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

Examination of Witnesses (Questions 80 - 99)



  Q80  Dr Turner: But you do not have any basis for comparison with any other mechanism.

  Mr Duggan: A great deal has been said about the German success with the feed-in tariff regime. I think that the most important fact is that the Germans have had a consistently supportive policy since the feed-in tariff regime was brought in in 1992. They had their first terawatt hour per year of renewables from wind that was reached before 1995 and that happened to us in 2004[4], I think, which is actually the time after the Renewables Obligation was brought in. It has been that long-term consistency of policy that I think has led to the majority of the German success and they seem to have addressed the issues around planning and grid access much more efficiently than we have up to now and the Government are trying to address that through the current Planning Bill and reforms of the grid access. Just on the cost-effectiveness point, I would like to make the point that the feed-in tariff and the RO are quite difficult to compare. A feed-in tariff regime sets the price that the generator receives. It obliges, in the German case, the regional network operator to pay that price. It is then supported by a lot of hidden subsidy, if you like, or hidden costs that the network has to find which are completely opaque. They are not included in the feed-in tariff regime at all. In contrast, the Renewables Obligation actually applies to the supplier, the supplier who supplies the end customer, and so the cost actually reflects much more the entire network cost from generation through the grid balancing costs and the other costs to the supplier. So, it is a bit apples and pears as a comparison to directly compare the costs. We accept that the Renewables Obligation has not been as efficient as we would have liked, which is why we are reforming it—to improve the cost effectiveness—and just on to the investment climate. Ernst & Young produced an independent country attractiveness rating from the point of view of renewables and it has consistently over the past few years put the UK as one of the top countries that it measures which includes all the major European markets, America and some other international markets.

  Chairman: Dr Gibson, would you like to come in at this point on feed-in tariffs while we have it on the agenda.

  Q81  Dr Gibson: What I really am concerned about is, are there any champions for feed-in tariffs anywhere in Whitehall? Is it likely to happen? Will there be a pilot in it? Do other different types of renewables feed into the system? Will we have a feed-in tariff? Will you try it and see—will you suck it and see?—or are you just hard and fast that Renewable Obligations are the big thing?

  Mr Duggan: I cannot judge what decisions ministers will take in—

  Q82  Dr Gibson: They were not very good last night on the issue when a friend of mine from Nottingham South raised it.

  Mr Duggan: I sat through some of that debate in the officials' box, so I heard some of that at least and I think it will be interesting to see when we have a kind of more rounded debate in—

  Q83  Dr Gibson: Gosh! How exciting! What is said in the Chamber counts, does it?

  Mr Duggan: I am sure that it does. Absolutely.

  Dr Gibson: Great! Good! That is fine!

  Q84  Dr Turner: Perhaps we ought to spend more time there!

  Mr Duggan: I think that there will be scope for more rounded debate of the issues.

  Q85  Chairman: I think what worries us, if I may be perfectly frank with you—and I know that it certainly worries Dr Turner who is a supporter of at least trying to get an answer to this question—is why feed-in tariffs are so off the agenda as far as your Department is concerned. If you are looking at incentivising people to bring new technologies into the marketplace, surely getting a direct return for their investment in terms of feed-in must be why the Germans have been able to install ten times more wind capacity and 200 times more PV capacity than the UK. It cannot just be by accident, can it?

  Mrs Rhodes: May I come in here?

  Q86  Chairman: Yes, help him out.

  Mrs Rhodes: They are not off the agenda, they are firmly on the agenda. The work that we have done through the Energy White Paper has been to enable us to work to a different target and, as Michael said, that is intended to deliver us 5% renewable energy by 2020. We are in a different space now; we are in a space where we are committed to delivering 15% electricity. Therefore, everything is on the agenda. We are about to announce today that we are starting work on a new renewable energy strategy; we are looking at everything. We will look at that. Dr Gibson has a point that maybe we should pilot some things, but we should not lose sight of the importance of investor certainty here and, while it would be lovely to be moving around between all sorts of different measures, we are all learning in this, all the countries are learning, so maybe we are beginning to see evidence that one or two systems are working more efficiently, but it still may not be in our interest to move around when people understand what our incentive system is and we do not necessarily gain from changing that. That is not to say that it is not all on the agenda, but it is to say, "Do not lose sight of the arguments on both sides".

  Q87  Mr Cawsey: I represent a constituency where there has been a great deal of effort to put in renewable wind technologies over several years yet, on the ground, there are none there or very few. So, at least to me, that does not appear to be a matter about Renewable Obligations versus feed-in tariffs. The simple truth is that you cannot get the permissions necessary to put the things up and that is not going to change whether you have obligations or tariffs, is it? Do you have a feeling for how much of the problem is the incentive to people to invest in the first place or actually the practicalities of getting permissions to put them up?

  Mrs Rhodes: We have information on the amount of capacity that is queuing through the planning system and it is very significant, so we know that there are projects that will come forward provided we can deal with some of the blockages.

  Q88  Mr Cawsey: Where would we be compared to some of these more successful countries if you could model where we would have been without the planning restrictions?

  Mrs Rhodes: I am not sure that you can really make those kinds of hard and fast distinctions but we are seeing a willingness to make the investment; we are very aware that there are barriers in terms of actually being able to get the approvals. Planning is a very significant part of that and of course the Government have introduced the Planning Bill to try and deal with that, but we will have to look in our renewable energy strategy as to whether that is enough.

  Q89  Chairman: So, we blame the local authorities and not the Government.

  Mrs Rhodes: Well, the system is designed for something else.

  Q90  Dr Turner: Feed-in tariffs are not the whole story in Germany obviously because Germany has also had the benefits since 1995 of the Renewable Energy Act which addresses the obstacles in addition to any investment difficulty. You refer again to investor security and confidence and stability. If you reform the ROC system—we have now developed the banding system—you are still going to have to grandfather existing ROC rights. So, whatever changes you make, you are still going to have to make grandfathering arrangements. So, why not take the opportunity to look at it root and branch and perhaps test the possibility of a feed-in tariff system as against a ROC system because it is simpler, it is more transparent and it is administratively much, much less complex?

  Mrs Rhodes: The short answer is "Yes, we absolutely need to do it and we will look at these through the renewable energy strategy".

  Q91  Dr Iddon: Energy related research is funded by a large number of organisations and I could read a list out here but I want to save time. What mechanisms are in place to co-ordinate the activities of all these different bodies and to convey a clear picture of their respective authority, responsibilities and funding?

  Professor Delpy: Let me answer obviously on behalf of the Research Councils and mention some of the others as well. It does look a crowded landscape and I think it is true that it is and it reflects the relative speed with which this has come up the agenda. Research Councils UK have answered this problem as far as the academic community is concerned by working I would say extremely well together in their cross-council energy programme, by working through a mechanism of setting up large consortia of academics, for instance in the SUPERGEN consortia, a total of 13 consortia taking academics from across the country and bringing them together. Those consortia meet regularly obviously with the UKERC, the Energy Research Cntre, and the ERP. We have at EPSRC put in place a senior energy research fellow, Nigel Brandon, at Imperial and, through the UKERC which is based there, we have also created a database of the research that is happening. I would say that, on the research side, although it appears to be a complex landscape, first of all there is an enormous breadth of activity which has to be tackled in terms of research from fuel cells, wind, wave, biomass, an enormous range, and therefore I think that one needs a variety of different funding mechanisms, but what you need to ensures is that the people who are being funded by these mechanisms are aware of what is happening across the UK as a whole and I would say that through these consortia that is in fact happening.

  Q92  Dr Gibson: It has come to me where I last saw the word "consortia". I saw it with Graham Beaufort(?) writing to me about the physics cuts, the alleged cuts on a daily basis. Will it affect these programmes that you are talking about? He implied that Scotland's consortia would be affected.

  Professor Delpy: I would say that in general it would not. The cuts that have been talked about via STFC are predominantly affecting the particle physics and astronomy community. The rest of the physics community receives tremendous support both from STFC, EPSRC, NERC and BBSRC.

  Q93  Dr Gibson: So, there is no attempt to curtail the work at all?

  Professor Delpy: No. I do not think that there would be any significant effect.

  Dr Iddon: Why do we not have a single energy authority in this country making this co-ordination much easier and driving the research forward?

  Q94  Dr Gibson: Why do we not have a department? Dave King wanted one.

  Professor Delpy: Or a single NSF and NIH, a single science council Yes. It is one of those attractive ideas that, when I was at UCL as Vice-Provost, I always thought looked great. When you actually get down to examining NSF, then below that top level name there are in fact more subdivisions than we have research councils anyhow. If you look at all the research councils across the developed world, they do generally split up in such a way as to handle particular communities. So, whether you actually have seven separate research councils as we have, or whether you have an overarching body but then seven or ten or 15 divisions below that I do not think matters too much as long as those individual research councils are working well together and are aware of what each other is doing and how they are doing it.

  Q95  Chairman: It is more than just research councils, is it not? We are talking about the whole gambit of whether organisations which the Government have set up ... Can you answer Brian's question, Sarah?

  Mrs Rhodes: Indeed. You can look at our system and you can say that it is a very crowded landscape. You can also look at it and say that it is plural, it is aimed at making comparisons—

  Q96  Dr Turner: You could also say that it was chaotic.

  Mrs Rhodes: You could, indeed. The questions that you need to ask and that we all need to ask looking at it is, can we get some strategic direction through it, does it represent good value for money for government spend and, if you are the customer out there, can you actually find where you get some support for what you want to do? We deal within a landscape that we have just been changing. There is a new Energy Technologies Institute now in this system and we think that it is an extremely good development and an extremely useful development and I am sure that you will be talking to ETI. We also have a new and different Technology Strategy Board in this. Those are two large, heavyweight players in this market; they are working out what their direction is intended to be. Coming back to my points on how we work out the strategic direction and how we make the links, we all work very closely together to ensure that we all try and ensure that our objectives through the system are the same objectives and they are aligned, so that we are all facing in the right direction and we are talking to each other. ETI itself is going to be a very useful new player in this in the way that it brings us all together. Research Councils on the board, Technology Strategy Board is also on the board, we in BERR are on the board; it is a place where a lot of things come together and it will be very useful.

  Q97  Dr Turner: You are right, it is very diverse, and we have a lot of things going on, but the trouble is some countries are choosing winners, they are developing technologies and exporting technologies based upon those winners. Would it not be more suitable if we had a renewable energy authority choosing winners and driving things forward instead of allowing people to thrash all over the place?

  Mrs Rhodes: Yes. It would be absolutely great if we thought we could choose winners, if we thought we could say, "Yes, there is one technology, we know it will deliver for us, will do everything we want, let us put everything we have behind that", but we are really not in this situation. Just from hearing all the questions on all the different technologies you were talking about in the first session, what is the potential of solar, what is the potential of biomass, what can we do through using our waste better, what can wind do for us, there are so many different options. If we pick winners we do seriously risk picking the wrong one and government's track record at picking winners is not one that would give us confidence. Let us accept this is a portfolio, it has to be a portfolio approach, and what we are collectively about are two things through this entire system: we are about proving technical feasibility, showing things can be done at scale, and really fundamentally we are about driving down the costs.

  Q98  Chairman: And letting other countries cash in on the work we do by developing these technologies?

  Mrs Rhodes: I would not at all underestimate the benefits. We have to have a substantial capacity, a skills capacity and industry to deliver that. There are lots of benefits in the fact that we have these targets, let us use these targets, let us gain the greatest benefits from them, but let us remember that renewable electricity generation is very much at the top end of the cost spectrum; our work is designed as to how we can bring it down.

  Q99  Graham Stringer: I understand it is government policy not to pick winners and they have made mistakes when they have gone for LPG and in other areas, but has not the opposite case of sitting back got two problems with it? One, it is an abdication but, two, it also obscures the fact that they are investing in particular areas of the energy industry, they are just not admitting that they are making very clear energy choices between nuclear and wind because there is a large amount of money going into it. What they are doing is stopping a transparent debate about nearly trying to pick winners, is that not the case?

  Mrs Rhodes: You are right that, if you like, the spectrum narrows as you go up. When we are in the research area there are so many potential ideas, there are so many things that need to be brought through, that there is a wide range of things that are looked at on that basis. When you get towards the area that my department particularly funds, which is demonstration, pre-commercial deployment, the way we approach this is by ensuring that we have, if you like, a strategy for each of the key technologies that is looking very much at what are the barriers to deployment and how can we use our own capital grant funding to deal with those barriers coupled with the market pull measures, like the RO, the potential of feed-in tariffs we have been talking about, and how do we make sure that the system works for the technologies that we regard as the most important ones. Increasingly, we are going to have to be making choices between those and increasingly, as there are so many different technologies, we have to ask that really difficult question of can we pay for all of this. This is why we are where we are with all the different things we aim to be funding. When I say "we" I do not just mean "we" in terms of how BERR spends its capital grant or any other department does, but in terms of "we" as a country. Our consumers pay for this, our taxpayers pay for this, how are we collectively going to get to the right investment most efficiently and most cost-effectively? That is the fundamental question we have to ask ourselves.

4   Note from the witness: "actually 2002". Back

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