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


APPENDIX 38

Memorandum submitted by Powergen UK

INTRODUCTION

  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 Framework Programme.

POWERGEN R & D

  4.  Powergen's primary interest in R & D is largely asset-based, with a strong emphasis on generation—both 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 carbon emissions;

    —  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 fossil fuels;

    —  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 capital subsidiary.

  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.

RELATIONS WITH ACADEMIC INSTITUTIONS AND OTHER CENTRES OF EXPERTISE

  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.

RENEWABLE GENERATION DEVELOPMENT

  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.

ENERGY EFFICIENCY TECHNOLOGIES

  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 gas boiler.

THE DIRECTION OF THE GOVERNMENT'S R&D EFFORT

  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 application.

  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.

October 2002



 
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