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

Memorandum 58

Updated submission from E.ON UK


    —  E.ON UK supports the role of market-based mechanisms such as the EU Emissions Trading Scheme to incentivise development of these technologies, but direct Government support is also required if they are to be brought to market with the level of urgency warranted by the need to take early action to reduce the impact of global warming.

    —  As a core partner in the Energy Technologies Institute (ETI), E.ON will be investing £5 million each year over the next ten years in the initiative. This partnership will provide risk sharing opportunities, accelerate routes to market for new technologies and will ultimately help to ensure a low carbon future.

    —  A focussed and coherent RDD&D strategy is needed to support delivery of the UK's energy policy goals including the provision of affordable and secure supplies, as well as mitigating and adapting to climate change. The Energy Research Partnership (ERP), co-chaired by E.ON UK Chief Executive, Paul Golby, is well placed to advise Government on the strategic direction.

    —  E.ON UK notes that a key strategic challenge for the industry will be training and recruiting a sufficient number of high calibre scientists and engineers. The ERP has completed a study examining the scale of this challenge.

    —  Significant investment in the national transmission network and storage solutions will be required if existing 2020 targets for intermittent generation are not to cause adverse impacts on supply security.


  1.  E.ON UK is one of the largest retailers of electricity and gas, one of the UK's largest electricity generators and operates Central Networks, the distribution business covering the East and West Midlands.

  2.  We are a leading developer of renewable plant, including offshore and onshore wind and dedicated biomass generation, and are currently investing significantly in tidal and wave demonstration technologies. Through our Sustainable Energy Solutions (SES) team we also support a range of mid and micro-generation demand-side technologies such as ground source heat pumps, micro wind, mini Combined Heat and Power (CHP), solar thermal and solar PV.

  3.  E.ON UK invests at least £10 million a year in the research, development, demonstration and deployment (RDD&D) of energy technologies, and our CEO, Paul Golby, is the co-chair of the Energy Research Partnership (ERP). Launched in January 2006, the ERP provides strategic direction to UK energy RDD&D by bringing together key public and private sector stakeholders.

  4.  The following paragraphs respond to the specific points raised in the Committee's call for evidence:

Current state of UK research

  5.  There are currently a number of R&D funding streams for the development of renewable energy technologies both at an EU level (EU Framework Programmes and IEA research and technology implementation agreements) and within the UK from the Research Councils, Government Departments and the Carbon Trust. In addition, the Energy Technology Institute (ETI) and the Environmental Transformation Fund (ETF) provide sources of funding supporting the development and deployment of renewable energies.

  6.  However, despite a significant level of research designed to facilitate the development, demonstration and deployment of renewable energy technologies, there has been an absence of co-ordination across the public and private sectors. The Energy Research Partnership now provides the opportunity to increase the efficiency and effectiveness of UK research by providing a co-ordinated and coherent approach to addressing UK energy challenges.

  7.  E.ON UK's Chief Executive Paul Golby co-chairs the ERP, with the Chief Scientific Adviser. The Partnership combines the expertise of public and private sector stakeholders and delivers a strategic direction for UK energy RDD&D.

International collaboration

  8.  E.ON is realigning its business in a number of areas on a functional rather than national basis. It has formed an E.ON Climate and Renewables unit which will operate internationally and will lead to a considerable increase in E.ON's investment in renewable energy sources in the coming years. It will also be investing in international climate protection projects.

  9.  E.ON has recently merged its technical and engineering expertise in Germany and the UK under the E.ON Engineering banner to better co-ordinate it's R&D in renewables and other fields. It is known that other energy companies are increasingly operating on an international basis in this area. Outside of the private sector international collaboration is generally poor.

Public funding/support for the development of renewable electricity generation and incentives for technology transfer

  10.  Energy research in the UK is framed by the UK's strategic energy policy objectives. Essentially these seek to:

    —  Combat climate change through the reduction of GHG release (especially carbon dioxide).

    —  Ensure affordable energy for all consumers.

    —  Ensure security and reliability of UK energy supplies.

    —  Promote the competitiveness of the UK economy.

  11.  Achievement of these objectives and the attainment of a long term, financially sustainable and co-ordinated energy research community are mutually reinforcing goals.

  12.  The breadth of energy policy objectives necessitates a co-ordinated and holistic approach, with social, economic and environmental research complementing the traditional scientific and technological research. For instance whilst the current favoured generation technologies are CCGT, coal (& CCS), nuclear and renewables, the factors determining how each of these technologies will develop in the future go beyond technological barriers and include public acceptability issues.

  13.  The long term nature of the energy policy goals combined with the confluence of scientific, social scientific and economic factors make predicting the potential development of differing renewable generation technologies highly complex. For these reasons it is essential that Government does not seek to pick "technology winners". Instead a technology neutral approach provides the most efficient and flexible route to achieving strategic energy objectives.

  14.  Following the privatisation of the utility sector, research activities were undoubtedly fragmented and public funding was significantly reduced. However, research activities (funded through a variety of sources as noted earlier) are once again gathering momentum. This is particularly true for renewable generation technologies, as research seeks to support national and international policies to protect the environment through the way in which we generate, transport and consume energy.

  15.  The work of the ETI and ERP now provides an opportunity for Government to benefit from advice on the strategic focus for energy RDD&D in the UK, restoring a clear direction and supporting the UK energy policy goals in a market-led fashion.

Establishment and role of the Energy Technologies Institute (ETI)

  16.  The core partners to ETI have developed a set of agreed high-level outcomes from the organisation:

    Address UK and Global Energy Challenges by:

    (i)  Reduction in greenhouse gas emissions through demonstration of technology to enable timely commercialisation.

    (ii)  Development, demonstration and (in some cases) initial deployment of affordable low carbon technology solutions.

    (iii)  Realisation of security of energy supply in conjunction with GHG mitigation.

    (iv)  Delivery of a step change in funding for Energy R&D in the UK.

  17.  The Institute will focus on delivery of effective R&D support for a strong, low carbon, energy innovation chain through delivery of targeted programmes of applied research and early stage demonstration. It will also seek to maximise collaboration and partnerships and act as an "incubator" for technologies. The Institute will also work to develop new human capacity and deliver trained personnel with appropriate skills, leadership and talent to meet commercial investor needs to enable full deployment of new technologies.

  18.  From an E.ON perspective, engagement in the ETI as a core partner brings a number of benefits, including enhancing the company's strategic development through provision of "risk sharing" opportunities, accelerating routes to market for the new technologies we will be reliant upon, and by providing additional benefit through gearing and deliverables that supplement existing internal programmes.

Commercialising renewable technologies

  19.  As noted within our response to the committee's previous inquiry, E.ON UK is actively involved in a number of projects estimating costs, timescales carbon abatement potential and commercialisation of new energy technologies. A summary of this data was provided with our original evidence.

Intermittency of supply and connection with the National Grid

  20.  According to UK ERC's 2006 report on "The Costs and Impacts of Intermittency", the current design of the UK transmission system should be able to accommodate up to 20% of the country's annual electricity demand from intermittent renewable energy resources. Above this level significant network stability issues are likely to be encountered. The recently announced binding EU target to deliver 20% of energy consumption from renewable energy sources by 2020 suggests that this upper limit will be breached. Therefore significant investment in transmissions network and energy storage solutions will be required on the same timescales to avoid adverse impacts. Specifically the main issues are:

Voltage control

  The technology exists and some measure of voltage control is already provided by wind turbines. However these will need to be improved (extended in range) by improving generator design or addition of extra equipment. There needs to be clarity on responsibility for paying for this.

Frequency support

  Wind turbines can provide frequency support and are generally faster at reacting than conventional steam plant. The biggest challenge is responding to frequency dips which require more power to be generated. Wind power plant can achieve this only by running most of the time at less than optimum output so they can increase output slightly when called. This will result in a significant loss of output. Alternatively some form of storage is required. Nevertheless, as the proportion of intermittent generation increases, the need for frequency support increases and the effectiveness of the addition of further intermittent plant is reduced. Therefore 20 GW of wind will not produce twice the energy of 10 GW.

Upgrading the national grid

  Renewable energy is generally available at some distance from population centres, and much of it may be offshore. It will be necessary to spend significant sums to strengthen the grid to enable transmission of power from these sources. Getting planning permission and other consents for overhead lines is increasingly difficult, but using underground cables will magnify costs further.

Government policy towards enabling existing technologies to meet targets

  21.  The recent CSR announcement identified the domestic element of the ETF as "at least" £370 million over three years (the international element of the fund represents a further £800 million over three years, to be administered by DfID and Defra). This essentially brings together BERR and Defra funding programmes for demonstration and deployment of emerging energy and energy efficiency technologies. This £370 million is broadly allocated as £170 million to Defra and £200 million to BERR. When existing commitments are taken into account, the overall funding "uplift" provided through the ETF is, therefore, only around £170 million over the three years of the programme (£40 million for BERR and £130 million for Defra).

  22.  The role for the ETF has been identified as providing "support for large scale demonstration and deployment of new low-carbon energy technologies which are close to market, building on the work of the Energy Technologies Institute and the Technology Strategy Board as a means of commercialising the technologies that these organisations develop". These aims are laudable. Our principal concern is, however, that the levels of additional funding identified in the CSR will not be sufficient to realise these aims.

  23.  Early discussions around the ETI identified that the funding it was seeking to deliver (£110 million per annum of "new" money) is insufficient to allow it to adequately support all RDD&D activities. Therefore the ETI is seeking to focus on applied research and early stage demonstration.

Whether the UK has the skills base to underpin the development of renewable technology

  24.  There is a growing body of evidence that there is a long term decline in the numbers of "next generation" scientists and engineers available to support UK industry and academia. At the same time it is evident that there are major challenges in meeting national energy policy goals. Achieving these goals is dependent upon having a sufficient number of high calibre scientists and engineers.

  25.  One of the initial objectives of the ERP was to "Address the high level skills shortages in the energy sector", where high-level skills are taken to mean those required to contribute to the research and development chain that provides innovative new solutions to the challenges the UK energy industry faces—and to deploy them effectively. E.ON led the delivery of this study as part of our input to the ERP. The key findings of the study were:

    —  Skills shortages are causing recruitment problems in the sector with technical skills specifically in short supply.

    —  Without intervention this situation is anticipated to worsen, particularly when the extent of energy innovation and infrastructure replacement that is required is taken into account.

    —  It is the shrinking pool of graduates that is the issue rather than any concern that their quality is degrading.

    —  Organisations are looking abroad for skilled resource, in part a direct response to worsening problems in recruitment.

    —  The sector is seen to have a poor image among young people, however it is recognised that we are at a turning point in the sector with some very powerful tools to change this.

    —  A significant "outreach" initiative could influence future career choices among young people.

    —  Energy sector pay compares favourably in engineering, but it is recognised this will never be a competitive advantage versus other areas such as financial services.

    —  There is no evidence of post-training attrition; retention rates in the sector compare very favourably with those in other sectors.

    —  The sector has strong competitive advantages, projects are engaging and exciting and, once recruited, labour does not tend to leave the sector.

    —  A key recommendation of the report is that harnessing the above advantage by interacting with young people at a very early age could make a significant impact on the number of recruits coming through, and improve general public perceptions.

  It is recognised there are individual organisational efforts, but the scale of the problem is likely to require additional activity, the form of which will need careful design and implementation.

January 2008

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