Examination of Witnesses (Questions 120
- 139)
WEDNESDAY 23 JANUARY 2008
MRS SARAH
RHODES, MR
MICHAEL DUGGAN
AND PROFESSOR
DAVE DELPY
Q120 Dr Gibson: You mean idiot-proof.
Mrs Rhodes: Let me firstly say
that we also are part of ETI so clearly that handoff between ETI
and us is never going to be a hard and fast line, there will be
all sorts of variants.
Q121 Dr Turner: There will be crossovers.
Mrs Rhodes: You are broadly right
that we are in large scale proof of concept prototypes, let us
show it works at scale, and then our money is very geared at what
are the specific barriers to the deployment of this technology
and how can we use our capital grants to deal with those barriers.
This brings me to your point on microgeneration where, as you
look at that sector, what we are attempting to do through our
capital grants scheme is really to kick-start the supply market,
again in the business that we are around, trying to make things
happen more quickly than they would happen without our intervention.
We are about trying to build the supplier base that will deliver
this and in order to do that you need to build some of the demand
base. I accept there have been all sorts of difficulties with
us in running household grant schemes, they are very difficult
things to run, and we are learning with all of this.
Q122 Dr Turner: In the past your
capital grants have never fully funded projects, they have always
been part-funding, and this is what has made life difficult for
some people because they have got to get matching funding from
elsewhere and it is not always that easy. Will you be changing
that?
Mrs Rhodes: There are two reasons
why we do that. The first is that we are bound by state aids rules,
so there are limitations on what we can legally—
Q123 Dr Turner: But, hang on, the
ETI is going to be able to totally fund projects.
Mrs Rhodes: Yes. It depends what
sector you are funding. If you are funding the academic sector
then certainly you can fund it 100%. If you are starting to fund
industry, corporates, then you are limited by EU law as to what
funding levels you can find. I would add one other point: quite
apart from that being the position—
Dr Turner: I am confused there because
we were told specifically by the Director of the ETI that they
proposed to totally fund—
Chairman: 100% funding.
Q124 Dr Turner: —early stage
commercial projects.
Mrs Rhodes: Let me add one further
point. ETI can do that by procurement, by buying the thing that
it wants to develop. In terms of a household grant, the government
does not wish to find itself owning panels on people's roofs and
people's ground source heat pumps, it is not where we want to
be. I would add one other thing, which is if government fully
funds things, in a sense we are taking all the risk of doing that,
we are taking the responsibility for doing that. If your aim in
this is to kick-start a market, kick-start some demand, we would
not be funding things, we would create an audience out there,
a market out there, that will not move unless we put 100% grants
in place and that really is not where we want to be. We also have
to look at who is funding who to do what here. The taxpayer is
funding people who may be able to afford to do some of their own
grants. There are all these issues that need to be balanced in
deciding what we think is the right level.
Q125 Dr Turner: Is there not a way
through this because, after all, the ETI is funded partly by industry
as well?
Mrs Rhodes: Yes.
Q126 Dr Turner: So its matching funding
is, if you like, integral to the whole concept. Can you not apply
the same concept to your capital funding because it would make
it a lot more effective?
Mrs Rhodes: Partly we are funding,
in a way, the supply industry to make this happen, so there is
obviously an element of joint funding, and where we are most successful
with our capital grant programmes is when we are actually leveraging
quite a bit of private sector funding and, indeed, funding from
consumers to make these things happen. That is certainly an aim
that we need to have. For some of this, for somewhere we are not
funding industry, we could legally do 100% but we have to ask
ourselves the question of whether we want to, whether that fits
the purpose of what the schemes are designed to do.
Q127 Dr Turner: We will leave that
for the moment. How is your future capital grant system going
to interact with the Environmental Transformation Fund, which
on the face of it is likely to do similar things?
Mrs Rhodes: Our Capital Grants
Programme is the Environmental Transformation Fund, the two are
the same thing.
Q128 Dr Turner: That helps. It is
a pity when there are lots of different names.
Mrs Rhodes: I know, you are right.
Q129 Dr Gibson: Life is like that!
Mrs Rhodes: What we have is a
set of existing grants and in schemes where they have been effective
they will be rolled forward. We also have some new money in our
settlement with the Environmental Transformation Fund so, again,
and particularly through the renewable energy strategy work, we
will be looking at how we best invest that new money.
Q130 Dr Turner: Do you think your
policies are going to be flexible enough to support new innovation?
There is obviously going to be an interface, or potential non-interface,
between yourself and DIUS because a lot of the work that used
to happen in DTI will now be in DIUS. Are you going to be able
to integrate sufficiently with DIUS to ensure that the whole innovation
process—I will not call it a chain because that is a linear
model which is out of date—hangs together so that a technology
development in principle does not get lost somewhere because the
two departments do not mesh together properly? How do you propose
to approach that from your end? We have asked DIUS this question
and now we want to hear your answer.
Mrs Rhodes: I very much hope it
is the same, and I am sure it is. We have very close working relationships
with DIUS. We work very closely together, our ministers meet regularly,
they have regular bilaterals, and obviously Malcolm Wicks has
just been the Science Minister. We have all sorts of institutional
links built in. I would say we also have a whole system of links,
a whole system of co-ordination, to make sure that all these different
funding bodies do work reasonably well together. To add to those
two, through our renewable energy strategy we are going to do
some work which is co-ordinated with the Carbon Trust, the Royal
Academy for Engineering and DIUS as well, and indeed other partners,
asking precisely those questions: are we sure we have got the
links right; how do we know this system is fit for purpose; what
is the right amount of funding in any different part of this system.
Q131 Dr Turner: How will you measure
those outcomes? Who are you going to ask for the evidence?
Mrs Rhodes: We are going to have
to do a lot of work for this. As we all know sitting here, it
is very, very difficult to measure innovation. That is no excuse
for not trying but there are no easy measures in this so you need
to work out how on earth you are going to do it. It is work we
know we need to do. There are changes to the targets, to the bodies
that are united in helping deliver those targets, and do we really
know this system is as good as we can make it.
Q132 Dr Turner: One of DTI's past
initiatives which has not yet produced is the Marine Renewables
Deployment Fund. Why has anybody not been able to qualify for
that yet? The OPD have had Pelamis developments in the water for
some time but they have not made it either. Why is this, do you
think?
Mrs Rhodes: I am very pleased
you have asked that question. I was very interested in your discussion
on this before. The MRDF is a fund for deployment and, indeed,
the fact that it is not spending is something which obviously
has concerned us. We have gone back through the Renewables Advisory
Board to ask for advice on should we change the scheme. Their
report is due this month. They have suggested some small changes
to it but they are not suggesting changes to the critical issue
which is there is a three month criterion for eligibility for
this funding, which is three months' proven testing in the water.
Q133 Dr Turner: Does that mean three
months' continuous successful operation?
Mrs Rhodes: Yes, you have the
evidence of three months' operation in the water, successive operation.
Q134 Dr Turner: So if you have a
maintenance break to fix a fault for a couple of days that breaks
the three months?
Mrs Rhodes: We really are not
in the business of being hard and fast about this. We are not
aiming to trip people up through this.
Q135 Chairman: Sorry to interrupt,
but you say you cannot get access to the Marine Renewables Development
Fund grants until you have had your appliance in the water for
three months?
Mrs Rhodes: Yes, and let me explain
why, which is your next question.
Q136 Chairman: Yes.
Mrs Rhodes: The why is because
this money is there for demonstration, it is to show that it works.
If you have really got no evidence coming out of R&D that
this works then the issue is have you done enough R&D and
that is what the Renewables Advisory Board's report is telling
us, that the issues here are mostly in the R&D chain, which
is why we are delighted, and we are part of this decision, that
this is one of the areas that ETI will start off in. We need to
get the technologies and show we can get the technologies to the
point where they work in the water and they are worth demonstrating
at scale. This is all an issue about spending money in the right
places.
Chairman: This is a valley of death that
we are talking about.
Q137 Dr Turner: My understanding
is that in order to apply for the MRDF developers had to have
been already the beneficiaries of capital grant funded programmes
from the DTI which had already done the demonstration and this
is really about initial commercial deployment. Have I got completely
the wrong end of the stick? Are you really seriously saying that
a developer must do the development, which is going to cost several
million quid, without knowing and only when that is done can they
apply to you for the fund? That does not make much sense at all.
Mrs Rhodes: Let us not lose sight
of the fact that the industry itself has reviewed this scheme
and they are finding that the way we have organised the money
here is sensible.
Q138 Chairman: That is why nobody
has got any of it.
Mrs Rhodes: You are absolutely
right to ask me the question, but we have asked these questions
too and we have asked them in collaboration with the industry
itself. What you have got here is an industry that is very much
small firm based and it finds it difficult to get access to the
capital so you are tending to find that three months is critical.
We, through the Technology Fund Programme, now part of the Technology
Strategy Board, have been funding these technologies but we need
to make sure that there is proof they are viable, feasible technologies
and, until we get that, and this is what the industry is telling
us too, it does not make sense to crack into MRDF funding. That
is why we accept there is a hole there and we want ETI to plug
that hole and really get a grip on how we are going to get those
three months in the water. ETI is meshing totally with MRDF to
make sure that happens.
Q139 Dr Turner: Surely you must identify
candidates beforehand?
Mrs Rhodes: There are a lot of
candidates. This is another feature, how many candidates do we
mean to have here.
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