Memorandum 39
Submission from Institution of Engineering
& Technology
EXECUTIVE SUMMARY
1. The IET believes that developing a diverse
portfolio of renewable technologies is crucial for the long term
sustainability of our energy system, for the UK to meet its national
and international environmental challenges, and for the economic
benefits that a strong position in this market can bring.
2. Renewables currently meet a very small
fraction of our total energy needs, and it will take decades of
sustained support before they begin have an appreciable impact.
This is an enormous long term challenge that will require strong
and sustained Government commitment, as apart of a long term multi-stranded
energy policy.
3. Government must adopt a better integrated
strategy covering the whole innovation chain, to maximise the
chances that successful R&D will deliver successful products.
Piecemeal policies have delivered mixed results, mainly limited
to the deployment of mature lower-cost technologies at the expense
of larger-scale and emerging technologies.
4. To improve support for renewables, we
recommend that Government should
— Be more selective in setting priorities
and allocating funding for early stage research;
— Be more successful at leveraging
support for costly demonstration and commercialisation;
— Take advantage of the potential for
international partnerships;
— Pre-emptively identify and address
barriers to deployment, including the supply of technical skills.
WRITTEN EVIDENCE
Below we present our detailed evidence in response
to the questions posed by the Committee.
The current state of UK research and development
in, and the deployment of, renewable energy-generation technologies
including: offshore wind; photovoltaics; hydrogen and fuel cell
technologies; wave; tidal; bioenergy; ground source heat pumps:
and intelligent grid management and energy storage.
5. Renewable energy technologies cover a
wide spectrum in terms of level of maturity, scale, cost and potential
benefits. A summary of the current state of development, deployment
and future potential of renewable generation technologies in the
UK (see Table 1) shows that many technologies are well advanced
in terms of basic R&D, and some are already deployed on a
commercial scale. However, others remain uncompetitive in terms
of cost, while a number of newer technologies require support
to effect the transition from R&D to full-scale demonstration
and commercial deployment.
6. Renewables currently meet a very small
fraction of our total energy needs, and it will take decades of
sustained support before they begin have an appreciable impact.
This is an enormous long term challenge that will require strong
and sustained Government commitment. Currently renewables supply
under 5% of UK electricity and under 2% of total UK energy. By
contrast, fossil fuels meet 90% of the UK's energy needs now,
and it is hard to see their contribution falling below 50% over
the next 50 years.
7. The potential for the contribution of
renewables in the short to medium term is limited by the fact
that we are not starting with a blank sheet of paper but must
operate within the constraints of an inherited energy system.
The critical and pervasive nature of energy infrastructure in
advanced industrialised nations such as the UK would make it extremely
difficult to implement some of the more radical scenarios that
have been put forward for renewables and distributed energy with
the urgency required to meet our goals. Therefore, strong support
for renewables will have to be taken forward alongside a diverse
set of measures to reduce energy demand and promote a broader
suite of low carbon technologies.
The feasibility, costs, timescales and progress in
commercialising renewable technologies as well as their reliability
and associated carbon footprints.
8. Projections of costs and timescales for
the commercialisation of energy technologies have to rely on many
assumptions about the structure of the markets the technology
will operate in and the availability and nature of government
and other support for R&D and deployment. They should therefore
be used with caution. Several studies of the costs of renewable
technologies are available, and we will not add to them, but will
instead put forward a couple of observations pertinent to interpreting
them.
9. The cost of energy technologies is in
part a function of their rate of deployment. Historically, the
cost of renewable technologies in Europe has decreased by between
15% and 30% for each doubling of installed capacity.[113]
Based on the experience of the last few decades, the time required
for energy technologies to reach maturity is of the order of 10-20
years, during which time cost is likely to fall by a factor of
3 to 4 times.
10. Many of the renewable technologies available
today (eg wind, solar thermal, first generation PV) have already
been in development for several decades, and therefore we should
not expect their costs to continue to reduce at such a rate in
future. For example, with an expanded market for microgeneration
technologies we might expect their cost to come down 30-50% over
the next 15 years.
The UK Government's role in funding research
and development for renewable energy-generation technologies and
providing incentives for technology transfer and industrial research
and development.
Context and principles
11. The UK Government has a crucial role
to play in bringing forward renewable technologies. Developing
a diverse portfolio of renewable technologies is crucial for the
long term sustainability of the energy system, for the UK to meet
its national and international environmental challenges and for
the economic benefits that a strong position in this market can
bring. Delivering these technologies within a market system at
the rate demanded by the climate change and security of supply
imperatives poses challenges that can only be overcome with strong
and sustained government support.
Review of current policies
12. Renewables and other emerging technologies
are now being developed in the context of a global technology
market, where funding and support has become considerably more
complex over the last 20 years. The UK has seen a dramatic change
in the structure of its energy industries. Today there is no indigenous
manufacture of large electrical generating equipment, and only
limited activity relating to electrical network equipment, most
or all of which is supplied from overseas. Against this backdrop,
both public sector and private sector energy R&D spending
has declined dramatically. At the same time, overseas manufacturers
are conducting ongoing R&D which directly benefits the UK
through the performance of the equipment purchased and installed,
but the expenditure is not recorded, even though in certain instances
it may even be incurred in the UK.
13. In principle, the main UK Government
policies to promote renewable energy technologies have been `technology
neutral' and `market based'. In summary, we believe that policies
have been designed in a piecemeal fashion and their results have
been mixed.
— The level of current R&D support
for renewables according to sources such as the UKERC Research
Register and the Research Councils ranges from a few thousand
pounds per annum for microgeneration and biofuels to a few million
each for photovoltaics, marine technologies and hydrogen and fuel
cells. The UK has a strong and capable research base to use this
funding effectively, but we suggest below that some of the funding
priorities may need to be reassessed (see s18).
— In addition to supporting basic research
through the Research Councils, government currently provides a
variety of capital grants for emerging technologies; however to
date they have lacked coordination and focus and as a result have
not had an appreciable impact. There are now proposals for new
institutional arrangements bringing together public and private
sector to enhance and focus funding resources for demonstration
and deployment (see s21). It will be essential for Parliament
to monitor and guide their remit and activities.
— The Renewables Obligation (RO) on
electricity suppliers has been successful in speeding up the deployment
of mature renewable generation technologies, but it has not encouraged
the development of the diverse portfolio of renewable technologies
that will be required in the longer term. The proposed `banding'
of the RO is a departure from `technology neutrality' which may
tip the balance in favour of some of the more costly technologies
(particularly offshore wind). Recent analyses, however, have questioned
whether the RO itself is the most cost-effective mechanism for
promoting renewables,[114]
and whether the latest round of consultations missed an opportunity
to revise it more radically.
— Long term support for renewables
is also expected to come from the EU Emissions Trading Scheme
(EU-ETS) which is designed to make the markets more favourable
to low-carbon technologies by putting a price on carbon emissions.
To date it has not provided the stable market outlook required
for long-term investment in the sector. The UK Government will
need to enter the negotiations for the next phase of the EU-ETS
(2008-2012) and the post-Kyoto framework with strong political
will to ensure that greater clarity is established going forward
on a global footing, or be prepared to act within the terms of
the draft Climate Change Bill if international negotiations do
not produce the desired results.
General recommendations
14. The IET believes that the role of Government
in promoting renewable technologies should be
— to provide efficiently managed public
funding for new technologies;
— to facilitate and co-ordinate technology
development activities by the public and private sectors, and
on the international scene;
— to understand and address the market
failures which put renewables at a disadvantage to established
technologies, despite their widely acknowledged benefits.
15. Effective and efficient support mechanisms
need to be designed based on an understanding of the whole innovation
chain, from the lab to the market. It is common now to talk of
Research, Development, Demonstration and Deployment ("RDD&D")
to encompass the different stages in the chain.
16. The design of support mechanisms, especially
those aimed at eliciting private sector investment, should also
be informed by an understanding of the cost and risk profiles
of different technology options[115].
While we agree with the current consensus that asking government
to `pick winners' in the technology stakes is neither appropriate
nor efficient, we believe that a `one size fits all' approach
risks limiting the diversity of the portfolio of technologies
coming forward (see comments on the RO, s13).
17. Public funding of new technologies is
vital, but needs to be managed creatively to maximise the benefits
delivered. In order to deliver optimal results, funds for RDD&D
need to be better targeted towards the most promising alternatives
and towards those organisations which have the capability to deliver
high quality results.
— In terms of technology areas, the
UK should avoid replicating research carried out in other parts
of the world, but should focus on adding value where it is best
positioned and on resolving the local integration of global technologies.
The UK remains a leading player in electrical systems design and
operations, and exploits this overseas through its consultancies.
Support should thus be targeted at this area and those technologies
where the UK has actual or potential industrial capability or
can demonstrate a unique advantage, such as marine power.
— The efficiency of the funding allocation
process could be improved by making more extensive use of competitive
bidding mechanisms, as was recently announced for the demonstration
of Carbon Capture and Storage technologies.
Research & Development
18. We recommend that the allocation of
R&D funding among the different technologies be reviewed with
a clear view on their UK potential further down the innovation
chain. In our view, there is a strong case for promoting more
research into biofuels given their key role in European and domestic
renewables targets. High levels of funding for PV research may
have to be reconsidered in view of the weak position of the UK
in PV manufacturing. Funding for marine technologies should only
remain at such a high level if there is serious commitment for
fostering a large UK manufacturing base. Funding for energy storage
technologies should continue to increase, given that they are
expected to play a vital role in integrating and balancing renewable
technologies. Finally, wind power research should focus on operational
issues rather than components, which are unlikely to be manufactured
in the UK.
19. Government could take a role in facilitating
the participation of UK organisations in EU-funded research projects.
Historically UK companies and research establishments have been
under-represented in EU energy research programmes[116]
(though UK universities have played a prominent role as members
of consortia with non-UK companies meaning that technology transfer
takes place outside the UK). Funding under FP7 includes `2.3 billion
for energy over the next seven years.
— Government support could include
better information dissemination, administrative support, and
even seed funding for collaborative bids, possibly under the remit
of the Environmental Transformation Fund.
— It would also be helpful for Government
to develop a clearer view of how national research priorities
relate to European and global programmes. The DEBBR Energy Group
has achieved good coordination in the area of hydrogen and fuel
cells, and we would argue for this approach to be rolled out to
other technologies.
Demonstration
20. In our view, the weakest link in the
innovation chain on which government needs to focus its attention
is demonstration, followed by deployment. The critical demonstration/early
commercial stage of a technology combines steeply increased costs
with substantial risks, and for this reason is often referred
to as the "Valley of Death" for new technologies. This
is a generic weakness that besets innovation in the UK and Europe
more generally. While most renewable technologies are successfully
supported through basic R&D, the transition to market is generally
left to the private sector and capital grants funding at this
stage is restricted by EU State Aid rules.
21. Government needs to be more successful
at leveraging support from the private sector and developing international
partnerships for demonstration projects, particularly in the case
of large scale capital intensive technologies which have the potential
to make a significant impact (eg wave and tidal technologies).
Demonstration is costly and will only make an impact on the total
UK and global position if it is undertaken on a material scale,
and followed by full-scale roll-out. The resources required will
be substantial particularly for large scale technologies, but
there is scope for sharing them with the private sector and international
partners under the right arrangements. The Energy Technologies
Institute and the Environmental Transformation Fund announced
in recent Budget rounds could provide the basis for such arrangements.
It is disappointing that several months after their respective
announcements, the arrangements and funding for these institutions
remain largely unknown to industry at large. Parliament should
monitor their development and seek to ensure that they fulfil
their promised roles.
Deployment
22. Government will need to commit resources
to defining and addressing the barriers to deployment. These can
include unintended barriers in the regulatory and commercial framework,
technical or safety standards, which need to be tackled through
better policy co-ordination. For example , barriers to the deployment
of investment forthcoming through the RO posed by the planning
and connection regimes have now been recognised by Government
and it is hoped that they will be addressed; more forward thinking
will be required to prevent such policy bottlenecks in future.
Other technologies, particularly those adapted for the consumer
market (microgeneration), are hampered by lack of comprehensive
accreditation schemes, a dearth of reliable information and advice
and a shortage of skilled installers (solar thermal, geothermal
and photovoltaics), which could be addressed with better government-industry
coordination.
23. Government must ensure that policies
designed to promote renewables do not founder on a lack of skills
to implement them. There will need to be a steady supply of a
skilled workforce to devise, design, install and maintain renewable
technologies as they come forward. There is currently significant
concern on the part of employers that the supply of skills will
not be adequate or suitable in coming years to meet their demand
for technical personnel. This concern extends to all levels of
education and qualification, from technicians to experienced professional
engineers and advanced researchers.[117]
Government will need to keep a watching brief on developments
in this area in partnership with industry, and be prepared to
intervene if necessary.
24. Finally, Government must recognise that
some of the emerging technologies may prove inherently more costly
to implement than conventional technologies and may therefore
require more long term support. Clarity of vision will undoubtedly
encourage more research, but a more sustainable support framework
may also be needed going forward.
Table 1
CURRENT STATUS, FUTURE PROSPECTS AND ACTIONS
ON RENEWABLE TECHNOLOGIES IN THE UK[118]
|
| Where are we?
| What can be achieved?
| What is holding it back?
| What needs to be done?
|
|
| Energy from waste | A variety of mature or near-market technologies exist for recovering energy from waste.
Electricity generation from landfill gas is the most widely used.
| Significant potential, depending on local circumstances.
| Potential for landfill gas limited by restrictions on landfill.
Planning consent for thermal waste to energy plants.
| Interaction with waste management policies.
|
| On-shore wind power | Technology is mature and economical with current policies.
| Gradual expansion of capacity (over 15GW of potential wind capacity has been applied for in Scotland alone).
| Objections under planning regime.
Transmission grid capacity.
Increasing costs due to global competition for raw materials and equipment.
Concerns about managing variability for increased wind capacity.
| R, D&D into active grid management.
|
| Off-shore wind power | Fundamental technology is mature but uneconomic under current policies.
Deployment offshore will continue to bring technological and operational challenges.
| Potential for large scale development.
| High capital cost—increasing due to global competition for raw materials and equipment.
Transmission grid capacity.
Transmission/distribution grid expansion.
Concerns about managing variability for increased wind capacity.
| May be favoured under reformed (banded) Renewables Obligation.
R, D&D into active grid management.
|
| Hydroelectric power | Mature technology.
| Future potential limited; most natural resources already exploited.
| | |
| Tidal power | Several technologies exist in prototype, in need of full-scale demonstration and commercialisation.
About 10-15 years from full commercialisation.
| Sizeable natural resource to be exploited in UK.
Potential for technology export.
| Risk/cost of demonstration.
High initial costs and extended operating lifetimes.
| Demonstration support.
Development of standards.
|
| Wave power | Several technologies exist in prototype, in need of full-scale demonstration and commercialisation.
About 10-15 years from full commercialisation.
| Sizeable natural resource to be exploited in UK.
Potential for technology export.
| Risk/Cost of demonstration.
| Demonstration support.
Development of standards.
|
| Photovoltaics | Mature but costly technology, currently used mainly in niche and "showcase" applications.
| Limited potential for improvement of current (first and second generation) technology but some scope to improve production costs through improved manufacturing processes.
Higher efficiency and more flexible materials currently in development could result in lower-cost, higher-efficiency applications.
Mass deployment has been achieved where government support has been substantial (eg Germany, Japan).
| High capital cost.
Competition for raw materials (silicon) resulting in high cost.
Lack of skilled installers.
Lack of information and accreditation schemes.
| R&D into manufacturing.
R&D into "second generation" thin film silicon PV, organic PV and high-efficiency "third generation" PV (eg quantum dots).
Skills development.
Technology and installation accreditation.
|
| Solar thermal energy | Technology is mature and relatively cost-effective.
| Large potential for domestic use, both retrofit and new build.
| Lack of skilled installers.
Lack of information and accreditation schemes.
Integration with building stock.
| Skills development.
Technology and installation accreditation.
Introduction of "microgeneration-ready" standards for new homes.
|
| Biomass | Technologies using "first generation" biomass resources for heat, power generation and transport are fairly mature but relatively costly.
Higher-yield "second generation" biofuels are being researched but are at least 10-15 years from commercialisation.
| Biomass for heat and power generation could be more widely used in parts of the country.
Potential limited by other demands for land use, especially food crops.
| Lack of supply chain coordination.
Lack of skilled installers.
Lack of information and accreditation schemes.
| Establishment of sustainable supply chains.
Skills development.
Resource, technology and installation accreditation.
R&D into "second generation" biofuels.
|
| Geothermal | Mature but costly technology.
| | High cost of installation.
Lack of skilled installers.
Lack of information and accreditation schemes.
Integration with building stock.
| Skills development.
Technology and installation accreditation.
Introduction of "microgeneratio-ready" standards for new homes.
|
| Hydrogen and fuel cells | Hydrogen is not inherently renewable; in the near term, the most likely sources are fossil fuels, resulting in CO2 emissions unless accompanied by abatement technology. This is an immature technology.
| | | Basic R&D on hydrogen generation.
R&D on hydrogen transport infrastructure requirements.
|
|
113
International Energy Agency (2000) Experience Curves for
Energy Technology Policy (OECD, Paris): http://www.iea.org/textbase/nppdf/free/2000/curve2000.pdf
Back
114
Ofgem response to the consultation on the Reform of the Renewables
Obligation 2006: http://www.ofgem.gov.uk/Sustainability/Environmnt/Policy/Documents1/16669-ROrespJan.pdf Back
115
UK Energy Research Centre (2007) Investment in Electricity Generation:
The role of costs, incentives and risks (UKERC, London): http://www.ukerc.ac.uk/content/view/410/014 Back
116
IET submission to the Energy Review 2006, Appendix 3: http://www.iee.org/policy/submissions/sub747.pdf Back
117
For a review of recent surveys, see Energy Research Partnership
(2007) Investigation into High Level Skills Shortages in the Energy
Sector: http://www.energyresearchpartnership.co.uk/files/ERP-Skills-Brochure.pdf Back
118
For further details on renewable technologies, see the IET Factfiles:
http://www.theiet.org/publicaffairs/energy/renewable.cfm Back
|
