Memorandum 46
Submission from the Department for Business,
Enterprise and Regulatory Reform
1. INTRODUCTION
1.1. This memorandum has been prepared by
the DBERR's Energy Group in consultation with the Department for
Innovation, Universities and Skills (DIUS) and DEFRA and it incorporates
their contributions. We are aware of the separate memoranda submitted
by the Research Councils and have endeavoured to provide our information
on a comparable basis. This memorandum addresses the technologies
and issues identified in the terms of reference, but we would
be happy to provide further information on these and other technologies
not specified if necessary.
1.2. The Government's policy on renewable
energy is set out in the recent Energy White Paper.[166]
Renewable energy is an integral part of the Government's strategy
for reducing carbon emissions. In 2006, 4% of electricity generation
was from renewable sources. Renewables also form a part of Europe's
climate change and energy policy. In March 2007, the European
Council agreed amongst other things, a binding target of a 20%
share of renewable energies in overall EU consumption by 2020
(this applies to transport and heat as well as electricity) and
a 10% minimum target for share of biofuels in EU transport by
2020.
1.3. The Government's strategy to develop
renewable technologies is devised and delivered in conjunction
with a wide range of bodies including private sector and academic.
Different organisation work together to provide strategic advice,
financial support and coherent framework of policy and action
in these areas, both domestically and internationally. The Government
sets the overall strategic direction by ensuring that each part
of the innovation system works effectively with the whole system
and bringing together participants to set common goals by setting
the level of public funding to leverage the investment from the
private sector and by working to expand research and industrial
capacity. The objective of Government support for renewable and
other low carbon energy technologies is to promote development
of new technologies from initial concept to the point where they
can be deployed commercially.
2. CURRENT GOVERNMENT
ROLE IN
SUPPORTING R&D FOR
RENEWABLE ENERGY
GENERATION TECHNOLOGIES
2.1. All energy technologies broadly go
through the same stages of development: research through to deployment,
each stage requiring different types of support, which collectively
constitutes the innovation system. In reality, the innovation
system is not linear and projects at the demonstration and deployment
stages may have further need for R & D. Support for the research,
development and demonstration of new technologies forms the technology
push aspect of innovation. Market pull comes by providing the
market mechanisms and incentives that help create the demand for
the wider deployment of new technologies eg Renewables Obligation.
Also the EU ETS which establishes a cost of carbon, providing
further incentives for low carbon energy generation. The role
of key Government organisations is set out below:
Research Councils
2.2. Research and development is essential
in developing new renewable energy sources to replace or complement
existing or future low carbon energy generation, as well as improving
existing energy generation. The DIUS provides funding through
the Science Budget to the Research Councils. The Research Councils'
Energy Programme brings together within one framework all Research
Council activities on energy. The programme is led by the Engineering
and Physical Sciences Research Council (EPSRC) and is made up
of a broad spectrum of energy-related research and postgraduate
training in the environmental, social, economic, biological and
physical sciences and engineering, funded both through joint activities
and by individual Research Councils. Comprehensive information
about the Research Councils' role in supporting energy R&D
will be provided in a separate memorandum to the Committee from
Research Councils UK.
2.3. Research Councils' expenditure on energy-related
basic, strategic and applied research and related postgraduate
training expected to amount to over £70 million in 2007-08.
The Research Councils fund the UK Energy Research Centre (UKERC)
and the Tyndall Centre for Climate Change Research, both of which
undertake research related to renewable energy. The Research Councils'
Energy Programme will work in partnership with the Energy Technologies
Institute when it is launched later this year.
Technology Strategy Board
2.4. The DTI's Technology Programme was
launched in 2004. It is designed to stimulate innovation in the
UK economy, provides funding to support Collaborative Research
& Development (CR&D) and knowledge transfer. One of the
priorities for the Technology Programme has been low carbon energy
technologies including renewables. Since the programme's launch
there have been 7 calls in this area and around 70 projects have
been supported with a total value of some £35.4M. Details
of the latest call can be found at: http://www.technologyprogramme.org.uk/extranet/competitions/Spring07/documents/Priority
Descriptions/LowCarbonEnergy.pdf
2.5. From July 2007 the Technology Programme
will be directed by a new executive body, the Technology Strategy
Board, set up to drive forward the Government's Technology Strategy.
Calls for proposals for low carbon energy projects will be handled
under existing arrangement during 2007 to ensure a smooth transition
from the existing Technology Programme.
Energy Technologies Institute
2.6. The Energy Technologies Institute is
due to be launched later this year. It is a joint venture partnership
which brings together public and private sector R&D in the
UK to set strategic direction in low carbon energy research and
fund its delivery. Current partners include BP, E.ON UK, Shell,
EDF Energy, Rolls-Royce and Caterpillar. It will provide the UK
with a world-class means for delivering applied energy technology
research to underpin eventual deployment. To do this, the Institute
will connect the best scientists and engineers working in academic
and industrial organisations both within the UK and overseas.
The projects these teams deliver will accelerate the progress
of industrially applicable innovative energy technologies through
the innovation system to enable some commercial deployment within
10 years. The potential budget is up to £100M pa for 10 years.
DBERR Sustainable Energy Capital Grants
2.7. The DBERR currently supports a number
of individual programmes which provide capital grants as part
of a long-term package (10+ years) of targeted support for demonstration
and early phase deployment of low carbon technologies. They are
designed to remove financial barriers to further development,
and identify risks and costs and sensitivity of key inputs to
financial viability across a number of low carbon technologies
such as wind, wave and tidal, biomass, microgeneration and low
carbon buildings, fuel cells and hydrogen, and carbon abatement.
Further information on these individual programmes is provided
at annex A.
Environmental Transformation Fund
2.8. In June 2006 the Government announced
the creation of a new Government fund to invest in low carbon
energy and energy efficiency technologies. The Fund will bring
together the Government's existing work within the UK, including
the DBERR's existing Sustainable Energy Capital Grants, and internationally
to support amongst other things the demonstration and deployment
of new energy technologies, including renewables, and to promote
the better use of energy. The Fund will open in April 2008 and
details of the domestic element of the programme will be announced
in 2007 in the context of the CSR.
Framework Programme 7
2.9. The EU's Framework Programme for Research
and Technological Development is the main instrument through which
research is supported at European level. The Seventh Framework
Programme (FP7) took over form FP6 on the 1st January 2007 and
will run for seven years. The focus of the research and demonstration
actions in this Work Programme will be on accelerating the development
of energy technologies towards cost-effectiveness for a more sustainable
energy economy for Europe (and world-wide) and ensuring that European
industry can compete successfully on the global stage. FP7 has
a budget €50.5 billion over the period of 2007 to 2013 of
which €2.350 million is available for Energy Theme. This
compares to the budget of €17.5 billion for FP6 which covered
the period 2003 to 2006.
2.10. In addition to the Framework Programme,
the Intelligent Energy Europe (IEE2) is part of a broader EU programme
on Competitiveness and Innovation Programme which supports promotional
sustainable energy projects and so-called "integrated initiatives".
The programme acts as the EU's tool for funding action to improve
market conditions so to encourage the use of renewable energy
sources and save energy. The programme budget of €727 million
will be used to co-finance international projects, events and
the start-up of local or regional agencies.
Market Pull Mechanisms: EU Targets/Renewables
Obligation/ETS
2.11. The Renewables Obligation (RO) is
the Government's key mechanism for encouraging new renewable generation
and runs until 2027. Since its introduction in 2002, electricity
supplied from renewables has more than doubled from 1.8% to 4%
in 2006. It places an obligation on licensed electricity suppliers
to source an annually increasing proportion of their sales from
renewables.[167]
Suppliers can meet their obligation by presenting RO Certificates
(ROCs); paying a buyout price (£34.30 for 2007-08 rising
each year with RPI); or a combination. Suppliers that surrender
ROCs receive a pro-rata share of the money paid into the
buy-out fund—acting as an incentive to invest in renewables.
2.12. The RO was designed to bring forward
the most cost-effective technologies first and it has been very
successful in doing this. However if we want to move significantly
beyond 10% renewables we need to bring forward those renewable
sources such as offshore wind that are currently further from
the market. To address this, the Energy White Paper set out detailed
proposals to reform the RO. The key proposals are to extend the
obligation level to a maximum of 20% on a headroom basis and "band"
the RO to provide differentiated levels of support for groups
of similar technologies, including more support for emerging technologies
2.13. This package will increase the deployment
of renewables by over 40% over 2009-2015 compared to existing
arrangements and increase the diversity of the technologies deployed.
This would bring the total projected electricity supplied by renewables
to around 15% in 2015[168].
The RO is expected to result in over £1bn/year support for
renewables by 2010 including the exemption from the Climate Change
Levy. In addition, by placing a price on current and future emissions,
the EU Emissions Trading Scheme incentives industry either to
improve its energy efficiency, invest at scale in technologies
using renewable and low-carbon fuels, or to develop innovative
renewable and low-carbon technologies. Further details on future
support levels can be found in Annex B and in the current consultation
on the RO.
2.14. The Energy White Paper also set out
proposals to improve the planning and consenting process and grid
connection for both on and offshore renewables including publishing
a statement of need for renewables and working with National Grid
on bringing forward connection opportunities.
3. CURRENT STATE
OF UK RESEARCH
AND DEVELOPMENT
AND DEPLOYMENT
OF TECHNOLOGIES
3.1 Onshore and Offshore Wind
3.1.1. The UK has some of the best onshore[169]
and offshore[170]
wind energy resources in Europe. Onshore wind technology is fully
deployed and off shore wind is at early demonstration phase. Much
of the technology involved in offshore wind is applicable to onshore
wind.
3.1.2. Industrial R&D in offshore wind
in the UK is currently being carried out by a variety of world-leading
UK organisations. These include major turbine blade manufacturers
(Vestas Blades UK Ltd), major offshore foundation installation
contractors (Seacore Ltd), world-class steel producers (Corus
UK Ltd), major offshore wind developers (RWE, Npower), large energy
companies (Scottish & Southern Energy, Scottish Power), international
engineering consultants (Atkins PLC), leading wind energy consultants
(Garrad Hassan) and international oil and gas companies (Talisman).
The UK also has a strong academic community with extensive capabilities
to support industry in offshore R&D. In addition to the following
universities: Oxford, Southampton, Loughborough, Portsmouth, Plymouth
and Strathcylde; there are centres of excellence, such New and
Renewable Energy Centre (NaREC) and Science & Technology Facilities
Council's (STFC) Energy Research Unit and others, which provide
facilities and services to industry.
3.1.3. Future research requirements over
the next 5-10 years are likely to be in the sizing-up of turbines,
with machine capacities increasing from the current 2 to 3 MW
to 5 MW plus, whilst at the same time reducing radar cross-section
using innovative design and advanced materials. The operation
and maintenance of these larger machines will need to meet market
expectations and increase reliability whilst reducing all elements
of cost. This may ultimately lead to a number of fundamental changes
in the design of major components including generators and drive
mechanism. As developments move to greater distances offshore
with deeper water sites and challenging seabed conditions, alternative
cost-effective foundations and installation methods will need
to be perfected. The scale of production required will also mean
development of production technology and techniques.
3.1.4. The supply chain includes, developers,
finance, legal, insurance, consultants, supply chain manufactures
covering all major elements of a wind turbine, including blade
manufacture, foundations, seabed survey, logistics and port storage,
installation, cable laying, connections, standards/certification,
and O&M services. Significant entry to the turbine supply
chain market is currently limited as the turbine suppliers source
many components outside the UK. Innovative product development
is required to enable UK companies to gain an edge over competitors
already established in this market.
3.1.5. The current worldwide demand for
wind turbines has resulted in supply chain constraints across
all of the manufacturers. This presents an opportunity for UK
companies to enter the supply chain especially with the UK market
being one of the top three markets in Europe in the wind sector.
3.2 Photovoltaics (PV)
3.2.1. Although the UK is not a leader in
the current PV market technologies there is potential and opportunity
for the UK in the next phase of technologies. For example, the
UK has strengths in the new PV generation technologies (including
scientific capabilities in organic semi- conductors which provide
a basis for organic/polymer), which could make PV economic.
3.2.2. Industrial R&D in photovoltaics
is pursued by a number of companies at a number of levels. Some
are mainly suppliers of materials to the PV industry while others
are more involved in the development of cell structures or applications.
The companies range in size from large multinationals (Johnson
Matthey plc, Merck Chemicals, DuPont, Kodak, Sharp Electronics
UK Ltd), through medium sized enterprises (Cambridge Display Technology
Ltd, PV Crystalox, ICP Solar Technologies UK Ltd, West Technology
Systems, Exitech Ltd) down to small niche companies (PV Systems
(EETS), NaREC, Plasma Quest Ltd). The UK science base for PV is
varied and covers a wide set of interests. There are currently
around 30 UK universities involved in academic research in this
area, indicating a significant research effort. Those with notable
strengths include: Bath, Imperial College, Cambridge, Oxford,
Southampton, and Sheffield Hallam.
3.2.3. Current research efforts are concenterated
on: reducing the cost of manufacturing existing crystalline silicon
PV modules and improvements in cell efficiency; process development
for thin and/or large area wafer that could lead to lower cost/improved
performance; new types of PV cells such as organic, polymers,
nanostructured solar cells etc.
3.3 Hydrogen and Fuel Cells
3.3.1. Fuel cells produce electricity by
means of an electrochemical reaction between hydrogen and oxygen
(air), with water as the only by product. They have been used
in space missions since the 1960s and are increasingly being demonstrated
in applications such as portable power, stationary power generation/combined
heat and power (CHP), and as a replacement for the internal combustion
engine for transport. With the exception of some niche markets
they are not yet cost-competitive for such applications, and further
R&D is required to address the techno-economic barriers. These
include for fuel cells, cost reduction and increased durability
under real operating conditions; and for hydrogen, cost -competitive
methods for producing low-carbon hydrogen, and hydrogen storage
systems to provide adequate driving range.
3.3.2. The UK has a strong research base
and a small number of world-class companies. These include both
multi-nationals such as Johnson Matthey (which produces Membrane
Electrode Assemblies) and Rolls Royce (a developer of Solid Oxide
Fuel Cells (SOFC) for industrial/commercial scale distributed
power generation/CHP, and SMEs such as Intelligent Energy (a developer
of proton exchange membrane (PEM) fuel cells, and Ceres Power
(a developer of SOFC for small scale power generation/CHP). One
of the key issues affecting the sector is that although the existing
status of the technology is largely pre-commercial demonstration,
once commercialisation begins the take-off could be extremely
rapid (as fuel cells displace the incumbent technology). This
would require a quick and flexible supply chain. Johnson Matthey
is one of the companies actively trying to develop such a UK supply
chain.
3.4 Wave and Tidal
3.4.1. A number of wave and tidal-stream
energy technologies are currently under active development, with
a small number of devices having already been demonstrated at
full-scale for limited periods. The UK has a significant wave
and tidal-stream resource which taken together it has been estimated
could provide up to 20% of UK electricity demand.[171]
3.4.2. The current exploited market for
wave and tidal-stream energy devices is at present small. The
technology is still in its early stages and the timing and size
of the eventual market is still uncertain. The eventual exploitation
of the potential market is dependant upon the successful development
of technologies that can extract this resource reliably and economically.
It is therefore by no means a foregone conclusion that a successful
industry can be developed.
3.4.3. However, leading technologies are
moving towards larger-scale demonstration and Government has put
in place a number of measures that collectively provide the most
comprehensive support for the development of these technologies
anywhere in the world.[172]
3.4.4. The number of UK companies involved
in technology development is relatively small. There are a small
number of companies with devices in the water or with developed
plans for deployment within the next year. These companies are
mostly SME's, focused on development of a particular device and
with annual turnovers of the order of a few £M. Some of these
SME's have larger companies as partners or shareholders.
3.4.5. The UK has a long established, world-class
academic science base in wave energy research. A thorough understanding
of wave climate and conditions and the available ocean and shoreline
resource has been developed over many years. UK companies and
academics are world leaders in tidal stream and wave energy technology.
3.5 Bioenergy
3.5.1. Biomass covers a wide range of fuel
types (including wastes) and can contribute to a range of end
markets—with mature technology in place for electricity,
heat and transport applications. Unlike other renewables, notably
wind, biomass is capable of providing continuous output once a
robust fuel supply infrastructure is in place. It is anticipated
that a combination of the Renewables Obligation (including proposed
banding), grants for biomass heat/CHP and co-firing will stimulate
interest in bioenergy.
3.5.2. The UK Biomass Strategy was published
on 23rd May 2007[173]
and gives an overview of the Government's aim to increase the
contribution of sustainable bioenergy and biofuels. The Biomass
Strategy estimates the current contribution from bioenergy and
biofuels to be approaching 4Mtoe.
3.5.3. The need to increase the energy supply
from sustainable bioenergy does mean that we need to develop more
efficient fuel supply chains, produce transport biofuels with
improved carbon savings, improve fuel sampling for biomass content,
develop systems for producing energy from biomass such as anaerobic
digestion and more efficient heat and power generation plant.
3.5.4. "Second generation" transport
biofuels are currently at the commercial research, development
or pilot stage and use more advanced technologies, eg converting
the whole plant into fuel, and using straw, wood and biodegradable
waste as feedstocks. They have the potential to deliver far more
fuel per hectare and give greater greenhouse gas savings than
first generation fuels but capital costs are currently much higher.
An extra £20M for research into green bioenergy was announced
on 8 March 2007. This takes total public funding to £36M
over the next five years. It will support the build up of research
capacity into how bioenergy can help replace fossil fuels with
renewable, low-carbon alternatives.
3.5.5. Specific programmes to tackle waste
sponsored by Defra include the Technology Research & Innovation
Fund (TRIF) which was set up to provide funding for R&D projects
into innovative new technologies which will help England's obligations
to reduce the amount of waste going to landfill; and the New Technologies
Demonstrator Programme which set up nine demonstration projects
covering at least four different waste treatment technologies
including anaerobic digestion and gasification. But policy focus
is on the speedier deployment of infrastructure using established
technologies, as much as the development and demonstration of
new technologies.
3.6 Ground Source Heat Pumps
3.6.1. Ground source heat pumps are a proven
and reliable product and there are encouraging signs that industry
is taking a lead in the development of the sector. Under the Energy
Efficiency Commitment (EEC), organisations such as nPower estimate
they have installed approximately 700 systems, as part of their
EEC offering.
3.7 Intelligent Grid Management and Energy
Storage
3.7.1. Many renewables are intermittent
by their nature and if we are to rely on them for a major fraction
of the electricity generation we need to consider how to manage
the challenges that this intermittency raises to secure a reliable
electricity supply to consumers. Intelligent Grid Management is
a generic term applied to a range of potential innovation which
aims to coordinate and manage generation and network resources
and possibly energy storage and demand. The UK is well placed
in the development of intelligent grid management technologies,
with a number of SMEs and academic institutions involved, such
as Ecconect, Universities of Manchester, Strathclyde, and Imperial
College etc. Due to the nature of the technology, SME's are as
likely to be successful in this area as larger multinational companies
that have a presence in the UK, which are all now foreign-owned.
The application of intelligent grid management techniques could
have a very significant impact on the capacity of the networks
to accept these new generation technologies and on the costs of
doing so.
3.7.2. A number of first generation products,
such as Ecconmect's GenAVC device, are now available commercially;
however there is considerable scope for innovation and further
development as the availability of commercial distributed generation
technologies gathers pace.
3.7.3. The DTI Technology Programme and
other support programmes have supported intelligent grid management
innovation. In addition, the availability of research funding
has improved markedly since 2005, with the introduction of Ofgem's
Innovation Funding Initiative, which allows Distribution Network
Operators to recover the costs of innovation and demonstration
in this area.
3.7.4. Work carried out by the Centre for
Distributed generation & Sustainable Energy indicates that
commercial utility-scale electrical storage technologies could
have a significant role to play in the next decade, as a means
of allowing significant amounts of variable-output renewable generation
onto the electricity grid and in managing the impact of that variability.
The Centre's work also suggests that electrical storage to the
electricity networks could be valued at a premium over conventional
generation alternatives, such as open cycle gas turbines.
3.7.5. The UK is relatively well placed
in terms of the development of novel battery technologies, particularly
in the area of flow cell batteries, where SMEs such as Plurion
are active. The flow cell battery appears to be a particularly
attractive development due to the potential for reduced capital
cost and the inherent separation of energy and capacity. Other
technologies with the potential for utility-scale applications,
such as pumped storage and compressed air storage, are subject
to significant siting and environmental constraints.
3.7.6. Demand side management is essentially
a technique for deferring the use of electrical energy, ie it
is analogous to electrical storage. A number of initiatives in
the area of demand side management as a potential means to mitigate
the impacts of dealing with the variable output of some renewable
generation technologies in a more cost effective and carbon friendly
fashion have been supported.
4. COMMERCIALISATION
AND CARBON
FOOT PRINT
OF RENEWABLE
TECHNOLOGIES
See table at Annex B.
5. OTHER RENEWABLE
ENERGY-GENERATION
TECHNOLOGIES
5.1. There are also a number of other renewable
products that are already deployed and not mentioned in the terms
of reference: geo-thermal (limited economical sites in UK); solar
thermal (well established technology—typical household system
£2-3k); barrages (technically feasible) and hydro (established
technology, but limited sites for environmental reasons). Further
information can be provided if required.
5.2. On technologies for the future, in
2006, the OSI Foresight carried out a review of how science and
technology could contribute to better energy management. A number
of state of science reviews across the energy domain, including
photovoltaics, wind and wave technologies were commissioned. The
overview report, state of science reviews and other related reports
produced by this review are available from the Foresight website
http://www.foresight.gov.uk/HORIZON_SCANNING_CENTRE/Energy/Energy.html
5.3. The reports highlighted the importance
of significant technological and scientific breakthroughs to allow
the theoretical or small-scale possibilities to be turned into
large-scale, deployable, solutions eg the more futuristic possibilities
include cheap, and more efficient, photovoltaic cells; high-temperature
superconductor power transmission; and technologies for storing
and transporting hydrogen. Major breakthroughs in the technologies
for energy storage would also help unlock the potential of intermittent
renewable energy sources such as wind and sun. New approaches
to systems modelling and software design are also seen as critical—eg
modelling wind generating systems in a variety of weather conditions;
developing software agents and information and communications
technologies to help introduce greater degrees of intelligence
into the management of energy demand.
July 2007
166 Energy white paper: meeting the energy challenge
2007-URN No: 07/1006 http://www.dti.gov.uk/energy/whitepaper/page39534.html
. Back
167
Eligible technologies are; Sewage gas, Landfill gas, Co-firing,
Onshore wind, Hydro-electric, Energy from Waste with CHP, Offshore
wind, dedicated regular biomass (with/without CHP); Wave, tidal
stream, ACTs (advanced conversion technologies-gasification, pyrolysis,
anaerobic digestion), solar PV, geothermal. Eligible waste technologies
only receive support in respect of the biomass fraction. Back
168
This figure includes electricity from RO ineligible sources. Back
169
Study of the Costs of Offshore Wind Generation-A Report
to the Renewables Advisory Board (RAB) & DTI. http://www.dti.gov.uk/files/file38125.pdf Back
170
Study of the Costs of Offshore Wind Generation-A Report
to the Renewables Advisory Board (RAB) & DTI. http://www.dti.gov.uk/files/file38125.pdf Back
171
Carbon Trust Marine Energy Challenge-www.carbontrust.co.uk/technology/technologyaccelerator/marine-energy.htm Back
172
Guidance on Consenting Arrangements in England and Wales for
a Pre-Commercial Demonstration Phase for Wave and Tidal Stream
Energy Devices-www.dti.gov.uk/files/file15470.pdf
DTI Wave and Tidal-stream Energy Demonstration Scheme-www.dti.gov.uk/energy/sources/renewables/business-investment/funding/marine/page19419.html
South West Regional Development Agency Wave Hub Project-www.wavehub.co.
Scottish Ministers' Wave and Tidal Energy Support Scheme-http://www.scotland.gov.uk/Topics/Business-Industry/infrastructure/19185/WTSupportScheme/WTSupportSchemeIntro
Renewables Obligation Consultation May 2007-http://www.dti.gov.uk/consultations/page39586.html
European Marine Energy Centre-www.emec.org.uk Back
173
http://www.defra.gov.uk/environment/climatechange/uk/energy/renewablefuel/pdf/ukbiomassstrategy-0507.pdf Back
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