BBC On The Record - Broadcast: 27.10.02

Film: TERRY DIGNAN reports that the Government has yet to decide what it wants to do about energy policy.

HUMPHRYS: You may not have noticed it in your bills, but the cost of electricity has fallen through the floor. Or, rather, the price the power companies get paid for generating the stuff has collapsed. Sounds good - but not necessarily. The industry is in serious trouble and the big companies say the Government hasn't a clue what to do about it. It's all part of the much bigger problem: how do we provide for our energy needs over the next fifty years? We can't rely on gas-powered electricity stations for ever, gas is running out, so does that mean we'll have to rely more heavily on nuclear power? The nuclear industry is on its knees and wants more help from the Government simply to stay in business. All of this is supposed to be addressed in a Government White Paper but, as Terry Dignan reports, there's little sign yet that the Government knows what it wants to do. TERRY DIGNAN: Welcome to BedZed, Beddington Zero Energy Development. Here in a London suburb architects have designed homes for an eco-friendly future. From first thing in the morning to the end of the day there's no shortage of energy. But it's produced without causing global warming. Wouldn't it be great if we could all live our lives like this - heating our homes and using electricity in ways which do not damage our environment or change our climate - for the worse. Easier said than done. Indeed, if the Government fails to make some really brave decisions - and soon - we'll go on using energy which produces greenhouse gases for many, many years to come. DR DIETER HELM: Now the Government realises it has to something, but I think it genuinely doesn't know what to do. DIGNAN: How will we get electricity for the daily chores of the future? Ministers face dilemmas over guaranteeing secure supplies of gas from abroad when North Sea gas runs out, expanding renewable energy and deciding on the future of nuclear power. In meeting these challenges the government says low electricity prices will remain its objective. Opposition politicians says ministers have dithered too long over energy policy. TIM YEO MP: We have to look at how else we're going to meet our energy needs fifteen years down the road, how much will come from renewables, how much may come from other sources, whether it's coal, whether it's nuclear. And as I say, because the decisions about new energy investment are very long term, can take ten years to get a new energy generation plant up and running, now is the time to address those issues, and there has been this year, a bit of a void at the heart of government policy. DIGNAN: Here at BedZed, you can make a quick cuppa before dashing to work without adding to global warming. But, increasingly, most of us will have to rely on gas for our energy because coal and nuclear are in decline. The problem with gas is that, as a carbon fuel, it's a major cause of climate change. HELM: Gas is a carbon fuel and if you want to move towards a non carbon economy, gas is not the answer. It buys you a bit of breathing space because it's better than coal but it's not non carbon and in the end, an economy based on sixty, seventy per cent gas, would not be environmentally very attractive economy at all. DIGNAN: From breakfast to bedtime, BedZed homes use eco-friendly energy. Yet, as a country, most of our energy contributes to global warming. The two big culprits are gas, which provides thirty-seven per cent of our needs, and coal, thirty-three point five per cent. Nuclear power, now being run down, meets twenty two per cent of our requirements. Renewables, a pathetic two point eight per cent. Yet environmentally-minded MPs say the future lies with the wind and sun. JOAN RUDDOCK MP: Well I think one of the most attractive things about renewables is that we can produce them at home. We've got tremendous off shore wind. We're the windiest country in Europe. We've got quite a reasonable amount of solar energy and of course we already use some energy from hydro schemes, and we will have wave energy in the future. So, for all those reasons, we - if we develop renewables - we get home energy production, and through crops. DIGNAN: Ideally we'd all start the day with an environmentally-friendly hot shower. The Government's target is for ten per cent of our energy to be renewable by 2010. This figure should be doubled to twenty per cent by 2020 says a report commissioned by Tony Blair. But some government supporters fear the policy is too timid. RUDDOCK: The regret is that it wasn't started sooner and that we don't have much more ambitious plans for the future. We've got to create the market and that requires more incentives by government to make renewables more attractive, and more affordable. DIGNAN: At BedZed, you can top up your electric car with energy from solar panels in your own home so the journey to work won't add to pollution or global warming. Sounds simple, doesn't it but in reality if we're to see a really big expansion in all forms of renewable energy, there are some very serious obstacles to overcome. The biggest problem is cost. Tony Blair says he wants cheap electricity. Well that's not possible if you're serious about renewables. HELM: Our electricity system is designed for big power stations. Since the Second World War, we've relied on ever bigger coal stations and ever bigger nuclear power stations and now quite large gas stations. Now renewables are the absolute opposite of such a system. They are tiny small plants, they are at the periphery of the system, they require major investment in the networks, the distribution systems, as well as building the renewables themselves, so therefore almost automatically they're going to be expensive, and if we really do want to have a renewables based economy, then we're talking about a much higher price for electricity. YEO: It would be misleading to tell the public that somehow you can have very very low energy prices, and also the satisfaction of playing your part in contributing towards achieving climate change goals. DIGNAN: We could produce lots of greener energy by converting wind power into electricity. But in windy rural Britain, the public says not in my backyard and government ministers fear their renewable energy targets are now at risk. BRIAN WILSON MP: The biggest problem we face is that roughly two thirds of the projects which are put forward never come to fruition and if you ask people in the... in the wind power industry for instance, what their biggest problem is, they won't say lack of government encouragement for renewables, they'll say planning, planning, planning and actually turning these projects in to reality. DIGNAN: Could more nuclear power help to reduce dependence on fuels which emit greenhouse gases? Far from it if current policy is anything to go by. The industry is a loss maker - indeed, the Government has just bailed out British Energy which operates power stations like this one in Kent, Dungeness B. In just six years' time - or so it's planned - these controls will switch off the supply of electricity to hundreds of thousands of homes. Indeed, the entire nuclear industry will eventually close down and what will replace it? Well, there's always gas or coal if you don't care about global warming. What about renewables? Well, even the government is increasingly sceptical there'll be enough renewable energy to replace the electricity currently supplied by these nuclear power stations, which means Dungeness B may well be getting a stay of execution. WILSON: You have to consider the impact of nuclear power on our carbon emissions targets. And you then have to say that if you allow the nuclear industry to run down in this country as some people would wish to see, but the implication of that is that you become more dependent on gas, and you have to recognise that by 2020 we'd be seventy per cent dependent on gas, ninety per cent of which would be imported. RUDDOCK: I think regarding nuclear energy as a clean source of energy is a real misnomer. Yes, it doesn't produce CO2 emissions, but it produces radio active emissions all the time both into the air, and into the sea. We now have a Irish Sea which is terribly polluted with radiation as a result of the Sellafield operations. So it continues to produce emissions whenever it's operating, and even more seriously there is this enormous legacy of nuclear waste, much of which is highly radioactive, will be there for thousands of years. DIGNAN: The government says a new generation of nuclear power stations would create less radioactive waste, yet the cost of nuclear-produced electricity is higher than energy from gas, so ministers are considering a carbon tax on gas and coal. They might even force the power generators to buy more of their supplies from nuclear - or will they be really radical? HELM: Either the government says, well, we're not going to have nuclear power, we're not going to build any more nuclear power stations, we're just going to look after handling the waste of what we've got at the moment. Then they have to get really radical about renewables, about energy efficiency and about a host of other ancillary policies, changing the grids, the distribution systems, and the price will go up a lot. Or they say we really do mean nuclear power, in which case they ought to build several of them because one on its own is incredibly expensive. RUDDOCK: I think the government needs to make a hard political decision, and that decision is not to go for new nuclear build. If they go for new nuclear build, I fear that they won't put sufficient support and sufficient resources, sufficient incentives behind developing renewables. So, it is that decision more than anything else I think, that is the key to developing renewables. DIGNAN: The critics say this is a government in search of an energy policy. It needs to find one quickly. Ministers are alarmed that it's not just the nuclear sector which is failing to attract investment; they fear it's an industry-wide problem. A market which is good at keeping prices down is also producing low levels of investment. WILSON: There's very little incentive at present for anyone to invest in any form of generation, and that is a function of the low price that generators are getting for the product that they produce. Now that has to be part of the White Paper discussion. DIGNAN: In nuclear power stations, safety regulations must be obeyed religiously. There are also rules for ensuring there's competition within the energy industry. Criticisms that the market is drying up investment - and could lead to power cuts - are forcefully rejected by the industry's regulator. CALLUM McCARTHY: We have inherited a position where for ten years, after privatisation, there were artificial arrangements for rewarding generators. That resulted in prices that were too high. It resulted in very high investment and very high levels of spare capacity, and we are faced with unwinding that and that is sometimes a painful process, but there is absolutely no evidence that the market signals are wrong, and that the basic market functioning is in any way wrong. HELM: The way the energy market is organised at the moment, particularly electricity, is that it's extremely good at sweating the existing assets, at getting out power at the lowest possible cost in price from the stations we've got. It is almost uniquely badly designed to deal with encouraging almost any form of investment, what we need is to replace our assets. Remember, all our coals stations bar one were built before 1970. They're all very old, even Drax is 74. All our nuclear power stations are coming to the end of their lives. We've sweated the assets and got the benefit in the 1990s, but in this decade and the next one, what we're in the business of is thinking about how to make investments. DIGNAN: It's argued that power cuts in California in the 1990s should act as a warning to politicians who fail to make the right choices. New investment - especially in power plant - can't be switched on overnight. YEO: You've got to look at a lead time probably of seven or ten years for a new electricity generator, and that does mean knowing what the government's overall strategy is pretty soon, so those decisions can be made in time to avoid the situation whereby capacity has fallen too far. HELM: If we carry on as we are, if the government takes the soft option and says you know, we're in favour of everything but actually we'll do very little because there's too many hard choices to make, it goes down the easy route. Then I think two things will happen. The first is that the instability and volatility of prices will, if anything, increase, and that means that the sorts of problems we've seen in the electricity market can only get worse. The word "California" jumps to mind in that sort of scenario. The other consequence is that the only technology that people will invest in, in the current structure without further intervention, is gas. DIGNAN: Energy is the one thing we are not short of. With homes like this it's used without harming our environment. Now the Government has to decide where we'll get our future energy from and whether we can produce it without contributing to global warming.
NB. This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy.