UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 216-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INNOVATION, UNIVERSITIES AND SKILLS COmmittee

 

Renewable electricity-generation technologies

 

WEDNESDAY 23 JANUARY 2008

PROFESSOR JOHN WILSON, MR JOHN LOUGHHEAD, DR GORDON EDGE and

MR PHILIP WOLFE

 

MRS SARAH RHODES, MR MICHAEL DUGGAN and PROFESSOR DAVE DELPY

Evidence heard in Public Questions 1 - 143

 

 

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Innovation, Universities and Skills Committee

on Wednesday 23 January 2008

Members present

Mr Phil Willis, in the Chair

Mr Ian Cawsey

Dr Ian Gibson

Dr Brian Iddon

Mr Gordon Marsden

Graham Stringer

Dr Desmond Turner

________________

Examination of Witnesses

 

Witnesses: Professor John Wilson, Member, Institute of Physics Science Board, Institute of Physics (IoP); Mr John Loughhead, Executive Director, UK Energy Research Centre (UKERC); Dr Gordon Edge, Director of Economics & Markets, British Wind Energy Association (BWEA); and Mr Philip Wolfe, Executive Director, Renewable Energy Association (REA), gave evidence.

Q1 Chairman: I welcome our first panel of witnesses to this our first oral evidence session on an inquiry into renewable electricity-generation technologies and welcome to the Committee Professor John Wilson, the Science Board of the Institute of Physics - welcome to you, John - John Loughhead, the Executive Director of the UK Energy Research Centre - welcome to you, John - Dr Gordon Edge, the Director of Economics and Markets at the British Wind Energy Association - welcome to you, Gordon - and finally to Philip Wolfe, the Chief Executive of the Renewable Energy Association. I would ask you, John, if you would chair your panel if it gets unruly, so you can allocate the most appropriate member of your panel to answer.

Mr Loughhead: With great pleasure, Chairman.

Q2 Chairman: We have three-quarters of an hour for this first session, so I would appreciate it if your answers were as brief as possible and clearly to the point. I would like to begin with you, John. We are a little unclear about the targets which the Government have set. Twenty per cent of energy from renewables by 2020 and Europe has set a similar target by 2020. How much electricity will need to be generated by renewables by 2020 on both the British and the European targets so we know exactly what we are talking about in our discussions this morning? Give us those figures.

Mr Loughhead: If we assume that the UK adopts the target of 20 per cent - and it is likely that it will be slightly less than that but if we take 20 per cent as a point - it is likely that that will mean that the UK would need to generate between 35 and 40 per cent of its electricity from renewables. The reason for that is that technically it is much less possible to implement renewables in the other sectors of heat and transport in that timescale.

Q3 Chairman: Is there any statistical research evidence that backs up your 35 to 40 per cent?

Mr Loughhead: There have been some calculations which have been performed both by the European Commission as to European scale and also by some initial work that has been done by BERR and by ourselves for the UK level. This is not yet complete, so we cannot state that that is a definitive figure, but the indications are the figures that I gave earlier.

Q4 Chairman: As far as our Committee is concerned, we are better looking at 35 to 40 per cent of electricity generated from renewables to meet those targets than concentrating on 20 per cent?

Mr Loughhead: Yes.

Q5 Chairman: Do you all agree with that, Panel? You are looking puzzled, Phil.

Mr Wolfe: Notwithstanding the remit of this Committee perhaps, I think it is important to remember that we need to expect a contribution from renewable heat and renewables in transport as well and, in a way, it is not always helpful to look at these in silos.

Q6 Chairman: We are looking specifically at renewable electricity-generation technologies, so it is about producing electricity.

Mr Wolfe: Yes, but it is important to remember that there are interfaces between these. If you look at renewables in buildings, for example, you can apply heat pumps. Heat pumps consume electricity but generate heat. So, the different technologies are not always readily entirely separated in the way you are perhaps suggesting.

Q7 Chairman: But you would accept that that does not take us away from the overall targets?

Mr Wolfe: No, certainly we would accept that the overall target for electricity will have to be in the high 30s.

Chairman: Just for the record, I notice that Professor Wilson and Dr Edge agreed with the statement.

Q8 Dr Turner: Looking at these targets, we already know - and I think you, Phil, would be the first to acknowledge - that the target to which we have been working and have accepted over the last two or three years of 20 per cent electrical renewables by 2020 is already looking more than challenging enough at least under business as usual conditions. What is your view of the attainability of the much higher target that the EU overall energy target implies and can you outline the sort of measures that we would need to take to drive the game to the level that would be needed to achieve that?

Mr Wolfe: We believe the higher target is attainable but only if, as your question suggests, we extend the policy measures into areas which historically we have not addressed. So, historical policy drivers for renewables have been fundamentally in the centralised electricity, the merchant electricity generation area, through the Renewables Obligation and similar measures and we feel that those measures will need to be strengthened to achieve rather more than the 20 per cent that historically has been aimed for. We think it is fundamental that policy now starts to address areas that historically have not really had a focus and that includes particularly things like renewables in buildings through on-site energy generation, both heat and electricity as I suggested earlier on, looking at the contribution of renewables in sectors like agriculture through anaerobic digestion, the processing of waste and biomass fuels into biogas that can then be used for electricity generation but also for other technologies. It is achievable provided that we widen the policy portfolio. We do feel in particular that it is not going to be delivered entirely by the energy sector and that we will need to bring other users into the market and that includes corporate energy users, the large supermarket chains, for example - the large corporates are now looking at their energy profile and the contribution they can make - and also the individual, the consumer in their house and, to bring him into the fold, you probably need a whole new type of incentive measure and the one that has been proven to be most effective has been feed-in tariffs.

Q9 Chairman: I will come back to feed-in tariffs later. Dr Edge, you may want to come in here. I am particularly interested in this basic question as to whether we do in fact have the renewables at the moment in order to meet today's very advanced targets.

Dr Edge: This 20 per cent target has very much pushing our policy agenda at BWEA and we have been looking very carefully at what we think is feasible from our technologies with wave and tidal in that time. We believe that, from onshore wind specifically, 1300 megawatts is an achievable target - in fact, if some of the planning constraints were lifted, it could be more than that, that could be a conservative figure - which would produce about ten per cent of our electricity and we are currently at about 2,000 megawatts onshore now. Offshore, with a really big push, we could be getting in excess of 20,000 megawatts which would be producing about 17 per cent of our electricity and the very welcome announcement from the Secretary of State on 10 December for a new round of sites which would facilitate that kind of growth is extremely welcome. It would need, as I have set out in our written evidence, a number of innovations on the technology side but also on the policy side to reach that 20,000 megawatts of offshore wind considering that there is only about 400 megawatts now and only just over 1,000 megawatts globally of offshore wind.

Q10 Graham Stringer: When you were quoting 13 megawatts, is that total capacity?

Dr Edge: Gigawatts.

Q11 Graham Stringer: Is that total capacity and you are not feeding into that a load factor for when the wind does not blow, are you?

Dr Edge: The ten per cent of electricity's electrical energy production and that includes a load factor for that. That would be the electricity energy generation from those 13,000 megawatts.

Q12 Dr Turner: You are assuming a higher name plate capacity?

Dr Edge: No, 13,000 megawatts of name plate capacity at around 30 per cent load factor would produce the electricity that is ten per cent of our electricity.

Q13 Dr Gibson: What is the variation on that? You have obviously done some calculations. What is the variation plus or minus?

Dr Edge: You would have a variation of somewhere in the region of ten per cent.

Q14 Chairman: Professor Wilson, I am anxious to bring you in. Is that really the answer? This is just an opening salvo. Is the answer to go through to known technologies and to concentrate on those over the next 12 years or would we be better looking at longer term technologies that could perhaps give far better payback in plus 2020?

Professor Wilson: I think that that is the problem. It takes so long to develop the newer technologies that we have to be doing that in parallel. I think it is essential for the year of 2030, if you look another ten years on, when I think that, by that time, we would have to look at resource limit as well. At the present time, I think the figures show that we can do it by developing what we already know about the alternatives, especially maybe for the photovoltaics which are perhaps the most technically demanding. There is no doubt that, as we go into 2030 and beyond, solar is probably the only resource that is available without having severe environmental problems and resource limitations of fuel and that means that we really have to start developing that much sooner because the principles that will be needed to develop the efficient and low-cost solar cells are really only just coming on to the scientific scene now.

Q15 Chairman: John, from the point of the UK Energy Research Centre, are there technologies which the UK is a market leader in where the Prime Minister should be saying, "Really put all your eggs in this basket because this is going to be a winner and it will be a global winner"?

Mr Loughhead: I think our view would be that there will not be a single answer to this question, that it will require a portfolio of different technologies. As far as the UK is concerned, I believe that, in terms of the manufacture and design technologies, it would be difficult to say that we were a clear market leader at an international scale at any of these. I believe that, in terms of designing systems for use and installation, which is an equally important area, we probably have a much stronger position because of the experience gained within the UK over the last 15 years and I think it is important to say that, on the research and development front, the UK remains world competitive in its research and development capability in all of the relevant technologies.

Mr Wolfe: I think that we can genuinely claim world leadership in the marine renewable technologies, wave and tidal technologies. Yes, they are at a relatively early stage of development but the UK definitely has a world leadership position in that and it is important that we maintain that.

Q16 Chairman: What about things like Bristol's Space Planes who report that SSP has the potential to provide virtually unlimited clean power? We have the sun producing all this amazing amount of power. Surely we should be risk takers here, should we not?

Mr Loughhead: I am not sure that I fully understand the question. We all accept that all the power ultimately comes from the sun but which specific application?

Q17 Chairman: Bristol Space Planes report that SSP has the potential to provide virtually unlimited clean power which is capturing energy in space and then beaming it down, as I understand it.

Mr Loughhead: Right. I am going to suggest that John answers that.

Professor Wilson: I am aware that this used to be known as the "Glazer Amazer" from Peter Glazer in the State who first proposed a similar satellite collection. Certainly, it is a proposal of course that you generate the power where it is not intermittent to the same extent and then you beam it down in laser beam or microwave power. The big problem is always the energy payback and energy consumption of course, calculating carefully the amount of energy investment needed to put that sort of thing into place and then the lifetime. I think at the moment we are not looking for such a desperate measure although it would still drive solar cell and to a certain extent storage and transmission, but there are a lot of technologies that should be driven on further by that.

Mr Wolfe: I am not aware that the technology of beaming it down without frying people on the way is yet fully developed.

Chairman: We will leave that.

Q18 Dr Iddon: I want to pursue PV technology a little further. We have the traditional silicone PV technology and firms now like Nanosolar - and I quote them as an example - are developing a thin-film technology, crystals of silicone on aluminium foil backing. Which of these is the most efficient and which might win out in the end, Professor Wilson?

Professor Wilson: There is no doubt at the moment that the crystal technologies produce the better efficiencies. Some of the thin-film technologies are producing similar efficiencies for the modules, that is for the cells fully mounted as a useable unit - they are getting closer - but it is a trade-off between efficiency, and cost and the important thing is perhaps not the peak efficiency but the cost per watt hour which then has to include the balance of systems, the transmission and maybe storage, invertors and so on. What appears to be interesting is that, if you project even ten years and certainly 20 years, at the moment there is not a big difference in what you achieve for the cost of euro-unit of electricity whether you go for a very high efficient costly cell or a lower efficiency cheaper cell. It depends of course on the site. Obviously with a lower efficiency cell you need much more space and space may be more expensive. It seems that there is not a big change there in what you are paying. The thin-film technologies are the ones that Britain is probably beginning to lead in some areas and it certainly has a strong scientific position and I certainly would say that I have an own interest in that we are trying to develop solar cells on textiles and trying to get away from the idea that photovoltaics are complicated micro-electronic devices. We would rather see them as something closer to painting walls.

Q19 Dr Gibson: Where does nano-technology fit into all this in terms of UK initiatives?

Professor Wilson: There are some interesting proposals - the science is looking fairly robust and the technology is not yet there - which allows you to use nano particles in a new way with the organic solar cells, that is the plastic solar cells, which we are hoping will of course produce the answer. If you are using organic solar cells, then there are some new ideas using nano particles that will enable them to overcome the problem of actually collecting the electrical charges in the device.

Q20 Dr Gibson: Is that supported by the UK Government?

Professor Wilson: There is some EPSRC-funded work on the principles. I think that the biggest problem as always is the gap between making a cell that works and then making sure that it is manufacturable.

Q21 Dr Iddon: Is not one of the problems with photovoltaic technology the payback period? When I visited Woking a few years ago, they were retro-fitting solar panels in quite a big way on existing buildings and the payback period I was quoted was 25 years. Is that not one of the difficulties and is not the real thing that is hindering development of PV technology the fact that people are waiting for the right technology to come along? People do not feel confident with the present technologies?

Professor Wilson: You have asked two questions. The payback time certainly for traditional single crystal silicone is quite high. I think at the moment people will quote you about five years; it does depend on the site of course because it depends how much you are generating. Conventional crystalline materials and some of the thin-film crystalline materials are high temperature processors, so they are of course energy expensive. The thin-film technologies tend to be closer to 18 months, anything between one year and two years. We have calculated these ourselves in the past and a number of other people have done it in different ways and you get similar answers whether you are looking at the carbon payback or the energy payback. The thin-film technologies certainly will pay back within the lifetime. The other problem that you mention, that people are waiting for the winning technology, is exactly that problem because at the moment we have a rather intermittent process for encouraging people to mount panels domestically and it means that somebody will look at the payback time and prefer to invest their money, though I guess it may change in current years, but it is very much a problem and there should be much more encouragement for the experience to be built up by installations.

Mr Wolfe: May I clarify? I think the figures Professor Wilson was talking about was the energy payback and I suspect that Dr Iddon was asking about the financial cost payback.

Q22 Dr Iddon: The fitting, yes.

Professor Wilson: In that case, yes, you are close to the truth.

Q23 Dr Iddon: Is retro-fitting efficient or should we be encouraging builders to build in solar panels from the beginning? When I visited Japan a few years ago, they were bringing pre-constructed roofs on site - admittedly, it is a different building system in Japan - and just lowering them on to the buildings and connecting them up into the system.

Mr Loughhead: Perhaps I could make a comment on that. It would be much cheaper to install any of these systems as part of the original build, but you asked the question about payback and, while I realise that your focus is on renewable electricity-generation, probably a much better payback would be obtained at this stage by fitting as original build solar thermal panels for water heating and similar devices, and estimates are that that would probably add £1,000 to £1,500 to the cost of a house as opposed to maybe £6,000 to attempt to retro-fit it.

Q24 Dr Iddon: If we leave Japan on one side, in Europe, Germany are certainly ahead of most countries in PV technology. You can go and see acres of solar panels in fields in Germany. Why do you think Germany is ramping ahead of all other European countries, especially this one?

Dr Edge: It is outside of my technology areas but, frankly, they have thrown a lot of money at it in a very conscious attempt to build an industry and I think that is something that you need to take away here. We have not supported our end-use generation technologies in such a way that we have built an industry around this and, if we are to meet our 20 per cent target, our share of it which I expect to be about 15 per cent overall, we will have to focus much more on how we build an industry to deliver it. Otherwise, if we compete with other countries for the technologies and the equipment like wind turbines, we will likely lose.

Q25 Dr Iddon: So, it is nothing to do with the availability of the sun in the south of Germany?

Dr Edge: No.

Mr Wolfe: It is a lot to do with the availability of feed-in tariffs in Germany.

Chairman: We are going to come back to feed-in tariffs.

Q26 Dr Iddon: Is it not something to do with the Green Party?

Mr Wolfe: The Green Party were instrumental in getting the feed-in tariff introduced, yes.

Dr Iddon: They have decided not to go nuclear, so they have had to do something else instead. Does politics not come into this?

Chairman: Dr Edge, I think that is the point you made, is it not? It does require a government very strongly to support which is what has happened in Germany.

Q27 Dr Iddon: Recently, I attended a very interesting seminar on the use of mirrors in the desert to collect solar energy and heating a large tank of water, generating steam and electricity in the usual way. There is a proposal for a European network coming out of the Sahara and other deserts and California has a working plant and I understand that Algeria has a working plant. Professor Wilson, is this going to overtake use of the sun through traditional PV technology?

Professor Wilson: Yes. I believe that there is a working plant in Spain for the same sort of principle, obviously it must be in direct sunlight. I am not sure. Probably the energy payback time is quite attractive. It is a central facility of course, so in some ways utilities would prefer that because they know how to manage the supply of electricity into the network. However, I do not think that there are sufficient sites at the moment. There is always the sensitivity of supply if it were to be coming from as far away as Africa of course and I am not sure if the economics are very much better for the net hour cost.

Chairman: I am going to move on. I am anxious to get in as much as we can in the time we have allowed.

Q28 Dr Turner: I would like to ask you about your feelings on the timescale for the major deployment of marine energy devices, whether wave or tidal or tidal stream. There have been various estimates of ten to 15 years. It clearly is dependent on policy background as well. May I have your comments on what we can realistically achieve with marine technologies in the next ten to 15 years.

Mr Loughhead: I think that maybe Gordon and Philip should have a crack at this.

Dr Edge: Our estimate of what is achievable by 2020 is in the region of 1,500 megawatts of wave and tidal stream all together. Philip alluded earlier to the fact that we have a world-leading technology here in the UK and I think that is absolutely true, but I think that we are in dire danger of losing that if we do not act now to take steps to move the support for these technologies much further and much faster. At the moment, we have the marine renewables deployment fund which, due to various issues, has not yet been taken up fully, but what we really do not have is anything beyond that and what technology developers are seeing is this valley of death beyond the MRDF in which they see no support sufficient to get them through to full-scale commercial deployment and that is a great fear. If we do not take the steps like they had just recently in Ireland where they have been establishing a feed-in tariff of 220 euros per megawatt hour for wave and tidal then we will miss out on this.

Mr Wolfe: I think that is a very comprehensive answer. It is vital that we do not do to our marine renewables industry what, sadly, we did to the wind industry in the early 1990s and actually lose the world leadership because we did not adequately incentivise the, if you like, pre-commercial stage.

Q29 Dr Turner: So, it is fair to say that this is not so much a technology issue as a policy issue.

Mr Wolfe: That is definitely the case.

Mr Loughhead: I think it is important to briefly add to that that everybody is quite right to say that the UK has a world lead, but it would be wrong to believe that this is currently at a fully commercially developed stage. I think it is very important to accept that. Although there are devices in the water, it is still a long way from saying, "Here is the finished product".

Q30 Chairman: Gordon's comment is right, is it not? Without that investment, we are never going to get to that.

Mr Loughhead: Exactly.

Q31 Chairman: The valley of death continues.

Mr Loughhead: Yes.

Q32 Dr Turner: The Royal Society of Edinburgh is a great fan of tidal barrages and they would like to see a system in the Pentland Firth and a barrage on the Severn Estuary. What is your view on the validity of proposals such as the Severn barrage? Is it going to be either economically or technologically viable, never mind the environmental consequences of it?

Mr Wolfe: Technologically viable, we believe clearly so. The two issues really, as you suggest, are the environmental issue and the economic one. I will begin with the environmental issues. I do think that it is appropriate now to reassess the type of projects that historically we have not been prepared to undertake because of the local environmental consequences. Now that we have a much better view of the, if you like, global environmental consequences, we are not doing that. So, the balancing act between the greater good of a much higher penetration of renewables compared to the prospective local disadvantages of projects does need to be reassessed now and, in our view, this goes beyond just tidal barrages as well. It may well affect potential large-scale hydro-generation in Scotland. Some sites that have not been developed because of the local environmental issues maybe need reassessing on the same basis. The question of economics clearly is a different one. The SDC suggested that the Severn barrage would need to be funded by the Government and that clearly is one approach. Certainly, it would be a very major cost to undertake a project of that sort of scale and it is questionable whether existing commercial funding models will actually be able to deliver those.

Q33 Dr Turner: Philip, your Association has stated that the UK has about 50 per cent of Europe's tidal resource and certainly as a sailor I know this. Britain has probably the best and strongest tidal resources of virtually any country in the world. How much of this energy source is potentially exploitable for electricity generation? Can you name the global potential figure?

Mr Wolfe: Yes. It is not massive. In the context of UK electricity, it is probably only a few per cent, two or three per cent in total, and that refers to tidal stream energy, that is the turbines on the base of the sea of the type that is now being installed at Strangford Lough, for example. Obviously, the potential for tidal barrages is very much greater; it has been estimated that the Severn barrage can deliver five per cent of our electricity and the barrages in Liverpool Bay, for example, could also generate quite significant contributions. So, the total contribution available from tidal is up in the ten to 15 per cent area. Of that, a smaller proportion from tidal stream, tidal stream of course having rather less environmental downsides, a larger proportion from tidal barrages.

Q34 Dr Turner: Has anyone actually undertaken a proper study of the potential tidal stream resource? I have to say that I find your estimates on the low side.

Mr Wolfe: The have been studies carried out and I am aware that one is published on the BERR website. Whether or not those stand up in the light or recent technology is questionable. Most of the studies that were carried out were done some years ago and it may well be that, with new technology, the figures could be increased.

Dr Edge: I think it is important to point out that the tidal stream resource is extremely concentrated in very few places: areas like the Channel Islands, around Anglesey and in particular in the Pentland Firth. If you are talking about exploiting those kinds of areas, you have to build the infrastructure to them. Pentland Firth would be extremely challenging, it being right in the north of Scotland.

Q35 Dr Turner: That is a grid problem.

Dr Edge: It is a grid problem but it is a practical barrier to the full implementation of tidal stream energy. I would agree. I would refer back to the SDC report which said that five per cent of our electricity from tidal stream is a feasible resource.

Q36 Dr Turner: What is your view of the relative stage of development of wave and tidal-stream technologies?

Dr Edge: To each other?

Q37 Dr Turner: To each other and to the commercial frontier.

Mr Wolfe: This is more of a personal view but I would say that arguably wave power is slightly more advanced at the moment. There has been more work done; there will be more devices in the water. Having said that, I believe wave power is inherently rather more difficult in that you have to design machines for environments that have energy several orders of magnitude bigger than they are designed to produce power in whereas tidal stream is a relatively benign environment, you are dealing with plus or minus ten per cent. My suspicion is that tidal stream might actually advance faster than wave power and my personal guess would be that tidal stream may well be delivering more to the grid faster than wave is in this country.

Chairman: I am going to leave that there and move on.

Q38 Mr Cawsey: Now is the time for some hot air and wind! Earlier, it was said that it was important to build an industry around research and development and, as far as wind is concerned, the UK's turbine suppliers source many of the components from outside of the UK. Do you think that this is an area in which the UK should focus on technology procurement rather than providing research funding?

Dr Edge: It is certainly true to say that onshore wind particularly is quite technologically mature and therefore the contribution of the UK at the R&D level is going to be relatively limited and we are into therefore the areas of industrial policy and looking to encourage companies in the UK, the manufacturing industry, into making components for large-scale wind turbines and therefore bringing in foreign investment to make turbines - assemble them here which is what we have missed out so far because we have not yet had a consistent market which we are now starting to have. When it comes to offshore wind, there are many technological innovations, particularly ones that we can transfer across from the offshore oil and gas industry which need to be done and where there is a definite need for UK R&D and innovation funding to support.

Q39 Mr Cawsey: This question might be more for Dr Edge again and perhaps Mr Wolfe. How realistic is John Hutton's ambition to deploy 33 gigawatts of offshore power by 2020? Is there sufficient funding available to support technology development on this scale?

Dr Edge: I think that we need to understand what that 33 gigawatt figure is, which is the eight gigawatts on the round two site awards plus potential further 25 gigawatts - the exact numbers are to be decided in terms of how many more sites will be given out to developers after a strategic environmental assessment which will be carried out this year and the site award process will be started next year. What we are seeing is the start of a process which could allow people to develop sites which could be built in that timescale and what will actually be built in that time is another matter. We have been talking about a figure of 20,000 megawatts of delivered projects. We are very glad that the Government have come out with a higher figure because it gives us something extra to aim for. We think that in terms of building out feasibly in that time, 20,000 megawatts is ambitious but achievable, and it will certainly need extra support in terms of expanding on the Renewables Obligation or adding another mechanism which will allow large-scale offshore wind to be developed at scale.

Mr Wolfe: I would encourage you to work to the BWEA figures in terms of deployable offshore wind resource and, as Dr Edge suggested, the figure that was widely quoted in the press was not necessarily a deployment figure, it was a total potential figure, but we would agree that 20 gigawatts is a realistic figure.

Dr Edge: I think I should also point out that we could be getting into the 33 gigawatt figures with a further build out beyond 2020 into the late 2020s because we are looking at, by the time we get to 2020, delivering about 3,000 megawatts a year. If we continue at that level, that is a very encouraging and tempting market for the supply chain to get into.

Q40 Dr Turner: Is there going to be a problem with the ability of the turbine manufacturing industry to simply supply on that scale? I know that at the moment there is a shortage of actual turbines and that people are having to wait a long time for them which is holding up developments. If we are going to expand the scale to that extent, can the industry support it at the moment?

Dr Edge: We obviously recognise that this is an issue. Certainly right now, there are very severe limits on what can be done. We surveyed our members both on the development side and the manufacturing side to see the mismatch between supply and demand and what might happen in the future and we worked out that, by 2015, the limits on supply would maybe keep us to around 6,000 megawatts of offshore wind but, by that time, instead of the two major turbine manufacturers that are in the market, we would have maybe seven or eight and they would be able to produce enough turbines to be meeting the demand at that time. Beyond then, eight years down the line, that is plenty of time and there is plenty of time to develop the new turbines and have new people come into the field. We have plenty of engineering companies which have the expertise that could come into the field specifically offshore because there are different challenges offshore to onshore. We think that there are plenty of opportunities and plenty of people coming into the market who see it as attractive.

Q41 Dr Turner: Do you see a technical issue in offshore as opposed to onshore because, at the moment, onshore wind turbines are essentially the same turbines stuck on a pole in the sea? Is there any scope for technological variation in the marine turbine?

Dr Edge: Absolutely. I have seen plenty of alternative concepts being put about. The difficulty is then the time and the expense of bringing those into commercial reality and that is a five/seven year period and it is many millions of pounds.

Q42 Mr Marsden: Dr Edge, taking the Secretary of State's projection of the 33 gigawatts, is it possible to give any estimate of the amount of marine area that might be required to achieve that?

Dr Edge: It will be in the thousands of square kilometres.

Q43 Mr Marsden: I ask that question because obviously there are a number of exploratory applications out for the Irish Sea and that is already raising environmental and other issues there. My colleague Dr Turner spoke earlier and we were given some priority areas for wave sites, but are there particular priority areas which might prove particularly fruitful for offshore wind farms?

Dr Edge: This is what the strategic environmental assessment which the Government will be taking on this year for offshore wind will be identifying ---

Q44 Mr Marsden: Do you have any views on it?

Dr Edge: Certainly I know that a number of my members are eying the Dog Bank quite carefully because that is a very large area of shallow sea in the middle of the North Sea which could be extremely interesting because there are fewer conflicts with other sea users. It could be a staging post to interconnect through to the European mainland which would be very important in accepting a large amount of variable wind power on to our and the mainland European system.

Q45 Mr Marsden: Mr Wolfe, we are expecting this week the new EU Statement on Targets which are expected to be quite demanding is probably the right word to use.

Mr Wolfe: It will be later today.

Mr Marsden: How do you think these targets impact on the Secretary of State's declared ambition to deploy 33 gigawatts by 2020?

Q46 Chairman: Briefly, Philip, because I am desperately looking at the time.

Mr Wolfe: They make it important to do that and a whole lot more as well. The target for the UK is likely to be in the range of 15/16 per cent. The White Paper published last year points out that current policy will take us to about five per cent by 2020, so we have only a third of what we need in policy terms to achieve the target.

Q47 Mr Cawsey: You said earlier that wind technology is the mature technology, yet actually has the development of it which has been rolled out across the UK in recent years not been a little disappointing? What do you think have been the major obstacles in it not going further than it has?

Dr Edge: It has absolutely nothing to do with the technology and everything to do with our very sclerotic planning system and difficulties in getting the grid developed to accept all the power that we might want it to. There is 7,500 megawatts of onshore wind in the planning system being held up by the planning regime. That is the stuff that is stopping its build.

Q48 Graham Stringer: As you move to a greater percentage of electricity generated by wind power, is it not the experience of other countries that this leads to instability in the grid?

Dr Edge: The short answer is "no". A great deal of the propaganda that has been put out by some people that says that the grid is very unstable is simply propaganda. If you go to somewhere like Spain where they are already getting ten per cent of their electricity from wind, there are no issues ---

Q49 Graham Stringer: I was thinking more of the experience in Denmark and Ireland.

Dr Edge: They have not had any grid ---

Q50 Graham Stringer: Are you saying categorically that switching between wind power and the rest of the system when the wind stops blowing does not produce instability to the grid?

Dr Edge: It is a management issue which they have managed to cope with without having failures in supply.

Q51 Graham Stringer: So, it is a problem when you say that ---

Dr Edge: It is an issue, it is not a problem. It is manageable.

Q52 Graham Stringer: It is somewhere between an "issue" and "problem".

Dr Edge: It is not a problem in that it can be managed and it is managed. Therefore, it is not a problem; it is merely one of planning and coping with.

Mr Wolfe: To add to that, it is an issue that needs serious consideration and, while I totally agree with what Gordon said, we should not underestimate the need to prepare for it appropriately.

Q53 Graham Stringer: This is fascinating! Can you refer the Committee to any papers on this that we can look to in order to define whether it is a problem or not.

Dr Edge: There is a link in my written submission.

Mr Loughhead: There are a number of publications which relate to some of that but I think it would be fair to say that it deserves further consideration. For example, Denmark uses the very strong grids of Sweden and Germany to balance its power and the problems it has experienced has been when those have not been available. That does not say that it is an insuperable problem, it means that the solution they have adopted has certain limitations that were experienced when connectors went down and things like that.

Q54 Dr Gibson: Is Scotland ahead of England in any way in all this? I keep seeing things about Lockerbie with biomass and I hear about Pentland Firth and wind and wave studies. Is it true?

Professor Wilson: I believe we have had in a sense an unfair advantage in the hydro schemes of course which have given us a good start and there is certainly further capacity for increased hydro, but I think that in the research as well we are punching well above our weight in the marine and the PV and in grid handling.

Q55 Dr Gibson: I am interested in biomass crops. Do you think that we have enough land available for that or will that hold us up?

Professor Wilson: I think that is a serious problem. It is not so much in the UK the competition between food crops and fuel crops, I think it is a matter of how much highland land which is not food-producing land could be developed into more of a biofuel. It is locally very important.

Mr Wolfe: This was studied in some depth by the Biomass Task Force led by Sir Ben Gill and he concluded that, if the biomass were deployed as heat rather than electricity, it would use seven per cent of the heat of the UK.

Q56 Dr Gibson: So we will import it. What is the problem?

Mr Wolfe: The biomass?

Q57 Dr Gibson: Yes. We will import it from England ---

Mr Wolfe: Or from Latvia or from Canada. There is quite a lot of biomass importing already going on.

Q58 Dr Gibson: What is the disadvantage of the importing in terms of energy consumption?

Mr Loughhead: The disadvantage generally is that biomass has a lower energy density than conventional fossil fuels and therefore the transport can impose quite a strong additional energy consumption on to the system.

Professor Wilson: I think that even locally in Scotland there is a problem between big producers able to supply it at a cheaper rate locally than the smaller producers, so there is not a great deal of encouragement for new producers to start because of the transport costs.

Q59 Dr Gibson: Where have we got to with micro-algae and hydrogen? Is it hopeful?

Mr Loughhead: Early stage research.

Q60 Dr Gibson: How early? How late is late?

Mr Loughhead: It is scientific research still.

Q61 Dr Gibson: Do you think that it is worth supporting?

Mr Loughhead: It is worth supporting and there is already industrial interest. Shell have just started work in Hawaii on related topics and I think that it has a very high potential for the future, very high research interest but at the very early stage.

Q62 Dr Gibson: Finally, for electricity generation, where has first and second stage bio-fuels research and development got to? It is getting a priority or is it just a nice thing to do or do you feel that there is a real push? Is it the same push as making a trident missile for example?

Mr Loughhead: A different stage of research, with respect. I think that the work that is going on is substantial but, if we decide that we wish to pursue it seriously, probably there is scope for more to be done than we are currently doing now. My estimation for instance is that a country like India is putting much more resource and focus on that than the UK for very good reasons in the Indian context.

Q63 Dr Gibson: For the record, why is that?

Mr Loughhead: The reason is that India has enormous quantities of agricultural waste residue and, if they can find a way of converting that into useable bio-fuel, it fulfils not only their energy objectives but it also gives their rural villagers a potential income stream and a way of generating money from stuff which at the moment is just a problem to them. So, it has a very strong social value as well.

Q64 Graham Stringer: What are the major constraints on the deployment of fuel cell technology and, if you want support for the development of industries, how on earth do the Government choose to support technologies that are as different as fuel cell technology compared to wind power or solar?

Mr Loughhead: I will take that question. The problems with the deployment of fuel cells is that first of all there are two different areas of deployment, either in vehicles which are the so-called low temperature fuel cells or in stationary applications, the high temperature fuel cells. For the first, the problem is cost compared with existing technology plus the problem of supplying hydrogen, which they need for fuel, from a source that is itself sustainable or renewable. At the moment, the cost of these devices is more than order of magnitude, probably two orders of magnitude greater than it would need to be to be commercially competitive. It is also a different technology; it is a disruptive technology; you need electric drive systems rather than mechanical drive systems; there is not the infrastructure to support and maintain the technology. In order to do it, it would need a substantive encouragement, whether through fiscal measures or whether through direct support means, to take it through into the market. If that were to happen, because of the international nature of the automotive market it would need to be done as part of a concerted international effort and Europe has just launched what they call a joint technology initiative to try to do that and hopefully the UK will play an intelligent part in that initiative to get the most benefit out of it and to support it. For the stationary applications, they are differentiated in that they can use carbon containing fuels and the big advantage is that they can generate electricity at high efficiency but at small scale, even down to domestic scale, and therefore they open up the possibility of combined heat and power. For instance, with one of the UK developers, British Gas is about to launch a demonstration scheme measured in the about 10,000 units. In order for that to then go forward, again there will need to be some incentive to do that rather than the conventional approach and I think that is going to be down to some consideration by Government to decide how best to do that.

Chairman: I am going to leave that there. I apologise to you all - you have been an absolutely splendid panel this morning - because we have not done justice to the agenda that we set ourselves. I ask that we may write to you with some of the issues which we have not been able to fully explore with you in order to complete the evidence session for this morning. I thank Professor John Wilson, John Loughhead, Dr Gordon Edge and Philip Wolfe. Thank you very, very much indeed for your contribution this morning.

Memoranda submitted by Department for Business, Enterprise and Regulatory Reform and Research Councils UK

 

Examination of Witnesses

Witnesses: Mrs Sarah Rhodes, Director, Emerging Energy Technologies, and Mr Michael Duggan, Deputy Director, Renewables Obligation, Department for Business, Enterprise and Regulatory Reform; and Professor Dave Delpy, Chief Executive, Engineering and Physical Sciences Research Council, Research Councils UK, gave evidence.

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 per cent 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 per cent 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 ten per cent biofuels, road transport fuel, and we are required to meet both.

Q66 Chairman: Is this specific for electricity generation?

Mrs Rhodes: No. The 15 per cent is renewable energy. There is a separate ten per cent within that for road transport and therefore the question that you rightly ask me is, what is the percentage 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 per cent; 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 per cent 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 per cent target? I would also say that this is a question of not just focusing on that immediate 20 per cent 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 at the moment our target is 60 per cent by 2050 though the new Carbon Committee may put us up to 80 per cent. 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 per cents or ten per cents. 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. Both 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 has started to approach it 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 in sufficiency 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 over deployment has grown by 40 per cent in a year for the last couple of years. There is a great deal of investment, gigawatts of investment, 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 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.

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, 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 - I hope not to the cost effectiveness - and adjust it down to the investment climate. Ernst & Young produced an independent country attractiveness rating for the point 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 five per cent renewable energy by 2020. We are in a different space now; we are in a space where we are committed to delivering 15 per cent 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. Good idea, 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 Council, 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 ---

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 ... 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 them. 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 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.

Q100 Graham Stringer: Professor Delpy, Europe in terms of the Framework 7 Programme has got an energy theme now. How valuable are those funds that British scientists can bid for to promoting renewable energy research in the UK?

Professor Delpy: I would say that most of the SUPERGEN consortia, where there has been an appropriate EU programme, have in fact both applied to it and in many instances been successful in doing that. What the Research Council is trying to do to encourage that is also provide some additional small amounts of funding for travel, subsistence enabling the academics in those groups to identify the partners in the rest of Europe that they wish to partner with in these schemes. I would say the EU funding is certainly something that all the Research Councils would support their academics in bidding for. There is a question, of course, of it being slightly less attractive financially to the universities because the overhead component that is returned on EU funding is less than we are now paying at 80 per cent of full economic cost.

Q101 Dr Iddon: So there is some co-ordination in making those bids against the energy theme?

Professor Delpy: There is and it is through the consortia, it is not an attempt at a top-down level to identify a particular European programme and say, "As UK plc we should be bidding for this". In the end these programmes work by identifying the best people in Europe and the best people in the UK to work together, so it has really got to be driven from the bottom up but we have got to provide that lubrication which enables these consortia to pull together and obviously put in the most attractive bid.

Q102 Chairman: Can I just continue on this theme with you, Professor Delpy. The Research Councils decided as one of their main themes they are going to have an energy programme. What made you decide on that?

Professor Delpy: Apart from the obvious one that energy, and sustainable energy in particular, has risen up the agenda and has been on the roadmap of most of the Research Councils for probably the last ten to 20 years in one guise or another, this is an area that has been obvious to the researchers in universities, it has come up in all of the international programmes that other countries have identified for the future. It is a case of being an obvious problem that we have to tackle in a more coherent way than we were previously.

Q103 Dr Gibson: What was the tipping point in that then? There was a time when wave power and tidal power meant damn all and there were cuts, cuts, cuts, I remember it well in my time. What made it happen? Was it a political gesture, decision?

Professor Delpy: It is difficult to identify a single point and I suspect you all have your own views on it. I think there was a point at which it became obvious that our consumption of oil and coal resources was exceeding our supply.

Q104 Dr Gibson: It was not that the miners were stuffed, was it?

Professor Delpy: No, I do not think it was. I am not going to get into an argument about the miners.

Q105 Dr Gibson: I know that, I am just asking.

Professor Delpy: I do not think it was that because it was a combination both of awareness of resource limitation plus the environmental effects of the use of carbon based energy sources. It was a combination of the two. Most politicians would have become aware when it became something that their constituents started to raise with them.

Q106 Chairman: The Research Councils now have a joint Energy Programme but individual Research Councils are continuing to have all the other programmes they had before. How do you decide whether money comes from the combined Research Councils' Energy Programme to individual research bids or whether it comes from your own Research Council? How does that work?

Professor Delpy: First of all, the Cross-Council Energy Programme is one that has been arrived at by careful consultation between the individuals within the Research Councils to discover what elements of their research they would like to form part of that Cross-Council Programme. EPSRC have taken on the responsibility for managing that programme, so the programme is co-ordinated through one Research Council, and the same is true of the other Cross-Council Programmes. To avoid having a distributed control we have a single Research Council taking responsibility for that. I would say the vast majority of the research in energy is being channelled through these Cross-Council Programmes. There is always work which will be funded through the responsive mode blue skies activities that all the Research Councils do because where do you define the boundary between a piece of research that relates to energy or a piece of research that in my area would be classified as materials based activity. There is a blurring of boundaries between materials and nanotechnology. Where does solar PV or photovoltaics become an energy problem as opposed to a narrow science problem or a problem of crystalline versus amorphous materials. There is not a sharp boundary so we are happy to take responsive mode projects, look at them and if they fit into the Cross-Council Energy Programme we will fund them via that mechanism, the academic does not have to worry whether they are actually tackling ---

Q107 Chairman: So it is just another layer of bureaucracy really?

Professor Delpy: It is not a level of bureaucracy.

Q108 Chairman: It makes you feel better that it has all been pulled together?

Professor Delpy: Not just feel better, but I hope we are actually doing it better and in a more co-ordinated way because previously ---

Q109 Chairman: What shred of evidence is there to say that is happening compared with our European rivals? We are talking about being pretty near the bottom of the league in renewable electricity generation technologies. Why is this going to make a difference?

Professor Delpy: First of all, the very fact that it has been identified as a major Cross-Council Programme has raised its visibility within the academic sector anyhow. We have put in place investments to increase the number of staff that are working in those areas through our S&I Awards, through using targeted doctoral training funding. By pulling it together and identifying it as a stream of activity that all the Research Councils are buying into, it has raised its visibility within the academic community and, therefore, I would say it has had a significant effect on the way that all researchers in universities view the energy research spectrum.

Q110 Chairman: My colleague, Ian Cawsey, earlier made a very, very pertinent point to the first panel which was about planning, that the capacity, if you like, is there but we cannot actually get it built because of planning. As part of this Research Councils' Energy Programme, how much effort is going in, for instance, through the social sciences to look at changing the behaviours of what are the problems in terms of behaviours of local people which, in fact, are significantly affecting our ability probably more than, with respect, your own Research Council?

Professor Delpy: Yes. Certainly in terms of short-term take-up I would agree. ESRC are a major partner in this and in terms of the SUPERGEN consortia there are those who are looking at this whole question of the public acceptance of renewable energy. I seem to remember ESRC recently produced a report on Beyond Nimbyism. ESRC, as the social aspect of acceptance of renewable technologies, is certainly a key component in the Cross-Council Energy Programme. It is not just engineering and physics.

Chairman: I am glad to hear that.

Q111 Mr Cawsey: Obviously it goes without saying that skills is an important issue for this Committee, so what mechanisms are in place to ensure that the UK skills base can support the needs of the renewable energy sector?

Mrs Rhodes: Clearly there are skills throughout the chain, if you like, all the way from research skills through to installation skills, building the equipment, a complete range of skills. Skills in this sector are very significantly an issue. We have done some work particularly around what the skills base is looking like, particularly in terms of production capacity. We have very much an ageing workforce. We have a new set of industries being developed here and we do not see the throughput in terms of the people coming through the education system and the training system in order to deliver those jobs and capabilities. I know that the Sector Skills Council is looking at a national skills academy in the environmental industries area and we are part of discussing that with them. We feel that pushes are needed to ensure that we have the skills to develop a 20 per cent energy target and all those other targets.

Professor Delpy: Obviously from the research point of view it does take time to build up a base of high quality researchers in an area where perhaps there were not as many people working as before. What EPSRC have done is use their Science and Innovation Awards to fund certainly two programmes I am aware of, one in Cardiff and one in Strathclyde, which will add both new permanent academic staff and kick-start the research with researchers and PhD students. We have put in place a series of training programmes, an engineering doctorate programme, some doctoral training centres, to try to build up the supply of researchers and of highly trained both masters and doctoral level students who can then go out into the industry as the need for them increases, and I think will continue to increase dramatically. We are aware that there is a supply problem and we are trying to address that first because you cannot get high quality research unless you have got high quality researchers there first.

Q112 Mr Cawsey: The Institute of Physics raised concerns regarding the provision of MSc courses and PhD opportunities in renewable energy technologies and suggested that the shortage of opportunities could be "partly due to the difficulty of obtaining funding for interdisciplinary or multidisciplinary research topics" and called for "a more flexible approach from funding bodies". How would you respond to their concerns?

Professor Delpy: The way that we are doing it, if you look at the EPSRC's delivery plan, and I think it would be fair to say most of this falls into the EPSRC area, is first of all we have identified strategic themes, and obviously energy is one of them. To a much greater extent during the next period we will be targeting some of our training specifically into those strategically important areas. We will be using signposting to a much greater degree to ask the universities to give the flexibility it gives them through their doctoral training accounts and collaborative training accounts which fund masters and post-doctorate student activities to target those in a much greater way. We are going to be linking our doctoral training centres and we have been putting more funding through doctoral training centres where we will bring a critical mass of students together around the major thematic areas of support, and energy is one of them. We are trying to link training and the strategic areas together in a much more coherent way than in the past. In the past, I think it would be true to say that areas of research importance have not necessarily been linked to training in those areas.

Q113 Mr Cawsey: Given the timescales in which we are required to improve our renewable output and technologies and the time you have pleaded for to develop the training and skills base, are we inevitably heading towards some sort of black hole between those two inconsistent timetables that you are working to?

Professor Delpy: In certain areas it could happen. One of the problems is we are covering a very broad range of technologies and you are never quite sure which one, because it is basic research, is going to be a winner. If one does take off to a greater degree than we had expected, there could be a shortage. One of the ways of getting around that is we are working very closely with both the ETI and TSB, so for areas which do appear to hold real promise we can in fact combine the funding from ETI and TSB, together with ourselves, to really pump-prime those activities. I am hoping that by working closely with those other funding agencies that you mentioned right at the start we can fill what potentially could be gaps. Obviously we have a fixed budget and we have largely decided on our allocations and there is often very little free money if in a year or so's time something suddenly appears on the horizon.

Q114 Chairman: Just as an aside to Ian's question, are you worried in terms of your own Research Council about the cuts that STFC are making to the physics grant budget? Do you think that will impact on the capacity of university departments to be able to not only develop good teaching programmes but actually have the academics there to attract the groups of students that Ian Cawsey has identified that you need?

Professor Delpy: Obviously STFC have made decisions over where they will make their cuts.

Q115 Chairman: Where are they?

Professor Delpy: They are largely cutting some funding in two areas which I mentioned earlier, particle physics and astronomy. Physics departments as a whole get an enormous amount of funding from other areas and from ourselves. I think our figure is somewhere around about 180 million per year going into physics departments or physics related research. My concern over this whole problem has been the message has gone out that physics departments are going to be drastically cut and if you look at the level of funding we are talking about an 80 million shortfall in probably over £2 billion. That is not true. Certain areas of physics are being hit.

Q116 Chairman: It will not affect the capacity?

Professor Delpy: It will not alter our capacity but it may turn school kids off wanting to do physics because I think the message has incorrectly gone out that physics as a whole is being affected whereas I would say it is only a very small component of physics.

Chairman: I just wanted to get that in while you were here.

Q117 Dr Turner: Can I first of all ask you about your capital grants, Sarah. Now that we have got the Energy Technology Institute obviously there are going to be differences in the way things happen. I want to establish first of all the actual place in the process of your capital grants programme. Am I right in understanding that it will in future be targeted on, if you like, proof of concept demonstrators, pre-commercial scale demonstrators, but after the basic research, so it is fitting there?

Mrs Rhodes: Yes.

Q118 Dr Turner: Am I correct?

Mrs Rhodes: Yes. In fact, it always has been. Broadly, there are different areas of innovation and we have always been focusing our capital grants on pre-commercial demonstration.

Q119 Dr Turner: Do you propose to make the administration and application process a little simpler and a little easier for applicants?

Mrs Rhodes: Let me talk ---

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 per cent. 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 per cent 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 per cent 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 per cent 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.

Q140 Dr Turner: Once a developer is a presumed candidate, presumably once they have achieved their successful three months' operation they then call on the fund, is that correct?

Mrs Rhodes: That is right. As I say, we are not designing to trip people up here, we are very keen to spend this money, but we are very certain that we need to spend it in the right way.

Q141 Dr Turner: It is £50 million as I recall.

Mrs Rhodes: It is £50 million. We have used it to fund things like the EMEC up in Orkney, the marine energy centre.

Q142 Dr Gibson: Scotland again.

Mrs Rhodes: Absolutely, it is where a lot of this resource is.

Q143 Chairman: There is a lot of water. Sarah, I do not mean to stop you there but it would be useful if we could have a brief note to say how many applications there have been from companies that have had their three months in the water and who are then applying to you for grants through this fund. That would be useful to get some idea of the scale of it.

Mrs Rhodes: Absolutely. I will send that to you with the report of the Renewables Board.

Chairman: Thank you very much indeed. On that very, very positive note could we thank you, Sarah Rhodes, Dr Michael Duggan and Professor David Delpy, for your time this morning. I am sorry it has been a fast canter through but we have very much appreciated your evidence this morning. Thank you very much.