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

Memorandum 53

Submission from the Micropower Council


  1.  The Micropower Council welcomes the Committee's inquiry into Renewable Electricity Generation Technologies. We believe that it is paramount to shift policy focus to enable faster development and deployment of renewable electricity technologies and renewable technologies in general, particularly for microgeneration within homes and small businesses.

  2.  In his speech to the WWF in November 2007, the Prime Minister made the following prediction:

    "Globally, the overall added value of the low carbon energy sector could be as high as 3 trillion dollars per year worldwide by 2050, and it could employ more than 25 million people. If Britain maintains its share of this growth there could be over a million people employed in our environmental industries within the next two decades".

  3.  Micro-electricity generation technologies are a vital part of the growing low carbon energy sector and should make a significant contribution in meeting future energy policy objectives. However, the UK lags significantly behind a number of European neighbours in both R&D spending and overall deployment. It is unlikely that these technologies will reach their full market potential in the UK, unless Government does more to promote adoption. Missing out due to a lack of appropriate policy mechanisms could slow Britain's move towards a low carbon economy and harm our international competitiveness.

  4.  Policies such as Zero Carbon Homes by 2016 are extremely welcome, however more work needs to be undertaken to address the practicalities of large scale incorporation of micro-electricity technologies into new homes. In the future, both the government and the house building sector should look to engage more pro-actively with major electricity suppliers and with manufacturers. The Calcutt Review is looking at the delivery of affordable and sustainable homes, but we feel it needs to be fully engaged with microgeneration manufacturers, practitioners and energy suppliers.

  5.  The Micropower Council would like to see a number of policy measures taken by Government to encourage greater take up of microgeneration, including:

    —  A comprehensive financial incentives strategy that provides a fair reward to the householder for electricity provided back to the grid via improvements to the Renewables Obligation or other support mechanisms.

    —  Greater recognition of the different stages of development that technologies have reached so that some funding for research and grant support for demonstration is still available.

    —  Statutory targets for the take up of microgeneration, to provide companies and their shareholders with the confidence to invest in the means of mass production that will help bring down the cost to consumers.

    —  Investment in skills and training for microgeneration installers. Ideally, through a Government subsidy for accredited training courses as has worked successfully in the heating industry.


  6.  The Micropower Council is a cross-industry body whose membership comprises electricity and gas companies, manufacturers, trade associations, professional institutions, not-for-profit companies, non-government organisations, charities and private individuals, all of whom have a strong interest and expertise in the development of the micropower sector.

  7.  We provide the Micropower industry's main focal point for Government, regulators, Parliament, opinion formers and the general public on regulation and public policy issues affecting the production by consumers of their own sustainable heat and power.

  8.  The most commonly installed microgeneration technologies that produce renewable electricity are micro-wind turbines, solar photovoltaic and hydro. Hydrogen fuel cells for use in micro-CHP units also offer significant future potential.

Why Micropower?

  9.  We believe that microgeneration of renewable electricity can, given the right policy framework, play an important role in addressing the key goals of energy policy for two principal reasons:

    (a)  The direct impact of the technology through production of electricity from renewable   sources. In large volumes the potential is significant.

    (b)  The increased use of energy efficiency and conservation measures as consumers and businesses become more engaged and interested in their own use of energy, and of its consequences.

  10.  Microgeneration is also at the cutting edge of new "green technology" and the industry is already a UK success story. Continued progress in the sector will help to create further employment and to support the Government's core energy policy objectives by reducing overall carbon emissions and increasing energy security. If we don't make progress, British manufacturing is likely to miss out to international competition on developing and manufacturing this type of low carbon technology.

The current state of UK research and development in, and the deployment of, renewable electricity-generation technologies

  11.  UK research in microgeneration lags behind that of other leading nations such as Germany. One of the principle reasons is the lack of targets and effective and stable support mechanisms for microgeneration which would encourage the private sector to invest in research. In Germany, the 100,000 roofs campaign provided companies with the confidence to invest in research and development of solar photovoltaic products.

  12.  The UK has had a prominent position in the development of small-scale wind turbines, and also in the development of building integrated PV, but support for the deployment of these technologies has so far been restricted to poorly implemented grant schemes.

  13.  Problems often emerge for SMEs who wish to move technology on from research stage to pre-commercial development and they find that support dries up. This is often referred to as the `death valley' for technologies. Support strategies such as RO and CERT work better for existing and mature renewable technologies such as Onshore Large Wind, than they do for embryonic technologies.

International collaboration

  14.  The process of knowledge sharing internationally occurs mostly in the interactions between the different national operations of multinational companies developing microgeneration. At an energy supplier level, this includes pan-European companies such as EDF Energy and NPower as part of the RWE Group.

  15.  There is extensive international collaboration in the development of low carbon Micro Combined Heat and Power (microCHP) products in the UK. WhisperGen UK Ltd, a leading company involved in bringing this technology to market will be setting up a large manufacturing plant in Europe during 2008. WhisperGen Limited is itself based in New Zealand, with Meridian Energy, one of New Zealand's leading utilities, as its major shareholder. Other companies such as BAXI, part of Baxi Group Europe Ltd, and Worcester Bosch part of the Bosch Group, have become much more involved in microCHP during 2007 and are devoting resources to developing this technology. E.ON, one of Europe's largest utilities, has also increased its commitment to developing microCHP for European consumers.

  16.  The export/import market for manufacturers and distributors between EU member states and wider international context is however restricted to an extent by the significant variation in national certification standards.

Public funding, and other support, for the development of renewable electricity -generation technologies and incentives for technology transfer

  17.  The termination of householder grants next year creates a cliff-edge situation for those microgeneration technologies unlikely to see support levels maintained under the recently launched Carbon Emissions Reduction Target. Earlier this year, the Prime Minister (in his previous role as chancellor) stated that support under CERT would surpass that provided by the householder grants scheme. Our analysis suggests that the current proposals will not provide sufficient uplift.

  18.  The Renewables Obligation has worked well for large scale renewable electricity generators, however microgeneration has been unable to take full advantage of the benefits. The high transaction costs for energy suppliers surrounding meter reading and the "hassle factor" in the application process for the customer reduces the benefits that could be achieved. Providing a deemed number of ROCs, rather than metering each individual installation could provide a solution to these issues.

  19.  The Government should look at other options available, including working with energy suppliers and the microgeneration industry to look at the possibility of some form of capitalisation of deemed ROCs. This could enable the consumer or energy supplier to receive ROCs advance for offsetting against the capital cost of installation.

  20.  Statutory targets are essential to provide companies with the confidence to implement investment into mass market scale production. Cost is an important factor to the take up of microgeneration, however costs will only come down with the introduction of mass market production techniques.

  21.  Consumers need to be given confidence in the product they are purchasing. A well managed industry certification scheme would help provide this, yet the development of such a scheme by BRE is beset by difficulties relating to cost of accreditation and compatibility with existing schemes

The establishment and role of the Energy Technologies Institute

  22.  We welcome the establishment of the Energy Technologies Institute (ETI) and support its remit to invest in research and development to accelerate the development of secure, reliable and cost-effective low-carbon energy technologies towards commercial deployment.

  23.  The involvement of some of the worlds largest energy and engineering groups will undoubtedly aid the development of the ETI, however we urge it to not to discount the contribution that can be made by smaller companies within the vibrant SME energy technology sector.

Commercialising renewable technologies

  24.  In the face of the binding European commitment to meeting 20% of European energy needs from renewable sources by 2020 it is essential that effective policy support measures are developed and implemented to allow all renewable and clean energy sources to achieve their full market potential.

  25.  We have identified three broad and often overlapping key phases in the process of moving micropower technology from a niche market position to full commercialisation and mass market status. The figure below demonstrates these three phases of market transformation.

Figure 1


Phase 1—Market start up measures for emerging and niche technologies (short to medium term)

  27.  Government funded grant schemes, supported by other early market stage enabling actions are critical to kick starting market and as a builder of market confidence. However, the vast majority of micropower technologies have moved beyond this stage and, in order to continue to grow, require a more enduring support mechanism independent of the Government and the perceived vagaries of Government spending rounds.

  28.  A number of market enablers identified as essential for phase one such as the removal of planning red tape for micro-wind and solar photovoltaic installations still need to be delivered.

Phase 2—Market transformation for maturing technologies (medium term)

  29.  The core objective for microgeneration in phase two—the phase that many of the technologies have now reached—is to move to a more enduring support mechanism that provides greater certainty for investors and the confidence within the sector to develop and grow the market.

  30.  Grant schemes will still represent an important part of the mix for less developed technologies, however, the required acceleration in the number of installations can only occur with the development of an enduring support mechanism (or support mechanisms). Support currently provided by the Renewables Obligation and proposals under CERT is still inadequate for market transformation.

  31.  We support many of the Government's microgeneration initiatives including, in particular, the push for all new homes to be zero carbon by 2016. But neither this, nor any other current, initiatives will address the inability of microgeneration to reap the full benefits of the Renewables Obligation or to provide funding to facilitate installation of microgeneration into the largest part of the potential domestic market—existing homes.

  32.  If no action is taken to avoid a major funding gap when the householder grant scheme ends next year, confidence could be undermined, leading to a slump in the market and in investment, seriously hampering efforts to secure mass production and supply chain development for many microgeneration products. Consequently, the benefits of lower prices and greater availability will be lost and the full potential of microgeneration in reducing carbon dioxide emissions, improving security of supply, and tackling fuel poverty will not be realised.

Phase 3 Mature market technologies (long term—2016 and beyond)

  33.  The objective of the micropower sector is to move to a position where technologies are able to capture the full value of the energy produced and the value of carbon reduction and increased security of supply and become cost effective on this basis without the need for any additional subsidy.

  34.  In this phase we suggest that the key pre-requisites of successful market arrangements would be a mechanism(s) that:

    —  enable the full value for energy, diversity and carbon value, to be captured;

    —  are simple to understand;

    —  easily implemented with low associated transaction costs; and

    —  create a positive incentive for "good" behaviour and penalty for "bad" behaviour for consumers.

Government policy towards enabling existing technologies to meet targets

  35.  The micropower industry is the only energy related solution to lower emissions which does not have a quantified government expectation of where it is expected to fit into the sustainable energy mix.

  36.  In order to bring down the future cost of microgeneration technologies, companies need to invest in mass market production capability. This is an expensive and potentially risky process, costing millions of pounds. Companies will not be able to persuade their boards and banks to invest these considerable sums of money, unless there is a reasonable expectation of a market. This certainty can only be provided by Government, who must set binding statutory targets for the uptake of microgeneration.

Developing the skills base to underpin the development of renewable technology

  37.  The need to develop a broad base of skilled installers is crucial to efforts to widen the market for micropower products. Whilst demand for microgeneration products remains low, there is little financial incentive for installers to undertake training in these new technologies. This in turn limits the choice for those customers who are interested and further suppresses demand.

  38.  The industry has concerns over the set-up and cost of the certification scheme currently being developed by the Building Research Establishment (BRE) for product installers. The Micropower Council has been at the heart of brokering the industry's input into the scheme, and put forward proposals to resolve some of the more contentious aspects of the scheme, some of which have been accepted. However, the exclusive nature of the current BRE contract with BERR is preventing competition in certification services and not allowing the industry-led steering group to set the compliance rules in a way that makes for a scheme that balances properly the cost of the scheme with the need for robust standards to protect consumer interests.

  39.  The Government recognised the vital role that installers play when it developed its targets for the installation of five million new high efficiency condensing boilers by 2010. In order to make this objective a reality, a new accreditation called "City & Guilds 6084 Level 3—Certificate in Energy Efficiency for Domestic Heating' was created. Partial financial support was made available, for a limited period, to installers in England to undertake the qualification and over 30,000 took advantage of this offer. This successful policy demonstrates a potential path towards expanding the number of microgeneration installers.

January 2008

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