Memorandum 34
Submission from East Midlands Development
Agency
SUMMARY
1. The East Midlands Development Agency
(emda) recognises both the economic risks as well as the opportunities
that the new energy agenda presents and has worked to ensure they
are reflected in the Regional Economic Strategy, in its own Business
and Corporate Plans and in the Regional Energy Strategy priorities.
2. emda would like to bring a number of
points to the notice of the Committee, in part relating to clarity
of the terms of reference, but mainly in response to the areas
in which the Committee are seeking information. In particular,
we believe that the diversity of the technologies must be recognised
as well as the risks associated with the perception that activity
(deployment) equals progress.
3. emda would like to emphasise the need
to review the approach to "demonstration" with respect
to replicability, return on (public) investment and relationship
with actual deployment. There is also a need to integrate consideration
of barriers to deployment into the R&D of the technologies
themselves rather than consider deployment or integration issues
as a separate or secondary issue.
4. Finally emda would raise with the Committee
the role that buyers (public and private) should play in encouraging
new technologies to market as well as demonstrating and building
confidence in them.
INTRODUCTION
5. East Midlands Development Agency is one
of nine Regional Development Agencies in England set up in 1999
to bring a regional focus to economic development. We work across
a broad set of areas that are important to those that live and
work in the East Midlands, such as:
— enterprising communities;
— international trade and inward
investment;
6. Part of our work includes the development
of a Regional Economic Strategy, setting out the regional investment
priorities. "A Flourishing Region" is the third Regional
Economic Strategy (RES). It sets out our aspirations and vision
for the region over the next decade or so to 2020. Its production
follows the most extensive consultation process we have ever undertaken
and is informed by the most comprehensive evidence base assembled
on the East Midlands, its economy and its strengths and its challenges.
A Flourishing Region can be found at http://www.emda.org.uk/res.
7. Energy (and renewable energy) technologies
apply across the region and to all sectors and this is reflected
in the RES in two of its three main themes:
— Raising Productivity: recognising
the benefits to our businesses in both developing and exploiting
as well utilising new energy technologies.
— Achieving Sustainability: recognising
the important role energy has to play in terms of natural resources,
wellbeing and quality of life and addressing environmental concerns
such as climate change.
8. The RES identifies Priority Actions that
are important to the regional economy and emda has a key role,
working with appropriate partners, to take them forward. Our regional
aim in terms of energy (and resources) is "To transform the
way we use resources and use and generate energy to ensure a sustainable
economy, a high quality environment and lessen the impact on climate
change".
9. emda has worked with the East Midlands
Regional Assembly (EMRA) and the Government Office for the East
Midlands (GOEM) to respond to national policy objectives and drive
forward the regional opportunities. We have jointly published
a Regional Energy Strategy. The vision of the Regional Energy
Strategy is that "The East Midlands will take a lead in moving
towards a low carbon future that benefits our economy, protects
our environment and supports our communities".
10. The aims of the Strategy are to achieve
a low carbon future that will deliver economic opportunities through
the exploitation of new markets and technologies as well as the
efficient use of resources; ensuring that low carbon design and
construction through the planning and regeneration process deliver
affordable warmth and cooling and, through a reduction in green
house gas emissions, ensure that changes experienced in our climate
are within limits that we can adapt to.
11. In support of delivering this strategy,
emda is leading on the "Energy for Enterprise" work
stream.
12. The priorities for this work stream
are as follows:
— Energy for Enterprise, emda
leading.
— Business Performance—Improving
the productivity and performance of businesses in the region through
more efficient use of energy and resources.
— Economic Exploitation—Enabling
the region to exploit new economic opportunities from new and
emerging technologies, processes and services.
— Energy Capacity—Supporting
an appropriate regional level of generation and supply of energy
to meet future energy needs reliably, securely and in a sustainable
way.
13. Set out below are the key issues that
emda would like to raise with the Committee.
Issues for consideration
14. The Committee should be clear in its
terms of reference about whether it is examining electricity-producing
technologies or energy-producing technologies. If it is the former
then this should be made more explicit in the wording. emda would
prefer the latter as we believe that once again the scope of an
examination into this area is likely to be dominated by the need
to fulfil a target (ie proportion of electricity produced from
renewables) rather than the need to explore and understand the
evidence.
15. If it is the latter, then technologies
such as solar thermal, biomass heat, wider bio-fuels (including
automotive and even aviation) and more process-based approaches
such as passive ventilation (and heating/cooling) for buildings,
heat recovery technologies and perhaps CHP should be included.
16. emda also believe that fuel cells (and
hydrogen for that matter) can only be considered a renewable energy
technology if the fuel (hydrogen) is produced in a renewable-energy
system. If hydrogen formed from natural gas is used, then it could
be a very efficient producer of electricity, but it is not renewable.
17. On 27 October 2005 in a House of Lords
debate on energy security, Lord Sainsbury (then Parliamentary
Under-Secretary, Department of Trade and Industry), said "...nuclear
is a renewable source of energy—it clearly is so. I am very
happy to agree that nuclear is a renewable source of energy."
Perhaps the Committee should clarify this position with respect
to its Terms of Reference and whether this is indeed the Government's
position?
Current state of UK research, development and
demonstration (RD&D)
18. emda supports research and demonstration
in various ways but does not maintain detailed evidence of the
broad landscape. We would like to refer the Committee to the Energy
Research Partnership work to map the UK's university research
into energy; http://ukerc.rl.ac.uk
19. We do, however, from time to time, commission
specific reviews into areas and/or sectors that we are considering
supporting. We would be happy to share (on request) these reports
with the Committee: recently these have included (some are still
under way):
— Low Carbon and Hybrid Vehicle
Technologies;
— Biomass Markets Analysis;
— Energy Investment Prospectus;
and
— Renewable Energy & Waste
Management Sectors: identifying inward investment opportunities.
20. emda has worked closely with the Universities
of Nottingham, Loughborough and Birmingham in their bid to host
the "hub" of the new Energy Technologies Institute.
All three universities are world leading in a range of energy
research areas and their work on the bid has shown a combined
excellence. The Committee may wish to contact these universities
with a view to sharing the evidence base that they have developed.
21. emda has also directly funded consultancy
support to build the industrial RD&D base evidence in support
of this bid, but at the time of writing this work has not reported.
The Committee may want to view this report, expected by the end
of July.
Commercialisation of renewable energy technologies
22. One of emda's priorities for energy
(see above) is to support the exploitation (deployment) of these
technologies by our businesses both at home and abroad. One of
the key points to consider is that in many ways the technologies
exist as separate "sectors" in that they often do not
share the same market, supply chain, skills sets etc. For example,
ground source heat pumps have little in common with micro-wind
or PV. Similarly, fuel cell technologies have little in common
with wave and tidal.
23. To further complicate matters, often
the small scale version of the technology shares little with the
large scale, eg micro-wind involving single 5KW (max) turbines
and wind farm developments using 3MW turbines.
24. At the larger scale, commercial decision-making
based on return on investment drives deployment of renewable technologies,
whilst at the small-scale decisions on investment are based on
personal value judgements, often the desire to do something good
for the environment. The DTI will be commissioning (with joint
funding from a number of RDAs, including emda) research into consumers'
attitudes towards so-called micro-generation technologies, with
a view to better understanding the market place. This work will
not report until next year.
25. There is increasing evidence, however,
that some of these technologies are not efficacious at the small
scale. Carbon Trust work has suggested that small scale CHP units
may in fact increase CO2 emissions in comparison to
conventional best practice and some preliminary work discussed
in one of our regional universities suggests that house-mounted
wind may be so affected by neighbouring buildings as to reduce
its stated capacity by more than 60%.
26. The danger that the public makes investments
based on perceived value that is subsequently called into question
by research and performance evaluation could lead to deepening
scepticism—even a backlash—and of course a great deal
of wasted investment potential.
27. Adequate and effective demonstration
of new energy technologies is essential. Historically, the public
sector has been guilty of what might be termed PPP (Perpetual
Pilot Projects) when it comes to demonstration. In fact most publicly
funded demonstration projects demonstrate that almost anything
can be achieved if there are large grants available. By their
(grant dependent) nature they are not replicable and the funding
tends to support the actual installation far more than it supports
the demonstration and little attention is applied to how the demonstration
activity accelerates deployment (or measuring its effectiveness).
28. Where focus is applied to the R&D
of a specific technology the institutions involved are rarely
tasked with better understanding the wider set of "enabling"
technologies and competencies that actually determine the rate
of deployment. These might include performance of essential supporting
technologies and components (eg reliability and longevity of inverters
for Photovoltaics), the manufacturing capabilities, capacities
and supply chain issues, installers' and wholesalers' skills and
competencies, specifiers' competencies and understanding, building
or other system integration issues.
29. All of these and more determine the
rate of successful deployment yet they are usually dealt with
as additional research and support programmes separate from the
technology development. More rapid commercialisation could be
achieved if deployment issues were considered alongside technology
development.
30. Large buyers, public and private, could
have a more active role in pulling technologies to market, growing
supply chain capacity and demonstrating (confidence in) technologies.
The public sector has recognised this for some time but downward
pressure on spending is stifling innovation and competency in
risk management when it comes to new technologies is questionable.
The private sector on the other hand is in the main a long way
from performing this role in the way they procure goods and services.
31. It is commonly cited that the energy
labelling on white goods enabled the consumer to make better choices
when buying new appliances and as a result selected better performing
products; influencing manufacturers to strive towards improving
their products' performance. In fact the pressure was far more
subtle. Evidence suggests that it was in fact the large buyers
(retail chains etc) that, in looking for product differentiation,
chose the energy labels as much out of convenience than conscience.
It was thus the professional buyers' approach that influenced
the market whilst simultaneously imposing a choice, albeit beneficial,
on the end consumer.
RECOMMENDATIONS
The Committee should:
32. seek to clarify the range of technologies
that are under scrutiny so as to ensure a clear outcome.
33. consider the diversity within the renewable
energy technologies sectors in terms of scale, market place, supply
chains and skills and competencies so as to reflect the variety
of needs in its recommendations.
34. consider the benefits as well as the
risks associated with small-scale deployment of micro-generation
technologies in order to inform the buyer of the potential performance
of his or her investment.
35. scrutinise the approach to the demonstration
of renewable energy technologies to reduce the incidence of PPPs
and increase the effectiveness of deployment and replication (public
purse return on investment).
36. review the way that "enablers"
of deployment are accommodated in the RD&D process for new
renewable energy technologies so that it may recommend a more
efficient approach that integrates deployment issues with the
technology development.
37. consider the role that large buyers
should be encouraged to play; in particular how private and public
buyers might collaborate to share risk (and risk management skills)
in demonstrating and accelerating energy technologies to the wider
market.
July 2007
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