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

Memorandum 46

Submission from the Department for Business, Enterprise and Regulatory Reform


  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.


  2.1.  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: 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.


3.1  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.


  See table at Annex B.


  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

  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 . 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. Back

170   Study of the Costs of Offshore Wind Generation-A Report to the Renewables Advisory Board (RAB) & DTI. Back

171   Carbon Trust Marine Energy Back

172   Guidance on Consenting Arrangements in England and Wales for a Pre-Commercial Demonstration Phase for Wave and Tidal Stream Energy
DTI Wave and Tidal-stream Energy Demonstration
South West Regional Development Agency Wave Hub
Scottish Ministers' Wave and Tidal Energy Support Scheme-
Renewables Obligation Consultation May 2007-
European Marine Energy 

173 Back

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