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

Memorandum 61

Supplementary submission from the Department for Business, Enterprise and Regulatory Reform


  1.1  This memorandum has been prepared by the BERR's Energy Group in consultation with the Department for Innovation, Universities and Skills (DIUS) and DEFRA, and it incorporates their contributions. This is a supplementary memorandum to the evidence provided by the department to the previous inquiry in July 2007 (Memorandum 46). It includes updates to that evidence and provides additional information on issues not covered by the previous response to the inquiry.

  1.2  The Committee should note some of the information in this memorandum is provided at a time when renewable energy policies are under review and the information provided is current at this time but does not take account of potential changes in the future.


2.1  Interrelation between public sector funding streams

  The Energy Technologies Institute (ETI), the Technology Strategy Board, the Engineering and Physical Sciences Research Council and the Carbon Trust are already working in close collaboration, with each other and with BERR and other Departments, to ensure effective coordination and coherence of research, development and demonstration projects across the low-carbon energy sector. The Research Councils continue to fund university-led conceptual and pre-commercial research and related training through their Energy Programme, and provide part of the public sector funding to the ETI. The Technology Strategy Board (which became an executive NDPB in July 07) provides funding for innovative industry-led R&D.[243] TSB has cross-cutting responsibility for business-led technology development across all sectors. It will continue to fund energy-related innovation as part of its portfolio, including both complementary activities and in areas which are outside ETI's scope or focus, as well as contributing funding to ETI. The ETI will focus specifically on low carbon energy, and with a focus on R&D to accelerate deployment of these technologies.[244] As with TSB, it will operate largely in the development area with an interest in (applied-end) research and small scale demonstration. The Carbon Trust supports the development and commercialisation of technology with the potential to reduce UK carbon dioxide emissions and focuses on overcoming the specific technical barriers that are holding back the next generation of low carbon technologies. The Environmental Transformation Fund aims to bring new technologies researched and developed by these funders and others closer to market through full-scale demonstration and pre-commercial deployment.

Research Councils—additional paragraph

  2.2  Energy research remains a priority for the Science Budget with publication of the detailed Allocations for 2008-11 on 11 December 2007.[245] The Research Council Energy Programme, under which Councils will spend nearly £300 million over the next three years, aims to sustain the research portfolio in power generation and supply, and grow the portfolio in demand reduction, alternative energy vectors, transport, security of supply, research capacity building, and international engagement. The Research Councils are submitting a separate memorandum to the Committee.

Technology Strategy Board (TSB) This section replaces and provides additional information

  2.3  This paragraph replaces 2.4 from previous evidence—With a business-led board and a business focus, the Technology Strategy Board has been established, as an executive NDPB since July, to play a cross-Government role, advising on polices which relate to technology innovation and knowledge transfer and in delivering a national Technology Strategy.

  2.4  This paragraph replaces 2.5 from previous evidence—The Technology Strategy provides a framework and the opportunity for Government Departments, the Research Councils, RDAs and DAs to work in partnership with the TSB, to provide business with a coherent package of technology and innovation support that is aligned to maximise impact.

  2.5  Over the Comprehensive Spending Review period, the TSB will develop and lead a strategic programme worth £1 billion, in partnership with the Research Councils and the Regional Development Agencies (RDA). This includes £180 million which will be earmarked by the RDAs and £120 million by the Research Councils to spend jointly on activities with the TSB.

  2.6  To date it has supported collaborative R&D programme projects in emerging low carbon energy technologies worth £90 million of which approximately £40 million is grant from TSB. It has also supported significant programmes of work focused on reducing energy usage in transport. The TSB has recently announced collaborative R&D calls of £12 million for "Materials for Energy" and £10 million for "Lower Carbon Energy Technologies". The TSB is also supporting Innovation Platforms focused on major societal challenges and include work on low carbon vehicles and low impact buildings. The Platforms are looking to link research to major procurement opportunities.

  2.7  The TSB, as part of developing a national technology strategy, is currently developing a strategy focused on energy technology and innovation.

Environmental Transformation Fund

  2.8  The CSR settlement for this joint BERR/Defra fund is £370 million for the three years from April 2008-11. Of this the BERR settlement is £200 million and Defra settlement is £170 million.

  2.9  DEFRA and BERR are currently developing the aims, objectives and governance structure of the ETF.

  2.10  As part of the agreement with Treasury on the ETF, BERR, DEFRA and DIUS are together developing a strategy for a low carbon technology framework across the full energy innovation system. It will focus on maximising the cost-effective potential for cutting emissions in the UK and internationally, and be published by summer 2008.

Market Pull Mechanisms: EU Targets/Renewables Obligation/ETS

  2.11  This paragraph replaces paragraph 2.11. from previous evidence—The Renewables Obligation (RO) is the Government's key mechanism for encouraging new renewable electricity generation and runs until 2027. Since its introduction in 2002, electricity supplied from renewables has more than doubled from 1.8% to 4.6% in 2006. It places an obligation on licensed electricity suppliers to source an annually increasing proportion of their sales from renewables. Suppliers can meet their obligation by presenting RO Certificates (ROCs); paying a buyout price (£34.30/MWh 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  Additional paragraph—Alongside the Energy White Paper BERR published a consultation document on our proposed reforms of the Renewables Obligation. The consultation included questions asking for comments on our analysis of the costs of the various renewable technologies and the levels of support in a banded RO. We received over 170 responses to the consultation and attach a copy of our conclusions following this consultation exercise.

  2.13  Additional paragraph—In Spring 2007 the UK played a key part in securing agreement among EU heads of government to a binding target of 20% of the EU's energy consumption to come from renewable sources by 2020. The European Commission is expected to publish early next year a draft directive to implement this target, including the contributions to be made from each Member State. This will then be subject to negotiation, with a final decision expected in early 2009. Therefore we do not yet know what the UK contribution will be, but it is clear that we will need to raise significantly the proportion of our energy that comes from renewable sources. We will launch a consultation next year on how we are to achieve our targets and we will publish our full renewable energy strategy the following spring once the EU directive has been agreed. In the meantime the proposed changes to the RO allow us to make good progress on this important agenda.


3.1  Photovoltaics (PV)—additional paragraph

  3.1.1  The UK government is now supporting UK industry to participate in pan European R&D projects on polymers for PV application through ERA-NET.

3.2  Wave and Tidal—additional paragraphs

  3.2.1  The Energy White Paper 2007 recognised the potential contribution that tidal power could make towards meeting our long-term energy challenges of tackling climate change and ensuring security of supply.

  3.2.2  BERR is now conducting a feasibility study of tidal range power in the Severn Estuary. Working closely with a number of other Government Departments, the Welsh Assembly Government and the South West RDA it will assess the costs, benefits and impacts (social, environmental, economic and energy market impacts, both national and regional) and consider whether Government could support a tidal range development and on what terms.

  3.2.3  The Severn Estuary is of National, European and International nature conservation significance and the work will look carefully at what could be done, with commitment and imagination, to mitigate damaging effects on the rare and protected environment of the Severn estuary and deliver a balanced and acceptable package that is positive for the environment as a whole. The estuary was notified in August 2007 to the European Commission as a candidate Special Area of Conservation (SAC) The study will also include engagement with the people and organisations that would be affected by any development".

3.3  Bioenergy—additional paragraph

  3.3.1  In order to realise a major expansion in the use of biomass in the UK, a major market push is required in the sustainable supply of suitable fuels. In England, the DEFRA Energy Crops Scheme provides support for bioenergy production through grants for the establishment of short rotation coppice and miscanthus. Operating as part of the new Rural Development Programme England (RDPE), the scheme will run from 2007-13. Support will be at 40% of actual costs, within a budgetary provision of £47 million over the seven year period. Natural England will administer the scheme.

3.4  Intelligent Grid Management and Energy Storage

  3.4.1  Replaces paragraph 3.7.6 from previous evidence—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. Notably, in the Summer of 2007 BERR published a report into the potential of "dynamic demand" as a means of mitigating the impact of intermittency and is supporting further work in this area.


  Please see paragraph 2.12 above for update.



  5.1  Replaces paragraph 5.2 from previous evidence—On technologies for the future, in 2006, Foresight in the Government Office for Science, 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

  5.2  Additional paragraph—Currently, Foresight is running a project on Sustainable Energy Management and the Built Environment. The project is building on the findings from the 2006 review as well as commissioning new material. The project is planning to publish its findings in Autumn 2008.


  6.1  International energy technology work is an essential part of delivering UK goals and an extension of the domestic strategy. The private sector is the main driver of technology collaboration but there is a role for Governments, as Stern notes, to help overcome barriers to development, widen networks and communications, agree standards and priorities, share learning and so on. There are a number of different multilateral organisations, committees and contacts, the main ones BERR are involved in are listed below:

International Energy Agency (IEA)

  6.2  The UK is one of the 27 member countries of the IEA. The IEA acts as an energy policy advisor to Member countries in their effort to ensure reliable, affordable and clean energy for their citizens. In pursuit of this objective, it has provided a structure for international cooperation in energy technology R&D and deployment. Within this structure there are Implementing Agreements (IAs) of which BERR are involved in a number of renewable technology specific agreements (eg Bioenergy, Ocean Energy Systems, Advanced Fuel Cells and Photovoltaic Power Systems). Participation in these agreements provides formal structures for international collaboration. The meetings and participation provide a forum to share ideas, work together on reports and areas of a particular technology that need further exploring to either progress the individual technology or provide an exchange of information and ideas between the member countries.

  6.3  BERR also sit on IEA's Committee for Energy Research and Technology (CERT) and one of its expert bodies Renewable Energy Working Party. CERT co-ordinates and promotes the development, demonstration and deployment of technologies to meet challenges in the energy sector The UK is currently chair of the IEA Governing Board.

Framework Programme 7 (FP7) and Intelligent Energy Europe (IEE)

  6.4  Both Framework Programme 7 (FP7) and Intelligent Energy Europe (IEE) have strong aspects of international collaboration. All projects funded under both schemes have to be made up of partners from different states. Under FP7 projects need to have a minimum of three partners from three different nations, two of these have to be member states whilst the third can be a non-member state country. Under IEE again there has to be a minimum of three partners again, These are usually member states but other countries and organisations can participate as the procedures and agreements allow. It is more common than not that projects have more than three member states represented in any project consortium in both FP7 and IEE. Under FP7 collaboration with non-member states is encourages to spread learning further than the EU, this can be done by "specific actions". Specific Actions are where a call for proposals specifically states that any proposals must be in cooperation with a specific country and a balanced consortium between Member states and the specific country.

  6.5  As the global demand for renewable energy accelerates and companies and Governments in new and emerging markets seek to find expertise and guidance, it is only sensible for UK companies with relevant capabilities to team up commercially with others internationally where they can add value. BERR's Renewable Energy Trade Promotion Service (RETPS) encourages this process. For example at the last British Wind Energy Association Conference in Glasgow in October 2007, a MOU was signed between Taiwanese company Sinotech and UK company Garrad Hassan related to offshore windfarm design work for Taiwan. The agreement was facilitated by the RETPS.


  7.1  The ETI will submit its own evidence and this therefore represents a brief summary of development.

  7.2  In the2006 Budget Statement, Gordon Brown announced: "After discussions with some of the world's biggest energy companies, they have agreed to work in partnership to create, for Britain, a new energy and environmental research institute, and for it to become, for Britain, at the cutting edge of science and engineering". This envisaged a 50:50 public-private partnership with a budget of up to £100 million per annum for at least 10 years.

  7.3  The Energy Technologies Institute (ETI) brings together public and private sector R&D in the UK to set strategic direction and fund its delivery. It aims to provide the UK with a world-class means for delivering applied energy technology research to underpin eventual deployment. The ETI is bringing together some of the world's biggest companies—BP, Caterpillar, EDF Energy, E.ON UK, Rolls-Royce and Shell. Their funding contribution, along with Government, provides the Institute with a potential budget of over £600 million over a lifetime of a minimum of 10 years. Additional private sector partners are being identified to match the Government's commitment of up to £550 million over the next decade.

  7.4  The Institute will operate on a "distributed" basis with research undertaken by centres of excellence across the UK and overseas, as necessary. It will focus on a small number of specific industrially relevant R&D projects, both commissioning and funding its own research and supporting worthwhile projects run by third parties. A formal application for State Aid approval for ETI and its operations was submitted in October 2007 and is currently being considered by the EU Commission.

  7.5  Following a competition to identify a suitable location to host the ETI Chief Executive and support staff, on 20 September the ETI Shadow Board selected the Midlands Consortium (led by Loughborough University with Birmingham and Nottingham) to host the ETI headquarters and appointed Dr David Clarke as ETI Chief Executive. A Limited Liability Partnership was signed and sealed on 12 December 2007 to formally establish the ETI.

  7.6  Detailed calls for proposals under the first programmes focused on R&D in offshore wind, wave and tidal energy were made on 17 December 2007 and ETI is currently working up the next tranche of technical programmes.


  8.1  The skill sets required for renewable energy cover a number of Sector Skills Councils, although Energy and Utility Skills drives the mechanisms to meet the skills challenges. The SSC has identified the following priority skill interventions:

    —  Analysis of the skills combination needed for new technologies.

    —  Regional skills/resource needs for new infrastructure to cope with things like Renewable Energy connection to the Grid etc.

    —  Robust intelligence on skills, qualifications and training provision.

    —  Critical areas will be the development of Engineers and Scientists, who are able to provide innovative approaches able to meet the environmental challenges.

  8.2  The proposed outcome is to undertake a comprehensive mapping of existing skills sets needs and the identification of skills needed, so that a genuine gap analysis can be undertaken. This work needs the creation of a definitive cross-sector Functional and Occupational Map.

  8.3  Researching the renewable energy workforce has proved to be very challenging for the Sector Skills Network because it overlaps with other skills sets, for example general building trades—roofers, plumbers, electricians, gas fitters—where workers spend much of their time on other things and where there are large numbers of self employed. Across energy generally, skills shortages are set to increase as retirement takes an increasing toll of the workforce, while skills gaps are also increasing. Thus there will be increasing demand for people across the sector. Young people are attracted to renewable energy but might also be attracted to bigger pay packets, say from oil and gas. We cannot predict how this will play out.

  8.4  BERR's analysis for the nuclear consultation showed that direct competition for skills between power station build (nuclear or otherwise) and renewables is limited. The availability of people to undertake the network connections or offshore installation for renewables will depend on the wider supply-demand situation at the time.

  8.5  Given the national and global situation across energy, it would be surprising if skills shortages did not impact on the development and deployment of renewable energy. But this is only part of a general supply side lack of capacity, with lead times for established technologies (eg wind) going up. Manufacturing for other renewables is, worldwide, woefully short of what is needed to make a difference. Developing the supply chains, which need increased output at all levels right back to the mines, is a huge challenge. It is possible that lack of supply chain capacity will have a bigger impact than skills shortages.

  8.6  The established energy sector is working hard on skills—witness the National Skills Academies for nuclear and the process industries (includes refineries) plus the advanced plans of the oils and gas industry. Electricity and gas distribution are also developing skills strategies, although the presence of regulated industries in the footprint is presenting some challenges.

  8.7  The 2007 Energy White Paper tasked the Sector Skills Network with reporting on skills across the energy sector. BERR is working with the Network to deliver this report in the first half of 2008. It will define the challenge, set out what is already being done and make recommendations for further action by employers and Government.



  9.1  The Energy White Paper 2007 announced a review, to be undertaken jointly by Ofgem and BERR, of the electricity transmission access regime in GB, in order to better support the timely and cost-effective connection of renewable generation.

  9.2  The UK Government has stated its firm commitment to meeting its share of the European target as set out in para 2.17 (this text is not quite right, but needs tweaking to avoid repetition). This sets an unprecedented challenge for our electricity networks and highlights the urgent need to tackle any barriers to grid access for renewable generators, which is the focus of the joint review.

  9.3  To date, the review has focussed on two key work streams—Access Reform and Operating and Delivering Infrastructure. In early January BERR and Ofgem published an Interim Report which outlined progress to date in removing barriers to grid access, set out some initial conclusions and highlighted the need for a strong and coherent package of measures to ensure timely and efficient connection of generation and more optimal use of transmission assets. The interim report also set out the next steps in the review, which is expected to conclude in May 2008.

Distributed generation

  9.4  We recognise that connection to the distribution network is not always easy, and that this can disadvantage smaller-scale renewable generators. DTI (BERR) and Ofgem published a Review of Distributed Generation, alongside the Energy White Paper in May 2007 which looked at the barriers effecting distributed electricity generation (DG). The report highlighted responses from a call for evidence which suggested Distributed Network Operators (DNOs) could provide a better service with regard to the connection of DG, with comments that in some cases they do not approach connection applications in a sufficiently positive way, even though incentives are now in place to encourage this.

  9.5  As set out in the DG Review, work is ongoing within Ofgem to encourage DNOs to facilitate connection of DG, for example encouraging cost-reflective connection charging, and providing cost recovery and innovation funding incentives. However, concern remains that progress to remove barriers to connection is not quick enough. Building on the DG Review, BERR and Ofgem published a consultation "Distributed Energy—Initial Proposals for more flexible market and licensing arrangements" on 18 December 2007. This puts more pressure on DNOs, setting out options to encourage them to come forward with positive measures for DG within 12 months. If this is not delivered we will consider taking action. A report on the outcomes of the consultation will be published in May 2008.

243   The TSB criteria for investment are: size of the global market opportunity; UK capacity to develop and exploit the technology; right potential for impact in the right time frame; and clear role for TSB to add value. Back

244   The ETI target outcomes are: contribution to reducing greenhouse gas emissions targets; acceleration of development and deployment of affordable low carbon technology solutions; increasing security of energy supply in conjunction with greenhouse gas mitigation; and increasing the level and capacity of the low carbon skills pool-both in the UK and internationally. Back

245   Written Statement on Allocations-11 December 2007 Back

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