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I have to conclude by saying how sorry I am that the noble Lord, Lord Drayson, is not in his place. With his current experience of motor racing, he would have been a most useful contributor to this debate.
2.31 pm
The Parliamentary Under-Secretary of State, Department for Business, Enterprise and Regulatory Reform (Baroness Vadera): I must apologise that I cannot quite fill the shoes of my noble friend Lord Drayson in his first-hand knowledge of the sport, but I reassure noble Lords that I am very passionate about the UK industry's competitiveness and what it represents in modern manufacturing, advanced engineering and world-class skills. That is critical in a fiercely competitive global economy. This is about ensuring that we continue to hold pole position as a world leader in this field and seize the benefits that this can bring to manufacturing and the economy more widely.
I acknowledge the enormous contribution of the noble Lord, Lord Astor, to the motorsport industry. However, I may not quite share the depth of pessimism that he expresses about the sector. Motorsport covers a wide range of events and activities; sometimes we focus only on the high profile world of Formula 1, which is at its pinnacle. The motorsport industry in
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The reasons for that are clear. We have a sector that specialises in the very best hi-tech manufacturing. UK companies conceive, design, develop and manufacture everything from hi-tech chassis, seats, cockpits, seatbelts and helmets to market-leading engines, transmissions brakes and suspension systems. They produce a seemingly endless range of precision components.
Research data from the Motorsport Academy last year shows that the sector is supported by 2,500 engineering companies with more than 100,000 employees. Most of those are skilled engineers or technicians. Those companies are growing. There was discussion of the value that they contribute to the economy. That research shows that it is about £6 billion, of which 60 per cent is exported. Two-thirds of the companies have sales of more than £500,000; more than 80 per cent expected to grow by 50 per cent in the next two years; and almost half expect to recruit new people.
The noble Lord, Lord Luke, refers to contracts being won by overseas companies. It would be fair to say that many UK companies have also been successful in winning contracts. For example, the majority of the A1 GP contract apparently lost to Italy has been subcontracted to UK companies.
People are key not just to the success of our motorsport industry but to the transfer of technology to other sectors. Many motorsport companies operate in the mainstream automotive industry, with highly skilled engineers bringing expertise and know-how to innovate new products and processes. It is one reason why the UK is a global centre of excellence for automotive powertrain design and production and all aspects of performance engineering. There are many examples of technology transfer. Most recently, Cosworth engineering used its expertise in high quality, short production runs to supply engine parts for Rolls—Royce marine engines.
For government, it is critical to sustain this success, which is why we established the Motorsport Competitiveness Panel in 2002. It identified market failures around the development of the industry at all levels from engineers to drivers. The panel of senior sport and industry experts, including the MIA, also recommended the need for an independent body to,
This resulted in 2003 with the creation of Motorsport Development UK, with a budget of £11.5 million. It undertakes five key programmes to tackle these market failures; that is, skills in the workforce, the motorsport academy, the motorsport learning grid—which is targeted at getting schoolchildren interested in engineering careers—energy efficient motorsport, business development and widening participation more generally by the public.
Of course, I will facilitate a detailed financial breakdown to be made available of MDUK’s performance and expenditure costs. I recognise the noble Lord’s
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Through the academy and the learning grid, 2,500 people have been helped to develop their engineering skills. Importantly for the future, more than 100,000 children have taken part in learning grid activities such as Formula Student, Formula 1 in schools and Greenpower, thus enthusing young people—boys and girls alike—to have an interest in engineering. Further support has gone into the volunteers; for example, more than 1,500 new marshals have been recruited and a further 800 have been trained. Without these volunteers many of today’s events could not take place.
The noble Lord expressed surprise that statistical data have not been refreshed since the MIA survey in 2000. That does not, of course, take into account the work that MDUK has done in developing Motorsport 100, which I understand is proving to be a worthwhile barometer of business confidence in the sector, as well as the data that I quoted earlier that the Motorsport Academy research has made available. With my department’s funding devolved to the regional development agencies, I would nevertheless suggest that the MIA discusses the opportunities for making a proposal on this subject with the relevant RDAs. Additional data that are fit for purpose are always valuable.
With environmental impact as one of the key issues facing this and other industries, the noble Lord rightly points out the important contribution that the industry makes to energy efficiency. The energy efficient motorsport programme—EEMS—has directly supported 15 projects to encourage energy efficiency, with some notable successes; for instance, the first biofuel success in a major championship—the car co- driven by my noble friend Lord Drayson—and the first class win for a hybrid vehicle, and, in Formula Woman, the first championship run entirely on biofuel.
The UK industry is pioneering the use of alternative race fuels such as bioethanol, LPG and diesel. For instance, the A1GP series recently enrolled as an EEMS campaign partner. The series has switched to biofuel and has committed to cut waste, to offset unavoidable emissions and to promote environmental awareness at its meetings around the globe.
My department will continue to fund MDUK until 2009, as committed. There is no budget for this activity beyond that date, but the Government’s involvement and interest in the industry, which is wider than any one organisation, will continue. I will be meeting MDUK in June to hear about the progress made and to discuss the future when it has its board
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Looking ahead, we must ensure the long-term competitiveness of the industry. That means starting with young people, so that we sow the seeds of success in our classrooms. We are keen to ensure that programmes such as the academy and the learning grid can continue to develop an enthusiasm for engineering amongst younger students, and to develop skills once those young people are in the workforce.
As noble Lords mentioned, my noble friend and ministerial colleague Lord Jones is no slouch when it comes to being a tireless champion all over the world. I am pleased to say that UKTI has recently agreed that advanced engineering, including this industry, will be one of its new strategic sectors and is planning support for four UK events.
It is essential that we retain Silverstone Grand Prix as one of the showcase events for UK design engineering services. I assure the noble Lord that we will help in any way that we can if planning or any other issues arise. As the noble Lord, Lord Luke, said, I am aware of the exciting designs that have been developed for the pit and paddock area and my department will continue to be engaged in discussions on its progress.
I am not sure that I would paint as bleak a picture as the noble Lord did about the state of the industry. As ever, we know that in a fiercely competitive global environment, there is absolutely no room for complacency. I welcome this debate and will ensure that we will continue to maintain our interest in this industry.
The Deputy Chairman of Committees: The Committee will adjourn until three o'clock.
[The Sitting was suspended from 2.41 to 3 pm.]
Energy: Renewables
Lord Beaumont of Whitley asked Her Majesty’s Government what plans they have to develop the production of renewable energy in the United Kingdom so as to reduce the United Kingdom’s vulnerability to global gas and oil price fluctuations.
The noble Lord said: The provision of affordable local and renewable energy is needed by everyone in this country today, and the question is whether this Government are doing enough to that end. The most obvious answer is that they are not doing enough, that there is real fuel poverty in the country and that people are suffering through the inability to access renewable energy supplies on good financial terms. At the moment it is being suggested that if you want renewable energy, you have to have vast wind farms operating on a very large scale. That is not necessary. Local energy is available at a low price for those who take the trouble to seek it out, and here I pay considerable tribute to the London Borough of Merton on its initiative to provide its residents with as much locally available energy as possible. It is no credit to this Government that it has been left to
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Local renewable energy supplies are desperately needed because without them the country will not be able to survive the challenges from abroad. Germany, for instance, has an immense amount of renewable energy, a large quantity of which it relies on, and a very small amount of non-renewable energy. Other countries in Europe and elsewhere also do better than we do. Only two or three very minor countries in Europe do less well than we do in producing renewable energy.
It is therefore with great interest and genuine curiosity that I seek to learn what the Government think that they are doing in this field and how they will be able to meet the needs that are very real and widespread.
3.06 pm
Lord Berkeley: I congratulate the noble Lord, Lord Beaumont, on securing this debate on a very interesting subject. Your Lordships have many Questions on renewable energy, some of which the noble Lord, Lord Beaumont, has led or taken part in, and it is good to be able to discuss this subject for a little longer in this debate. I will concentrate most of my remarks on wind energy.
I start by following up a rather interesting answer that I got from my noble friend Lady Taylor on 7 February about the MoD objecting to many wind farm developments. The message that I have been getting from people in the industry is that the MoD tends to object informally to virtually every application that is submitted or every proposal that is discussed with it in advance of putting in a formal planning application. Therefore, it is probably not surprising that my noble friend Lady Taylor said:
“In the past three years we have objected to only 31 applications, and ... raised no objection to 352 applications”.—[Official Report, 7/2/08; col. 1165.]
But there is the whole question of the costs of achieving planning permission, which I shall come on to later. If one has spent several years trying to get a decision out of the MoD before you put in a formal application, or if it changes its mind halfway through the process, it costs companies an awful lot of money.
I know that the objections may only be informal, but there seems to be a certain inconsistency about the approach. I am talking primarily about land-based wind farms, but DBERR has produced plans for an enormous increase in wind farms across the North Sea, which seems a most excellent place to put them, and in the Thames Estuary. I find it very difficult to understand what the MoD’s real objections are. Apparently it is to do with the blades turning and causing clutter on radar screens, which means that those operating the radar screens cannot see what is behind the turbines for a fraction of a second if a plane is coming in.
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I look at what is on the other side of the North Sea and I see Belgium with rows and rows of wind farms along the coast. I think they have been there for 20 or 30 years. Germany has an enormous number of wind farms. I think that the Netherlands has two and so has Denmark. If the Belgian air force was going to invade us, would it fly over its own windmills, then go along the sea and would the MoD not be able to pick it up for a millisecond? Are we fighting the right war? I suspect that it the MoD could put a little bit of money into upgrading these radar screens—I know that it is very short of money but we could always cancel Trident or a few other things—and try to make it less difficult for these private-sector promoters to get their wind farm proposals through the planning system.
Then you have to look at the North Sea, which has a large number of oil and gas rigs, as we all know. They have motors that go round and round. One would think that they would also show up on radar screens. Surely the difference between a wind turbine and an enemy aircraft is that the wind turbine is fixed in one spot, although it is going round, whereas an enemy aircraft is flying rather fast. One has to question whether there is a significant problem here or whether the MoD does not have the relevant resources. I am told by people who know much more about this than I do that its real problem is technical and procedural and concerns resources. One has to question whether it is using the proper analytical tools to assess wind farms. It is very difficult when it says, “That’s all right. We think this farm will be all right”, but when the project is in its first or second year of development it suddenly says, “Sorry, we’ve changed our mind. It’s not all right and you’d better go somewhere else”. A lot of money will have been spent by then.
I hope that my noble friend’s reply will encourage the MoD to develop a better, more consistent process for dealing not just with formal applications, because it is probably too late by then, but with some of the informal approaches that always have to come first. That will require resources but a policy direction is needed. I was very pleased that my noble friend said in reply to my Oral Question that the MoD was fully in favour of wind farms. Therefore, I hope that this matter can be resolved quickly. If it is not, we shall not meet our targets; that is quite clear. A large number of companies are waiting to invest in these wind farms. The offshore visual intrusion is very small. The costs involved are a bit higher but it seems that we should push ahead with these structures—DBERR wants to proceed with all speed—as they would help to increase our proportion of renewable energy. Therefore, I hope that my noble friend will give me comfort that government will work collectively towards achieving this growth and that the MoD will be helped to come up with a consistent policy.
The British Wind Energy Association very much welcomes draft PPS22, the planning guidelines, which are designed to bring consistency into the process. When you read that 50 per cent of applications in England are approved compared with 94 per cent in Scotland, you realise that that is a very big difference.
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I have one last question for my noble friend. Something that worries me about renewable energy is the related price of oil. From her time at the Treasury, she will know that the price of oil in the Treasury forecasts is something like $57, whereas in Germany and France, the government think tanks are talking about $200. They cannot both be right. I realise that forecasting is always wrong, but I worry that the UK appears to be totally out of line with those two countries, our next-door neighbours. I do not know who is right, but it will affect just about everything we do in this country and it would be nice to know why the difference and whether the Treasury is rethinking it.
3.16 pm
Viscount Eccles: I am grateful to the noble Lord, Lord Beaumont, for giving us an opportunity to debate this subject. I very much agree with him that there is a dilemma about what is affordable and also renewable. It is a feature of quite a large proportion of the renewable options that they are not easily affordable. I am not going to follow the noble Lord, Lord Berkeley, down the wind avenue. I remind the Committee that quite a lot of people like to find a way to fly below the radar.
I will concentrate on the renewable transport fuel obligation as it relates to biodiesel. It also relates to bioethanol, and they both have the same targets. Those targets are set at 2.5 per cent of the total diesel supply from next month, rising to five per cent in 2010.
Back in November 2006, a Committee of your Lordships' House stated:
“It seems highly unlikely that the biofuels directive in its current form can provide the necessary impetus for the EU to reach the 2010 target of 5.75 per cent market share”,
which is what the target was and still is for quite a lot of members, but there is discretion to set it at a different figure. At that time, an equivalence was worked out of about $80 a barrel as being the price at which biodiesel could reasonably compete with fossil fuel oil. Since then, the fuel oil price has risen and so have the prices of the feedstocks for biodiesel. So it is a moving target—that is very much along the lines of the point made by the noble Lord, Lord Berkeley.
Biodiesel has not yet been produced economically; it has always needed subsidy. I go back a long way with biodiesel. I remember, when operating for the Commonwealth Development Corporation, looking at experiments in Malaysia of firing agricultural tractors on 100 per cent palm oil-derived biodiesel. It worked perfectly well. If I remember rightly, at that time the oil price equivalent needed to be $40 a barrel, but in fact was around $15.
The first generation of biodiesel has, to date, depended primarily on palm oil, which is a tropical oil; soya oil derived from soya beans, which is a
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The problem at the moment is price. Since November 2006 when the House of Lords committee reported on this, the prices of the three chosen feedstocks for biodiesel in the first generation have more than doubled. The price of fossil fuel oil has also gone up, of course, but not by nearly as much. Palm oil and soya bean oil prices have been reaching new highs in the past few weeks. In November 2006 palm oil cost around $500 per tonne, while today it is achieving around $1,300. The point is that these prices are being driven up by the demand for food products, not by the demand for biodiesel, although it has been recognised in recent reports from the Department for Transport that it does add a little to the price pressure. So, given the relative price levels and the very high price of the best feedstock for biodiesel in the first generation, which is undoubtedly palm oil because it provides a much higher yield of oil per hectare than either soya or rapeseed, all three sources are uneconomic under the present UK regime because it allows for only a 20p reduction in the 47p duty.
I am not suggesting that we should subsidise biodiesel to any great extent; rather I am pointing out the dilemma here and I do not want to be particularly critical because it is simply a reality. Indeed, the European Union website on the issue of biofuels is remarkably silent at the moment. Not much on it has been produced recently. It could be that someone is saying that unless and until we reach around $150 a barrel for oil, biodiesel is almost hopelessly uncompetitive. There are imports from the United States of American of a blend called B99. However, rather surprisingly, the US subsidises its biodiesel production from soya beans to a much greater extent than we subsidise ours.
Where are we going with this? At the moment, we are looking forward to the second generation. We are being promised results from the jatropha plant, which produces an oil-bearing nut. The nut is inedible and the plant grows in India in hot, barren areas on not particularly fertile land. But it will be five years or even more before any major commercial exploitation of jatropha can be made.
This leads to questions, which follow up on one of the opening remarks of the noble Lord, Lord Beaumont; namely, that the United Kingdom is very far down the league of producers of renewable energy and far down the league of producers of biodiesel, which again is led by the Germans using, in the main, very large quantities of rapeseed.
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