TL: MEMORANDUM FROM GREENPEACE UK TO THE PARLIAMENTARY SELECT   
   COMMITTEE ON TRADE AND INDUSTRY ON BRITISH ENERGY POLICY AND 
   THE MARKET FOR COAL 
SO: Greenpeace UK (GP)
DT: November 23, 1992
Keywords: atmosphere energy uk europe coal policy gp /

INTRODUCTION

Greenpeace UK is grateful to the Committee for this opportunity
to submit evidence to its inquiry. The present note represents
a summary of the principal conclusions arrived at by Greenpeace
on the question of British energy policy and the market for
coal. The more detailed background to these questions are set
out in a separate report which, with your permission, we will
submit to the Committee as an addendum.

In this submission, Greenpeace will first briefly summarise the
nature of the environmental imperatives bearing on British
energy policy. Attention will then turn to the best available
means to accommodate these constraints, and to mitigate any
increase in emissions in the event that a decision is taken to
retain a larger market for domestic coal. The memorandum will
then focus in more detail on three issues: the avoidable costs
of Magnox electricity; the employment intensity of energy
efficiency; and the means by which serious failures on the part
of the electricity Regulator might be rectified. A series of
detailed recommendations are made under each, including the
following:

The immediate closure of Magnox stations. These reactors are in
any event due to shut down shortly. They have been referred to
as "unsafe" by the President of the Board of Trade. Their
avoidable costs are shown to be higher than those of competing
options. Their electric output is equivalent to that generated
by some 9 million tonnes of coal.

An immediate targeted Government investment programme in energy
efficiency as a means to effect real reductions in polluting
emissions. This would be undertaken, inter alia, in the current
coal mining regions using funds set aside for regional economic
regeneration and would begin the process of realising the
massive possible economic savings to the country. It is
demonstrated that energy efficiency investments yield more jobs
per pound than less cost-effective spending on energy supply.

A set of detailed recommendations are made as to how the
Director General of Electricity Supply might be required to
fulfil existing obligations on the promotion of energy
efficiency which he has hitherto failed to address. This would
establish a market in electricity efficiency, enabling the
harnessing of the massive available cost-effective potential.

It is the opinion of Greenpeace that the present wide ranging
Review being conducted by the Department of Trade and Industry
is a landmark in the development of British energy policy. It
will result in the preparation of the first white paper in a
quarter of a century on general energy policy issues. As such,
it offers a unique opportunity to give full consideration to
matters such as the environmental, economic and security
benefits offered by improved energy efficiency and the
harnessing of renewable energy. These issues have been sadly
neglected in Government policy making over recent years. In the
longer term, it is likely that the present Review will be judged
according to its success in taking full account of these
important questions. 


THE GREENPEACE PERSPECTIVE

Throughout its twenty year history, Greenpeace has advocated the
policy measures and practices which are required to protect the
environment. Greenpeace's work in the Energy Sector addresses
threats posed by phenomena such as acid rain, photo chemical
smog, the build-up of greenhouse gases in the global atmosphere
and the dangers of radioactive contamination and nuclear
proliferation. The development of a comprehensive Government
policy on energy is urgently required if these environmental
challenges are to be met. The failure to implement any kind of
coherent energy policy over the past decade has resulted in a
series of Government blunders and miscalculations, the latest of
which is the recent attempt immediately to close 31 British deep
coal pits.

Though they may partially be mitigated by investment in modern
combustion and clean-up technologies, the environmental, safety
and health impacts incurred in the mining and burning of coal
are inescapable and unacceptable. For this reason, Greenpeace
advocates that the use of coal, along with all fossil fuels, be
phased out as part of a long term, carefully developed strategy.
The process of transition from old to new has always required
sensitive management. Environmental imperatives are nothing new
in this respect. A clear responsibility resides with Government
to manage the phased transition to new and relatively
environmentally benign industries, ensuring continuity of
employment, community investment and regional development.

The benefits acknowledged, by Government bodies to be offered by
investment in improved energy efficiency and renewable energy
resources have remained almost totally neglected. These new
generation technologies allow the delivery of energy services to
the consumer at lower cost than spending on traditional supply
side capacity. With proper attention by policy makers, the
employment and regional development potential presented by these
new approaches are also superior. Far from taking advantage of
these opportunities, policy making over the past decade has
culminated in a situation where over one billion pounds of
consumers' and tax payers' money is lavished annually on an
obsolete, expensive and dangerous nuclear power industry. In
moving towards a rational and environmentally acceptable energy
future for the UK, the first priority must be the elimination of
nuclear power, not the coal mines.

THE ENVIRONMENTAL IMPERATIVES

Nuclear Power

On 19th October 1992, the President of the Board of Trade stated
that 'it is perfectly true that the fossil fuel levy creates a
subsidy for the nuclear industry. However, the subsidy is to
deal with the decommissioning of old and unsafe plants. I defy
the Labour Party to suggest that I should not carry out my
statutory duties to make these plants safe' 1. Perhaps Mr
Heseltine's apparent wish to close down the older Magnox
reactors reflects the concerns of the Nuclear Installations
Inspectorate (NII). In September 1991, the NII acknowledged the
existence of serious safety problems arising from corrosion and
the embrittlement of pressure vessel welds at five of Nuclear
Electric's Magnox stations commissioned between 1962 and 1966.2
Such difficulties are possible precursors to a serious core melt
accident 3. In the absence of any effective secondary
containment structure, the consequences would be comparable with
those of the Chernobyl accident in April 1986.4 For a densely
populated country such as the UK, such an event would be truly
catastrophic. Although the original design life of these
reactors was twenty years 5, Nuclear Electric is currently
seeking extensions up to forty years 6. 

On average, the seven Magnox stations generate less than 8 per
cent of British electricity 7 at an avoidable cost (discussed
later in this submission) greater than that of the available
alternatives. Their total output is roughly equivalent to that
produced by the combustion of some nine million tonnes of coal.
Greenpeace argues that, even without consideration of the
economic benefits, it is imperative that these stations be shut
down immediately. This should go hand in hand with a programme
of investment in energy efficiency and renewable energy
technologies which would allow reductions in carbon dioxide and
other pollution associated with the burning of fossil fuels.

Fossil Fuels

The environmental problems posed by the continued combustion of
fossil fuels are, in the longer term, no less serious than those
presented by nuclear power. The British Government has
undertaken a commitment under the EC's Large Combustion Plant
Directive to reduce acid emissions from power stations by 60 per
cent over 1980 levels by the year 2003 8. Recent scientific
assessments of the ecological impacts of acid rain in Europe
show that further cuts are needed 9 and these are likely to be
undertaken when the Directive is reviewed in 1994.

The Greenhouse Effect poses an even greater threat than acid
rain. The Inter-Governmental Panel on Climate Change (IPCC) this
year confirmed 10 the alarming conclusions of its 1990 report.11
In recognition of the gravity of the environmental risks posed
by continuing emissions from fossil fuels and other sources, the
UK signed the Framework Climate Convention in Rio de Janeiro in
June this year. The Treaty includes a commitment to stabilise
"greenhouse gas concentrations in the atmosphere at a level that
would prevent dangerous anthropogenic interference with the
climate system"12. According to the IPCC, global carbon dioxide
emissions must be reduced by at least 60 per cent over current
levels if such an objective is to be achieved 13. Producing
three per cent of global carbon dioxide emissions for the
benefit of only one per cent of the world's population, Britain
must aim for emissions reductions significantly greater than 60
per cent. Thus, the UK has effectively undertaken a commitment,
at the very least, to a radical reduction in fossil fuel use.
Under the terms of the Convention, the time period over which
this must be achieved is constrained by the adaptive ability of
agricultural and natural ecosystems. This means a matter of
decades.

Government policy making shows little sign of addressing the
challenge posed by these commitments. In contrast to more
stringent measures in other countries, Britain's own declared
national target is to "return carbon dioxide emissions to their
1990 level by 2000" 14. If the British Government is to honour
its treaty commitments, and play its part in averting the
potential catastrophe of global warming, then concrete policy
measures are required to reduce fossil fuel use in the energy
sector. Given the long lead time of investments in the
electricity supply industry, immediate action is required.

THE ENERGY POLICY SOLUTIONS

Fortunately, the means to achieve the environmental commitments
outlined above are readily available. Improved energy efficiency
and the harnessing of renewable energy offer the only effective
instruments with which to address the serious environmental
challenges acknowledged by the Government. We are fortunate that
the technologies which offer a solution to environmental
problems should also be so economically attractive. The
following discussion summarises a more detailed account provided
in the addendum to this submission.

Energy Efficiency

In 1989, the Department of Energy concluded that British energy
demand could be reduced by 30 per cent through investments in
existing cost-effective energy efficiency measures 15. The
Building Research Establishment confined in 1990 that energy
demand in buildings alone (responsible for half of British
carbon dioxide emissions), might cost-effectively be reduced by
twenty five per cent is the key to realising the opportunities
presented by these vast and lucrative energy savings resources
lies in overcoming market failures and establishing a 'level
playing field' for efficiency investments. Regulatory systems
have been developed in the USA and elsewhere which allow
utilities to invest in, and profit from, extensive energy
efficiency programmes. Relatively minor administrative changes
in the UK could begin to realise the potential of the energy
efficiency market.

Specific recommendations are made later in this submission for
one way in which the practice of the Office of Electricity
Regulation might be amended. In addition to this, other
essential policy measures include:

(1) a comprehensive system of grants for energy efficiency
investments in low income households; 

(2) mandatory minimum efficiency standards for appliances,
motors, boilers and buildings; 

(3) comprehensive energy labelling schemes for appliances,
vehicles and buildings;

(4) an energy tax (such as that proposed by the EC) allowing for
the internalisation of the economic costs of environmental
pollution;

(5) a programme for investment in 'state-of-the-art' efficiency
measures in the public sector; and, in the transport sector:

(6) the abolition of company car tax breaks, increased
investment in public transport and restrictions on car use in
urban centres.


Renewable Energy

To complement these measures, active policy making is required
to enable the use of the wealth of renewable energy with which
this nation is endowed. The 'credible contribution' that might
be made by renewable energy technologies (after economic,
environmental and social factors have been taken into account)
has been placed at up to eighty per cent of current UK
electricity demand by the Government's Energy Technology Support
Unit (ETSU). This estimate itself excludes consideration of many
promising technologies. Indeed, in May 1991, a report by ETSU to
the European Commission concluded that, when assessed at an
eight per cent discount rate, more than twenty five per cent of
British electricity needs might be met by renewable technologies
at costs less than or equal to seven pence per kilowatt-hour
(the cost of electricity from new nuclear power stations 17). As
is the case with energy efficiency, the barriers to the
harnessing of this substantial resource lie largely in 'market
failures' such as lack of information, planning, investor
confidence in new industries and credit for avoided pollution,
as well as in the relatively small scale of many of the
investments, which are often too small to attract the interest
of major financiers. In order to remove these obstacles,
deliberate policy making is required to:

(i) increase the national target for penetration of renewable
technologies into the electricity market from the present two
per cent of total capacity to 10 per cent by the year 2000;

(ii) replace the 1998 deadline for favourable contracts for
renewable electricity under the Non Fossil Fuel Obligation
(NFFO) with a rolling fifteen year contract period, running from
the date of commissioning of a renewable installation;

(iii) extend the NFFO from England and Wales alone, to Scotland
and Northern Ireland, where some of the most promising renewable
energy resources are located;

(iv) redress the neglect of funding of renewable and energy
efficiency research and development, by phasing out nuclear
research and redirecting resources to the development of these
new technologies.


THE BENEFITS OF CLOSING 'OLD AND UNSAFE' MAGNOX PLANT

A Decommissioning Fund?

Mr Heseltine's stated opinion that the purpose of the Fossil
Fuel Levy is to pay for the decommissioning of 'old and unsafe'
nuclear reactors is not borne out by close examination of
Nuclear Electric's latest annual accounts. The nuclear
provisions (the costs of decommissioning and waste management)
are now put at œ9,883 million 18. Contrary to popular
understanding, it seems that no fund has been set aside
specifically to cover these massive costs. Much of the annual
œ1.265 billion subsidy instead seems to be consumed in meeting
what would otherwise be a loss on current operations and
liabilities and in "payments to acquire tangible fixed assets",
of which œ518 million is represented by "assets in the course of
construction" - mostly Sizewell B. 19

The money notionally allocated to Nuclear Electric's
decommissioning liabilities amounts to some œ180 million (just
14% of the subsidy). Instead of putting this aside in a
dedicated investment fund, Nuclear Electric seems to be
reallocating this to cover costs such as current operations and
the construction of Sizewell B. Since Sizewell B is itself
projected to generate electricity at costs well above market
prices 20, Nuclear Electric evidently hope that future subsidies
will cover not only this deficit, but also the decommissioning
costs for existing plant, and the new liabilities incurred by
the operation of Sizewell B itself. Continued allocation of the
present subsidy to current losses and future loss-making
investments means that decommissioning will inevitably place
further burdens on the taxpayer and the electricity consumer.

The Example of Hunterston A

The cost of decommissioning existing old nuclear plant cannot be
avoided. However, part of the excessive cost of continuing to
operate this plant is avoidable. Nuclear Electric's statements
that Magnox avoidable costs are as low as 1.2 p/kWh reflect a
strong vested interest in continuing to receive the subsidies on
the output of these reactors. In 1990, the then South of
Scotland Electricity Board stated that the avoidable costs of
the Hunterston A Magnox station were some 80 percent higher,
amounting to 2.225 p/kWh 21 (2.4p/kWh in 1992 money), with
further savings to be realised in fixed operating costs if the
station were to close. The decision to shut the reactors was
taken in March 1990 "on economic grounds alone" 22. Yet
Hunterston A was one of the better performing Magnox stations.
Compounded by the fact that the Nuclear Installations
Inspectorate is likely to require further safety investment if
English and Welsh Magnoxes are to continue operating, this means
that the avoidable costs of Hunterston A represent only the
lower bound of the likely range of avoidable costs. It must be
regarded as probable that the real avoidable costs to Nuclear
Electric of operating Magnox plant are higher than the current
rolling one year average pool price at around 2.3 p/kWh.

Avoidable Reprocessing Costs

Yet even this does not represent the entirety of the avoidable
costs of old Magnox stations. Nuclear Electric seems to regard
its newly negotiated œ13 billion reprocessing contracts with
BNFL as fixed, and so effectively excludes the Magnox portion
from its computation of Magnox avoidable costs. However, the
Government also underwrites BNFL's long term waste management
and decommissioning costs. Nuclear Electric's new reprocessing
contracts have yet to receive Government approval; Even if
Nuclear Electric does not, the taxpayer must regard the
avoidable costs that would have been incurred by BNFL in
reprocessing future Magnox spent fuels as part of Magnox
avoidable costs. One estimate of Magnox avoidable costs which
includes consideration of BNFL's avoidable costs places the
total at 3.57 - 3.65 p/kWh 23. This is far higher than any
likely equilibrium pool price.

Decommissioning Magnox

The old English and Welsh Magnox stations currently generate as
much electricity as would be produced by nine million tonnes of
coal. Even if permission is granted by the NII, the old Magnox
stations will run for only a few more years. Mr Heseltine has
himself expressed the view that safety problems would be posed
by their continued operation. Early closure of these stations
would eliminate serious risks and avoid substantial costs that
would otherwise fall on the tax payer and electricity consumer.
The reference decommissioning plan published by Nuclear Electric
shows that only œ60 million would be incurred per station in the
first five years, amounting to a total of œ421) million for all
seven stations (1989 money). According to Nuclear Electric's
preferred decommissioning strategy, no substantial further costs
would be incurred for more than a century 24. The first stage in
the decommissioning of the Berkeley station is reported to have
been completed at well below budget.

The annual average Magnox decommissioning cost in the first five
years would thus amount to only some eight per cent of the
current Fossil Fuel Levy (1992 money). In addition to avoiding
substantial costs to the electricity consumer and tax payer,
therefore, early closure of the Magnox stations need not make
any substantial short term call on the Public Sector Borrowing
Requirement. For all these reasons, Greenpeace recommends that
the remaining Magnox stations be shut down.


THE EMPLOYMENT BENEFITS OF INVESTMENT IN IMPROVED EFFICIENCY

The question of employment is central to the current debate over
the future of British Coal. The speed of the planned mine
closures, the manner of the announcement and the lack of
alternative community investment plans are matters of the utmost
concern. However, in a broader energy policy context, the
question must be asked whether strategies to improve energy
efficiency and harness renewable resources, advocated by many on
environmental and economic grounds, would also yield favourable
results in terms of employment.

In the absence of any British Government studies on this
important question, Greenpeace commissioned in November 1992 a
detailed report from the US-based Goodman Group 25. The purpose
of the study was to document the actual employment consequences
of the many large scale programmes for 'demand side management'
(DSM) now being undertaken by several US utilities. This was
achieved by conducting a comprehensive review of the recent US
literature on the employment effects of investment in energy
efficiency, and by undertaking original research on the
employment effects of the US $3.1 billion scheduled for
investment in DSM programmes in the US in 1992. The full report
will be published by Greenpeace in the near future and is
summarised in more detail in the addendum to this submission.

The papers reviewed in this study compare the employment effects
due to fluidised bed and conventional coal, gas combustion and
combined cycle turbines, nuclear power and DSM. The analyses
take account of 'gross effects' (associated with the efficiency
investment itself), 'displacement effects' (associated with
employment losses resulting from foregone opportunity
investments) and 'respending effects' (employment associated
with changes in real incomes arising from the efficiency
investments). Employment in each of these categories is further
analysed in terms of 'direct', 'indirect' and 'induced'
components. Direct effects arise from payment of wages and
purchase of manufactured materials. Indirect effects arise from
the purchase of services and materials by suppliers to sustain
the activities generating the direct effects. Induced effects
are generated by the spending of wages earned through direct and
indirect employment. The total employment effects resulting from
the various investment options are given by the sum of these
components (with displacement effects being negative).

The results of five recent studies show that the gross
employment generated by energy efficiency investments is
comparable with that of traditional supply side alternatives on
a kilowatt-hour basis. However, due to the greater cost-
effectiveness of energy efficiency investments, DSM consistently
generates more employment per unit investment than any supply
side alternative. This picture is borne out by the theoretical
literature relating to hypothetical energy efficiency investment
programmes in the UK dating from 1983 which have recently been
reviewed by the Association for the Conservation of Energy 26.

The results of the more detailed analysis carried out by the
Goodman Group of the employment consequences of actual DSM
programmes implemented in the US in 1992 are given below.
Contrary to assertions that are sometimes made, it was found
that employment resulting from energy efficiency investments is
not distributed towards the lower end of the wages scale
compared to supply side investments.

                                Jobs per million US$ (1990)

Fluidised bed coal combustion              25.6
Gas combined cycle                         14.2
Gas combustion                             16
DSM residential                            27.4
Commercial                                 24.7
Industrial                                 26.5

It can be concluded that, in addition to bearing environmental
benefits and in addition to being more cost effective, energy
efficiency investments also tend to yield more jobs per pound
than supply side alternatives. Whatever the outcome of the
current inquiries conducted by the DTI and the Select Comrnittee
itself, it is likely that a further decline in employment
prospects within the coal mining industry will occur in future.
As part of a process of phased transition away from polluting
fuels such as coal, therefore, the Government should ensure that
full advantage is taken of the employment and community
investment potential of energy efficiency and renewable energy.
In particular, Greenpeace recommends that, using resources
already set aside for economic regeneration, the Government
implement an energy efficiency programme targeted at the areas
to be affected by coal closure plans. This should best be
conducted as part of a general programme relating to all British
housing stock. Further to this, the Government should commission
a major national study of the relative employment benefits
offered by energy efficiency and renewable energy investments.

THE ROLE OF OFFER

In July this year, the Director General (DG) of Electricity
Supply, Professor Littlechild, admitted that 'I have not, as
yet, taken any direct action in relation to my general
environmental duty'. 27 Under Section 3 of the Electricity Act
of 1989, the DG is required, inter alia, "to protect the
interests of consumers of electricity" 28, to promote "the
efficient use of electricity supplied to consumers" 29 and "to
take into account the effect on the physical environment of
activities connected with the generation, transmission or supply
of electricity" 30. In each case, the DG is required to exercise
these functions "in a manner which is best calculated" to secure
the stated objectives. This "best calculated" requirement
obliges the DG not only to take action to promote demand side
energy efficiency and environmental protection, but also to
develop some form of assessment upon which the proper exercise
of his powers can be based. Such assessments are essential in
order for the DG to fulfil his legal obligations to ensure that
electricity companies are in fact serving the best interests of
electricity consumers,promoting energy efficiency and paying due
regard to protection of the environment. The DG's failure to
develop some form of assessment compounds his failure to
consider and enforce potential breaches of Condition 5 of the
Public Electricity Supply Licences which require the licensee to
"purchase electricity at the best effective price reasonably
obtainable".

Further to this, under Section 41 of the Act, it is stated that
the DG may, after consultation, "determine such standards of
performance in connection with the efficient use of electricity
by consumers as, in his opinion, ought to be achieved by such
suppliers". In explaining the intent of this section, the
Secretary of State for Energy responsible for introducing the
Act stated that 'the new clause spells out clearly the two
specific duties imposed on both the regulator and the public
electricity supplier. Specific action will be taken to set
standards, collect information and enforce standards' 31. This
further underscores the requirement of OFFER to develop and
enforce standards of energy efficiency in electricity demand.

In view of the professed adherence of the British Government to
the cause of environmental protection, and in particular to the
fulfilment of explicit pollution abatement targets relating to
acid and carbon dioxide emissions 32, it is a matter of great
regret for Greenpeace that the provisions of the 1989
Electricity Act are not more stringent and detailed in requiring
environmental protection and the promotion of energy efficiency.
However, in adopting what the Select Committee on Energy has
described as a "bureaucratic" and "unimaginative" approach to
the exercise of his powers 33, the present DG has manifestly
failed to discharge even those statutory responsibilities which
he does hold in these areas. Standards of energy efficiency in
electricity demand or environmental performance in electricity
supply have both yet to be developed by OFFER. The most
substantive move by OFFER towards the promotion of energy
efficiency lies in the requirement by the DG that public
electricity suppliers (PES's) formulate Codes of Practise on the
provision of information on energy efficiency to their customers
34.

The Consumers Association has tested the telephone 'help-lines'
through which this information is supposedly provided and "found
them wanting" 35. The most substantive moves by OFFER to protect
the environment have been minor interventions such as the
requirement of the National Grid Company to place certain
restricted stretches of transmission line underground 36.

It is the opinion of Greenpeace that the present DG has taken an
unacceptably narrow view of his role as a Regulator of the
electricity market. He has failed to uphold even the provisions
set out in the Electricity Act. To his acknowledged neglect of
important responsibilities in relation to environmental
protection must be added a failure to promote enhanced energy
efficiency or to act on behalf of consumer protection. Due to
his inaction, important opportunities are being missed, both for
rectifying economic inefficiencies in the market, and for the
generation of productive employment. Immediate corrective action
is required.

Fortunately, the means to remedy the failures of the Regulator
are readily available and entirely consistent with a broad
interpretation of the provisions of the Electricity Act.
Environmental protection is most rapidly and cost effectively
achieved by improving energy efficiency. Energy efficiency is
most rapidly and cost effectively achieved by enacting 'demand
side management' (DSM) measures such as those implemented for
several years in many US states. By decoupling profits from
revenues on sales, these techniques allow utilities to benefit
from energy efficiency gains on the part of their customers.
Where a consumer is able to save electricity at lower cost than
it would cost to purchase it, DSM provides a framework for the
creation of a market in energy efficiency. Utilities, specialist
energy service companies and consumers themselves are able to
compete in this market, thus allowing the best opportunities for
gains in efficiency to be realised at lowest cost.

In order to ensure that the Director General fulfils his
existing obligations, and that consumers and society at large
benefit from the economic and environmental rewards of
establishing a market in enhanced efficiency, Greenpeace urges
the Select Committee to recommend the following,changes:

i) The DG should exercise his existing legal powers to develop
and apply efficiency standards, requiring regional electricity
companies (RECs) to prepare biannual demand side management
(DSM) resource plans including an assessment of the technical
resource and the cost effective potential for efficiency gains
over a long term planning horizon.

ii) The economic purchasing obligation (Condition 5) of the
public electricity suppliers' (PES's) licence should be revised
to include economic purchasing of both supply and demand side
measures. Where a REC does not implement a DSM programme which
is demonstrably cheaper than a supply side resource, the DG
should disallow the additional costs that are incurred as a
result. Full account should be taken of DSM resource plans when
reviewing the value of "X" in the distribution price control
formula.

iii) The DG should introduce to the supply pricing formula an
efficiency factor and a cap on electricity supply costs. This
would involve the replacement of the "Y" factor by an
electricity price index minus an efficiency factor.

iv) In order to decouple the profits of the RECs from their
sales, the DG should introduce into the distribution pricing
formula a flexible revenue cap (such as that used in Northern
Ireland) which embodies a mechanism for reconciling the
difference between revenues actually collected and those
determined by the formula. Fixed and variable costs should be
assigned weightings, with variable costs related to criteria
such as the number of customers. This would provide a financial
incentive to the REC's to reduce sales, whilst retaining
incentives to win new customers and reduce costs.

v) The DG should require RECs periodically to issue invitations
to tender competitive bids by independent 'energy service
companies' for DSM, identifying, inter alia, a ceiling price to
be paid for DSM which embodies consideration of RECs avoided
costs and the environmental benefits of DSM. RECs would be
required to enter into contract with those companies tendering
the best bids. OFFER should oversee the bidding procedure,
ensuring fair practice and dispute settlement.

vi) The DG should require the National Grid Company (NGC) to
prepare an industry-wide biannual 'integrated resource plan',
combining the DSM resource plans of each REC with NGC demand
forecasts and detailed and comprehensive assessment of the
environmental impacts of electricity resources. This would both
enhance market performance (through providing superior
information for planning by generators and distributors) and
offer a basis for the development of systematic long term policy
by Departments of Trade and Environment, particularly in respect
of granting consent for building new power stations.

CONCLUSION

Greenpeace has outlined in this memorandum some specific means
by which the current crisis in the coal industry might be
addressed, whilst at the same time making a start in moving
towards a sustainable energy future based on enhanced energy
efficiency and renewable energy technologies. The environmental
imperatives are so acute and so serious, that immediate policy
action is required. Beginning with the old Magnox stations,
nuclear power should be phased out immediately. This should be
accompanied by vigorous promotion of energy efficiency and
renewable energy, in the absence of which, the retention of a
large market for domestic coals could have substantial
environmental impacts.

Over a longer time frame, it is necessary to phase out all
fossil fuel use, including coal. In the interim, while
investment in new clean technologies is taking place, urgent
attention must be given to the retrofitting of all existing coal
plant with flue gas desulphurisation equipment and to ensure
that any new fossil fuel capacity employs only the most
efficient and environmentally acceptable technologies. Although
there can be no doubts about the scale of the resources, and the
favourable costs at which they are available, the process of
transition towards an energy efficient economy powered by
renewable energy will require careful management. Currently
obstructive market imperfections must be overcome, whilst
maintaining continuity of employment, investment and regional
development. This is the challenge of energy policy in the
1990's.


References

1.  Hansard, Col. 212, 19 October 1992

2. Letter from Peter Morgan, Press Officer to the Nuclear
Installations Inspectorate, to Greenpeace UK, 3rd October 1992

3. J. Large, "Magnox Nuclear Power Stations: the nuclear safety
case - scenarios and consequences", report prepared for
Greenpeace UK, November 1991

4. J. Large, ibid.

5. HM Nuclear Installations Inspectorate, "Hinkley Point A
Nuclear Power Station: the findings of NII's assessment of
Nuclear Electric's long term safety review", HMSO, September
1991

6. J. Matthews, C. English, UKAEA, "Can Old Reactors Take the
Strain?", New Scientist, 19th September 1992

7. 3224 MWe derated output operating at a mean load factor of 74
per cent in 1991 (data from S. Thomas, Science Policy Research
Unit) expressed as a fraction of current UK electricity demand:
280 TWh/y

8. CEC, "Large Combustion Plant Directive", 88/609/EEC, 1988

9. J.Sweet. "Meeting Critical Loads for Sulphur. A Study of
Energy Use and Emission Reduction Strategies in Europe".
Greenpeace International, Swedish Secretariat on Acid Rain and
World Wide Fund for Nature International. London. To be
published February 1993.

10. IPCC, "Climate Change 1992: the supplementary report to the
IPCC scientific assessment", Cambridge University Press, 1992


11. IPCC, "Report of Working Group 2: Impacts", June 1990

12. Article 2, Framework Climate Convention, 1992

13. IPCC Working Group I, "Climate Change: the IPCC Scientific
Assessment 1990", WMO/UNEP, 1990

14. Department of the Environment, "This Common Inheritance",
the Second Year Report, HMSO, London, 1992.

15. Department of Energy, "An Evaluation of Energy Related
Greenhouse Gas Emissions and Measures to Ameliorate Them",
Energy Paper 58, October 1989

16. G. Henderson, L. Shorrock, "Greenhouse Gas Emission and
Buildings in the United Kingdom", Building Research Department 
Information  Paper, IP2/90, April 1990.

17. Fourth Report from the Select Committee, Session 1989-90,
"The Cost of Nuclear Power", Volume II, June 1990

18. Nuclear Electric Accounts, 1991-2

19. The argument is set out in more detail in Greenpeace UK
Energy Policy Project, "Nuclear Electric: the misuse of the
subsidy and the case for the immediate closure of Magnox", 23rd
November 1992.

20. Fourth Report from the Energy Select Committee, Session
1989-90, "The Cost of Nuclear Power", Volume II, June 1990.

21. Energy Select Committee, ibid.

22. Fourth Report from the Select Committee, Session 1989-90,
"The Cost of Nuclear Power", Volume II, June 1990

23. K. Gregory, Hoskins OR Consulting, "The Avoidable Costs of
Magnox Generation", October 1992

24. F. Pass ant, NE Waste and Decommissioning Manager, "In-Situ
Decommissioning - you can take it or leave it", paper presented
to "Waste Management '91" symposium, Tucson, AZ, February 1991.

25. B. Krier, I. Goodman, "Energy Efficiency: Opportunities for
Employment", prepared for Greenpeace, November 1992.

26. L. Taylor, "Energy Efficiency: the Policy Agenda for the
Nineties", ACE for PSI and NEA, 1992

27. S. Littlechild, "Competition, Efficiency, Emission
reduction: a Regulators View", in Utilities Policy, "Strategy
Performance, Regulation", Volume II, N3, July 1992, Butterworth-
Heinemann Ltd, Oxford, p.189.

28. Section 3(3)(a), Electricity Act, 1989

29. Section 3(3)(b), Electricity Act, 1989

30. Section 3(3), Electricity Act, 1989

31. C. Parkinson, Hansard, House of Commons, Vol.157, Col.553

32. such as those undertaken under the EC Large Combustion Plant
Directive and the Framework Climate Convention of 1992. See
notes 8 and 12 supra.

33. House of Commons Select Committee on Energy, "Report on
Consequences of Privatisation", Session 1991-92, 1992,  para.133

34. Farhana Yamin, "Memorandum on the Failures and Shortcomings
of the Director General of Electricity Supply in Fulfilling his
Obligations under the Electricity Act 1989", prepared by the
Foundation for International Environmental Law and Development
for Greenpeace, November 1992

35. OFFER, "Energy Efficiency, the Way Forward", October 1992,
page 33

36. T. Woolf, C. Mickle, "Integrated Resource Planning in
Europe: a Handbook for Advocates of Rational Energy Use", report
by the Association for the Conservation of Energy to Greenpeace
International, November, 1992