Response to DTI Energy Review –Securing clean, affordable energy for the long term

In deciding the UK’s future energy mix, a diverse, flexible and secure energy supply is essential if we are to achieve targets in cutting the UK’s carbon emissions, maintain reliability of energy supplies, raise the rate of sustainable economic growth, promote a competitive energy market in the UK and beyond and ensure that every home is adequately and affordably heated. There is no one single solution which can adequately satisfy all of these demands.

As a Member of Parliament for a number of coalfield communities, I would like to concentrate my submission on coal and particularly the need for clear government support for clean coal technology as part of a balanced energy portfolio which can contribute to improved energy efficiency as well as reduced greenhouse gas emissions.

The aim of the Energy Review is to look at how we can secure clean, affordable energy for the long term. Coal is secure- there is a significant, indigenous supply- and it is relatively affordable. Coal has supplied 50% of our electricity this winter.
The question is whether it can also be clean and if the commitment exists to develop the   appropriate technology to make it clean.

Coal output in 2005 amounted to some 20 million tonnes – half from deep mines and half from opencast. The Ayrshire coalfield is now exclusively surface mining. (See attached Open Cast Fact Sheet prepared by Scottish Enterprise Ayrshire for details of the contribution it makes to the Ayrshire economy.)  While it has been competitive with imported coal   we are not competing on a level playing field. Imports from, for example, Russia and Columbia, which are not subject to the same health and safety, regulatory, planning or tax regimes can provide coal cheaper even with transport costs taken into account. (One issue which   is seldom recognised is the carbon emissions involved in transporting imported coal across the world.)

The introduction of SPP16 with a presumption against opencast development in the planning system in Scotland has meant an increase in costs and uncertainty as far as investment is concerned.

However the spiralling cost of gas oil duty is threatening to be the straw that broke the camel’s back. The industry has been struggling with increases in the price of gas oil, its single biggest cost, and three successive gas oil duty increases. These rises have added £16.5 million to Scottish Coal’s annual operating costs and other surface mining companies have suffered in the same way. It has been clear for some time that there would be consequences in terms of job losses and indeed late last year one Ayshire site was mothballed with the loss of 80 jobs. The latest increase in duty announced in the recent Budget of a further 1.25 pence per litre, has sparked consultation on up to another hundred job losses in Scotland.

This is as relevant to the future potential of coal in contributing to a balanced Energy Policy as it is to sustaining jobs in the industry today and enabling an indigenous contribution to coal supply. I strongly urge the Government to look at the tax and planning regimes for coal urgently before we are no longer in a position to contemplate a realistic move towards new technology as the surface mining industry struggles to retain profitability.

An exemption from duty on off road diesel would provide a level playing field with imports. It can be substantiated that the industry is not part of the estimated £600,000 million on oil fraud.

Secondly, the presumption against in planning should be removed on energy policy grounds and recognition of the need for coal should be a material consideration in planning guidelines.

In terms of the future development and research into clean coal technology, since 1999 the Government has provided £13 million to the Cleaner Coal Technology Programme and an additional £3.5 million collaborative Cleaner Coal Technology projects with the USA. The DTI Carbon Abatement Technology Programme has also provided £4 million for new Carbon Abatement Technologies including Cleaner Coal Technologies under its first call for project proposals 2005-6. The Government has also made available a further £35 million, including £10 million for demonstration projects in Carbon Abatement Technologies which will involve carbon capture and storage. 

So there is a recognition that clean coal can be part of the solution in the future. While this is welcome I would question whether it is enough to provide incentives for the necessary investment in low carbon coal plant from   the private sector and whether there is a clear enough Government policy to provide the kind of certainty needed for long term investment. How, for example, does this compare with Government subsidy or incentives on nuclear or renewables?

I support the view of the industry that long term carbon allowances beyond phase 2 of EUETS (2012) is essential and should be based on the German model which has brought forward investment in supercritical plant. Also, the current £35 million in the Carbon Abatement Strategy is not enough and further assistance is required for Carbon Capture and Storage demonstration plants.

The Energy Review consultation document acknowledges that there is likely to be greater reliance on gas as this is what the market will dictate because of low initial capital costs. But this brings with it risks to security of supply and price volatility as we have seen recently with adverse effects on industry and the public. I believe there is widespread and justified public concern at a possible future Energy supply in the UK which is so heavily dependent on imported gas, especially with the volatility in the Middle East and the former Soviet Union. While this has not proved an impediment in the past as far as the UK is concerned no one can predict the future and guarantee security of supply from foreign sources.

It is imperative that while securing contracts and infrastructure for imports in the short to medium term we also do everything possible to develop indigenous supply and coal has a vital role to play in that scenario. By supporting indigenous coal an important contribution can be made to security of supply, to maintaining an essential skill base, and to providing hope to communities whose livelihoods were built on the coal industry. 

While as previously stated my main input into the consultation is concerned with the role coal has to play in a balanced Energy policy, I would also like to refer briefly to biomass, wind energy, nuclear power and fuel poverty and energy conservation.

Biomass

The issues concerning biomass have been thoroughly investigated both in Scotland and in the UK in recent years in four significant and influential reports. The potential of biomass to reduce greenhouse gas emissions, promote rural development and contribute to a secure and diverse energy supply has been clearly identified, as have the measures that need to be put in place to achieve that potential. The Government should work urgently with the Biomass Industry and farmers on the action needed to remove barriers, put the necessary facilitative measures in place and create a stable policy framework within which the industry can plan and invest.

Wind Energy

While it is almost universally accepted that windfarms can contribute to reduction in CO2 emissions the kind of targets which have been set are, I believe unrealistic.
In my own constituency of Ayr, Carrick and Cumnock planning applications for windfarms are submitted on an ad hoc, speculative and grossly over ambitious basis in terms of numbers, concentration and over development. A number of local communities would effectively be surrounded by wind turbines if even half of the applications submitted were granted and the environmental impact of some of our most precious areas of natural beauty would be devastated along with our tourist industry. I believe a national strategy (UK) is urgently needed as part of the Energy Review which does not permit applications to be lodged purely based on market forces. Planning guidelines should indicate far more stringently where it is appropriate for windfarm development to take place and areas which are unsuitable should be ruled out.

The proliferation of applications in my constituency is definitely contributing to a loss of public confidence and support for windfarm development. While it is true that not every application will come to fruition, the scope and number of applications is overwhelming and people feel their community will be swamped. Most people are not against development per se but want it to be proportionate and environmentally sensitive. I believe a more predictable planning regime would help with this.

Nuclear Power

I would not necessarily be opposed to new modern nuclear power stations as I can see that they could contribute to reduction in carbon emissions. However I would like to see the Report of the Committee on Radioactive Waste Management on the options for the long term management of the UK’s higher activity wastes and their recommendations in this regard. The storage of waste is a matter of major concern which must be resolved before any further development is considered. Also further clarity is required relating to cost. The consultation document does not make it clear how cost conditions have changed so radically as to justify a change of direction from the previous assessment of ruling out new nuclear power stations on grounds of cost. This must be spelled out in detail. 

Fuel Poverty and Energy Efficiency

Both the Westminster Government and the Scottish Executive have taken measures to address fuel poverty especially among pensioners with excellent results. This is being undermined by rising fuel prices .The Government must continue to counter this by boosting the incomes of the most vulnerable groups and the promotion of energy efficiency schemes.
It should be automatic that new build housing is built to the highest available standards of energy efficiency. It is a false economy to avoid doing this now, as it will only mean further expense in the future to bring properties up to an acceptable standard. Energy efficiency is advantageous to consumers as well as contributing positively to the environment.