Select Committee on Science and Technology Fourth Report


PUBLIC FUNDING OF ENERGY RD&D

20. Public funding for energy RD&D comes directly from Government Departments, from the Research Councils and from Government-funded bodies such as the Carbon Trust. This is summarised in Table 1.

Table 1: UK Government funding of energy RD&D (£million)


Historical expenditure

Forecast expenditure


1999-

2000


2000-

01


2001-

02


2002-

03


2003-

04


2004-

05


2005-

06


DTI

Biomass

2.2

1.2

2.8

4

4.2

3

0.3

Waste

0.02

0.6


0.04

0

0

0

Embedded Generation




2

0.8

1.02

3

Fuel Cells

1.5

1.4

2.2

2

1

0.4

0.02

Solar

1.73

1.4

2.7

5

4.2

1.4

0.5

Wind

1.2

1.1

2.2

2

0.9

0.3

0.01

Hydro

0.3



0.2

0.1

0

1

Wave

0.01

0.4

0.3

1.6

2

0.55

0

Tidal

0



1.2

0.4

0.53

4

Technology Transfer and Export Promotion

0.9

3.6

3.4

0.3

0

0

0

Nuclear fusion

14.4

14.3

14.3

14.3

14.3

14.2

14.3

Research Councils[16]

7.2

8.2

10.8

11.0

7

12.6

13.4

DEFRA

Bio Energy





0.5

1

2

Community Energy




20

30



Carbon Trust R&D aspect of the LCIP




4.2

8

5.6


Energy Saving Trust Energy Efficiency and FP Research


0.24

0.45

0.07

0.02

0.02


Public funding bodies

Research Councils

21. The seven Research Councils are NDPBs under the auspices of the Office of Science and Technology (OST), within the DTI. These fund research and researchers in universities and within their own research institutes. Five of the Research Councils have interests in energy research: the Biotechnology and Biological Sciences Research Council (BBSRC), the Council for the Central Laboratory of the Research Councils (CCLRC), the Economic and Social Research Council (ESRC), the Engineering and Physical Sciences Research Council (EPSRC) and the Natural Environment Research Council (NERC). Between them, in 2002-03, they will spend an estimated £11 million on low and non-carbon energy technology.[17]

Engineering and Physical Sciences Research Council

22. The largest contribution comes from EPSRC, which expects to spend £9 million on low carbon energy technologies in the year 2002-03. The Council's total budget for 2002--03 is £460 million; generally energy research represents around 2% of its expenditure. The expenditure on non-carbon energy related research has increased in recent years (see Table 2), reflecting the budgetary increases to the EPSRC, and indeed all the Research Councils. The EPSRC also quotes its expenditure on energy in terms of its "portfolio", which Dr Peter Hedges, Manager of the EPSRC's Energy and Environment programme, told us meant the "current value of grants at that particular time. It is confusing because we will quote figures in different ways".[18] Dr Hedges is absolutely right, it is confusing and there seems little obvious purpose of talking about "portfolios", unless from a desire to make small figures look bigger. The EPSRC has a large area of science to fund but it is hard to accept that energy research, given its economic and environmental importance to the UK, should receive such a small slice of the cake.

Table 2: EPSRC grant expenditure on non-carbon energy related research (£k)[19]

 

Technology area

1998-99

1999-00

2000-01

2001-02

2002-03

2002-03 percent

Biofuel

0

0

22

52

142

1.5%

Biomass

359

357

289

477

515

5.5%

Combined heat and power

36

63

77

267

372

4.0%

CO2 sequestration

0

0

23

42

67

0.7%

Fuel cells

1,016

703

899

1,145

1,487

15.9%

Geothermal

0

0

0

7

4

0.1

Hydrogen

136

59

83

319

536

5.7%

Photovoltaic

3,002

2,760

2,992

3,536

2,685

28.7%

Nuclear

81

62

128

325

293

3.1%

Wave and tidal

0

0

185

491

452

4.8%

Wind

216

167

261

330

481

5.1%

Waste

10

40

40

96

125

1.3%

Conventional

1,317

1,260

1,428

2,058

2,211

23.6%

Total

6,173

5,471

6,427

9,145

9,370

100%

23. The EPSRC's energy research funding comes predominantly through managed mode (see paragraph 25). This enables it to direct its funding to priority areas rather than to respond to the interests of researchers. Looking at Table 2, it is not clear how it arrived at its priorities. There is a bias towards photovoltaics, fuel cells and "conventional technologies" (which we understand relates to research into improvements in conventional generation, such as clean coal, and electricity transmission[20]). We appreciate that the EPSRC must be sensitive to the needs of its user industries but spending such a high proportion of its research funding on "conventional technologies" where there is an established industry seems curious, especially when nuclear fission research funding is negligible and none of this is targeted at new reactor technologies. The EPSRC decides its research priorities with inputs from a Technical Opportunities Panel, comprised largely of academic researchers, and a User Panel with industrial representatives. There is a danger with the latter that it steers the EPSRC's research priorities towards areas with which it is familiar. Half the membership of the EPSRC's council is from industry and we fear that this may lead to conservatism. We regret that technologies with the potential of wave and tidal or hydrogen are given so little funding. The EPSRC should be given a stronger lead by Government to ensure that investment is consistent with wider energy policy.

24. EPSRC said that the figures provided for the inquiry were based on projects directly related to energy. Dr Peter Hedges told us that if they included blue skies research that might have applications to energy the figure would be several times higher (see Table 3).[21]

Table 3: Estimate of blue skies research with possible energy applications and the resulting expenditure in 2002-03

Basis of estimate

Grant expenditure in 2002-03

Directly relevant research topics

£12.4 million

Directly and indirectly relevant research topics

£68.2 million


25. The EPSRC, in common with other Research Councils, allocates its research funds in either managed or response mode. In the former, the Council invites applications in a specified field of study, while in the latter researchers will submit grant proposals for research they wish to pursue and it is funded on merit. The ratio of managed to response mode funding for the EPSRC is around 1:2, but in energy it is 2:1.[22] We are aware that the EPSRC, in common with other Research Councils, has been receiving an increasing number of applications and that this is having an effect on the success rate of applications. We were told that until recently the success rate for grant applications for the EPSRC as a whole was around 34%.[23] Professor John O'Reilly, Chief Executive of the EPSRC, told us that "My own view is that if the success rate of highly regarded proposals is between one in two to one in three then the system itself is a workable and sustainable one. When success rates get to be very low then I think it is not". EPSRC has presented data to us, showing that energy projects perform quite well, with a 56% success rate in response mode and 45% in managed mode.[24] Professor Dennis Anderson from Imperial College is concerned that because of the low success rate for Research Council grant applications "many researchers do not submit applications given such a high probability of rejection and the time and effort entailed, and many projects that are financed are under funded".[25]

26. We have also heard concerns that EPSRC's funding is too risk-averse, concerned more with the researcher's track record than the quality of the proposal. Professor Michael Graham of Imperial College told us that "EPSRC always asks now for adventure in research and ticking those boxes is requested if you are refereeing these applications, but it is just one of the items being assessed and probably the most important are the track record and the scientific quality of what is being looked at".[26] We believe that good research needs to take chances and pursue novel lines of enquiry. We appreciate that striking the right balance between funding applied and blue-skies research is difficult but we urge EPSRC to ensure that researchers with innovative, if risky, projects get the funding they need.

27. The EPSRC has recently established a major research programme on Sustainable Power Generation and Supply (SUPERGEN). This programme will invest £25 million over five years to establish research into the sustainability of the power supply industry. EPSRC is expanding its SUPERGEN programme into the social, environmental and life sciences to address these challenges with input from BBSRC, ESRC and NERC. EPSRC is also planning to work in partnership with the Carbon Trust on a major joint RD&D venture called the Low Carbon Innovation Programme.[27]

28. The DTI's budget for nuclear fusion research has recently been transferred to the EPSRC, following a DTI review. This has some advantages, notably that the EPSRC is well placed to build links between the fusion research conducted at the UK Atomic Energy Authority's (UKAEA's) facilities at Culham in Oxfordshire and universities. We do have concerns, however, that the EPSRC has little experience of funding a large project of this type. Indeed, we understand that there was a suggestion that UKAEA would have to apply for funding through the usual peer-review process. This would have been completely inappropriate. A project of this nature could not have continued with the likely fluctuations in funding that would have inevitably resulted. We were reassured to hear Professor O'Reilly say that "The fusion activity at Culham is certainly ... rated very highly amongst fusion research in the world. I think we do have something that we should be willing to make a commitment to".[28] We consider the future of fusion in greater detail later in paragraphs 181-191. We agree with the Government that there are merits in placing fusion research under the auspices of the EPSRC but we have reservations about its commitment to the technology. To maintain the UK's position in this field, we believe it should remain a special case for funding with a ring-fenced budget. We will be watching the operation of the new funding arrangement for nuclear fusion research at Culham with great interest.

Other Research Councils

29. The energy-related expenditure of the other Research Councils is relatively modest; nevertheless many of them have an active interest in the field and we welcome their positive input to this inquiry. We are not qualified to comment on the merits of individual funding decisions; that is rightly left to those with a specialist knowledge. What is important is that they work together on areas of mutual interest. Energy research is multi-faceted and the research funded by the Research Councils needs to be well coordinated. It is pleasing to see that the Research Councils are beginning to improve the way they are working together and in particular that they put in a successful joint bid to the Spending Review on sustainable energy.

30. We are particularly pleased to see the ESRC playing an active role in energy research. Issues of acceptability and adoption of new technologies are causes for concern: it is vital that social research is undertaken in tandem with the technological development. On 22 January 2003 we invited Professor Ian Diamond, the new Chief Executive of the ESRC, to take part in an introductory hearing before the Committee. We were pleased to hear of his track record in conducting multidisciplinary research and hope that this experience can be applied to the Research Councils' programme on sustainable energy.[29]

The Tyndall Centre

31. The Tyndall Centre is a national centre for research on climate change, launched in November 2000. Its headquarters are in the School of Environmental Sciences at the University of East Anglia but eight other UK research institutions are partners. The core funding of the Tyndall Centre (£10 million over 5 years) is composed of contributions of £5 million from NERC, £1.25 million from ESRC and £3.75 million from EPSRC. The DTI provides additional support to fund a Business Liaison Officer.[30] The Centre expects to have spent £2 million on research of direct relevance to low or zero-carbon energy research between 2000 and 2003.[31] Examples of projects funded by the Tyndall Centre are shown in Table 4.

Table 4: Examples of Tyndall Centre funded projects on zero and low-carbon energy technologies

Description

Expenditure 2002-2003 (£k)

Technology and the economy—energy system in an integrated assessment of climate change

107

Technology policy and technical change, a dynamic global and UK approach

326

The transition to a decarbonised UK: research with a direct relevance to low or zero-carbon energy research

100

Behavioural response and lifestyle change in moving to low carbon transport futures

97

Carbon sequestration: a pilot stage multi-criteria evaluation of biological and physiochemical approaches

30

The hydrogen energy economy: its long-term role in greenhouse gas reduction

156

Integrating renewables and CHP into the UK electricity system

157

Micro-grids—distributed on-site generation

104

Fuel cells: Providing heat and power in the urban environment

100

Research on energy efficient and low-emission housing

240

32. The Centre is clearly conducting useful multidisciplinary work on climate change and energy, and is reaching out to the UK research community, as was planned, strengthening the UK's reputation in this field. We are concerned that the research is not adequately driven by the Research Council's energy research programme. We were pleased to see, however, that the Tyndall Centre was identified as a playing an important role in the formation of the recently announced National Energy Research Network and indeed serves as a model for the Network's structure and management. The Tyndall Centre's funding has been confirmed until 2005 but a decision about future funding is not planned until the end of 2004.[32] We urge the Research Councils to make an early decision on the continuation of funding of the Tyndall Centre to avoid any interruptions in the Centre's research programme, and to increase its resources.

Spending Review 2002 and the UK Energy Research Centre

33. Of the six grant-awarding Research Councils, three—EPSRC, ESRC and NERC—made a successful joint bid to the 2002 Spending Review for a Cross-cutting programme on sustainable energy. The programme aims to:

34. An extra £26 million will be made available over two years (2004-05 and 2005-06).[33] This sum is tiny given the scale of the problem, but we accept the argument that research capacity cannot be built overnight and look forward to further increases in funding for sustainable energy research in the 2004 Spending Review. In 1998 our public expenditure per capita on energy RD&D had fallen to one tenth of the OECD average, and one eighth of that of the USA.[34] The challenge of creating a low carbon energy future has been with us for nearly 50 years, going back to the 1950s; the emergence of the climate change issue has only added to the importance of this; it remains the biggest technological challenge the energy industry has ever faced, and will not be solved without a significant RD&D effort. We welcome the cross-Council programme on sustainable energy. The Research Councils' expenditure on energy research has been pitiful and this investment is a step in the right direction. But it only remains a step, which we hope will be followed up vigorously in the future. If UK technologies are to succeed the scale of investment must increase rapidly.

35. A key part of the Councils' Spending Review proposal was for a dedicated UK Energy Research Centre (UKERC) and a National Energy Research Network (NERN).[35] We understand that this will begin work in April 2004. UKERC's principal functions will be to:

  • promote interdisciplinary, integrated whole systems approaches to UK energy research;
  • provide greater coherence, coordination and connectivity for all government-funded energy research activities primarily via establishment and operation of a NERN;
  • provide a focal point for data and information on UK energy research funding;
  • provide a capability for effective knowledge transfer of research outcomes to both business and policy makers; and to
  • provide views and advice on future research needs.

The Research Councils are consulting on a more detailed specification. It is not clear to us what research budget it will have of its own, although we understand the cost of setting up the Centre will be in the region on £8-12 million.[36] Unless it its research budget is substantial it will lack the credibility to make a real difference. We will await the development of a UK Energy Research Centre and a National Energy Research Network with great interest but we are concerned that its remit is too narrow and aims to modest to turn energy RD&D into deployed technologies.

36. Concern has been expressed to us about the proliferation of public funding bodies. Indeed, Research Councils UK refers to the "complex research landscape" in the energy field. We gather that the Research Councils are "giving consideration as to how best to engage and involve other major players" such as the Carbon Trust and DTI in the UK Energy Research Centre, yet surely these "major players" should have been an integral part of the Centre's strategy from the beginning.[37] We understand that UKERC will provide "a focal point for data and information on UK energy research funding".[38] If this means that the Centre will provide a one-stop shop for those seeking energy-related RD&D funding then it is a proposal that we warmly welcome.

37. We have no doubt that the Research Councils are funding world-class research into low carbon energy, but is our impression that instead of driving these exciting new technologies forward they have a passive, unadventurous approach. There will be few sleepless nights in our competitor countries. The Research Councils might argue that this is not their role, and we would agree but at present no public body exists that will take this on if they do not.

The Carbon Trust

38. The Carbon Trust came into being on 29 March 2001 as an independent company limited by guarantee, set up by Government in partnership with business to invest in the development and deployment of low carbon technologies.[39] Its funding, approximately £50 million a year, comes from grants from DEFRA, the Scottish Executive, the National Assembly for Wales and the Northern Ireland Assembly, and in part from Climate Change Levy receipts. It has two principal programmes: Action Energy, designed to accelerate the deployment of existing energy efficiency and low carbon technologies; and the Low Carbon Innovation Programme (LCIP) to support the development and commercialisation of new and emerging low carbon technologies. One of the four elements of LCIP is support for RD&D (£18 million over three years). A second element funds demonstration projects (£20 million over three years).[40] Part of the LCIP, a £14 million partnership with EPSRC called Carbon Vision, was launched in November 2002. Under the scheme, identified demands from business for low carbon technologies and solutions will be matched against university R&D departments. Investments will be in the region of £1-2 million.[41] Projects funded through this initiative were announced on 24 February 2003. These are shown in Table 5.

39. The Carbon Trust published its Low Carbon Technology Assessment for 2002 in January 2003, using as its starting point the ERRG report.[42] It reviewed 49 technologies and aimed to identify those technologies which have emerged as having the greatest impact on carbon reduction and where Carbon Trust levels of investment can have a significant impact. These are:

  • biomass (for local heat generation);
  • building (fabric, heating, ventilation, cooling, integrated design);
  • combined heat and power (CHP) (domestic micro);
  • CHP (advanced);
  • fuel cells (domestic CHP, industrial and commercial);
  • hydrogen infrastructure (including transport, production, storage and distribution); and
  • industry (combustion technologies, materials, process control, process intensification, separation technologies).

Table 5. Examples of projects funded by the Carbon Trust

Type

Project

Value (£k)

RD&D

Carbon Vision, an R&D fund (jointly with the EPSRC) for universities. Projects will include low carbon buildings, industrial processes and fuel cells

14,000

Portico Software, a Welsh project on energy analysis and monitoring tools to provide more effective energy management for process industries such as steel and glass.

 340

Participation in the Orkney-based European Marine Energy Centre to support companies involved in the development of future wave and tidal power technologies.

6,700

Usher, a demonstration project that links photovoltaic generation to hydrogen production, storage and utilisation to power fuel cells.

4,500

University of Glamorgan research project for producing hydrogen from starch to use in electricity production via fuel cells.

76

Commercialisation

Minority participation in a £16 million equity investment to support the development of a Southampton-based Bowman Power which produces advanced gas turbine CHP systems.

-

Funding for B9 Energy Biomass, a Northern Ireland-based company developing a biomass CHP plant.

600

Dissemination of new technology

Project run by IT Power that will implement a UK-wide roll-out of an accredited programme for photovoltaic installation training.

160

40. The Action Energy programme has an annual budget of around £20 million and promotes deployment of efficient and renewable technologies. Alongside the services it provides to businesses and public sector organisations, are two financial support initiatives:

  • the enhanced capital allowances scheme, in which companies can set the whole of their expenditure on designated energy efficiency equipment against taxable profits; and
  • the Carbon Trust's interest free loan scheme. The scheme helps SMEs invest in energy efficient plant or processes through loans of £5,000-50,000 repayable over four years. Total funding for the loan scheme is £10 million over three years.[43]

41. We asked several of our witnesses their views of the Trust but few were very forthcoming. Most felt that it was a good idea and that its strategy was sensible. None of the researchers who gave evidence to us had had much contact with it. It was the impression of Professor Mike Hulme from the Tyndall Centre that "It seems to have been rather slow to actually get off the ground".[44] We have greater concerns over the level of funding, which appears to be too low to make much of an impression. A second worry is that its formation introduces yet another funding body into energy research. We are pleased to see evidence of collaboration with other bodies but this will be little consolation for researchers or energy technology companies. We asked Brian Wilson what distinguished funding provided by the Carbon Trust from that from the DTI or the Research Councils. Very little, seems to be the answer. He said that it was independent and provided flexibility.[45] Independence is little use, however, if it means that its funding does not complement that of other public funding policy. It is not clear to us why the DTI cannot be similarly flexible if this is such a virtue. Mr Wilson insisted that the Trust's work was complementary to the DTI and the Research Councils. This misses the point. The issue is whether there was any good reason to set up the Carbon Trust in the first place if existing Government structures could have fulfilled its function. We do not understand why the functions of the Carbon Trust could not have been taken on by existing Government bodies. We suspect that its formation was primarily a political gesture to bolster the Government's green credentials.

42. We have heard from researchers frustrated with the work required to attract public funding, sometimes for very small amounts of money.[46] In the Energy White Paper, the Government said, in response to the PIU's recommendation of a review of low-carbon support schemes, that the programmes of the Carbon Trust were too new to be reviewed but that this would take place by the end of 2004.[47] It is too soon to judge the effectiveness of the Carbon Trust but we detect a lack of urgency. It must be an active partner of the UK Energy Research Centre in its provision of advice and information on funding.

Energy Saving Trust

43. The Energy Saving Trust (EST) was set up by the UK Government after the 1992 Rio Earth Summit as a non-profit company. In 2002-03, the EST's budget is £90 million, comprising mostly funding from the UK Government and the devolved administrations. The EST runs two schemes aimed at stimulating the market: the Community Energy programme, funded by DEFRA and managed jointly with the Carbon Trust, and the Photovoltaic Demonstration programme, funded by the DTI. Support through the Community Energy programme includes 50% of the cost of development studies, and up to 40% of capital cost of implementing a scheme. £20 million is available in 2002-03, and £30 million in 2003-04 for the implementation of community heating CHP schemes. The Photovoltaic Demonstration programme provides 50% of the cost of installation for small-scale applications (0.5kWp-5kWp) and between 40-65% of the cost of installation for larger scale applications (5kWp-100kWp). £20 million is available over three years. The EST also runs an innovation programme, providing up to £10,000 for feasibility studies and up to £90,000 for implementation of schemes that reduce CO2 emissions in housing.[48]

44. It has been suggested that the EST and the Carbon Trust should merge to reduce the number of funding bodies. Tom Delay told us that the organisations focused on different markets and where there was overlap they worked closely together. There are so many funding bodies that we feel that every effort should be made to reduce them. We commented in paragraph 41 that it was unclear what the Carbon Trust could achieve that central government could not. The same is true of the EST. We present proposals to simplify the public support system for new technologies in paragraph 68.


16   The forecasting figures only include funding for the Research Councils Sustainable Energy Programmes and EPSRC's SUPERGEN initiative (assuming £5 million a year). A breakdown of allocated Research Council expenditure can be found on Ev 76-77 Back

17   Ev 74, 76-77 Back

18   Q 24 Back

19   Predicted spend for 2002-03. Back

20   Qq 9-11 Back

21   Q 3 Back

22   Ev 157 Back

23   Q 28 Back

24   Ev 158 Back

25   Ev 162 Back

26   Q 156 Back

27   Ev 70-71 Back

28   Q 53 Back

29   Evidence presented by Professor Ian Diamond, Chief Executive, Economic and Social Research Council, on 22 January 2003, HC 277-i Back

30   Ev 165 Back

31   Ev 75 Back

32   Ev 164; DTI, Science Budget 2003-04 to 2005-06, December 2002, pp 25-26 Back

33   BBSRC, CCLRC. EPSRC, Medical Research Council and NERC. £6 million had already been allocated to the Research Councils following a speech by the Prime Minister on 6 March 2001, along with £2 million for the 2003-04 budget.  Back

34   Ev 162 Back

35   Ev 136 Back

36   Ev 166  Back

37   Ev 166  Back

38   Ev 136 Back

39   The Carbon Trust is funded by the Department for Environment, Food and Rural Affairs, The Scottish Executive, Invest Northern Ireland and the National Assembly for Wales, partly via funds voted by Parliament and partly from climate change levy receipts. Back

40   Ev 62 Back

41   Press release from the Carbon Trust "New business/academic partnership delivers £14 million for low carbon innovation", 11 November 2002. Back

42   The Carbon Trust, Low Carbon Technology Assessment 2002-Making Our Investment Count, January 2003 Back

43   Ev 62 Back

44   Q 119 Back

45   Q 575 Back

46   Q 157 Back

47   DTI, Our energy future-creating a low carbon future, Cm 5761, February 2003, para 7.16 Back

48   Unpublished memorandum from Energy Savings Trust Back


 
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