 3 Energy Efficiency
3.1 Over the last thirty years, our economy has
doubled in size, while energy use has barely
1
increased . Nonetheless, we are still using far
more energy than we need, in particular
because we are using it inefficiently. Energy
is often wasted because of poorly insulated
buildings or where heating, ventilation, air
conditioning and lighting are poorly
controlled. Products are less energy efficient
than they could be - for example, the average
upright freezer on the market today uses
nearly three times as much energy as the
2
most efficient one. Energy saving light bulbs
use less than a quarter of the energy of
ordinary light bulbs, and also last ten times
longer. Businesses and householders may
not know how to cut energy use, which is just
one of many demands on their time and capital.
Chart 3.1
Energy intensity ratio in “top 20”
OECD countries, 20004
Switzerland
Japan
Denmark
Austria
Germany
Ireland
Italy
France
Luxembourg
Norway
Netherlands
Sweden
Spain
UK
Belgium
Portugal
Greece
Finland
Australia
USA
0
50
100
150
200
250
300
Energy consumption (thousand toe) per $US bn output
3.2 The cheapest, cleanest and safest way of
addressing our energy policy objectives is to
use less energy. The financial benefits of
doing so are clear. Better insulated buildings
and more energy efficient workplaces cut
energy bills for householders and businesses.
Reducing demand puts less pressure on
energy supplies.
3.3 Over the last 30 years the economy’s energy
3
intensity - the ratio of energy consumption to
GDP - has improved by around 1.8% each year.
Without this, home heating, for example,
would use more than twice the energy it
uses today. But simply continuing previous
rates of change is not enough. We have to
improve energy efficiency far more in the
next twenty years than in the last twenty if
we are to meet our goals. Many other
industrialised countries already do far better
than the UK.
1
See paragraph 2.16
2
Compact fluorescent lamps (CFLs)
3
Energy intensity for the UK as a whole is total energy consumption divided
by total GDP. It is normally expressed as Mtoe/$USbn, to enable
international comparison.
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ENERGY WHITE PAPER Our energy future - creating a low carbon economy
3.4 This chapter sets out how we will achieve
the necessary step change in energy
efficiency across our economy. Our policies
have to tackle barriers to the uptake of
energy efficiency across all energy users, and
provide the framework for continuing, and
accelerating, the rate of improvement in the
UK’s energy intensity. We must also promote
innovation to find new ways to save energy
in the future.
The savings we need...
3.5 We expect more than half the emissions
reductions in our existing Climate Change
Programme - around 10 MtC per annum by
2010 - to come from energy efficiency.
4
Source: IEA
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Section Two
The Low Carbon Economy
Chapter 3: Energy Efficiency
by 2020, a further 4-6MtC of annual
savings can come from households.
This will require further uptake and
development of insulation, including in
homes that current technologies cannot
tackle cost effectively, such as the 7
million homes with solid walls. Building
standards, heating systems, lighting and
appliances must continue to improve, in
some cases through technologies yet to
6
reach the market, such as LED lighting.
We will need more innovative
developments, which combine energy
efficiency with measures such as micro
CHP, small-scale renewable heat such as
solar water heating, or renewable power
such as solar electricity; and
by 2020, a further 4-6 MtC can be delivered
annually from the business and public
sectors. The source of savings, and the
types of policy to encourage them, would
build on those to 2010, with progressively
tighter emissions caps under the EU
emissions trading scheme being a key
measure to stimulate further savings.
5
Energy efficiency savings to 2010
Households account for around 5MtC of the
expected savings. We have put in place measures
to deliver 1.5 MtC, and this white paper sets out
key measures which have the potential to deliver
the remaining 3.5 MtC. The following are not
targets for individual items, but illustrate where
savings might be achieved:
progressively raising efficiency standards to
that of the most efficient boiler type,
condensing boilers, and installing around 5
million, saving around 0.6MtC;
insulating around 4.5 million cavity walls from
2005-2010, saving around 1.2 MtC;
installing an extra 100 million energy saving
lights, beyond the 60 million already anticipated
by 2005, saving around 0.5MtC;
faster improvements in the standards of new
household appliances and significantly
increasing the uptake of A-rated appliances,
which could save around 0.4MtC; and
other insulation measures, improved heating
controls, improved standards of new build and
refurbishment through revisions to the building
regulations, and community heating with CHP,
saving around 1MtC.
The Climate Change Programme anticipates
savings of around 6MtC by 2010 from businesses
and the public sector. The climate change levy,
the associated climate change agreements, and
the UK’s own voluntary emissions trading scheme
already put us on track to deliver these savings.
3.6 Further ahead, we believe that energy
efficiency can contribute around half of the
additional 15-25 MtC savings we are likely
to need by 2020 (see chapter 2 table 2.1).
5
These savings are already anticipated in the 135 MtC baseline emissions
to 2020 explained in chapter 2.
3.7 Savings of this magnitude would need roughly
a doubling of the rate of energy efficiency
improvement seen in the past thirty years.
Delivering the savings...
3.8 To deliver these savings, we need a mixture
of measures, addressing key areas of our
economy - including energy used for heating,
lighting and powering buildings and
appliances in them, which accounts for
around half of the UK’s total energy
consumption. Different policy instruments emissions trading, the energy efficiency
commitment, tax incentives, a greater
6
Light emitting diodes
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introduced in April 2002. Similarly in Scotland,
higher standards were introduced in March
2002, including for replacement windows,
and the Building Bill will be enacted in 2003
with the aim of further improving standards.
emphasis on energy services, building and
product regulations, advice and information will be designed to reinforce each other.
3.9 As chapter 2 explains, the new EU emissions
trading scheme will play a central role from
2005. By setting strict limits on carbon
emissions, it will spur large energy users to
find cost-effective ways to reduce emissions.
We will press for the scheme to develop
so that other sectors can be added or linked
to it wherever possible. The energy efficiency
commitment (see paragraph 3.32) will have
a major role to play in homes, and we will
consider whether to extend it beyond the
household sector. Higher efficiency standards
for products and buildings will be required.
3.10 Tax measures will also have a role to play.
Lower taxation on lead-free petrol helped to
shift consumer demand to the point where
leaded petrol was phased out. The Chancellor
announced in the 2002 Pre-Budget Report
that we would consult further on specific
measures to promote greater energy
efficiency in households.
3.12 But standards elsewhere remain higher,
particularly in Northern Europe. A detached
house built to the latest standards in England
and Wales consumes nearly 20% more
energy than an equivalent home in Denmark7.
We will raise standards over the next
decade, learning lessons from the
standards achieved in other comparable
European countries.
3.13 We will also use the regulations further to
raise the standard required for new and
replacement boilers to the level of the most
efficient boiler types - A and B rated
condensing boilers. Over 1 million boilers,
heating and hot water systems are replaced
each year, and we believe around 5 million
condensing boilers need to be installed by
2010. Currently, our performance falls well
short of what has been done elsewhere, as
the table below illustrates.
Through higher building
standards...
3.11 Compared with the 1990 building regulations,
the latest revisions introduced last year have
reduced the energy needed for heating a
new home by half. Similar improvements
have been achieved in new commercial and
public sector buildings. In the existing stock,
which will continue to account for the vast
majority of energy consumed in buildings for
decades to come, regulations also cover
major changes - for instance, higher
standards for replacement boilers and
windows in England and Wales were
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7
Putting Climate Change at the Heart of Energy Policy; EST submission
to the energy white paper, 2002 (www.est.org.uk/est/index.html)
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Section Two
The Low Carbon Economy
Chapter 3: Energy Efficiency
Condensing boilers - a case study8
The Netherlands
UK
1980-1987: Subsidies for condensing boilers and a
widespread information campaign.
1980s: Development and demonstration of
technology under the Government’s Energy
Efficiency Demonstration Scheme.
Mid 1980s: Demand outstripped supply so
manufacturers launched intensive installer training
programmes.
1989-today: Promotion under the Government’s
Energy Efficiency Best Practice Programme.
1993-4: British Gas-funded cashback scheme.
1990: Subsidies relaunched: government funding
matched by funding from energy companies
through a customer levy. Housing policy promoted
condensing boilers.
1996-9: Government-funded cashback schemes.
9
1997 onwards: ‘Energy Efficiency’ awarenessraising campaign with labelling of condensing
boilers.
1995: Building regulations require new build
to meet standards of energy efficiency only
achievable with condensing boilers.
10
2000 onwards: EESoP/EEC and Government
fuel poverty programmes installing condensing
boilers; Energy Saving Trust working with
manufacturing industry.
1996: Long term awareness campaign started,
plus energy efficiency labelling.
1996: Energy tax introduced with hypothecated
revenue for energy efficiency.
2002: Condensing boilers account for ~12%
of UK market.
2000: Subsidies (25%) for energy audits
introduced.
To achieve much higher levels is likely to require
measures such as:
2002: Condensing boilers account for ~75%
of Dutch market.
9
8
Ibid
a communications campaign raising awareness
of links between climate change and household
energy use;
training of heating engineers and gas fitters;
voluntary agreement with industry on
condensing boilers; and
higher boiler standards required by building
regulations for existing and new dwellings.
www.saveenergy.co.uk
10 EESoP - the Energy Efficiency Standards of Performance;
EEC - the Energy Efficiency Commitment.
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3.14 A new EU directive on the energy performance
of buildings is now in place11. This covers
homes alongside business and the public
sector. It requires EU member states to set
minimum standards for building work on new
and existing buildings, to review building
standards at least every five years, to
introduce energy certificates for all buildings
to show how efficient they are, and to test
the efficiency of boilers and air conditioning
systems in commercial and business premises.
3.15 We already have minimum standards for
building work and a building certification system
for dwellings and welcome the impetus the
directive will give to these. We also welcome
the challenge the directive presents to extend
certification to all buildings and to introduce
boiler and air conditioning inspection
systems, or similar, that mean these can
be operating more efficiently. The Office of
the Deputy Prime Minister will take the lead
in responding to the directive, as it has
responsibility for most of the legislation that
can be used to transpose it into law; however,
DTI and Defra will also play a full part.
3.16 We will start work immediately on the next
major revision of the building regulations,
which we will aim to bring into effect in 2005.
Tighter building regulations will also encourage
developers to use low carbon solutions such
as solar water heating and photovoltaics.
3.17 We will also make a start on developing the
new provisions that will be needed to
implement the directive’s certification and
inspection requirements, so that public
11 The EC directive on the energy performance of buildings came into force on
4 January 2003. Member states have three years to implement the directive
with an additional three years if needed to implement requirements on
building certification and inspection of boilers and air conditioning systems.
See www.europa.eu.int/eurlex/en/dat/2003/1_001/1_00120030104en00650071.pdf
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ENERGY WHITE PAPER Our energy future - creating a low carbon economy
buildings and those buildings that are sold or
tenanted each year can be certified within
the timescale required.
3.18 There is also a huge opportunity to deliver
improvements through our public investment
in schools, hospitals and other public
services. In February 2003, we launched
Sustainable Communities: Building for the
Future12, a long-term programme to increase
housing supply in high demand areas such
as the Thames Gateway. This includes a
commitment that, from April this year, the
Housing Corporation will require that the new
homes they fund achieve the Building Research
Establishment’s EcoHomes13 standard for
sustainable residential development.
3.19 Achieving these bigger and faster changes
will require the concerted effort of all parts
of the industry - customers (particularly in
industry, business and the public sector),
architects and designers, the construction
industry, manufacturers and other suppliers,
the professional bodies, energy companies
and government itself. The shift to far greater
energy efficiency is also an ideal opportunity
to intensify the efforts already being made to
improve the productivity of the construction
industry. Our sustainable communities action
plan is a major opportunity to encourage
sustainable construction and maximise the
potential that energy efficient technologies
can play in the planned new housing
developments and refurbishment of existing
developments. We will therefore bring
together representatives of housebuilders,
the Housing Corporation, the construction
industry and others in a new working group
to consider how best to improve the
12 www.communities.gov.uk
13 www.products.bre.co.uk/breeam/ecohomes.html
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Chapter 3: Energy Efficiency
sustainability of all aspects of construction
and design, including off-site construction
and low carbon technologies (such as
photovoltaics or CHP). We will also bring
together representatives of all the key
players in a Better Buildings Summit, which
will be jointly convened and chaired by
Ministers from ODPM, Defra and DTI.
3.20 We will also work with local authorities and
their building inspectors to see whether
and how enforcement of the regulations can
be cost-effectively improved to achieve
better correlation between design and built
performance.
And higher product standards...
3.21 Today’s homes contain more household
appliances than our grandparents ever dreamt
of - cookers, microwaves, washing machines,
fridges and freezers, TVs and videos (with
multiple sets in many homes), computers and
game machines. UK households spend
around £5 billion each year on electricity to
power lights and appliances, which account for
around a quarter of UK electricity consumption.
And as these basic products achieve near
universal take-up, new, energy-hungry
services such as digital TV and broadband
communications pose a new challenge.
3.22 Not only are these new gadgets energy-hungry,
but as users most of us are also energy-lazy.
Each year, video recorders and televisions in
the UK consume around £150m worth of
electricity while on standby, and our homes
have increasing numbers of power supplies
and chargers permanently plugged in.
Consumer education can only have a limited
effect in this area. Instead, we need to raise
the standards of the products themselves
to give us the best technological answers for
cutting energy consumption. Overall, faster
improvements in the standards of new
household appliances and greater uptake of
A- rated appliances can bring about significant
carbon savings and could save around
0.4MtC by 2010, relative to the business as
usual baseline.
3.23 Similar issues arise in industry and
commerce, where the speed of information
and communications technology leads to
new demands. At the same time, smart
control systems can significantly cut usage
and waste. Again, we need the best possible
standards to ensure that equipment is as
energy efficient as possible.
3.24 Overall, we need to remove the least
efficient products from the market,
encourage competition to bring forward
improved products, and make it easier for
people and businesses to choose the best.
Ways to do so include minimum standards,
voluntary agreements with industry, fiscal
measures, procurement policy, and better
information on product performance.
3.25 Provided manufacturers are given adequate
time to change their product specifications,
higher standards should not damage our
industrial competitiveness. Indeed, properly
designed, they can help British and other
European manufacturers to anticipate and
meet rising consumer expectations in other
parts of the world. We will continue to
consult closely with UK industry, including
manufacturers, dealers and service providers,
and with the European Commission and
other member states, on how best to deliver
low-cost improvements in product standards.
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Our Market Transformation Programme14
already works at national and EU level with
Governments, industry, retailers and others.
3.26 We are already encouraged by industry’s
response to this agenda, especially in its selfcommitments to improve efficiency
standards and targets for such things as
electric motors, televisions, video recorders,
digital TV services, power supplies, water
heaters and washing machines. The European
code of conduct on digital TV services has
enabled the UK to avoid additional energy
consumption equivalent to around 0.4MtC a
year. We will encourage and support such
industry self-commitments when these will
deliver earlier or higher standards than
mandatory measures alone.
3.27 The UK’s membership of the single European
market means that product standards on
tradable goods and equivalent industry
voluntary agreements usually have to be set
or agreed at the EU level. Mandatory
standards to remove inefficient boilers,
15
fridges and fluorescent lamp ballasts from
the market are already in force and are very
effective. For example, even the least
efficient new fridge freezer in the EU now
consumes only half as much energy compared
to products that were still on the market 5
years ago. The standard for lamp ballasts alone
will save nearly 0.25MtC a year in the UK.
3.28 The Commission is now proposing a new
framework directive16, to set standards
for a wider range of products, and to revise
the energy labelling regime which currently
deals only with household appliances.
14 www.mtprog.com
15 A ‘lamp ballast’ controls the current passing through fluorescent lighting tubes
16 Proposal for a framework directive on the eco-design of end use equipment
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ENERGY WHITE PAPER Our energy future - creating a low carbon economy
It has estimated that such measures could
save around 10% of total EU energy
17
consumption by 2020 . We support these
proposals and will work proactively
to influence and speed their delivery.
3.29 In particular, our analysis and consultations
suggest that we should press for urgent action
in the EU to raise standards in air conditioning,
boilers and water heaters, power chargers,
consumer electronics, office equipment, motors,
fans and pumps, washing machines, fridges
and other white goods and lighting, including
significant reductions in standby power.
3.30 We will also reinforce other measures to
promote the sale of products above current
EU minimum standards, including fiscal
instruments, information tools such as the
EU energy label, the Energy Saving Trust’s
Energy Efficiency Recommended logo and
the Energy Star label for IT equipment.
In the home...
3.31 Tougher building regulations will have an
impact on new homes, alterations to the
existing stock and all replacement windows
and boilers. But they will not deal with longstanding problems like the 15 million homes
with inadequate wall insulation - either solid
walls or unfilled cavities.
3.32 We have already introduced - in April last year
- an energy efficiency commitment (EEC) for
domestic energy suppliers, which runs until
2005. Each supplier18 has an energy saving
target, which they can meet by encouraging
17 European Commission background and discussion paper on a draft proposal
for a framework directive on energy efficieny requirements for end-use
equipment, April 2002. (This proposal is now integrated with the proposal in
footnote 16).
18 Applies to licensed energy suppliers with at least 15,000 electricity and/or
gas customers.
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Chapter 3: Energy Efficiency
householders to install energy saving
measures, for example by subsidising the
cost of installing a condensing boiler, wall or
loft insulation, energy efficient lights and
appliances either directly or through retailers.
At least half the target must be met in
households whose occupants are either on a
low income or disabled. It is already
accelerating the uptake of energy efficiency
measures, reducing the cost of measures to
the consumer, and encouraging the heating
and insulation industries to build up their
capacity to meet the increased demand. But
by 2005, when the current EEC ends, there
will still be around 6-7 million homes where
cavity wall insulation would be relatively easy
to install. Filling 4.5 million of these by 2010
would save around a further 1.2 MtC.
3.33 Energy suppliers have responded positively,
and are working hard to meet their targets.
We want their good work to continue, and
for it to become an integral part of their longterm business strategies. So, we will consult
on an expansion of the EEC to run from
2005 to at least 2008, at possibly twice its
current level of activity. This will allow
energy suppliers and the energy efficiency
industries to plan the level of EEC activity
over the medium and longer term. It will
require energy suppliers to take up a
substantial proportion of the potential for
higher energy efficiency in homes, and
deliver carbon savings of around 1 MtC by
2010, primarily by encouraging better home
insulation. As we introduce the new EU
emissions trading scheme, we will consider
how the EEC can be best dovetailed with it.
Looking to the future, a continuation and
further expansion of EEC, or some successor
mechanism, could deliver a further 3 MtC of
savings by 2020.
3.34 While energy suppliers are selling energy
saving measures under EEC, few have
sought to develop new markets in energy
services. Rather than simply selling electricity
and gas, energy services focus on the
outcome the customer wants - such as warm
rooms and hot water - and offer the most
cost-efficient way of achieving it. Under an
energy services contract a supplier might, for
example, install insulation or a more efficient
boiler in a customer’s home, and recoup the
investment through the quarterly bill over,
say, 3 to 5 years. The householder uses less
energy as a result, and the savings on the
energy bill are used to repay the cost of the
measures. So, worthwhile home
improvements are installed with no upfront
cost to the householder, who benefits from a
warmer, more comfortable home and lower
energy bills for years to come once the initial
investment has been repaid. Some have
called this approach selling ‘negawatts’
instead of ‘megawatts’.
3.35 Energy services could help to overcome
consumers’ reluctance to invest in energy
efficiency improvements. However, since the
energy markets were opened up to
competition in the late 1990s, householders
can switch supplier by simply giving 28 days’
notice. Energy suppliers have little incentive
to offer energy service contracts if customers
can switch at short notice. We will therefore
establish a working party with OFGEM,
energy suppliers and others to explore how
to create an effective market in energy
services. This will address, among other
issues, the barriers caused by the current
28-day notice period while maintaining
adequate freedom of choice and consumer
protection for customers. It will report initial
conclusions later this year.
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3.36 We will also continue to tackle poorly
insulated and inefficiently heated homes
through our fuel poverty and social housing
programmes (see chapter 8). Because these
focus on helping people heat their homes
adequately, in the short term their
contribution to carbon savings is relatively
small. But they will help to ensure that we
have a much more energy efficient housing
stock in coming decades.
At work...
3.37 In businesses and the public sector, there are
many ways to reduce energy use. Improving
insulation, heating, lighting and equipment
are important, particularly in the commercial
and public sectors. There are also many other
opportunities in day-to-day operations and
production processes. Many savings can
occur at the time of investment in new or
replacement plant. Technologies include
more efficient motors, variable speed drives,
heating and cooling plant and proper pipe
insulation. Savings can also come through
making productive use of otherwise ‘waste’
heat and cooling, and avoiding unnecessary
heating and cooling through better design
and control.
3.38 As chapter 2 explained, we have already put
in place a range of actions to promote energy
efficiency in business. The climate change
levy (CCL) is a levy on business and public
sector energy use. Receipts (around £1 billion
a year) are recycled back to business, mainly
through reduced National Insurance but also
through £50 million for tackling business
energy efficiency. Within the CCL, climate
change agreements (CCAs) have been
negotiated with energy intensive industries.
Participants pay only 20% of the CCL in
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ENERGY WHITE PAPER Our energy future - creating a low carbon economy
return for agreeing to meet challenging
energy efficiency targets over a 10-year
period. The CCAs alone are expected to
achieve savings of around 2.5MtC by 2010.
3.39 We launched the world’s first economy-wide
greenhouse gas emissions trading scheme in
April 200219. By December 2002, 34 companies
had become members, while a further 6000
companies with CCAs can use the trading
scheme either to help meet their target or to
sell any over-achievement. The targets set for
participants in the scheme should deliver
20
1.1MtC of carbon equivalent savings by 2006.
3.40 Taken together, the savings generated by
these schemes account for most of the
6MtC of savings identified under the Climate
Change Programme. Beyond that, three other
mechanisms help business improve efficiency:
building regulations;
the Carbon Trust (see box below); and
the Enhanced Capital Allowances Scheme21
which enables businesses to claim 100%
first year capital allowances on
investments in energy saving technologies.
3.41 Chapter 2 noted that policies will in future
need to be reviewed in the light of the
emerging EU emissions trading scheme.22
We will also consider whether to extend
the EEC beyond the domestic sector,
perhaps to businesses that do not pay the
19 www.defra.gov.uk/environment/climatechange/trading/
20 The UK emissions trading scheme includes all 6 greenhouse gases. All
savings are expressed in terms of the estimated global warming potential
on an equivalent basis to those from carbon dioxide.
21 www.eca.gov.uk/
22 In addition, the linkage with the integrated pollution prevention and control
(IPPC) directive will need to be clarified.
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Chapter 3: Energy Efficiency
CCL, as a means of improving their energy
efficiency. We would consult fully on such
a proposal if we concluded that it was the
right approach.
In the public sector...
3.42 The public sector accounts directly for only
5% of UK carbon dioxide emissions. But this
sector - in particular the Government itself has a vital role to play in leading by example.
3.43 Government, along with other public sector
organisations, is taking action to improve
energy efficiency. For example:
we will be showing leadership in our own
performance. The central Government
estate has an interim target to reduce carbon
emissions by 1% a year from 1999-2000,
with new targets to be set in 2003,
including on CHP (see chapter 4). Our
review of government procurement has
identified a number of areas where
government purchasing could more
strongly support sustainable development
goals. The review has been considering
how to build energy efficiency into
government procurement and contract
strategies, and identified some specific
categories where products are already
available which meet high energy
efficiency standards. As a result we have
made central arrangements for departments
to purchase goods with high energy
efficiency standards and which provide value
for money in areas such as IT equipment,
boilers, lights and lighting systems,
refrigeration equipment, televisions and
washing machines. We will be implementing
our conclusions later this year;
NHS Trusts are already targeted to reduce
the level of primary energy consumption
by 15% or by 0.15 MtC equivalent from
23
March 2000 to March 2010 ; and
since 2002/3 local authorities have been
required to benchmark their energy use
in operational property and street lighting
and will set local improvement targets
from 2003/04. Along with Registered
Social Landlords, they are also required to
bring their own housing stock up to decent
standards by 2010.
Preparing the market and
helping people make choices...
3.44 With the Devolved Administrations we
will continue to support the work of the
Energy Saving Trust and the Carbon Trust
which provide free advice to households,
businesses and public sector bodies on how
to save energy. Raising awareness and
providing targeted advice and information is a
cost-effective way of overcoming barriers to
energy efficiency. Advice also supports EEC
by encouraging customers to take up the
energy suppliers’ offers. The UK-wide
network of Energy Efficiency Advice Centres
might, over time, evolve to become Local
Sustainable Energy Advice Centres, covering
energy efficiency, renewables and transport
energy use.
23 www.nhsestates.gov.uk/sustainable_development/index.asp
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Encouraging innovation...
Encouraging energy efficiency in
homes, business and the public sector
Government and the Devolved Administrations
provide funding for the Energy Saving Trust and
the Carbon Trust to stimulate the uptake of
energy efficiency in homes, business and the
public sector.
The Energy Saving Trust24 (EST) works in
partnership with manufacturers, retailers, installers,
energy suppliers, local authorities, advice providers
and others. EST seeks to ensure the most
effective delivery of energy efficiency to homes
and small businesses for consumers, the ‘Energy
Efficiency’ branding and marketing programme
aims to transform attitudes to energy efficiency.
25
The Carbon Trust , launched in April 2001, is
developing and implementing programmes to
accelerate the take-up of energy efficiency in the
non-domestic sector. These include the ‘Action
Energy’ information and advice service; an
interest-free loan scheme for small businesses;
and stimulating innovation in new low-carbon
technologies.
3.45 Our forthcoming Housing Bill will propose
a requirement for home sellers to produce
a sellers pack. This will be necessary for us
to comply with the requirements of the EU
buildings directive. The pack will promote
energy efficiency by ensuring all homebuyers
have access to information on energy
performance of the homes they are
considering buying.
3.46 We also need to ensure that industry is
suitably qualified to deliver the measures we
have set out. Our policies to improve training
and skills are outlined in chapter 7.
3.47 We need to develop even smarter ways to
satisfy our energy needs, through better
building techniques and products. Industry
needs to continue to develop more efficient
manufacturing processes that improve resource
productivity. New types of meters will be
needed to enable homes and businesses to
make the best use of on-site electricity
generation through renewables or CHP.
And once products have been developed we
need to get them deployed into the market.
We agree with the recommendation of the
Chief Scientific Adviser’s Energy Research
Review Group that energy efficiency should
be treated as a priority area in which increased
investment in research and development is
particularly likely to yield major breakthroughs.
The research and development to enable
these technologies to make a contribution
in the years to come needs to start now.
The Carbon Trust’s Low Carbon Innovation
Programme26, launched in 2002, provides
funding to enable that to happen.
3.48 The new generation of buildings could have
both minimum energy requirements and
produce their own electricity through new
and emerging technologies such as micro
CHP27, photovoltaics and fuel cells. Some
homes that use little or no energy for heating
already exist in the UK. In 2002-03 we
introduced two new programmes - Community
Energy and Clear Skies (a community and
household renewables scheme) - worth
£60m over three years to support CHP and
renewable energy technologies.
26 www.thecarbontrust.co.uk/foundation/
24 www.est.org.uk
25 www.thecarbontrust.co.uk/thecarbontrust/default.htm
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ENERGY WHITE PAPER Our energy future - creating a low carbon economy
27 Micro-CHP enables the simultaneous production of heating and electricity in
the home and in small businesses.
It is likely to operate in place of a domestic central heating boiler. CHP
policies are further discussed in chapter 4.
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Reporting progress...
3.49 These strands of policy in different sectors
add up to an ambitious strategy for change.
Further work is needed to consult on and put
in place some of the detailed policies that will
deliver it, for example as the scope and
operation of the EU emissions trading
scheme becomes clearer. But we do not
want to lose momentum. So, within a year,
we will publish an implementation plan
that sets out in further detail how we will
deliver the strategy that we have set out
here. This will update and expand on the
measures set out in the Climate Change
Programme. From then on we will report
annually, as part of the follow up to this
white paper, on progress towards achieving
the savings we have set out.
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Chapter 4 Low carbon generation
4.1 A new energy policy demands new thinking
about energy supply. We need a shift towards
energy sources and generation technologies
that produce much less or no carbon. We can
expect to see far more small-scale,
distributed heat and electricity generation.
4.4 This chapter looks at the role that we can
expect renewables and CHP to play; examines
the obstacles to their greater take-up;
reviews the short and longer-term technological
opportunities and the role we can play in
promoting them; and sets out our
conclusions on the role of nuclear power.
4.2 In particular:
The role of renewables...
renewable energy will play a vital part.
To date, renewable energy has expanded
far less in the UK than in some other
European countries. Yet the potential is
huge. For example, the UK has over one
third1 of Europe’s entire potential for
offshore wind energy. And there is great
scope for innovative, local developments,
bringing together low carbon technologies
such as renewable energy and energy
efficient buildings2; and;
What is renewable energy?
Renewable electricity can be generated from wind
power, wave, tidal, solar photovoltaics (PV), hydro
generation, geothermal and biomass (energy from
forestry or crops). These forms of generation
offer an enormous potential resource, particularly
in the UK where our coastline provides extensive
opportunities to use wind, wave and tidal power.
They all produce no carbon at all or, in the case of
biomass, produce only the carbon they have
already absorbed from the atmosphere when
growing. Some forms of waste are also classed
as renewable under the Renewables Obligation.
combined heat and power (CHP), which is
an efficient form of providing heating and
electricity at the same time, also fits into
this wider picture. The UK already has
around 5GW of CHP installed, mainly on an
industrial scale. In the future, we can also
expect to see far more ‘micro-CHP’ efficient, small-scale heating and electricity
generation systems in homes as well as
businesses.
4.3 Although nuclear power produces no carbon
dioxide, its current economics make new
nuclear build an unattractive option and there
are important issues of nuclear waste to be
resolved. Against this background, we conclude
it is right to concentrate our efforts on energy
efficiency and renewables. We do not,
therefore, propose to support new nuclear
build now. But we will keep the option open.
1
BWEA, 2002 www.offshorewindfarms.co.uk/info.html
2
Renewable fuels will also be important in transport. This is discussed in
chapter 5.
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Solar energy can heat water directly, either for hot
water or for space heating in buildings. And heat
from the ground, river water, sewage and even
the air can be put through a heat exchanger for
both water and space heating.
4.5 If we are to achieve a 60% reduction in
carbon emissions by 2050, we are likely to
need renewables by then to be contributing
at least 30% to 40% of our electricity
3
generation and possibly more. We therefore
need to develop a framework which
encourages the development of a wide range
of renewable options and to make significant
changes to our institutions and systems.
3
Options for a low carbon future (Future Energy Solutions, 2003)
www.dti.gov.uk/energy/whitepaper
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Chapter 4: Low carbon generation
We have made a start...
4.6 In January 2000 we announced our aim for
renewables to supply 10% of UK electricity in
2010, subject to the costs being acceptable
4
to the consumer . It is clear that achieving
the 10% target over the next seven years will
be very challenging.
4.8 We are pushing forward these programmes in
consultation with industry. A new Renewables
Advisory Board - comprising representatives
of the relevant industries, the Government and
the Devolved Administrations - has been set up
with a remit to provide expert independent
advice to DTI on renewables issues.
But we need to do still more...
4.7 We have recently put in place a range of new
measures to deliver this. We have:
introduced a Renewables Obligation for
England and Wales in April 20025. This will
incentivise generators to supply progressively
higher levels of renewable energy over
time. The cost is met through higher prices
to consumers. By 2010, it is estimated that
this support and Climate Change Levy (CCL)
exemption will be worth around £1 billion
a year to the UK renewables industry;
exempted renewable electricity from
the CCL;
created a renewables support programme
worth £250m from 2002-2005;
drawn up a strategic framework for a major
expansion of offshore wind; and
created a new organisation within
Government - Renewables UK - to help our
renewables industry grow and compete
internationally.
In addition, from 2005 onwards, the EU
emissions trading system will provide a
further incentive for renewables.
4
Conclusions in response to the public consultation - New and Renewable
Energy: Prospects for the 21st century (DTI, 2000)
www.dti.gov.uk/renew/condoc/policy.pdf
5
The Scottish Executive launched the Renewables Obligation Scotland on 1
April 2002. We make proposals in paragraph 4.64 on integrating the
Renewables Obligation Certificate trading schemes for Great Britain and
Northern Ireland.
4.9 We produce less electricity from renewables
than a number of our European partners.
In 2000, renewables (excluding large hydro
plant and mixed waste incineration) supplied
6
only 1.3% of our electricity, compared with
16.7% in Denmark, 4% in the Netherlands,
3.2% in Germany and 3.4% in Spain. To hit the
10% target we will need to install approximately
10,000MW of renewables capacity by 2010,
an annual build rate of over 1250MW. Only
1200MW of renewables capacity has been
installed in total so far (excluding large hydro).
The measures we have already put in place
will make a major difference to the rate at
which capacity is installed. But they were
only introduced last year and it will take a few
years before these measures impact fully.
4.10 Our analysis and consultation has shown that
we need to strengthen our policy if we are
to ensure that the measures we have put in
place have the maximum impact. We describe
below a number of steps that we will take
to accelerate the take-up of renewables.
4.11 As we have set out, our aim for renewables
is that they should supply 10% of UK
electricity in 2010, as long as the cost to
customers is acceptable. We believe that
renewable sources of energy will increasingly
6
Renewables Information 2002 (IEA, 2002)
www.iea.org/stats/files/ren2002.pdf
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demonstrate that they can meet our energy
needs both economically and in a carbon free
way. Technologies such as onshore and
offshore wind and biomass are potentially after energy efficiency and alongside CHP the most cost-effective ways of limiting
carbon emissions in the longer-term. We
expect industry to respond to the framework
established by the Government and
demonstrate they can achieve our goals at
an acceptable cost. On that basis, our
aspiration is by 2020 to double renewables’
share of electricity from our 2010 target and
we will pursue policies to achieve this.
4.12 We remain firmly committed to the current
Renewables Obligation and will maintain the
level of support it provides as planned until
2027. In 2005/06, we will review progress
and will elaborate a strategy for the decade
to 2020. This will take account of the
experience of carbon prices arising from the
emissions trading scheme and of the costs
of renewable technologies.
4.13 We have already put in place a substantial
renewables support programme worth in total
£250m between 2002/03 to 2005/06. But we
recognise that further funding is needed to
give us the best chance of reaching the 2010
target. We will therefore increase funding
for renewables capital grants by a further
£60m within this period. This is additional
to the extra funding announced in the
2002 Spending Review, which allocated
an additional £38m for energy policy
7
objectives in 2005/06 . This funding will
enable us to increase momentum and to take
forward a broad strategy for renewables
including ramping-up medium-term funding
for offshore wind.
4.14 As well as making progress towards our
2010 target, and paving the way for our 2020
strategy, we need to make sure that we are
planning for the longer-term up to 2050.
We are already reviewing innovation
spending, including that for renewable
energy, across government. With respect to
renewable energy, we will review the barriers
to successful innovation across the range
of renewables technologies and will set out
a programme for developing, with industry,
strategies for the successful application of
those technologies in the liberalised energy
market. We expect this work to cover
advanced conversion technologies for
biomass, wave and tidal, building-integrated
renewables, and hydrogen and fuel cells.
Innovation, research and
development are crucial...
4.15 Key to realising the full potential of
renewables over time is the generation of
innovative ideas which will bring on new
technologies as well as improving existing
ones. The Chief Scientific Adviser’s Energy
Research Review Group8 recommended that
more needed to be spent on energy research
and development and singled out two
renewables technologies (solar PV and wave/
tidal power) as areas in which increased
investment was particularly likely to lead to
step-change breakthroughs. We accept these
recommendations and have already
increased funding for basic research into
renewables (see paragraphs 4.60 and 4.61).
8
7
46
Compared with 2002/03
ENERGY WHITE PAPER Our energy future - creating a low carbon economy
Report of the Chief Scientific Adviser’s Energy Research Review Group,
Office of Science and Technology, 2001.
www.ost.gov.uk/policy/issues/csa_errg/main_rep.pdf
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Chapter 4: Low carbon generation
Combined heat and power
also has significant potential...
4.16 CHP is an efficient form of providing heating
and electricity at the same time. CHP’s overall
fuel efficiency is around 70-90% of the input
fuel - much better than most power stations
which are only up to around 40-50% efficient.
It enables a very wide range of energy users,
from heavy industry down to individual homes,
to save money and help the environment by
reducing overall carbon emissions. It is also
the cornerstone of many community energy
schemes, providing heating, electricity and in
some cases cooling to a wide range of users.
But the low prices in the wholesale electricity
market and the increases in wholesale gas
prices over recent years are adversely
affecting new CHP developments. A number
of proposed new power stations, which
already have planning approval, are awaiting
electricity price rises and/or gas price
reductions before they go ahead.
4.17 We have set a target of achieving 10GWe
of Good Quality CHP9 by 2010. Good progress
has been made over the last decade and
4.8GWe is currently installed. Achieving the
Government’s target could save a further
1.25MtC per year. We remain committed
to a target of 10GWe of Good Quality CHP
capacity being installed by 2010.
4.18 In addition to the measures we have
already put in place to support CHP, we will
introduce a number of further measures to
help address the current market difficulties
and support the achievement of our target:
9
Good Quality CHP is CHP generation that meets efficiency standards
prescribed in the Government’s CHP Quality Assurance programme.
we will undertake a review of the existing
guidance on information required to
accompany power station consent
applications. Applicants will need to provide
significant evidence clearly demonstrating
they have considered all economically viable
options for CHP and community heating;
we will continue to emphasise the
benefits of CHP and community heating
whenever Planning Policy Guidance,
Regional Planning Guidance or
Sustainable Development Guidance is
introduced or reviewed;
it is vital that NETA does not discriminate
against smaller generators, including CHP.
Some changes have already been made.
We expect OFGEM to continue to work
with smaller generators and ELEXON to
ensure that the administrative procedures
for the Balancing and Settlement Code
under NETA are fully accessible to smaller
generators. We will work with OFGEM to
keep these developments under review
since the existence of a level playing-field
for smaller generators, including CHP and
renewables, is essential if our ambitious
targets are to be met;
in the draft CHP Strategy we announced
that we would consider setting targets for
Government Departments to use CHP
generated electricity. We will now proceed
with this. Over the coming months we
will consider the nature and extent of
such a target or targets and announce
our conclusions in the energy section
of the Framework for Sustainable
Development on the Government Estate
that we hope to publish later this year.
We will also encourage other parts of the
public sector to consider whether setting
CHP targets would be appropriate;
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as we consider and consult on the
expansion of the energy efficiency
commitment (EEC) for households from
2005 onwards and on whether to
extend the EEC beyond the household
sector (see chapter 3), we will explore
the opportunities for incentivising CHP
technologies;
we will support field trials designed to
evaluate the benefits of micro-CHP;
we recognise that the CHP target will
require sustained effort from both the
private and public sectors, and can
therefore only be achieved with the active
collaboration of all the partner
organisations which have a contribution to
make. We have invited the Energy Saving
Trust and the Carbon Trust to review
their current and future programmes
to ensure that they reinforce the delivery
of the Government’s CHP target; and
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over time the measures outlined in this
white paper - in particular emissions
trading - will encourage lower-carbon forms
of generation and more efficient use of
fuels. Under the UK Emissions Trading
Scheme, carbon savings from CHP can
already be traded, and we will work on
a framework for pilot projects within
the Scheme for which CHP projects may
be eligible. This work would take into
account the forthcoming EU Directive on
emission reduction projects. Furthermore,
the EU emissions trading scheme will
encourage low-carbon technologies,
including CHP. And we expect to see a
new approach to electricity generation
developing that recognises and encourages
local generation opportunities.
ENERGY WHITE PAPER Our energy future - creating a low carbon economy
4.19 These measures will be elaborated in the
final version of our CHP Strategy to be
published in the course of this year, on which
we look forward to a continuing and
constructive dialogue with industry.
4.20 We will also monitor and reporrt on
developments on CHP as part of the
arrangements described in chapter 9.
Structural barriers to
renewables and CHP...
4.21 Many renewable and CHP generators,
because of their small size and/or location,
need to be connected to local distribution
networks rather than the national
transmission network. To achieve our targets
for higher levels of renewable generation and
CHP plant, distribution networks will have to
be capable of accommodating many more
directly connected generators. Very
substantial changes will be needed in the
way in which our distribution networks are
designed, organised and financed - greater
than anything we have seen in the last 50
years. Distribution Network Operators
(DNOs) will also need to take a more
proactive approach to distributed generation.
4.22 During the white paper consultation,
distributed generators expressed concern
that their projects were being unduly delayed
because they could not obtain quick and easy
connections to the distribution network.
Under the present price control rules there is
no financial incentive for the DNOs to
connect distributed generation to their
networks. We therefore believe that the
regulatory framework needs to be amended
so that the DNOs connect and use higher
levels of distributed generation.
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Chapter 4: Low carbon generation
4.23 OFGEM has started working with the DNOs
to address these issues10. OFGEM is
committed to publishing the detail of an
incentive framework for connecting and
utilising distributed generation later this
year, for implementation in April 2005.
This will help distributed generators to obtain
quicker and easier connections to the
distribution network in the interim period to
the next price control and beyond. DNOs
need to work closely with the industry to
exploit the existing infrastructure by using
innovative engineering solutions when
connecting higher levels of distributed
generation.
4.24 We are also working with OFGEM to
address the administrative burdens placed
on smaller generators and to ensure that
they are not unfairly disadvantaged in their
relations with local suppliers11. Through the
Distributed Generation Co-ordinating
Group12, we are also following up a range
of wider changes designed to facilitate
distributed generation. We will report
progress on this in the follow-up to the
white paper (see chapter 9).
4.25 We need to develop the existing transmission
network to exploit our massive onshore and
offshore wind resources. Transmission
companies must start preparing now to
10 In January 2003 OFGEM published its initial thoughts on both the principles
for developing the regulatory framework for the next distribution price control
and on interim arrangements for the period to April 2005 when the next
price control is implemented. www.ofgem.gov.uk/docs2003/dnoletter_jan.pdf
11 OFGEM has recently launched a help facility for smaller generators under
NETA www.ofgem.gov.uk
12 The DTI and OFGEM created and jointly chair the Distributed Generation
Co-ordinating Group. The Group is concerned with a wide range of issues
related to the connection and operation of distributed electricity generation
in Great Britain. The Group is also considering recommendations made by
an earlier group (Embedded Generation Working Group) on how to
encourage DNOs to connect higher levels of distributed generation
www.distributed-generation.org.uk
strengthen the network to enable the UK to
increase substantially its deployment of
renewables. The regulatory arrangements
are crucial to our ability to deliver
infrastructure which will, in turn, permit the
development of renewable generation
throughout the country - not least in those
peripheral areas where natural resources
are often greatest. Discussions are currently
taking place between OFGEM and the
transmission operators on plans to upgrade
the transmission network across the whole
country. We are also consulting on network
issues across Great Britain (GB) in the
context of the forthcoming British Electricity
Trading and Transmission Arrangements
(BETTA) legislation (as discussed in
paragraphs 4.28 and 4.29). It is essential to
create a network infrastructure capable of
supporting our environmental objectives.
4.26 We are establishing with OFGEM a joint
working group on environmental issues13
modelled on the successful joint working
group on security. One of the key priorities
for the group will be to monitor network
operators’ progress in modernising the
transmission and distribution networks to
meet our carbon aims.
The New Electricity Trading
Arrangements (NETA) are
evolving to respond to industry
concerns...
4.27 During the first few months of NETA some
generators, in particular renewables and CHP,
were exposed to very high costs as a result
of the mechanism used to balance the
13 As discussed in chapter 9.
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electricity system. NETA is evolving to deal
with these problems. It is important that the
balancing mechanism reflects costs and that
the system as a whole provides a realistic
route to market for all generators. We have
worked with OFGEM to make the balancing
mechanism more genuinely reflect costs.
A number of amendments have been made
since NETA was introduced14. This has helped
all players but especially smaller generators
such as renewables and CHP to operate more
effectively in the market. OFGEM has also
approved a proposal to introduce in February
2003 a further amendment that should more
accurately reflect the costs of being out of
balance15. OFGEM is also committed to
continuing to work with smaller generators to
ensure that the Balancing and Settlement
Code is fully accessible to smaller generators16.
We will continue to keep the operation of
these aspects of NETA under close review.
We discuss the impact of NETA on the
electricity industry as a whole in chapter 7.
14 Modification P12 to the Balancing and Settlement Code (BSC) was
implemented on 2 July 2002. This has the effect of reducing gate closure
to one hour and has helped all participants (and especially less predictable
generators) better manage the risk of being out of balance.
15 Modification P78 to the Balancing and Settlement Code (BSC).
16 The Balancing and Settlement Code covers the trading, balancing and
subsequent settlement of electricity.
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ENERGY WHITE PAPER Our energy future - creating a low carbon economy
What is NETA?
The New Electricity Trading Arrangements (NETA)
were introduced in England and Wales on 27
March 2001. NETA replaced the Electricity Pool
whose centralised, inflexible arrangements for
setting wholesale electricity prices meant that
prices failed to reflect falling costs and increased
competition.
NETA put in place market-based trading
arrangements, more like those in other
commodity markets. The majority of electricity is
traded through bilateral contracts where prices are
agreed between parties and on power exchanges,
the remainder, around 2%, is traded through the
NETA balancing mechanism.
The Balancing Mechanism has two functions.
As electricity cannot be stored, the transmission
system has to be balanced on a second by
second basis to ensure system security. The
National Grid Company (NGC) operates a
balancing mechanism to do this. The 2% of
electricity traded through the balancing
mechanism is due to generators and suppliers
being out of balance with their contracted
position; either a generator not producing enough
or too much electricity or suppliers not consuming
enough or too much electricity. NGC then has to
accept offers for more electricity, or bids to
produce less. These additional costs to NGC are
passed on through imbalance charges.
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Chapter 4: Low carbon generation
BETTA...
4.28 We have announced that we intend to bring
forward legislation to create a wholesale
electricity market for GB as soon as
Parliamentary time allows. The development
of these new arrangements, is being
undertaken with OFGEM and with the
involvement of industry. For planning
purposes, we are working towards the
implementation of BETTA in October 2004.
We intend to implement BETTA by April 2005
at the very latest.
4.29 BETTA will mean that Scottish domestic and
business customers will benefit from the
same levels of competition that are now
established in England and Wales. The single
set of trading rules, connection policies and
transmission charging arrangements under
BETTA will reduce barriers for independent
generators across GB to getting their power
to market. BETTA will help to create a diverse
generating base in GB and encourage new
transmission capacity, helping to support
renewables development.
Planning needs to be
streamlined and simplified ...
4.30 Many of those who responded to the white
paper consultation saw planning as one of
the big obstacles to new renewables. We
recognise that this is a serious problem for
renewables. The Office of the Deputy Prime
Minister (ODPM) will shortly publish new
planning guidance on renewables (PPS22)
17
for England . A separate guide containing
advice on best practice will also be
published. These documents will provide
guidance to local planning authorities and
developers about the best way to promote
renewables through the planning system as
well as encouraging a strategic approach to
the deployment of renewable projects
through regional planning guidance and
development plans. We will also be
consulting on a new regional-level strategic
approach to energy issues, including
renewables, which we expect will incorporate
regional targets, as discussed further in
chapter 9. This approach will help to
encourage regional bodies as well as local
authorities to examine strategically the
resources and opportunities for renewable
projects within their areas and what they can
do to develop them in their region.
4.31 ODPM, in partnership with other
government departments, will be examining
how to bring consideration of the use of
renewables and energy efficiency in
developments more within the scope of the
planning system, in the context of the
review of PPG22 and the Government’s wider
planning reforms, and in a way that does
not impose undue burdens on developers.
4.32 We need better information on what is
happening on the ground. We will therefore
work with local planning authorities and
others to obtain better statistics on the
number of renewable projects that are
achieving planning approval and why
others are being rejected.
17 The Welsh Assembly Government is currently revising its national planning
guidance on renewables (TAN8) and has commenced the process of
developing a Wales spatial plan. The Scottish Executive updated its national
planning guidance (NPPG6) in 2000.
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4.33 We have published legislative proposals18 to
streamline the public inquiry process for
Major Infrastructure Projects in the planning
process in England by allowing lead
inspectors to appoint further inspectors to
share the work and allowing issues to be
considered concurrently in inquiries rather
than sequentially. We will also apply these
principles to decision-making for major
energy projects in England and Wales, where
consents are awarded by the Secretary of
State for Trade and Industry.19 This should
help streamline planning processes for large
renewable energy developments and other
large generation plant and help major
upgrades of the transmission network.
4.34 There is currently no guidance on the
implications for land use planning at local
level for projects related to energy reliability.
We will prepare a separate guidance
note focusing on this for local planning
authorities.
distributed generation, in gaining acceptance
of new infrastructure and in developing
opportunities for local energy delivery.
Developers need to continue to engage local
planning authorities and work directly with
communities. We have recently launched
Clear Skies, a three-year capital grant
programme worth £10m, for schemes such
as solar water heating and biomass heat
which have a strong community or household
focus. The Scottish Executive has also a
similar community and household capital
grants scheme in Scotland worth £3.7m over
3 years. Defra’s Community Energy scheme,
which has a two-year budget of £50m, helps
install and refurbish community heating
systems. The Countryside Agency launched
the Community Renewables Initiative in 2002
to help people to influence and benefit from
renewable energy. All of these schemes have
a key role to play in helping to breakdown the
barriers to public acceptability of renewables
by providing local residents with a direct
benefit from the renewables development.
People make the difference ...
Community action in practice
4.35 Increasing the deployment of renewables will
depend on people supporting local projects20.
The public consultation suggests people are
keen on renewables, particularly for their
contribution to tackling climate change.
But they feel that they do not know enough
about the impact of renewables in practice.
4.36 The white paper consultation has shown the
value of community engagement. This will be
crucial for the development of new forms of
18 Planning and Compulsory Purchase Bill
www.publications.parliament.uk/pa/cm200203/cmbills/012/2003012.htm
19 These powers are devolved in Scotland.
20 Renewable Energy in the UK (PIU, 2001)
www.piu.gov.uk/2001/energy/Renewener.shtml
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National Wind Power’s practice is to establish
community funds at each operating wind farm in
consultation with local communities and
councillors. These funds benefit the community
and typically include student sponsorships,
equipment for schools and village halls repairs.
One such example is the provision of IT and other
equipment worth up to £60,000 to support 19
schools near the Bears Down Wind Farm in
Cornwall. Local schools also received two days
energy efficiency training as part of a £30,000
energy efficiency scheme funded by the wind
farm and carried out by the Cornwall Energy
Advice Centre.
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Section Two
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Chapter 4: Low carbon generation
4.37 We see a clear benefit in local communities
becoming producers, as well as consumers,
of energy, establishing and benefiting from
the local ownership of some forms of
generation. To help promote ideas and good
practice we will collate and publish examples
of projects in which developers have gained
added value by taking innovative
approaches to engaging and working with
communities, in partnership with local
government and the renewables industry.
We will simplify the procedures
for accommodating our national
security needs...
4.38 The Ministry of Defence (MoD) needs
to make sure that windfarm developments
do not impair operational needs including
training and radar monitoring. MoD has
objected to a third of all recent on and
offshore wind energy proposals21. We need
to work with the industry to reduce this.
4.39 To address these issues, MoD:
has contributed to the issue recently of
new guidelines for windfarm developers
through the Wind Energy, Defence and
Civil Aviation Working Group22, designed to
increase the transparency of the process
for assessing wind proposals;
will provide more central guidance to those
reviewing applications, develop a help line
for the industry and shorten proposal turnaround times from the current 6-8 weeks;
21 Ministry of Defence (2002).
22 Comprising DTI, MoD, the Civil Aviation Authority, the British Wind Energy
Association, the Devolved Administrations and others with an interest.
will provide advice to developers on any
adjustments that could be made to the
location of a wind farm in order to make it
acceptable to MoD. If this is not possible,
MoD will explain to developers the problem
of siting a wind farm in the locality; and
is supporting research to model the effect
of turbines on radar and to identify ways
in which adverse impacts could be
reduced, including technical adaptations
to turbine design.
4.40 MoD is also ready to engage with local
authorities and regional bodies as they move
towards considering the best sites for wind
farms in the longer-term when they begin to
develop their regional strategies for energy,
as discussed in chapter 9.
Learning to handle
intermittency...
4.41 Renewables contribute to certain aspects of
security of supply. Supplies will not be
disrupted by international crises. But some
will create additional system complications,
depending on the extent to which they are
intermittent (wind energy, wave energy, tidal
and solar) and on the types of generation
they displace. Intermittency causes additional
system costs. And as the proportion of
intermittent generation increases, the cost of
maintaining stable supplies also increases23.
23 The additional system costs - attached to transmission, the distribution
network and balancing generation and demand - of 20% and 30% of
electricity supplied by intermittent generation is equivalent to a maximum
of £0.9/MWh and £2.20/MWh respectively. It is quite possible that technical
developments in storage, fuel cells and load management may by 2020
reduce such costs. Quantifying the system costs of additional renewables in
2020 (Ilex, 2002). www.dti.gov.uk/energy/developep/080scar_report_v2_0.pdf
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4.42 These costs need to be managed and new
ways found to minimise them. We are
already funding research into this through the
DTI’s Renewable Energy and the Engineering
and Physical Sciences Research Council’s
(EPSRC)24 SUPERGEN25 programmes. As part
of our current capital grant programme we
allocated in 2002 an additional £4m to
facilitate the demonstration of new control,
storage and metering technologies.
Renewable technologies
are at different
stages of development...
4.43 We need to scale up substantially our
deployment of renewables in order to secure
economies of scale and reduce costs
significantly. Some renewable technologies
are close to commercial deployment and
should be pulled through to market by the
range of measures that we have in place.
With support from the Renewables
Obligation and the Renewables Obligation
Scotland, onshore wind is already economic.
But we are also strongly committed to
supporting the innovation that will be
fundamental to bringing forward new and
emerging technologies. The remainder of this
chapter looks at what more needs to be done
for us to fully establish a wide range of
renewable options to deliver our carbon aims.
Offshore wind about to take off...
4.44 We have more wind off our coasts than
26
anywhere else in Europe . Given our
experience in offshore engineering, we should
be able to expect offshore windfarms to
make a strong contribution to our carbon aims.
4.45 Developers have entered into agreements for
leases for windfarm sites around the UK
coast with a total capacity of at least
1400MW of renewable energy, sufficient to
power a city the size of Greater Manchester.
The offshore wind industry considers a
27
further 3000-4000MW can be built by 2010.
4.46 Only 250MW28 of offshore wind capacity has so
far been installed world-wide. 4MW of this is
in UK waters. Although the long-term potential
looks promising, the economics of offshore
wind are very uncertain. In the short-term
significant fixed costs have to be borne
before installation can begin. Our programme
of capital grants has started to address this.
4.47 Delivering our carbon aims will require the rapid
expansion of offshore wind not only within
territorial waters but beyond. We published in
29
November 2002 a consultation document ,
Future Offshore, which proposes a strategic
planning framework to harness the significant
potential of offshore wind. The Future Offshore
consultation document includes proposals for
the provision and regulation of offshore
infrastructure for transmitting electricity.
We will work with OFGEM, developers and
the transmission companies, over the
26 BWEA, 2002 www.offshorewindfarms.co.uk/info.html
27 BWEA, 2002
28 BWEA, 2002
24 Government’s leading funding agency for research and training in
engineering and the physical sciences www.epsrc.ac.uk
25 Sustainable Power Generation and Supply initiative www.epsrc.ac.uk
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29 Future Offshore: A consultation of the future framework for developing
offshore wind farms (DTI, 2002)
www.dti.gov.uk/energy/leg_and_reg/consents/future_offshore/index.shtml
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Chapter 4: Low carbon generation
A Renewables Timeline
The timeline below shows the key dates on the
critical path to help us to achieve our 2010 10%
target and to double the renewable’s share of
electricity generation in the decade after.
2000
2005
2010
2001/06:
Bio-energy capital grants and Energy Crops
scheme to develop biomass generating capacity.
2015
2020
Biomass may be
economically viable
in mid-2010’s
2002 – 2012:
Implementation of solar PV demonstration
programme, in line with our competitors, as set
out in the “Opportunities for All” white paper.
PV may be
economically viable
post-2020.
2002 - 2027: Operation of the Renewables Obligation
2003:
Second round
of allocation of
offshore wind sites
2005:
Installation of offshore
wind farms from first
round of allocation of
offshore wind sites
2005/06:
We review the
Renewables Obligation
2003:
OFGEM sets the
incentive
framework for
distributed
generation, for
implementation in
April 2005
2000
2005 onwards:
Installation of further offshore wind farms
following the second and subsequent rounds
of allocating offshore wind sites.
2010 - 2015+
Wave and tidal
technologies
may become
commercially viable
2005:
Next distribution price
control implemented
2005
2010
2015
2020
2002:
2010 target:
2020:
Renewables supply 1.5%
of UK electricity (excluding
large hydro and mixed
waste incineration). Onshore
wind (500MW) and Landfill
Gas (400MW) largest
contributors.
Renewables supply 10% of
UK electricity.
Onshore and offshore wind
may be the largest
contributors to the
renewables generation mix
in 2010.
Renewables supply around
20% of UK electricity.
Onshore and offshore wind
and biomass may be the
largest contributors to the
renewables generation mix
in 2020.
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coming months, to take this issue forward.
A second round of windfarm site allocations
is planned for spring 2003, focusing on three
strategic areas of the sea within territorial
waters, informed by a strategic
environmental assessment.
4.48 To enable further rounds to extend the
opportunity for developers to exploit areas
beyond the UK 12-mile zone we will also
bring forward legislation as soon as
possible to enable the granting of licences
for offshore windfarm developments
beyond territorial waters. We will identify
and assess the difficulties that might be
posed for aviation and other military and
civil interests before we offer areas of the
sea to the wind industry for development.
Biomass and waste technologies
need to gain momentum...
4.49 Biomass30 and waste can be used for
electricity, heat and liquid fuels. Unlike wind,
biomass and waste generation is flexible - it
can be generated at any time. A strong
biomass supply chain can also revitalise rural
communities, offering diversification
opportunities for farmers and foresters as
well as job opportunities in growing, supply
and electricity plant building. We are
supporting biomass projects through our
3-year £66m Bioenergy Capital Grants
Scheme and through our £29m Energy Crops
Scheme, to help farmers and foresters
establish energy crops.
30 Biomass is anything derived from plant or animal matter and includes
agricultural, forestry or wood wastes/residues and energy crops. Energy
crops are crops grown for the purpose of energy generation, such as short
rotation coppice willow and miscanthus.
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4.50 To develop a stronger stimulus to provide a
biomass supply chain, we will undertake a
statutory consultation in 2003 of the
current requirement under the Renewables
Obligation that by 1 April 2006 75% of
the biomass in co-fired stations should be
energy crops31.
Elean Power Station the UK’s first straw-fired power plant
Elean Power Station at Sutton near Ely,
Cambridgeshire, is the UK’s first straw-fired
power plant. With an electricity output of 36MW,
it is the world’s largest such facility. The power
station will generate enough power to heat and
light 80,000 homes.
The 200,000 tonnes/per year of straw needed to
fuel the facility is being procured through longterm contracts with farmers and contractors
located within a 50-mile radius. Running currently
on 100% straw, Elean Power Station also has the
capability of using a range of biofuels and up to
10% natural gas. Whatever the exact make-up of
its fuel in the course of its life, the plant
represents an important first in the development
of renewables in the UK and a significant step
forward towards the Government’s objectives for
renewables deployment over the coming years.
31 Stations that are powered by co-firing may have an important role to help
deliver biomass and energy crops and in delivering renewable energy
capacity quickly at relatively low cost. Under the current Renewables
Obligation arrangements, electricity generated from biomass by co-firing in
existing generating stations are eligible for Renewable Obligation Certificates
(ROCs) subject to two restrictions. Only electricity generated before 1 April
2011 will be eligible and from 1 April 2006 at least 75% of the biomass
must consist of energy crops.
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4.51 The Government’s Strategy Unit published a
report in November 200232 on its review into
the delivery of our Waste Strategy 200033.
The report includes the recommendation that
we should ensure that there are financial
incentives to develop new waste technologies,
such as pyrolysis, gasification and anaerobic
digestion. We are now considering the
recommendations of the report.
Wave and tidal are further off
but potentially very important ...
4.52 Wave and tidal technologies are rather further
from commercialisation, with a number of
competing designs. The UK is at the forefront
of these technologies. On the island of Islay,
we have the only commercially operational
wave-power station in the world. Yet progress
from research and development to more general
commercial application has been slow. But, as
recognised in the Chief Scientific Adviser’s
review, the UK has an opportunity here to
develop world-leading expertise.
4.53 Recognising this, we are supporting industry
to develop prototype wave and tidal
technologies in projects off the Western
Isles and Devon coasts. We are also
supporting, along with the Scottish
Executive and others34, the establishment
of a marine test centre off the coast of the
Orkney Islands. This centre, a first in
Europe, is expected to open later this year.
We are determined that wave and tidal
technologies should be given the opportunity
to play the fullest part they can in the
32 Waste Not, Want Not (Strategy Unit, November 2002)
www.piu.gov.uk/2002/waste/report/index.html
33 Waste Strategy 2000 for England and Wales (Defra, 2000).
www.defra.gov.uk/environment/waste/strategy/cm4693/pdf/wastvol1.pdf
expansion of generation from renewables.
This in turn can create another significant
opportunity, with world-wide application, for
our manufacturing sector.
Energy from the Oceans The Stingray Project
Funded under the DTI’s Renewable Energy
Programme, a Northumberland-based company
The Engineering Business has successfully
developed its ideas for a tidal stream generator
system ‘Stingray’ from concept through to
demonstration stage. In September 2002,
following early design work carried out under
Phase 1 of its project, a 150kW full-scale
prototype weighing 180 tonnes was built, installed
and successfully operated on the seabed in Yell
Sound, Shetland.
With early results encouraging, the technology
will continue to be developed with further
offshore testing planned this year. The company
has plans to commence installation of a 5MW
‘Stingray’ power station with connection to the
local distribution network in summer 2004.
4.54 Large-scale tidal barrages have the potential
to make a significant contribution to carbon
reductions in 2020 or beyond. But such
schemes have a very substantial impact on
the local and regional environment and are
very expensive, though some of the costs
could be offset by other benefits. It is clear
that plans for a Severn Barrage would raise
strong environmental concerns and we doubt
if it would be fruitful to pursue it at this
stage. Tidal barrages may be capable of
offering major renewable projects which will
help us reach our goals and we will continue
to explore opportunities.
34 The Carbon Trust, Scottish Enterprise, Highlands and Islands Enterprise,
Orkney Islands Council.
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Solar PV is a potentially
very large market...
4.55 The costs of solar PV technology have fallen
substantially over the last 25 years and are
widely expected to fall further as global
markets expand. We committed in the
35
Opportunities for All white paper to
embarking on a major initiative with industry
and others to achieve a UK solar PV
demonstration programme in line with those
of our main competitors. The current
programme, worth £20m over 3 years, is the
first stage of this process.
4.56 At present solar PV qualifies for the
Renewables Obligation. In practice almost all
schemes are too small to generate the
minimum 0.5MWh a month to qualify for a
36
ROC . We will explore whether there is
scope through the European renewables
Directive to help bring smaller sources of
generation within the Renewables
Obligation. Through the Distributed
Generation Co-ordinating Group, we are
also exploring the scope for developing
simpler metering arrangements to help
micro generators (including solar PV)
obtain a fair value for the surplus electricity
they export to the grid.
4.57 The Chief Scientific Adviser’s Energy Research
Review Group also identified solar PV as a key
research area and specifically recommended
that work on novel emerging systems, such
as organics and polymers, could offer major
decreases in the costs of production.
Fuel cells offer a
longer-term advantage...
4.58 Fuel cells produce electricity from hydrogen
and air, with water as the only emission.
Potential applications include stationary
power generation, transport (replacing the
internal combustion engine - as described
more fully in chapter 5) and portable power
(replacing batteries in mobile phones, laptop
computers etc). Fuel cells also have the
potential to help renewables produce more
stable supplies. Hydrogen can be generated
when electricity demand is less than that
being generated by the renewable energy
source. This can then be converted to
electricity via the fuel cell when electricity
demand exceeds that being generated by the
renewable energy source.
4.59 To ensure that the UK is at the cutting-edge
of fuel cells technology, we will:
following the Fuel Cells Market Study37
funded jointly by DTI and the Carbon
Trust, work with industry to produce a
Fuel Cells Vision for the UK;
launch a new industry network, Fuel
Cells UK, in May through which the
industry can collaborate and work with
us in implementing the vision (see Fuel
Cells UK box);
develop a web-based fuel cells exchange
so that global information can be
accessed quickly and easily by UK industry;
35 Opportunities for all in a World of Change (DTI, 2001)
www.dti.gov.uk/opportunityforall/pages/contents.html
36 Eligible renewable generators receive ROCs for each MWh of electricity
generated. These certificates can then be sold to suppliers. In order to fulfil
their obligation, suppliers can either present enough certificates to cover
the required percentage of their output, or they can pay a “buyout” price of
£30/MWh for any shortfall. All proceeds from buyout payments are recycled
to suppliers in proportion to the number of ROCs they present.
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37 Review of Fuel Cells Commercial Potential for DTI and the Carbon Trust
(E4Tech, 2003) www.dti.gov.uk/energy
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develop a research programme dedicated
to fuel cells to be funded jointly by
EPSRC, DTI and the Carbon Trust;
review the objectives of the DTI research
and development programme;
encourage UK organisations to work
with the DTI’s International Technology
Service to identify potential partners and
to participate in European collaborative
research and development (R&D) projects
including the EUREKA programme and to
complement work by National Contact
38
Points to support participation in the
EU’s 6th Framework Programme;
in collaboration with the EPSRC, review
the supply of doctorates and MScs with
the requisite skills; and
working with the Carbon Trust, DTI’s
Small Business Service and Regional
Development Agencies, support new
start-ups in this sector.
Fuel Cells UK
Interest in fuel cells across the world has never
been higher as commercialisation draws closer.
The UK has a significant number of fuel cell
players but there is no established forum to
enable the industry to come together and to raise
its profile. Fuel Cells UK is being established to
foster the development of a UK industry, to raise
the profile of fuel cell activity in the UK, and to act
as central liaison point for national and
international activity.
Fuel Cells UK will become the first point of
contact for information on UK fuel cell activities.
It will develop and distribute relevant promotional
material (including a UK capabilities guide) and
will foster partnering by linking potential partners
together. Its activities will be guided by a highlevel steering group which will ensure that its
activities have maximum relevance for industry.
Fuel Cells UK will work closely with existing and
new initiatives across the UK to build synergies
and optimise the outcomes for both the industry
and other stakeholders (including Government).
One such DTI initiative will be Fuel Cells Forum, a
network for industry, academia, venture capitalists
and Government stakeholders in fuel cells to
exchange and disseminate information.
Fuel Cells Forum will enable organisations to
highlight their activities, and for industry to pose
challenges to the research community. The DTI’s
International Technology Service offers the
possibility for stakeholders to identify and engage
overseas partners and keep abreast of
developments overseas.
38 National Contact Points provide an information and assistance service for
UK organisations seeking R&D support from the EU’s Framework
Programme for Research and Development.
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Research is needed to
give us new options for
the longer term...
4.60 Technology will almost certainly surprise us
in the field of renewables as elsewhere.
To expand the knowledge base we have
already provided an extra £8 million to the
Research Councils specifically for
renewables research over the next three
years. This is part of a new £28m
investment in support of sustainable
energy research. The money will be spent
on fundamental research into a range of
technologies, consistent with the
recommendations of the Chief Scientific
Adviser’s Energy Research Review Group.
4.61 We also need to support industry in taking the
new ideas generated in the laboratory to
the point where they can enter the market.
We have increased the amount available to
support industrially-led research and
development through the DTI (£19m per year)
and the Carbon Trust (£5m per year).
Renewables offer big
opportunities for UK business...
4.62 The growth in the global renewables market
offers considerable opportunities for UK
companies to create jobs in manufacturing,
services and supplies and to improve their
export capabilities. The development of
windfarms is already producing new jobs in
manufacturing39. Renewables UK will help
to secure benefit for UK industry in the
renewables market.
39 The world’s leading wind turbine manufacturer, Vestas, established a
turbine manufacturing base at Campbeltown in the Kintyre peninsular
creating 130 jobs. Cambrian Engineering is establishing a wind turbine
tower and offshore pile manufacturing and assembly operation at Arnish
in the Isle of Lewis, expected to create 65 jobs.
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4.63 If the UK is to compete globally, projects
need to move out of the R&D stage into
commercialisation. We have a role to play in
facilitating this. Through Renewables UK
we will develop by April 2004 programmes
and tools to assist the UK renewables
supply chain.
Widening the renewables
obligation certificate market...
4.64 The Northern Ireland Executive has recently
brought forward an Energy Bill containing
provisions to introduce a Northern Ireland
Renewables Obligation. We are considering
with the Scottish Executive how we
might devise a system allowing mutual
recognition of Renewable Energy
Certificates under the Renewables
Obligation and those in Northern Ireland
under their future Obligation.
The international community
has a role to play...
4.65 The World Summit on Sustainable
Development (WSSD) took place in
Johannesburg in August/September 2002.
The Summit brought together 180 countries
who reaffirmed the international community’s
commitment to sustainable development
through action to provide access to clean
water, sanitation and sustainable energy, and
to protect biodiversity, the oceans, fish
stocks and natural resources. The Summit
agreed joint actions urgently and substantially
to increase the global share of renewable
energy sources.40 At the Summit the Prime
Minister announced that the UK’s Export
40 www.johannesburgsummit.org/
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Credit Guarantee Department will make
available £50m per year to renewable energy
exports to developing countries. The
Sustainable Energy Exports Committee will
work to deliver this commitment. At WSSD,
the UK also launched and is taking forward an
international partnership to promote the
growth of renewable energy and energy
efficiency systems (REEEP).
A Renewable Energy and Energy
Efficiency Partnership (REEEP)
REEEP aims to deliver our WSSD commitments
on energy and take forward the recommendations
of the G8 Renewable Energy Task Force for
removing the policy, technical, market and regulatory
barriers to renewable energy and energy efficiency.
Interested partners include governments from
OECD and non-OECD countries, businesses,
non-Governmental organisations and international
agencies committed to accelerating the market
development of renewable energy and energy
efficiency technologies.
The partnership will focus on:
state-of-the-art policies for power sector reform
and building on best regulatory practice to
promote distributed energy systems;
innovative financing and tradable certificates
for renewable energy and energy efficiency
projects; and
evaluation and awareness raising of the noncarbon reduction benefits of renewable energy
such as energy security, rural development and
export opportunities
4.66 We will integrate the WSSD agreements
and relevant follow-up into UK policy and
action with a clear focus on the use of
technological innovation to deliver
sustainable development. We will work
with like-minded states to promote the
deployment of renewable sources of energy
in developing countries, building on the
initiatives launched at WSSD as well
as encouraging investment in appropriate
energy infrastructure.
We do not propose
new nuclear build...
4.67 As chapter 1 makes clear, our priority is to
strengthen the contribution that energy
efficiency and renewable energy sources
make to meeting our carbon commitment.
We believe that such ambitious progress is
achievable, but uncertainties remain.
4.68 While nuclear power is currently an important
source of carbon free electricity, the current
economics of nuclear power make it an
unattractive option for new generating
capacity and there are also important issues
for nuclear waste to be resolved. This white
paper does not contain proposals for building
new nuclear power stations. However, we
do not rule out the possibility that at some
point in the future new nuclear build might be
necessary if we are to meet our carbon
targets. Before any decision to proceed
with the building of new nuclear power
stations, there would need to be the fullest
public consultation and the publication
of a white paper setting out the
Government’s proposals.
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But we are not seeking to shut
existing stations prematurely...
4.69 The financial problems of the private sector
nuclear electricity generator, British Energy,
are well known. These problems are about a
company, not about the future of nuclear
power. Our main objectives with regard to
British Energy continue to be the safety of its
nuclear power stations and the security of
electricity supplies to the grid and
consumers. British Energy’s nuclear power
stations will continue to generate electricity.
And since the revenue from continuing to run
those stations more than covers the
avoidable costs of their operations, this
revenue can be put towards paying for the
nuclear liabilities that are already incurred and
cannot now be avoided.
4.70 Under the company’s restructuring proposal,
announced on 28 November 2002, which is
subject to the approval of the European
Commission, we are taking on financial
responsibility for the company’s historic spent
nuclear fuel liabilities. We are also, to ensure
safety and environmental protection,
underwriting new and enhanced
arrangements by the company to meet
decommissioning and other liabilities.
On 14 February 2003, British Energy secured
the agreement in principle of its financial
creditors to its restructuring proposal.
Managing the Nuclear Legacy
Irrespective of decisions on future nuclear build,
the legacy of nuclear waste has to be dealt with
safely, securely and cost effectively in ways that
protect the environment for current and future
generations. We have announced our intention to
make radical changes to arrangements for nuclear
clean-up funded by the taxpayer. The white paper
Managing the Nuclear Legacy41 set out proposals
for a new authority, the Nuclear Decommisioning
Authority (NDA), to deal initially with the historic
liabilities already funded by the taxpayer, which
represent 85% of total UK nuclear liabilities.
The NDA will set a framework for a clean up
programme over the long-term, securing best
value for money consistent with high safety,
security and environmental standards, and using
the best available skills through competitive
markets for clean-up contracts. Preparation for the
necessary legislation is underway.
For nuclear sites outside the NDA remit, we
will seek to ensure there are adequate
resources set aside to provide for clean-up.
In 2001, the Government and the Devolved
Administrations for Scotland, Wales and Northern
Ireland published Managing Radioactive Waste
Safely,42 a proposed programme of action for
deciding how best to manage the UK’s solid
radioactive waste in the long-term. Having
considered responses to the proposals, we
announced in July 2002 that we would set up a
new independent body to oversee a review of
different ways of managing the waste, and to
recommend a national strategy to Ministers.
We hope to receive recommendations and
announce the strategy by 2006.
41 July 2002, CM5552
42 Managing Radioactive Waste Safely, 2001
www.defra.gov.uk/environment/consult/radwaste/pdf/radwaste.pdf
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Chapter 5 Clean Low Carbon Transport
Transport will contribute
to carbon reductions...
5.1 The transport sector, including aviation,
produces about one quarter of the UK’s total
carbon emissions. Road transport contributes
85% of this, with passenger cars accounting
for around half of all carbon emitted by the
transport sector.
The Powering Future Vehicles
(PFV) strategy
The PFV strategy provides a framework for
decisions and action, aimed at promoting the
development, introduction and take-up of lowcarbon vehicles and fuels; and at ensuring the full
involvement of the UK automotive industries in
the new technologies.
The key components of the strategy are :
5.2 The movement of people and goods will
remain essential for economic success.
Rising demand for transport reflects the
priority which people attach to mobility.
Transport is and will continue to be a highlyvalued, high demand commodity.
5.3 But we can reduce the impact of transport on
the environment through better, cleaner
vehicles and fuels and by our action to
reduce the negative impacts of traffic growth.
5.4 Measures for promoting a shift to low-carbon
vehicles and fuels are brought together in our
1
Powering Future Vehicles strategy, published
in July 2002. That strategy is
complementary to this white paper. In the
foreword to the strategy, the Prime Minister
spelled out his objective that the UK should
lead the global shift to the low-carbon
economy, building competitive advantage for
the UK’s automotive industries as well as
providing cleaner and better transport. We have
set targets that within the next decade one in
ten new cars sold in the UK will be low-carbon
vehicles with emissions of 100 grammes per
kilometre (g/km) CO2 or less, and that one in
five new buses will also be low-carbon.
We have made the UK the first country to set
itself targets for shifting its mainstream
transport fleet to low-carbon technologies.
1
to promote research, development and
demonstration of new vehicles, fuels and
fuelling infrastructure;
to ensure that environmental, health and safety
issues are dealt with;
to ensure that new technical standards and
testing procedures are promptly developed and
put in place;
to work proactively with EU and other partners
on international issues and standards;
to facilitate the quick and smooth development
of new fuel distribution infrastructures;
to ensure the continued development of
appropriate taxation of low-carbon transport;
in this and other ways, to encourage
consumers’ take-up of low-carbon vehicles
and fuels, including financial measures and
consumer information and awareness;
to make maximum use of new vehicles and
fuels in the Government and other public
sector fleets;
to work closely with all stakeholders in
establishing the Low Carbon Vehicle
Partnership; and
to set challenging targets for making the
UK a world leader in the move to low-carbon
transport.
Powering Future Vehicles: The Government Strategy. DfT, DTI, Defra and
HMT, July 2002
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5.5 Action at both UK and European level has
already promoted significant technical
progress and innovation in the automotive
industries. We expect this progress to
continue. Since 1990, the average carbon
efficiency of new cars entering the fleet - the
distance travelled for a given amount of
carbon emitted - has improved by 10%. Cars
have also become safer and cleaner, with air
quality emissions down to one twentieth of
what they were 20 years ago. These are
important achievements. At the same time,
strong economic growth and the high priority
which people attach to mobility has led to
increasing car mileage. The net effect is that
total carbon emissions from car transport
have been roughly flat.
5.6 The Transport Ten Year Plan2 sets out a
comprehensive programme of investment
and innovation. The strategy focuses on
addressing the negative impacts of congestion.
It promotes increased use of public transport
and a shift of goods traffic from road to rail,
as well as sustainable patterns of land use.
All help to reduce the need to travel and
consequent environmental impacts. By 2005,
we expect to see progress as a result of
schemes to tackle traffic bottlenecks; a
growing programme of new bypasses and
other major road improvement schemes;
better traffic management, helping to limit
congestion on both motorways and in towns
and cities; and increased use of public transport.
5.7 The Plan will be reviewed in 2004. The review
will roll forward the Plan, setting out proposals
for transport up to 2015 and will continue to
take full account of our objective to reduce
the environmental impact of transport.
2
64
Transport 2010 - the Ten Year Plan, Department of the Environment,
Transport and the Regions, July 2000.
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Innovation will continue to
improve vehicle efficiencies...
5.8 The EU voluntary agreements on new car
fuel efficiency with the European, Japanese
and Korean manufacturers have proved a
highly effective mechanism for improving
cars’ fuel efficiency and reducing carbon
emissions. They have provided manufacturers
with a stable long term framework within
which to plan, research and introduce fuelsaving innovations. This approach, which
focuses on the levels of carbon emitted
rather than on dictating particular technologies,
gives manufacturers the flexibility to develop
the best and most cost-effective solutions.
The agreements are on course to reduce
emissions from the average new car from
190g/km in 1995, the base year for the
agreements, to 140 g/km by 2008 - a
reduction of around 25%3.
5.9 We strongly support this approach. We will
work with the Commission in developing
further voluntary agreements to continue
the reduction in average new car emissions
or other arrangements with the same
objective. We will draw on the expertise of
the Low Carbon Vehicle Partnership in doing so.
5.10 In the UK we have backed the voluntary
agreements with a supportive fiscal
framework. We have moved to graduated
Vehicle Excise Duty and Company Car Tax,
both now linked to the car’s CO2 performance.
This is encouraging car buyers to consider
buying the lower-carbon vehicles coming
into car showrooms. We will keep transport
taxes under review to ensure that they
3
All figures relating to the voluntary agreements are for ‘tank to wheel’
emissions.
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continue to provide incentives to encourage
the early development and take-up of low
carbon vehicles and fuels.
it has attracted international attention.
A further call for projects is in progress, to
deal with identified Roadmap priorities.
Vehicle taxation - supporting
low-carbon choices
Before 1999, Vehicle Excise Duty (VED) was
the same flat rate for all cars. VED for new cars
is now graduated, linked to a car’s CO2 emissions.
VED now ranges from £60 to £160, with zero
duty for electric vehicles.
Company Car Taxation (the personal tax on
private use of company cars) also shifted to a
graduated, CO2-linked basis last year. Tax is
payable on a proportion of car list price, ranging
from 15% to 35% for higher emission cars.
We are monitoring the impact of the shift to CO2related taxation on car buyers’ choices. Diesel car
registrations in 2002 - with their lower CO2
emissions - were 38% up on the previous year,
taking diesel’s share of total new car registrations
to 23.5%, compared with less than 5% in 19904.
5.11 We are also supporting strategic automotive
research and development through the
Foresight Vehicle programme. Over 400
companies and organisations are involved in
projects valued at £100m. Around one third
of these projects relate to low-carbon vehicle
technologies, including new powertrains,
advanced electronics and advanced materials
and structures. The Foresight Vehicle
Technology Roadmap5 was developed in
collaboration with industry, and identifies
priority issues. Published in November 2002,
4
Society of Motor Manufacturers and Traders Analysis of 2002 car sales.
5
www.foresightvehicle.org.uk/initiatives/init01.asp
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Foresight Vehicle Programme Project Examples
HEART4EV
This project seeks to increase the efficiency of
the gas turbines used to power hybrid vehicles.
The current limitation of this technology is a
reliable, low cost, highly effective air-to-air heat
exchanger (known as a “recuperator”), used to
recover energy from the turbine’s high
temperature exhaust gases and pre-heat the
incoming air.
The project will result in the UK having a world
leading, low-cost, durable and highly effective
recuperator, for marketing worldwide. It will also
open the way for future drivetrain programmes
aimed at establishing the recuperated
microturbine as an alternative to reciprocating
internal combustion engines, with significantly
lower fuel consumption and carbon emissions.
HERO
This project is investigating the application of
parallel hybrid drivetrain technology in an off-road
4x4 vehicle. HERO demonstrates that the
application of hybrid technology in the form of a
“mild hybrid” can enhance both the performance
and functionality of an off-road vehicle and
reduce its environmental impact. This could
significantly reduce exhaust emissions and allow
the use of regenerative braking to make
significant gains in efficiency.
LAMTRAK
This project is supporting another innovation - an
infinitely variable ratio transmission device for
use in vehicles - known as the Torotrak rolling
traction variator - to increase fuel efficiency and
reduce pollution.
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LAMTRAK will assist Torotrak in meeting its target
of 80% penetration of the world’s automatic
transmission market. The project will improve
understanding of the elastohydrodynamics of
friction reduction in thin lubricating films. This in
turn will lead to increased application in vehicles,
leading to greater fuel efficiency.
RHOLAB
The RHOLAB project aims to develop a novel lead
acid battery incorporating thermal management,
fault tolerance and safety features as a traction
battery for hybrid vehicles. A battery pack must
meet a specification that includes sensing,
switching and thermal and electrical control
devices in a way that does not jeopardise its
manufacturability. As part of the project, the
consortium will build a prototype pack that will
allow the operation to be assessed while
powering a hybrid vehicle.
CHOICE
This project will design, build and evaluate a
diesel series hybrid city bus incorporating vehicle
and passenger information systems.
The vehicle performance will be optimised in
terms of exhaust emissions and fuel efficiency
based upon a wide range of input information
including current and predicted operational duty,
actual measured performance and current and
immediate route location. The platform for the
project is the Dennis Dart SLF single deck 50passenger bus, with latest access features for
disabled passengers. The series hybrid powertrain
will employ an engine from the passenger car
sector, giving lower cost, better emissions
performance and fuel economy, compared to
conventional bus powertrain systems.
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5.12 The creation of the Low Carbon Vehicle
Partnership is an important component in the
Powering Future Vehicles Strategy.
The Low Carbon Vehicle
Partnership - (LowCVP)
LowCVP - an action and advisory group - will
promote the UK’s shift to low-carbon transport,
help industry, consumers, environmental and
other stakeholders to participate in the shift, and
maximise the competitive advantage for UK
businesses.
5.13 Work6 commissioned by the Department for
Transport and the DTI indicates the scope for
further reducing average new vehicle carbon
emissions. It suggests that full-specification
family cars with carbon emissions of
100g/km (equivalent to about 75 miles per
gallon of diesel) or less may be achievable
within the next two decades, in particular
through hybrid and related vehicle technologies.
As the Foresight Vehicle Programme projects
show,(see box, page 66) this is an area of
technology where the UK has a strong
research, development and design presence.
Launched in January 2003, the Partnership Board
is made up of top-level executives of UK auto
manufacturers, transport operators, consumer and
environmental groups and the research and
technology sectors.
Early projects will include:
a collaborative programme involving bus
manufacturers, operators and users in shifting
the UK to low-carbon buses;
a programme to build the UK component
industry’s capability in the design and
manufacture of key components for new
technology vehicles;
advice to Government on the role and remit
of the Centre of Excellence for Low Carbon and
Fuel Cell Technologies, an initiative proposed
by the Automotive Innovation and Growth
Team (AIGT) now being taken forward by the
Government;
advice to Government on the setting of 2020
targets for ultra-low-carbon vehicles, including
zero-emission vehicles, and on the priorities for
government R&D programmes; and
helping Government co-ordinate its low-carbon
research development and demonstration
activities and providing a ‘single portal’ for
potential participants.
6
Carbon to Hydrogen Roadmap for Passenger Cars : A Study for DfT and
DTI, Ricardo Consulting Engineering Ltd, November 2002.
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Hybrid vehicles
Hybrid vehicles use internal combustion engines
in conjunction with electric battery power, to give
increased efficiency, lower fuel consumption and
lower CO2 emissions. Hybrids usually incorporate
energy recovery from braking systems, and
eliminate engine idling in static traffic. This also
reduces noise and urban pollution. Hybrid vehicles
will increasingly have the capability to switch to
electric-only driving for extended distances, giving
zero tailpipe emissions for example when driving
through Low Emission Zones.
performance with a 1.2 litre diesel engine.
A number of global vehicle manufacturers and
component suppliers are now applying i-MoGen
technology in their future programmes.
We support take-up of hybrid cars with £1,000
purchase grants under the TransportEnergy
programme, administered by the Energy Saving
Trust. Hybrids also benefit from lower Vehicle
Excise Duty and Company Car Tax.
Technology and Environmental Transportation
Systems; and an LPG-fuelled hybrid urban delivery
van being developed by ENECO Ltd. Projects in
the pipeline include several demonstration pilot
diesel hybrid taxis.
Two hybrid cars are currently available in the UK the Toyota Prius, a family saloon with CO2 emissions
Hybrid technologies provide direct and immediate
benefits in reducing cars’ fuel consumption,
driving costs and carbon emissions. They also
provide a stepping stone to the development of
mass-market hydrogen powered fuel cell vehicles,
since the electric traction and control systems
used in hybrid vehicles will also be key
components in fuel cell vehicles.
of 120g/km7 and the Honda Insight, a two-seater
car at 80g/km. A four-door Honda Civic hybrid will
become available in early 2003, at 116g/km.
UK-based Ricardo Engineering Consultants have
produced the i-MoGen - a demonstration hybrid
diesel car, delivering full 1.8 litre diesel
We are supporting development and road
demonstration trials of hybrid and other
innovations through the Government’s New
Vehicle Technology Fund. Projects include a
micro-turbine-engined bus developed by the
Wright Group of Northern Ireland; two other
hybrid bus projects being carried through by EA
We can also reduce emissions
through lower-carbon fuels...
5.14 Better cars will significantly reduce fuel use
and carbon emissions. But we can also reduce
the carbon intensity of transport by adopting
fossil fuels that have a lower-carbon content.
We already support the increased use of the
well-established road fuel gases - LPG
(Liquefied Petroleum Gas) and natural gas.
7
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A car which has a fuel economy of 55mpg will emit 120g/km of CO2
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Section Two
The Low Carbon Economy
Chapter 5: Clean Low Carbon Transport
LPG and Natural Gas
We promote the wider use of these gases
through lower rates of fuel duty, and through our
TransportEnergy Programme, run by the Energy
Saving Trust. This provides grants for the
purchase and conversion of gas vehicles, and
works together with the fuel industry on the fuels’
availability on the road, and with vehicle
manufacturers.
Starting from scratch in the late 1990s, LPG is
now available nationwide from over 1,100 filling
stations. The positive experience of LPG shows
that, with industry and Government working
together, major innovations in fuel technologies
and distribution can be quickly and successfully
carried through.
There are currently (February 2003) around
75,000 LPG cars in the UK. We have particularly
encouraged manufacturers to develop off-theshelf LPG car models, to make this fuel a
mainstream showroom option for car buyers.
Models are now available from eight
manufacturers.
Natural gas is mainly used in heavy vehicles.
Apart from lower emissions, the noise from gas
fuelled engines is up to two-thirds lower than
diesel engines, a useful environmental benefit in
busy urban areas. TransportEnergy grants support
the conversion or purchase of lorries, buses and
utility vehicles. A major supermarket chain is in
the process of converting its delivery fleet. Work
with industry - vehicle manufacturers, users and
fuel suppliers - continues with a view to
encouraging wider take-up.
Our objectives for natural gas reflects the EU
Commission’s analysis of the future pattern of
transport energy use, which identified natural gas
- alongside biofuels and hydrogen - as an
important component in widening fuel diversity
and energy security in the transport sector.
5.15 And we are promoting the wider use of other
alternative fuels - in particular biofuels which have significantly lower lifetime carbon
emissions. With the low duty rates being
introduced, we estimate that biodiesel and
bioethanol could account for up to 5% of
total fuel use by 2020.
Biofuels for transport
Alongside renewably-produced hydrogen, fuels
made from biomass represent an important
potential route for achieving the goal of zerocarbon transport, creating new opportunities for
agriculture in the UK as well as globally.
We have reduced the duty on biodiesel to 20
pence/litre below the standard (ultra low sulphur)
diesel rate, and this fuel is now coming on to the
retail market in increasing volumes in a 5% blend
with conventional diesel. Some lorry fleets are
also converting to 100% biodiesel fuelling.
As announced in the Pre-Budget Report in
November 2002, we propose to introduce the
same 20 pence/litre incentive for bioethanol,
subject to EU agreement. This can also be used in
blends for existing cars, potentially also as an
85% pure biofuel in adapted cars.
Biofuels are currently made from food crops.
We are also interested in supporting the
development of bioethanol and biodiesel
production from biomass such as farm wastes,
forestry residues, coppice crops and possibly also
domestic waste.These can potentially deliver
bigger carbon savings and wider environmental,
farming and rural employment benefits.
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A significant contribution
to carbon reductions...
5.16 Taken together, the proposed continuation of
voluntary agreements on vehicle carbon dioxide
performance, increased use of biofuels and
other initiatives could improve the carbon
efficiency of transport by up to 10% by 2020.
The carbon savings will increase further
beyond 2020 as more fuel-efficient cars
spread progressively into the fleet.
Ultimately taking us beyond
fossil fuels, to a very low-carbon
transport economy...
5.17 Although vehicle technologies seem capable
of becoming twice as fuel-efficient as today’s
vehicles, deeper carbon reductions will need
low-carbon fuels - either hydrogen (generated
from non-fossil sources) or biomass-based
liquid fuels.
5.18 The auto industry generally expects hydrogen
powered fuel cell cars to move towards
mass-marketing around 2020. This timetable
ties in with the findings of a recent
investigation8 carried out for us by environment
and energy experts from three leading UK
environmental organisations, the Energy
Saving Trust, the Institute for European
Environmental Policy and the National Society
for Clean Air. This study indicates that the
greatest carbon savings from early noncarbon electricity will come from its use to
displace more carbon intensive electricity
generation rather than from its use for
transport energy. This suggests that the
major environmental benefits from a shift to
8
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Fuelling Road Transport - Implications for Energy Policy, by Nick Eyre,
Malcolm Fergusson and Richard Mills, November 2002.
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the large-scale use of hydrogen-fuelled
vehicles will come at the point when surplus
low-carbon energy becomes available.
5.19 But on a longer-term time scale, hydrogen
use in transport has major potential for
decoupling transport and carbon, if current
technological and cost barriers can be
overcome. We are is therefore supporting
research, development and demonstration
programmes (including vehicles and
fuelling infrastructure) to overcome the
initial market barriers to the development
of this technology. The Chief Scientific
Adviser’s Energy Research Review Group
recognised that hydrogen production and
storage was a key research area.
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Section Two
The Low Carbon Economy
Chapter 5: Clean Low Carbon Transport
Hydrogen, transport
and future energy systems
Hydrogen looks likely to play a key role in future
low-carbon energy systems, as an ‘energy carrier’
through which non-fossil energy can replace fossil
fuels in stationary power units such as domestic
fuel cell based CHP units and in vehicles. Hence the
very wide interest in the prospective shift to a
future ‘hydrogen energy economy’.
Hydrogen fuelled vehicles have zero tailpipe
emissions - they emit only water vapour at the
point of use, improving local air quality. They will
also be low-noise. Industry experts agree that
buses, utility vehicles and similar depot-based
fleets are likely to be candidates for the early
trialling and introduction of hydrogen fuel cell
technology, since larger vehicles can handle
hydrogen fuel tanks more easily and need only
depot supply of the fuel.
There is considerable international interest in
developing hydrogen for transport. In the USA,
increased funding for research and development
into hydrogen-powered vehicles was announced
in the 2003 State of the Union address. The aim is
to take hydrogen powered vehicles from the
laboratory to the showroom within a generation,
and to develop hydrogen production, storage and
distribution technology. This is expected to create
further opportunities for US-UK collaboration.
Hydrogen can be produced from a wide range of
sources, including hydrocarbons, biomass and
wastes, or the electrolysis of water. But these
sources must themselves be non-fossil for hydrogen
vehicles to deliver their full lifecycle carbon benefits.
Hydrogen seems likely to play a key role in future
transport technologies. We are supporting the
shift by:
exempting hydrogen from road fuel duty for
a period to encourage its early development
and take-up;
granting Enhanced Capital Allowances with
a 100% first-year write-down for investment
in hydrogen fuel infrastructure;
supporting fuel cell research (see paragraphs
4.59-4.60);
giving hydrogen projects a high priority in the
Carbon Trust’s Low Carbon Innovation
Programme;
funding the trialling of fuel cell buses by
Transport for London in 2003 and the
supporting hydrogen fuelling station being
installed by BP;
supporting the trialling of fuel cell cars as
these come out of car-makers’ design
laboratories; and
working with London and other local and
regional organisations on a wider network of
demonstration trials, including linkages with
existing local hydrogen distribution networks
such as that on Teesside. We will encourage
projects that can demonstrate hydrogen
production in combination with other carbon
abatement technologies.
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A low-carbon economy
needs to be planned for...
5.20 We expect both hydrogen and biomass fuels
to play major roles in a very low-carbon
transport economy, with benefits also in
terms of improved energy diversity and
security. But significant use of hydrogen for
transport has profound implications for the
long-term demand for non-fossil electricity as
well as for future energy infrastructures,
including electricity and gas. Equally,
significant use of biofuels for transport has
major implications for biomass production,
fuel production, and fuel distribution - as well
as for the rural economy and agriculture.
5.21 We need to adopt a strategic approach to
both these important new technologies,
bringing together the prospective uses of
hydrogen and biofuels in transport with other
aspects of the energy system. We need to
understand more about the options and
technologies for hydrogen and biofuel
production. And we need a clear vision of the
way in which infrastructures can evolve in
good time. With industry, we also need to
reach a common understanding of the likely
trajectory to the availability of affordable
hydrogen vehicles. Drawing on the Low
Carbon Vehicle Partnership and other
expert knowledge, we will over the next
year produce an assessment of the overall
energy implications of both a hydrogen
economy, and of large-scale use of
biomass-based fuels, and develop
roadmaps of the possible transition to
these new fuels and vehicles.
We need to reduce the
emissions from aviation...
5.22 Demand is rising in the aviation sector
internationally at about 4% a year. We all
benefit from the growth in business, services
and our ability to travel. International aviation
emissions currently do not count in the
national inventories of greenhouse gas
emissions. There is no international
agreement yet on ways of allocating such
emissions. The UK’s international emissions
currently amount9 to some 8MtC (9MtC
including domestic). They are expected to
rise to some 14-16MtC by 2020.
5.23 We are committed to ensuring that the
long-term development of aviation is
sustainable and that it meets its external
environmental costs. We are discussing
with stakeholders the most economic
instruments for ensuring that the industry
is encouraged to take account of, and
where appropriate reduce, its contribution
to global warming. We will set out our
plans in an Air Transport white paper.
Potential instruments to address CO2
emissions from international aviation being
considered internationally include an en route
emissions charge and participation in an
open emission permit trading system.
For domestic flights British Airways has
joined the UK emissions trading scheme.
These may be opportunities for future
participation in this scheme for other carriers
who operate UK-based routes.
9
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UK aircraft CO2 forecasts for 2030 are reported in Annex E of : The Future
Development of Air Transport in the United Kingdom: South East.
Department for Transport, July 2002 and February 2003.
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Section Two
The Low Carbon Economy
Chapter 5: Clean Low Carbon Transport
Reduced emissions from
the other transport
modes, such as shipping...
5.24 Other transport modes account for much
smaller amounts of energy and carbon but
can contribute useful reductions. Like
aviation, shipping is international in nature
and in its oversight. The UK supports the
work of the International Maritime
Organisation (IMO) to put in place a global
strategy for reducing greenhouse gas
emissions from ships. An IMO Working
Group is working on both technical
improvements to engines, onboard
machinery, hull and propeller design, and also
working on operational and market-based
measures such as environmental indexing of
ships, voluntary agreements, emission
standards and emission trading. The Working
Group will put forward a draft resolution on
the strategy at the IMO Assembly this year.
And rail...
5.26 Rail transport carbon emissions, accounting
for less than 1% of total UK emissions, are
typically about half those for road-based
modes per passenger or tonne per kilometre.
Investment in rail infrastructure will help to
reduce overall carbon emissions by
supporting the shift in passenger and freight
transport from roads and domestic aviation.
New rolling stock on the network is also
more energy efficient, further helping to
improve carbon performance.
5.25 On the domestic shipping front the we are
working to reduce carbon emissions from
domestic freight transport by encouraging a
switch from road to other modes. Freight
Facility Grants support freight owners and
carriers in switching traffic from road to
inland waterways and this programme has
now been extended to coastal freight and
short sea shipping.
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Section
Three
Reliable, competitive
and affordable supplies
Section Two of this white paper
outlined our proposals to move to a
low carbon economy and explained
how energy and environmental
policy will in future be better
integrated. As we outlined in the
first chapter, we also have three
other goals that we believe can be
achieved simultaneously alongside
action to reduce carbon emissions reliability of supply, competitiveness
and affordable heating and lighting
in every home. These are dealt with
in turn in the next three chapters.
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Chapter 6 Energy reliability
6.1 Our goal is that people and businesses can
rely on secure supplies of energy - gas,
fuel and electricity - at predictable prices
delivered through the market. Reliable
energy supplies are an essential element of
sustainable development.
6.2 To achieve this we need a resilient energy
system, without significant weaknesses,
which works well and which recovers quickly
if problems occur. This means a diverse
system based on a mix of fuel types, a
variety of supply routes, efficient international
markets, back-up facilities such as storage,
and a robust infrastructure. Developing low
carbon options will also create opportunities
further to increase energy reliability1.
6.3 Reducing demand also helps energy reliability.
Demand can be reduced through better
energy efficiency (as described in chapter 3).
Technologies and pricing structures that enable
and encourage users to manage their electricity
and gas demands away from peak periods
also help. Reliability can also be enhanced by
decreasing our dependency on imported fossil
fuels, eg by investing in technologies which
will enable us to diversify our fuel options.
6.4 Energy reliability raises issues on a number of
time horizons. We need short-term contingency
plans against the possibility of geopolitical
instability, terrorism, major technical
problems and extreme weather conditions.
The UK energy system has proved robust.
But we cannot at anything like a reasonable
cost completely eliminate all risks of supply
disruption, for example during extreme
weather conditions. We also need long-term
strategies to secure sufficiently diverse fossil
fuel sources as the UK becomes, over the
next two decades, a net energy importer rather
1
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The term energy reliability is taken to encompass all aspects of energy security;
the words reliability and security are used interchangeably in this chapter.
ENERGY WHITE PAPER Our energy future - creating a low carbon economy
than exporter. And we need to rise to even
longer-term challenges in reconciling the use
of energy with long-term environmental
objectives, both domestically and overseas.
6.5 In preparing this white paper, we have
considered these issues carefully. The energy
supply risks that we face are important. But
we believe they are manageable. Our new
arrangements for monitoring energy security
have given us better information on risks and
opportunities and on the markets’ response
to them. Energy markets are already
responding2. Our role is continually to monitor
developments, and to create a competitive
market place, including through good
international relations, within which liberalised
markets will deliver energy reliability.
6.6 Our strategy is based on the following
principles:
2
the regulatory framework must give high
priority to reliability. OFGEM and the
Government both have duties to secure
that all reasonable demands for electricity
and gas are met. OFGEM has agreed that
in future it will report on how its
regulatory activities impact on energy
security;
diverse sources, fuel types and trading
routes should be promoted to avoid the UK
being reliant on too few international
sources of oil and gas. We will work with
producer nations and the private sector
to promote the conditions needed for
investment in energy infrastructure;
For example, in the past year contracts have been signed, or definite
interest expressed, for additional gas supplies and new infrastructure
projects. These are diverse and include Centrica contracting with Statoil and
Gasunie to import natural gas, Exxon -Mobil with Qatar for LNG, increased
compression on the interconnector at Zeebrugge, and proposals for new
LNG terminals at Isle of Grain and Milford Haven.
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Section Three
Reliable, competitive and affordable supplies
Chapter 6: Energy reliability
liberalised energy markets are a cornerstone
of our energy policy. Competitive markets
incentivise suppliers to achieve reliability.
For example, suppliers will diversify their
own sources to reduce their commercial
risks, thus contributing to wider diversity.
We will continue to work to create an
effective policy and regulatory framework
for the market, both nationally and at
European and international levels; and
we need robust information on supply
and demand and market responses to it.
We will therefore give high priority to our
new monitoring arrangements to track
all aspects of energy reliability.
Short-term reliability issues...
6.9 Energy security is a shared responsibility.
OFGEM and the Government have duties,
in carrying out their primary function of
protecting the interests of consumers, to
secure that all reasonable demands for
3
electricity are met and to secure a diverse
and viable long-term energy supply. OFGEM
does so through for example setting licence
conditions on industry participants and the
price reviews of the monopoly infrastructure
providers. The aim is that, should energy
supplies be disrupted or energy demand
exceed expectations in the short-term, the
problem could be swiftly resolved.
6.7 For the markets to work, firms need to be
confident that the Government will allow
them to work. Energy supply problems in
other countries have demonstrated the risks
of not doing so. We will not intervene in the
market except in extreme circumstances,
such as to avert, as a last resort, a potentially
serious risk to safety.
6.8 Our perception and understanding of terrorist
threats changed on 11 September 2001.
Since then we have improved and will
continue to improve our contingency planning
and resilience in dealing with major incidents.
This applies especially to the energy sector,
which along with other areas of our critical
infrastructure is vital to the every day needs
of industry and the public alike. Measures
outlined elsewhere in the white paper to
promote distributed generation and
renewables will add to the diversity and
robustness of the energy system.
Meeting peak gas demand
On 7 January 2003 GB gas demand reached a
new record high of around 5 million MWh (450
million cubic meters). This level of demand is 5%
higher than the previous maximum in 2002 but
still only represents 85% of the potential peak day
demand (a demand that is expected in 1 year in
20) that Transco has to ensure that the gas
network can cope with.
6.10 Energy consumers, the market and
Government need reassurance that the
regulator is giving sufficient weight to energy
security in proposing or making new
regulations. OFGEM has agreed that in future
its consultation documents will explain how
its proposals will affect energy security as
well as their impact on the environment and
our social objectives.
3
For gas: the need to secure that, so far as it is economical to meet them, all
reasonable demands in Great Britain for gas conveyed through pipes are met.
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6.11 Where short-term problems arise we will
continue, where appropriate with OFGEM, to
evaluate what has happened and act
accordingly. For example:
4
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the storms of 27 October 2002 were
severe in some parts of the country and
many households were without electricity
for over a week. We considered the
response of some of the electricity
companies inadequate and immediately
launched an investigation by engineering
consultants into the resilience of the
networks themselves and the response by
the companies to the emergency. The
report4, published in December 2002,
confirmed that those companies which had
carried out effective network maintenance
and which had anticipated the storms well
suffered fewer incidents and reconnected
customers more quickly. We are
considering along with OFGEM and the
industry the best means of ensuring that
the recommendations made in the report
are implemented; and
following the fuel protests in September
2000 we signed a Memorandum of
Understanding with oil industry companies,
the police, the Trades Union Congress, the
Cabinet of the National Assembly for
Wales and the Scottish Executive which
sets a framework to improve co-operation
and co-ordination between the key
organisations in the event of a threat to oil
supplies. We are now reviewing with the
industry and other stakeholders the
detailed plans for tackling oil emergencies
and updating them in the light of
developments in the economy.
Power system emergency post-event investigation www.dti.gov.uk/energy/domestic_markets/security_of_supply/index.shtml
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Long-term challenges...
6.12 We have analysed closely the issues relating
to future energy reliability. This analysis broadly
supports that of the PIU which led to the
conclusion that increased dependence on
gas was not of itself a pressing problem.
But safe and reliable supplies of electricity
and gas are fundamental to our economy and
way of life. We must therefore constantly
monitor developments.
6.13 As a country we have been a net exporter of
energy, with significant imports and exports,
for the past two decades following the
successful development of North Sea oil and
gas. But this will change. Forecasts vary but
it is commonly agreed that UK oil and gas
production will decline significantly over coming
years. We are currently working with the
5
industry to maximise the economic potential
of our North Sea supplies (see paragraph
6.37). But it is still likely that the UK will
become a net importer of gas on an annual
basis by around 2006 and of oil by around
2010. By 2020 we are likely to be importing
around three-quarters of our primary energy
needs. And by that time half the world’s gas
and oil will be coming from countries that are
currently perceived as relatively unstable,
either in political or economic terms.
6.14 Relying on imports need not be a problem
in itself. Oil and - currently to a lesser extent gas are internationally traded commodities.
And all countries, whether import-dependent
or not, have a common interest in promoting
open markets and predictable prices.
Most other advanced industrial economies
5
The PILOT initiative.
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Section Three
Reliable, competitive and affordable supplies
Chapter 6: Energy reliability
already import significant proportions of their
energy needs without noticeable disruption.
Import dependency has long been a fact of
life for all the G7 countries apart from the UK
and Canada.
6.15 World wide fossil fuel resources are very
large. Oil is the world’s most important fuel,
accounting for 40% of global primary energy
consumption.6 Its share in 2020 is likely to be
at a similar level. Globally, conventional oil
reserves are sufficient to meet projected
demand for around 30 years7, although new
discoveries will be needed to renew
reserves. Together with non-conventional8
reserves such as oil shales and
improvements in technology, there is the
potential for oil reserves to last twice as long.
Proven gas reserves would meet at least
45 years of demand and there remains vast
potential beyond this. That there is no
shortage of oil and gas resources globally
means that supplies are unlikely to be
disrupted for long. But just as today, there
will be risks of price shocks resulting from
geopolitical disruption or damage to
infrastructure in the short-term. These risks
need to be monitored and managed.
International risks...
6.16 Moving from being largely self-sufficient to
being a net importer of gas and oil requires
us to take a longer term strategic international
approach to energy reliability. We need
continually to monitor and to manage the
following international risks, while at the same
time deepening international co-operation:
6
insufficiently diverse sources of fossil fuels.
We should avoid becoming reliant on too
few international sources of oil and gas; and
global anti-competitive practices and
illiquid markets. Competitive and liquid
global markets, with oil and gas traded
freely are the most effective way to help
deliver more stable energy prices and for
us to purchase what we need at any time.
We explain in the following paragraphs how
we will mitigate these risks.
Diversity in gas markets...
6.17 Norway has been and is likely to remain a key
provider of gas to the UK, and the Netherlands
may become a more important supplier of
gas to Western Europe. The world’s largest
gas reserves are to be found in Russia, the
Middle East and Africa. Russia has the largest
gas reserves, with around a third of the
9
world’s total and has been exporting gas
to Western Europe for over 30 years without
interruption. Many other countries offer
potential supplies of gas including Algeria,
with a long track record dating back to
the late 1960s of providing gas to Europe,
and countries in the Caspian region, North
and West Africa and the Middle East (in
particular Iran and Qatar).
6.18 We are putting in place a new treaty with
Norway to facilitate continued supplies of gas
- as a primary fuel and as a source of feedstock
for the UK chemical industry - and to simplify
cross-border developments, which will enhance
the UK’s production from the North Sea.
IEA World Energy Outlook 2002
7
IEA World Energy Outlook 2002
8
Oil not produced from underground reservoirs, for example oil shales, oil
sands, extra heavy crude, etc.
9
BP Statistical Review of World Energy
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6.19 Our priority has to be to bring diverse
supplies on-stream and into the EU market.
Substantial long-term investment is needed
to build the necessary infrastructure. For
10
example some estimates suggest that
investments of US$170 billion may be
required to develop gas production in Russia
alone to 2020. While the total sums are large
there is already evidence of the market
expanding export routes, for example through
the development of the North European
Pipeline which would provide a much more
direct route for Russian gas to the UK.
The private sector has an incentive to
undertake the necessary investment but
given the scale of the infrastructure
investments required and the long investment
lead times we will continue to monitor
infrastructure development and international
gas markets closely and support efforts to
encourage investment (e.g. by promoting
stable financial regimes and working with
11
IFI’s to support project financing).
6.21 Liquefied Natural Gas (LNG) offers a flexible
alternative to piped gas. International trade in
LNG is growing at about twice the rate of
pipeline gas. This may over time lead to
greater price convergence between regional
markets given the increasing scope for
arbitrage. The development of LNG import
facilities in the UK will need additional
onshore pipelines in some locations. This is
being actively considered by Transco. It is
possible that gas imports from some
sources, particularly LNG, will vary in energy
content and may require blending with other
gases in the system, special processing on
import, or the modification of certain gas
appliances. We will keep developments here
closely under review. In particular we
will monitor the likely effects on gas quality.
In general we welcome the expansion
of the LNG market as a contribution to
diversity and security and as a source of
competition to piped gas.
6.20 Companies importing gas into the UK have
a strong commercial interest in diversifying
their own risks by having supply contracts
with a number of different suppliers and by
encouraging the development of appropriate
infrastructure. The number and diversity
of participants in the UK gas market is also
making a valuable contribution towards
expanding arrangements for future supply
of gas into the UK. To support the creation
of an economic environment conducive to
investment we will continue to engage
with Russia, Iran, the Caspian, Middle East
and African countries and the potential
transit countries, focusing on good
governance and the development of stable
investment and transit regimes.
6.22 The development of a gas cartel amongst
pipeline gas and LNG producers could
undermine long-term price security. We will
work with the European Commission and
other member states in monitoring the
situation closely, maintaining and developing
a dialogue with exporting countries,
encouraging diversification of gas supplies to
Europe and addressing any emerging risks.
Diversity in oil markets...
6.23 The bulk of world oil reserves are found in
the Middle East, with Saudi Arabia alone
holding around a quarter.12 The other major
Gulf producers hold as much again. Other
significant reserves are found in South and
10 IEA, 2002
11 International Financial Institutions
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12 BP Statistical Review of World Energy
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Central America, Africa, Russia and the
Caspian Basin. In addition to conventional oil
reserves there are also massive unconventional
oil reserves13 in Canada and Venezuela.
The costs of production have fallen rapidly for
these reserves but they remain higher than
those of conventional oil. They also tend to
be of poorer quality but can be upgraded.
To monitor trends in international oil markets
and prepare for risks and uncertainties we
will enhance our existing arrangements to
monitor oil security issues. This work will
be led jointly by the DTI and the FCO.
6.24 Oil stocks can contribute to resilience in the
event of actual or potential supply
disruptions. But they are unlikely ever to be
large enough to act as a lever on oil prices.
The International Energy Agency (IEA) is the
key organisation for managing oil supply
disruptions and the release of stocks by its
members, including countries such as the
USA and Japan in addition to EU members.
As the proportion of world oil consumed by
non-IEA members increases, it will be
important for the IEA to establish a dialogue
with key consumer countries, such as China
and India, on the importance of oil security
arrangements, the role of the IEA and how
these countries could develop a closer
relationship with the IEA. The intention would
be that this process would lead to these
countries developing an oil security
framework that worked alongside, and
complemented, that of the IEA. We will
continue to support the work of the IEA in
encouraging members and non-members to
maintain and develop oil security
arrangements for use in the event of oil
supply disruptions.
13 See footnote 9
International Energy Agency (IEA)
The IEA - an OECD forum - plays an important
role helping to ensure stable energy markets.
Originally formed to oversee its members’ oil
emergency arrangements (described above), it
is now also a policy forum for analysis, sharing
best practice and technical collaboration in energy.
Its committees review the energy policy of both
member and non-member countries and longterm issues such as regulation, security of supply
and the environment as well as R&D, technology,
oil markets and emergency preparedness.
6.25 Like other importers, our dependence on
14
OPEC for our oil supplies is likely to increase
in the long-term. Supplies from other sources
such as Russia, the Caspian Basin and West
Africa will remain important and will add to
diversity in the short and medium term.
We will continue to promote good relations
with key existing and new suppliers in the
Middle East, Russia, the Caspian and
Africa. In particular we will continue to
work to increase the transparency, diversity
and liquidity of the world oil market and
to improve the investment climate in key
producing countries.
Ensuring an effective
EU market...
6.26 Oil is an internationally traded commodity.
This is not yet true to the same extent for
gas. We therefore need to work to ensure
the development of liquid international gas
markets. Our first priority is to work for fully
competitive gas (and electricity) markets
14 Members are: UAE, Venezuela, Saudi Arabia, Kuwait, Iran, Libya, Nigeria,
Algeria, Indonesia, and Qatar. Iraq is also a member but remains outside the
group’s quota agreements, as the country is still under sanctions resulting
from the aftermath of the 1990-1991 Gulf War.
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within the EU. The energy liberalisation
package we instigated, which was agreed by
EU energy ministers on 25 November 2002
(subject to co-decision procedure and
approval by the European Parliament), is
a major step towards this. It includes a
commitment to allow industrial and
commercial electricity and gas consumers
a choice of supplier by 1 July 2004 and all
consumers this choice by 1 July 2007.
6.27 The new liberalisation directives require the
legal separation of transmission and
distribution from production and supply and
access to grids and downstream pipelines on
published non-discriminatory terms. These
structural measures are essential to achieving
properly functioning internal EU markets. This
will benefit consumers in terms of prices,
efficiency, choice and service levels.
Around 70%15 of global gas reserves are
within economic distance of the EU market.
Accessing these resources will increase the
diversity and resilience of our own gas supplies.
Encouraging international
co-operation...
6.31 Producers and consumers have a common
interest in ensuring effective trade in energy
products. Both benefit from stable markets
that help ensure that supply is sufficient
to meet demand and thus contribute to
relatively stable global prices.
6.28 The directives also require member states to
establish independent economic regulators such as OFGEM in Great Britain - with
specific duties in relation for example to
transmission and distribution access tariffs
and the allocation of interconnector capacity
to third parties on a transparent and nondiscriminatory basis. These steps will make
a major contribution to the reliability of our
energy supplies in the long term.
6.32 For over a decade oil and gas producing and
consuming countries have been engaged in
dialogue on both a bilateral and - through the
International Energy Forum - on a multilateral
basis. The UK has been an active supporter
and participant. The dialogue has helped
improve mutual understanding, confidence
and awareness of long-term common
interests as well as promoting the development
of specific initiatives such as the Oil Data
Transparency exercise. As trade in energy
increases and the interdependence between
new and existing oil and gas producer and
consumer countries deepens, such dialogue
will become more and more important.
6.29 We have been pressing for these changes for
a number of years. We will now work with
the Commission and with other member
states to make sure the agreement is
effectively implemented. We will also
continue to press the Commission to tackle
competition issues vigorously.
6.33 Sustainable energy solutions also have the
potential to strengthen energy reliability
worldwide. We will work to promote the
deployment of renewable sources of energy
in developing countries (as covered in
chapter 4) as well as encouraging investment
in appropriate energy infrastructure.
6.30 In the longer term we will work within the EU
to encourage greater links between the
EU market and supplies beyond its borders.
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15 BP Statistical Review of World Energy. Based on proven reserves in
countries currently exporting gas to the EU.
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6.34 Across departmental boundaries we need to
give greater prominence to strategic energy
issues in foreign policy. Both in the UK and
through its network of overseas posts the
FCO will work more closely with other
government departments to achieve
common objectives in international energy
security. Our aims are to maintain strong
relations with exporting countries and to
promote the benefits - to both producers and
consumers - of transparent, liquid, and
liberalised world energy markets and diverse
supplies of energy. In promoting diversity we
will also work to minimise the risk of
disruption to supplies from regional disputes
or local instability and to promote sustainable
approaches to energy reliability issues.
6.35 To this end, we will continue to work with
consumers and producers and with the
international community to:
promote regional stability and economic
reform in key producing areas;
improve mutual understanding and the
functioning of world energy markets, for
example through continued improvements
to international data transparency;
promote conditions for Foreign Direct
Investment through stable financial
regimes, transparent legal frameworks,
predictable domestic energy policies and
predictable foreign investment terms;
promote liberalisation of energy markets
including through the World Trade
Organisation (WTO), the IEA and the
Energy Charter Treaty;
work with other large consumers such as
China and India to encourage more
effective management of energy demand
through energy efficiency improvements;
work with IFIs to support financing for
energy infrastructure investment;
work with OECD partners and the
international oil companies to promote
sound economic development, particularly
among the emerging oil and gas producers in
Africa and Central Asia, for example through
the Extractive Industries Transparency
Initiative multi-stakeholder coalition; and
through the FCO develop an Environment
Attachés network to follow up on the
Kyoto Protocol and other sustainable
policies, extend the Science and
Technology Attaché network, and engage
key posts in promoting UK policies and
reporting developments relevant to the
international oil and gas markets.
Domestic issues...
6.36 In addition to the international risks there are
potential risks to energy reliability within the
structure of our own market. These are that:
the economic potential of our oil and gas
reserves is not maximised;
electricity generation companies will not
invest in new capacity in sufficient time to
meet future needs;
our sources of electricity generation may
become insufficiently diverse;
supplies, particularly in gas markets, may
not be sufficiently diverse and flexible; and
potential short term disruption may arise
from financial difficulties among network
operators.
We examine each of these risks in turn below.
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The UK energy industry
PILOT
The UK is home to a number of world class
energy companies and companies specialising in
all aspects of the energy sector. The UK has
expertise ranging from niche extraction
techniques and offshore engineering, to cutting
edge renewable energy and environmental
protection technologies.
Now in its third year, the PILOT initiative is
promoting industry co-operation with Government
to enhance recovery of the UK’s oil and gas
resources and so prolong indigenous supplies.
We greatly value the contribution that these
companies make to the UK economy and to
our wider international goals. We will work with
our companies to ensure that their international
investments continue to make important
contributions to economic development, good
governance and political stability in key producer
states.
We will also continue to work with the industry
(for example within PILOT - see below) to maintain
the UK’s energy networks and to manage the
UK’s domestic resources to maximise economic
and security of supply benefits.
Maximising our
oil and gas reserves...
6.37 We are committed to maintaining an active
and successful oil and gas industry in the UK,
and to promoting future development of the
nation’s oil and gas reserves. The sector is
and will remain important to the wider UK
economy in terms of jobs, investment and its
contribution to national income. We are keen
to continue to encourage investment in both
existing and new fields. The PILOT initiative
is central to this aim.
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PILOT’s specific vision targets for 2010 are to:
prolong self-sufficiency in oil and gas for the UK;
maintain production levels of 3 million barrels
of oil equivalent per day;
sustain investment levels of £3 billion per year;
deliver a 50% increase in the value of industryrelated exports by 2005 (from 1999 level);
bring additional revenue of £1 billion from new
businesses;
sustain 100,000 more jobs than there would
have been; and
ensure that the UK is the safest place to work
in the worldwide oil and gas industry.
Specific activities to maximise recovery include
stimulation of activity through the review of fallow
acreage and fallow developments, promoting
trading assets between operators, co-operative
work to enhance brownfield developments and
the promotion and sharing of best practice.
6.38 The 2002 Finance Act introduced important
changes to the UKCS fiscal regime. It put in
place a stable regime for the future which
will raise a fair share of revenue on North Sea
producers’ profits while promoting long-term
investment. The balanced package - the
introduction of 100% investment allowances
and a 10% supplementary charge on oil
production profits on 17 April 2002 and the
abolition of royalty on older fields from 1
January 2003 - puts the fiscal regime on a
sustainable, long-term basis. New fields now
enjoy one of the most favourable tax regimes
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amongst major oil producing countries,
along with all the other advantages of political
stability, open and competitive markets,
access to a skilled workforce and an
extensive oil and gas infrastructure.
It enables the system to respond reliably
and quickly to unexpected peaks in demand
or unexpected interruptions in generation.
In 2001/2 the installed plant margin in
17
England and Wales was around 27% falling
to around 20% in 2002/318. Chart 6.1 below
shows the plant margin over the past
decade. The decline has been partly due to
plant being mothballed. Recently mothballed
plant could be returned to service at relatively
short notice and low cost if required. In future,
measures to make demand more flexible, for
example through new metering technology,
may mean that a smaller margin could provide
the same level of security.
Ensuring incentives to invest
in electricity generation...
6.39 Electricity cannot yet be stored economically
in large quantities. We therefore need to have
sufficient spare capacity to deal with variations
in supply or demand, especially at times of
peak demand. This is the plant margin16.
Chart 6.1
Installed Capacity and Electricity
Demand, England and Wales
80
70
60
Plant margin
GW
50
40
30
Average Demand
20
Peak Demand
Installed Capacity
10
0
1990/91
1991/2
1992/3
1993/4
1994/5
1995/6
1996/7
1997/8
1998/9
1999/00
2000/01 2001/02 2002/03
Source: NGC. 2002/3 data are provisional to date, average for 2002/3 is DTI estimate
17 NGC Seven Year Statement Update January 2002. Since 1990/91 the
installed capacity margin has varied between 18% and 32%.
16 Installed Plant Margin is defined as (Installed Capacity - Peak Demand)/Peak
Demand and is expressed as a percentage.
18 NGC Seven Year Statement Update January 2003. The margin in Scotland
is currently 28%.
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6.40 Wholesale electricity prices have been low
recently. This is a result of the considerable
increase in investment in generating capacity
following higher prices in the 1990s. Recent
prices are lower than many companies
anticipated and some of them have found
themselves in financial difficulty. Given current
prices and the amount of existing capacity
available there is currently no need or
incentive for significant investment in new
generation plant apart from renewables.
These are not market failures. They are
proper market responses. But some people
have expressed concern about the longer
term prospects for investment.
6.41 Over the next 20 years almost all our existing
nuclear power stations will close as they end
their operating lives. Most existing coal-fired
power stations will also close as they age
and as environmental controls become more
stringent. There is inevitably a good deal of
uncertainty as to the type and location of
stations that will replace existing capacity as
market participants respond to evolving price
signals. But given current levels of capacity,
including mothballed plant, and our
expectations of growing renewables
generation and energy efficiency
improvements over the coming years, we are
unlikely to need significant new investment in
non-renewable power stations over the next
five years or possibly longer.
6.42 A number of electricity markets elsewhere
employ a form of capacity margin instrument
(CMI) to seek to secure a fixed level of
capacity margin, often to counteract the
effect of price caps imposed elsewhere in
their electricity markets. We have reviewed
19
the case for such a measure here .
19 NERA study: Security in Gas and Electricity Markets, October 2002. NERA
study: Electricity Markets and Capacity Obligations, December 2002.
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6.43 We have concluded that the case has not
been made for such an instrument in the UK
market. The UK market already provides
strong financial incentives for suppliers to
contract for sufficient power. We also note
that experience with CMIs in other countries
has been mixed. Some have been subject to
material alterations within short time periods
the very sort of regulatory risk that the
instrument is supposed to offset. NERA also
estimated that a CMI could increase costs to
consumers by some £150 million per year.
6.44 Licence conditions on NGC20 and electricity
21
suppliers also play an important role in
maintaining security. OFGEM enforces
licence conditions, a breach of which can
lead to financial penalties of up to 10% of
turnover. OFGEM can also modify licence
conditions, or put new ones in place, with the
agreement of electricity industry participants
or after reference to the Competition
Commission. We will look to OFGEM to use
its powers vigorously to apply and enforce
appropriate licence conditions.
6.45 OFGEM has confirmed that it considers that
the current statutory framework, including
the duties and functions set out within the
relevant Acts and contained within related
documents such as the Grid Code, is
sufficient to help ensure the security of the
balancing of the electricity transmission
22
system. Through JESS we will keep this
under review.
20 For example National Grid Company has a licence condition to promote
the security and efficiency of the electricity generation, transmission and
distribution systems in England and Wales.
21 Electricity suppliers are required to take all requisite steps, so far as is
reasonably practical, to secure the necessary supply of electricity.
22 The DTI/OFGEM Joint Energy Security of Supply Working Group.
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6.46 In addition, OFGEM has agreed to publish a
report every six months on the performance
of the electricity and gas industries in delivering
security, detailing any issues which have given
rise to energy reliability concerns and saying
what, if any, actions had been taken or might
be needed to address those issues in future.
These reports will be in addition to the forward
looking security monitoring role of JESS.
A diverse mix of
electricity generation...
6.47 Some people argue that the UK Government
should specify the mix of fuel sources in
electricity generation, allocating a proportion
to gas, a proportion to coal and so on. We
have considered this proposition carefully and
have dismissed it. In our view Government is
not equipped to decide the composition of
the fuel mix used to generate electricity.
Our preference is for a market framework
with the right regulatory framework.
6.48 But neither should we allow ourselves to
become overly dependent on any one fuel
source across the whole economy or in a
specific sector, such as electricity generation.
It is our view that the policies we put forward
in this paper will encourage the long-term
development of new, more diverse and cleaner
energy technologies that will promote both
energy reliability and our low-carbon objectives.
6.49 Coal (UK produced or imported) and nuclear
power have traditionally offered sources of
electricity relatively secure from sudden
changes in other international energy
markets. The future of coal generation and
new measures to encourage the
development of carbon capture and storage
are discussed below. The future of nuclear
generation is discussed in chapter 4.
6.50 Diversity goes beyond a simple choice of
fuels. It relates to how the fuel or energy is
moved and used and to the range of sources
for any particular type of fuel. Additional
electricity interconnectors, like the existing
one to France, would increase resilience.
Projects are being developed for new direct
current electricity interconnectors to Norway
and the Netherlands and discussion is
underway on a possible link to the Republic
of Ireland. These are essentially market
decisions, driven by the commercial
assessments of electricity suppliers.
We will continue to keep the diversity
of the electricity mix under review.
Gas supply flexibility...
6.51 Demand for gas in the UK is highly seasonal.
We have a relatively low level of strategic gas
storage compared with France, Germany and
Italy. This is not of itself a problem, provided
that the market can continue to deliver
sufficient flexibility to meet demand,
especially as UK gas output falls and with it
the capability of UK gas fields to meet shortterm periods of high demand. Alternative
ways of providing supply flexibility such as
new storage projects and flexible import
contracts appear to be being delivered by the
market. The diversity that these projects can
bring to the market in term of flexibility of
entry points and means of delivery will be
welcome. The provision of timely new
infrastructure will be important in backing up
these commitments and, along with progress
on EU liberalisation, provides confidence that
access to flexibility can be maintained.
We will closely monitor and assess the
adequacy of provision of sufficient supply
flexibility to the UK gas market.
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Availability of Networks...
6.52 Gas and electricity networks, and their
uninterrupted operation, are essential to
security of supply. In other utility sectors,
there are provisions for the appointment of
an administrator in the event that the
operator of a network becomes insolvent.
During the passage of the Enterprise Bill last
summer, we undertook to consider further
the case for special provisions for gas and
electricity. We now propose to undertake
a public consultation on the need for an
administration regime for gas and
electricity networks, including the scope
of the provision, its potential effectiveness,
and other details.
Monitoring the situation...
6.53 We have set out above our response to the
security of supply risks we face. All are
important but none appears to pose an
immediate or unmanageable threat. There are
many triggers within a liberalised market to
incentivise energy reliability. And markets are
likely to deliver energy reliability most costeffectively. The experience of California, though,
shows that it is important for governments
to monitor reliability, including how their own
actions may influence market behaviours.
6.54 We will continue actively to monitor energy
security through JESS and to make the
conclusions of that group publicly available.
The group will continue to provide the market
with assessments of supply and demand
information and will periodically review the
dependence of the networks on particular
facilities. We will use the information
gathered by JESS as a guide to issues in
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the market or regulatory system or
elsewhere (for example planning) that may
be preventing an adequate market
response.
6.55 Where the issues fall outside OFGEM’s
remit, close joint work between the FCO
and DTI will be put in hand to monitor
wider issues of energy security.
Handling the carbon
consequences of coal-fired
generation...
6.56 For most of the time since the industrial
revolution, coal has been the main source
of primary energy in the UK. Even now coal
generation provides around a third of the
UK’s power output. But in a low-carbon
economy the future for coal must lie in
cleaner coal technologies - which can
increase the efficiency of coal-fired power
stations and thereby reduce the amount of
carbon they produce - or carbon capture and
storage. Electricity generation from coal will
become more expensive when measures
already agreed in the EU’s large combustion
plant directive (to control emissions of
sulphur dioxide, nitrogen oxides and dust)
comes into effect. Plant that does not meet
demanding emissions standards is likely to
be retired over the period to 2015. EU-wide
carbon emissions trading will also make coal
less attractive as a source of power. By 2020
coal generation’s contribution to the UK’s
power output is likely to be significantly
lower than today.
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6.57 If ways could be found cost-effectively to
handle the carbon, keeping coal-fired
generation in the fuel mix would offer
significant energy security and diversity
benefits. Coal is easy to store and transport
and can be sourced from diverse of stable
suppliers both domestically and worldwide.
Loads in coal-fired stations can also be varied
relatively easily, so coal fired generation is
particularly useful in meeting peak demand or
covering for supply intermittencies in other
fuels. This may encourage generators to keep
some coal-fired plant so as to give
themselves the capacity to meet demand
under a variety of circumstances. But by
itself this would be unlikely materially to
increase UK energy security more generally.
Carbon capture and storage may
offer a promising way forward...
6.59 Carbon capture and storage (CCS) - and the
potential value of carbon dioxide injection for
enhanced oil recovery (EOR) as a means of
extending the life of the North Sea oil
reserves - is described in detail in the box
below. The recent review of cleaner coal
technologies23, shows that CCS is currently
constrained by a number of significant legal
and technical issues. Measures to address
these are the subject of a number of current
follow-up projects.
6.58 If coal is to play more than a marginal role in
the mix beyond around 2015, generators will
need to find economic ways of dealing with
the consequential carbon dioxide emissions.
One option is to capture and then store the
carbon dioxide. The most promising approach
at present would be to lock the gas away in
geological structures such as depleted oil and
gas fields. There is significant international
interest and effort going in to carbon dioxide
capture and storage, especially in the USA
and Canada, where many of the technical
obstacles to economic implementation are
being researched. The UK North Sea offers a
potentially very valuable resource in this
respect, as do other offshore reservoirs.
23 Cleaner coal review: www.dti.gov.uk/energy/coal/cct
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Carbon dioxide capture
and storage (CCS)
CCS offers the potential to deal with the carbon
emissions from using fossil fuels in electricity
generation or from other large CO2 sources (such
as chemical plants and refineries). In coal plant
it could be achieved either by capturing the CO2
from flue gases or technically more easily by
gasifying the coal prior to electricity generation
(in an integrated gasification combined cycle IGCC - plant).
Once it is captured the CO2 needs to be placed
in some form of long-term storage. The Chief
Scientific Adviser’s Energy Research Review
Group identified CCS as an area in which increased
research effort could yield major breakthroughs.
In particular, it suggested that effort be concentrated
on fundamental research into storage which was
less well understood than capture. The theoretical
storage capacity of suitable geological formations
(depleted oil and gas fields and deep saline
reservoirs) is massive, subject to cost and the
environmental and public acceptability.
European capacity for storing CO2 in geological
formations could be around 200GtC, mostly under
the North Sea and mainly in the Norwegian sector
and the UKCS. About 95% of this potential is in
deep saline aquifers and only about 5% in
depleted oil and gas fields. The North Sea oil and
gas well capacity in the UKCS is sufficient to
absorb all UK CO2 emissions at current levels for
up to 15 years, potentially hundreds of years if
saline aquifers are included. Theoretically there
could be further capacity in unmineable coal
seams but further investigation is required.
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Geological formations are capable of containing
gas. They have done for thousands of years.
Geological sequestration should be capable of
retaining CO2 for a very long time, perhaps
indefinitely. But accessing reservoirs would
necessarily disturb them and leakage might occur,
for example through geological faults, seismic
activity, failure of pipelines or other engineering
components and groundwater movement.
The political and public acceptability of CCS is
likely to depend at least in part on a convincing
risk analysis and on the ability to detect slow
leaks if they occur.
A pilot project in the Norwegian sector of the
North Sea is the only example of offshore carbon
dioxide injection currently in process. This takes
CO2 that is co-produced with the gas in the
Sleipner West field and injects it into an aquifer.
In North America a number of projects are
injecting CO2 into oilfields to help increase oil
recovery (known as enhanced oil recovery or
EOR). During this process most of the CO2 used
ultimately remains in the oilfield, so is effectively
sequestered.
EOR would allow additional oil recovery from
the UKCS - 200Mt (1.5 billion barrels) may be
achievable over 20 years. This compares to
current annual oil production of about 130Mt.
But the current rates of field depletion mean that
this opportunity only exists in the short term and
CO2 injection needs to start by 2006/8 if it is to
have an impact on the largest fields before the
existing infrastructure is dismantled.
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Enhanced oil recovery...
6.60 Although enhanced oil recovery (EOR) has
benefits both in terms of extending our
existing oil reserves and reducing carbon
emissions, studies by Future Energy
24
Solutions and others suggest that EOR is
unlikely to be cost effective in a time scale
that will fit the existing UKCS needs. A single
carbon dioxide pipeline from a medium sized
coal power station together with onshore
compression and wellhead injection and
handling facilities could cost around £1-1.5
billion. The additional oil recovered could
justify this investment but would not cover
the costs of capturing and storing the carbon
dioxide at source.
6.61 Coal-fired power stations offer the most likely
source of the volumes of carbon dioxide that
are likely to be needed for EOR. Integrated
gasification combined cycle power plants
(IGCCs) gasify coal to produce power,
hydrogen and carbon dioxide. These offer a
particularly promising source of carbon
dioxide. Two schemes at Onllwyn in Wales
and at Hatfield near Doncaster are actively
being developed at present and have applied
for Section 36 planning consent to build
power generation capacity. This plant would
also be able to generate large quantities of
hydrogen, potentially of interest in enabling
the development of production scale
hydrogen projects.
6.62 If EOR is to be of value to the UK it needs to
start within 5 years. Large fields (Forties,
Brent, Ninian, Fulmar) would offer the best
prospects. In addition to the short-term
24 The papers from this work are being published on
www.dti.gov.uk/energy/coal/cct/co2capture.shtml
carbon savings an EOR scheme would offer,
this would also deliver a basic infrastructure
to enable the delivery of carbon dioxide for
later CCS as and when the technological,
legal and gas security issues are resolved.
The infrastructure would be significantly
easier to fund from the anticipated EOR
revenue streams than if it were to be funded
for CCS alone from expected carbon
emissions trading benefits. And since the
technologies need to be demonstrated and
tested in an offshore environment before firm
commitments could be made to a CCS
scheme, an EOR project would also provide
significant help to the research and analysis
of the options. There is also considerable
international interest, and potentially access
to international funding, provided the UK can
offer leadership to demonstrate some
technically distinctive options.
6.63 Given the potentially significant strategic role
that might be played by CCS in longer-term
energy security, we believe there is a strong
case to examine more closely what might be
done to help stimulate the take-up of EOR in
the North Sea. We will therefore set up an
urgent detailed implementation plan with
the developers, generators and the oil
companies to establish what needs to be
done to get a demonstration project off the
ground. This study will reach conclusions
within six months to enable firm decisions
to be taken on applications for funding from
international sources as soon as possible
thereafter. This will follow on from the initial
25
work already sponsored by the DTI .
25 The papers from this work are being published on
www.dti.gov.uk/energy/coal/cct/co2capture.shtml
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There may be opportunities
for cleaner coal technologies...
6.64 Coal will remain the dominant generating fuel
in large parts of the developing world such as
China and India for many years to come. UK
industry is potentially well placed to promote
cleaner coal technologies, technology transfer
and capacity building into developing countries.
In the longer run it should be possible for UK
project developers to benefit from carbon
credits through international trading under the
Kyoto Protocol clean development mechanism.
With this in mind, we have already put in
place a programme of support for advanced
26
traditional cleaner coal technologies which
is intended to bring forward demonstrator
projects that may help to showcase the
relevant technology more widely.
The current Cleaner Coal Technology Programme
(worth £25m over 3 years) has two components:
Support for research and development into new
cleaner coal technologies. These include:
support for 40 R&D projects covering new
technologies for coal gasification, higher boiler
efficiencies, co-firing with biomass and computer
simulation of cleaner coal-fired generation;
a collaborative agreement with the British Coal
Utilisation Research Association (BCURA) to
provide support for joint projects designed to
contribute to university R&D; and
investigation into the feasibility of underground
coal gasification and coal bed methane in the UK.
Facilitating the transfer UK cleaner coal
technology to other countries and promoting the
exports of UK expertise and products abroad.
Activities have included:
support for outward missions to promote UK
technology;
26 Details available at www.dti.gov.uk/energy/coal/cct
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Coal mine methane
is a legacy to be managed...
6.65 Disused coal mines continue to produce
methane even after they are closed, although
the amount of methane reduces over time.
Methane is significantly more damaging to
the environment in terms of its global
warming potential than carbon dioxide.
Where it can be captured this gas can be
used to generate electricity and heat, thus
contributing to the energy mix and reducing
the greenhouse gas emissions from
abandoned mines significantly. To help
stimulate the industry we indicated in the
2002 budget that we would, subject to
Commission approval, grant coal mine
methane (CMM) plant an exemption from
the climate change levy.
a Memorandum of Understanding with China
for collaborative R&D and the promotion of
cleaner coal technology;
the production of a range of publications and
seminars, in collaboration with the International
Energy Authority, to promote cleaner coal
technology and help reduce the non-technical
market barriers to their development;
help with initiating and establishing a major
R&D collaboration on advanced supercritical
technology under the auspices of the European
Commission’s Framework Programme; and
liaison with the US Department of Energy to
determine areas for future collaboration under
the US/UK Memorandum of Understanding on
Energy R&D.
Other work outside the CCT programme includes
the possibility of Government support for
retrofitting a supercritical boiler to an existing
power plant in the UK.
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6.66 The longer-term decline of methane
emissions mean that CMM electricity
generation will not offer significant long-term
help to the reliability/diversity of UK energy
supplies. But in the short term CMM
presents a material environmental problem.
6.67 Even with existing levels of support a
number of potential CMM electricity
generation projects will remain uneconomic.
The carbon valuation in the EU Emissions
Trading Scheme is likely to provide a
significant incentive to CMM mitigation
projects that would otherwise not justify
themselves. The route by which CMM may
be able to claim credits under the EU
Emissions Trading Scheme is expected to be
project (as opposed to direct activity) based.
We will work to negotiate such an entry
route and in the meantime we will work on
a framework for pilot projects within the
UK emission trading scheme for which
CMM projects may be eligible. The timetable
for pilot projects is currently under review.
6.68 Even this, however, is unlikely to be sufficient
to stimulate the industry in the short term,
given the costs of generation from CMM as
compared with the market price for
electricity. We will continue to work with the
industry to explore ways, including through
the licensing system, in which we can help
recognise the environmental benefits it
secures. The industry has argued for the
introduction of an obligation equivalent to the
renewables obligation. But the renewables
obligation has a specific aim - to develop long
term carbon free generation technologies to
the point where they become economically
viable in their own right, and offering the
obligation more widely risks undermining our
longer term renewables aims. To offer a
similar level of support (via a separate
obligation or equivalent) to the whole chain
from methane extraction to generation would
be difficult to justify, since it is not clear how
much methane would leak naturally and how
much is extracted by the process of recovery.
We accept, however, the need to move to
control CMM emissions and will work with
the industry and relevant environmental
agencies to find ways of doing so more
effectively.
The UK coal mining industry...
6.69 The level of coal-fired generation is not of
itself a limiting factor on UK mines. Coal
production in the UK will decrease over
coming years predominantly as a result of the
increasingly difficult geological and mining
conditions in UK pits. Within 10 years most
of our existing deep mines are likely to have
exhausted their economic reserves.
6.70 Coal, like oil and increasingly gas, is an
internationally traded commodity. Supplies
are available from a wide variety of reliable
sources. The relevant infrastructure notably in
ports and the rail network is likely to be
sufficient to meet expected demand in a very
wide range of scenarios, subject to marketled investment. Given this relatively mature
and flexible market, there do not appear to be
strong economic grounds for supporting UK
coal production as a hedge against import
prices or security of electricity supply
grounds for supporting production as a
means of increasing diversity.
6.71 We recognise that coal producers can make
positive contributions to areas that are often
economically and socially disadvantaged, by
providing well-paid and skilled jobs. The UK’s
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coal industry is the most efficient in Europe.
It has made great strides in improving
productivity and has shown itself able, except
in unfavourable market conditions, to
compete successfully both with other fuels
and with imports.
6.72 Where there is the potential for coal
companies to make worthwhile investments
they have to date been prevented by EU
rules from seeking government help in doing
so. In 2002 we negotiated the flexibility
we receive at an EU level to correct this
27
anomaly so that we now propose to
introduce an investment aid scheme to help
existing pits develop new reserves, where
they are economically viable and help
safeguard jobs.
27 The new Council Resolution on State aid to the coal industry
(EC No 1407/2002)
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Chapter 7 Productivity,
competitiveness and innovation
7.1 Raising the sustainable rate of economic
growth and maintaining industrial and business
competitiveness are central to our economic
strategy. Energy has an important role to play
as a key input - without reliable supplies the
economy and our national infrastructure
would not function. But we must also ensure
that the price of energy allows us to maintain
our competitiveness. Our recent white paper
on ‘Productivity and Enterprise’ 1 set out the
benefits of liberalised markets. As in other
markets, vigorous competition in energy
stimulates innovation and ensures the
efficient allocation of resources, improving
service quality and driving down prices.
7.2 To boost productivity and competitiveness
we need to:
ensure efficient markets which deliver
competitive prices for business and
domestic consumers;
promote resource productivity - this will
benefit the economy and individual
businesses as well as increasing energy
security and reducing carbon dioxide
emissions;
pursue our energy policy objectives through
market mechanisms which promote
competition, flexibility and efficiency; and
help business by setting a clear and
consistent long-term policy framework.
7.3 To deliver these goals in the energy system
we need to address what the Government
has identified as the key drivers of
productivity. These are:
1
to strengthen the competition regime to
encourage firms to innovate and minimise
costs and to deliver better quality goods
and services to customers;
Productivity and Enterprise: A World Class Competition Regime: July 2001
to promote enterprise to help new and
established businesses to start up, develop
and grow;
to improve skills through better education
for young people and greater training
opportunities for those already in the
workforce;
to support science, research and innovation
to utilise the potential of new technologies
and to develop new ways of working; and
to encourage investment to improve the
stock of physical capital.
We need to maintain
competitive energy prices...
7.4 The energy sector represents around 4% of
UK GDP but is a required input to the other
96%. To maintain competitiveness and
encourage inward investment, energy for
businesses and consumers must be
competitively priced, including in comparison
with other EU and G8 countries.
7.5 Vigorous competition improves efficiency and
drives down prices. This has already been
seen in energy markets. For domestic
consumers, average prices in real terms fell
by 10% for gas and 19% for electricity
between 1997 and 2002. For industrial users,
between 1997 and 2001, electricity prices fell
by 22% in real terms, even when the climate
change levy is included. This can be attributed
to measures like the introduction of NETA,
increasing competition in the supply market
and the reduction in the fossil fuel levy
feeding through to contracts. Our industrial
gas and electricity prices were the second
and third lowest respectively in the EU in
2001. Our domestic gas and electricity prices
were the second and fourth lowest.
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7.6 The impact of the measures to promote energy
efficiency proposed in this white paper should
mean that, for many households and users,
energy bills should fall as the amount of
energy needed and consumed is reduced,
although the unit price for energy charged to
consumers and users is likely to rise. Over the
17 years to 2020, the policy measures
suggested here - on emissions trading,
renewables and energy efficiency - might add
approximately: 5-15% (per unit) to household
electricity prices and less than 5% to
household gas prices; and 10-25% to industrial
electricity prices and 15-30% to industrial gas
2
prices . Such price increases would not
translate into similar increases in energy costs.
A part of the price impact reflects energy
efficiency measures which should lead to
reductions in energy use.
7.7 Assessments like these are very uncertain
and it will be important to keep price impacts
under review. Much of the impact is due to
the EU emissions trading scheme (which,
being EU-wide, will impact widely on
European prices) and is dependent on how
the scheme develops as well as on the price
of carbon in the trading market. It is
important to put these potential rises in
context. Electricity prices have fallen
significantly in real terms over the last 20
years to their current historically low level.
Even under a high case scenario the price of
electricity to domestic consumers should
remain below that for, for example, the 20
years to 1995. For industrial consumers,
prices might return to the levels of the early
1990s but remain below those for the whole
of the 1970s and 1980s. For domestic
consumers, a high case scenario could see
prices rising to late 1990s levels, although
2
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this would still be below the level during
nearly all the 1970s and 1980s. Industrial gas
prices have already increased from a
historically low level in the mid 1990s. The
high case scenario is that they might return
to the level of the late 1980s. To the extent
that such an increase in gas prices reflects a
rising wholesale price, this will also affect the
UK’s competitors in Western Europe in a fully
liberalised gas market.
7.8 NETA was introduced in 2001 to replace the
electricity Pool and was designed to bring
greater efficiency to wholesale electricity
trading while maintaining the operation of a
secure and reliable electricity system. Under
NETA the bulk of electricity is traded forward
through bilateral contracts and power
exchanges. It also includes a short term
balancing mechanism to ensure supply
meets demand at all times. NETA provides
for more direct competition in wholesale
electricity than occurred under the Pool.
Traded wholesale electricity prices are around
40% lower than in 1998. The market has
now seen a significant increase in liquidity
and trades.
7.9 Our market is also - unlike California in 2000 dynamic. Under NETA, generators and
suppliers are encouraged to use hedging
arrangements and contracts to avoid
exposure to volatile prices in the balancing
mechanism. In California, regulators
prevented suppliers buying power on longterm contacts. As a result, forward signals
were too weak to trigger new generating
plant. California also faced the reluctance on
the part of regulators to adjust price controls
on consumer prices (price controls in GB
were abolished in 2002), transmission
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constraints, and very fast demand growth.
The UK market is different. Nonetheless we
recognise we must remain vigilant.
7.10 The UK market is also increasingly
competitive. The number of companies
generating electricity has risen considerably
from 6 at the time of privatisation to over
30 by October 2002. Competition is also
forcing companies to work harder to attract
and retain customers. By June 2002, 8.3m
domestic electricity customers - 34%
of total domestic customers - had switched
from their incumbent electricity supplier.
So had 7.1m domestic gas consumers - 36%
of the total. Although switching continues to
take place at a high rate - 115,000 electricity
customers change their supplier every week the market is not yet mature. We are working
with OFGEM, Energywatch and the industry
to ensure that the market works better and
that consumers have confidence in it. In
particular we are supporting efforts to stamp
out mis-selling of electricity contracts,
improve the customer transfer process and
ensure that mistaken transfers are corrected
quickly.
7.11 Energywatch will also be seeking to ensure
that both the industry as a whole and
individual companies improve their
performance in a range of other areas of
customer contact, including the
administration of complaints and the
management of accounts. This is designed
to reduce complaints by addressing them
at source. We will also consider, with
Energywatch, OFGEM and the industry,
whether the funding arrangements that
support Energywatch can more accurately
reflect the performance of suppliers in
relation to their customers.
Energywatch
Energywatch was established under the Utilities
Act 2000 as an independent advocate for
consumers in the gas and electricity markets.
It works closely with OFGEM, the gas and
electricity regulator, which carries enforcement
powers. Energywatch’s aim is to provide
consumers with a ‘one stop shop’ service that:
investigates and resolves consumer complaints
about energy companies;
helps the energy companies improve their
complaint and enquiry handling;
deals with enquiries from members of the
public; and
produces consumer information and advice.
Energywatch recently published its Forward Work
Programme for 2003/4 outlining its key priorities.
The document is available on Energywatch’s
website:
(www.energywatch.org.uk/about_energywatch/for
ward_work_plan/index.asp)
...there is a clearly defined role
for Government...
7.12 The role for Government in the market is to
set the right competition and regulatory
framework. We recognise that competitive
markets cannot deliver some wider policy
objectives. We have a role in correcting
market failures, including countering socially
or environmentally undesirable outcomes.
For example the market may not properly
value externalities created by energy
efficiency or innovation. But government
intervention is justified only where it is well
targeted, cost-effective, affordable and
efficient, promoting appropriate signals within
a credible long-term framework.
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7.13 As stated in chapter 1, this white paper
demonstrates our commitment to the
principles of better regulation. In particular:
to engage with stakeholders to find out
what they need from policy;
to examine what instruments are available
to achieve those outcomes, with a
preference for market measures;
to treat regulation as the last option if
nothing else will work;
to use existing regulations where possible;
and
to impose new regulation, exceptionally
and then only when it is fit for purpose.
We must seize opportunities
to promote enterprise...
7.14 Moving to a low carbon economy also
presents opportunities for businesses to
seize competitive advantage. We have
established a number of Innovation and
Growth Teams (IGT) and some of these have
looked specifically at energy issues. For
example the Automotive IGT considered the
future contribution of low carbon transport
within its overall remit of safeguarding the
competitiveness of the UK’s automotive
sector. Manufacturing standards - be they
quality, environmental, health, safety or
security - also have a vital role to play.
7.15 Businesses will need to adjust their own
operating practices to reduce their carbon
intensity and will need advice and incentives
to help them. This means simplifying access
to funding, particularly for smaller
businesses, alongside DTI’s reform of its
general business support schemes, replacing
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them by fewer, streamlined schemes. All this
will help businesses to seek funds for the
purposes of energy innovation. Local Energy
Efficiency Advice Centres will also be able
to advise on national sources of funding.
We will complement this by developing a
single web-based portal for businesses
wanting access to energy support schemes,
as part of a single knowledge bank for
business support schemes. The Energy
Saving Trust and the Carbon Trust are also
piloting a project for Small and Medium-sized
Enterprise Energy Advice Centres (SMEEACs).
7.16 The PIU called for a fundamental review
of low carbon support programmes aimed
at business, particularly the Carbon Trust
and the Energy Saving Trust. Although
we consider that some of these bodies
and programmes are too new to review now,
we will review low carbon delivery
programmes and associated support bodies
before the end of 2004 in the context of
a review of low carbon instruments more
generally in advance of the introduction
of the EU emissions trading scheme.
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Addressing skills...
Resource Productivity and Sustainable
Consumption and Production (SCP)
The Strategy Unit’s (formerly PIU) report,
Resource Productivity: making more with less
(November 2001) was one of three linked reports
which also included its Energy Report and its
recently published waste report, Waste not, want
not (November 2002). The outcome of the World
Summit for Sustainable Development last year,
particularly a commitment to a ten-year drive on
SCP, has recently re-focused our follow-up work
on resource productivity. In coming months we
will develop a strategic overview of resource
productivity and SCP more widely. This will:
set out the economic, social and environmental
rationale for long-term policy planning to
decouple economic growth from environmental
degradation and resource use;
draw on the two major policy blocks of energy
and waste as core elements of an SCP future;
consider the case for and identify further
indicators for resource use as a means to
stimulate and track long-term improvements;
set out our approach to sustainable
consumption, with specific proposals to help
empower consumers and improve
environmental impacts of goods and services
(eg with better information right through the
supply chain); and
identify the key policy levers for encouraging
SCP, and set out how a co-ordinated use
of tools and instruments could drive such
a programme - eg economic pricing
instruments, support for innovation,
procurement, signalling of future targets
and minimum standards.
7.17 We need to address skills development,
training and an ageing workforce in the energy
industries. The problems are widespread:
nearly a third of staff in offshore oil
companies are over 45 and only 6% under
25. 20% of companies provided no regular
staff training - nearly 40% for smaller
3
companies ;
even without new build the nuclear fuel
cycle, power generation and environmental
restoration sectors are likely to need
around 19,000 graduates and skilled trades
people over the next 15 years to replace
retirements and satisfy demand in
4
environmental restoration ;
the Gas and Water Industry National Training
Organisation (GWINTO) has predicted that
there could be a major shortage of skilled
gas installers in the coming years; and
key skills in companies building major
infrastructure such as power stations and
refineries are currently concentrated in the
over-50s.
7.18 Many employers invest in training but finding
time and resources can be difficult, particularly
for smaller companies. Our Manufacturing
5
Strategy emphasised the importance of a
skilled workforce to a productive and
competitive economy - not only technical
skills but also leadership and management
3
Skills Foresight, The Industry Survey, OPITO 1999
4
The Report of the Nuclear Skills Group, DTI, December 2002
(www.dti.gov.uk/energy/nuclear/skills/nsg.shtml). The figure of 19,000 is
based upon the age profile that currently exists in the sector and the
assumptions that the fuel cycle will remain stable, the planned closure
programme of Magnox and AGR power stations will proceed and that the
numbers engaged in environmental restoration will double over the next 15
years. No allowance has been made for potential new build.
5
The Government’s Manufacturing Strategy, DTI, May 2002
(www.dti.gov.uk/manufacturing/strategy.htm)
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It will cover both demand (from employers
and their investment in skills and training)
and the supply of skilled people.
Government, business, the new Sector
Skills Councils (SSCs), the Sector Skills
Development Agency, the Learning and
Skills Council, Regional Development
Agencies, other public and private bodies
and employers will need to work together
to identify skills needs and measures to
deliver them. Resources for SSCs will
increase to £42m in 2003/04, to £45m in
2004/05 and to £48m in 2005/067;
skills. It also highlighted the need for a
demand-led approach, combining government
investment, access to best practice support
and increased support for the science base.
This implies close co-ordination across the
industry, in particular between employers
and education and training providers and also
through supply chains (especially where
seasonal shifts in workloads are a factor).
We are addressing similar skills
needs across the economy...
7.19 Such problems are not energy-specific.
We are already addressing common problems
across the economy6 which are also relevant
to the energy sector. In particular we are:
investing an extra £100m per year by
2005/06 through the Office of Science
and Technology (OST) to improve
the development of the UK’s science
and technology skills base;
targeting science and mathematics
teaching in schools to ensure that we have
the right mix of teaching skills at primary
and secondary level and also providing
resources (including £60m between 2000
and 2002) to modernise and upgrade
science laboratories;
6
100
commissioning an independent review into
how business can draw more effectively
on university expertise, to report in
summer 2003;
publishing a new skills strategy for England
in June 2003 aimed at reducing our
productivity gap with major competitors.
Links to more detailed information about the measures set out in this
paragraph and others can be found on the DFES and HM Treasury websites
(www.dfes.gov.uk/learning&skills/index.shtml) (www.hmtreasury.gov.uk/Documents/Enterprise_and _Productivity/Research_and
Enterprise/ent_res_roberts.cfm)
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raising the profile and attractiveness of
apprenticeships with a major marketing
campaign to promote Modern
Apprenticeships. A new National Modern
Apprenticeship Task Force has been set up
as a high level, employer-led body, driving
the expansion and development of Modern
Apprenticeships, so helping to meet the
nation’s skills needs and the aspirations of
young people; and
extending training for lower-skilled
workers, helping highly skilled individuals
to enter the UK and encouraging take
up of Investors in People in small firms.
The energy sector
also has specific needs...
7.20 We will ensure that these cross-cutting
initiatives take proper account of energy
issues, such as the move to a low carbon
economy, which will affect businesses across
the economy. For example:
7
www.ssda.org.uk
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our Fuel Poverty Advisory Group is
considering ways to encourage small firms
to take on apprentices and possible links
to government and local authority funded
programes; and
we are working closely with the industry
and training providers to review the skills
and research capabilities required to
manage more distributed generation in
the future. And we are looking into
supporting the creation of a ‘centre of
excellence’ in distributed generation which
will bring together universities that have
power systems expertise to enhance UK
R&D capability.
7.21 We recognise the interrelationship between
skills, research and innovation: skills tend to
drive innovation; in turn innovation creates
more demand for new and established skills.
A healthy research base is crucial to nurturing
the skills needed to manage the effective
application of emerging new energy
technologies. Not all research training in our
universities will produce radical new
technologies but the skills and expertise
developed will equip people for the vital task
of implementing and maintaining new energy
infrastructure.
7.22 We are committed to working with
employers in the energy sector, both through
the evolving SSCs and the SSDA, involving
Government and other bodies at central,
8
devolved , regional and local level as well as
education and training providers.
This includes the SSC for the oil and gas
extraction and chemical manufacturing sector
9
(COGENT ), which was set up in April 2002.
8
Training and education are devolved issues and both the Scottish Executive
and the Welsh Assembly Government will have their own skills strategies
and policy measures
9
www.cogent-ssc.com
COGENT
COGENT works with employers, Government
and education and training providers. It aims to
stimulate action at all levels of industry and
emphasises that skills and training have to be a
Board-level concern. It has already launched:
an offshore technician training scheme to bring
in 150 new trainees each year;
a programme aimed at engineering
undergraduates, promoting careers in the oil
and gas sector; and
interactive web-based material for schools,
featuring young people talking about their jobs
in the industry.
It also includes the developing SSCs for the
Process and Manufacturing sector and the
Science, Technology and Engineering Training
Alliance (SEMTA), which will address some
energy-related areas.
7.23 Upgrading skills will be vital for effective
delivery of the step change in energy
efficiency, particularly in the household
sector, which is our goal. We therefore
welcome the proposed creation of an Energy
Utility SSC and look forward to working
through such an SSC, provided it achieves
licensed status, to develop new ways to
enhance the skills and training of employees
in the energy efficiency industries.
7.24 It would be premature for Government to
attempt to prescribe in detail what action
should be taken to address skills in the
various sectors of the energy industry at a
time when a network of employer-led SSCs
is emerging. Through the SSDA we are
working closely with employers to ensure
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that, as soon as possible, all parts of the
energy industry are included within the
emerging SSC network which has recently
received a substantial increase in
Government funding (see paragraph 7.19).
This will enable energy employers to
articulate their needs, influence training
providers and improve productivity and
service delivery - at the same time building
on existing work in the energy industry (in
many cases undertaken by the former
National Training Organisations) and new
ideas and proposals. For example:
the Electricity Training Association is
commissioning a Skills Foresight Project
to identify the skills requirements of the
renewables industry to 2010; and
GWINTO has made proposals to address
shortages of gas installers including a pilot
project with EAGA to deliver around 400
qualified central heating installers.
7.25 In December 2002 we published the results
of a nuclear and radiological skills study10.
Although there is no immediate, general skills
shortage, some shortages do exist, particularly
in safety case production and radiological
protection; there are problems associated
with an ageing workforce; competition for
engineering and science skills; and
uncertainty about the future of nuclear
power. In response, a task group is being
formed across the sector to develop and
implement a workforce development strategy.
10 www.dti.gov.uk/energy/nuclear/skills/index.shtml
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We need to support
action by others...
7.26 We aim to achieve a better and more
appropriately skilled workforce to meet our
energy objectives - which means adopting a
common approach that connects supply and
demand for skills development. This must be
driven by employers, in collaboration with
others - with education and training providers
and with related and supply chain partners.
Innovative thinking will be needed, for
example to make the most of transferable
skills. Offshore construction and engineering
skills can be adapted to the development
of offshore windfarms, and engineers leaving
the armed forces can be retrained to work in
a variety of energy sectors. Employers could
encourage older workers to stay on to help
meet skills shortages and to assist with
succession planning or training. Such a
collaborative approach will enable industries
to build on the skills that already exist rather
than pulling against each other.
We also need to become
more innovative...
7.27 To achieve our objectives we need to exploit
existing and develop new technologies.
Industry will need to innovate to maximise
the opportunities offered by a low carbon
economy and by global markets in
environmental goods and services.
7.28 Government needs to play a role in developing
innovation, because the benefits, in terms
of the environment and security of supply,
do not always deliver short-term profits for
the private sector. This is particularly true for
low carbon technologies where innovation is
needed to support major changes over a
significant period of time. We should be wary
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Chapter 7: Productivity, competitiveness and innovation
of picking technology winners, but we are
ready to fund innovation where this can achieve
the best results in terms of its policy objectives.
We will also work to create a policy
environment that encourages the private
sector to bring the key technologies forward,
and play a key role in the delivery of major
new infrastructure. Of particular importance
will be the move towards internalisation of
the cost of carbon, through emissions trading
(discussed in chapter 2). This should also
help to incentivise low carbon innovation.
We are keeping innovation
policy under review...
In November 2002 we began a broad review including energy - that will by July 2003:
assess the UK’s relative innovation performance;
identify strengths and weaknesses and where
market or institutional problems inhibit innovation;
identify how Government policies can help; and
set out a new strategy, involving key stakeholders,
to improve the UK’s innovation performance.
We have also set up an independent review, led
by Richard Lambert, on strengthening links
between business and universities. The review
team will consult widely with business, universities
and national and regional administrations in the
UK and overseas. The review will complement
and contribute to the Innovation Review and will
report to Ministers in late summer 2003.
We will invest more
in energy innovation...
Adviser and a group of experts. This Energy
Research Review Group (ERRG) was asked
to look particularly at whether the overall
level of expenditure on research,
development and demonstration was
sufficient and whether it was being targeted
at the right areas.
7.30 The group concluded that the UK’s spending
should be raised. We are increasing public
spending on energy research, development
and innovation. DTI spent around £40m
supporting sustainable energy-related
research and technological development in
2001/02. We have already put in place a
substantial renewables support programme
worth in total £250m between 2002/03 and
2005/06. We will also, as described in
chapter 4, increase the funding by a further
£60m in this period. This is additional to the
extra funding announced in the 2002
Spending Review, which allocated an
additional £38m for energy policy objectives
in 2005/06 compared with 2002/03.
7.31 We set up the Carbon Trust in April 2001
to lead on low carbon technology and
innovation. It is spending £75m over the next
three years. Funding for energy-related
technology has also been available via the
DTI’s Innovation and Business Support
programmes and through various European
programmes. The Research Councils will
spend over £11m on energy-related research
in 2002/03. They have been allocated an
additional £28m under spending review 2002
for further research in support of a
sustainable energy economy.
7.29 For the PIU Energy Review, a report on the
Government’s support for energy research,
development and demonstration was
prepared by the Government’s Chief Scientific
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Prioritise and properly
co-ordinate our resources...
7.32 We endorse the ERRG’s research priorities:
carbon dioxide sequestration;
energy efficiency;
hydrogen production and storage;
nuclear (particularly waste);
solar PV; and
wave and tidal power.
All these have been identified as areas in
which increased support for research and
development is particularly likely to result in
step-change breakthroughs which will
contribute significantly to carbon reductions.
7.33 ERRG also recognised the need for further
research into social, economic and
environmental factors as well as the crucial
role of cross-cutting research, for example, in
advanced materials, super-conductors,
nanotechnology and biotechnology. It noted
the importance of targeting support at basic
research, as this is the point at which the
maximum number of options can be generated
for development and commercial application.
We agree that basic research is critical to
sustaining innovation over the longer-term.
7.34 A new Energy Research Network is being
developed by the Research Councils to
establish interdisciplinary teams with
expertise in the scientific, technological,
social, economic and health impacts of
energy, providing much needed co-ordination
and cohesion. A new UK Energy Research
Centre will act as the hub, providing a national
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and possibly European focus to integrate
and accelerate research in this priority area.
It will play a key role in co-ordinating
research, facilitating collaboration with
industry and UK participation in international
projects, as well as being a centre of
excellence in its own right. The centre will
also signal the importance the UK attaches to
energy research, helping to attract highcalibre scientists and graduates to the sector.
Work with others
internationally...
7.35 A number of countries are developing lowcarbon technologies. We need to focus on
areas where UK industries can deliver
innovations before or better than others.
But international collaboration is important
where pooling resources can encourage
innovation at lowest cost.
7.36 We are promoting an international initiative
to strengthen efforts to bring science,
engineering and technology to bear on
efforts to slow climate change, initially
through the G8. We will also continue to
collaborate in IEA work in areas such as
renewables, end use and fossil fuel
technologies, fusion and the exchange of
scientific and technical information on energy
technology. In our relations with the United
States we will build on the Memorandum
of Understanding on energy R&D between
the DTI and the US Department of Energy
to develop a more strategic collaboration on
energy technologies. We have recently
published a report that shows that it should
be technologically and economically feasible
to achieve a virtually zero carbon energy
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system in the long-term, if we use energy
more efficiently and develop low carbon
technologies11.
The European Framework Programme
The European Framework Programme supports
R&D projects across a range of science and
technologies.
The new programme, beginning in 2003, gives
more emphasis to renewables. We will continue
to assist UK applications for its support. The DTI
has also commissioned a study on how Germany,
Spain and the Netherlands promote the programme
and organise energy research, especially in
relation to small and medium sized companies.
The ENERGIE programme supports R&D in the
three broad categories of renewables, rational use
of energy and fossil fuels. UK participants have
received nearly B180m from this programme,
Thermonuclear Experimental Reactor (ITER)
and the International Fusion Materials
Irradiation Facility (IFMIF). The US and China
have both signalled their intention to join
ITER, an ambitious international research
project to harness the potential of fusion
energy. The project will involve the UK, US,
China, Russia, Japan, Canada and other
European nations. We expect ITER to lead,
by the middle of this century, to the
commercially viable production of clean, safe
and renewable energy without the emission
of greenhouse gases. The UK has
considerable expertise in fusion and a
complementary national fusion programme
will also be needed to maximise the benefit
from this expertise.
There will be significant new
opportunities for investment...
around 20% of its budget.
The UK also participates in nuclear research
under the EURATOM Programme, primarily on
fusion research.
7.37 In the long term, nuclear fusion could provide
power generation from an abundant fuel
source with zero carbon emissions and
without the problems associated with longterm highly radioactive waste. We are a long
way from a commercial power plant, but
the technical feasibility of fusion power
generation could be demonstrated within
25 years given adequate resources, possibly
leading to full-scale power generation within
30 years. The next step towards this is the
construction of the International
11 Assessment of Technological Options to Address Climate Change,
A Report for the Prime Minister’s Strategy Unit: December 2002
(www.strategy.gov.uk/whatsnew/whatsnew.shtml)
7.38 The UK has a world-leading manufacturing,
service and research capability in the energy
field and a world-class science base.
The power generation, transmission and
distribution equipment and service supply
industry alone makes a very substantial
contribution to the UK’s economy by way
of goods, services and jobs. In 2001 21% of
all industrial investment was made by the
energy industries, compared to 20% in
198012. There will be considerable
opportunities for the UK energy industry to
invest to meet the challenges of delivering
the infrastructure, new technologies and
solutions we will need in the future. With its
long-standing knowledge and experience of
the UK energy scene, the UK equipment and
service supply industry has a central role
12 UK Energy Sector Indicators, DTI, December 2002
(www.dti.gov.uk/energy/index.shtml)
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to play in helping us to achieve our objectives.
The white paper sets a clear, consistent and
settled framework against which business
can plan to that end. We will continue to
work with industry to help business move up
the value chain and reap the commercial
benefits this will bring, both in the UK and
abroad through export opportunities.
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Chapter 8 Energy and the vulnerable
Energy policy raises
a range of social issues...
8.1 Most of us take for granted being able to turn
the lights on and keep our homes warm.
But for some people, basic energy needs
account for a disproportionate amount of their
income. We must ensure that as we address
the security, environmental and competitiveness
aspects of energy policy we also take account
of social impacts, especially on the poorest.
We are making good progress
in tackling fuel poverty...
8.2 Some households need to spend more than
10% of their income to heat their homes
adequately and affordably - the ‘fuel poor’1.
Fuel poverty is caused by a combination of
factors, including the energy efficiency of the
home, fuel costs and household income.
So we need better energy efficiency,
competitive energy prices and increased
incomes. We are committed to eradicating
fuel poverty and have a legal obligation under
the Warm Homes and Energy Conservation
Act 2000 in England and Wales and the
Housing (Scotland) Act 2001 in Scotland to
specify a target date by which, as far as
reasonably practicable, this will be achieved.
The UK Fuel Poverty Strategy2, published in
November 2001, sets out policies for ending
fuel poverty in vulnerable households in
England - older households, families with
children and householders who are disabled
or have a long-term illness - by 2010.
We reaffirm these commitments and policies.
1
2
Different definitions of fuel poverty apply in each country, though we are
working to bring them closer into line. There are also two methods of
assessing income - either to include or exclude Housing Benefit and
Income Support for Mortgage Interest. The figures quoted include this
income. The numbers in fuel poverty are greater if this income is excluded.
www.dti.gov.uk/energy/consumers/fuel_poverty/strategy.shtml
We aim that as far as reasonably
practicable no household in Britain should
be living in fuel poverty by 2016-183.
8.3 Encouraging progress is being made. In 1996
there were 51⁄2 million UK households in fuel
poverty. Today there are around 3 million. Of
these about 2 million are vulnerable households.
The 21⁄2 million overall reduction is due mainly
to energy price reductions and increased
benefits. On current forecasts we might expect
economic growth to take about 1 million
more households out of fuel poverty by 20104.
We will publish our first annual progress
report on the UK Fuel Poverty Strategy shortly5.
This will provide more detail on the progress
being made and the programmes in place.
8.4 Eradicating fuel poverty sustainably, particularly
for the most vulnerable households, requires
action in the home - better insulation, more
efficient heating systems and minimising
draughts. Together with the Devolved
Administrations we fund a number of grant
schemes to support this - Warm Front in
England, Warm Deal and the Central Heating
Programme in Scotland, the New Home Energy
Efficiency Scheme (HEES) in Wales, and Warm
Homes in Northern Ireland6. These schemes
provide help for people on income or disability
benefit. The energy efficiency commitment
(EEC) requires half the target energy savings
to be achieved in this priority group.
3
In England and Scotland the target date is November 2016. Scotland has an
interim target of achieving by 2006 a 30% reduction of people in fuel
poverty as shown in the 2002 Scottish House Condition Survey. The Welsh
Assembly Government has proposed in their consultation document a
target date of 2018. There is no date yet for Northern Ireland.
4
assumes that incomes grow by 2.5% in real terms each year to 2010
5
www.dti.gov.uk/energy/consumers/fuel_poverty/strategy2.pdf
6
www.eaga.co.uk and www.txuwarmfront.co.uk/content/general/default.asp
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Our recently published policy on sustainable
communities7 has an important role to play.
Our target of bringing all social housing up
to a decent standard will also contribute.
8.5 Continuing these initiatives in their current
form and at their current levels would
remove up to another 1 million vulnerable
households from fuel poverty by 2010,
though some of these will already have been
removed through economic growth.8
But we need to do more...
8.6 Evaluations of Warm Front in England and
a progress report on the first year of the EEC
will be completed this year. These will help
us assess the impact of the schemes and
their contribution to our Fuel Poverty Strategy.
The Warm Front review also provides an
opportunity for changes to the scheme,
looking ahead and ensuring the best use of
our resources in fulfilling the Strategy.
8.7 We are also exploring new ways of tackling
fuel poverty. Five pilot Warm Zones were
established in 2001 - in Stockton, Sandwell,
Hull, the London Borough of Newham, and
Northumberland - bringing together the
deliverers of Warm Front, energy suppliers,
local authorities, health officials and others to
provide a co-ordinated approach in a local area9.
7
Sustainable Communities: Building For The Future www.communities.gov.uk
- see chapter 3
8
As with the estimated impact of economic growth, there is considerable
uncertainty about the full impact on the numbers in fuel poverty.
9
www.warmzones.co.uk. A summary report evaluating the first year
performance of Warm Zones is at
www.est.org.uk/est/documents/warm_zones_evaluation_l_summary.pdf
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Tackling fuel poverty through partnership
The Dundee Community Energy Partnership brings
together Dundee City Council, Transco, the Scottish
Executive, and Scottish and Southern Energy, to
identify areas of good practice and establish a
working model. Partnership workers go door-todoor throughout the city to determine if there is
fuel poverty, what measures are needed, and
what the best use of funding programmes would
be to help the household out of fuel poverty.
8.8 To advise on progress and suggest
improvements in delivering the fuel poverty
strategy, we established the Fuel Poverty
Advisory Group in England. A similar group
works with the Scottish Executive on
progress in tackling fuel poverty in Scotland.
We welcome the English Advisory Group’s
10
first annual report as a valuable contribution
to the challenge of meeting our fuel poverty
targets. We will work with the Group as
we consider how its recommendations
will be taken forward. In particular we will
continue to:
report annually on progress against the
fuel poverty targets;
keep under review the resources needed
to achieve our targets;
find ways to achieve greater efficiency
in delivery, through closer co-ordination
between the various initiatives which
deliver energy efficiency improvements
to the fuel poor;
work across Government to ensure that
policies on benefits, health and housing
help to alleviate fuel poverty; and
address the need to overcome skills
shortages - see Chapter 7.
10 www.dti.gov.uk/energy/consumers/fuel_poverty/fuel_adv_grp/report1.pdf
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Chapter 8: Energy and the vulnerable
There is a need to
tackle rural issues...
8.9 Most people in fuel poverty live in urban areas.
But it can be more acute in the countryside,
where houses tend to be older, less energy
efficient and harder to heat. Also many
people in rural areas do not have mains gas.
Oil fuel, solid fuel, electric heating or liquefied
petroleum gas (LPG) can be more expensive
and less convenient. The DTI is therefore
working with Transco to identify areas
where extensions of the gas network and
connection to energy efficient gas central
heating systems might be justified. We will
explore options for pilot projects
on gas extension.
8.10 People living in rural areas are particularly
dependent on cars and can be affected by
higher fuel prices and the closure of filling
stations. We have set up a taskforce with
industry on services for rural motorists to look
at issues such as the costs of environmental
measures for small filling stations and
schemes to support rural filling stations.
services as a necessary requirement for
addressing international development and
poverty reduction objectives. The recent
DFID issues paper Energy for the Poor12
explains the importance of access to
affordable, safe and reliable energy services
in the achievement of the international UN
Millennium Development Goals.
8.12 We shall strengthen international dialogue
on energy and development. We will
support and promote two international
WSSD follow-up activities aimed at
improving access to energy services - the
Global Village Energy Partnership (GVEP),
whose leading partners include the United
Nations Development Programme (UNDP)
and the World Bank, and the EU Energy
Initiative for Poverty Eradication and
Sustainable Development.
And internationally...
8.11 International development also has an
important part to play in improving energy
security in the medium to long term. We will
promote economic growth, especially propoor growth, stability and good governance in
energy-producing countries as part of our
11
international development efforts. At WSSD
in Johannesburg last year it was agreed that
concerted international action is needed for
increasing access to sustainable energy
11 World Summit on Sustainable Development - see chapter 4
12 www.dfid.gov.uk Issues and Briefing Notes
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Section
Four
Delivery through
partnership
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Chapter 9
We need to work with others...
9.1 People gave us a very clear message in the
public consultation leading up to this white
paper. They told us that they care about the
environment and that they want to play their
part in tackling climate change. But they need
practical leadership and help to understand
what they can do.
9.2 We have set a lead in this white paper. We
have set out new objectives for energy policy,
including a clear commitment to move towards
a low-carbon economy. And we have set
out new measures to deliver our objectives.
9.3 We will need to work with others to achieve
these goals. The products and services
needed in future will depend on business
enterprise and innovation. Local authorities
and regional bodies are pivotal in delivering
change in their communities. We will
continue to work closely with the Devolved
Administrations. We will continue to need a
sound basis of academic research and
information. Independent organisations and
voluntary bodies can communicate messages
to the public and help them to get involved in
decision-making.
9.4 And Government itself must change so that
energy policy is looked at as a whole.
Our challenge is to achieve all our objectives
together rather than pursuing them as
separate streams. And this approach needs
to be reflected in the way energy markets are
regulated.
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We need new ways of doing
things in Government...
9.5 We have set out a challenging, long-term,
agenda for change. We need to make sure
we have the institutions in Government to
deliver it.
9.6 We do not believe we need a new
organisation for this. We want to concentrate
our energies on following through the
commitments we have made, not on creating
new machinery. We have shown, during the
preparation of this white paper, that with
commitment and effective leadership we can
achieve extremely effective
interdepartmental working. We intend to
build on this. The white paper itself will give
us a new focus for our future efforts in this
respect.
9.7 This work cuts across traditional
departmental boundaries. To deliver the
programme successfully, we need to provide
a clear locus for:
advising the Government on energy
security (including longer-term international
trends) and on carbon emission targets;
monitoring the introduction and impact of
policies to deliver those security and
carbon goals;
monitoring performance;
reporting to Ministers on performance
and on any policy adjustments needed;
reporting publicly on performance; and
coordinating across Government on
international sustainable energy issues.
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Delivery through partnership
Chapter 9
9.8 To this end, we will strengthen departmental
analytical and strategic capabilities in the
field of energy policy. The DTI’s Energy
Strategy Unit will provide the focal point of
a network - a Sustainable Energy Policy
Network - of departmental policy units that
will be involved in delivering the white
paper’s commitments. We expect the DTI,
Defra, the FCO, the Treasury, the ODPM, DfT,
the Scotland Office, the Wales Office, and
the Devolved Administrations all to play
a full part in this network. The regulators,
particularly OFGEM and the Environment
Agency, will also play an important part.
The primary task of the network will be to
ensure that the aims we have set out in this
white paper are delivered. This will require
the network, acting as a virtual unit, to
ensure that the Government as a whole
pursues effectively the policies and
programmes that we need to deliver all our
objectives, including a significant stepping-up
of our international capability.
9.9 To provide a clear line of accountability for
the network, we will also put in place a new,
ad hoc, Ministerial group which will oversee
the delivery of the commitments in this
white paper. This group will be chaired
jointly by the Secretary of State for Trade and
Industry and the Secretary of State for the
Environment, Food and Rural Affairs. To
support the Ministerial group, the governance
of the Sustainable Energy Policy Network
will be strengthened with the creation of a
Sustainable Energy Policy Advisory Board,
made up of senior, independent experts and
stakeholders. The role of the Advisory Board
will be to provide the Ministerial group with a
source of well-informed, independent advice
on the approach and the work of the Network
as a whole.
9.10 To ensure the transparency of the follow-up
to this white paper, the Sustainable Energy
Policy Network will publish annually a report
on the progress being made towards the
aims we have set out here. This will report
on how the Government, regulators and
industry are delivering security of short-term
and long-term energy supply, moving towards
our intermediate and longer-term carbon
reduction goals (including those already set
out in the Climate Change Programme),
delivering our fuel poverty targets and
maintaining the competitiveness of our
energy markets more generally.
9.11 We will need appropriate indicators to monitor
progress. Government already publishes an
extensive range of energy indicators, and
these will continue to be published annually.1
But we need to focus on a smaller set of
indicators to give a broad overview of whether
overall energy policy objectives are being
delivered. Therefore, as a supplement to the
white paper, we will be seeking views on the
most appropriate indicators to focus upon.
9.12 We also need to ensure that our future
policies and measures take full account of
their carbon impacts, that they are
transparent and that information about them
and about energy policy choices is available
to business and the public in a format that
they will find accessible. The recently
updated guidance for regulatory impact
assessments includes a provision to consider
environmental impacts as part of delivering
the Government’s commitment to
sustainable development. A carbon impact
assessment will in future be an integral
part of assessing environmental impacts.
1
UK Energy Sector Indicators , DTI, December 2002
(www.dti.gov.uk/energy/index.shtml)
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assessments through primary legislation,
bringing OFGEM into line with the
position in other areas, notably the
Financial Services Authority and Ofcom;
Linking to the work of OFGEM...
9.13 Government sets the regulatory environment
in partnership with OFGEM, the independent
economic regulator for the gas and electricity
markets. OFGEM has a key influence on the
energy markets for which it is responsible.
The way in which OFGEM and Government
discharge their responsibilities will play a
central part in determining whether the
environmental transformation and the
security of the energy industry we envisage
in this white paper are delivered in practice.
OFGEM and the DTI share common statutory
duties under the gas and electricity
legislation, but have separate responsibilities:
the roles are complementary. Our proposals
will facilitate dialogue, and provide for a clear,
shared, understanding of objectives.
9.14 To help minimise inconsistencies between
our energy policy objectives and the
regulatory regime for the gas and electricity
markets we need to:
raise the profile of environmental
considerations in OFGEM’s regulatory
decision-making;
improve co-ordination and understanding
between Government and the regulator on
environmental objectives; and
114
OFGEM is committed to publishing
regular statements on security of supply;
DTI, Defra and OFGEM will establish
a joint working group on relevant
environmental issues, and publish
statements of progress though the
Sustainable Energy Policy Network.
This group will build on the successful joint
group which has been established for
security of supply; and
we shall revise the statutory guidance
on social and environmental issues
in the light of this white paper making
the guidance more specific.
9.16 Many of the detailed rules for the electricity
and gas markets are set in codes rather than
in legislation or licence conditions. Industry
code panels advise the regulator on proposals
for modifications. OFGEM then makes
decisions on code modifications. In making
its decisions OFGEM is not bound by the
panels’ advice. We will:
seek to strengthen the code panels which
advise on code revisions by ensuring
they include people with expertise in
renewables and the environment;
work with OFGEM to strengthen the
transparency and accountability of the
code modification process. OFGEM already
publish reasons where they do not accept
the advice of the industry code panel; and
also consult on a range of further
measures, including whether it would be
appropriate to provide for appeals against
strengthen OFGEM’s transparency.
9.15 To this end we propose a wide-ranging
programme of action:
OFGEM has committed to producing
regulatory impact assessments, including
environmental impact assessments, for all
significant new policies. This will enhance
transparency until there is opportunity to
provide statutory backing for these
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OFGEM decisions on certain code
modifications. This consultation will take
place within the wider context of a House
of Lords inquiry into the accountability of
regulators.
9.17 It has been argued that we should introduce
a power of direction over OFGEM. We
believe that independent economic regulation
delivers very significant benefits. Although a
power of direction would allow the
Government to have a direct impact on
regulatory decisions, we consider it would
undermine the independence of the
regulator, and politicise the regulatory
process so as to cause unacceptable levels
of uncertainty in the markets.
We must also work closely with
the Devolved Administrations...
9.18 We will continue to work closely with the
Devolved Administrations on energy policy
objectives, in particular through the new
Sustainable Energy Policy Network. We are
encouraged that the Devolved Administrations
are developing strategies and targets on
devolved aspects of energy policy.
Scotland and Wales Approaches to Energy Strategy
In Scotland, the Scottish Executive is committed
to raising the overall proportion of electricity
generated from renewable sources to 18% by
2010 (including existing large hydro). The Executive
has recently consulted on the potential to
generate as much as 40% of Scotland’s electricity
from renewable sources by 2020. Scottish
Ministers are currently considering the views
expressed and intend to make an announcement
shortly about a 2020 target and the measures
required to achieve it.
The Scottish Executive is also strongly supportive
of a single GB market in electricity through BETTA.
Wales has a climate, geography and industrial
structure which present tremendous opportunities
for clean generation technologies which can be
developed very much in accord with sustainable
development principles, including creating wealth
for communities from energy generation and
supply chain growth. Renewable energy, CHP and
energy efficiency opportunities have already been
examined in depth by the Welsh Assembly’s
economic development committee and are being
supported within the EU Structural Funds
programmes. Against this background the Welsh
Assembly Government and relevant agencies are
strongly pursuing an increasingly active clean
energy/energy-conservation strategy which will be
further boosted in the light of the developments
described in this white paper.
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Regional and local leaders...
9.19 Local authorities and other local bodies,
regional chambers and Regional Development
Agencies (RDAs) make decisions that are
vital for energy policy - for example on
planning, regeneration and development,
procurement, housing, transport and
sustainable development. Specific examples
are set out throughout this white paper.
In future there will be greater emphasis on
local and regional approaches in delivering
our energy objectives. Local authorities
have a growing role as community leaders.
Elected regional assemblies will provide
2
additional political leadership .
9.20 We already work with local and regional
bodies in England on energy issues - for
example, on energy efficiency. We will build
on this to develop a new package of
measures to promote national objectives
through local and regional decision-making.
This will enable local and regional priorities
to be better reflected in national policy.
Over time a more proactive role will be
developed for local and regional bodies in
energy policy.3 Local policy is devolved and
the Devolved Administrations will wish to
consider whether to take action in their
respective areas.
9.21 Several regions already have energy or
renewables strategies. We propose to build
on these by taking steps to ensure that a
strategic approach to energy is developed
and implemented in each region. Ideally
2
In regions that choose to establish them.
3
The approach builds on policy set out in the recent white paper on regional
governance Your Region, Your Choice: Revitalising the English Regions.
Cm 5511 HMSO May 2002.
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this strategic approach will be integrated
as appropriate into existing strategies.
We expect that it will:
set out a strategic vision of the interaction
between national energy policy and
specific local and regional concerns;
include regional targets (such as for
renewables and energy efficiency)
negotiated between the region and
national Government;
set out an action plan showing how
regional bodies and local authorities
intend to help to deliver objectives on
energy through their various roles and
functions; and
act as a contribution by the region to the
development of national policy.
9.22 We expect this strategic approach to be
developed by a partnership of regional
chambers, RDAs, Government Offices in the
Regions (GOs), local authorities and other
stakeholders, such as businesses, unions and
voluntary groups. Its objectives will need to
be delivered by all these bodies working
closely together. In the longer term elected
regional assemblies will take responsibility for
leading the work where they are established.
We will consult shortly on detailed proposals.
Arrangements in London
In London, the Greater London Authority (GLA)
was created in 2000, with responsibility for
preparing statutory strategies in a number of
areas. We believe it is too early to change current
institutional arrangements in London, given that
the GLA has only been in existence for two years.
But we welcome the Mayor’s decision to prepare
a non-statutory energy strategy.
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9.23 RDAs’ role as the drivers of regional
economic development means that they can
make a significant contribution to meeting
the energy policy objectives set out in this
white paper. In particular they will have a key
role in implementing a strategic approach at
regional level, and the Regional Economic
Strategy will be a key driver in its
development. We will therefore strongly
encourage RDAs to play a key role in the
delivery of energy policy objectives at
regional level. We will also support them in
helping to develop their understanding of
the implications of the white paper for their
region and in identifying specific actions
they can take to meet its aims.
9.24 Many local authorities and regional bodies
are already developing innovative initiatives
and strategies that go beyond their statutory
functions. In the longer term we want to
see more taking such a pro-active role.
The Sustainable Energy Policy Network
will have a remit further to develop the
partnership with local and regional bodies
on energy issues. In addition we will:
establish a new beacon councils theme
on sustainable energy to promote
innovative local approaches on
generation and demand-side measures;
promote energy efficiency and the rollout of new technologies as areas in
which local authorities can consider Local
Public Service Agreements;
urge local authorities to give energy
issues priority at a strategic level, for
example, through their Community Plans
and Housing Strategies, consistent with
the new strategic approach to be
developed at regional level;
encourage local authorities to take the
lead, acting as catalysts for change,
developing and facilitating cross-sectoral
partnerships and providing advice and
encouragement;
review existing guidance to Energy
Conservation Authorities on complying
with the requirements of the Home
Energy Conservation Act;
consider with the Local Government
Association (LGA) whether at the next
review to include energy as a shared
central-local priority; and
consult on arrangements to collect and
make available data on the pattern of
energy usage in local areas, to enable
local authorities and regional bodies to
target activity more effectively.
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Examples of Successful
Local and Regional Initiatives
The Northern Energy Initiative, an independent
organisation undertaking work for the regional
GO, the RDA, academic institutions and business,
has developed an energy strategy for the North
East of England. This sets regional targets for
business energy efficiency, job creation in the
energy sector, renewables and CHP. It has set up
support for smaller businesses, a renewable
energy agency and a ‘clean coal’ project.4
The Council is in partnership with Yorkshire Forward,
the RDA in a scheme to increase the take-up of
solar PV technology throughout West Yorkshire.
A recent report by the Audit Commision into the
work of the Calderdale Housing Energy Team said,
“the work carried out by the Council on energy
efficiency measures and advice is impressive”.
Woking Borough Council is the only UK local
authority to supply customers with electricity,
heat and cooling on private wire district energy
The South West RDA and GO have, with local
Government and business, drawn up a Strategic
Framework for the Development of Renewable
Energy in the South West. The framework
addresses issues such as skills and awareness,
markets for renewable energy and planning.
The partners have subsequently set up a not-forprofit company ‘Regen SW’ to guide the
development of renewables in the region and to
help deliver action under the strategic frameworks5.
networks, using fuel cells, CHP and solar power.
It also supplies energy services to homes and
businesses, financed through a public/private joint
venture energy services company, for which the
Council gained a Queen’s Award for Enterprise.6
Leicester City Council has a major energy
efficiency housing programme which incorporates
expanding the district heating system, introducing
CHP, renewable energy systems and energy
efficient independent boilers, and a policy for
installation of new, PVCu double-glazed windows
to all council housing in Leicester.7
Calderdale Council has utilised funding from the
local Primary Care Trust to insulate the homes of
people over 60. In 2001, 711 householders had
their homes improved under this scheme.
4
www.umitek.com
6
www.lgib.gov.uk/policy/Woking_intro.htm
5
www.oursouthwest.com - “Regional Sustainability”page.
7
www.leicester.gov.uk
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Business can help...
9.25 Many of the measures set out elsewhere in
this paper are designed to encourage action
by business in general, as well as by
companies in the energy generation,
distribution and supply industries. Companies
can also encourage action themselves - by
reporting publicly on their own performance
for instance, and by encouraging their
customers and stakeholders to act
themselves. For example:
we have already called on businesses to
report on their environmental performance,
including greenhouse gas emissions, and
8
have produced guidance to help them.
We have put forward proposals in the
Modernising Company Law white paper
that would require leading companies to
report on environmental issues where they
are relevant to an understanding of the
business. We have appointed an
independent group of experts to provide
guidance on how directors can assess
whether an item is material and would have
9
to be included in the annual report; and
businesses can encourage their customers
to be energy efficient. Energy suppliers for
example are required to offer their customers
incentives to encourage energy efficiency
and should provide information about practical
steps to reduce energy consumption.
Retailers are working within the Energy
Efficiency Partnership on how to promote
more efficient products to consumers.
8
The greenhouse gas emissions guidance and other reporting guidelines
are available at www.defra.gov.uk/environment/envrp/index.htm
9
The Modernising Company Law white paper is available at
www.dti.gov.uk/companiesbill/index.htm
Developing a consistent
and coherent message...
9.26 Our consultations featured a strong message
that there should be wider and more
sustained public debate about energy policy.
We can facilitate that at both national and
local level. This means consulting about key
decisions and reaching key stakeholders on a
regular basis. It also requires an effective and
consistent joining up of the messages on
energy across Government.
9.27 The new Sustainable Energy Policy Network
will accordingly bring together a crosssectoral group of interests to agree on
consistent and coherent messages on the
vision set out in this white paper.
It will include the Small Business Service,
the Energy Saving Trust, Energywatch, the
Carbon Trust, the Low Carbon Vehicles
Partnership, non-Governmental organisations
and business groups, the Environment
Agency and others.
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Annexes
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Annex A Glossary
122
Term
Definition
Balancing mechanism
The mechanism used by the National Grid Company to balance
the supply and demand of electricity.
Biomass
Biomass is anything derived from plant or animal matter and
includes agricultural, forestry wastes/residues and energy crops.
It can be used for fuel directly by burning or extraction of
combustible oils.
British Electricity Trading
& Transmission
Arrangements (BETTA)
Arrangements to create a single wholesale electricity market
for Great Britain.
Capacity Margin
Instruments (CMI)
A mechanism such as a capacity obligation that requires electricity
industry participants to provide a defined level of generating capacity.
Carbon capture
Removal of CO2 from fossil fuels either before or after
combustion. In the latter the CO2 is extracted from the fluegas.
Carbon credits
A credit or permit arising from a greenhouse gas emissions
reduction scheme, such as emissions trading
Carbon emissions trading
scheme/carbon trading
A scheme in which greenhouse gas emissions are controlled by
setting a cap on total emissions and allowing the market sector(s)
to reach an economically balanced response via trading of
emissions allowances. Allowances are allocated initially, perhaps
through a free distribution or through an auction, and the total
allocation is adjusted (capped) periodically.
Carbon storage
The long-term storage of carbon or CO2 in the forests,
soils, ocean, or underground in depleted oil and gas reservoirs,
coal seams, and saline aquifers. Also referred to as engineered
carbon sequestration. Carbon Capture and Storage can be
referred to as CCS.
Carbon Trust
An independent not for profit company set up by the Government
with support from business to encourage and promote the
development of low carbon technologies. Key to this aim is its
support for UK businesses in reducing carbon emissions through
funding, supporting technological innovation and by encouraging
more efficient working practices.
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Term
Definition
CCGT
Combined cycle gas turbine - a gas fired electricity generation plant.
Climate Change Agreement
An agreement between the Government and a business user,
whereby a reduced rate of Climate Change Levy is payable in
return for a commitment by the user to achieve certain
pre-determined targets for energy usage or carbon emissions.
Climate Change Levy (CCL)
A levy applied to the energy use of all non-domestic sectors.
Subject to certain exemptions and reductions to encourage
energy efficiency.
Climate Change Programme
Published in 2000, sets out the Government and Devolved
Administration strategic approach to tackling Climate Change and
meeting the UK’s Kyoto target of a 12.5% reduction in
greenhouse gas emissions from 1990 levels by 2008-2012 and
the domestic goal of reducing CO2 emissions by 20% by 2010.
CMM plant
Coal Mine Methane plants generate electricity and heat from
methane that is emitted from disused coal mines.
CO2
Carbon dioxide (a greenhouse gas).
COGENT
Sector Skills Council for the oil and gas extraction and chemical
manufacturing sector.
Combined Heat and
Power (CHP)
CHP is the simultaneous generation of usable heat and power
(usually electricity) in a single process, thereby discarding less
wasted heat.
Community Energy
Programme
A £50m, 2 year capital grants programme (2002-04) offering funding,
information and support to Local Authorities, Registered Social
Landlords, Universities, Hospitals and other public service
organisations for the refurbishment of existing and installation of
new community heating schemes. Operates across UK and is
jointly managed by the Energy Saving Trust and the Carbon Trust
on behalf of Defra.
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Term
Definition
‘Decent standards’
Set by ODPM, the decent home standard is a minimum standard
that all social housing in England should achieve by 2010.
A decent home is one that is wind and weather tight, warm and
has modern facilities. Similar standards apply in the DAs.
Defra
Department for Environment, Food and Rural Affairs.
DETR
Former Department of the Environment, Transport and the Regions.
DFES
Department for Education and Skills.
DFID
Department for International Development.
DfT
Department for Transport.
Distributed generation
Electricity generation usually on a relatively small scale that is
connected to the distribution networks rather than directly to the
national transmission systems.
Distribution Network
Operators (DNOs)
Companies that are responsible for operating the networks that
connect electricity consumers to the national transmission system
and provide interconnection with embedded generation.
EAGA
The Eaga Partnership manages fuel poverty programmes on
behalf of the Government and Devolved Administrations.
Embedded generation
See distributed generation.
ENERGIE Programme
An EU programme supporting research, development and
demonstration aimed at delivering cost effective solutions to key
energy related problems on a European scale. In particular the
aims are to minimise the environmental impact of the production
and use of energy and to increase the share of new and
renewable energy sources in EU’s energy balance.
See www.dti.gov.uk/ent/energie/index.htm
Energy Charter Treaty (ECT)
A multilateral treaty to promote trade, investment and transit of
energy products between Contracting Parties and sets a standard
for non-discriminatory access to energy supplies.
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Term
Definition
Energy Efficiency
Advice Centres
Network of centres across the UK providing free, impartial
and locally relevant energy efficiency advice to householders and
small businesses. Call free on 0800 512012.
Energy Efficiency
Commitment (EEC)
The Energy Efficiency Commitment (formerly known as Energy
Efficiency Standards of Performance, EESoP) is an obligation
placed on all domestic energy suppliers to achieve a specified
energy saving target through the installation of energy efficiency
measures in homes across Great Britain. At least 50% of the
benefits are focused on disadvantaged households. A similar
scheme (Energy Efficiency Levy) operates in Northern Ireland.
Energy for the Poor Initiative
An EU initiative focusing on poverty eradication in developing
countries by improving people’s access to adequate, affordable
and sustainable energy services.
Energy intensity
Energy consumed per unit contribution to Gross Domestic
Product, ie for business sectors it is the energy per unit Gross
Value Added. The equivalent for the domestic sector is energy
consumed per household.
Energy Research Network
A new network being developed by the Research Councils
to establish interdisciplinary teams addressing all aspect
of energy research (scientific, technological, social, economic
and health impacts).
Energy Research Review
Group (ERRG)
A group of experts set up under the chairmanship of the Government’s
Chief Scientific Adviser. The Group was assembled to review
Government support for energy research, development and
demonstration as an input to the PIU’s Energy Review. The report
of the Group was published on 14 February 2002.
Energy Saving Trust (EST)
The Energy Saving Trust is an independent not-for-profit organisation,
set up and largely funded by the Government to manage a number
of programmes to improve energy efficiency, particularly in the
domestic sector.
Engineering & Physical
Sciences Research Council
(EPSRC)
The UK Government’s leading funding agency for research and
training in engineering and the physical sciences.
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Term
Definition
Enhanced Oil Recovery (EOR)
Increased production of oil from an oil field, brought about
by injecting gas (eg CO2) or water to raise the oil pressure
and force more oil out.
Environment Attache Network
Network of Environment Attachés at British Missions Overseas.
EU 6th Framework
Programme for R&D
The European Framework programme supports R&D projects
across a range of science and technologies. The 6th Framework
Programme will start during 2003 with a large emphasis on
renewables.
EU Data Transparency
Initiative
This was announced by the Prime Minister at WSSD to increase
the transparency over payments by companies to Governments
and Government-linked entities, as well as transparency over
revenues by these host country Governments.
EURATOM Programme
European Atomic Energy Community.
EUREKA programme
Established in 1985 by 17 countries and the European Union to
encourage a bottom-up approach to technological development
and to strengthen the competitive position of European
companies on the world market.
European Emissions
Trading Scheme
The EU emissions trading scheme, to be introduced in April 2005.
See the section on ‘Carbon emissions trading scheme’, above.
Extractive Industries
Transparency Initiative
The Extractive Industries Transparency Initiative was announced
by the Prime Minister at WSSD, Johannesburg in September 2002.
Its aim is to increase transparency over payments by companies to
Governments and Government-linked entities, as well as
transparency over revenues by host country Governments.
FCO
Foreign and Commonwealth Office.
FGD
Fuel gas desulphurisation.
Freight Facility grants
Government grants that are given to assist taking freight
movements from road to rail or ship.
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Term
Definition
Fuel cells
Fuel cells produce electricity from hydrogen and air, with water
as the only emission. Potential applications include stationary
power generation, transport (replacing the internal combustion
engine) and portable power (replacing batteries in mobile phones).
Fuel poverty
The common definition of a fuel poor household is one needing
to spend in excess of 10% of household income to achieve
a satisfactory heating regime (21˚C in the living room and 18˚C
in the other occupied rooms).
GLA
Greater London Authority.
Global Village Energy
Partnership (GVEP)
Launched at the WSSD, this is a 10 year programme to
reduce poverty and enhance sustainable development through
the accelerated provision of modern energy services to those
un-served or under-served.
Government Offices (GOs)
There is one Government Office in each of the 9 English regions.
Their role is to act as the Government’s eyes and ears in the regions,
communicating the Government’s messages and ensuring a regional
input to the policy making process at the centre.
Greenhouse gases
Gases which contribute to global warming.
Grid Codes
The industry codes that govern the technical interface between
the users of the electricity transmission systems and the
transmission licence holders. Under a GB market the codes will
be amalgamated into a single code.
Hybrid vehicles
Vehicles which use batteries or fuel cells as part of their power
source in combination with a traditional internal combustion
engine (ICE). Allows the ICE to be used with less energy loss
and has overall greater efficiency.
Hydrogeneration
Electricity generation involving the use of water to turn a turbine.
Hypothecated revenue
Tax revenue that is raised for a specific expenditure purpose.
IAG
Interdepartmental analysts group.
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Term
Definition
IFI
International Financial Institutions.
IMO
International Maritime Organisation.
Integrated Gasification
Combined Cycle (IGCC)
IGCC plants initially gasify the raw fuel input, before passing the
so-called synthesis gas through a conventional combined cycle
set up. IGCCs can be designed to use a range of raw fuel inputs,
including coal, oil products and wastes.
International Energy
Agency (IEA)
An autonomous body, established in 1974 within the framework
of the OECD, to implement an international energy programme.
IPCC
Intergovernmental Panel on Climate Change.
Joint Energy Security of
Supply (JESS)
The JESS Working Group, set up in July 2001, has brought
together DTI and OFGEM to monitor the security of energy
supplies as part of an initiative to keep the reliability of energy
supplies under ongoing review.
Kyoto Protocol
A Protocol to the UN Framework Convention on Climate Change
(UNFCCC) agreed in 1997. Developed nations are required to cut
overall greenhouse gas emissions by an average of 5.2 per cent
below 1990 levels over the period 2008-2012.
Learning & Skills
Council (LSC)
The Learning and Skills Council is responsible for funding and
planning education and training for over 16-year-olds in England.
LGA
Local Government Association.
Liabilities
The costs involved in: decommissioning; the processing, long
term management, storage and final disposal of waste materials
and spent fuel; and the environmental remediation of nuclear sites.
Liquefied Natural Gas (LNG)
When natural gas is cooled to a temperature of approximately
-160°C at atmospheric pressure it condenses to a liquid called
liquefied natural gas (LNG). Natural gas is composed primarily of
methane (typically, at least 90%), but may also contain ethane,
propane and heavier hydrocarbons.
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Term
Definition
Liquefied Petroleum Gas (LPG)
Gas usually propane or butane, derived from oil and put under
pressure so that it is in liquid form. Often used to power portable
cooking stoves or heaters and to fuel some types of vehicle,
eg some specially adapted road vehicles and forklift trucks.
Low Carbon Vehicle Partnership
An action and advisory group, set up early in 2003, to bring
together all stakeholders in the UK’s shift to clean low carbon
vehicles and fuel.
Major Infrastructure Projects
Projects such as interconnectors, which typically involve a
substantial investment over a number of years to construct and
bring into operation.
MARKAL energy model
A model whose main characteristic is the processing of detailed
bottom-up data in order to meet pre-determined energy demand
at the lowest cost. Its emphasis is on analysis of the longer term
potential for new technology uptake.
Micro-CHP
CHP (as above), but in very small scale, typically below 5kW
electrical output, applications (eg in the residential and
commercial sectors). It is likely to operate in place of a domestic
central heating boiler.
MtC
Million tonnes of Carbon.
Mtoe
Million tonnes of oil equivalent.
Market Transformation
Programme (MTP)
A Government programme that aims to bring forward products,
systems and services which do less harm to the environment,
using less energy, water and other resources. The MTP provides
strategic support to a growing set of ‘product’ policies that aim
to encourage resource efficiency through supply-chain measures
such as reliable product information, raising minimum standards
and encouraging best practice.
MW
Mega Watt - a measure of power, one million watts.
MWh
Mega Watt hour, one thousand kWh. A 1 MW power-generating
unit running for 1 hour produces 1 MWh of electrical energy.
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Term
Definition
NEPAD
The New Partnership for Africa’s Development.
New Electricity Trading
Arrangements (NETA)
New Electricity Trading Arrangements - in England and Wales these
arrangements replaced ‘the pool’ from 27 March 2001. The
arrangements are based on bi-lateral trading between generators,
suppliers, traders and customers and are designed to be more
efficient, and to provide greater choice for market participants.
New HEES (Wales)
A scheme for the provision of energy efficiency improvements,
in Wales. The ‘Basic’ scheme offers a range of insulation and
basic heating improvements. ‘HEES +’ offers gas or electric
central heating and is available to households containing lone
parents, sick or disabled persons and those over the age of 60 in
receipt of Income Support, Housing Benefit, Council Tax Benefit
and income based Job Seekers Allowance.
ODPM
Office of the Deputy Prime Minister.
OECD
Organisation for Economic Cooperation and Development.
OFGEM
Office of Gas and Electricity Markets.
OPEC
Organisation of Petroleum Exporting Countries.
Photovoltaics (PV)
The direct conversion of solar radiation into electricity by the
interaction of light with the electrons in a semiconductor
device or cell.
PIU
Performance and Innovation Unit (now the Strategy Unit).
PPG
A Planning Policy Guidance note for England. PPG22 covers
renewable energy and the planning system. The guidance notes
are in the process of being replaced by Public Planning
Statements (PPS).
RCEP
Royal Commission on Environmental Pollution.
Regional chambers
In each English region outside London there is a voluntary multiparty body with members drawn from local government and the
social, economic and environmental sectors in the region.
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Annex A: Glossary
Term
Definition
Regional Development
Agencies (RDA)
The agencies aim to co-ordinate regional economic development
and regeneration, enable the English regions to improve their
relative competitiveness and reduce the imbalances that exist
within and between regions.
Regional Selective
Assistance (RSA)
RSA is a discretionary grant which provides assistance towards
projects with fixed capital expenditure over £500,000 and which
will create or safeguard employment in assisted areas.
Registered Social Landlords
(RSLs)
RSLs are non-profit making bodies run by voluntary committees
who provide rented accommodation at an affordable cost. Some
also provide homes for sale through special schemes to help
people on lower incomes become homeowners.
Renewable energy
Renewable energy includes solar power, wind, wave and tide,
and hydroelectricity. Solid renewable energy sources consist of
energy crops, other biomass, wood, straw and waste, whereas
gaseous renewables consist of landfill gas and sewage waste.
Renewable Energy and
Energy Efficiency
Partnership (REEEP)
An international partnership to promote the growth of renewable
energy and energy efficiency systems, launched by the UK
at the WSSD.
Renewables Obligation
The obligation placed on licensed electricity suppliers to deliver a
specified amount of their electricity from eligible renewable sources.
Renewables Obligation
Certificate (ROC)
Eligible renewable generators receive Renewable Obligation
Certificates (ROCs) for each MWh of electricity generated.
These certificates can then be sold to suppliers. In order to fulfil
their obligation, suppliers can either present enough certificates
to cover the required percentage of their output, or they can pay
a ‘buyout’ price of £30 per MWh for any shortfall. All proceeds
from buyout payments are recycled to suppliers in proportion to
the number of ROCs they present.
Regional Economic
Strategies (RES)
Produced by RDAs with partners and stakeholders in their region.
These documents set out the framework of regional economic
priorities which guide the activities of organisations promoting
regional economic development, and are revised at least every
three years.
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Term
Definition
Science & Technology
Attaché Network
Network of Science & Technology Attachés at British Missions
Overseas.
Sector Skills Councils (SSCs)
SSCs are independent, UK wide organisations developed by
groups of influential employers in industry or business sectors
of economic or strategic significance, to tackle the skills and
productivity needs of their sector throughout the UK.
Sector Skills Development
Agency (SSDA)
The SSDA funds, supports and champions the new UK-wide
network of influential employer-led SSCs to promote effective
working between sectors.
Small and Medium-Sized
Enterprise Energy Advice
Centre
The Energy Savings Trust together with the Carbon Trust has
launched a new service called Action Energy to give advice to
Small and Medium-Sized Enterprises.
SMEs
Small and Medium-Sized Enterprises.
Sustainable Development
Commission
The Commission’s main role is to advocate sustainable
development across all sectors in the UK, review progress
towards it and build consensus on the actions needed if
further progress is to be achieved.
UK Emissions Trading
Scheme
A scheme which started in April 2002, under which 34
organisations have voluntarily taken on legally binding obligations
to reduce their greenhouse gas emissions against 1998-2000
levels, delivering over 4 million tonnes of additional CO2
equivalent emission reductions in 2006.
UKCS
United Kingdom Continental Shelf - areas of seabed and subsoil
over which UK exercises sovereign rights of exploration and
exploitation of natural resources (popularly known as ‘North Sea’
but geographically wider than that).
UN Framework Convention on
Climate Change (UNFCCC)
The international framework established in 1992 to tackle the
issue of climate change and greenhouse gas emissions.
The UNFCCC aims to prevent dangerous man-made climate
change and commits developed countries to taking the lead in
tackling climate change.
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Annexes
Annex A: Glossary
Term
Definition
UNDP
United Nations Development Programme.
USDOE
United States Department of Energy.
Warm Deal (Scotland)
A scheme for the provision of energy efficiency improvements,
in Scotland, administered by Eaga Partnership for all housing
stock and Local Authorities for their own stock.
Warm Front (England)
A scheme for the provision of energy efficiency improvements,
in England, providing grants to households with
children, who are on income related benefits. Larger grants are
available for households whose occupants are 60 and over and
receive an income related benefit.
Warm Homes
(Northern Ireland)
A scheme for the provision of energy efficiency improvements,
in Northern Ireland, designed to increase access to energy
efficiency advice, including grant availability, among families with
young children from low income families, particularly those from
single parent families. It also aims to reduce the incidence of fuel
debt within the target group, improve comfort levels and prevent
cold related illnesses.
World Summit on
Sustainable Development
(WSSD)
An international summit, held in Johannesburg in August/
September 2002, to reaffirm the international community’s
commitment to sustainable development.
WTO
World Trade Organisation.
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Annex B References
134
Author/lead
department
Date
Description
Web link
BP
2002
BP Statistical Review of World Energy
www.bp.com/centres/
energy2002
Defra
2002
Framework for Sustainable
Development on the Government
Estate
www.sustainabledevelopment.gov.uk/
sdig/improving/index.htm
Defra
2000
Warm homes and Energy
Conservation Act
www.hmso.gov.uk/
acts/acts2000/
20000031.htm
Defra
Ongoing
Market Transformation Programme
www.mtprog.com
DETR
2000
Transport 2010 - the Ten Year Plan
www.dft.gov.uk/
trans2010/
DETR
1999
A better quality of life: a strategy for
sustainable development for the UK.
www.sustainabledevelopment.gov.uk/
UK_strategy/index.htm
DETR
2000
Climate Change Programme
www.defra.gov.uk/
environment/climate
change/cm4913/
index.htm
DETR, Scottish
Executive,
National Assembly
for Wales and the
Department of the
Environment in
Northern Ireland
2000
Ther Air Quality strategy for England,
Scotland, Wales and Northern Ireland
Working Together for Clean Air
www.defra.gov.uk/
environment/airquality/
strategy/pdf/forward.pdf
DFID
2002
Energy for the Poor
www.dfid.gov.uk
DfT
2002
Airport capacity in the South East:
Consultation Document
www.aviation.dft.gov.uk/
consult/airconsult/se/
mainconsult/15.htm
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Annexes
Annex B: References
Author/lead
department
Date
Description
Web link
DfT, DTI, Defra
and HMT
2002
Powering Future Vehicles:
The Government Strategy
www.roads.dft.gov.uk/
cv/power/html/index.htm
DTI
2000
Conclusions in response to the public
consultation - New and Renewable
Energy: Prospects for the 21st century
www.dti.gov.uk/renew/
condoc/policy.pdf
DTI
2003
UK Energy Sector Indicators
www.dti.gov.uk/energy/
inform/energy_indicators/
index.shtml
DTI
2002
Digest of UK Energy Statistics
www.dti.gov.uk/energy/
inform/dukes/index.shtml
DTI
2001
Productivity and Enterprise:
A World Class Competition Regime
DTI
2002
The Report of the Nuclear Skills Group
DTI
2002
The Government’s Manufacturing
Strategy
www.dti.gov.uk/cp/white
paper/cm5233.pdf
www.dti.gov.uk/energy/
nuclear/skills/nsg.shtml
www.dti.gov.uk/
manufacturing/
strategy.htm
DTI
2002
The Modernising Company Law
white paper
www.dti.gov.uk/
companiesbill/index.htm
DTI
2000
Utilities Act
www.hmso.gov.uk/acts/
acts2000/20000027.htm
DTI and Defra
2003
Fuel Poverty Advisory Group First
Annual Report (for England)
www.dti.gov.uk/energy/
consumers/fuel_poverty/
fuel_adv_grp/reports.pdf
DTI and Defra
and the Devolved
Administrations
2003
The UK Fuel Poverty Strategy 1st
Annual Progress Report
www.dti.gov.uk/energy/
consumers/fuel_poverty/
index.shtml
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Author/lead
department
Date
Description
Web link
DTI and Defra
and the Devolved
Administrations
2001
UK Fuel Poverty Strategy
www.dti.gov.uk/energy/
consumers/fuel_poverty/
strategy.shtml
DTI and OFGEM
2003
Joint Energy Security of Supply Working
Group reports
www.dti.gov.uk/energy/
domestic_markets/
security_of_supply/
jessreport2.pdf
Eyre, Fergusson
and Mills
2002
Fuelling Road Transport - Implications
for Energy Policy - study for DFT
www.roads.dft.gov.uk/
cv/fuelling/index.htm
Future Energy
Solutions
2003
Options for a low carbon future phase 2
www.dti.gov.uk/energy/
whitepaper/index.shtml
Estimating the Social Costs of
Emissions, Working paper 140
www.hm-treasury.gov.uk/
documents/taxation_work
_and_welfare/taxation_
and_the_environment/tax
_env_geswp140.cfm
Government
Economic
Service
136
Page 136
House of
Lords Select
Committee
on the
European Union
2002
Energy Supply: how secure are we?
www.parliament.thestationery-office.co.uk/
pa/ld200102/ldselect/
ldeucom/82/8201.htm
IEA
2002
World Energy Outlook 2002
www.worldenergy
outlook.org/
IEA
2002
Renewables Information 2002
www.iea.org/stats/
files/ren2002.pdf
Ilex
2002
Quantifying the system costs of
additional renewables in 2020
www.dti.gov.uk/energy/
developep/080scar_
report_v2_0.pdf
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Annexes
Annex B: References
Author/lead
department
Date
Description
Web link
Intergovernmental
Panel on Climate
Change
2001
Third Assessment Report
www.ipcc.ch
National Grid
Company
2002
NGC Seven Year Statement and
Updates 2002
www.nationalgrid.
com/uk/
NERA
2002
Security in Gas and Electricity Markets
www.dti.gov.uk/energy/
whitepaper/index.shtml
NERA
2002
Electricity Markets and Capacity
Obligations
www.dti.gov.uk/energy/
whitepaper/index.shtml
ODPM
2002
Your Region, Your Choice: Revitalising
the English Regions
www.regions.odpm.
gov.uk/governance/
whitepaper
ODPM
2002
Planning and Compulsory Purchase Bill
www.publications.
parliament.uk/pa/
cm200203/cmbills/
012/2003012.htm
Office of Science
and Technology
2001
Report of the Chief Scientific Adviser’s
Energy Research Review Group
www.ost.gov.uk/
policy/issues/csa_errg/
main_rep.pdf
OFGEM
2003
Initial thoughts on both the principles
for developing the regulatory... when
the next price control is implemented
(open letter).
www.ofgem.gov.uk/
temp/ofgem/cache/cms
attach/1259_dnoletter_
jan.pdf
Opito
1999
Skills Foresight, The Industry Survey
no web link
Performance and
Innovation Unit
2002
Energy Review
www.cabinet-office.
gov.uk/innovation/2002/
energy/report/index.htm
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Author/lead
department
Page 138
Date
Description
Web link
Performance and
Innovation Unit
2001
Renewable Energy in the UK
www.piu.gov.uk/2001/
energy/Renewener.shtml
Ricardo Consulting
Engineering Ltd
2002
“Carbon to Hydrogen” Roadmap for
Passenger Cars: A Study for DfT and DTI
www.roads.dft.gov.uk/
cv/power/carbon/
index.htm
Royal Commission
on Environmental
Pollution
2000
22nd Report: Energy The Changing Climate
www.rcep.org.uk/
newenergy.html
Scottish
Executive
2001
Housing (Scotland) Act
www.hmso.gov.uk/
si/si2002/20022264.htm
Strategy Unit
2002
Waste Not, Want Not
www.piu.gov.uk/
2002/waste/report/
index.html
Trade and
Industry
Committee
2002
Security of Energy Supply
www.parliament.thestationery-office.co.uk/pa/
cm200102/cmselect/
cmtrdind/364/36402.htm
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