Select Committee on Science and Technology Fourth Report


1. We agree with the value of a target for renewable electricity generation but we must not lose sight of the principal objective, which is to introduce non-polluting, sustainable forms of energy on a large scale (paragraph 15).

2. 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 (paragraph 22).

3. 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 (paragraph 23).

4. 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 (paragraph 26).

5. 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 (paragraph 28).

6. 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 (paragraph 29).

7. 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 (paragraph 32).

8. 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 (paragraph 34).

9. 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 (paragraph 35).

10. 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 (paragraph 36).

11. 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 (paragraph 37).

12. 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 (paragraph 41).

13. 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 (paragraph 42).

14. The DTI seems to be looking for reasons not to invest in RD&D. The Government must be doing more than filling in the gaps left by the private sector and drive forward important technologies (paragraph 47).

15. The Government has expressed its concern that the UK does not derive sufficient commercial benefit from the excellence of its science base. The DTI's inability to fund properly energy RD&D projects is a clear case of its policies betraying the fine words of its Ministers (paragraph 48).

16. The UK is spending much less than its competitors on energy RD&D. The PIU money and the Research Councils' new Sustainable Energy Programme provide a welcome and long-overdue boost to energy RD&D in the UK. We are pleased to see the Chief Scientific Adviser recommending further increases in the future and strongly urge the Government to make a commitment to this end over a defined period (paragraph 57).

17. We support the idea of a single entry portal for those seeking support for RD&D in fuel cells but believe there is merit in extending the concept to embrace all new energy technologies (paragraph 60).

18. The coordination of public funding bodies and research policy in the field of energy RD&D has been poor. We shall be monitoring the progress of Government and the Research Councils in improving coordination with great interest. The establishment of a UK Energy Research Centre is a step forward but we have little confidence that it has the remit to solve the problem (paragraph 61).

19. It is reasonable to ask how the Government can have an energy RD&D policy that does not embrace a vision of which technologies should be backed (paragraph 65).

20. The Government has the option of creating a framework of incentives, such as tax credits for RD&D, which will devolve the responsibility for picking winners (and inevitably some losers) to industry; but it also has to make choices and take risks too, especially in its support for RD&D, where it cannot avoid setting some priorities. The Government has an important role in identifying those of Britain's strengths that are consistent with the industrial environment and the market. It should provide a clear and unambiguous focus. (Paragraph 65).

21. The Government seems nervous of being accused of picking winners. As a result tough decisions have been avoided. We should be selecting all of those research projects for funding which we have the capacity to execute and which have a reasonable chance of delivering solutions and significant benefit for UK society (paragraph 67).

22. Britain's energy structures are too complicated. As a result, efforts to stimulate RD&D are fragmented and directionless. No public body or Minister is taking responsibility for driving forward technological innovation and deployment (paragraph 68).

23. Much bolder action is needed to make non-carbon technologies play a significant contribution to the UK's energy mix. For this reason, we recommend the creation of a Renewable Energy Authority. It should emulate the function of UKAEA in driving the nuclear industry after the World War II. The Authority would subsume the UKERC and the Carbon Trust, the DTI's energy programme and the energy policy unit. It would:

1. conduct applied research and development in selected technologies;

2. conduct demonstration programmes, usually but exclusively in collaboration with industry;

3. provide a fast-track planning service to non-carbon energy applications; and

4. supervise infrastructural modifications to the grid and distribution netwoks to facilitate the connection of distributed generation (paragraph 68).

24. We are puzzled by the Government's assertion that privatisation and liberalisation has not led directly to a decline in energy RD&D—it has led to a dramatic decline, by far the largest decline in all OECD countries. The forces that drove innovation in the past are at least as strong as they ever were and it seems hard to believe that the Chief Scientific Adviser's energy group and several of our witnesses are so ill-informed. We are concerned that the Government is poorly placed to stimulate energy RD&D investment in industry if it is in a state of denial over its causes (paragraph 71).

25. The fall in private sector RD&D expenditure has been higher than would have been expected from simply improving its focus. We conclude that there has been a real and damaging reduction in the amount of private energy RD&D spend since privatisation and liberalisation of the market (paragraph 72).

26. We recommend that the Government establish demonstration projects to establish how distributed sources of electricity generation can be incorporated into local networks, in particular the development of metering systems to allow domestic generation to export power to the network (paragraph 79).

27. United Utilities rightly recognises the value of non-technical research into commercial and regulatory initiatives for distribution networks. We recommend that the Economic and Social Research Council make provision for such studies (paragraph 80).

28. We appreciate the commercial constraints on companies and recommend that the Government and the regulator work to create a better environment for RD&D (paragraph 82).

29. It is disappointing that the UK's experience in the North Sea oil and gas industry is not being employed to develop new marine energy technologies. Clearly the incentives for oil and gas companies are insufficient, a situation which the Government should remedy (paragraph 85).

30. We are pleased that the UK Government supports an EU target of 3% of GDP invested in RD&D but given the strong link between investment and productivity, we are disappointed that it has not adopted this "aspiration" for the UK. We recommend that the Government does so (paragraph 87).

31. The Government should recognise that even companies not regularly making a profit need to think long term and invest in RD&D and should consider introducing mechanisms that provide that incentive (paragraph 91).

32. The existence and nature of R&D tax credits are not well understood by companies—particularly the smaller ones—and the rules of the R&D tax credit seem to be too complicated or inadequately explained. The Government should remedy these problems, since if energy RD&D is to be resuscitated in the UK in the field of low carbon technologies, a clear and significant tax incentive is much-needed (paragraph 92).

33. The Government has failed to encourage an environment that encourages technical innovation, to provide sufficient direct investments and to make any significant response to the scale of market failure (paragraph 93).

34. The proposed UK Energy Research Centre and Network should play a crucial role in bringing forward the next generation of skilled people for the energy sector. We recommend that it adopt this as a key part of its mission (paragraph 98).

35. We recommend that the Government recognises low and non-carbon energy as a shortage area, recognising its importance in combatting climate change (paragraph 99).

36. It is hard to imagine the nuclear skills situation improving, since the Energy White Paper has all but ruled out new nuclear build. Even with no new nuclear build, nuclear engineers will be needed for many years to come to deal with decommissioning and storage but few graduates will be inspired to join an industry in its death throes (paragraph 105).

37. We argued in our report on Science Education from 14 to 19 that science education needed to be made more relevant. There are few better examples of a subject that could enthuse our schoolchildren than non-carbon energy, which has the power to tackle the potentially catastrophic effects of climate change (paragraph 107).

38. We consider CO2 sequestration to be a necessary part of the transition to a non-carbon fuel economy. Nevertheless, it is important that its use should not act as a disincentive to the elimination of carbon-based fuels (paragraph 110).

39. We commend the Government's positive approach to CO2 sequestration. There is a real opportunity in the North Sea with enhanced oil recovery as the initial economic driver. Policy mechanisms are needed to ensure that it happens and that there is an agreement on the legal and environmental issues of CO2 storage (paragraph 111).

40. We believe that the UK should play to its strengths and exploit its natural resources. As such, the continued use of coal has a role in the UK's energy mix provided that CO2 emissions are substantially reduced. We therefore support investment in clean coal technologies, for export as well as UK use, in tandem with CO2 sequestration (paragraph 114).

41. The Carbon Trust's RD&D budget is not very large and we dispute the Government's assertion that it has the funding to make a significant impact on energy efficiency RD&D (paragraph 119).

42. The housing market is driven by Government regulations and it is our view that these have not been tough enough in the past (paragraph 122).

43. We welcome the Government's pledge to make major revisions of its building regulations and recommend that these are demanding, recognising that these can be a powerful stimulus to innovation by manufacturers (paragraph 122).

44. We await the revised building regulations in the hope they will provide the market pull for innovative energy-efficient products. We hope they are able to compensate for the lack of technology push generated by the feeble level of public RD&D funding in this area (paragraph 124).

45. We find it hard to reconcile the Government's apparent lack of interest in a relatively mature technology with the enthusiasm of the International Energy Agency. We recommend that the Government follow up the IEA's report with its own assessment of the role that hydro can play in the UK's energy supply (paragraph 125).

46. We recommend that the Government commission a cost-benefit assessment of different solar technologies (paragraph 133).

47. We are pleased to see that wave and tidal energy has received greater governmental attention since our predecessors' report. We hope that the recent increases in funding represent the first stage in building capacity, leading to investment commensurate with the potential of wave and tidal energy. We can look forward in the near future to investment commensurate with wave and tidal energy's potential impact on the UK's energy supply (paragraph 135).

48. Wave and tidal energy has enormous potential and can deliver a clean and predictable energy supply. We recommend that the UK should make a major investment in this niche market and aim to generate at least 5% of its electricity using wave and tidal technologies by 2020 (paragraph 138).

49. We welcome the attention being given to hydrogen RD&D by the Government. There is a UK big opportunity to take the lead here in a key area of energy research (paragraph 154).

50. We are struck by the particularly high number of public funding bodies active in bioenergy. The Government should simplify its support schemes in this area (paragraph 158).

51. We support policies to encourage less wastage and more reuse and recycling but it is inevitable that there is waste and Government policy should place no obstacles in the way of technologies that can harness waste which cannot be recycled to generate power (paragraph 162).

52. For the Government to keep the nuclear option open, participation in the Generation IV Forum is essential to give the UK a stake in the direction of future technologies. We recommend that provision is made for British companies to participate actively (paragraph 167).

53. We applaud BNFL's investment in pebble bed reactors and the long-term view it is taking of reactor technologies in an uncertain climate. We will watch the development of the technology with interest (paragraph 169).

54. Public opinion is a major obstacle to new nuclear build but this should not preclude the funding of research which could go a long way to addressing public concerns into the waste and safety of existing systems. We believe that the Government should not underestimate the public's pragmatism and should not be afraid of people's ability to balance its legitimate concerns with the great dangers posed by climate change (paragraph 170).

55. We recommend that the Government monitor technological developments in transmutation and keep it under review as part of its radioactive waste management strategy (paragraph 175).

56. The Government's announcement that new nuclear build would require another public consultation and another White Paper is perplexing. The Government says with great pride that this is "the most significant consultation on energy policy ever carried out in the UK". There would have been no shortage of views expressed on the nuclear issue and unless the situation changes substantially, which seems unlikely, a further consultation would simply involve the same people repeating the same arguments (paragraph 178).

57. The nuclear industry faces a continuing decline unless positive steps are made now. The only way to keep the nuclear option open is for the Government to indicate that it would in have no objection in principle to granting permission for new reactors to be built, even on a modest scale, to send a clear message that the technology has a future. It should benefit from its status as a carbon-free source of energy (paragraph 179).

58. The next generation of fission reactors is likely to be the last. Nuclear fission power should be used to keep the UK's CO2 emissions as low as possible until fusion power and other non-carbon technologies are commercially available (paragraph 180).

59. We conclude that the progress in fusion research has been substantial in recent years. Together with the huge impact that fusion could have in reducing carbon emissions, we consider it be foolish not to at least maintain the current level of resources invested in UK fusion research (paragraph 188).

60. From 2003, EURATOM funding for the UK's national fusion programme will decline from 25% to 20%. We would like the Government's reassurance that it will compensate UKAEA for this loss in income (paragraph 190).

61. The UK has been fortunate to host JET but it must not waste this good fortune. We recommend that the Government invests resources to maintain the UK's domestic fusion programme with a view to building a major facility in the future. We believe that fusion power will become a reality and the UK must benefit from the fruition of this technology (paragraph 191).

62. The UK can only play a significant role in international programmes if it is done from a strong national base. Participation in multinational ventures must be used to complement a strong domestic RD&D base (paragraph 197).

63. At present the transmission companies and network operators have little obligation or incentive to invest in bringing forward and installing the technology needed to make large-scale renewable generation a reality. The lack of these incentives discourages industry to tackle the problems remaining with many exciting new energy technologies. We are pleased that the Government appreciates the need to revise the regulatory framework. In selecting the methods of energy generation for the future, account will need to be taken of the potential changes needed in the distribution network infrastructure (paragraph 202).

64. If the UK is to stand a chance of reaching its renewables target, it needs to stimulate development of less mature technologies now. The Renewables Obligation fails to provide this incentive. It should be reformed or replaced with a mechanism that will (paragraph 208).

65. We recommend that the Government introduce a tax incentive that distinguishes between: fossil fuel with carbon capture; carbon neutral technologies; nuclear fission and mature non-carbon technologies; maturing non-carbon technologies 10 to 15 years into the market; non-carbon technologies 5-10 years into market; and nascent renewable technologies in their first 5 years of commercial use (paragraph 209).

66. Ofgem should establish a more supportive framework for innovation and RD&D toward the new "climate friendly" technologies. Ofgem must be more willing to allow RD&D against companies' profits when looking at prices (paragraph 213).

67. While we agree with many of its sentiments, we remain disappointed with the White Paper, largely because that is what it is, a document full of sentiments with few practical policy proposals that give us any confidence that its targets (and aspirations) can be met. It has ducked a central issue—whether to provide a future for the nuclear power industry—and failed to give a lead. On the specific issue of RD&D, it makes all the right noises but fails to pledge any further investment nor provide any further direct incentives to industry to do so. RD&D investment in the UK is set to remain at the bottom of the international league table (paragraph 215).

68. There is no prospect of achieving the target of 10% renewable generation by 2010 or the aspiration of 20% by 2020. There is no chance of meeting the Government's targets for CO2 reductions if current policies and market conditions remain in place (paragraph 216).

69. Given the importance of reducing UK carbon emissions, we propose a Renewable Energy Act at the earliest opportunity. The Act should include the following provisions:

1. The establishment of a Renewable Energy Authority (REA) with UK-wide responsibility for co-ordinating and promoting RD&D in renewable energy and disbursement of funds for that purpose.

2. The replacement of the Climate Change Levy and the Renewables Obligation with a unified Carbon and Renewable Energy Tax to be levied on the electricity generators, the yield from which should be hypothecated to the REA (paragraph 217).

70. Despite recent increases in Government energy RD&D funding, investment is pitiful in absolute terms and in comparison with out international competitors. We believe the UK should be investing more, on economic grounds and to ensure that the technology is suited to Britain's national needs and takes advantage of our strengths. By repeating the not picking winners mantra, the Government has failed to take a lead. We consider the following areas to be our strengths, reflecting the UK's natural sources and research strengths :

1. Offshore technologies—wind, wave and tidal

2. Nuclear fusion

3. Nuclear fission (paragraph 218).

71. Offshore technologies should be funded at least on a par with fusion (currently £23.5 million a year) and fission should be funded at £10 million a year to fund participation in the Generation IV Forum and boost the academic skills base (paragraph 218).

72. Investments in RD&D must be complemented by policies to stimulate the market. Grants for deployment and tax incentives must be employed to greater extent, commensurate with the threat from global climate change (paragraph 219).

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