Source: BBC Radio Scotland: Good Morning Scotland
URL: N/A
Date: 23/07/2012
Event: Tim Yeo and Roger Harrabin speaking on BBC Radio Scotland
People:
Gary Robertson: Plans to reform Britain's electricity market, to encourage more use of renewable energy, have been strongly criticised by a committee of MPs. The Energy and Climate Change Select Committee warns the government could impose unnecessary costs on consumers, reduce competition and deter investment. Our business and economy editor Douglas Fraser reports.
Douglas Fraser: To keep the lights on, the UK government needs to ensure electricity generating companies have incentives to build new capacity, and to do so with fewer carbon emissions. It plans a new regime of long-term contracts to reduce risks for investors. The Energy Select Committee has savaged the plans, saying they need urgently re-thought, before legislation begins in autumn. Its report says that the proposed contracts look too complex and are possibly not legally enforceable. The MPs' report says decisions about support for nuclear power are being made behind closed doors and should be independently scrutinised. With concerns about apparent conflict of the issue within Whitehall, Vince Cable, the Energy and Climate Change Secretary [sic], is in Scotland today, visiting a renewable energy research project.
Gary Robertson: In a statement about another aspect of funding support for renewable energy, the First Minister has warned that Whitehall's delay in announcing the levels at which onshore wind farms are subsidised, is putting off investors. Alex Salmond has written to the Environment Secretary in Whitehall, Ed Davey [sic], saying that evidence supports a proposal that subsidy from other forms of generation should be cut by 10%.
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Gary Robertson: The Treasury is facing strong criticism for standing in the way of the Coalition's flagship plans for low-carbon and affordable energy. The Energy and Climate Change Committee have examined the government's draft energy bill, and warned that the proposals could impose unnecessary costs on consumers, lead to less competition and deter badly needed investment. We're joined now by Roger Harrabin, the BBC's environment analyst. So, Roger, what exactly are MPs' key concerns here? They seem to be that the policy, as it stands, could drive up cost and deter investment, the worst of both worlds.
Roger Harrabin: Yes, well, we know that the government is trying to attract £110 billion's worth of investment into the energy sector by the end of the decade, to keep the lights on, meet renewables targets and meet the CO2 targets. In order to do that, the Department for Energy had proposed that the government should underpin the contracts for these massive developments that will be needed. But the Treasury has intervened and said no, the government will not underpin them. And the committee says this will have a perverse effect. So it appears that the Treasury's trying to keep down the cost and risk for the taxpayer, but the committee is saying it'll have the exact opposite effect, because it will make it much more difficult for the firms to borrow, so it will jeopardise investment in the first place. And if firms can borrow, the banks who are lending them the money will lend for a shorter term and at a less preferential rate. So it will put up costs, and those costs will directly be passed on to consumers, because we are the ones who are subsidising all the investment. And they're extremely cross that the Treasury, they say is unaccountable - they've been trying to question the Treasury, the Treasury won't answer their questions, the Treasury ministers wouldn't turn up to the committee, and they say there's a real lack of accountability here.
Gary Robertson: So a lack of accountability, that's the allegation. There's been concern for a long time, Roger, within the renewable industry, about what's seen as some kind of ideological battle going on within the Coalition, about support for renewables, low-carbon energy generation and subsidies for renewables, in particular. Is it overly simplistic to characterise it in that way? Is the Treasury at loggerheads with other departments?
Roger Harrabin: I think there's more than one factor at play, here. I mean, I should say the Treasury's official line is that they stand behind the government's pollution targets, and are also trying to drive down costs for consumers and business. So that's the official line. The unofficial line is that the Chancellor, George Osborne, is being lobbied very hard by Conservative backbenchers who simply don't like wind farms in the landscape. And I think there's another factor here, which is little talked about, really, which is that a number of backbenchers really don't like the government's idea of - the law, which commits the UK to long-term carbon targets. They can't say so, I think, because the Coalition is absolutely committed to keeping to our law on carbon targets. But I think this is underlying it - people, some backbenchers saying maybe we'd be having a cheaper energy system if we went with gas. Now the position of the Energy Department on that has been that gas may look attractive in the short term but that gas has been responsible for the spikes in energy price, and therefore the cheapest thing, in the long term, is to wean ourselves off gas and fossil fuels and get ourselves onto renewables. And it was thought that this debate had been ended, say a year or 18 months ago, but it appears to have resurfaced, but resurfaced behind the scenes, in a way that the debate is not public and it's very difficult to find out exactly what's going on.
Gary Robertson: Meanwhile, the Scottish government, of course, has thrown its weight firmly behind the renewables sector, the First Minister here, Alex Salmond, writing to the UK government, asking for clarity about the level of support for the renewables sector, today. How does Scotland fit in to the bigger picture at Westminster, Roger?
Roger Harrabin: Well, Scotland is expected to provide an awful lot of the UK's low-carbon energy. It's very interesting to see the move from Alex Salmond, certainly. And I think it will be welcomed in the Department of Energy, because they are trying to push forward a subsidies policy which sees a cut in subsidies to onshore wind of 10%. Now they came to that figure after a long consultation, and Alex Salmond has said he can't see any evidence at all to say why the cut in subsidies should be any bigger than 10%. Now that, actually, totally accords with the Department of Energy. It's the Treasury who are pushing for a bigger subsidy cut. And it's thought, going back to the political point that you mentioned earlier on, it's thought that that is being driven by Conservative backbenchers who actually want to cut the subsidy so far - and some of them are quite overt about this - that it starves wind power out. Now that clearly isn't going to happen in Scotland - it may happen in other parts of the UK, but it appears it's not going to happen in Scotland.
Gary Robertson: Roger Harrabin, thank you. And I should say that we'll be speaking to the chairman of the Westminster Energy and Climate Change Committee, Tim Yeo, round about half past seven, here on Good Morning Scotland.
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Gary Robertson: Let's bring you more, now, on the news that the Treasury is facing strong criticism for standing in the way of the Coalition's flagship plans for low-carbon and affordable energy. The Energy and Climate Change Committee have examined the government's draft energy bill, and warned that the proposals could impose unnecessary costs on consumers, lead to less competition and deter badly needed investment. Tim Yeo chairs the committee and joins us from Westminster. Good morning to you, Mr Yeo.
Tim Yeo: Good morning.
Gary Robertson: Is George Osborne attempting to frustrate the UK's renewable energy ambitions on ideological grounds?
Tim Yeo: Well, we do fear that the Treasury is making life much harder for the Department of Energy. And, incidentally, I strongly support Alex Salmond's call this morning for clarity about support for onshore wind, which is one of the most affordable and best value renewable technologies. But our scrutiny of this draft bill was hampered by the fact that the Treasury refused to send a minister to answer our questions, and then, when we sent them some questions in writing, to answer, they refused to those as well. So it's hard to be sure exactly what their intentions are, but one clear piece of evidence we do have is that last year, in the consultation document, there was a proposal for these so-called contracts for difference - which will be the new way in which low-carbon electricity generators are rewarded - for the government to stand behind those contracts, to act as a sort of back stop, a guarantor. In the draft bill, that proposal's been removed, and there's no government guarantee. Now, the effect of that is to introduce a little element of credit risk for the companies making huge sums of investment into new electricity generating capacity, and that will raise the costs of their capital. And in turn that feeds through to higher electricity bills for all consumers.
Gary Robertson: But can David Cameron deliver on his much-vaunted clean, green energy claims and targets if we see his own Chancellor apparently taking a different tack, and not only his Chancellor but also - as we were hearing earlier in the programme - growing numbers of Tory backbench MPs?
Tim Yeo: Yes, I think there are some challenges. We need a stable framework which encourages investment in new capacity, and a significant part of that must be in low-carbon capacity. That includes nuclear, of course, as well as a range of renewable technologies. Now, one of the problems here does relate to onshore wind, and everyone accepts there should be a reduction in the level of support available for onshore wind, at the moment, but the Treasury appears to want to make that cut of support much bigger, much quicker than I think the industry can cope with. And that is a problem, and I think there are a number of Members of Parliament who also consider onshore wind to be very controversial, even though actually it is one of the cheaper renewable technologies. And again, one of the perverse consequences of cutting the support for onshore wind too fast will be that we have to use more expensive renewable technologies, and that once again this will have the effect of putting electricity prices up rather than down.
Gary Robertson: One of the reasons, of course, you could argue that backbench MPs are opposed to the UK government's targets is because they're hearing louder and louder protests from constituents. We're also hearing criticisms of your own role, this morning. People saying, well, you're president of the Renewable Energy Association as well as the chairman of this committee. How do you square those two roles?
Tim Yeo: Well, my position at the Renewable Energy Association is, of course, entirely unpaid. I've got no financial interest in any wind farm projects of any sort, onshore or offshore -
Gary Robertson: Just to be clear, Mr Yeo - I'm sorry to interrupt, but - absolutely for the record, no financial interests at all in any renewables companies?
Tim Yeo: No, the register of members' interests in the House of Commons contains references to my interests in companies developing fuel cells and second-generation biofuels, but no interests in wind. As far as the Renewable Energy Association is concerned, the position of president is, as I say, it's an unpaid role. I attend a number of their events but I'm not obliged to share their views - indeed, I've advocated a number of views which I know are the opposite of those which their members hold. So there's absolutely no representative role, but it is useful for them to have someone who has extensive knowledge of the energy industry to consult, and so on, and I attend functions that they hold in Parliament and elsewhere. I think that on the issue of wind, in particular, that there is a lot of controversies surrounding individual proposals, and I fully support those communities which say that it is not acceptable of visual or noise intrusion for a development to take place in their neighbourhood. What I'd like to see is a more creative approach to how communities which do accept onshore wind might receive some of the benefits - I think there could be opportunities to give them discounts on their own electricity prices for a period. Things like that might make people more accepting of this quite important technology.
Gary Robertson: Tim Yeo, thank you very much indeed for your time, this morning. Tim Yeo there, the chairman of the Commons Energy and Climate Change Committee. Worth pointing out, of course, that the First Minister has written to the UK government, calling for clarity on the level of support for the renewable energy industry. Much more on that story throughout the day here, on BBC Radio Scotland.