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


APPENDIX 37

Memorandum submitted by the Department of Trade and Industry, the Office of Science and Technology and the Department of Environment, Food and Rural Affairs

1.  INTRODUCTION

  1.1  The Department welcomes this inquiry. The Committee's views will provide a valuable contribution to the current debate on future energy policy. This memorandum has been prepared by the DTI's Energy Group in consultation with the Department of Environment, Food and Rural Affairs (DEFRA), the Department for Transport (DfT), the Office of Science and Technology (OST) and the Forestry Commission and it incorporates their contributions. We are aware of the separate memoranda submitted by the Research Councils and the Carbon Trust and have endeavoured to provide our information on a comparable basis. This memorandum is structured in accordance with the inquiry's terms of reference.

  1.2  We have assumed that the Committee will wish to take a broad view of non-carbon fuels. This memorandum seeks to follow as far as possible the approach adopted by the Energy Research Review Group (ERRG) and comments on the technologies referred to annex C of the ERRG report viz. Those supporting clean fossil fuel power generation, renewable fuel power generation, nuclear power, carbon sequestration, energy efficiency and the crosscutting technologies. We understand that the Research Councils intend to take a similar approach in their memorandum. In addition, we include direct generation of heat from biomass.

2.  ROLES AND RESPONSIBILITIES

  2.1  The Government's key energy policy objectives are to ensure secure, diverse and sustainable supplies of energy at competitive prices, and efficiency in energy use. In delivering these policy objectives, the need to develop those sustainable technologies which will contribute to achieving increasingly rigorous and challenging environmental emissions targets (particularly in relation to combating climate change) needs to be recognised, as does the finite nature of fossil fuel supplies.

  2.2  The Department of Trade and Industry's Energy Group has lead responsibility for pursuing the objectives of energy diversity, sustainability and competitive prices. It works with others (inside and outside Government) to strike the appropriate balance between these, potentially conflicting, objectives. Tensions can arise, for example, between increasingly rigorous environmental targets and the need to maintain competitive energy prices. The Government believes that innovation is central to resolving these tensions and, to this end, the DTI's Energy Group funds a number of support programmes to facilitate technological development and associated demonstration and deployment activities in the areas of new and sustainable energy, cleaner coal, nuclear fusion and oil and gas extraction. In addition to funding provided by the DTI's Energy Group, substantial public funding for energy-related R&D activities also occurs via the Office of Science & Technology (through funding provided to the Research Councils). The energy industries are eligible also for funding for R&D related activities from the Innovation, LINK and Smart programmes, as well as indirectly through various EU programmes.

  2.3  The Office of Science and Technology (OST), through the Director General of Research Councils, is responsible for advising on the broad allocation of the Science Budget and in securing the successful operation of the Research Councils in pursuit of their missions. The Research Councils are responsible for decisions on the scientific merits of different strategies, programmes and projects. The Head of OST, the Chief Scientific Adviser (CSA), has a cross-government responsibility to advise the Prime Minister, Cabinet, Secretary of State for Trade and Industry and Minister for Science on science, engineering and technology matters.

  2.4  The Department for Environment, Food and Rural Affairs (DEFRA) has responsibility for policy on sustainable development, climate change and environmental protection, as well as energy efficiency, including combined heat and power (CHP) and fuel poverty. It funds the Carbon Trust and Energy Saving Trust to take forward RD & D work on low-carbon technologies. The Carbon Trust is responsible for the development of pre-commercial low carbon technologies across all markets. The Energy Saving Trust is responsible for the deployment of these technologies into the domestic sector, reflecting its housing remit, and the road transport sector, reflecting its transport action programmes. The Carbon Trust is responsible for the deployment of non-domestic technologies into the business and public sector markets, reflecting the work of Action Energy (previously the Energy Efficiency Best Practice programme) and the enhanced capital allowances scheme. DEFRA leads for the UK in international and EU negotiations on the UN Framework Convention on Climate Change and the Kyoto Protocol. It is responsible for policy on impacts and adaptation and for co-ordinating action on carbon emission mitigation under the UK Climate Change Programme.

  2.5  DEFRA also works closely with the Forestry Commission on the development of purpose grown energy crops and forest material for use as sources of biomass for energy. DTI and DEFRA work very closely together on issues relating to the environmental and social impacts of energy supply and demand, especially on energy conservation, renewable energy, CHP and fuel poverty. These broader responsibilities mean that DEFRA, in consultation with other Government Departments, needs to consider any wider environmental impacts (negative as well as positive) of low carbon technologies, including possible effects on releases of other pollutants to the environment, and visual impact or other environmental disturbances or risks associated with infrastructure development and use.

  2.6  The Department for Transport (DfT) has responsibility for co-ordination of the Government's strategy for promoting the development, introduction and take-up of low-carbon vehicle technologies and fuels. It works closely with the DTI, DEFRA and HM Treasury, all of which have an important role to play. More detail about the Government's strategy document `Powering Future Vehicles' is provided in Annex B.

3.  RECENT DEVELOPMENTS IN ENERGY RD&D POLICY

  3.1  In September 2001 the Secretary of State for Trade and Industry commissioned the Chief Scientific Adviser (CSA) to chair a review of the UK's public energy RD&D—the Energy Research Review Group (ERRG). Their report fed into the Performance and Innovation Unit's (PIU) review of energy policy and was published simultaneously with the PIU review in February. The report made a number of key findings and recommendations which are summarised in its Executive Summary.

  3.2  The Government will produce a White Paper on energy policy around the turn of the year. This will build on the PIU and ERRG reports and on other reports which have looked at major areas of energy policy, including "Energy—the changing climate" by the Royal Commission on Environmental Pollution in June 2000.

  3.3  A group with high-level representatives from the various public research funders (including Government Departments, Research Councils, the Carbon Trust and the Energy Saving Trust) has been formed to improve the excellence of UK energy research and to help deliver an energy policy which is supported by scientific evidence and takes advantage of the opportunities offered by advances in science and technology. Its immediate priority will be to consider follow-up to the ERRG report. In particular the group will seek to improve the co-ordination of research and ensure research priorities reflect adequately ERRG's recommendations. The follow-up group will have its first meeting in October.

  3.4  Also feeding into the White Paper process is a full public consultation, which began on 14 May and is due to run until the end of the summer. The Consultation, which is designed to be as open and inclusive as possible, focuses on the key issues identified by the PIU Review, and seeks views on how our future energy policy framework can most effectively achieve all three objectives of sustainable development—economic, environmental and social improvement.

4.  CURRENT LEVELS OF GOVERNMENT RD&D SUPPORT FOR NON-CARBON ENERGY TECHNOLOGIES

  4.1  A table is attached at Annex A. This sets out the technologies in receipt of RD & D support with annual expenditure in each of the last three years, and allocated expenditure in 2002-03 and each of the next three years. The R&D programme covers early demonstration of prototype technologies, although to date a separate record of projects has not been kept. The need for a programme of demonstration has resulted in the domestic and large-scale PV field trials and the capital grants programmes for PV, Offshore Wind, Bioenergy and Community and Household.

  4.2  The DTI's Energy Group will spend around £55 million supporting sustainable energy-related research and technological development in 2002-03. This is part of an increase of Government support for renewables to over £260 million over the next three years, including the £100 million fund announced by the Prime Minister, (of which £10m has been allocated to the Research Councils). In addition to this the 2002 Comprehensive Spending Review allocated £38m to the Energy Directorate for renewable energy for the year 2005-06. Other general programmes such as Innovation, LINK and Smart fund some work of relevance to the energy sector. Collaborative funding is also available under European programmes such as Framework 5 (now 6) and ALTENER. Finally there are a number of generic programmes supported by DTI that may impact on DTI Energy Group programmes eg materials R&D. Even the DTI Civil Aviation R&D (CARAD) programme, supports work which has an indirect impact on the development of gas turbine technology.

  4.3  The DTI led Foresight Vehicle programme includes a number of strands of research aimed at low-carbon technologies. These include new and improved propulsion technologies and control systems as well as materials and structures work aimed at light weighting. About one third of the £90 million presently committed to the programme could be categorised as "towards low carbon". Moreover, following the publication of the report in May 2002 of the Automotive Innovation and Growth team, DTI's Automotive Unit is taking forward plans to implement a new Centre of Excellence on low carbon and fuel cell technologies. Government programmes also support pilot demonstration of non-carbon fuel technology in the transport field, through the DfT's New Vehicle Technology Programme in particular. Projects include support for the pilot demonstration of hydrogen fuel buses in London in 2003, and the development by UK industry of other fuel cell buses. The Government's Powering Future Vehicles strategy includes new arrangements for ensuring more systematic links between the Government's programmes, with the involvement of the Low Carbon Vehicle Partnership.

  4.4  The DTI takes account of other UK and European sources of funding in determining individual programme strategies which are structured around a technology path progressing through the stages of assessment, R&D, demonstration, market entry, full-scale industrialisation and finally open competition.

  4.5  The Research Councils, funded from the Science Budget through OST, will spend over £11m on energy related research in 2002-02, the majority through EPRSC (Engineering & Physical Sciences Research Council), with further investments from BBSRC (Biotechnology & Biological Sciences Research Council), NERC (Natural Environment Research Council) and ESRC (Economic & Social Research Council). Figures for expenditure in recent years are estimated below:


1998-99
1999-2000
2000-01
2001-02
2002-03(forecast)

Total
£8.154m
£7.132m
£8.132m
£10.746m
£11.292m


  In addition, the Tyndall Centre for Climate Change Research (funded by NERC, EPSRC and ESRC) will invest a further £1.98m over the period October 2000 to 2003. Details of the Research Council's investment in energy research and development, and their future proposals, are contained in their separate memorandum. Details of the 2002 Spending Review allocations to Research Councils will be announced later in the autumn. Research to support sustainable energy has been identified as one of the opportunities for outstanding new areas of investment, with a proposed joint Research Council initiative "Towards a Sustainable Energy Economy". This would aim to build on the UK's existing research strengths to address the technological and societal challenges of a sustainable energy supply. Discussions on the establishment and role of a UK Energy Research Centre are currently in progress. Those involved in discussions include: the Director General of the Research Councils, the Chief Scientific Advisor, BBSRC, CCLRC, ESRC, EPSRC, NERC, the Carbon Trust, DEFRA, DTLR and the DTI Sustainable Energy Policy Unit.

  4.6  Information on the state of play for the different technologies is set out in Annex B.

  4.7  The UK Fuel Poverty Strategy launched last November announced proposals for a micro-CHP pilot. Up to 6,000 installations were proposed to be carried out over a 3-year period. The Government is currently considering the timing and practical implications of these proposals. If successful, the intention would be to offer micro-CHP through the Warm Front Team. The Strategy also announced proposals for a joint DTI/DEFRA pilot project to test a range of renewable energy and related technologies for use in vulnerable households. A scoping study to assess the contribution that such technologies could make in delivering affordable warmth to vulnerable households is now underway. DEFRA fund the Carbon Trust who carry out energy efficiency R&D and related activities via the Trust's `Low Carbon Innovation Programme' (LCIP). LCIP has been developed to support RD&D and innovation to bring forward new and emerging low carbon technologies and has an initial annual budget of around £20-25m per year. The Forestry Commission contributes directly to research programmes to support biomass production and utilisation as well as timber utilisation and marketing as an energy efficient construction material.

5.  ASSESSMENT OF THE SKILLS BASE

  5.1  Across many parts of the energy sector and its major equipment suppliers, the workforce is skilled but is badly skewed towards older age groups. There are many reasons for this but four can be singled out: (i) the traditional routes of entry—apprenticeships or graduate traineeships with big employers such as the CEGB, Gas Board, ICI etc—have disappeared, along with many of the employers themselves; (ii) the sector is perceived to be in decline and is unpopular with young people; (iii) past recruitment moratoria have produced gaps in the age structure and (iv) fewer young people are choosing to study science and engineering.

  5.2  Although these are "old" skills from the carbon-driven economy, many of them are also critical to a future low-carbon economy.

  5.3  Detailed research into workforce skills and demographics has been undertaken for a range of sectors including oil & gas, gas utilities, nuclear, electricity, engineering design and engineering construction.

  5.4  In general, current levels of recruitment area a fraction of what is required to replace the workforce. Towards the end of this decade, retirement will increasingly take its toll and a severe cut in workforce numbers can be predicted—leading to a loss of experience and know-how. Moreover recruitment will become increasingly difficult as the number of young people in the UK continues to decline.

  5.5  Sector-specific activities have had some successes, such as re-training redundant steel workers to become gas installers and the introduction of skills and experience passports in the offshore workforce. But, often, the numbers involved are a fraction of what is required to replace those will be retiring in the next two decades.

  5.6  The INREB Faraday Partnership, which deals with the integration of renewable energy technologies into buildings, is looking at training requirements at all levels, and will be working with others to develop courses where needed to address gaps. As with other Faraday Partnerships, INREB also employs Technology Translators whose job is to communicate on a face to face basis with firms in the industry. This is both to disseminate the results of research and to help to ensure that the research needs of the industry are being addressed by the Partnership where this is appropriate.

  5.7  Many of the issues go to the heart of Government policy on skills and education. Energy Group staff continue to work with the DTI Skills and Education Group to develop strategy and influence DfES and DWP. Much is being achieved on school curricula and non-higher education workforce development such as creating more modern apprenticeships and increasing employer involvement in the Sector Skills Councils, but, even so, it will be a decade before real differences are seen in the workplace.

  5.8  Higher education is more problematical. Considerable efforts are being made to encourage young people into science and engineering. EPSRC and its sister agencies are taking steps to address the problem at post-graduate level with, for example, significant investment in doctoral and masters-level training in low/non-carbon energy R&D.

  5.9  Current and future skills are being evaluated for the forthcoming Energy White Paper, which will make recommendations on policy in this area. Some specific comments on the skills base of the different technologies are included in Annex B.

6.  FORMULATION, IMPLEMENTATION, EVALUATION AND CO-ORDINATION OF GOVERNMENT POLICY ON ENERGY RD&D

  6.1  The rationale for Government funding of R&D, applied both in the UK and internationally, is based on the premise that social rates of return on some R&D, for example energy technologies that can help to address to environmental problems and which involve lengthy development timescales, are higher than private rates of return. Investment in these areas is therefore likely to be to low without Government support or intervention. Low levels of investment in R&D can be exacerbated by the existence of specific market failures such as:

    —  Externalities; where, for example, environmental costs may not be fully internalised in market prices;

    —  free rider problems: where businesses cannot achieve adequate returns for their own R&D effort;

    —  market barriers to entry: such as predatory pricing or other action by incumbents; and

    —  information/collaboration failures where markets fail fully to realise the benefits of innovation due to lack of information or difficulties in sharing costs and benefits.

  6.2  The existence of one or more of these factors may justify some form of Government intervention, although that intervention may not necessarily involve direct R&D support. It may be that market failures are best addressed by policy actions, for instance by carbon taxation to internalise environmental costs, or by the provision of information to bring interested parties together. Direct involvement in R&D activity may still be justified where other actions are insufficient to deliver an adequate private sector response. The overarching criteria adopted by the DTI's Energy Group in testing whether or not direct R&D support by Government is justified in specific circumstances, are:

    —  R&D funding should be consistent with the delivery of stated DTI's Energy Group or Government policy aims and objectives, or inform the policy making process.

    —  Evidence of one or more relevant market failures should be demonstrable.

    —  Funding should be related to themes or opportunities identified by Foresight and contribute to wealth creation, jobs and the knowledge base.

    —  The principle of "additionality" should apply; ie the DTI's Energy Group should avoid funding activities that would otherwise be funded by industry.

    —  Funding should not duplicate R&D and related activities being undertaken overseas unless there is a clear rationale for doing so—international collaboration should be used to maximum advantage and strengthen not weaken UK competitiveness.

    —  Funded projects and programmes should incorporate a technology transfer/deployment plan; have reasonable prospects of being developed to commercial success and/or the results can be utilised by the Government and its agents to enable it to meet its regulatory functions.

    —  R&D support should have a clear industry focus; eg the work should be relevant to industry's needs and include their input on defining the R&D and its evaluation.

  6.3  The UK Government has supported the development of renewable energy since the mid-1970s by funding a programme of work which included research and development (R&D) into renewable technologies. This programme initially brought together industrialists and academics to identify the technological opportunities and advise on the R&D priorities and, latterly, address market, planning and regulatory issues. Government support for the development of renewable energy technologies resulted in a financial support mechanism under the Non Fossil Fuel Obligation (NFFO) introduced in 1990.

  6.4  The Utilities Act 2000 provided for the development of the Government's support mechanism for renewable energy and the NFFO has been replaced by the Renewables Obligation, which is designed to ensure that 10% of the UK's electricity is supplied from renewable sources by 2010. In order to help achieve this objective, the Government has also expanded its support for emerging renewable technologies via the New and Renewable Energy R&D programme and by a mechanism of capital grants. Overall Government support for renewables amounts to £260 million over the next three years, over and above the support provided by the Renewables Obligation and exemption from the Climate Change Levy.

  6.5  The New and Renewable Energy R&D programme, managed by an external contractor, consists of seven sub-programmes covering solar energy, wind energy, bioenergy, water energy, wave energy, fuel cells and embedded generation. Long term strategies have been developed involving a technology route mapping exercise for each specific programme area. As part of the route mapping exercise, the current status of the individual technologies, UK strengths and R&D needs of each sector have been identified, a detailed set of technology targets prepared in consultation with industry and academia, and strategies developed to ensure the delivery of those targets.

  6.6  The recruitment of projects is via a twice-yearly call for proposals. Projects are selected in accordance with the criteria set out above and on the basis of their technical merits. Selection is by a panel comprising DTI officials, independent technical assessors, industry representatives and academics that makes recommendations on the suitability of projects to receive DTI support and the level of funding they should receive. It is our intention to refine the technology route maps produced for each technology in the light of the White Paper.

  6.7  In developing policy and addressing longer-term energy-related issues, the DTI's Energy Group seeks the fullest possible contribution from industry, academia and other stakeholders. It is advised by the Energy Advisory Panel across the range of energy issues and the Renewables Advisory Board provides similar support on policy making in the renewables areas. Other advisory bodies help inform DTI's Energy Group thinking on specific technology areas, such as the Advisory Committee on Cleaner Coal Technology, and the Distributed Generation Co-ordination Group, which attempts to facilitate the deployment of small-scale renewable and other technologies.

  6.8  R&D on energy crops and biomass is co-ordinated across government departments by the Inter-Departmental Group on Energy Crops. This DEFRA-led sub-group includes the DTI, Forestry Commission and the devolved administrations. It identifies research priorities and looks at departmental R&D programmes in order to eliminate gaps or overlap.

  6.9  The ERRG follow-up group, described in paragraph 3.3, will provide a new mechanism for the co-ordination of energy research.

  6.10  Renewables UK, a unit within the DTI's Energy Group, has been set up with a remit to maximise the UK's involvement in renewables projects, both at home and abroad, in terms of jobs and investment in manufacturing, services and supplies. It has recently commissioned a UK gap analysis to identify industry's strengths and weaknesses in each technology and the existing and potential supply chains.

7.  INTERNATIONAL COLLABORATION ON ENERGY RD&D

  7.1  The need to maximise the payback from available funding by international collaboration is of considerable importance. Many energy-related technology and development issues are of common interest across the developed and developing world and significant advantage can be obtained by buying-in to international R&D programmes, or those operated by individual countries. This is leading increasingly to the development of global R&D networks and increased international collaboration.

  7.2  In addition to maximising the cost-effectiveness of R&D funding, international collaboration has many advantages such as exposure to the best of overseas innovation and technology and the involvement of UK technological skills on the global stage. On the other hand, over-reliance on international R&D collaboration could result in UK-specific requirements in terms of technology or timing not be satisfied—or only with additional costs via plant modification and further R&D. It may also lead to key technology components and services being sourced from overseas with consequent lost opportunities in terms of wealth creation and long term jobs.

  7.3  There are three main arenas for international collaboration in energy R&D—the European Union's Framework Programme for Research and Development, the International Energy Agency's Implementing Agreements and bilateral Memoranda of Understanding, such as that with US Department of Energy.

Europe

  7.4  Energy R&D has formed a significant part of all previous European Framework Programmes. In the Fifth Framework Programme (FP5) that is just drawing to an end, non nuclear energy R&D was supported by the ENERGIE programme, an independent sub programme within the Energy, Environment and Sustainable Development Programme with its own budget (

1,042 million) and programme management committee. This programme and its predecessors have covered a wide range of non nuclear energy technologies that could generally be classified as falling within one of three broad categories—renewables, rational use of energy and fossil fuels. Nuclear R&D also forms part of the Framework Programme, but the different Treaty base (EURATOM) means that it is a distinct and separate entity that is negotiated in parallel with the main EC programme. Within the EURATOM part of Framework there are two main programmes, nuclear fission (waste management and safety) and fusion. The budget in FP5 was

1.26 billion, of which fission had a budget of

142 million, fusion

788 million and nuclear research at the Joint Research Centre

330 million.

  7.5  The Sixth Framework Programme (FP6) will concentrate on a limited number of priorities, but will continue to support energy R&D. The budget for non-nuclear R&D has, despite the efforts of UK, been reduced to around

800 million. The EURATOM programme budget is marginally reduced to

1.23 billion, with

140 million for fission and

750 million for fusion.

290 million is for the nuclear research at the Joint Research Centre. It should however be noted that the cuts in energy R&D in FP6 appear to have fallen entirely on fossil energy, so that R&D in non carbon energy technologies may not be disadvantaged, and may even get increased support.

  7.6  Partiticipation in the Framework Programmes is via calls for proposals issued periodically by the European Commission. Proposals must be submitted by a consortium involving a minimum of two Member States (rising to three in FP6). The decision on whether or not to participate is taken by the research organisations or industry concerned without any intervention by DTI. DTI does however seek to influence the shape of the work programme so that it is attractive to UK organisations and promotes the programme within the UK, as well as providing an advice and support service via the "ENERGIE Helpline" based in Manchester.

  7.7  In FP5, UK partners participated in nearly 45% of the successful proposals and were awarded nearly 21% of the budget. UK coordinated projects at

128 million represented 15% of the total recommended budget. Our overall performance was second only to Germany.

Multilateral collaborations through the International Energy Agency (IEA)

  7.8  UK participates in a wide range of Implementing Agreements under the umbrella of the International Energy Agency. These cover R&D on a range of renewables (biomass from both purpose grown energy crops and conventional forestry, wind, PV, ocean energy), fuel cells, fossil fuel and end use technologies and carbon sequestration, as well as several information centres through which energy related information is exchanged. The IEA also provides a forum for collaboration on fusion (UK participates as part of European programme). There are nine fusion Implementing Agreements overseen by the Fusion Power Co-ordinating Committee.

  7.9  These multilateral collaborations include 4—20 countries (typically about eight), and are of two basic types—task sharing and cost sharing. In the former, the partners make "in kind contributions" (sometimes with a small financial contribution to support a secretariat), sharing the work and pooling results. In cost sharing agreements, partners make a contribution to a central fund that pays for an operating agent to carry out the task, eg of operating an information centre. In most of these Implementing Agreements, UK participation is periodically evaluated, usually before renewal of the Agreement at the end of its term (usually five years).

  7.10  The cost of UK participation varies considerably from Agreement to Agreement and is difficult to quantify with precision in the case of task sharing agreements, but most would fall in the range £50 to £250k per annum. The gearing on the investment can be substantial—for example, UK contributes about 5% of the input to the world's largest database of energy research information (the Energy Technology Data Exchange (ETDE)), and thereby gains access to the rest of the information from around the world.

Bilateral collaboration

  7.11  DTI has a Memorandum of Understanding with the US Department of Energy, the objective of which is "to continue, expand, and maximise cooperation in energy research and development". It currently covers:

    —  fossil energy;

    —  renewable energy;

    —  waste-related management and the environment;

    —  energy end-use technologies and techniques; and

    —  research related to energy technologies, systems, services, and policies.

  7.12  The scope may be expanded by written agreement. The current MoU was signed in 2000 and runs for 10 years. A meeting between DTI and USDoE was held in Washington in September last year with the objective of identifying areas for collaboration, and giving impetus to the MoU. On fossil energy, a workshop was held in Tennessee in May last year and a follow up is planned for October this year in UK. There was also a conference, co-sponsored by DTI, on zero emission power plant in New Orleans in October 2001. A joint workshop on advanced biomass conversion technologies is to be held in the UK in October. There will also be a further meeting between DTI and US DoE in October that aims to take up some of the opportunities previously identified and develop new ideas for collaboration.

8.  THE EFFECT ON ENERGY RD&D OF PRIVATISATION, LIBERALISATION, REGULATION AND CHANGES IN OWNERSHIP IN THE SECTOR

  8.1  The ERRG noted that, before privatisation, the nationalised industries had provided an important source of research effort. It has been suggested that the alignment of priorities towards the market may have resulted in a reduction in the overall energy RD&D effort of UK industry. This is probably untrue but there was a change of emphasis. The electricity and gas industries were privatised only a decade after the conversion to North Sea gas and the power station build programme of the 1970s. With a young- to mid-life infrastructure, there was less need for R&D. British Coal was facing the inevitable downsize to a much smaller industry as the UK switched to other fuels. Thus R&D effort in the former nationalised industries did fall. R&D effort in the electricity sector has seen a transfer of responsibility from the generation companies to the equipment suppliers.

  8.2  On the other hand, R&D effort grew strongly to support the development of North Sea oil. Alongside this was the first flush of renewables. This was exemplified by the Altamont Pass wind farm in California—largely developed and built by the Glasgow company, James Howden. There was also a great deal of research into the end use of energy which led, for example, to improved energy-efficient in buildings and consumer goods, low-energy lighting and clean, lead-free motor fuels.

  8.3  Thus, while the privatised industries did cut back on R&D, this was bound up in a broader sea change in which the emphasis of R&D shifted to the new energy providers (the North Sea and Renewables) and to improved energy use.

  8.4  Clearly the next sea change has to shift emphasis to low-carbon energy technologies. The DTI, through Renewables UK is already facilitating this change. ERRG recommended (Recommendation 1 page 8) that further investigation and research into non-technical policy drivers, such as regulation, social, economic and commercial factors was warranted due to their importance in determining the level and type of research in the private sector and the commercial uptake of new technologies. The key issue is to ensure that all these factors support the low-carbon objective.

  8.5  The main effect of privatisation has been to drive down the cost of electricity which, though an advantage to technologies with low production cost, has also disadvantaged high production cost (and possibly low-carbon) technologies. Achieving the right balance of many competing factors is a central aim of the forthcoming White Paper.

  8.6  A number of factors have led to a decline in nuclear R&D, in particular longer-term R&D. Financial pressures in the nuclear industry, the closure of power stations and the lack of immediate prospect for new nuclear build are unlikely to encourage growing investment in longer term research by industry.

  8.7  The decline in UK nuclear R&D has seen the closure of most nuclear research facilities. The UK had two world leading laboratories at Harwell and Berkeley but both are now in the final stages of closure. BNFL is establishing a Technology Centre at Sellafield, primarily aimed at supporting its reprocessing and waste storage facilities. A key issue for the future of nuclear R&D is attracting young researchers into an area seen to have little future.

9.  COMPARISONS WITH OVERSEAS COMPETITIORS

  9.1  The ERRG's report included some comparative data on research by the UK's overseas competitors based on the IEA's annual R&D statistics reports. This information has been updated and a revised table is attached at Annex C. Additional information on the specific technologies is included also in Annex B.

  9.2  The ERRG acknowledged the difficulties of comparison where data may be inconsistent and noted that the UK's position was improving. It concluded that overall spending lagged behind some of our main EU industrial competitors such as France and Germany and recommended bringing spending, over time, more in line with these competitors.

  9.3  The IEA figures show a steady decline in public nuclear R&D expenditure since 1980. Seven countries account for over 95% of total spend (Canada, France, Germany, Italy, Japan, UK and US). All of these countries have significantly decreased their R&D spending since the 1980s, except Japan and France. Expenditure by these two countries now accounts for 90% of public fission (non-breeder) R&D. Total IEA public expenditure on fission (non-breeder) R&D in 1998 was $2,939 million (at 1999 prices). Against this international background, it is worth noting that the US has recently increased its public nuclear programme and that there are recent examples of substantial government sponsored nuclear R&D programmes such as the CEA's proposal to build a European Materials Test Reactor (MTR) at Cadarache in France, and the new US Nuclear R&D Centre at the Idaho National Environmental and Engineering Laboratory (INEEL).

10.  BIOENERGY

  The DTI has supported biofuels through its R&D programme since the 1970's, with current funding ranging between £3-4 million per annum. The programme has worked on a range of projects including field trials of energy crops and development and installation of cost efficient biofuel conversion technologies. The Forestry Commission has supported bioenergy from purpose grown energy crops and conventional forestry since the early 1990s with current funding of £300k per annum. DEFRA also has an annual research budget of £600k for the development of energy crops.

  So far, the programme has supported research into a number of biofuels to produce electricity, heat and transport fuels. Crops such as short rotation coppice (primarily willow) and miscanthus are potential sources of fuel and are now being commercially developed in the UK. Research into other energy grasses has also shown considerable promise and a number of larger trials have been established as a result. Material from existing forests and woodlands, together with agricultural residues could provide feedstocks in significant volumes. Forest and agricultural material and residues are seen as critical to deployment in the short and medium term until a diverse range of secure, high yielding energy crops are on-stream and in the longer term will complement purpose grown crops and other forms of renewable energy. Research has also been carried out to improve the efficiency of harvesting and transportation of biomass, which are key elements in reducing the delivered cost of the fuel source to the power station.

  Research into a number of technologies has progressed under the programme. This ranges from conventional combustion to advanced conversion technologies (gasification and pyrolysis) and also includes anaerobic digestion. Environmental monitoring of biomass plant has also been a significant feature of the R&D programme to date.

  Power generation boilers for CHP and co-firing operations that combine biomass with fossil fuels are also under research. Development in these technologies is more advanced in other countries, particularly Scandinavia.

  The further deployment of bioenergy in the UK will also be supported by the £66 million capital grants programme for electricity, heat and CHP plant led jointly by DTI and the New Opportunities Fund. £32.5 million for energy crops establishment and infrastructure has also been made available by DEFRA. The Capital Grants should lead to at least 100MW of electricity from biomass and significant penetration of biomass in the heat market in the UK. The Renewables Obligation has the potential to bring forward some co-firing of biomass and energy crops, as well as the "advanced conversion" energy-from-waste technologies of gasification, pyrolysis and anaerobic digestion.

11.  CHP

  Combined Heat and Power (CHP) is a highly fuel-efficient energy technology, which puts to use heat produced as a by-product of the electricity generation process. Most new CHP schemes use natural gas, but a significant proportion burn alternative fuels such as wastes or bio-fuels. The Government has set a target of at least 10,000 MWe of installed Good Quality CHP capacity by 2010.

  The largest, most economic opportunities for CHP are usually found in the industrial sectors with their large requirements for process heat. However, there is a significant number of opportunities in commerce and public services. The possibility of linking heat users together, including community heating to link up residential users, can provide additional opportunities.

  CHP's traditional deployment in larger applications will continue to develop, resulting in improved efficiency and performance levels. New and novel technologies, including a range of other mini-CHP technologies are currently being developed. The long term potential (10-20 years) for mini- and micro-CHP is considerable—perhaps half of UK homes could host a unit, while over 600,000 SMEs could benefit.

  A number of measures were introduced in April 2001 to help maintain existing CHP in operation and encourage investment in new CHP. These include the partial exemption from the Climate Change Levy of electricity from Good Quality CHP and eligibility of investments in Good Quality CHP for Enhanced Capital Allowances (ECAs), together with the exemption from business rates of the electricity generating plant and machinery in CHP schemes. In Budget 2002, the Chancellor announced both the completion of the exemption from the Climate Change Levy of Good Quality CHP electricity and the eligibility of leased assets for ECAs. DEFRA has also set up the £50 million UK-wide Community Energy programme which provides grants to install and refurbish community heating schemes, primarily using CHP. The programme will initially operate for this financial year and next.

  Leaving aside the market and economic difficulties currently faced by CHP developers generally, there are several technical issues that will have to be resolved if the full potential of micro- and mini-CHP is to be realised. These include:

    —  Support for trials to better understand commercial issues, network effects, etc.

    —  Technical standards for connection to electricity networks.

    —  Smart metering or profiling to assess the value of electricity exports.

    —  Development of Domestic Energy Services.

    —  Installation and maintenance requirements, including infrastructure and skills and resources.

    —  Developing technologies, for example fuel cells.

12.  CARBON SEQUESTRATION

  Carbon Dioxide (CO2) Capture and Storage applies to fossil fuel electricity generation (particularly coal-fired generation) and is a process by which the CO2 is captured during generation and then transported to a storage facility for permanent sequestration. If viable this technology would provide significant opportunities to reduce CO2 emissions from electricity generation and could support the continued use of fossil fuels whilst contributing considerably to the RCEP's 60% target in 2050.

  CO2 has limited uses and hence sequestration is the only solution for removing it from the atmosphere, however it can also be used as a working gas for Enhanced Oil Recovery (EOR).

  This use would enable the UK to maximise the value of the oil it extracts from its North Sea reserves which could provide a return for any capital investment as well as additional revenue for the Treasury.

  Although the technologies involved are well understood and have been demonstrated individually in industrial applications, they have, with the exception of one plant in the USA, never been brought together for demonstration in electricity generation and at the moment are not considered to be commercially viable. It is estimated from the preliminary findings of the DTI Cleaner Coal Demonstration Review that the generation cost (p/kwh) of a new coal based power generation plant incorporating CO2 capture and storage could be anticipated to be in the range of 1.3 to 2.3 times more expensive than a comparable new plant without such facility. Site specific investigation would be needed to improve confidence in such figures. However with the dissemination of the technology and the development of a CO2 infrastructure these costs could be expected to decrease. There are also a number of possible controversial issues around this approach to eliminating CO2 emissions, particularly around its sequestration. This involves the risk associated with CO2 leaking from storage and the public perceptions associated with this, as well as the position regarding its legality—currently the OSPAR and London Conventions on dumping waste at sea are unclear about whether CO2 sequestration at significant depths below the seabed would be legal or illegal. It is clear however that EOR is permissible.

  If such issues can be overcome then there are opportunities in the depleted oil and gas wells as well as in aquifers under the North Sea for storing CO2. Once this use had been exhausted the infrastructure could continue to be used for storage only if the uncertainties.

  Currently, following the recommendation of the PIU Energy Review the DTI is investigating the feasibility of this technology and is expected to publish its findings in the Spring of next year. It is unclear at this stage what recommendations will emerge although it is clear that the legality of sequestration and its economic viability are key issues that will affect the final conclusions. If viable then Government involvement could either be in the form of providing support for a demonstration facility to "kick start" investment or alternatively in the form of fiscal incentives. At present it is not clear what the costs could be, although it is thought that £billions rather than millions would be needed to develop such an infrastructure.

13.  CLEANER COAL TECHNOLOGY

  The Cleaner Coal Technology (CCT) Programme provides support for R&D projects most of which are concerned with developing greater efficiencies in pulverised fuel boilers as well as co-firing coal with other fuels such as biomass and natural gas, all of which reduce carbon emissions per unit of electricity produced. The total value of all CCT Programme projects is some £22 million of which government funding is £8 million. Of this sum, some £1.25 million has been allocated to a coal/biomass co-firing project at Tilbury power station. The UK is also involved in the EU700 project which is looking at technologies which will produce much higher levels of plant efficiency (up to 55%) in newly constructed coal plant based on much higher (700 deg C) steam cycles. Such a plant demonstration targeted by European utilities for commercial tender in 2006 would save around 14% CO2 in comparison with a current best technology coal plant whose efficiency is approximately 45% on the assumption of an efficiency of 52%. Compared to the best existing UK coal station, Drax, whose efficiency may be assumed to be around 39%, the equivalent CO2 savings would be approximately 25%.

  The recent review of CCT demonstration plant, published by the DTI at the start of the year, recommended modest support for retrofitting a supercritical boiler (nominally 300 bar/600 deg C steam) to an existing power plant for demonstration purposes. This would kick start the introduction of more efficient technologies and provide a show-case for other countries such as China and India. Beyond this it is not expected that there would be any government support for their dissemination and it is thought that other measures such as Emissions Trading Schemes would encourage their deployment.

14.  EMBEDDED (OR DISTRIBUTED) GENERATION

  Traditionally, electricity distribution networks have been developed primarily to transfer energy from the transmission system to end-users and are designed on a radial, tapered basis to handle uni-directional power flows. Unlike the transmission system where generation and transmission assets are continually co-ordinated to achieve security, the distribution networks are operated in a passive fashion. Due to this design and operational philosophy, connection to the distribution networks often represents barriers to the deployment of renewable and efficient generation. Furthermore, these barriers are reinforced by the regulatory environment, which offers no incentive to Network Operators to connect generation with some elements of the current regulatory regime acting as a positive disincentive.

  In recognition of these potential barriers to the connection of renewable and efficient generation, and the threat posed to the achievement of Government targets, a segment of the Sustainable Energy Support Programme has been devoted to addressing a range of technical, commercial and regulatory issues related to the deployment of embedded or distribution-connected generation. In addition to a number of shared-cost projects developed with industry partners, the programme will, during this and the next financial year, is expected to support in excess of 60 fully funded projects designed to address these issues at a potential cost of around £2 million. This work programme is agreed and reviewed by the Distributed Generation Co-ordinating Group which brings together government, industry and the regulator to address these issues.

  In addition to this work, £4 million has been allocated to R&D work on net metering, storage and control from the Prime Minister's £100 million fund for renewables. This new funding will be spent via the New and Renewables research and development programme and projects under each of the three headings are currently being developed for submission to the October 2002 call.

  Further work in this area is being co-ordinated through the Transmission Issues Working Group which brings together representatives of the three transmission companies, the devolved administrations, Ofgem and those conducting relevant studies. The purpose of the group is to look at the implications for the GB electricity network of the Government's renewables targets, particularly in relation to large-scale renewable development.

15.  ENERGY EFFICIENCY (HOUSEHOLDS, BUSINESSES AND THE PUBLIC SECTOR)

  Energy efficiency has major economic and social benefits for households and businesses, helping to protect the environment by reducing carbon emissions. It reduces energy inputs for the same output by reducing heat loss from buildings and by using more energy-efficient equipment such as boilers, lights and more advanced industrial processes in a wide variety of applications. Benefits of reduced energy consumption are economic, environmental and social. Other examples include:

    —  better control systems to reduce the wasteful use of equipment;

    —  development of alternative processes to achieve the same outputs;

    —  development of technologies to reduce local demand (eg insulation); and

    —  improved overall design of buildings and industrial processes to reduce underlying demand.

  Current development is very wide ranging; from mature developments such as traditional insulation to such laboratory developments as new light sources and new glazing materials. Some RD&D needs and problems are generic, for example more efficient motors and lights, or new materials for insulation while others are very process-specific. Demonstration is essential for all new commercial developments, since uptake in the UK is generally very slow.

  In round terms, there is longer term potential for 20% energy efficiency improvement over a 15-20 year period. New developments continually appear on the market to maintain the cost-effective potential around this level. A sustained push to achieve a much higher market share for the most efficient products on replacement, and possibly earlier replacement of out-of-date equipment, is expected to stimulate faster development of new products and provide a continuing long-term potential.

  Government has supported energy efficiency since the 70s in the form of demonstration schemes, subsidised surveys, good practice guides and support for R&D. For the future, government support may well be needed for more generic R&D at a pre-competitive stage. It is also necessary to support demonstration schemes.

16.  ENERGY EFFICIENCY (TRANSPORT)

  Transport accounts for a major and growing volume of energy use. At present, it runs almost entirely on carbon fuels. But vehicle technology is developing quickly, opening up the possibilities for a switch to a non-carbon transportation system, radically reducing the impact of transport on the environment, both globally in terms of climate change, and locally in terms of reduced air pollution, noise and quality of life. In particular, hydrogen fuel cell technology is being actively developed by automotive companies worldwide, and this could enable the shift to a non-carbon "hydrogen economy", when fuel cells can be run with renewably-produced hydrogen, or hydrogen produced in conjunction with carbon sequestration. Vehicle transport therefore represents both a challenge—but also an opportunity for the move to a non-carbon fuel economy. Meantime, "hybrid" (electric and internal combustion) vehicles are being developed and are already starting to appear in the market. Hybrid vehicles provide an important stepping stone to mass-market fuel cell vehicles, by supporting the development, commercialisation of the vehicle technologies needed also for fuel cell vehicles—in addition to providing energy and carbon savings of up to 50%.

  Following wide consultation with industry, consumer, environment and other stakeholders, the Government in July published its "Powering Future Vehicles" strategy for promoting the development, introduction and take-up of low-carbon vehicle technologies and fuels, and for ensuring the full involvement of the UK automotive industries in the new technologies.

  The strategy was jointly produced by DTI, DfT, DEFRA and HM Treasury, all of which have an important role. The foreword to the strategy is by the Prime Minister, underlining the Government-wide commitment to the shift to new transport technology and fuels. The strategy made the UK the first country to set itself a target for shifting its mainstream motoring to low-carbon technology, specifically with the target that within the next decade, one in 10 new cars in the UK would be low-carbon, defined as 100 grams of carbon per kilometre or less, compared to around 180 g/km for today's new cars. There is also a target for low-carbon buses. Beyond 2010, the strategy indicated that the Government is aiming for an accelerating shift to hydrogen fuel cell vehicles and other zero-emission technologies.

  The consultation on the Powering Future Vehicles strategy emphasised that, as well as the different parts of Government, the shift to new vehicles and new fuels needed the involvement of the vehicle and fuel industries, consumers, the research and academic community and others. The Government suggested that a Low Carbon Vehicles Partnership should be created. This was agreed, and Ministers have commissioned Professor Jim Skea, Director of the Policy Studies Institute and a member of the Automotive Innovation and Growth Team (see also paragraph 4.3) to work with leaders of the industry, consumer, environmental and other stakeholders, with the aim of getting the Partnership up and running by the end of the year.

  The DTI's RD&D programme on advanced fuel cells supports work related to both transport and stationary applications of fuel cell technology.

17.  FUEL CELLS

  The DTI has been supporting fuel cells R&D since 1992, and one of the objectives has been to develop the capability of UK suppliers. With the commercialisation of the first markets for fuel cells rapidly approaching, a number of UK companies are well positioned to compete in this emerging global market. Capabilities exist for fuel cell stack design and manufacture (PEM and SOFC types) and for critical components including membrane electrode assemblies. There is a need for companies with the ability to design and integrate fuel cells into complete systems although this is related to the timing of the commercialisation for particular applications which remains uncertain. A number of serious techno-economic issues remain to be overcome before mass market applications in the fields of transport (replacement for the internal combustion engine) or stationary power generation (distributed generation/CHP) will be possible, and this is as true for UK firms as for those from the leading nations (Canada, USA and Japan). Commercialisation for niche applications is widely expected within the next 2 to 5 years. The DTI works closely with the Carbon Trust to ensure the respective fuel cells programmes complement each other.

  The UK industrial base is well supported by fundamental research eg on materials and catalysis at a number of universities and there is also an academic network which facilitates information exchange.

  At the present time the relatively small number of companies in the industry do not appear to be encountering problems in recruiting skilled staff but this could change rapidly as commercialisation begins. There is an obvious risk of a brain drain to the USA and Canada with their considerably larger industries. The need for training at technician level will also need to be addressed, but again this is dependent on the timing of commercialisation.

18.  HYDROGEN

  The DTI has not to date had a separate programme for hydrogen but this was recommended by the Chief Scientific Adviser in the ERRG. The Powering Future Vehicles Strategy also announced the intention to establish such a programme, which would also cover low carbon fuels such as methanol. A number of UK Universities are working in the areas of hydrogen production and storage, including biological production, and there is an active University network which facilitates information exchange. UK companies have capabilities in this area and could become major players if the market develops.

  While many experts remain convinced that the Hydrogen Economy (with hydrogen being generated using only renewable energy sources) is the end game, the timescale for this is long (three to 50 years). However, the deployment of hydrogen technology may begin considerably earlier. A widespread switch to use of hydrogen as a fuel (strictly, an energy vector) has profound implications for electricity demand and work is in hand to analyse this is more detail.

19.  HYDRO

  Hydro power is a commercial technology and accounts for a significant proportion of our renewable output. Total electricity generated from renewables in 2001 amounted to 10099GWh, 38% of which was from large-scale hydro generation. The UK has a small number of companies manufacturing hydro plant mainly for export. However trading conditions for these companies remains difficult mainly due to exchange rate considerations and cheaper competition from abroad.

20.  NUCLEAR FISSION

  Nuclear Power currently accounts for around a quarter of UK electricity generation. It produces no greenhouse gas emissions and therefore, compared with the rest of the generation sector, plays a significant role in helping the UK meet its emission targets. Nuclear electricity generation is expected to peak at about 85TWh in 2005 (around 25% of electricity supplied) and then decline to around 9TWh in 2025 (when only one of the 16 existing nuclear stations will remain).

  Nuclear fission R&D has been declining steadily over the last 10 to 20 years. Publicly funded research into fission reactors began to decline with the privatisation of the electricity sector in 1990-91. DTI (previously Department of Energy) funded nuclear research has decreased from £164m in 1989-90 to just £17 million in 2000-01—a reduction of 90%. All of this current expenditure is on fusion related work and there is currently no expenditure on fission R&D.

  The Health and Safety Executive (HSE), administers nuclear safety research programmes of around £8 million per annum, which are funded mainly by industry contributors. DEFRA contributes some £0.7 million (ex VAT) to programmes which include aspects of safe handling and storage of radioactive wastes and the Department of Health funds research into the health effects of exposure to man-made and naturally occurring radiation. The UK Government also contributes around £4.5 million by year to the Euratom budget (under the four-year Framework Programme 5 (FP5)) for research focusing on radiation protection, waste management and plant life management and safety.

  This decline in R&D is also reflected in the private sector—while Nuclear Electric spent £116m on R&D in 1989, British Energy[18]and BNFL combined spent £115 million in 1999-2000[19] representing a considerable reduction in real terms. The break up of the UK nuclear industry may have made it "meaner and leaner" but is has created an unattractive environment for longer term R&D.

  There has been a significant decline in university based fission related research over the same period, which has been identified by the Nuclear Skill Audit Report. Among the Research Councils, EPSRC is currently the largest sponsor of fission-related R&D with commitment for areas such as materials research (eg for containment vessels) of approximately £350,000 per annum. However, the nuclear energy sector currently attracts a relatively small amount of research sector spending when compared with other sectors of industry.

  The nuclear sector is in competition with other sectors for a diminishing pool of potential recruits and is currently an unpopular career choice. This shortage affects all users of engineering and physical science skills, not just nuclear. There are many reasons for the engineering sector's unpopularity, including pay, status, stimulation and career development, but a key factor in the nuclear sector is the perceived uncertainty of future programmes. Uncertainty is a discouragement and projection of a positive future and stability in the sector is fundamental to the attraction and retention of skilled people.

  A recent DTI skills study has identified that the nuclear sector, comprising power generation, defence, the fuel cycle and nuclear clean up, is currently (2002) approximately 56,000 people strong. The sector is likely to grow, even without new-build, primarily in the clean up area. Responding to potential growth, without new build, and replacing people leaving the sector on retirement means that the sector may need to recruit 1,000 graduates and 750 apprentices per year.

21.  NUCLEAR FUSION

  Unlike its better-known counterpart nuclear fission, where nuclei are spilt, in fusion nuclei come together rather than split, and the reaction products are not radioactive. This process also differs in that the elements required are virtually limitless; deuterium is derived from seawater and tritium from lithium. The fuel cycle offers other advantages in that at the end of the process the waste materials have low radio toxicity, decaying after a period of 100 years to the same level as power stations using fossil fuels such as coal. The cost of generating electricity from fusion is comparable to that of clean coal and renewables. Taking a long-term view this is a cleaner, safer and perhaps more socially acceptable energy source than nuclear fission.

  The current annual spend by DTI is £14.4 million. £6 million of this represents the sum paid by the Department to EURATOM under the Framework Programme for hosting the Joint European Torus (JET) facility in the UK. Of the remainder, £2.8 million comes from EURATOM as a contribution of 25% towards our national fusion research programme. Currently the OST provides the funding directly to UKAEA but this will transfer to EPSRC from the next financial year.

  The prevailing view until recently was that fusion power generation was 50 years away. Recent developments have convinced people that a 25-30 year timescale is now possible and consequently fusion power has started to figure more prominently in energy policy formulation. A Fusion Policy Review was carried out in 2001 and this was fed into the UKAEA quinquennial review announced in November 2001. An external review was also conducted by A D Little in 2001 and policy recommendations were made by the Fusion Science Panel. Reducing the fusion power generation timescale from 50 years to 25-30 remains high on the Chief Scientific Adviser's agenda and continues to be actively pursued with our international partners. The focus of that agenda is the construction of the International Thermonuclear Experimental Reactor (ITER) which would be the next step after JET. The EU is committed to the ITER programme as are Russia, Japan and Canada, and there are indications that the USA is considering whether to rejoin it. Fusion research is a key element of the Framework Programme, and this is covered in Section 7 (International Collaboration on Energy RD&D).

22.  SOLAR

(i)  Heating & Cooling

  Otherwise known as Passive Solar Design, this means making use of the form, fabric and orientation of a building to capture, store and distribute the solar energy received. This differs from other renewable energy producing technologies in that it directly replaces the conventional energy used in buildings. The DTI supported a programme of R&D for PSD from the late 1970's until completion of the final dissemination outputs in 1999. DTI support for this work was about £20 million, including the Energy Design Advice Scheme (EDAS). The information gained from the PSD programme is now fully integrated into the building component of the Energy Efficiency Best Practice Programme (now Action Energy) which is the responsibility of the Carbon Trust and funded by DEFRA.

(ii)  Solar Thermal

  Also known as Solar Water Heating (SWH) or Active Solar Heating (ASH) this technology was introduced to the UK in the 1960s and now has an established if small market, principally for domestic hot water and for heating swimming pools. The DTI had a substantial technical R&D programme between 1977 and 1984, spending around £4 million. As the technology is now mature and proven, there are few R&D opportunities to reduce costs or improve performance. Since that time a smaller industrial sponsorship programme has been maintained, helping in the collection and dissemination of information and in the development of industry infrastructure including training and standards and support for the Solar Trade Association (STA).

  The STA currently has around 20 members, mainly installers and a few equipment manufacturers. About half of the installation companies are not members and the industry suffers from a bad reputation due to the activities of a half dozen less reputable companies. There is also a shortage of trained plumbers, but this is being addressed through the EU funded SHINE 21 project and via other local initiatives such as the 20 or more Solar Clubs around the country.

(iii)  Photovoltaics

  Otherwise known as solar electricity or power from the sun, PV is the technology that converts daylight into electricity. The DTI has had an R&D programme since the mid 90's at a level of £0.5—£1 million per annum, largely targeted at paper studies addressing technical and infra-structural barriers and monitoring the few existing installations.

  1999 marked something of a step change in the DTI's support of PV with Mr Battle's announcement of three new initiatives with an initial budget of £5 million spread over two to three years. The first was a £1 million call for proposals for PV components and systems. This had the aim of reducing the cost and improving the performance of PV cells and balance of system components. This programme is ongoing with regular six-monthly calls for proposals to which industry and research organisations respond.

  The second was the £1 million Domestic PV Systems Field Trial (DFT) which was aimed at clusters of houses in the social and private sectors, both new-build and refurbishment. This resulted in some 25 applications, nine of which were supported for an expanded budget of £1.4 million, representing over 160 homes and 220kWp capacity. This initiative was so successful that in 2001 Ministers decided to hold a second round with a budget of £3 million to extend the trial to other parts of the country. This resulted in 60 applications, of which 23 were selected for increased support of £4 million, representing some 380 homes and 600kWp capacity.

  The third initiative was the £3 million Large Scale BIPV Field Trial, which was eventually confined to the public building sector because of State Aid limitations on grants to the private sector. This resulted in over 60 proposals for installations over 20kWp, and there were sufficient high quality proposals to justify increasing the budget to £4.2 million in order to support 18 projects with a total capacity of over 1MWp. These projects are now starting to be installed.

  The next stage of the Government's support for PV is the £20 million First Phase of the Major PV Demonstration Programme launched by Patricia Hewitt on 26 March 2002. Though entitled "Demonstration" this is really the first part of a major market stimulation programme over 10 years intended to rival the large Japanese and German PV rooftop programmes. It is thus more akin to the capital grants programmes on offer for offshore wind, energy crops etc which are also part-funded from the Prime Minister's £100 million Renewables Fund.

  The British Photovoltaics Assocation (PV-UK) currently has around 50 members, but only a few of these are installers or equipment manufacturers. There is a definite shortage of skilled engineers in the industry, which is resulting in some poaching between companies. There is also a dearth of trained installers to meet the increasing demand occasioned by the Field Trials and the Demonstration Programme. However, some companies are attempting to address this through their own in-house training programmes and by mentoring others under the MDP installer accreditation scheme. A training course is also being developed by IT Power with EU ALTENER funding, and other EU ALTENER projects like RE-TRAIN and PV-DOMSYS are helping to train installers in specific parts of the UK as the market expands.

23.  WAVE AND TIDAL

  Electricity generation from waves and tidal streams, if it can be successfully developed, offers the prospect of a more reliable source of renewable energy than wind. The UK has a small number of companies who lead the development of the technologies as well as a number of universities with a significant research capability in this area. The UK has one of the very few operating shoreline wave energy generators in Europe and is well advanced with development projects aimed at harnessing the larger resource in offshore waves. The UK has recently made significant progress with development projects aimed at harnessing the energy in marine currents and two are close to demonstration.

  An additional £5 million has been allocated to wave and tidal from the Prime Minister's £100 million for renewables and some of the £10 million allocated for "blue skies" research may also be used for wave and tidal research. These new budgets are in addition to about £5 million currently committed from DTI's R&D programme and grants of over £1 million from EPSRC.

  In the last year, DTI has supported three projects that will lead to demonstrations of prototype devices in a real marine environment. These represent real progress considering that the programme was re-launched only in March 1999. These three projects are the most promising ones from those submitted and we have provided them with the opportunity to prove their claims. It would be premature to move on to further development of these projects before the outcomes of the test programmes are known.

  The Government is a founder signatory to the IEA Agreement on Ocean Energy Systems aimed at disseminating information and sponsoring the development of these technologies.

24.  WIND

  The UK has a number of successful companies developing wind farm projects and a small number of component suppliers but no major manufacturer of large-scale wind turbines. Denmark is seen as the example to follow having a thriving wind turbine manufacturing industry. The reasons for this success include early "green demand" from the general population, strong geographical advantage, early experimentation with wind technology, strong infrastructure, small size of electricity companies, and government subsidies that guaranteed wind farmers a revenue and made wind technology an attractive investment. RisO National Laboratory also conducts extensive research and sets safety standards that reduces the perceived risk for investors and, because the safety standards are higher than in any other country, the turbines are easier to export. There is, however, some evidence that the Danish industry has begun to lose its lead in the international market as its competitive advantage is eroded by competition from the German industry in particular, which now accounts for over 27% of world sales. Cited reasons for this include: less predictable government intervention in Denmark, making wind technology a less attractive investment; and the absence of national standards for noise that make obtaining a building permit unpredictable or require design modifications for each site.

  Both onshore and offshore wind development will be critical to the achievement of a non-carbon fuel economy and the government is working to address both technical and non-technical barriers to deployment for both. The technology route maps for onshore and offshore wind development in the UK suggest that the major issues are the planning framework for both onshore and offshore wind and foundation design and installation techniques for offshore wind.

  Onshore wind is an extensively deployed and commercially viable technology and so relatively little government research and development money is allocated to it. The UK has been slow to develop its resource, however, although it has one of the best wind resources in Europe. The reasons for this are understood to be mainly impacts on civil and military aviation interests and public perception. The former barrier is being addressed through the Aviation Interests Working Group which has representatives from the MoD, the CAA and government. The second is being addressed via work on regional targets and by funding for planning facilitation of £2.5 million.

  Offshore Wind requires further development, demonstration and assessment before it becomes a proven and commercial technology. Work on foundation design and installation techniques is being supported through the DTI R&D programme and early deployment is being supported through the £74 million capital grants programme run jointly by DTI and NOF. Planning barriers for offshore wind are being addressed via a series of studies leading to a strategic framework for offshore wind, the consultation document for which will be published in the Autumn of 2002.

  The Government is a signatory to the IEA Wind Agreement which aims to exchange information and promote R&D into the development of technologies for harnessing wind energy and for removing barriers to its deployment.

25.  ENERGY-FROM-WASTE

  The Government is keen to support the development of this sector, as it can play an important part in waste management, increase the recovery of value from waste and make some contribution to offsetting the environmental burden of fossil-fuel based energy production. Technology for combustion of waste is well established on a commercial scale in the UK, whereas new technologies (such as the "advanced conversion technologies" of gasification, pyrolysis and anaerobic digestion) are less established. The Government hopes to encourage the development of these new technologies through the Renewables Obligation. Where conventional combustion of waste is proposed, it should include a combined heat and power system wherever possible—to ensure that energy recovery is maximised.

October 2002


18   British Energy Annual Report and Accounts 1999-2000-R&D spend of £19 million, p 28. Back

19   BNFL's overall spend on R&D in 2000 amounted to £96 million, compared to £81 million in 1999-BNFL Annual report and Accounts 2000 p 22. Of the £96 million approximately 50% was spent on plant support activities. Back


 
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