Examination of Witnesses (Questions 182-203)
DR DAVID
CLARKE
8 JULY 2009
Q182 Chairman: Welcome, Dr Clarke. You
have us to yourself for the next three quarters of an hour. You
are our fifth witness but you are covering the same area all by
yourself. Perhaps you would like to introduce yourself for the
record.
Dr Clarke: I am Dr David Clarke,
Chief Executive of the Energy Technologies Institute which I will
henceforth call ETI for simplicity.
Q183 Chairman: Could I invite you
to start by reflecting on the main objectives and priorities of
any green stimulus? What do you think should be the areas of concentration
of the green stimulus and what would be your view about the relationship
between short term stimulus and longer term investment?
Dr Clarke: If I could start by
saying that to my mind across this whole space there are three
critical issues and that plays into what you are talking about.
The first one is in terms of deployment of new energy technologies,
what we are talking about here is very much a mass scale deployment,
this is not niche application. The first thing to recognise from
the point of view of stimulus is that the deployment across the
breadth of the UK is really going to relate to major industrial
groups and they can provide both the deployment capabilities but
also the support in terms of operation and maintenance on whatever
the systems are that we end up talking about. The second thing
is that having said that those companies do not necessarily have
the innovative ideas and the technology base in some cases to
actually put that capability into practice to start with. There
is a big challenge in terms of having to find ways of making sure
that innovation gets pulled through from small and medium enterprises
and from academia in a collaborative win-win way into those companies.
The third thing very much I would say is around the support side—this
is probably the most critical issue across the piece -we have
to have sustained support for long term incentives around energy
deployment but also around the skills development and the regulatory
framework that goes with it. So those are the three things I think
are the key items in actually taking the green economy forward
in the UK but each of those is amenable to a different kind of
stimulus approach and a different kind of set of incentives. I
think it is very difficult to give you one answer when actually
we have to look at this in the round and find incentives and mechanisms
that hit all of those three areas.
Q184 Chairman: We will perhaps look
at some of those more specific incentives in a moment. Overall
what is your view of the extent of the UK stimulus package? We
have heard already this morning about the issue of the size of
the UK stimulus package compared with what Lord Stern recommended
in terms of 20% of stimulus package compared with estimates of
7%. Bearing in mind what you have said about the different forms
of stimulus which may be required, how do you think that stimulus
package is targeted within that 7% and do you think that 7% is
sufficient for the purposes that you have outlined?
Dr Clarke: I guess I look at it
from the point of view of whether it is actually 7%. If I looked
at what would probably be classed as a stimulus package it probably
is about 7% and at that stage I would say it is inadequate. If
I then looked at everything that is going on in the UK across
a whole range of different mechanisms which actually support or
can support some of the three items I have said there, I think
we will probably find we are more in the 20% territory, certainly
in excess of 10, heading towards 20. I think the challenge we
have is to get the coherency and the strategy across all of those
areas such that we recognise that it is a much bigger number than
7%. In doing that I am not suggesting for a minute that we should
have some kind of single plan that says that everything has to
fit into this and here it is laid down centrally because it is
not just practical to do that on the scale that we are talking
about, but what it does require is a very clear overarching strategy
with a very clear set of objectives and goals that we should be
aiming for. Then I think in terms of the very broad range of bodies
that can help with that stimulus package people can then actually
see why they are lining up behind it and how they line up behind
it.
Q185 Chairman: You say there should
be clear goals. What might those consist of and particularly to
what extent do you envisage those re-entering the territory of
picking winners and focussing as again we have heard about this
morning?
Dr Clarke: If you look at the
goals today superficially what would you find? For the 2020 target
you would find a percentage of renewable energy, 15% for 2020;
you would find a CO2 reduction target; you would find a transport
biofuels target; you would find building energy efficiency targets
and so on. I am not sure I would find anything about affordability
of energy; I am not sure I would find anything about security
of energy in terms of security of supply both from a geographic
point of view and from an intermittency point of view. Once you
step into those kinds of areas it is difficult and challenging.
I think that is the critical issue you have to try and set: what
is the level we are actually trying to achieve on some of those
things? It may not be absolute but the reality, from an economic
development point of view—whether that is a "business
as usual" economic development or whether it is wearing a
more green economy badge -is that it is critical to be able to
offer affordable, secure, sustainable energy. If you do not have
that you cannot develop the industrial base because it will go
somewhere else. I think the fundamental is how do we set targets
in those kinds of areas so that people can understand (by people
I mean governing bodies as well as the public) why those targets
are there and then we can then shoot for those in a sensible way.
That is the piece that is missing. It is very, very difficult
to do and does not at that stage get you into picking technological
winners necessarily but it does get you into a space of economic
planning without a doubt.
Q186 Chairman: Let us take briefly
one of those three imperatives you mentioned, affordable. One
of the arguments that has been widely put forward is the question
of the extent to which there needs to be carbon price mechanisms
within a future energy economy which will in turn stimulate investment
and development of new green technologies and also other mechanisms
to maintain an energy price at levels which will more broadly
do that which appear to push against the imperative of affordability.
How would you balance those in terms of your views of imperatives?
Dr Clarke: You are quite right
because fundamentally if you look at almost any renewable energy
source today it will be more expensive than central generation
from the point of view of the national energy price. That is the
challenge we have got. The only way you can mitigate against that
fundamentally is by setting a realistic carbon price which has
a floor on it. At the moment clearly we have a carbon price which,
to all intents and purposes, has no floor on it. I think that
is the kind of challenge we have going forward and probably going
into Copenhagen later this year, to find a mechanism that allows
us internationally to set a realistic carbon price that we can
all see the imperative for. Whether that number is £60 a
tonne or £100 a tonne or whatever it is, it clearly is not
nine euros a ton. It is just not viable at that level. To my mind
the carbon pricing issue is the key challenge going forward. If
we had that mechanism identified and taking exactly the same area
that some of the other witnesses gave this morning, the position
around a long term sustained position in terms of what is the
target going forward if we have that long term sustained position
on policy around carbon pricing, the market can then actually
start to operate from the point of view of technology development
and deployment and delivery of energy to the customer but without
it we will be in a position where the offshore renewable industry,
for instance, will be fundamentally dependent on a government
subsidy to be price comparable with central generation at which
point, from a market point of view and from an industrial development
point of view, why would I go into offshore wind when it depends
on a subsidy that may be taken away?
Q187 Dr Turner: How would you suggest
the European Investment Bank's £4 billion is best used? Who
would you lend to?
Dr Clarke: I have dealt with the
European Investment Bank before; if you operate in the right style
it is not a difficult debate. They would view a good credit as
research and development in major global industry where they can
see that fundamentally they will get a return.
Q188 Dr Turner: In practice if you
are looking to use that money to support renewable technologies
they tend to be developed by SMEs, not major industries. How are
you going to make them the beneficiaries of the European Investment
Bank?
Dr Clarke: Going back to what
I said at the start, development of technology is one thing; deployment
of technologies on that scale—
Q189 Dr Turner: I am talking early
stage deployment here.
Dr Clarke: Deployment at mass
scale is a different story. An SME will not be capable of doing
that. If you look around the industries that we are talking about
at the moment (you have had a lot of conversations about offshore
wind and marine), marine is a very good example. Right now if
you want to transport a marine device up the coast of the UK from
where you built it to where you want to deploy it the insurance
for the journey will be well in excess of the cost of the machine,
probably three times. That is the kind of challenge you are up
against. So for an SME that says they are looking to take insurance
at that point of the order of one and a half to two million pounds;
that will be the premium they will have to pay to move the machine.
Clearly you either have to pay £2 million which you do not
have, or you risk moving the machine and if it gets washed off
the boat or the boat sinks the company has probably just gone
with it. Which do you do as an SME? You cannot do the first one;
you have to take the risk on the second one. How many of them
are prepared to take that risk? Very few. So fundamentally what
you say at that point is that the SMEs in the innovation space
do a fantastic job; the developers are mostly in that space and
can actually bring those ideas into the market. Then you start
to need major industrial and financial players who can carry that
kind of risk that I have described as an example. You need those
kinds of players who can then work with the SMEs in a collaborative
fashion to say, "Fine, we will now take those ideas and capabilities
to the market in the initial stage of deployment and potentially
mass production". You have to find ways of engineering partnerships
with these guys because clearly the SME will perceive risk at
this point from the point of view of their future business potential;
the bigger corporate who is going to take the financial risk at
this stage is quite clearly going to be considering whether it
is really worth it, is there a long term policy and is this going
to be useful in the UK? If they answer is yes then they will probably
do it. It is a matter of finding that partnership.
Q190 Dr Turner: Can you see any sign
of these partnerships developing?
Dr Clarke: Yes. If you look round
the industry right now we are starting to see a few big players
who are aligning themselves with specific SMEs in these current
spaces. Some are what we class as major industrial engineering
companies and some of the power utilities who have started to
take that alignment, to make it happen. I would stress that it
is challenging for both sides.
Chairman: Could we now look at some of
the specific low carbon technologies, particularly those mentioned
in the memorandum to us from DECC: CCS, offshore wind, marine
energy. I appreciate it is not within your remit to look particularly
at nuclear energy, but it mentioned also low carbon vehicles and
the like.
Q191 Mr Weir: What potential do you
think carbon capture and storage has to contribute to a low carbon
economy and in particular to the 2020 targets?
Dr Clarke: In terms of 2020 targets
it is clearly going to be a relative small part. You would have
to say the same about nuclear. Unlike some of the previous speakers
I am quite happy to give you a statement on nuclear. The position
on some of the big technologies—if I can call them that,
these are the very large plant technologies—is that in the
main the deployment and implementation of them is not constrained
by technology, it is constrained by supply chain and then issues
around planning, the grid and more usual things, but the critical
ones are in the supply chain and then the planning side. The supply
chain is the main one. When you look at carbon capture and storage—and
nuclear would be a very similar story—it has not yet been
fully demonstrated anywhere in the world. All the elements have
been demonstrated in different places but they need putting together
in one place in a complete, full scale unit for demonstration.
The estimate for that is something in excess of £2 billion
per unit. How many of those can we actually implement world-wide
by 2020? Not many; a few 10s perhaps. The reality in terms of
what we can do in the UK is we are probably in the one to 10 space
somewhere, hopefully it is significantly more than one but it
is difficult to see it being in excess of something like 10. That
would account for only, at the very best, probably 10% of UK electricity
generation. On the nuclear side there is a similar story; it is
about supply chain, it is about planning to an extent, but critically
it is about supply chain and the capacity does not exist world-wide
to build these plants at the rate the world is starting to demand
them. By 2020 they are going to be quite small.
Q192 Mr Weir: How about low carbon
vehicles? What do you think they can contribute to a low carbon
economy? What could the government do so support them?
Dr Clarke: Low carbon vehicles
is a very interesting area. I will talk primarily about light
vehicles rather than heavy goods vehicles but the situation is
to some extent similar. Light vehicles—cars, light goods
vehicles—produce in excess of 50% of the CO2 emissions from
UK transport and that makes up about 20% of the total CO2 emissions
in the UK. There are three major areas which can be addressed
there: fundamentally the design of the vehicle from an efficiency
point of view (engine efficiency) and from an aerodynamics point
of view (light weight and so on). The second area which then splits
into two is the fuel source and fundamentally we have three options.
We have fossil fuel today which is what it is; we have then got
what would be classed probably as zero carbon biofuels in some
way, they are liquid fuels; then we have electricity. By 2020
certainly those are the three options. We—ETI—all
have been working very closely with the manufacturers and the
electricity companies around the electric vehicle question, what
level of deployment might be possible by 2020. What we are starting
to see there is a significant step change in what may be achievable
around electric vehicles and by that I mean all electric vehicles
and plug-in hybrid electric vehicles. Where we are now in terms
of what government is doing says that on the electric vehicle
side the right kind of mechanisms are starting to be put into
place to give the industry that long term confidence that the
UK is going to be a sensible place to start putting some of this
capability. We are in the process of developing a project which
will be announced in the next few weeks which will start to form
part of the glue for making that happen in terms of incentivising
the industrial base. I think the general government policy has
changed significantly over the last 12 months and we are now starting
to see manufacturers getting confidence around electric vehicles.
The challenge for the UK is then to understand what is the mix
and where do these vehicles go. Clearly, as the Carbon Trust was
saying earlier, there are big questions around range on all electric
vehicles and what is actually achievable. Plug-in hybrid vehicles
are probably a good option for a lot of the UK in reality in terms
of area of population. The third one area is biofuels. Biofuels
is clearly going to be important again because of the geography
of the UK and the population arrangements. A lot of people require
fairly long distance vehicles on a regular basis and that implies
liquid fuel. Biofuels are clearly going to be important. The question
then becomes: if we have a finite level of biomass and biofuel
capability in the UK in terms of what we can actually grow—which
we have—where is the best place to use it? Transport? Power
stations? Something else? That is what we are trying to work through
at the moment with a number of people across the sector.
Q193 Mr Weir: As regards electric
vehicles, what is the interaction with the de-carbonisation of
the electricity supply? If we having difficulty because of the
technology in that, is the introduction of electric vehicles perhaps
going to exacerbate rather than help the situation overall?
Dr Clarke: That is a very good
question. If you did nothing from today and you introduced electric
vehicles then clearly the demand for electricity is going to rise.
In essence, even taking into account our energy savings efficiency
measures and so on, that says that we will have to install additional
electricity generating capacity just for electric vehicles. How
fast can we do that? I can see nothing dramatically changing before
about 2017 or 2020, so clearly by 2020 the benefits of putting
in a lot of electric vehicles in pure CO2 terms is actually going
to cost more. The benefit will start to ramp up after that if
we continue to de-carbonise the electricity generation side in
the way that we expect we will have to do and that is why nuclear
has to be part of the equation, as does coal and CCS, because
the electricity demand is going to rise significantly as we go
more and more towards electric vehicles. As a consequence you
simply say, for all sorts of reasons, that you will have to have
a degree of base rate generation which runs as background and
that realistically means coal with CCS, gas with CCS and nuclear.
Q194 Charles Hendry: Can I say first
of all that I think your answers have been incredibly helpful
and you are speaking not as somebody with aspirations but as somebody
who is talking absolutely in terms of delivery and how you bring
about change. I think that is really useful for us. I am concerned
about the disconnect between some of the talk that there has been
about low carbon technologies and the delivery. When we started
talking about carbon capture and storage here four years ago we
probably were leading the world in some of that thinking but now
we have seen that lead being taken by the United States, Canada,
Abu Dhabi, Australia, China and we are slipping behind. I am concerned
about how we get back in front of that movement again. In the
marine technologies we have had some really brilliant British
companies developing some of those technologies but something
like Polamis are now looking to Portugal because they are going
to get more support from the government in Portugal than they
are getting in the United Kingdom. Again this is an area where
we should naturally have a global leadership potential but where
it seems to be slipping away. What needs to be done in concrete
terms to re-gain global leadership?
Dr Clarke: I will talk about CCS
and marine in a second. What needs to be done to regain leadership,
I think fundamentally we have to recognise that there is a distinction
between energy systems which are very suitable for deployment
in the UK versus things that we may have the design and manufacturing
base for in the UK but which fundamentally are going to be an
export opportunity. Those two things are different. In some cases
they overlap and are the same, but in some cases they are different
and we have to be quite careful about what answer we are trying
to discuss. In terms of technologies in CCS and technologies in
marine and the whole system, CCS is going to be a global market;
it already is, as you said yourself. Australia, China, the United
Kingdom, Japan, America are all very interested in CCS for obvious
reasons; everyone has coal and everyone in those geographies is
pretty reliant on coal from a history point of view and from a
future energy supply point of view going forward. CCS is going
to be a major global market. The companies that provide the equipment
and technology will be global players and they will operate globally.
It will be the well-known names in the engineering supply industry
and energy supply. How do we re-gain the lead in that area where
we are now talking about having to operate on a global basis?
I think we have to be realistic about how many of those global
players currently have what I would class as design and manufacture
in the UK? The answer is not many of them, if any. The question
becomes: how do you incentivise those kinds of companies—the
big multi-nationals—to set up those operations in the UK
or to transfer them to the UK? It is clearly very, very challenging.
I think the kinds of things that influence those decisions are
major financial incentives on an on-going basis. It is not about
implementing a CCS plant in the UK and as a consequence suddenly
a major multi-national relocates all its design and manufacture
capability to the UK. That is very unlikely to happen. It will
be about a sustained series of financial business incentives to
actually make that happen. Going back to what we said right at
the start, I think most of those sectors probably exist in the
UK already but it is the package, how it is seen by a potential
inward investor as a package. That is one aspect. The second aspect
where we have real strength is in the underpinning innovation
base in the SMEs and particularly in this case in universities.
We have historically a very strong chemical industry in the UK.
We have still got the underpinning science base that goes with
that and in some cases we have got the engineering for it. It
is really making that available to potential investors which is
important but again I think we probably need to articulate how
well that capability exists. Marine is a different story altogether.
Some of the best, if not the best, marine energy resources from
a wave and tidal point of view are off the coast of the UK, predominantly
the north coast and the south-west. There are some other good
spots in the world but in terms of density of resource UK is one
of the best in the world. Logically you say that this has got
to be a good place to do marine technology and clearly we have
had the SME's development base historically in the UK which has
looked at marine. It is a global industry but nobody has taken
a great interest in marine until very, very recently. It is predominantly
a geographic specific market. As I say, there are a few key regions—the
UK, the Pacific, the West Coast of South America and so on—and
the market is quite small. From an engineering point of view people
talk about it being difficult; I would say this is extremely difficult
engineering. Clearly it is something which is quite important
for the UK. On a global basis it is high risk frankly. The question
then becomes: how do we encourage this to develop in the UK because
it is not going to develop anywhere else? Now it is about getting
the engineering companies and the utilities to start to take this
seriously and to take some of the risk out of it. That is the
kind of work ETI are trying to do through demonstration of devices,
not in testing tanks necessarily but as a full system test in
the sea with the right kind of engineering backing from major
engineering companies, the kind of members I have on my board,
who have the skills, the market knowledge engineering capability
and the financial capability to really take some of those devices
and put them in at the right scale in the real conditions, and
then we can lead the industrial development.
Q195 Charles Hendry: We have established
that these new technologies are very challenging and therefore
probably going to be very expensive. We talked earlier about some
of the targets and the nature of those targets. As an engineer
are there any of those targets which you think are going to be
impossible to achieve without compromising the other requirements
you talked about in terms of affordability and security of supply?
Dr Clarke: If we are in the marine
sector it is what I always class as "do-able"; it is
difficult but we can do it and we can do it for the UK. There
are other areas where we have to be realistic and look at what
is the deployment opportunity. From a point of view of deployment
in the UK I think solar photovoltaics today are far too expensive.
If we can get a real cut in the price of photovoltaics it may
become economic for the UK. It will be economic for other areas
of the world, southern Europe most definitely. I think that is
one where today it is exceedingly expensive in terms of the efficiency
you can get with the UK sun, the problem being that generally
we have quite a lot of cloud and no intense light from one direction.
Long term solar PV has great potential but possibly not so much
for the UK so it becomes an export opportunity. That is one where
I am not sure we can actually get the price right for the UK.
Marine and CCS can be done.
Chairman: Can we now turn to the question
of the extent to which we can mitigate some of those costs, for
example, of increasing electricity supply by means of energy efficiency,
smart grids and associated matters? Robert?
Q196 Sir Robert Smith: Given the
make up of your board I should remind the Committee that my entry
in the Register of Members' Interests is as a shareholder in Shell.
How realistic do you think the target is for all new homes to
be zero carbon by 2016?
Dr Clarke: My answer on this kind
of thing is very straightforward. If you are prepared to pay for
the house it is do-able. Is there an affordability question? Right
now, if you want a zero carbon building, we can do that but you
will have to pay an awful lot of money for it. We can deliver
zero carbon housing by 2016 but my question is whether people
will be able to afford it? Fundamentally there is a cost reduction
required on a whole range of technologies going into those types
of development. The question is not can it be done; it is what
is going to be the price of doing it? I do not know the answer
to that.
Q197 Sir Robert Smith: Looking at
the housing market, when the developer is selling they want to
put in as little investment into the house and sell it for as
much as possible. The buyer pays a mortgage to cover the cost
of the house and then pays the running costs of the house. Do
you think our market is not fully developed enough where people
are able to see that actually if the developers put more in and
they paid more for the house, the overall running cost of the
house would actually be cheaper?
Dr Clarke: Yes, but capital up
front drives a lot of thinking. It does not matter whether it
is houses or whether it is offshore wind farms or gas fired power
stations, people generally want to expose as little capital as
they can at the front end. That is the reality. Yes, is the answer
to your point, but I do not know whether it is actually practical.
Q198 Sir Robert Smith: In fact even
if we did get new homes to be zero carbon by 2016 that would only
be the tip of the iceberg because people would be living in existing
homes.
Dr Clarke: The real challenge
is to find ways of retrofitting the existing housing stock to
improve energy efficiency on it. We turn over about 1% of the
housing stock a year so by 2016 we are going to be making pretty
small inroads, even after that, in terms of energy efficiency
in buildings from that point of view. The challenge is implementing
retrofit technology into houses and doing that in a way that is
both affordable to the owner (or whoever is paying for it) and
secondly in a way they find socially acceptable from the point
of view of disruption and what changes it physically makes to
their building and anything else. That is partly mindset and it
is also partly about perceived commercial value and so on. Those
are the two issues. The one that we are trying to address at ETI
is the issue around how do you actually find ways of implementing
packages of technologies as a retrofit rather than just somebody
coming along to do the insulation and then somebody else at some
other stage comes along and does something else. We are trying
to see how we can actually implement packages of technologies
to give the maximum benefit to any particular building and owner,
and how do you then implement those very quickly so that there
is minimal disruption and it is practical to actually say, "We
need your house keys on Monday; you can keep the upstairs until
Wednesday; we will do upstairs Wednesday to Friday and then we'll
be gone". That is the kind of challenge we are trying to
address on a mass scale because doing one is no good. We have
to make this available at community level; it must be mass deployment
on thousands of buildings.
Q199 Sir Robert Smith: Is there more
that the government should be doing to incentivise this?
Dr Clarke: We have not looked
specifically at government incentives in this area yet; we are
looking at it from a technology point of view at this stage about
how difficult this is and how could we make it attractive to the
consumer. When we get that far, if we can identify what I would
class as reasonably low cost approaches to that then I suspect
the question would still come: how do we then turn a reasonably
low cost option into a very low cost option? I think that is where
the government incentive and regulation will come into it. We
are not there yet.
Q200 Sir Robert Smith: One of the
other things you mentioned was the need for a coherent integrated
approach to smart grids. Is there one at the moment?
Dr Clarke: Not yet, no. That is
for a number of reasons, one if which is that we do not yet know
what the question is. Going back to the point about low carbon
vehicles, it is only over the last nine months where we have been
in the process of bringing together a whole range of groups across
the industry from the car manufacturers to the National Grid to
electricity suppliers to what would be classed as a systems integrated
service type provision people, the kind of people who run the
congestion charge network here in London. We need to bring all
of those groups together to actually understand how might this
grid look in the future and how might it operate. Actually the
big issues are probably not at National Grid level; they are down
at a distribution network level so it is seeing what happens here
in London or what happens in the centre of Birmingham and that
is when the big challenges start to come in. The points that were
being discussed earlier around the challenges of introducing micro-generation
and so on and the impact that could or could not have on the grid
and central generation, the whole smart grid question, low carbon
vehicles is a really good example of this because the vehicle
is relatively straightforward in terms of battery technology (it
is not simple but it is understood and we know how to do it) and
the distribution network side operates the way it does today.
What is missing is the equivalent of the thing that turns a mobile
phone in your pocket into something that enables you to talk to
anybody in the world whilst you are driving down a motorway; it
operates seamlessly in a very fluid fashion that probably no-one
in this room understands how it actually works and you get billed
for it using some system that you are not too worried about because
it is affordable. It is getting the smart grid to that level of
sophistication so that when you plug your car in you have confidence
that when you get back it will be charged. At this point, does
a vehicle know when you are coming back? It depends. If it is
seven o'clock at night it probably says, "Well, I know normally
you do not come back until eight o'clock in the morning or whatever.
If it is overnight, I can charge it whenever I want in the next
14 hours". It is getting that information base and getting
the systems that can make that kind of assessment for us so that
we do not need to know what is going on frankly on a day to day
basis but that is when the smart grid will start to operate and
that is when it will work well. At a distribution level that is
what will stop the existing trips and fault mechanisms cutting
out on the grid all the time, having that level of sophistication
and understanding of what can be done or not on the distribution
system at any one point in time.
Chairman: Could we briefly consider the
question of the barriers to this investment and changes in deployment
of resources, particularly in respect of the recession?
Q201 Dr Turner: What effect is the
recession having on investment in low carbon technologies?
Dr Clarke: I would say that it
is having three effects. There is a greater demand for support
from what I would class as the industry in the sense that clearly
people are finding it difficult to get credit and are now looking
for more support in general from a range of investors, whether
it is grant giving bodies or whether it is technology investors
such as ourselves, venture capital or whatever. People are looking
for money. Clearly that is one issue. Then the real effects we
are seeing are people being much more focussed about what they
want and why they want it but they are starting to be more flexible
around what they are prepared to accept. As an example, a company
came to me looking for investment recently. I was prepared to
consider that but on the basis of first auditing their engineering
capability because I was not totally convinced it was what we
needed. One of my engineering company members carried out an audit
of that company on an engineering capability base. I should say
that the company did not really want to have this happen for reasons
you can probably imagine because they perceived a risk in this.
The potential upside was that they got a tick from a major global
engineering company. They got the tick. As a consequence their
standing has gone up significantly not in the formal sense (the
credit rating kind of question) but from an engineering point
of view. They came to us, we have audited them and we have said
that this is something we are prepared to look at. It has been
audited by a major engineering company and they can tell the people
that. What we are starting to see is that people need money; you
can argue they see more challenges in getting money but they are
prepared to be more flexible to get the funding that they need
and as an impact of all of that things are starting to move faster
and in a more focussed way.
Q202 Chairman: We are running out
of time this morning I am afraid. You have given very useful and
extensive answers. Can I just ask you one brief question? How
important do you think energy from waste will be to meeting the
2020 targets?
Dr Clarke: In simplistic terms,
very important. There is no doubt that the biofuel question and
the biomass question—you can include waste in that—is
a big opportunity for the UK; globally as well but fundamentally
for the UK. These start to form part of your zero carbon liquid
fuel options or gaseous fuel options that can be used to replace
either transport fuels or, certainly when we start talking about
micro-CHP systems long term. If you want those to be really efficient
and low carbon, you will probably have to put a bio-feed stock
in the gas lines to reduce the carbon. At which point you say
that waste becomes very important and it is accessible.
Q203 Chairman: Do you see that as
a long term approach, particularly in terms of de-carbonising
the gas supply for example?
Dr Clarke: I would class it as
reducing the carbon in the gas supply. De-carbon tends to imply
zero. I cannot see that kind of feed stock provision for the UK.
Micro-CHP systems are clearly going to happen in certain areas;
the market will drive that. Micro-CHP will help us get to 2020
but getting to 2050 with an 80% reduction in CO2 says, I have
now got 20 million domestic gas boilers to day so let us say we
roll over 20%, we are going to have a million or more[1]
of micro-CHP systems emitting CO2 and I will not be able to catch
that CO2 the way I can off a central plant. These are point sources
distributed across the UK; there is no way I can capture that
CO2 economically. If we are going to hit an 80% CO2 reduction
target I have to, because there will be CO2 from other places
that I will not be able to capture from transport potentially,
international aviation, shipping potentially. Micro-CHP long term
becomes a real problem unless I can mitigate some of the CO2 by
putting a bio-feed stock in the line. I cannot see us ever having
biomass feed stock to fully replace the gas system. It is that
kind of interplay that we have to look at. Some of these technologies
clearly are going to fill gaps for us and energy from waste and
micro-CHP systems are all things which are going to be really
important in the near term. In the long term, energy from waste
is clearly going to remain important. Whether some of the others
do or not will depend on what the mix looks like between de-carbonised
electricity, biofuel availability and so on.
Chairman: I think you have at the very
least set us a challenge for some of our future inquiries in terms
of those longer term thoughts which are extremely important. Thank
you very much for your very comprehensive evidence this morning
which has been very helpful to our inquiry. David Clarke, thank
you very much. That concludes our business this morning.
1 Note from the witness: "Four million
or more" Back
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