Memorandum submitted by Powergen UK
1. Powergen UK is one of the UK's leading
integrated electricity and gas businesses with interests in electricity
generation and distribution and the supply of electricity, gas
and telecommunications. It is a major trader on wholesale energy
markets. Powergen generates electricity from coal, gas and oil
and has developed significant renewable and CHP businesses. It
has been part of the E.ON Group since 1 July 2002. On 21 October,
Powergen acquired the UK retail and generation businesses of TXU
Europe, principally TXU's 5.5 million electricity and gas customers,
its three coal-fired power stations and the Citigen CHP scheme.
The acquisition requires approval from the European Commission.
TXU had previously submitted evidence to the inquiry concerning
their interests in non-carbon and low carbon R & D area.
2. Powergen is a major developer of renewable
generation and has 120MW of operational wind turbines with a further
200MW under development. It is also exploring the development
of biomass projects both in purpose built plants and co-fired
with coal in existing power stations. Powergen also operates the
largest hydro plant in England and Wales, a 50MW scheme at Rheidol.
3. As part of the E.ON group, Powergen has
access to the R & D activities carried out by other members
of the group. In particular Powergen's Power Technology Centre
and E.ON Engineering collaborate on the direction of their R&D
programmes and have bid jointly for a number of carbon capture
and storage projects to be funded as part of the EU's sixth R&D
POWERGEN R &
4. Powergen's primary interest in R &
D is largely asset-based, with a strong emphasis on generationboth
as an operator of fossil and renewable generating plant and as
a purchaser of proven generating plant both now and in the future
from plant manufacturers. Powergen also has an interest in the
deployment of energy saving technologies to reduce the energy
consumption of customers and to meet its obligations to secure
energy savings under the Energy Efficiency Commitment scheme.
5. Powergen's own R & D programme is
carried out primarily by its Power Technology Centre in Nottinghamshire,
although other parts of the company are also involved in demonstration
work. The Centre has 220 staff who conduct both R & D and
sell expertise to internal and external clients. About 50% of
its income comes from the sale of services externally which has
helped the Centre to continue to operate despite the severe pressures
on the industry to cut costs in response to the steep and sustained
fall in power prices. The Centre has a 1MW combustion rig, built
in 1992, which is a unique facility capable of trialling a range
of fuels, including different forms of biomass. Powergen's R&D
activities in relation to the development of renewable energy
technologies or technologies which reduce CO2 emissions
from fossil-fired plants focus on:
tracking the development of non-carbon
power generation technologies and carbon reduction technologies
which could become options for us in the longer-term;
supporting the ability of Powergen's
renewables business to develop on and off-shore wind power projects
and the generation of electricity using biomass either in purpose-built
plants or co-fired with coal in operating power stations;
exploring means of improving the
environmental performance of Powergen's existing fossil-fired
plant, including improvements inn operating efficiency which reduce
carrying out work to advise Government
on the direction of its R&D effort.
6. Powergen's own R&D activities relevant
to non-carbon or low carbon technologies include:
using Computational Fluid Dynamics
(CFD) modelling techniques to predict wind yields and optimise
the deployment of wind turbines to maximise energy output;
using the 1MW combustion rig to test
the combustion characteristics of different types of biomass;
modelling and design work of coal
gasification cycle, which has the potential to facilitate the
removal of CO2 from the flue gases arising from burning
tracking the development of photovoltaics
and CHP applications for domestic and small business use to develop
the option of bringing these technologies to market;
carrying out research into the combustion
of fossil fuels in pure oxygen to produce almost pure CO2
and thus facilitate its removal;
tracking fuel cell development, including
the testing of novel domestic CHP applications for E.ON's venture
7. Powergen is represented on The DTI's
Advisory Power Generation Task Force and the Advisory Committee
for Clean Coal Technology. Powergen is carrying out two projects
for the DTI relevant to the generation of power from biomass aimed
at assessing the corrosion potential of biomass fuels and handling
and processing issues.
8. Powergen works, primarily as a member
of a Working Group of the Engineering and Physical Sciences Research
Council, to help universities ensure their work is focussed on
areas of practical commercial application. Powergen's involvement
enhances their ability to obtain funding from Government. This
collaboration with universities also helps ensure that graduates
have the skills which are relevant to the power industry and supports
Powergen's own recruitment of engineering and scientific staff.
9. Carbon issues are, by definition, global
and the UK is only a small player. The focus of UK energy R&D
has traditionally been parochial and the future thrust in this
area should be to a larger international engagement. To this end,
Powergen's R&D has retained an international perspective and
also shares expertise through its membership of the power industry
research associations of EPRI in the USA and of VGB in Germany.
10. Powergen Renewables Limited (now wholly
owned by Powergen after buying out the interest of its joint venture
partner, the Abbot Group, for £57 million earlier this month),
is actively involved in the demonstration of off-shore wind technology
and is a member of the consortium which built the UK's first offshore
wind farm off Blyth in Northumberland.
11. Powergen has no current operational
biomass capacity but has plans to develop and build biomass capacity
through a combination of co-firing biomass with coal and from
developing and building dedicated biomass generating stations.
In order to gain the necessary experience in co-firing biomass
in existing fossil fuel fired plants, it is intended to undertake
a limited trial at Kingsnorth power station in Kent starting on
18 November 2002 and extending into January/February 2003.
12. The biomass fuels proposed for the trial
will be "clean" biomass, meeting the definition within
the Renewables Obligation and being exempt from the requirements
of the EU Waste Incineration Directive. Typical fuels would be
palletised sawdust and could comprise clean wood, cereal husks,
citrus pulp, olive cake and palm kernels.
13. There is considerable experience in
Europe and North America with co-firing biomass with fossil fuels
both by introducing the biomass into the existing coal milling
plant and by providing dedicated biomass mills. Powergen has extensively
researched the experience to date and undertaken a number of plant
visits in Europe prior to formulating the trial protocol for Kingsnorth.
In particular, the E.ON Benelux plant at Maasvlakte near Rotterdam
has very similar milling and boiler plant to Kingsnorth and has
been satisfactorily co-firing a range of biomass fuels for the
last six years.
14. There is active development of dedicated
biomass stations focused on developing a standard specification
that initially will utilise state of the art technology rather
than demonstration or advanced technology. The key in this area
is establishing a sustainable and secure fuel supply. Powergen
is keen to encourage the development of new supply chains for
biomass. In particular the Government is keen to establish energy
crops as a key fuel in the growth of the bioenergy sector. The
Bioenergy capital grant scheme has been introduced specifically
to do this. Powergen has submitted an application under priority
1 of this scheme and is at the forefront of developing associated
supply chains on a large scale.
15. Powergen explores the potential of innovative
technologies to help reduce the energy comsumption of consumers
and to meet its obligations to achieve energy savings under the
EEC scheme. For example it has recently announced its intention
to install ground source heat pumps in 1,000 homes in the UK's
social housing sector. The technology, which extracts heat from
the ground, causes 50% less carbon dioxide emissions than a conventional
16. Powergen believes that the role of government
in this area is to carry out R&D aimed at ensuring that the
Government has a number of technological options for securing
major reductions in CO2 emissions and achieving its
other energy policy objectives. Its R&D efforts should focus
on areas of research which will help bring technologies to the
point where industry can assess their suitability for commercial
17. There are potentially a wide range of
different technologies which the Government could support and
it is important for the Government to assess these against a mix
of technical and economic criteria to identify those technologies
where expenditure is likely to provide the most value for money.
In assessing value for money, the Government will need to consider
the contribution these technologies can make to all its energy
policy objectives, not only the reduction of carbon emissions.
This means that the Government also needs to consider value in
relation to its objectives of maintaining secure and diverse energy
supplies and of ensuring energy prices remain competitive.
18. In this context the role of carbon capture
and storage technology has particular value. This is because this
technology can both contribute to lowering carbon emissions from
coal or other fossil-fired plants and to maintaining coal-fired
generation as part of a diverse fuel mix for power generation.
The technology involves the extraction of CO2 from
the gases arising from the combustion of fossil fuels, its transportation
away from the site under high pressure and its storage in geological
formations such as a depleted oil field. It can also be used to
facilitate additional oil recovery from oil reserves. The UK is
effectively positioned for this technology given its use of coal
for power generation and its access to storage in depleted oil
fields in the North Sea.
19. Both the USA and Canada have been exploring
the potential of this technology for some time and there is already
a demonstration of CO2 oil enhanced recovery at Weyburn
in Canada. Both countries have a significant RD&D programme
in CO2 carbon capture and sequestration. The EU is
now responding to the need to fund R&D in this area. It is
one of the few opportunities in the new EU Framework 6 programme
that pertains to "conventional" electricity production.
20. Carbon capture and storage applied to
existing coal-fired plants is potentially one of the most cost-effective
routes for carbon reduction. Capture efficiencies are high in
amine scrubbers (up to 90%), but capital costs are likely to be
high and the effect on plant efficiency is significant (more than
10 percentage points). With this impact the incentive to improve
the CO2 capture technology is great and this should
be a focus for future research. Storage of CO2 also
raises legal issues (is CO2 a waste and is it therefore
covered by the London Convention concerning disposal in the North
Sea?) and environmental questions (how permanent is the storage?).
These are issues which need further investigation.
21. Powergen expects the review of the case
for a clean coal demonstration plant, carried out by the DTI last
year and concluded in December 2001, to lead to an increase in
the existing cleaner coal technology budget to allow for a level
of CO2 related research and perhaps some clean coal
"component" demonstration. Powergen believes that the
Government should give serious consideration to the funding of
demonstration of carbon capture and storage technology (probably
in a depleted North Sea field) on an existing coal-fired plant.
22. However, pursuit of carbon capture and
storage technologies R&D for application to existing coal
plants would only make sense in the context of a government energy
policy which recognised a role for existing coal-fired power stations
within a diverse fuel mix, and which avoided undermining the medium
term viability of existing coal-fired plants through other measures
such as emissions trading which could lead to their closure before
carbon capture and storage technologies could be deployed. This
reinforces the need for joined up thinking between the Governments'
energy policy and R&D objectives.
23. Powergen hopes these issues will be
addressed further in the Governments' forthcoming White Paper
on energy policy.