Montgomeryshire Liberal Democrats

A Submission By The Welsh Liberal Democrats To The 2006 Energy Review

Welsh Lib Dems support an energy system based around energy conservation, microgeneration and renewable sources

Introduction

In 2003, the Government commissioned an energy review to develop a strategy for creating a low carbon economy in the UK. In the following energy white paper, the Government argued that the priority should be "reducing the amount of energy we consume, together with a substantial increase in renewable energy". On nuclear power, the Government argued that its "current economics makes it an unattractive option" as well as accepting the existence of "important issues of nuclear waste to be resolved". We believe the conclusions of the 2003 Energy Review remain valid and that the Government should show the political will to fully implement its recommendations.

Reforming our energy policy is of paramount importance given the changing national and global context:

• Human-induced climate change is rising significantly.

• North Sea oil and gas reserves are diminishing, leaving us increasingly dependent on imports from abroad, especially from Russia and Central Asia.

• Nuclear power for existing plants, which accounts for about 22% of the UK's energy mix, will be phased out over the next 15 years.

• In Wales, there is just one nuclear plant still operating; the Magnox Wylfa nuclear power station on Anglesey, which is due to be decommissioned in 2010. Nuclear power provides about 10% of Welsh energy needs and this gap in supply must be met.

The task is to establish a sustainable and secure energy supply for Wales and the UK, which will lead to significant reductions in carbon emissions. The Welsh Liberal Democrats believe this can be achieved by implementing measures in the following fields:

• Energy Efficiency

• Decentralisation of energy supply

• Microgeneration

• Extensive development of renewable technology

The Welsh Liberal Democrats are strongly against plans to build a new generation of nuclear power plants.

Energy efficiency

1. Much debate surrounding this Energy Review has focused on the supply side of our energy markets: the generation, production and distribution of energy. However, the DTI's 2003 Energy Review identified energy efficiency as the cheapest, cleanest and safest way of cutting carbon emissions while maintaining reliable energy supplies. The demand-side of energy is vitally important, and the right policies could lead to huge carbon savings in this area. The European Commission estimate that cost-effective energy efficiency savings could reduce energy demand across Europe by at least 20% by 2020 .

1.2 Welsh Liberal Democrats want to see the Government endorse and enhance a culture of energy efficiency through a package of financial incentives, greatly improved energy efficiency standards of building regulations, and an effective long-term public information campaign.

1.3 The Government should introduce 'green taxation' and financial incentives designed to encourage more sustainable behaviour among individuals and businesses. These should operate on a simple 'polluter pays' principle with a Carbon Tax giving industry an incentive to decrease their carbon emissions. The Government must also seek to substantially raise environmental standards by imposing sustainable regulations for new buildings.

1.4 The domestic sector consumes over 30% of the total UK energy consumption. Average homes in Wales and England consume up to 20% more than their equivalent in Denmark . Demand would be halved if all homes were properly insulated, with effective heating controls, and up-to-date appliances. Yet energy efficiency standards in houses in Wales and the UK are among the lowest in the EU. Opportunities for intervention in houses already built can fit in with the natural cycle of replacement, and new builds should have to adhere to stricter energy efficiency standards.

1.5 The Government should seek to implement the widespread use of domestic micro combined heat and power (CHP). CHP, where both electricity and heating are produced from one boiler, would improve efficiency in homes by 20-35% , cut bills, improve home comfort and relieve the Grid.

1.6 By raising environmental awareness through effective public information campaigns, major savings could be made across Wales and the UK at minimal cost. For example, Britain could save 500,000 tonnes of carbon dioxide emissions annually if people did not leave their TVs on standby. This equates to almost 3% of the total cuts in CO2 emissions needed by 2010 to meet the target of a 20% cut on 1990 levels.

1.7 In addition, we urge the Government to use the natural replacement cycle of electricity and gas meters and building regulations to install smart meters that allow consumers to monitor energy use, energy costs and carbon emissions at any time. Ofgem argue that highlighting to individuals the costs of energy and their individual contribution to carbon emissions can have a major effect on consumption levels. In Italy, where firms have been installing 'smart' meters since 1997, as a result of customers being able to monitor how much their energy use was costing them, peak-time demand for power has fallen by 5%.

1.8 Energy efficiency measures would have major economic, as well as environmental, benefits. On DTI estimates, CHP could save the average Welsh company £4,760 each per year, or £800m across all businesses per year. Going green will help businesses across Wales and the UK become more competitive. Domestically as well, energy savings will lead to considerable financial savings. The DTI estimates Micro-CHP could save Welsh homes £160 each per year (at a conservative estimate of a 20% energy saving).

1.9 Changes such as these could be hugely influential on our overall energy needs. It is estimated that if 60% of Welsh Households had CHP by 2020, that would meet 10-15% of Welsh power needs.

1.10 While progress has been made in recent years, Britain is still failing when it comes to energy efficiency. The National Grid estimate that total UK annual electricity demand is projected to increase by 1.3% per annum over the period 2004/05 to 2011/12.

1.11 By implementing a package of financial incentives and building regulations, as well as an effective long-term public information campaign, the Government can accelerate moves towards energy efficiency within the domestic, industrial and commercial spheres. Doing so will lead to significant long term environmental and economic gains.

Decentralisation of energy supply and microgeneration

2.1 Our current energy supply system is highly centralised and extremely inefficient. Two-thirds of the energy generated in power stations is lost through heat and transportation across the system. The Welsh Liberal Democrats believe in the need to decentralise power production, and bring the generator as close to the user as possible, through measures such as microgeneration.

2.2 When it comes to the UK's pattern of production and distribution, building a new generation of nuclear power plants is the easy, and wrong, option. Instead of building a new generation of large generators the Government should use this review as an opportunity to radically reform our energy network.

2.3 The way forward, in terms of greater efficiency, lower costs and reduced dependence on others, is through micro-generation and decentralised energy. The Energy Saving Trust's decentralising energy report 'Potential for Microgeneration', which was commissioned by the DTI, concludes that by 2050 microgeneration could potentially provide 30-40% of the UK's total electricity needs and help to reduce carbon dioxide emissions by 15% per year.

2.4 The Sustainable Development Commission (SDC) has expressed grave concerns about the impact a new nuclear power programme could have on the future of the microgeneration and decentralisation of energy across the UK. We agree with the SDC's conclusions that "a new nuclear power programme could lock the UK into an inflexible, centralised electricity generating system for the next 50 years," and that subsequently, "investments to develop the electricity networks to cope with more decentralised, small-scale technologies will be suppressed just as their potential is growing."

2.5 Combined Heat and Power (CHP) technology is a case in point. CHP is estimated to save 20-35% of energy use in the average building . This is a relatively new technology and at present there are only 1500 CHP schemes across the UK. New CHP products are coming onto the market soon so costs will be driven down. The Government should shape incentives and regulations to aid the growth of this embryonic market. By replacing all old boilers with CHP at the normal replacement rate, 750,000 homes in Wales could have CHP by 2020 meeting 10-15% of Welsh energy demand. But building a new generation of nuclear power plants would 'lock-in' the inefficiencies of our current centralised system, and curtail the growth of 'green industries' such as CHP.

2.6 The decentralised model of production has numerous advantages over our current centralised system. Most importantly, it would massively reduce the amount of energy wasted between generator and user and reduce costs in transport and distribution facilities.

2.7 A decentralised system would also reduce the insecurity of our energy supply. A centralised network, particularly one based around a small number of nuclear power stations, is more susceptible to terrorism. Furthermore, the consequences of any system failure in a centralised network are greater, and more paralysing, than in a well-developed decentralised system.

2.8 A recent study concluded that London could reduce its energy consumption by 35.5% through a decentralised energy system . The Mayor of London, Ken Livingstone, argues that a decentralised system would wipe out any need for nuclear power and is now in the process of putting in place a strategy to realise these energy savings in London.

2.9 A decentralised network of energy production and distribution would greatly increase the efficiency and security of our energy supply system. The Welsh Liberal Democrats want the Government to move away from a centralised model and establish a network that allows for mass microgeneration. We urge the Government to make it compulsory for certain microgeneration units to be part of any new buildings and to establish greater financial incentives to stimulate the market in microgeneration units. This new model, if correctly implemented, would provide a far more efficient, more secure and more sustainable energy network.

Nuclear Power

3. Over the next 15 years, existing nuclear power capabilities in the UK will close, leaving a deficit in the national energy supply of around 22%. Much of the controversy around the current energy review is over whether the Government has already decided to build a new generation of nuclear power stations to meet this shortfall. The recent announcement that the Government has approved the selling off of British Nuclear Group has only added to such speculation. While the Welsh Liberal Democrats believe that a considerable proportion of future UK energy demand can be offset through a committed drive towards energy efficiency and a more efficient decentralised energy network, we recognise that energy supplies must be sufficient to meet demand. However, we strongly believe that nuclear power is not the solution.

3.2 The Welsh Liberal Democrats believe that nuclear power is too great a risk in cost terms to be considered part of the UK's future energy mix. The Sustainable Development Commission concluded recently that "the economics of nuclear new-build are highly uncertain. There is little, if any, justification for public subsidy, but if estimated costs escalate, there's a clear risk that the taxpayer will be have to pick up the tab" .

3.3 Historically, the nuclear industry has failed to be cost-effective and profitable and has required billions of pounds worth of public subsidy and financial support from the Government. British Nuclear Fuels Ltd. suffers from consistent heavy annual losses of billions of pounds. Nuclear power stations take up to 10 years to build, have a life span of around 50 years and a decommissioning life of over 30 years. If the economics of nuclear power are so uncertain, this is a huge risk to take with state funds over so many decades.

3.4 The costs of decommissioning nuclear power are equally uncertain. Decommissioning costs have risen from an estimated £46bn in 2002 to £62.7bn this year, with further potential costs of £7.5bn identified. There are still major uncertainties with these figures and we won't know the full clean-up costs of our existing nuclear legacy until 2008 when the Nuclear Decommissioning Authority announces its final strategy. These costs have never fully been taken into account when considering the costs of generating electricity from nuclear power, even though they are clearly part of the full life-cycle costs of nuclear power. The Welsh Liberal Democrats would like to see the Government take into account these costs in the energy review, within the cost-benefit analysis of nuclear power. However, there are undoubted difficulties in doing this when the costs are so wildly uncertain.

3.5 In Wales, the current estimate of decommissioning Wylfa and Trawsfynyndd power stations is over £2.2bn . However, the incremental increases in costs of decommissioning over time, and the fact that Wylfa will not begin to be decommissioned until 2010, suggests that these figures are underestimates.

3.6 Despite the fact that nuclear power has received considerably more funding for research and development from the British taxpayer than renewable alternatives , electricity from nuclear power is relatively expensive to generate. As part of the 2003 energy review, the Performance and Innovation Unit of the Cabinet Office concluded that the cost of electricity from nuclear power was on a par with biomass and Combined Heat and Power, and more expensive than onshore and offshore wind power .

3.7 The Welsh Liberal Democrats are deeply concerned about the lack of any viable or acceptable solution to disposing of nuclear waste. High Level and Intermediate Level nuclear waste have very long half lives. There is over 100,000m3 of High-Level (HLW) and Intermediate Level Waste (ILW) in the UK. In Wales there is currently 400 tonnes of ILW in storage, which is estimated to increase to 10,000m3 by 2010. The Committee on Radioactive Waste Management (CoRWM) is due to report on a solution for radioactive waste. The only possible solution currently in operation globally is the Finnish deep-ground storage solution. However, this is extremely expensive and the longevity of the radioactivity of the waste raises grave doubts over its long term safety. The Welsh Liberal Democrats believe that it is wrong to add to the UK's stockpile of nuclear waste without first establishing a safe, secure and publicly acceptable solution to dealing with nuclear waste.

3.8 The Welsh Liberal Democrats are also opposed to nuclear power because it does not offer a significant enough contribution to tackling climate change. Building and running nuclear plants, transporting uranium and nuclear waste, reprocessing and handling spent nuclear fuel and decommissioning plants all have a significant carbon footprint. The Sustainable Development Commission showed that even if 20 nuclear power plants were built in the UK, by 2035 they would only give rise to an 8% reduction in carbon emissions . We believe this is woefully insufficient considering the scale of the climate change challenge.

3.9 The Welsh Liberal Democrats are equally concerned about the long-term security implications of nuclear power. As the Sustainable Development Commission has argued , we believe it is highly irresponsible to build a set of new nuclear power stations across the country given the current terrorist threat. It is well known that certain terrorist groups have considered nuclear installations as potential targets. Similarly, the inevitable increase in the level of uranium, plutonium and nuclear waste transported into and across the UK offers a range of opportunities for terrorist groups to acquire highly lethal material. Furthermore, as previously stated, such a centralised system is less robust in the face of interrupted supplies or system failures than a decentralised energy network.

3.10 Wylfa nuclear power station, the only operational nuclear plant in Wales, is due to be decommissioned in 2010. In Wales, there is a debate underway about whether to extend the life of the 960MW capacity plant or build a Wylfa B. In particular, the pro-nuclear arguments have focused on maintaining subsidised electricity supplies to Anglesey Aluminium Ltd., which requires 250MW of power for its smelting operations, and which employs 540 people, as well as the 400 people employed at the power station itself.

3.11 The Welsh Liberal Democrats are opposed to any extension to Wylfa's life or the building of a Wylfa B. In addition to the arguments already outlined, the supply of subsidised, cheap electricity is not a political decision about nuclear power vs. alternatives, but one of pricing policy. Wylfa has not provided a constant supply of electricity in the past. Between 2000 and 2001, the plant was closed for 15 months, during which time Anglesey Aluminium Ltd drew power from the National Grid.

3.12 The Nuclear Decommissioning Authority argues "there is no realistic possibility of an extension to the plant's life beyond 2010" . As well as for a number of technical reasons that question the safety of the ageing plant, the Springfields factory, the only plant that provides Magnox power stations with fuel rods, will be completely shut down by 2010 .

3.13 The Welsh Liberal Democrats believe that the £100m cost of carrying out safety assessments before any decision on extending the life of Wylfa can be made is too great and a poor use of public finances. In addition, we believe that decommissioning Wylfa will provide considerable employment possibilities as would the installation of local alternative energy technologies. It is quote clear that the future of the aluminium plant is entirely distinct from the future of Wylfa.

Alternative energy sources

4. The Welsh Liberal Democrats believe that the Government should look to renewable energy as the long-term source of energy for the UK. The 2003 Energy Review concluded that by 2050, 67-85% of the UK's power could come from renewables. The UK has 33% of European offshore wind potential , some of the largest tidal ranges and strongest tidal currents in the world, substantial fertile grassland for biomass and biofuel production and a strong potential for solar power.

4.1 The Welsh Liberal Democrats recognise that it will take time to take advantage of the full range of renewables in the UK. We therefore advocate the use of clean coal, co-fired gas and Carbon Capture and Storage (CCS) as a relatively clean and cheap way of meeting energy demand in the medium term. We strongly urge the Government to use this time to substantially develop our renewable capabilities and explore the full range of renewable energy sources that are available in the UK.

4.2 In a report in February 2006, the House of Commons Science and Technology Select Committee concluded that Carbon Capture Technologies have the potential to make a dramatic impact on climate change emissions in a short space of time. Although we agree with the Committee that CCS must not be regarded as a substitute for developing renewable forms of electricity generation, or for implementing energy efficiency measures, we see a role for CCS as a transitional technology, a form of damage limitation, limiting the impact of fossil fuels until renewable energy sources are able to play a larger part.

4.3 As an energy source, biomass has huge potential. The UK currently generates around 1.5 % of its energy from biomass sources, well below the EU average of 4%. The EU Action Plan states that energy production from this source could be doubled by 2010 without the risk of significantly altering domestic food production. The Welsh Liberal Democrats believe that Wales has significant potential for biomass production. There are about 67,000 hectares of arable land in Wales, 184,000 pastures under five years old, and one million hectares of permanent grass. Estimates suggest that up to 20% of this could be used to grow biomass crops. We believe Wales should set itself an ambitious but achievable target of 100,000 hectares of biomass, which represents one-tenth of the grassland and arable areas in Wales. This would produce one million tonnes of biomass per annum by 2020, or 10.9% of the UK's electricity demand.

4.4 A further advantage of biomass production is that it could help provide a viable livelihood for many Welsh farmers, many of whom are currently struggling in hostile market conditions.

4.5 We would urge the Government to establish a body for the promotion of biomass nationally. We feel that biomass would benefit from having a recognisable voice. National authorities need a single body to turn to and talk to, similar to the current role of the Forestry Commission.

4.6 Electricity can be generated from all types of biomass and several reliable technologies are available. These technologies can be used to "co-fire" biomass, by mixing it with coal or natural gas, or to run freestanding power stations. There are concerns that current controls are over-bureaucratic and need simplifying, particularly in relation to off-site blending of fuels. The Welsh Liberal Democrats therefore advocate a review of regulations of biomass production in the UK to boost its supply in line with EU objectives and commitments.

4.7 Biomass can also be converted into heat and fuel by anaerobic digestion. We would strongly encourage the Government to bring about the rapid development of a third generation process, by commissioning the design of a small-scale modular plant suitable for UK production and operational support. Sir Ben Gill's Biomass Taskforce recommended the development of small scale, high conversion digesters, linked to Combined Heat and Power systems with gas cleaning and compression or liquefaction. The Government should also learn from the huge growth in the use of biogas technologies in Sweden.

4.8 As a result of the UK's strong tidal currents and large tidal ranges, the UK has an enormous potential to generate electricity from tidal power. We welcome the recent grant of £50m awarded to Marine Current Turbines Ltd. (MCT Ltd.) to carry out a review of the Welsh coastline for suitable sites for Turbines. In particular, we urge the Government to consider the case for Marine Turbines off the Anglesey coast as a means of providing localised electricity to partly compensate the loss of power generated from Wylfa. According to MCT Ltd. the site is likely to be one of the best locations for this form of tidal electricity generation due to its strong currents and because the pump storage facility at nearby Denorwick would smooth out any interruptions in supply from current variations. MCT Ltd. Estimates that potentially hundreds of megawatts could be available from this site and many hundreds more across Wales. The Welsh Liberal Democrats recommend that the Government increases its support for marine turbine technology with a comprehensive review of sites across the whole of the UK, as well as significantly boosting funding for the installation of marine turbines.

4.9 The Welsh Liberal Democrats are particularly keen to see the UK take advantage of the power from another form of tidal technology - tidal lagoons. Tidal Electric Inc. estimates that using the UK's large tidal ranges, tidal lagoons could generate a substantial proportion of the UK's energy needs.

4.10 Tidal lagoons have a number of attributes. A recent Ofgem report focusing on the comparative costs of energy generation put tidal lagoons second only to onshore wind in terms of value. According to Tidal Electric Inc. there are sizeable sums of private money keen to invest in tidal lagoons. Tidal lagoons have a substantial generating capacity and take only two years to build. Tidal Electric Inc. estimates that from a multi-pooled tidal lagoon scheme in the Severn Estuary, 4500MW of power could be generated, meeting 7-8% of the UK's energy demand, the equivalent to five Wylfa nuclear power stations. Through pump storage they provide uninterrupted electricity generation and with the consistency of tides, they offer totally predictable supply of electricity.

4.11 Tidal lagoons can also provide substantial coastal protection. According to the Environment Trust , a project designed by Tidal Electric Inc. to protect nine miles of vulnerable coastline around Rhyl in North Wales would provide substantial coastal protection, at a fraction of the cost of traditional coastal protection schemes. Traditionally, coastal protection costs £4,000 per linear metre. According to Tidal Electric Inc. this scheme would cost just £30 per metre and have the capacity to generate 432MW, half the power that Wylfa nuclear power plant generates.

4.12 The DTI, however, have opposed tidal power in the past. The department only recently approved the Swansea Bay Tidal Lagoon Scheme, the first of its kind. We believe the DTI may have been using out-of-date figures in the past to consider the cost-effectiveness of tidal lagoons . The Welsh Liberal Democrats strongly urge the Government to review its stance on tidal power to take into account more recent evidence such as that presented in the Ofgem study. We also recommend that the Government considers the potential dual function of tidal lagoon schemes as a source of power and coastal protection, especially given the rising costs of coastal protection as sea levels rise. We would welcome a national survey.

4.13 As previously stated, the UK has the best potential for offshore wind generation in Europe. The Welsh Liberal Democrats believe that offshore wind power in Wales can meet a substantial proportion of Welsh energy demand.

4.14 Certain onshore wind projects have caused great controversy in areas of Wales. Where the Government chooses to establish onshore wind sites it must endeavour to ensure there is a positive consensus in the local community about the project in question, and that the costs to the local environment do not outweigh the energy benefits of the project.

4.15 However, we are concerned that without further investment in wind power, we will fail to maximise its potential. We urge the Government to increase its level of support to round 2 offshore wind projects. We also urge the Government to carry out a UK-wide onshore and offshore survey to establish where wind power could be generated most cost-effectively and with minimal impact on the environment and areas of natural beauty.

Summary

5. The Welsh Liberal Democrats believe that the bulk of the 2003 Energy Review is still valid. We would argue that the Government must do considerably better at implementing its 2003 Energy White Paper. We believe that the most cost-effective way of achieving a clean, safe, secure and sustainable low carbon energy economy for Wales, and the UK at large, is to focus on maximising energy saving and conservation, developing a more efficient decentralised energy network and maximising the potential for electricity generation from a full range of renewable energy sources.

5.2 We recommend the Government encourage a culture of energy efficiency through a package of the following measures; financial incentives such as green taxes based on the 'polluter pays' principle; greatly improved energy efficiency standards in building regulations, and the installation of smart meters; and an effective long-term public information campaign to promote energy awareness.

5.3 The Government must encourage and develop a decentralised energy network with a strong focus on microgeneration. We recommend the Government use the normal replacement rate of boilers to install micro-CHP in homes and introduce new building regulations and greater financial incentives to stimulate the market for microgeneration units.

5.4 We strongly reject the argument that nuclear power is a cheap, clean, safe and secure energy source and oppose any further building of nuclear power stations in the UK. We urge the Government to take into account the full life cycle costs of nuclear power, including decommissioning and clean-up costs within the Energy Review and any future Energy white paper. We urge the Government to publish in full its calculations of these costs. In Wales, we believe that any extension to the life of Wylfa power station beyond 2010 is unsafe and far too costly.

5.5 We believe the UK should aim to maximise its renewable energy potential. In particular, we strongly urge the Government to reconsider its historically negative position on tidal lagoons and consider the potential it holds for coastal protection as well as energy generation; establish a national authority for the promotion of biomass, set targets and review the regulations to boost biomass production, especially in Wales, in line with EU objectives and commitment; carry out a national survey to establish the most cost-effective sites with minimal environmental impact to develop tidal lagoons, onshore and offshore wind power and marine current turbines; and boost the level of financial support to the offshore wind industry.

5.6 We recognise that it will take time to realise the UK's potential for renewable energy, energy efficiency and microgeneration. In the medium-term, we recommend that the Government develops clean coal, co-fired gas with Carbon Capture Storage as a cheap and relatively clean way to meet energy demand, while the UK's renewable energy capabilities, energy efficiency potential and decentralised energy network are fully explored and developed.

5.7 Finally, to allow Welsh energy policy to develop in a more cohesive and 'joined-up' manner, we believe further powers should be devolved to the Welsh Assembly. Firstly, the planning, building and development of power stations with a generating capacity above 50 megawatts should be subject to the approval of the Welsh Assembly. Secondly, the Welsh Assembly should have further control over building regulations, allowing it to set sustainable standards for new-builds.