Content Coms Summary: Energy and Climate Change Select Committee Grills Amber Rudd

Our Enviro Specialist, Giles Crosse has been watching Secretary of State for Energy Amber Rudd give evidence to the Select Committee for Climate Change today (July 21, 2015).

Here, Ms Rudd has outlined DECC priorities post election/Budget.

A note on the text:  The bold headers are the questions asked by the Select Committee. The answers given were approx 90% from Ms Rudd and about 10% from Stephen Lovegrove.

Witnesses: Rt Hon Amber Rudd MP, Secretary of State, and Stephen Lovegrove, Permanent Secretary, Department of Energy and Climate Change

Overview of DECC’s strategy and policy decisions:

• Consumers and consumer engagement with the energy market
• Plans to meet long term renewables and decarbonisation targets
• Energy security
• Networks and infrastructure
• Energy efficiency

Opening statement:

Controlling costs and assessing which policies work

1. Keep lights on (security of supply)
2. Keep bills low
3. Persist with carbon reductions policies
4. Carbon reduction targets ‘challenging’ to 2050. Reduction more essential than renewables.

What changes will we see?

Very big question. Looking at all areas of policy. Conservative priority: value for money. Policy costs apply to business bills. Interconnectors to reduce the costs of wholesale, look at different measures.

Carbon reduction policy?

Carbon budgets system to plan 15 years ahead is the right way. Changes to decarbonise take that period of time. Targets for Climate Change Act are right.

We can make improvements on fairness for families which lead to costs. More renewable energy and more low carbon energy need to be explained clearly; how they work, what they cost.

I will see if we use the most efficient ways of delivering reduction targets.

Energy efficiency is the most effective way to reduce carbon and bills. Pledged £1 million of efficiency measures for homes. Announce later in the year on detail. I am confident we will reach as man homes as practicable by 2030. There is a problem with heat, we need to do more on that.

Competition and market authority report…

How do we look after people who aren’t switching? People can save £200 a year, but they’re not taking this. A default price for those not engaging in this way on temporary basis/safety net until smart meters engage them more. This is an interesting proposal. The market is becoming more efficient.

Transitional regulated tariffs / energy price capping?

Transitional phase till smart meters come in is; interesting…

Lack of robustness / transparency in DECC?

We will do more to be transparent. I will listen to suggestions.

What will a good deal in Paris look like?

Everyone signing up. 194 countries. Keep goal of 2 degrees within reach. I think a good deal = 194 signing up to 2 degrees including viable commitments, 5 year reviews, plus a long term goal without impinging on sovereignty.

We want to bring other countries with us. The EU has a commitment which is ambitious, and it’s the right place for us to be now. EU could be more ambitious.

We have met the 1st carbon budget and are set to meet 3rd and 4th there is a shortfall to mid 2020s and we are developing policies to meet that.

Climate policy for UK subsequent to Paris?

There are so many changes in this area. New tech, costs of tech. We don’t know what the answer for mid 2020s / 30s will be. We will support renewable tech we have and innovation. We must find find out where we can improve carbon reductions. I am keen to find out more about storage. Our carbon budgets are much admired by other countries. Nobody raises concerns internationally about us on either renewables or reductions.

We appear to be doing the opposite of recommendations for climate budgets recently.

I will be coming back with more policy.

How does restricting the cheapest form of renewables (wind) through ending onshore subsidy benefit consumers?

Glad you refer to consumers. They are the priority. LCF goes on people’s bills. When I entered this post, it became apparent LCF = £9.1 billion – thus I have had to reduce the subsidies. Existing pipeline we will get to 12GW by 2021 for onshore wind. It has deployed faster and is taking the subsidy. It is right we stepped in.

Manner of announcement / left uncertainty for future.  Investor concern. And concern for small businesses?

I don’t believe it was an enormous surprise. It was disappointing for developers. I appreciate that. Three developers have suggested interest in developing without subsidy.

There is no reason why renewable tech must become more expensive and make cutting this subsidy more expensive in the long term. Who knows how quickly wind prices may come down? Who knows how quickly solar development will come down in terms of cost? It is now 25% of cost 5/6 years ago. Future inherently impossible to prove.

Contract for difference / feed in tariff / renewable obligation?

Announce shortly for industry. We will take time to work out exactly what is available, and how far deployment can continue.

How will you promote growth from alternative renewables?

Onshore wind has demonstrated great cost reductions. Reason for overspend is the success of onshore wind. It remains an important part of the mix. Subsidies are a part of this new industry, but we don’t want them to be a long term part of the low carbon economy.

We have successful deployment of solar and offshore.

How important do you see new tech in energy markets? Estimates on energy storage?

We’d like to see more successful energy storage. Investing and supporting and working with scientific communities will be essential. Review ongoing to try and coordinate this. DECC work more closely to support innovation. Solar storage, then electricity back into grid… Storage is a fantastic opportunity. Not yet there. We have to make sure renewable growth accompanied by secure baseload.

Aim is to deliver examples like storage to get British business ahead.

Subsidies. We want cheaper renewables. What plans are there ?

I don’t agree industry consensus is subsidy is needed. Around the world, solar is generated already without subsidy. Costs will come down if people use them enough. We need confidence in renewables deploying in a way that is less and less costly, we need to support this without subsidy.

Normal market forces give priority to best companies which then make profit. Not subsidy. We will back a number of technologies. No one can see the future answer. The markets will give the answer.

Impact on investor confidence ? You must understand you have shaken investor confidence?

I don’t. This is not a surprise. End to onshore wind was set out clearly. There are investors interested without subsidy. I would say the larger investors are the ones coming to us saying they can manage without subsidy.

I would have to look at the figures for Scottish Renewables comment that closure costs £3bn of investment. It may be correct. We have to look at everybody’s bills.

Decarbonising is the most important approach. Low carbon energy and renewables are part of this.

Public opinion on scale of cutback / wind development / renewable energy in general?

The PM wanted to end subsidy due to community anger at large wind farms and the subsidy cost.

Will funders/investors/banks be nervous in your regime?

That is up to companies and banks. I would hope the long term signal for renewable developers is we are committed to carbon reduction.

How is market reform going?

Well, at a cost effective price. We can procure electricity more effectively through EMR.

We think we have security of supply. We are looking at whether there is enough new generation in there.

LCF – how much money is there?

LCF numbers are moving around and we are discussing with the Treasury any future availability. For 2020, the certainty is on current projections we will overshoot £7.6bn. We won’t breach headroom in LCF, these things are hard to predict far out.

We must reduce pressure on LCF. We would hope to see 2020 spend predictions dropping.

What is prospect of announcement on LCF system post 2020?

I am aware of need to give certainty post 2020. I am in discussions on this.

Contracts for difference.

Our manifesto said there would be no more subsidies for onshore wind. We are implementing that. Onshore wind will not be part of the next CFD.

Electric and gas networks to 2020

Ofgem manage the networks. This must be properly done.

Barriers to grid connection? (smaller renewables)

This is something for Ofgem. They are aware of this. There is a need to make universality of access for SMEs you are talking about.

The network must evolve to accommodate renewables, while offering security of supply.

Competition is the way to deliver more effective services.

Security supply risk to UK

We certainly need more infrastructure. We need more sources of energy supply. In the meantime we have security, we have interim measures to deliver.

We are committed to new nuclear; Hinkley point first of these. Nuclear makes 20%, we want to maintain that as new nuclear comes on, we want to procure investment.

Gas is an important part of our mix. We must develop our own also. There is plenty of supply of hydrocarbons in the market at the moment. There is no danger at the moment.

Strike price on nuclear?

Affordability. We must have secure baseload. I am not surprised we are ready to pay more for that to ensure nuclear is part of our mix.

Nuclear is a contract for difference. Until we get storage right renewables are unreliable. There is a good prospect of Hinkley reaching a good conclusion later this year.

National grid security and consumer bills.

Security does impact but an efficient market is the right thing to do so there is no doubt with security of supply.

Strike price on Hinkley at odds with subsidy for renewables being cut?

This is the 1st new plant in 20 years. So we must get it. It doesn’t mean that future nuclear plants will get the same price.

Which of the technologies you are looking at is crucial. Across the basket and delivering diversity of supply is how we justify price. Fossil fuel prices have dropped in the last year the marginal cost are expected to rise. Additional to that we don’t have a functioning carbon market. That would disadvantage hydrocarbons in a way that nuclear would not.

Future nuclear should come in cheaper. Hinkley is due in 2023.

Energy efficiency (EE). How to increase?

I’m ambitious. I want a framework for homes and fuel poverty. I am looking at initiatives which have been in place to see which are and are not working.

Then we can work with industry to deliver as much as possible. Efficiency is the best way to deliver

Can we protect the EE budget? Green Deal?

I am looking at Green Deal. It has not been successful as first envisaged. How can people make homes efficient for less cost.

We want funds for energy efficiency available to fuel poor, the best way is through energy companies.

I will talk to them about how best to do that. We must think about using modern methods of data collection to check our money is targeted effectively.

Barriers to takeup on efficiency and landlords?

Areas that have most challenging efficiency needs are private rented sector. New EPC rating targets are here. Tenants must be able to request efficiency from landlords.  I will be looking at a pay as you save model. We must improve our housing stock.

Government has pulled plug on zero carbon homes. Were you consulted?

It is now postponed. My colleagues want new houses and this was seen as a tax on that. We agreed to discuss further measures for existing housing stock. This is the big prize.

We don’t have zero carbon homes for now. But we are looking to sort out existing housing stock.

Low carbon heat. Is progress too slow?

I accept we need to do more on heat. This is hard to get right. We have domestic and non domestic measures- I am looking at all these policies. It has been hard and slow and is a priority going forward.

What can step in to meet 2020 renewable shortfall?

I haven’t given up. I want to step up deliver of heat.

RHI? Uncertainty on investors?

I don’t think RHI is impacting and causing investor uncertainty. I appreciate there is uncertainty in how it goes forward after the spending review.

I can’t indicate whether I will secure budget for future RHI.

Shale

Shale will be an important part of the decarbonisation targets. I am committed to exploring for shale. I am aware of concerns about it. But we must reassure people that experts in field have given their stamp of approval.

It can be extracted safely. We have a strong safety record on oil and gas and we would hope developers would continue that.

Oil and gas authority.

It is now an arms length body. We need the most from the North Sea and it will support them. I will do my best to keep everyone in the tent.

Closing statement

Community renewable energy is important. We want to assist on this.

Summer consultation will be open to stakeholders on all the areas we’ve covered.