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

Memorandum 63

Submission from npower renewables


  1.  npower renewables, part of the RWE group, welcomes the opportunity to respond to the Innovation, Universities and Skills Committee inquiry into renewable energy technologies. We also submitted evidence in July 2007 to the inquiry previously announced by the former Science and Technology Committee. Noting both the changed focus of the new inquiry, and recent organisational changes of significance to npower renewables, we have updated our evidence submission.

  2.  Consumers, industry and Government face difficult choices in responding to the need to provide secure and sustainable energy supplies for the UK. npower renewables is committed to engaging with Government on this issue, and to playing a key role in helping to deliver government targets for renewables.

  3.  The UK Government has been effective to date in identifying and supporting the most viable and cost effective renewable technologies. The recent Government focus on addressing the economic issues faced by renewable technologies is welcome; npower renewables support the proposed reforms to the Renewables Obligation (RO). Further, we feel that RO monies are most efficiently used when directed to near-commercial technologies with the potential for large-scale deployment, namely onshore wind, offshore wind and biomass.

  4.  Existing renewable technologies have the capability to meet a significant proportion of the current targets. Indeed, many onshore and offshore projects have been developed to an advanced stage and are now reliant on government action, in particular in the area of consenting. Government policy has a primary role in enabling this capability to be realised, and in this regard we feel it is now appropriate to shift focus from economic matters to other barriers.

  5.  This written evidence provides details on the current state of research and development (R&D) in, and deployment of, renewable technologies; government policy towards enabling existing technologies to meet the targets; and, the commercialisation of renewable technologies. In particular, we highlight some of the barriers to the large-scale deployment of existing renewable technologies, especially planning, transmission grid connection and supply chain issues.


  6.  In November 2007, RWE announced plans that will enable the significant expansion of its renewable activities, both in the UK and in Europe. From 1 February 2008, all RWE renewables activities will be pooled in a new company, RWE Innogy. RWE intends to invest at least €1 billion per year from 2008 onwards in expanding its renewables activities. We anticipate that growth will be aligned with the policy targets set at European and at national levels, and that ambitious UK targets for renewables will attract substantial investment by RWE into the UK renewables market, where we will continue to pursue our commitment to organic growth through investment. Our primary focus will be the development, construction and operation of currently deployed commercial renewable technologies where we have developed significant expertise: onshore and offshore wind, hydropower and biomass. Innovation will also be a central strand of our activities with a particular focus and significant expenditure on the commercialisation of emerging technologies, such as wave and tidal power from 2008 onwards.

  7.  From 1 February 2008, all npower renewables UK assets, as well as our development and operational activities, will be pooled into the new company, RWE Innogy. To date, our operating portfolio has the ability to generate approaching 500MW of clean electricity, and we have many more projects in construction and under development.

  8.  Our previous submission to the Science and Technology Committee provided detail on our operational assets, activities in the development of wind, hydro and marine renewables as well as activities elsewhere in the RWE group related to renewables and sustainable electricity generation. For ease of reference, this is included as a appendix to our submission.

The current state of UK deployment of renewable electricity technologies

  9.  The table below sets out the renewable technologies which are supported through the RO and the Non Fossil Fuel Obligation (NFFO). The table also shows npower renewables' position (RWE npower where appropriate) with regards to each of these technologies, as well as the key barriers to overcome in achieving large scale deployment.

Installed Capacity
Installed Capacity
(MW): npower renewables
Key Challenges/comments

Onshore wind
Planning; Grid; Supply Chain
Landfill gas
Limited opportunities for growth.
Hydro MW DNC
Limited opportunities for growth
Offshore wind
Grid; Supply Chain; Economics
(refer to #)
Co-firing of biomass
10 (c 8%)[249]
Supply Chain
Supply chain; Economics
(refer to #)
Sewage Gas
Limited opportunities for growth
Biomass and waste using ACT
(No active RWE involvement in UK)
Waste using ACT
(No active RWE involvement in UK)
Marine (wave and tidal power)
None at present
Full scale demonstration; Economics; Planning; Grid
None at present

#  Note that the economic challenges of offshore wind and biomass will largely be resolved by reforms to the RO under the Energy Bill, as detailed in paragraph 12 below. There remain, however, significant economic challenges for demonstration technologies such as wave and tidal which the RO reforms will not fully address.

Government policy towards enabling existing technologies to meet targets

  10.  We believe that the UK Government has been effective to date in identifying and supporting the most viable and cost effective renewable technologies. Those technologies currently supported through R&D funding programmes, the RO and the Climate Change Levy represent those which demonstrate the greatest potential for large scale deployment, through which government targets can most efficiently be met.

  11.  We are confident that existing renewable technologies have the capability to meet a significant proportion of the current targets. Government policy has a primary role in enabling this capability to be realised, as there remain significant barriers to the deployment of existing renewable technologies which the UK Government must address.

  12.  We are reassured that the Government has recently progressed substantial reform of the RO mechanism that will enable large scale deployment of existing technologies. In particular, the banding up of "post demonstration technologies" will go some way to addressing economic challenges encountered by renewable technologies, in particular offshore wind. It is now critical that Government ensure policy, and hence the support available, is consistent across the UK.

  13.  Aside from economic issues, other significant barriers remain which will inhibit the speed at which existing renewable technologies can be deployed to meet targets. Without concerted effort and radical reform in the areas of consenting, grid connection and supply chain, existing technologies will not be deployed in time to meet the targets.


  14.  The lengthy planning and consenting regime has slowed deployment of renewable technologies, in particular onshore wind. The UK Government's Energy White Paper recognises that the current process burdens participants with uncertainty, delay and sometimes significant upfront cost.

  15.  npower renewables generally welcome the proposal in the Planning Reform Bill to replace Section 36 and 37 consent processes in England and Wales with an Infrastructure Planning Commission (IPC). We believe that this will provide a more efficient and predictable approach to planning and consenting. It should be noted that projects below 50MW (which we estimate comprise 30% of projects submitted to planning) will be unaffected by the IPC and therefore the proposal does not address the slow progress of many onshore wind projects. Further, as planning is a devolved matter these proposals will not impact upon devolved administrations.

  16.  Consumers and the general public will face difficult choices if renewables targets are to be met, for example related to the planning and development of wind farms.

Grid Connection

  17.  The availability of grid connections for renewable projects remains a major barrier to the deployment of most renewable technologies, particularly wind and marine renewables. Designed for conventional forms of generation, physical grid access and the grid code inhibit, and therefore delay, the connection of renewable assets to the grid. Further, UK grid code obligations are more onerous than in other European countries, and impact upon the technical requirements of turbines and impose unnecessary costs.

  18.  In the short to medium term, the constraints associated with grid queue management need to be addressed to enable timely connection of new generation. In the medium to long-term, appropriate investment in infrastructure will be necessary to prevent the transmission and distribution grids constraining current and future generation, and to provide for the changing nature of generation to include more distributed and embedded generation, in addition to existing centralised generation.

  19.  Investment in infrastructure must be appropriate and timely; we believe the best way to achieve this is to ensure that investment is driven by the requirements of projects being developed. npower renewables recognise that we and all other projects developers have a responsibility to commit fully to infrastructure development.

  20.  Delivering additional renewable capacity will necessitate new grid infrastructure, which will need to include new overhead lines and pylons. In this area, we feel that the UK Government has a responsibility to ensure that local impact and cost issues associated with new infrastructure do not cause further delays. We are supportive of recent proposals to include necessary infrastructure in the planning process.

  21.  With regards to intermittency of supply, npower renewables support the current approach of cost-reflectivity. That is, all generators and grid users pay the costs that they impose on the system. Intermittent generators, such as wind farms, are thereby encouraged to manage such costs, for example by consolidating their output (by pooling generation with other generators or by netting generation against customer demand, in order to achieve portfolio benefits) or by investing in more sophisticated forecasting techniques.

  22.  Renewable generation also has certain inherent advantages. Renewable generators can, for example, provide the grid with much needed and valuable flexibility, such as the ability to switch off or cap generation in order to provide frequency response at times of low demand.

UK Supply

  23.  Wind developers in the UK must compete for turbines in a competitive international environment. Demand for turbines, in particular, has risen dramatically over recent months and has contributed to rising project costs for both onshore and offshore wind. Further, the costs of turbines, towers and blades are expected to increase in real terms until around 2010 as a result of supply/demand issues and rising steel costs. We also support the development of voluntary approaches to developing opportunities for UK manufacturers that can be adopted by the industry as a whole and contribute positively to UK GDP.

  24.  npower renewables takes its role as a buyer very seriously. As such we actively seek to engage with manufacturers to develop opportunities in the UK. For example, in 2007 we co-sponsored (with Business Link North East) "Meet the Buyers—Wind Energy". This trade fair in Northumberland aimed to bring together turbine suppliers, the construction industry and local contractors in order to build relationships between local and international suppliers. We support the development of voluntary approaches to developing opportunities for UK manufacturers that can be adopted by the industry as a whole and contribute positively to UK GDP.

  25.  The issues currently experienced in obtaining grid connections and the supply of turbines have a direct impact on overall project costs. Whilst we believe the currently proposed bands under the RO (to be introduced from 2009-13) broadly capture the appropriate range of costs, it is critical that changes in project costs are reflected in a timely manner to ensure consistent deployment of renewables.

  26.  In summary, while it is important that there is "blue sky" research into new renewable and low carbon energy solutions, we feel that the UK Government should focus on tackling barriers to the deployment of existing renewable technologies, namely planning, grid and supply.

Public funding and support for development of renewable technologies and technology transfer

  27.  Generally, npower renewables is supportive of government involvement to date in funding R&D, for example, through the work undertaken by bodies such as The Carbon Trust.

  28.  We believe that Government can and should play a role in encouraging and facilitating technology and/or knowledge transfer, for example in identifying synergies between industries (eg offshore wind and oil) or opportunities for knowledge transfer by publishing industry specific information.

  29.  We also support the Government's commitment to raising the profile of R&D and trying to tackle the severe skills shortages in renewables R&D (and elsewhere). We look to the Government to assist with funding mechanisms which will bring forward technology development and deployment.

Commercialising renewable technologies

  30.  Some emerging renewable technologies, notably marine, face substantial economic and practical challenges before they can be fully commercialised.

  31.  The RO was designed as a "near to market" technology support mechanism and we do not believe that it should be used to fully support emerging technologies, primarily because it will not provide sufficient revenue to support them without distorting the mechanism (even with current banding proposals).

  32.  Emerging technologies should be supported through appropriately structured R&D funding, be it in the form of capital grant funding or revenue support (or a combination of the two). Further, proceeds from environmental taxes should directly fund R&D. We therefore welcome the use of funds brought together under the Environmental Transformation Fund, including funds generated from Carbon Auctions under EU ETS, to support emerging low carbon and renewable electricity technologies and energy efficiency measures.

  33.  We would encourage the Government not only to maintain current corporate tax reliefs for R&D, but where necessary to broaden those allowances to ensure that they will apply to the development and commercialisation of early stage renewables technologies. Our concern is that the existing reliefs are either framed or interpreted in too narrow a way, such that they may have negligible effect on stimulating R&D and investment in this area. The corporate tax reliefs available to renewable generation projects, or the lack of them, are an essential part of assessing the overall economic feasibility of various technologies. Regarding marine renewables in particular, the impact of the abolition of industrial buildings allowances (for structures rather than machinery) could seriously reduce their viability. We have in the past[250] been assured, in the context of investment in renewable energy sources, that the Government would remain committed to retaining a mechanism for delivering specifically targeted incentives. We therefore believe such incentives should be actively considered as new forms of renewable technology emerge.

Developing the skills base to underpin the development of renewable technology

  34.  It is widely recognised that the energy industry as a whole suffers from a skills shortage. It is critical that an appropriate skills base is developed to underpin the continued development and deployment of renewable technologies.

  35.  npower renewables already plays an important role in developing the skills base of the renewables industry. We are committed to recruiting and training new entrants into the industry, with particular focus on technology, operations, and engineering. We are keen to develop our relationships with UK universities and colleges to encourage the progression of highly educated and skilled individuals into the renewables industry.

  36.  We are also supportive of trade body initiatives to help skilled workers access job opportunities through links to the renewables industry.

January 2008

246   Source: Ofgem list of stations accredited for the Renewables Obligation and Climate Change Levy 

247   Source: Ofgem list of stations accredited for the Renewables Obligation and Climate Change Levy 

248   Ofgem estimation calculation: ROCs are only issued for the percentage of electricity generated from eligible renewable sources. This qualifying percentage changes on a monthly basis for each station. This estimate of capacity is based on the number of ROCs issued in the latest month. Back

249   Calculated using Ofgem methodology. Back

250   Letter from HMPG, 2 February 2004. Back

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