Select Committee on Innovation, Universities, Science and Skills Minutes of Evidence

Examination of Witnesses (Questions 65 - 79)



  Q65  Chairman: We move on to our second set of witnesses this morning on our inquiry into renewable electricity-generation technologies and we welcome this morning Mrs Sarah Rhodes from BERR, Dr Michael Duggan from BERR and Professor David Delpy, the Chief Executive of EPSRC on behalf of the Research Councils UK. Welcome to you all. I am sorry that we are running a few minutes late but I do intend to finish by 11.25. May I begin, Sarah, with the same question as I asked the previous panel regarding this figure of 20% renewables by 2020. What is the Government's view at the moment in terms of electricity generation? How much electricity will we have to generate from renewables by 2020 to meet your targets and indeed the European targets?

  Mrs Rhodes: We are expecting the Draft Directive to be published today and we are expecting that it will have a target for the UK probably of 15% overall. We will obviously have to wait until we see it in print but that is our expectation. It is also worth recognising that there is a separate target in there of 10% biofuels for road transport, and we are required to meet both.

  Q66  Chairman: Is this specific for electricity generation?

  Mrs Rhodes: No. The 15% is renewable energy. There is a separate 10% within that for road transport and therefore the question that you rightly ask me is, what is the expected percentage share for electricity? We have a fair bit of work to do to work out what we think is the right percentage for electricity but I entirely agree with the views you have had so far that it is somewhere between 30 and 40%; it is a large amount. Electricity is likely to take the larger share of this because although we will want to do a fair bit through heat, it is a very difficult market in which to achieve those kinds of savings.

  Q67  Chairman: Michael and David, do you agree basically with that assessment?

  Professor Delpy: From all the information I have heard and seen to date, yes, I would think that is a reasonable assessment.

  Mr Duggan: I will have seen the same papers that Sarah has.

  Q68  Chairman: In 2006, renewable energy accounted for 4.55% of all electricity generated. Why is the UK implementing its renewables more slowly than other European countries, particularly like Germany and Spain? Why are we so far behind?

  Mrs Rhodes: We have had the advantage and the disadvantage of a ready supply of fossil fuel. We have been an oil and gas producer. Therefore, we have been in a position where we have had a ready supply—

  Q69  Chairman: Germany has had a fair bit of coal, has it not?

  Mrs Rhodes: Yes, absolutely, it has. We have been blessed and now we have to deal with the fact that we need to catch up. We are putting a lot of resource into the question of catch-up and I would say that this is very much a question of sensible investment. This is a question of cost. How do we plan our way most economically to achieve the 20% target? I would also say that this is a question of not just focusing on that immediate 20% target, although it is incredibly important; we also have to look to the wider picture that we will probably have to reduce our carbon emissions by much more in the longer time. At the moment our target is 60% by 2050 though the new Carbon Committee may put us up to 80%. Yes, 2020 matters a lot but let us not also lose sight of the larger picture.

  Q70  Dr Gibson: I get absolutely baffled by figures in this field; I think everybody gets a bit fed up and I am sure that the public do not understand a damn about 20% 10%. Do you not think that confuses the picture and that we need a different language? We have 4.55, we have 20, we have 60 and we have 80 and so on. Do you think that is helpful when the measurement of it is probably inaccurate anyway?

  Mrs Rhodes: You are absolutely right that people need to understand a clear target because behaviours are one of the most important things and behaviours of us as consumers, individuals and organisations, is terribly important to reaching whatever our targets are. So, yes, but this is a picture that moves constantly. The science is moving, the evidence is moving and the policy is moving. So, yes, you are right, we do have to find a way of communicating that really effectively.

  Q71  Chairman: There are that many figures being bandied around that it is difficult for this Committee to get a grip of it and we have actually decided that we want to do this inquiry. I see communicating it more broadly is difficult and you have introduced new figures today which are coming out of the European Directive. Professor Delpy, wind has been a very, very important part of actually meeting these targets as far as the UK is concerned. The British Wind Energy Association suggested that new investment in terms of wind technologies would in fact decline after 2012. Is that a huge concern?

  Professor Delpy: I think that one has to distinguish between the wind base that is going to be installed now and the technology has already been developed. The Research Councils are funding developments that will come on stream in I would say at best in six to seven years' time, reality often in ten to 20 years' time. The research that we are funding in the wind turbine area relates to probably the offshore aspect of wind turbines where there are particular problems which have not yet really been successfully answered and a tremendous amount of work in modelling of wind turbines and airflows in order to both maximise efficiencies and to deal with the large variation that I think Dr Gibson mentioned that occurs in the load factor that wind turbines experience.

  Q72  Chairman: Is it not all to do with the Renewable Obligations and the fact that we do not know what is going to happen after 2012? Is that not one of the core issues in actually trying to give the industry some sort of sense of security to actually make long-term investments? After all, 2012 is only four years away.

  Professor Delpy: It is and, as I say, I am not sure that you are actually asking the right person because I suspect that these are issues that relate to regulation, to fiscal policy and to local planning policy rather than to basic research. If the Research Councils have an obligation there, I think it is to ensure that we have a supply of engineers and scientists who can in fact support the industry.

  Q73  Chairman: If you cannot answer it, obviously the man who is responsible for regulation is in front of us, so he will be able to answer it.

  Mr Duggan: The Renewables Obligation was brought into effect in 2002 as a 25-year instrument. Most of these projects that come, wind farms and the like, have investment periods and payback periods of the order of 15 years and only a bit on individual business models, and clearly an instrument which ends in 2027 will start to run out of impact between the 2010 and 2015 period.

  Q74  Chairman: What are you doing about it?

  Mr Duggan: That time has started to approach within a sort of reasonable policy timescale at about the same time as the 2020 target has come up, so clearly the consultation that will take place on the 2020 target, one of the things we will have to do is consider what it is that we do as the next step, either in extending the Renewables Obligation or in adding to the Renewables Obligation, to bring on increased investment over that kind of timescale from 2010 onwards.

  Q75  Chairman: Come on, you are advising the Government. What is your view?

  Mr Duggan: I think the interesting thing is that the Renewables Obligation was set up, as I said, really in the context of an attempt to reach renewables targets around 2010. I think that moving to a hard 2020 target and a much later target requires quite a major review of what we should do. A lot has been said about feed-in tariffs, for example. My view is that feed-in tariffs are not the kind of silver bullet that they are sometimes regarded as. The changes we are making in banding the Renewables Obligation will significantly increase its efficiency and make it a much more flexible instrument, so I think that extending the Renewables Obligation would certainly be one major policy option that we will be considering.

  Q76  Chairman: Giving out more ROCs does not in fact achieve anything unless there is a value to them and in fact investors can actually see that there is a long-term investment value to those and that is one of the big problems, is it not?

  Mr Duggan: Investor confidence is a very important factor in that.

  Q77  Chairman: Given that Government policy says that this has to be led by private sector investment, it is more than just a factor.

  Mr Duggan: I think the evidence is that the Renewables Obligation has inspired a lot of investment. We have seen the levels of build and onshore wind deployment has grown by 40% a year for the last couple of years. There is a great deal of investment, gigawatts of capacity, that people are prepared to make that is held up in the planning and grid queues. I do not think that the Renewables Obligation has failed to bring forward investment in renewables over the past few years. In fact, I think it has succeeded because we have seen a tripling of the deployment[3] in the first five years of its existence.

  Q78  Dr Turner: Can you back that up with reasonable evidence because (a) you are starting from a very low base so, if you had not tripled the deployment, by God, you will have been doing very badly and (b) the uncertainty of the value of the ROC can hardly be discounted because there are theoretical circumstances when the value of the ROC can be zero. So, it would not matter how many ROCs the generator held because, if they are not worth anything, that is not going to give them very much confidence, is it? Given that feed-in tariffs have produced much greater deployment in Germany at no greater cost, in other words much less cost per gigawatt, how is it that you can justify sticking to the ROC the British way especially when it is so administratively complex as well? I talk to the people in the industry a lot and they tell me that, as an investment climate for renewable energy, Britain is the worst in Europe.

  Mr Duggan: As I said, in terms of the evidence in the past few years, we have seen a great deal of investment come forward. That has not always delivered projects on the ground as we would have liked and that has not been due to a failure—

  Q79  Dr Turner: Can you be sure that it is the ROC mechanism which is actually pulling that investment?

  Mr Duggan: Yes because, if you look back, without stimulus and under the previous regime, the non-fossil fuels obligation, we saw very little growth at all in renewables deployment and that took from the early 1990s through to 2001 and we were only at a couple of per cent renewables and a great deal of that was the kind of historical hydro that had been built more than 50 years ago. So, the RO has delivered a tripling of renewable deployment and that is entirely down to the financial incentive that the Renewables Obligation has brought forward.

3   Note from the witness: "RO eligible generation was 4,884 GWh in 2001 (the last year before the RO was introduced) and 14,554 GWh in 2006". Back

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