Select Committee on Science and Technology Appendices to the Minutes of Evidence


APPENDIX 27

Memorandum submitted by the Engineering & Physical Sciences Research Council

BACKGROUND TO EPSRC

  1.  EPSRC has specific responsibilities to support research and training in the core physical sciences (mathematics, physics & chemistry), underpinning technologies (eg materials science and information & communications technologies) and all aspects of engineering.

  2.  EPSRC awards research grants through two main delivery modes—responsive and managed. Through the responsive mode EPSRC invests in the highest quality research projects, as judged by peer review, within subject areas of the researchers choosing. In managed mode, researchers submit their research ideas in response to a research remit specified by EPSRC; conditions may be applied to applications, for example, a requirement that proposals involve an industrial collaborator.

  3.  EPSRC has a large portfolio of research relevant to the power sector with a total value in excess of £24 million. Research activities include technologies associated with the extraction of energy resources (principally coal, oil and gas), energy production (utilising carbon-based, nuclear, and renewable sources), and electricity transmission and distribution. Renewable sources of power include wave, wind, biomass, solar PV, and fuel cells utilising renewable hydrogen sources. The transmission and distribution of electricity encompasses research relating to power systems management, protection and control systems, and includes issues relating to the integration of renewable sources of generation into the energy grid. 60% of EPSRC's current energy research portfolio is conducted in collaboration with industry, involving over 130 companies, with the value of their cash and in-kind contributions totalling almost £11 million.

LEVEL OF EXPENDITURE ON R&D IN NON-CARBON ENERGY TECHNOLOGIES

  4.  EPSRC provides a major investment in low and non—carbon energy technology R&D, at a level of £36 million expenditure in the period 1998-99 to 2002-03. A full breakdown of EPSRC's investment classified by technology area is provided in Table 1. This data provides details of current and past investment in the subject areas covered by the inquiry. The nature of research is such that it is likely that EPSRC funded research being undertaken in other areas may also give rise to useful results in this field. Full details of all of the projects identified by EPSRC as relevant to the inquiry can be provided if required.

  5.  The investment by EPSRC in these areas reflects, to some extent, current and past research priorities in energy research. EPSRC has supported a series of managed programmes in energy—relevant topics including combustion, fuel cells, photo voltaics, energy storage, renewable and new energy technologies, and energy supply research for the 21st century. The operation of responsive mode and managed programmes in parallel means that while the managed programmes have a significant influence on the overall distribution of research funding, the ongoing award of research grants in responsive mode allows for a broader range of innovative research ideas.

  6.  EPSRC is continuing to make strategic investments in research addressing both the supply and demand side of the energy economy. It has recently established a major research programme on Sustainable Power Generation and Supply (SUPERGEN). This Programme will invest £25 million of EPSRC funds over five years, in addition to the responsive mode, to establish research consortia tackling key challenges in improving the sustainability of the power supply industry. The expectation is that the total value of the Programme over the five-year period, inclusive of third party contributions, will be in excess of £40 million. EPSRC is pleased to be managing funds on behalf of the OST to expand the activities of our SUPERGEN Programme into the social, environmental and life sciences to address these challenges. This has enabled SUPERGEN to become a collaborative activity across the research councils including BBSRC, ESRC and NERC. Multidisciplinary research that simultaneously addresses technical solutions and market and public acceptability issues is ideally placed to inform the development of effective regulatory strategies to enable the transition towards a low carbon economy.

  7.  EPSRC is also planning to work in partnership with the Carbon Trust on a major joint R&D programme on Low Carbon Innovation. This Programme will support research and development to underpin the development of tomorrow's low carbon technologies. This initiative draws on the market insights available to the Carbon Trust through its other activities, particularly the Low Carbon Innovation Programme (LCIP), and the Carbon Trust will take the lead in defining the priority areas for support. Each partner has earmarked an initial sum of £7 million over three years with the aim to lever in funds from other sources. The Natural Environment Research Council and the Economic and Social Research Council have expressed interest in participation. The DTI, DEFRA, DfT and OST are being kept aware of this initiative, which is intended to be complementary to any National Energy R&D Centre which the Government decides should be established—see below.

  8.  Given the planned investments in energy research through managed programmes and responsive mode, EPSRC is of the view that energy research receives attention and support at an appropriate level given the other demands on EPSRC's budget. There is considerable scope for increased investment in the area and EPSRC would welcome the opportunity to work more closely with other Research Councils, particularly ESRC and NERC on collaborative research programmes. This is particularly important for the objective of conducting R&D on technological innovation in parallel with research on energy markets, public perception and public acceptability issues which we believe is crucial in areas such as nuclear fission.

  9.  EPSRC has played a key part in shaping the joint Research Councils' proposal under SR2002 for a special multidisciplinary cross-Council programme; "Towards a Sustainable Energy Economy". This proposes a broad-based programme of research including carbon management, nuclear energy, renewable energy, energy markets and public acceptability, equity and risk. This proposal allows an effective way forward to develop genuinely multidisciplinary research addressing the key issues in the energy R&D agenda. EPSRC also endorses the proposal to establish a National Energy Research Centre.

PRIORITIES FOR R&D INVESTMENT

  10.  Climate Change is potentially the most serious environmental challenge facing mankind and EPSRC supports a constructive, balanced approach to achieve a more sustainable future. Material resource efficiency and energy efficiency leading to more effective exploitation of natural resources makes good business sense, irrespective of the potential threats of climate change to business and the UK as a whole. There is huge potential to build on the UK's internationally recognised expertise in climate change to enable the UK to take the lead in the development of the technology, processes and policies required to respond to a changing climate. If this can be achieved, UK business should be well placed to exploit what is potentially a massive market opportunity to achieve a low carbon future. EPSRC believes that it invests in energy R&D at a level commensurate with its importance in addressing the issue of resource efficiency and climate change.

  11.  EPSRC also recognises the importance of conducting technology-based research in the context of a thorough understanding of markets, consumer demand and public acceptability. This is a major feature of the cross-Research Council SR2002 proposal. It is also reflected in the approach adopted by the joint NERC/ EPSRC/ ESRC funded Tyndall Centre for Climate Change, established last year to support research that addresses both climate change adaptation and mitigation.

  12.  EPSRC recognises the huge potential for energy efficiency improvements to lead to a reduction in CO2 emissions. The proposed joint programme with the Carbon Trust will tackle carbon reduction issues through R&D on low carbon technology innovation. Innovation in the development of new or improved products, for example in areas such as electric motors and drive systems, has the potential to produce market-led efficiency savings which can be market driven through, for example, the Carbon Trust's LCIP programme. In many areas, for example combined heat and power, technology development has to be followed by effective demonstration programmes to increase the potential for market penetration; EPSRC is working closely with DTI to ensure complementarity between our respective RD&D activities in such areas.

  13.  A revised target of 20%. of UK electricity generation from renewable sources by 2020,while representing a challenging target, is nonetheless feasible. However, to achieve this objective, it is essential that firstly RD&D activities are supported immediately to enable the innovation required to deliver renewable power systems to the market; and secondly that future market arrangements are favourable to encourage investment in renewable generation plant. EPSRC strongly favours a broad-based approach to renewables RD&D as it is still unclear which renewable technologies will present the best options to expand generation capacity in the medium term (2010-20). EPSRC priorities for renewables R&D reflect this perspective and strategic investments will be made in the next 6-18 months in four key technology areas: biomass, hydrogen, wave & tidal and photo voltaics. The intermittency of renewable generation will present major challenges for supply management and R&D in distributed generation, network management strategies and technology for energy storage will also receive due attention by EPSRC.

  14.  Research on fission power, and in particular waste management and novel reactor technology, has been identified in a community-wide consultation exercise as one of a number of potential priority areas for our SUPERGEN programme. The importance of research on both the economics and public acceptability of the nuclear option and its potential impact on future energy markets has also been highlighted.

  15.  EPSRC also continues to invest in research and training relevant to the oil and gas sector and was a key sponsor of the recently closed Oil & Gas Extraction LINK Programme. EPSRC also invests in R&D on clean coal, efficient combustion and gasification technology. EPSRC recognises the potential of carbon sequestration combined with fossil fuel plant as a potential zero-net carbon energy source; this option must be explored as one of a number of priorities within a broad-based R&D programme.

SKILLS BASE AND STATE OF R&D IN TECHNOLOGY AREAS

  16.  The UK has an outstanding track record of academic and commercial innovation in power engineering and this resource must be maintained. The power sector industries have two key requirements of EPSRC; the first is to support effective, multidisciplinary energy RD&D to enable the operation of an energy market that encourages innovation and diversity of supply. The second is to ensure that the key assets required by both industry and the research base—skilled people—are available of the right calibre and in sufficient numbers. EPSRC is a significant investor in doctoral and masters level training in low/non-carbon energy R&D. Table 2 provides an estimate of the number of new PhD studentships supported.

  17.  The shortage of trained personnel has been identified by the energy industry as a key area of concern. EPSRC works with sister agencies on this issue and, for example, has been engaged with the DTI study on skills requirements for the nuclear industry. EPSRC has two main objectives in establishing research consortia in this area. The first objective is to develop critical mass in the research community and to provide a focus for EPSRC research activities. The second objective is to enable the establishment of the virtual national Centres of Excellence that can compete effectively for funding from industry and the EU and providing a focus for postgraduate training.

GOVERNMENT ENERGY POLICY AND COORDINATION BETWEEN FUNDING AGENCIES

  18.  It is essential that future energy policy adopts a long-term view if the challenge of future CO2 emission targets is to be attained. Research, development, demonstration and technology transfer are all key to enable the implementation of innovation in the energy supply market. EPSRC acknowledges the need for funding agencies to work in effective partnerships to ensure that all aspects of the innovation chain can work effectively in the energy marketplace. In particular, EPSRC recognises the need for our research programmes to be conducted in consultation with both DTI and OFGEM to ensure complementarity in RD&D activities, and that research outputs can be fed into the development of regulatory strategy.

  19.  It is clear that, in the short and medium term at least (to 2020 or 2030), low or zero- CO2 emission stable bulk generation capacity will be required in order to maintain security of supply. The only likely options for this capacity are fission plant or fossil fuel plant (probably natural gas-fired) combined with carbon sequestration. EPSRC agrees with the consensus view in the industry that it is unlikely that renewables coupled with energy storage could on their own ensure the necessary stability or security of supply by 2020/30, although this option may form an increasingly important element of energy supply. The longer-term (2030- 2050) reliance on oil & gas as the primary energy source for electricity generation has high risks given the likelihood of diminishing supplies.

  20.  There is a risk that the position adopted by some NGOs in opposition to energy from waste may have a negative impact on other incinerator-based technologies such as biomass or bio-fuel generation. It also highlights the importance of wider societal issues concerning the development of renewable generation capacity and the importance of addressing public acceptability and engaging planning authorities in renewables RD&D programmes.

  21.  In the longer term (2040-2050) fusion generation has the potential to fill the low/non-carbon energy generation requirement that the UK's existing fission capacity currently fills. EPSRC is working closely with UKAEA Fusion to develop the UK Fusion Research Programme and to ensure better engagement of the wider academic community in fusion research. The UK welcomes the impending agreement on the development of ITER, the next generation fusion experiment, and recognises the potential of the "fast track" approach to achieve fusion power generation in the medium/longer term.

  22.  It is particularly important that R&D-based innovation targeted at addressing the demand aspects of the energy economy is conducted in the context of a thorough understanding of markets, consumer demand and public acceptability issues. R&D has the potential to inform and ideally to lead the development of regulatory strategies in this area. Effective regulation must operate in concert with incentives for capital investment or grants if proper account is to be made of social equity and inclusion issues. This is of particular importance concerning energy efficiency improvements to the existing housing stock.

  23.  EPSRC supports the concept of a National Energy Research Centre within the context of a balanced portfolio of Government support for energy RD&D. Such a Centre could act as the hub of a national energy research network and bring together all Government-funded energy RD&D in a "network of networks". In order to achieve this aim, EPSRC believes that the national centre would have to host its own major research programme on aspects of the energy research agenda to ensure its international status as a Centre for RD&D. In addition to, or as part of, its research activities, the Centre should also host expertise on energy markets, public perception/acceptability issues and Government policy/regulation, and disseminate information on these issues to the wider research community through the national network. The Centre itself could be virtual, based on a "hub and spoke" model with the hub hosting the central coordinating role of the Centre. The Centre will require leadership from an individual that can command respect both internationally and nationally across Government, industry and academe. EPSRC believes that it should be possible to establish the Centre as the hub of a national energy RD&D network and in its coordinating role for Government energy RD&D by May 2004.

INTERNATIONAL COLLABORATION & COMPARISON WITH INTERNATIONAL COMPETITORS

  24.  EPSRC recognises through discussion with our industrial partners that energy R&D is increasingly international, reflecting the multi-national nature of key industrial players. It is, therefore, essential that UK researchers continue to play an active role in the EU Framework activities on energy RD&D. The proposal in the Energy R&D Review to establish a National Energy Research Centre could provide an ideal focus for UK researchers to network with the best research teams from overseas. While it is essential that research is supported that addresses the specific challenges faced by the UK in the context of our energy market and existing generation infrastructure, research that is in itself not internationally competitive is a poor investment.

  25.  EPSRC conducts regular international reviews of our research programmes and the conclusions of those reviews, in terms of the international standing of EPSRC- funded research, is generally very favourable. The outputs from annual internal evaluation procedures also conclude that EPSRC-funded research across a wide spectrum of science, technology and engineering is world leading. However, it is also clear that in R&D investment terms the UK is falling behind our competitors in some technology areas although this reflects, to an extent at least, the multinational nature of some business sectors, for example the automotive industry. EPSRC believes that the UK is well placed to exploit low carbon innovation for the major benefit of UK business.

INFLUENCE OF PRIVATISATION AND MARKETS ON ENERGY R&D

  26.  The development of a framework for the electricity supply industry in which innovation and diversity in generation capacity is to be encouraged. EPSRC believes that a diverse energy supply scenario should be more stable than dependence on one or two primary energy sources. There is a need for future market arrangements to recognise the technical challenges of a supply grid supported in part by small scale, embedded generation capacity (eg domestic CHP) and a high level (20-25%) of variable renewable generation capacity. EPSRC would agree with the consensus view in the industry that energy supply in the short and medium term (perhaps to 2050) will continue to depend largely on stable, bulk generation capacity. As a result, in order to meet the requirements for large-scale reductions in CO2, it is essential that net low or zero-carbon emission bulk generation capacity is available in the energy market, at least in the medium term. The recent financial problems suffered by British Energy PLC have provided stark evidence of the need for regulation to take into account the overall driver of CO2 emission targets as part of the overall market management strategy. EPSRC continues to invest in R&D focused on efficiency improvements in existing bulk-generation technology as a means to provide significant carbon savings in the short/medium term.

  27.  EPSRC is actively encouraging R&D to address the technical issues concerning the control and management of distribution networks based on high percentages of distributed and variable generation capacity. The future structures of energy markets are central to achieve the proposed redefinition of DTI's energy policy objective and the overall objective of a more sustainable energy system. There are difficulties inherent in establishing a regulatory structure that does not disadvantage the penetration of small generators into the market that will be essential to achieve a diverse energy mix; it is essential that energy-trading arrangements do not inhibit the innovation or capital investment required in the industry to provide low carbon energy generation capacity.

  28.  There are signs that the current structure of the privatised market place may be acting to discourage commercial R&D and the market regime should, at the very least, not discourage electricity generation and supply companies to innovate. The ongoing rationalisation and closure of industrial R&D facilities is symptomatic of the difficulties faced by industry in the current market. The recent changes to R&D tax incentives are welcome and have potential to make a significant impact on innovation in this sector. Many energy technologies have progressed to the stage where demonstration of their viability is a next key step in the innovation process. EPSRC supports the activities of the DTI energy programmes on technology development and demonstration and acknowledges the importance of the Research Councils, DTI, and other funding bodies working closely to ensure synergy and complementarity of our respective activities.

30 September 2002

TABLE 1: EPSRC GRANT EXPENDITURE ON NON-CARBON ENERGY RELATED RESEARCH (£k)


Technology area
1998-99
1999-2000
2000-01
2001-02
2002-03
Total

Biofuel
0
0
22
52
142
216
Biomass
359
357
289
477
515
1,997
Combined Heat & Power
36
63
77
267
372
815
CO2 sequestration
0
0
23
42
67
132
Fuel cells
1,016
703
899
1,145
1,487
5250
Geothermal
0
0
0
7
4
11
Hydrogen
136
59
83
319
536
1,133
Photovoltaic
3,002
2,760
2,992
3,536
2,685
14,975
Nuclear
81
62
128
325
293
889
Wave & tidal
0
0
185
491
452
1,128
Wind
216
167
261
330
481
1,455
Waste
10
40
40
96
125
311
Conventional
1,317
1,260
1,428
2,058
2,211
8,274
Total
6,173
5,471
6,427
9,145
9,370
36,586

Notes:

(1)Predicted spend

(2)The data presented are for expenditure on grants in the financial years shown. The data vary from those provided in the evidence presented by EPSRC to the Select Committee Inquiry on Wave and Tidal Energy in 2001. The 2001 data were based on the total value of the then portfolio of current grants.


TABLE 2: EPSRC PHD STUDENTSHIPS, NEW STARTS BY FINANCIAL YEAR


Technology area
1998-99
1999-2000
2000-01
2001-02
Total

Biofuel
0
0
1
0
1
Biomass
0
3
3
2
8
Combined Heat and
Power
0
1
2
1
4
CO2 sequestration
0
1
0
0
1
Fuel cells
5
6
12
5
28
Geothermal
1
0
0
0
1
Hydrogen
0
0
2
0
2
Photovoltaic
6
14
23
11
54
Nuclear
0
0
0
0
0
Wave & tidal
0
1
0
0
1
Wind
0
1
2
0
3
Waste
0
1
0
0
1
Conventional
12
12
1
2
27
Total
24
40
46
21
131





 
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