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

Memorandum 39

Submission from Institution of Engineering & Technology


  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.


  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.


  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.


  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


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.
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.
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.
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):  Back

114   Ofgem response to the consultation on the Reform of the Renewables Obligation 2006: Back

115   UK Energy Research Centre (2007) Investment in Electricity Generation: The role of costs, incentives and risks (UKERC, London): Back

116   IET submission to the Energy Review 2006, Appendix 3: Back

117   For a review of recent surveys, see Energy Research Partnership (2007) Investigation into High Level Skills Shortages in the Energy Sector: Back

118   For further details on renewable technologies, see the IET Factfiles: Back

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