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
Technology Transfer and Export Promotion
Carbon Trust R&D aspect of the LCIP
Energy Saving Trust Energy Efficiency and FP Research
Public funding bodies
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.
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".
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)
Combined heat and power
Wave and tidal
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).
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).
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
Directly and indirectly relevant research topics
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.
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%.
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.
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".
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".
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.
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".
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
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.
The Centre expects to have spent £2 million on research of
direct relevance to low or zero-carbon energy research between
2000 and 2003. 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
Expenditure 2002-2003 (£k)
Technology and the economyenergy system in an integrated assessment of climate change
Technology policy and technical change, a dynamic global and UK approach
The transition to a decarbonised UK: research with a direct relevance to low or zero-carbon energy research
Behavioural response and lifestyle change in moving to low carbon transport futures
Carbon sequestration: a pilot stage multi-criteria evaluation of biological and physiochemical approaches
The hydrogen energy economy: its long-term role in greenhouse gas reduction
Integrating renewables and CHP into the UK electricity system
Micro-gridsdistributed on-site generation
Fuel cells: Providing heat and power in the urban environment
Research on energy efficient and low-emission housing
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. 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
33. Of the six grant-awarding Research Councils, threeEPSRC,
ESRC and NERCmade a successful joint bid to the 2002 Spending
Review for a Cross-cutting programme on sustainable energy. The
programme aims to:
- create an international lead in basic and strategic research
on sustainable energy and its impacts;
- support the development of economically viable and publicly
acceptable renewable energy sources and technologies to enable
the UK to achieve 10% of electricity generation from renewable
sources by 2010;
- identify and support the development of new products and processes;
- enhance our understanding of the implications of the liberalisation
and globalisation of energy markets, technological developments,
new energy sources and policy and regulatory frameworks.
34. An extra £26 million will be made available over two
years (2004-05 and 2005-06).
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.
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).
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
- 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.
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
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.
We understand that UKERC will provide "a focal point for
data and information on UK energy research funding".
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
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).
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.
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. 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
- 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
Carbon Vision, an R&D fund (jointly with the EPSRC) for universities. Projects will include low carbon buildings, industrial processes and fuel cells
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.
Participation in the Orkney-based European Marine Energy Centre to support companies involved in the development of future wave and tidal power technologies.
Usher, a demonstration project that links photovoltaic generation to hydrogen production, storage and utilisation to power fuel cells.
University of Glamorgan research project for producing hydrogen from starch to use in electricity production via fuel cells.
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.
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.
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.
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".
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.
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
42. We have heard from researchers frustrated with the work required
to attract public funding, sometimes for very small amounts of
money. 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.
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.
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.
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
Ev 74, 76-77 Back
Q 24 Back
Predicted spend for 2002-03. Back
Qq 9-11 Back
Q 3 Back
Ev 157 Back
Q 28 Back
Ev 158 Back
Ev 162 Back
Q 156 Back
Ev 70-71 Back
Q 53 Back
Evidence presented by Professor Ian Diamond, Chief Executive,
Economic and Social Research Council, on 22 January 2003, HC 277-i Back
Ev 165 Back
Ev 75 Back
Ev 164; DTI, Science Budget 2003-04 to 2005-06, December
2002, pp 25-26 Back
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
Ev 162 Back
Ev 136 Back
Ev 166 Back
Ev 166 Back
Ev 136 Back
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
Ev 62 Back
Press release from the Carbon Trust "New business/academic
partnership delivers £14 million for low carbon innovation",
11 November 2002. Back
The Carbon Trust, Low Carbon Technology Assessment 2002-Making
Our Investment Count, January 2003 Back
Ev 62 Back
Q 119 Back
Q 575 Back
Q 157 Back
DTI, Our energy future-creating a low carbon future, Cm
5761, February 2003, para 7.16 Back
Unpublished memorandum from Energy Savings Trust Back