Select Committee on Innovation, Universities, Science and Skills Written Evidence

Memorandum 11

Submission from 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.


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;

    —  transport;

    —  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].


  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.


  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 Back

12   Flexible Alternating Current Transmission Systems-or "FACT-lite" technologies which have been adapted for application on distribution networks Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2008
Prepared 19 June 2008