Memorandum 11
Submission from EDF Energy
INTRODUCTION TO
EDF ENERGY
1. EDF Energy is one of the UK's largest
energy companies with activities throughout the energy chain.
Our interests include coal and gas-fired electricity generation,
combined heat and power plants, electricity networks and energy
supply to end users. We have over 5 million electricity and gas
customer accounts in the UK, including both residential and business
users. We are part of EDF Group, one of the largest energy companies
in the world. EDF Group maintains a large energy research and
development capability in-house.
2. EDF Energy already contracts with a wide
range of renewables generators, both bilaterally and via the Non-Fossil
Purchasing Agency, and in response to the Renewables Obligation
and consumer demand is aiming to develop 1,000 MW of renewable
generation by 2012. This includes a Section 36 application for
a 90 MW offshore windfarm off the coast of Teeside. We also co-fire
biomass and energy crops at both our coal-fired power stations
and are assessing a number of renewable microgeneration technologies.
ELECTRICITY GENERATION
TECHNOLOGIES
Drivers for renewables deployment in the UK
3. There are a number of drivers for increasing
the level of renewable generation/energy in the UK at present
including:
— increasing demand for renewable electricity
by consumers, in particular in the business/government sector
created by financial benefits available from Climate Change Levy
Exemption Certificates and corporate social responsibility initiatives;
— change to the planning system and
building regulations whereby new developments will be required
to deliver a defined percentage of their energy demand from low
or zero carbon sources; and
— financial support from the Renewables
Obligation.
These are likely to be supplemented in the near
future by:
— the introduction of mandatory renewable
energy targets by the European Commission, although the level
of any such target for the UK is, as yet, unclear; and
— evolution of schemes such as the
Carbon Emission Reduction Target which may move energy suppliers'
business models further towards energy services.
Rate of deployment of renewables generation technologies
in the UK
4. To-date the primary renewables support
mechanism, the Renewables Obligation, has been designed to enable
the deployment of the most economic renewables technologies—primarily
landfill gas, onshore wind and co-firing. Other technologies have
only been deployed where supported with additional grant funding
(eg Low Carbon Buildings Fund, Round 1 offshore grants, capital
grant support for biomass plants).
5. Looking forwards the proposed banding
of the Renewables Obligation will provide greater financial support
for pre-commercial technologies such as offshore wind and dedicated
biomass that are relatively more expensive and emerging technologies
such as tidal / wave technologies that are inherently more expensive
and not yet developed commercially.
6. However, a number of factors may continue
to limit deployment including:
— attractiveness of the UK (level and
stability of support mechanisms) relative to other jurisdictions
both for investors and as markets for renewable generation equipment
manufacturers. A key part of this is regulatory uncertainty—the
RO has been amended every year since its inception;
— delays caused by the current planning
regime. We welcome the proposals contained within the Planning
White Paper for consenting decisions on major energy infrastructure
projects to be decided by an Infrastructure Planning Commission
(IPC) using National Policy Statements as their primary consideration.
However we remain concerned as to whether the proposals for smaller
projects will have a material effect on the probability of success
or speed at which their decisions will be reached and at some
aspects of the proposed IPC process such as the absence of a definite
time limit at the preliminary stage;
— delays in connection to the transmission
system, particularly in Scotland;
— the current RO banding proposals
may not be sufficient to deploy some technologies. For example,
later offshore windfarms may be further offshore and therefore
incur increased costs associated with their connection, location
in deeper water and requirement for larger machines. Uncertainty
concerning offshore projects also remains from the as yet unfinalised
offshore transmission charging regime;
— immature and limited scope support
frameworks for low carbon heat; and
— lack of supply of qualified engineers
from British Universities.
Feasibility, cost, timescale and progress in commercialising
7. Theory suggests that as greater volumes
of a particular technology is deployed, unit costs should reduce.
Recent experience has demonstrated that other factors may have
a greater impact than this learning curve effect. For example,
wind turbine costs have increased in the last couple of years
because commodity prices have risen significantly, bottlenecks
in turbine supply have occurred and other markets have offered
a greater financial reward and/or more stable mechanism for investors.
8. When assessing costs as well as looking
at each technology in isolation, consideration should also be
given to the total cost/benefit for energy system users associated
with each technology, ie a holistic approach. For example:
— wind generation provides a limited
capacity credit and therefore to maintain security of supply at
a specific standard additional non-intermittent plant is required
to provide the same effective capacity margin;
— additional operational reserves may
have to be held by the System Operator to respond to rapid changes
in wind speed; and
— predictable distributed electricity
generation technologies may provide a benefit from reducing the
requirement for investment in the distribution system.
Carbon Footprint
9. A number of organisations (eg International
Atomic Energy Agency, Parliamentary Office for Science and Technology)
have produced recent reports on lifecycle carbon emissions from
different technologies which present a broadly consistent picture.
Renewables technologies typically produce significantly less than
100gCO2/kWh on a lifetime basis (and frequently < 50gCO2/kWh).
The only equivalent large scale energy generation technology is
nuclear power. The carbon footprint of heat pump technologies
is dependent on the CO2 intensity of electricity used
to power the device—as the UK's electricity generation sector
progressively decarbonises these devices will develop a progressively
smaller carbon footprint.
Research and Development activity in the UK
10. We see the introduction of the Energy
Technologies Institute (ETI) as a major step forwards in galvanizing
UK research and development efforts into low carbon energy technologies,
including renewables. EDF Energy has been supporting government
efforts to establish an Energy Technologies Institute since the
Chancellor Gordon Brown announced its creation in the 2006 budget.
We are prepared to commit up to £5 million per annum over
10 years to the ETI along with a number of other industrial partners
with this funding matched by government.
11. The Institute's remit is to accelerate
the development of secure, reliable and cost-effective low-carbon
energy technologies towards commercial deployment. The Institute
will focus on a small number of specific R&D projects relevant
to industry, commissioning and funding and supporting projects
run by third party researchers and consortia. This will include
R&D in support of demonstration (including possible funding
for small scale pre-commercial demonstrations) and eventual deployment,
selected from within a framework of the following general themes:
— large scale energy supply technologies;
— energy security of supply;
— end use efficiency/demand management;
— small scale energy supply technologies;
— support infrastructures (such as
energy supply networks, storage skills and capacity); and
— alleviating energy poverty.
Intelligent Grid Management—Current state of
UK research and development
12. The current UK university research base
is strong, albeit this strength is concentrated within a relatively
small number of key universities. That said, there is generally
a strong culture of collaboration between the more involved universities
(eg Manchester University, University of Strathclyde, and Imperial
College). To exploit our UK capability fully will require intensive
investment coupled with the necessary intellectual resource (ie
good quality PHD/research students) becoming available to feed
growth.
13. The UK commercial sector research base
is now limited to the relatively few remaining UK based manufacturers.
However, this is largely a function of the fact that the major
manufacturers are now global players with centralised R&D
facilities.
14. In terms of Distribution Network Operator
(DNO) R&D activity, Ofgem's Innovation Funding Incentive (IFI—which
took effect from April 2005) has catalysed a significant upturn
(see also 27 below).
15. Specific examples of intelligent grid
systems under development by EDF Energy in collaboration with
strategic partners include:
(a) AURA NMS which will provide automated
reconfiguration of a distribution network to optimise its efficiency
in terms of distributed generation export, electrical energy storage,
and electrical losses; and
(b) FENIX which will explore the feasibility
of aggregating the outputs of large volumes of small distributed
generators to form Large Scale Virtual Power Plants (LSVPPs) which
can then participate in the trading and system balancing market.
16. Notwithstanding the above, in terms
of developing intelligent grids, there needs to be a much stronger
UK commitment to the EU Technology Platform "SmartGrids"
Strategic Research Agenda[11].
INTELLIGENT GRID
MANAGEMENT—FEASIBILITY,
COSTS, TIMESCALES
AND PROGRESS
IN COMMERCIALISATION
(RELIABILITY AND
ASSOCIATED CARBON
FOOTPRINTS)
17. The decline in the UK's traditional
heavy industrial base will be a limitation in terms of our immediate
future manufacturing and hence commercialisation capability. The
UK contribution in the shorter term (five years) is more likely
to be in the form of designers and implementers of innovative
applications utilising global products and solutions in new and
cost-effective configurations, based on our knowledge of advanced
market liberalisation and de-regulation.
18. In the short to medium term (five to
10 years), the manufacturing base will continue to migrate towards
low cost countries. However, given our maturity in a liberalised
market and our innate ability to innovate, the UK could dominate
in the high-end of the value chain. In terms of manufacturing,
the greatest UK value is likely to lie in development of control
systems, software and modelling (and hence in licensing), and
also in terms of consultancy and knowledge transfer. A strong
UK R&D base would also support our universities and enable
the UK to attract key skills.
19. For successful commercialisation, delivery
mechanisms must be improved to transfer academic work into real
applications. The relevant "intelligent grid" applications
in which the UK could then become successful include: software;
light current solutions (eg control of FACTS[12]
devices); Wide Area Monitoring and Protection systems (WAMS/WAPS);
and Intelligent Grid Management applications.
20. Given the rapid development of the European
"SmartGrids" forum and the USA Electrical Power Research
Institute (EPRI) "Intelligrid" programme, coupled with
the "developing economy" countries following an accelerated
pathway to low carbon economies, the potential world market over
the next five to 15 years for intelligent grids is extremely strong
(but also potentially very competitive).
21. In terms of commercialisation routes,
investment will be forthcoming provided that the risks can be
assessed and managed. This in turn requires regulatory uncertainty
to be as low as possible, as the technology risks are reasonably
high. Given the envisaged UK value opportunities (above) there
is a strong established UK technological base that could benefit
from measures to grow the market.
22. In terms of key UK commercial players,
this would include the major electricity distribution infrastructure
providers and distributed generation providers (eg E.ON, EDF Energy,
Scottish and Southern Energy, Scottish Power, Iberdrola, RWE,
etc.) and also the key (global) manufacturers who are strong in
the UK (eg ABB, Areva, GE, Siemens, etc.). Competition will inevitably
materialise from the countries with fast growing economies and
(still) a low cost base—ie China and India, and also potentially
Russia.
23. In terms of successful commercialisation,
the most critical factors include:
a) demonstrating deliverability by application
and deployment of new technology;
b) making available further funds for research
and development;
c) commitment of resources deeply focused
on technology transfer;
d) conviction to drive to a vision, and a
will to deliver a competent solution;
e) a sensible planning regime and a strong
commercial framework based upon science and engineering, allowing
markets to deliver within the vision framework;
f) removal of identified barriers to technology
adoption, commercial deployment, environmental acceptance, and
cultural change; and
g) continuing to provide leadership to, and
engagement with, the European SmartGrids Technology Platform.
24. In the UK, by 2020, intelligent grids
will have reached a stage of partial maturity, but far reaching
emission targets (eg to 2050) may give rise to even greater network
developments, for example to accommodate fuel cell and storage
technologies, to accommodate an increasing interface with electrically
powered transportation systems.
INTELLIGENT GRID
MANAGEMENT—UK GOVERNMENT'S
ROLE IN
FUNDING R&D AND
PROVIDING INCENTIVES
FOR TECHNOLOGY
TRANSFER
25. As well as direct funding of R&D
(eg through the DTI's Sustainable Networks Programme) the Government's
role is primarily in establishing the necessary stakeholder groups
to jointly steer R&D effort and addressing barriers to technology
transfer (noting that these barriers might be not only technological,
but also constitutional, commercial and regulatory in nature).
26. The DTI/Ofgem-sponsored Electricity
Networks Strategy Group (ENSG) and its associated Transmission
and Distribution Working Groups (TWG & DWG) have the capacity
to make a key contribution in terms of implementing Government
policy. The ENSG has a brief to consider the technical, commercial
and regulatory issues surrounding the development of "intelligent"
distribution grids that will support a low carbon economy.
27. Closely linked to the work of the TWG
and DWG is the work of the DTI sponsored Centre for Distributed
Generation and Sustainable Electrical Energy (CDGSEE). The CDGSEE
was established in 2004 and the Government has allocated a further
£1 million to continue and expand the CDGSEE's activities
relevant to the development of intelligent grids.
28. A particular Government (Ofgem) initiative
has been the introduction of the Innovation Funding Incentive
(IFI) which encourages British DNOs to engage in relevant R&D.
A further example is the complementary Distributed Generation
(DG) and Registered Power Zone (RPZ) mechanisms. The IFI scheme
alone gives access to some £16 million/year for distribution
network related R&D. This has recently been extended for the
period to 2015 and to include transmission networks.
29. The development of intelligent grid
supporting technologies will require a sustained high level of
R&D investment but, given the appropriate market signals,
such investment will be provided by manufacturers (with support
from the DNOs through their IFI allowances in some cases). Government
funding is best directed at creating the required "pull-through"
environment that will accelerate the development of the market.
30. Currently, the key constraint is in
not yet feeling the degree of technology pull that would create
the confidence for a adoption by the key stakeholders in this
area of technology. The Energy White paper proposals should provide
a catalyst, but more closely directing Government focus towards
this area of technology is necessary.
31. The UK is currently challenged in terms
of skills associated with the implementation of intelligent grids.
Barriers include a relatively small number of specialists, a rising
age profile, and a level of inertia in terms of only just beginning
to realise the extent of the challenges of a low carbon economy.
Training focus needs to move more rapidly away from "traditional"
power engineering concepts to modern intelligent grid skills which
better reflect developments in technology and applications and,
in particular, the emerging recognition that social, environmental
and economic sustainability are essential elements of future intelligent
grids.
July 2007
11 See http://www.smartgrids.eu/ Back
12
Flexible Alternating Current Transmission Systems-or "FACT-lite"
technologies which have been adapted for application on distribution
networks Back
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