CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1624-iii

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

Energy and Climate Change Committee

The Future of Marine Renewables in the UK

Tuesday 13 December 2011

Hannah Nixon, Stuart Cook, Harry Huyton and John Callaghan

Greg Barker MP, Duarte Figueira and Trevor Raggatt

Evidence heard in Public Questions 117 - 236

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Energy and Climate Change Committee

on Tuesday 13 December 2011

Members present:

Mr Tim Yeo (Chair)

Dan Byles

Ian Lavery

Dr Phillip Lee

Albert Owen

Christopher Pincher

Sir Robert Smith

Dr Alan Whitehead

________________

Examination of Witnesses

Witnesses: Hannah Nixon, Ofgem, Stuart Cook, Ofgem, Harry Huyton, RSPB, and John Callaghan, The Crown Estate, gave evidence.

Q117 Chair: Good morning. Thank you for arriving early, enabling us to start a few minutes ahead of time. As you represent rather different organisations, some of the questions will clearly be directed at individuals, or at least individual organisations, and others may be more general, but do feel free to respond to any of the things that we raise, any of you. We know who you are, so we do not need to have any formal introductions.

Could I kick off with the issue of grid charges, which the industry have said are one of the biggest barriers to the development of marine energy in the UK, and ask Ofgem to what extent you are considering wave and tidal energy in your review of transmission charges?

Hannah Nixon: We kicked off Project TransmiT about a year ago. We started with a call for evidence, and that call for evidence highlighted two issues that marine generators are particularly concerned about. One was connections and one was charging, and in fact they highlighted both as equally important. On the charging side, we have in place a regime that was very much designed for a generation mix where we had relatively few generators and those were mainly large-scale. That is clearly not the generation mix we have today, so TransmiT is about standing back and saying, "Do we need to update that methodology to take into account the new realities of the generation mix?" Throughout that review, we have explicitly incorporated consideration of both wave and tidal generation and they are fully incorporated in our modelling.

Q118 Chair: You are going to make a recommendation early next year?

Hannah Nixon: We are planning on putting a consultation document out before Christmas, consulting on the options for the way forward and then concluding in the early spring next year.

Q119 Chair: How do you balance up the different factors when you are trying to reach these sorts of conclusions? Obviously, there is a question about consumer prices; there is progress towards low emissions, and general economic effects. Do you have a method of assessing the importance to attach to each of those?

Hannah Nixon: Yes, we do. It is a good question. We are committed at Ofgem to facilitating the achievement of the environmental goals in terms of low carbon and renewables, and in doing so making sure that we maintain safe and reliable services for consumers and ensure value for money to consumers today and in the future. What we are doing in TransmiT is we have a detailed model of the different generators; it is a half-hourly model that goes out 20 years. We then assess how individual generators would respond to different charging regimes. All the models are calibrated to give the same level of renewable and low carbon output, so we can compare them directly, and we assess the total cost of delivery, delivering the low carbon economy under each model. We also assess what that would mean for security of supply as well.

Stuart Cook: I think it is worth adding that the process that has been run is a very open and inclusive one. There have been a lot of stakeholder meetings and all participants have had a chance to comment on the results.

Q120 Chair: Could you share with us some of the ways in which that modelling works? Is it possible to do that?

Hannah Nixon: Yes. We are looking at two key alternatives to the existing charging regime. One is a socialised or a postalised approach, whereby all generators would pay exactly the same charge regardless of where they are located in the system. The other alternative is looking to improve the cost reflective nature of the regime. By "cost reflective", we do not just mean taking into account location; we also mean taking into account network technology and the type of generator. Those are the two broad alternatives. What the model does is see how generators would respond to those different transmission charge signals; it then looks at how generators would come on to and off the system by type of generator in each region and what that would imply for the renewables target, the low carbon target, and total cost to consumers and security of supply.

Q121 Chair: Have you made an assumption about what the likely capacity for the wave and tidal energy sector will be in the UK?

Hannah Nixon: Yes, we have. We have used the information that has been published by DECC and the industry, and also the input that our stakeholders have provided to us in our technical working group. We have assumptions for the capital costs, which are based on publicly available information. We have assumptions on the maximum build rate per year and also on learning rates.

Q122 Sir Robert Smith: Currently, new connections to the grid require the user to underwrite the cost of that new grid connection, but you are consulting on changes to the user commitment arrangements. Could you outline what those changes might be?

Hannah Nixon: Yes. As I mentioned at the beginning, one of the key issues that marine generators mentioned was the amount of security they have to post against new connection assets. We have encouraged National Grid to lead some work with the industry on assessing what the appropriate level of security is for generators, particularly small generators, to post against new connection assets. They have recently tabled a proposal-it came into us at the end of November and we are assessing it now-that we take a risk-based approach to the amount of security that needs to be posted. That would significantly reduce the amount of security that small generators in particular would need to post.

The proposal is that, pre-consenting, the generator would post around 40% of the existing liability; post-consenting that would drop to 10%. That would result in a huge reduction in the amount that the small generators need to post. We need to go away and assess that and make sure it provides the appropriate balance between the need to get renewables on to the system and the need to protect consumers against bearing the cost of stranded assets.

Q123 Sir Robert Smith: You are also consulting on the possibility of wider works being borne jointly by the generator and the consumer?

Hannah Nixon: There are two aspects to TransmiT. One is about connection arrangements and how much the generator has to securitize up front, which is the industry process I just outlined. The other question is to what extent wider works are socialised across all generators and consumers, which has been picked up through our charging arrangements. One of the models that we are looking at there is a fully socialised approach where all generators would pay the same charge.

Q124 Sir Robert Smith: Would there be any consideration of the local works being also socialised because of the security of supply benefits of marine versus more intermittent generating?

Hannah Nixon: We have looked at that model and it is one of the models that we are actively considering, yes.

Q125 Sir Robert Smith: Even for the local works?

Hannah Nixon: Even for the local works, yes.

Q126 Sir Robert Smith: When do you think there will be an answer on that?

Hannah Nixon: As I mentioned, we intend to consult on the way forward on charging before Christmas, and then to firm up the direction of travel in early spring.

Q127 Sir Robert Smith: Have there been any examples where the Government have underwritten transmission costs?

Stuart Cook: I am not aware of any specifically, no.

Q128 Sir Robert Smith: Finally, Scottish and Southern Energy Power Distribution has launched a consultation on building a new connection between Orkney and the mainland. Is this likely to be affected by the changes or will it be under the current system?

Hannah Nixon: The purpose of the Orkney proposals is to make sure that the network does not stand in the way to new renewables connecting in Orkney. That is a two-phase approach, as I understand it. Will it be impacted by the charges? To the extent that any change in the regime means that there is less security required by generators and/or it reduces charges to generators on Orkney, then we would expect that generation to come forward more rapidly, and therefore it would be easier to make a near-term case for that link.

Q129 Albert Owen: Still with Ofgem on grid connections, it seems that the wave and tidal energy companies are likely to have a double whammy in that they have high admission charges and commitments to liabilities. To what extent have you considered this?

Hannah Nixon: This is absolutely at the heart of Project TransmiT. Under the proposals that National Grid have tabled on user commitments, marine generators and all small generators would benefit significantly if we were to approve those. On the charging side, at the moment the regime does not take into account the variable nature of some generators, including marine. Both of the alternatives we are looking at would take into account the variable nature of those types of technology. If we were to go down that route, that would benefit generators in Scotland and the north of England, but we would actually see higher charges for generators in the south.

Stuart Cook: It is precisely because of those types of challenges that we launched Project TransmiT as an attempt to understand and drive that forward.

Q130 Albert Owen: With TransmiT, obviously, it is spring you intend to bring this out. Have you heard concerns from potential generators that this is an issue? Are you looking at that specifically?

Hannah Nixon: Yes. It was directly in response to concerns raised by generators that we launched TransmiT a year ago. As soon as we got the powers to launch code reviews ourselves we launched Project TransmiT. We then went out straightaway with a call for evidence and, as I mentioned, people came back with concerns both on the connection side and the charging side, and that is true of the marine generators in particular.

Q131 Ian Lavery: Mr Huyton, the RSPB have been particularly critical of the way in which the offshore Strategic Environmental Assessment was carried out in both England and Wales. This has now been completed. In your view, are there any outstanding problems? If there are, can they be rectified, or do you believe that things have gone too far-it is a little bit too late?

Harry Huyton: Thank you. Our criticisms of the SEA process in England and Wales were that it was not spatially defined, unlike the parallel SEA in Scotland. It was so broad and shallow that it did not provide the direction for the industry in terms of where these technologies would be most appropriate spatially. As you say, the SEA is done. What do we do next? Our view is that we need a push behind survey, deploy and monitor around the UK waters: i.e. we need to invest in bird and marine mammals sites in those areas where wave and tidal are most likely to be deployed, so that in the future we are in a position to be able to filter out those most sensitive sites and ensure that they are deployed in the most appropriate area from the outset.

Q132 Ian Lavery: In relation to the environmental monitoring, there are basically two hugely different approaches being taken by different marine planning authorities. One is a deploy and monitor approach and the other one is a precautionary approach. What are your views on those two?

Harry Huyton: I am probably not going to surprise you by saying there is probably a middle way to this. If you were asking me that question in a perfect world where we already had a thorough understanding of marine biodiversity in our waters, then we would be feeling a lot more relaxed about deploy and monitor because you would be able to filter out all the most sensitive sites; but, given that we have an imperfect and partial understanding of where wildlife is in the seas, I do not think deploy and monitor is appropriate for now. That is why we are talking about survey, then deploy and monitor, so that you can filter out those sites.

There are instances where deploy and monitor might be appropriate. To give an example, in the Sound of Islay where ScottishPower Renewables have been awarded their lease for a tidal stream array, and that is effectively a deploy and monitor approach, we welcomed that because there is good baseline data for that area and we know that that area does not have areas of significant biodiversity interest. For now, because we have imperfect knowledge of biodiversity, deploy and monitor is not appropriate as a general rule, but it might be in certain instances.

Q133 Ian Lavery: Mr Callaghan, the Crown Estate is planning a second marine energy leasing round in Northern Ireland. I am wondering why this new area, and why there was not a continuation of the approach in Orkney.

John Callaghan: We look at the resources the UK has in wave and tidal energy all around the UK. In Northern Ireland we see potential for perhaps 200 MW to 300 MW of tidal developments. Over the last couple of years we have been working very closely with the Department of Enterprise, Trade and Investment in Northern Ireland to understand those resources. DETI itself has done a Strategic Environmental Assessment and provided regional location guidance, and we see the logical next step as offering leases in and around Northern Irish waters. We are also going to do that for offshore wind as well as tidal.

Q134 Ian Lavery: At what point will the Crown Estate consider further leasing in and around Orkney? Will that happen?

John Callaghan: Yes, we think it will happen. We are certainly conscious that there is a high degree of local interest in further development around Orkney. It is fair to say that for the time being the industry is also interested in other areas. Since we concluded the Pentland Firth leasing round, if anything, the industry has been interested in sites off the Western Isles and off Shetland and we have leased about a dozen sites in other places.

We need to be conscious of two risk factors with regard to further leasing in the Pentland Firth area. One is potential risks to the existing 11 projects: we do not want progress in development of those projects to be delayed. Due to the current state of the science, around resource effects and cumulative environmental impacts, that is something to bear in mind. The second thing is we want to avoid precluding large-scale commercial development in future. The Pentland Firth area has some of the best resources in the UK. We think it is important that the industry is able to develop those at real scale when it is ready to do so.

Q135 Ian Lavery: Do you have plans for leasing rounds in England and Wales?

John Callaghan: We are doing some work at the moment to work out key resource areas, strategic areas, all around the UK that have potential for large-scale development in future. Informed by that, we are planning to run a consultation with the industry next year to ask developers where they would like to see developments going forward and that will influence our leasing approach.

Q136 Albert Owen: On that point, I am not sure of the role of the Crown Estate. You say developers approach you, but have you done an independent mapping exercise where you think the potential is?

John Callaghan: Both, actually. Developers do approach us very frequently to express their interest in sites in various places. We are doing a study at the moment to try to understand better where are the best locations all around UK waters for large-scale wave and tidal project development. We will be publishing that next March.

Q137 Albert Owen: As the Crown Estate, basically your priority is to gather money in, isn’t it? How do you work with developers and how do you decide which area has the best potential?

John Callaghan: I suppose there are two things we do. We do lease sites and, under the Crown Estate Act, we are obliged to take a commercial interest when we do that leasing. We also actively support development, so we make investments to try to accelerate and de-risk the development process. I suppose we are receptive to industry views where developers see the best sites and the best chances for development. Currently, we also work very closely with DECC and the devolved Administrations, understanding their interests, for example, in relation to economic development. Of course the Scottish Government sees a lot of potential in economic development through development of the wave and tidal industry.

Q138 Chair: Just for clarification, to whom do you feel most accountable? Is it the Treasury? Is it DECC? Is it the devolved Administrations? When you are sitting there working out what to do next, who do you think is going to be the person who takes the most close interest in you?

John Callaghan: I guess we have to balance a range of interests on the side of both Government and the industry and other stakeholders, such as the RSPB. As I say, we are very receptive to what the industry wants to do. We work very much with the Government in understanding national policies to develop renewables, but also with local interests around economic development and other areas, so essentially we have to balance a set of interests

Q139 Chair: Which Minister could call you into account if you did not do it right?

John Callaghan: I guess we work most closely with DECC in relation to energy policy as it affects renewables, and wave and tidal in particular, so Greg Barker.

Q140 Dr Whitehead: Can we turn to the suggestion that there should be a further marine wildlife survey? Mr Huyton, you suggested that. What are the particular things that you would want to look for in that, over and above what has already happened in the Strategic Environmental Assessments and the Environmental Impact Assessments that already go into the consent process? Are there new areas that you consider are not researched and, if so, what are they?

Harry Huyton: From our perspective, the key criterion to getting these schemes in the right place is avoiding areas at sea that are important for vulnerable sea birds and vulnerable marine mammals. At the moment our data for those species-for birds-is largely based on a survey that was conducted and funded by the oil and gas industry throughout the 1980s and 1990s, but it was only of certain parts of our waters. For example, it was done from ferries and you can see we have very good data from some ferry lines but beyond that nothing. There are large data gaps that need to be filled and, effectively, those data gaps are baseline monitoring of those species that are vulnerable to wave and tidal power-as well as other marine developments; this is of interest to all energy operations in our seas-so that we can fill that baseline data and direct development into the right places.

Q141 Dr Whitehead: Essentially you are saying that the information we have is, first, area specific, and secondly, not in depth in terms of understanding marine interactions. Is that right?

Harry Huyton: That is absolutely correct, yes. In an ideal world we would have a co-ordinated partnership with industry, Government and other interested bodies to get the full baseline data that we need, but it takes time to deliver that. There are examples of a more strategic approach. My colleague here from the Crown Estate was talking about Pentland Firth and Orkney waters. Marine Scotland are doing aerial surveys of those waters at the moment to identify and filter out the most sensitive parts of those waters, which I think is a good approach that we could easily replicate, i.e. focus on those areas of most strategic importance to the industry and make sure we get the baseline data.

Q142 Dr Whitehead: I presume there is a difference between saying certain areas are less sensitive than others and saying, "We don’t know too much about how the whole thing works, so we need to do a first principles study of whether there are unacceptable effects on marine mammals in general from noise, vibration and so on." Which way do you tend to go on this suggestion?

Harry Huyton: There are two issues here. One is your baseline data, which is what I have been talking about today; That is about directing developments into the right place. The other is understanding how wave and tidal schemes interact with marine wildlife. For that, the critical way of improving our understanding is making sure that all the developers set up monitoring-so we are talking about survey, deploy and monitor-to look at interaction with the marine wildlife and their turbines. The key challenge is getting that data into the public arena. If you look at what has happened with offshore wind, although we have had monitoring for a lot of the round 1 and round 2 sites, and Cefas recently published a review of what that tells us, little data has been made public, and it was not harmonised so the data was incompatible and we know very little about how that interacts with wildlife. All of that monitoring has not furthered our understanding of this industry. That means that we can’t relax, which is what we would like to do. We would like to know that certain species are not affected by offshore wind in this particular example and we can therefore relax about their interaction in future developments. That is where we would like to be with tidal and wave, but for that to happen the monitoring has to be made public and it has to happen.

Again, there were instances with round 1 and round 2 where the monitoring that was part of the licence did not actually happen. That will be the challenge for this industry and how we overcome it. There is a potential model for collaborative research called COWRIE from round 1 and 2 offshore wind. It stumbled because of commercial confidentiality of data, but that kind of partnership and the kind of common requirements on licensing for wave and tidal so that monitoring is compatible might be able to make sure that in five years’ time we understand how these things interact with wildlife.

Q143 Dr Whitehead: Who would be responsible for this?

Harry Huyton: The monitoring requirements are put on the licences issued by the MMO in England and Marine Scotland in Scotland.

John Callaghan: May I add to that point just briefly? The Crown Estate is working with DECC to create a data and knowledge exchange network, including for environmental data, to encourage sharing and support research into environmental effects.

Q144 Dr Whitehead: What would this cost and over what period? Who would foot the bill for the sort of survey you are suggesting and what would the bill be?

Harry Huyton: There are a number of different things. First of all, some of this monitoring already happens and the first challenge is making sure it goes into the public arena. That is free. The bigger baseline surveys do, of course, have costs. I am not in a position to give you a quote, but JNCC, Marine Scotland and MMO should be able to give that data.

Q145 Dr Whitehead: Are you making the assumption that this is for waters other than marine conservation zones, or are you suggesting that, in principle, marine conservation zones would fit in with development of wave and tidal energy, subject to this sort of survey?

Harry Huyton: Marine conservation zones need to happen to give further certainty and spatial guidance for the industry, but in themselves they will not lead to the kind of monitoring we are talking about.

Q146 Sir Robert Smith: Can I just ask how it compares with the data sharing for the oil and gas industry in terms of the public availability of the data that they acquire?

Harry Huyton: That is quite interesting. We might be able to come back with an answer on that. I would have to consult colleagues who are involved in the oil and gas sectors.

Q147 Sir Robert Smith: I just wonder if there are any lessons learnt, because obviously there has been huge activity out there where data has been gathered and has been shared.

Harry Huyton: Absolutely. I think the one big strategic survey that we did have, which was called the European Seabirds at Sea survey that was done annually by the JNCC-it is the one I have referred to-does have big data gaps, but it was done for the oil and gas industry effectively and it was paid for by the oil and gas industry. That does at least give us an example of what can be done, and it helped the whole industry because it was pooling resource and information.

Q148 Dr Lee: Allow me just to broaden out to the RSPB’s view of energy in general. What is the RSPB’s position on the Severn Bore projects that have been proposed?

Harry Huyton: The Severn tidal power?

Dr Lee: Yes, harnessing the Severn Bore, what is the RSPB’s position on it?

Harry Huyton: Sorry, it is the Severn power or the Severn tidal power?

Dr Lee: The Severn tidal power, the Severn Bore, harnessing it: what is the RSPB’s position on that?

Harry Huyton: We are supportive in principle of a tidal power scheme in the Severn if it can be done within existing environmental legislation. We are aware that there is currently interest from a private developer on the Severn, and we are already working with them closely on what they need to do if they are going to overcome the environmental challenges in the Severn. Of course, some of the initial proposals did have hugely detrimental impacts. We think they could be managed and reduced-we hope they can be-and we are working with others on that.

Q149 Dr Lee: In making that judgment, does the RSPB have a view on the ideal energy generation form, and if not, why not?

Harry Huyton: We are supportive of all renewable energy technologies where they can be deployed within the environmental legislation that we have.

Dr Lee: That is not my question.

Harry Huyton: We are not going to pick a favoured, I mean-

Q150 Dr Lee: Why not?

Harry Huyton: Because we know that we need all of the renewable energy technologies that we have available to deliver to their maximum sustainable potential. We know that we need wave, we know that we need tidal, we know that we need on and offshore wind, and that is why we support all those technologies. I do not think it would make sense for me to back one of those over another.

Dr Lee: Yes, but if you are coming out against something, it is easy to be against; it is very difficult to be for.

Harry Huyton: We frequently come out for-

Q151 Dr Lee: In view of the fact that electricity demand in this country is going to go up quite significantly in the next few decades, and the RSPB is undeniably a powerful force in terms of lobbying with the size of its membership, it would be nice, if you were against the Severn Bore development because of the environmental impact, that you could come up with an idea of how we would switch on the lights.

Harry Huyton: We have publicly supported onshore wind. We have publicly supported a number of offshore wind proposals, including the Thames Array, for example. As I said, we have publicly supported some of the most recent tidal stream applications on the Severn. We have spent our own money helping to develop alternative technologies that could be deployed. During the Severn tidal power feasibility project we commissioned one of the engineering consultancies to look at the tidal reef, for example, and how that might be deployed in the Severn. I absolutely agree that, as an NGO that is objecting to some technologies, we have to be taking a positive position on others. I hope that we are doing that and-

Q152 Dr Lee: Is there an acceptance within the RSPB that there is going to have to be compromise at some point if we are to mitigate CO2 emissions? It strikes me that offshore wind is going to cause problems, but by the same token if we allow our carbon emissions to go up you are going to get climate change that is going to change migration patterns, there will be species that will not withstand that changing climate, et cetera. Whichever way we turn, there is going to be an impact upon bird life. I am suggesting that it might be-I don’t know-that we have to suck it up in the Severn, so to speak, in order to mitigate damage elsewhere.

Harry Huyton: I hope that we can exploit the Severn but in a sustainable way. The lens that we look at all of this through is absolutely-as you suggest-that climate change is the biggest long-term threat to wildlife. That is why we absolutely have to deliver on renewables. I think we are taking compromises across the line. We publicly supported these, and do not forget we have taken an awful lot of stick from our own constituency for doing that. We have lost a lot of members for doing that. It is tough; we are walking a really hard line here. What I would say at the moment is we do not think it is a simple trade-off. We do not think it is, "Meet your renewables target but don’t meet your biodiversity target." We think you can do both, and that is the aim of the contribution we have tried to give this Committee on marine renewables and on other energy policy.

Q153 Chair: One of the factors in reaching renewables targets is the availability of incentives to address the fact that some of them are much less economic than others. Given there is now a lot of interest in the fact that the amount of money available for FITs is capped, it sounds a tiny bit of a cop-out to say the RSPB supports all these because in the end there is a limited amount of resource available for incentives. Some of them are clearly much more expensive than others. Are you going to reach a conclusion at some point, do you think, organisationally, that in order to get to the renewables target we have to focus on some of the ones that may offer better value than others?

Harry Huyton: Yes, but we interpret value as cost to the consumer as well as environmental impact, which of course has a cost to the overall country. A few weeks ago we did publish, along with our European partners, a review entitled In Harmony with Nature of how we believe we can meet the 2020 targets in Europe. That includes a risk assessment of each technology and their potential impacts for wildlife, and categorises technologies into high, medium and low risk in terms of their environmental impact.

Of course, we would advocate lower-risk technologies receiving greater support. We have always said that we think the renewables obligation and feed-in tariffs should be banded so that they reflect sustainability. I think that is as far as we can go on that, but if others believe that it would be more useful for an organisation like ourselves to take a stronger line on which technologies should and should not receive support, I think that is something we should probably consider.

Q154 Christopher Pincher: Mr Callaghan, it is clear from what you said that the Crown Estate is very keen to develop areas like the Pentland Firth and the Orkney waters. You said that you deal with developers and you ask them which are good sites, and you also talk to DECC and you talk to the Scottish Executive. What you did not say was whether you talk with local communities. Of course, their engagement is very important to obtain buy-in or to identify the concerns that they have. I wonder if you could tell us what sort of community engagement you would normally undertake.

John Callaghan: Yes, certainly. To look at the Pentland Firth first, just a couple of weeks ago, and also this time last year, we ran a series of public events, inviting the public to come along and find out about the projects being developed, and to meet some of our team and other public bodies that are supporting development and, of course, the developers that are leading the projects. We had about 700 people come to events over four days last year. This year we ran a couple of evening talks. We had about 100 people come to those events in Thurso and Kirkwall to get an update on progress. We are very keen to hear local views, to facilitate a discussion between local stakeholders and folks who are representing organisations such as RSPB locally, but also members of the public as well.

We are conscious of two issues in particular that are coming to the surface with the Pentland Firth projects. One relates to impact on fisheries, so we are trying to facilitate a discussion with local fisheries groups and the local fisheries industry; and secondly, visual impact. We are aware that some parties in Orkney have concerns, particularly about the west coast of Orkney mainland and how projects may affect views from that coastline. We are keen to engage with local communities to understand those concerns and to also encourage developers to work with local stakeholders.

Q155 Christopher Pincher: When the Committee went up to Orkney earlier this year they heard from representatives of the local council group suggesting that there had been no engagement at all, so there is clearly a disconnect between some people who say they hear nothing from the Crown Estate and your saying that you engage with local people-hundreds of people turn up to the public events that you organise and learn about your proposals. Why do you think there is that disconnect?

John Callaghan: We probably could have done more before and during the leasing round competition. To a certain extent we were limited, due to competition law considerations. For example, we could not disclose parties involved in the leasing round or the sites they were looking at because that was a commercial competition. Certainly since completion of the leasing round, we have been very active in trying to work with local stakeholders and get that-

Q156 Christopher Pincher: But that is after the fact, isn’t it, rather than before and during?

John Callaghan: Yes, and I would accept that there is probably more that we could have done before and during.

Q157 Christopher Pincher: Given you accept there was more you could do and you are undertaking the same sort of leasing round in Northern Ireland, what more do you plan to do there?

John Callaghan: Earlier this year, ahead of the leasing round, we ran a consultation to invite views on where we should lease projects and also how we should give development rights. We had around two dozen responses to that consultation exercise, which we called a design discussion.

Christopher Pincher: Two dozen?

John Callaghan: Yes. Prior to that DETI, in running the Strategic Environmental Assessment and forming regional location guidance, gained views from a wide variety of stakeholders looking at different aspects of development, including environmental aspects and impacts on other sea users. So in Northern Ireland there has been a fair degree of consultation already, some run by DETI, some run by us, but no doubt there is a need for further work with local stakeholders as we go forward.

Q158 Christopher Pincher: What impact has that further consultation had? Are you changing or revising your plans to persuade the community that your plans are appropriate and desirable?

John Callaghan: I think it has helped us balance interests, which I mentioned earlier we needed to do, and find the right balance in Northern Ireland. For example, for tidal projects we know there is interest in both small technology demonstration projects and some larger scale schemes, such as those that are being developed in the Pentland Firth. We need to see how both sorts of projects can be accommodated and also think about the best places for those different sorts of projects.

Q159 Christopher Pincher: What has the community feedback been so far?

John Callaghan: There has not been a great deal of community feedback to us. We are aware of one concern related to fisheries in one of the areas we are considering leasing, but beyond that there has not been a great deal of feedback.

Q160 Christopher Pincher: Why do you think that is? Is it because people do not know about the proposals, or because people are not too concerned about them?

John Callaghan: I imagine that awareness will increase once we start the leasing round, and certainly when we award sites people will be able to see where we have awarded development rights. I suppose the key thing to bear in mind, though, is that when we give development rights, which we call agreements for lease, they are only rights to survey and start to plan developments. They are not actually leases. The statutory consents process will happen afterwards and doubtless will include a great deal of consultation, some led by the development companies themselves with local stakeholders in the run-up to them making consent applications, which will be determined by the Northern Ireland Environment Agency with input from various others in Northern Ireland.

Q161 Christopher Pincher: Can I ask you about the Coastal Community Fund that the Chancellor announced in July? As I understand it, the revenues will be raised by the Crown Estate’s marine renewable proposals and the outcomes of those, and 50% of those revenues will be put back into good local causes. How much do you estimate will be raised?

John Callaghan: As you say, the fund is based on the surplus revenue that is attributable to the marine estate, which is one part of the Crown Estate. My understanding is that when the scheme starts in April next year there will be a total of £23.7 million available.

Q162 Christopher Pincher: Is that more or less than you expect? What sort of figure were you hoping for?

John Callaghan: It is based on a formula of half the surplus revenue of the marine estate. That figure is based on the surplus revenue.

Q163 Christopher Pincher: The more you develop the bigger that fund is going to be, surely?

John Callaghan: That is right.

Q164 Christopher Pincher: So you have an incentive to develop as much as possible?

John Callaghan: That is right, and in obtaining grants from the scheme, we and the Treasury hope that local communities will benefit from that.

Q165 Christopher Pincher: What is your view of that fund? Is that going to prove valuable? Are you in favour of it?

John Callaghan: Yes, we are certainly very supportive. I should say that it is a Treasury fund and it is not administered by the Crown Estate-in fact we understand that the Big Lottery Fund is going to manage it going forward-but we are certainly supportive of the spirit and principles of the fund, and what it is trying to set out to achieve.

Q166 Christopher Pincher: You say it is a Treasury fund, not a Crown Estate fund, but will you have any say in how the funding is allocated?

John Callaghan: No.

Q167 Christopher Pincher: Do you think you should?

John Callaghan: No, I think we are content for the Treasury to administer it with the Big Lottery Fund.

Q168 Christopher Pincher: Will you have any role in identifying which communities should benefit from the fund?

John Callaghan: We will not, but my understanding is that it will be distributed across the four countries of the UK, making an additional distinction in Scotland between the Highlands and Islands and the rest of Scotland. The pot of funds available to each region will depend on the scale of activities the Crown Estate is developing in the marine estate locally. There is a formula but we will not be involved beyond that.

Q169 Christopher Pincher: Essentially, your role is to develop as much of the estate as possible to fill that pot as much as possible. Then it is for the lottery fund and for the Treasury to decide how that money should be allocated.

John Callaghan: That is correct.

Q170 Chair: We were told by the industry that the consenting process is more streamlined in Scotland than in England. Could it be improved in England?

John Callaghan: Sorry, is that a question to me?

Chair: Yes.

John Callaghan: I would say that overall there is not that much experience to date. While we have leased sites for 33 projects, only a handful have yet obtained consents or are actually operating in the water. The majority of sites are in Scottish waters and Marine Scotland and other parts of the Scottish Government have been very active in supporting their development. It is probably the case that the equivalents to Marine Scotland around the rest of the UK could learn from the experience that Marine Scotland has gained, but I suppose they have not seen the volume of projects coming forward to consent yet that Marine Scotland has.

Q171 Chair: Could I ask you all more generally whether you think it would be appropriate for DECC to adopt a deployment target for wave and tidal energy?

John Callaghan: I can comment on that. Certainly, what we would see as valuable is DECC and other parts of Government maintaining a clear long-term commitment to the emerging industry. I suppose the longevity and the durability of that commitment is material to investors. It may be that through setting a target, investor confidence could be increased, but I suppose there are other ways that that clear long-term commitment could be demonstrated.

Chair: Anybody else?

Stuart Cook: The observation I would make is that we are at a very early stage in a potentially new industry and there are a lot of uncertainties around the way in which the technology would unfold in the future, and hence trying to fix a view on what the level might be is a relatively difficult exercise for anybody to try.

Harry Huyton: I agree it is difficult. I guess where the uncertainty lies is what happens post-2017, because we have a cap on the 5 ROCs per MWh subsidy up to 2017 and then what will happen beyond then with the Contracts for Difference? The value of a longer-term target would be that it provides certainty for the industry in that transition period.

Q172 Sir Robert Smith: Do you think that, rather than having a target, just ending that uncertainty would allow investors to then work out how best to respond?

Harry Huyton: That might be appropriate-I would ask investors that. As others have said, a target is difficult in that a target could just as well limit ambition as drive ambition if you set it incorrectly, so yes, that could be a prioritisation.

John Callaghan: In the previous sessions you have heard from developers talking about what happens in the gap between the renewables obligation closing and feed-in tariffs coming in under and the electricity market reform. Certainly, we understand that developers and investors are looking at this as a longterm opportunity, so that gap is important. For the Government to provide a signal as to what might come out of EMR for wave and tidal is also important.

Q173 Chair: Given how many organisations there are involved in the process of delivering marine renewables, not just the Government ones but lots of other ones as well, is the co-ordination satisfactory at the moment? You have DECC, the Scottish Executive, the Carbon Trust, the ETI, the TSB, and so on and so forth.

Stuart Cook: I think it is difficult. We play a part in that overall exercise, so I think as far as the role that we play there is an awful lot of co-ordination between Ofgem, the Department, the companies and the local communities, but that is one part of the picture.

John Callaghan: I suppose the risk associated with lack of co-ordination is certainly something we are very conscious of. To come back to the Pentland Firth and Orkney waters, we are working very closely with the Scottish Government, Marine Scotland, Highlands and Islands Enterprise and the local councils and others to co-ordinate activities between ourselves, but also think about how collectively we can deliver things working with the private sector.

Q174 Chair: Finally, could I just ask Ofgem: when Project TransmiT is completed could you share with us the numbers about the assumptions you have made on the modelling process? Is that possible to do in due course?

Hannah Nixon: Yes. We have been committed to running a fully open and transparent process on TransmiT. As I say, we have had a technical working group who have developed the inputs to that modelling. We have had a number of stakeholder engagements. We have published all the assumptions behind our modelling. We have had working group sessions where we have taken the stakeholders through the modelling in detail, so we are happy to make all of that available.

Chair: Thank you. We have some more witnesses just about to start, so thank you all very much for coming in.

Examination of Witnesses

Witnesses: Greg Barker MP, Minister of State, DECC, Duarte Figueira, Head, Offshore Renewables, DECC, and Trevor Raggatt, Deputy Head, Offshore Renewables Unit, DECC, gave evidence.

Q175 Chair: Thank you for coming in. I am sure there is plenty going on in your lives. Your officials have given us most of the answers but there are one or two tricky questions they thought they would reserve for you.

Could I start off by raising what appears to be a mismatch between what the industry thinks it can deliver from marine renewables and what is in the renewable energy roadmap? Why do you think there is a difference there?

Greg Barker: Would it be useful, before I launch into the nitty-gritty, just to give the Committee a brief overview of what it is that we are actually trying to do and maybe the context of our ambition?

Chair: By all means, yes.

Greg Barker: When the Coalition came to Government last year there were some very ambitious targets for marine. There were some large pots of money for marine. What is clear is that there was a total absence of delivery: neither were the targets anything close to what was potentially achievable by the industry, nor did they in any way reflect the actual progress that there had been on the ground.

Basically, what I wanted to do was drive progress on the ground, which meant having a much more realistic strategy for deployment, implementation and funding. Also, we had to have an approach that took more into account than simply carbon abatement, particularly in relation to our 2020 target. Part of the reason for the lack of progress on the ground was that, at DECC, the wider context in which marine operated was very much the imperative of meeting our 2020 renewables targets. With the best will in the world, marine is not going to make a material contribution to meeting that very ambitious target. However, in the 2020s, and indeed in the 2030s and up to 2050, marine can make a very substantial contribution to our renewables portfolio. What is more, marine offers the UK a unique entry point into a global renewables market, in that the UK really is a global leader in this particular technology and there is a huge industrial potential that was not being reflected in the focus on marine.

What I have endeavoured to do is drive forward the realistic deliverable deployment on the ground by working much more closely with the industry and being much more mindful of what we can help deliver at an industrial level, even if this is a longer timeframe than perhaps we have been used to in the past. If we do not start, we will never deliver that future potential.

In terms of the roadmap you are right, Chair. The UK renewables roadmap quotes 200 to 300 MW by 2020, when the 2010 Marine Energy Action Plan suggested 1 to 2 GW. Some people have interpreted this as representing in some way a lack of ambition or a rowing back. The fact of the matter is the 200 to 300 MW by 2020 by no means represents a cap on our ambition. Instead, it is meant be a realistic most up-to-date projection, based on independent consultants’ reports of what is actually in the pipeline and what is potentially deliverable. We are going to continue to monitor that, however, and if there is the opportunity to upgrade that realistic forecast we will certainly do so. I would be disappointed if the efforts we are making to drive progress in the sector do not result in an upgrade of the potential.

The fact is that in May 2010, when we came into office, despite the high targets and the high numbers for potential funding, there were only 2 MW of marine energy devices deployed globally and almost all of that was in the UK. We are starting from an incredibly low base of actual deployment-effectively from a standing start-so we are trying to go from 2 MW to 200 to 300 MW. Certainly everyone that we talk to in the industry thinks this more realistic approach is going to actually deliver, and obviously it is delivery that is going to be the benchmark of success.

Q176 Chair: That is helpful. There might be circumstances in which that realistic estimate might be raised in due course?

Greg Barker: Absolutely.

Q177 Chair: Have you envisaged what those circumstances could be?

Greg Barker: Success for our policy. We want to under-promise and over-deliver. That is the new ethos that we are trying to drive right across DECC, rather than have these targets that are totally out of kilter with what will be delivered on the ground. I hope that the introduction of marine energy parks-for which there is huge appetite and potential, both in the far north of Scotland and the Orkneys and in the south-west, and which are now coming together-will drive progress. I hope the greater strategic direction that we are giving to the industry by the formation of the Marine Energy Programme Board, which I chair, will help to galvanise industry and to inform policy, to ensure that we stay much more closely aligned between Government policy, Government expectation, Government targets and Government funding, and what can be delivered on the ground.

I also hope that expanding the UK’s marine testing infrastructure, by investing in EMEC, Narec and Wave Hub, will help. I also hope that if we are successful in prioritising the UK’s bid for EU NER300 funding, this will be additional support into the marine sector; and that the impact of the £20 million, which we announced in the summer, to support the demonstration of marine energy arrays will be much quicker and much more effectively deployed than previous attempts to get money into the sector have been.

Finally, we think that the announcement that we are consulting on 5 ROCs for wave and tidal stream technologies from 1 April 2013 is what the industry has been asking for for years. We listened very closely and I think that the 5 ROC signal will be very powerful, but I do not want to raise expectations so that they run ahead of what we can deliver on the ground. It is all about delivery.

Q178 Chair: We will come back to the 5 ROCs a bit later on. DECC is a member of the Low Carbon Innovation Group, which has adopted a goal of reducing the cost of energy in the marine sector. Do you have a figure in mind that you think would be acceptable for the costs in 2020?

Greg Barker: The costs in 2020? Perhaps one of my officials can answer.

Duarte Figueira: The renewable energy roadmap set out in the relevant chapter at the front the range of potential costs in 2020, which range from £160 to £340 per MWh. Of course, the long term ambition for the sector, in order to enable deployment to happen, must be that we get costs further down below that. The problem we have at the moment is that, because there has been so little deployment, there is very little idea about costs. When we published the Arup report in the summer, which set out a range of costs for marine renewables, it had quite a wide range for high, low and medium costs. It was based upon very little real data and therefore projections up to 2020. We do not have projections for costs at the moment because there has been so little real deployment. We have projections of costs up to 2020. The long term ambition must be to make the sector less reliant on subsidy funding from the RO and the EMR FITs.

Q179 Chair: Are you saying it is too early to be very specific about what the figures would be?

Duarte Figueira: Yes. In the report that they published as an independent study for us, Arup specifically said that there was enormous uncertainty about cost projections. It does depend upon whether or not there is scale deployment and what effect that will have on costs. It also depends on the costs of deployment and whether we can get those down through technology innovation and through reducing non-financial barriers.

Q180 Chair: I understand the point about the realistic projection. Do you think it would be helpful if we had a deployment target for wave and tidal?

Greg Barker: We have a target effectively, which is 200 to 300 MW but, as I say, it clearly is just a beginning. I think there are too many uncertainties at this stage to set targets that would be credible beyond 2020, but as we start to make real progress on the ground and the industry starts to mature and gets more kit in the water, it may be something that we will want to revisit. Simply putting into documents targets that have been plucked out of thin air is not particularly helpful. It can give a false sense of progress or ambition.

Q181 Albert Owen: Minister, can I take you back to what you said about how you do not think marine energy will make a material difference to carbon abatements on the scale that the industry and jobs-

Greg Barker: Before 2020. I think it may have a big difference post-2020.

Q182 Albert Owen: I realise that, but you do not have any deployment targets because it is underdeveloped, so you are not in a position to say what you are going to do post-2020, either. Can I say-and this is quite a topical question but it has been around for a long time-have you considered the barrage? When we talk about barrages, have you talked about Bristol Channel and that kind of thing? Some estimates say that that could produce 5% of the country’s energy resources. Is that something that the private sector is looking at now and has that been put into the roadmap?

Greg Barker: That is not in the roadmap. It is certainly not in the consideration of the marine strategy as things stand, but you are absolutely right, Mr Owen: that would be a game changer. It is something that we remain interested in. As you know, we have undertaken recent studies, which concluded that a public sector funded proposition running to north of £30 billion is not something that we think is currently feasible, but we have by no means closed our minds to that in the future. However, the private sector is still actively pursuing that and we are very supportive of private sector propositions. There are a range of technologies, and it is not a one monolithic technological proposition. The private sector is actively looking at that and I am aware of at least one major project that is currently being evaluated, and we are waiting for more details of that. It is something that I have by no means ruled out, but I am afraid I do not have anything more than that to say at this stage.

Q183 Albert Owen: On the jobs aspect, you said it is a very important industry. I think it is unfair to say that nothing happened prior to May 2010. We have been up to Orkney and we have seen some of the schemes, the European scheme up there, the European Centre, which has been producing and it is a world leader in many ways.

Greg Barker: I do not want to be disparaging of the last Government-

Albert Owen: You sounded it in your opening remarks.

Greg Barker: I suppose I am little bit disparaging because the reality is that we got two to three-

Q184 Albert Owen: When I raised the issue only last year with the Secretary of State for Energy, and asked him about development in marine, he was saying, "Oh yes, it is underdeveloped. Wind is actually a technology that is proven so that is why we are supporting it." You have had a change of policy in recent months on that. Returning to the jobs aspect in the roadmap, can you tell us how many jobs you envisage in the UK in the marine industry?

Greg Barker: I think it would be difficult to give you a very precise figure, but I was really surprised. When I took over the chairmanship of the Low Carbon Innovation Group, which I jointly chair with David Willetts, one of the first questions I asked of that group, which brings together a number of the large strategic funding bodies, was: what was the impact on jobs and growth of the specific projects that we were sponsoring? One of the officials looked at me with rather glazed eyes and said, "I am afraid I can’t tell you that, Minister." I said, "Why ever not?" He said, "Well, no one has ever asked that question before" in the context of-

Albert Owen: Now I am asking you.

Greg Barker: I can tell you that we are now much more focused. The Carbon Trust and Renewable UK estimate that between 16,000 to 19,000 jobs could be created in the UK by 2040. Personally, I think it could be significantly more than that. I do not have any learned studies to back that up; I just feel, given the potential technological advantage, that that figure tends to look at the UK deployment, but the fact of the matter is that the UK, albeit in a very nascent industry, is still seen as a global leader. We know Korea and Japan are looking at these technologies. They look to us, but they are also looking to develop their own capabilities elsewhere around the world. I think this could be an industry that not only services the potential that we have in our own coastline, but becomes a global export industry. That is very hard to quantify but intuitively, politically I think it is much more.

What we are seeing that I think is exciting is the entry of larger companies with stronger process engineering skills, like Rolls Royce, who are able to offer a path to a scaleable manufacturing proposition into this market. Before, it was dominated by incredibly innovative, very bright, exciting young VC players, but they hit the buffers when it came to scaling up. The skill set that you have in terms of innovating, taking things out of a laboratory or taking a proposition out of an idea is one thing, but scaling up to large deployment is quite another, and I think those process engineering skills, which are typically in relatively few large manufacturers who could do this, are key to unlocking it.

Q185 Sir Robert Smith: Perhaps one of the keys to unlocking is to make it clearer how the funding all fits together. It has been put to us that in the US they have the Department of Energy basically handling the funding of energy investment, whereas in the UK there are at least six different organisations administering marine energy funding. Is there any scope for making it more streamlined and efficient?

Greg Barker: I totally agree with you. If you look back over the last 10 years, the landscape has been far too complex and we have begun trying to simplify and harmonise that. Obviously there is a limit to the extent to which you can do that, given that some funding will come from Europe and some funding is going to come from the devolved Administrations, and those are important pieces of the jigsaw. Certainly, through the funding we have at our own disposal or have an influence on, we are trying to create a much greater sense of purpose. That is why we have the Low Carbon Innovation Group, which is directly tasked with trying to bring some sense to that. I am sure we can continue to do better, not just for marine funding but across the board. I agree that the funding landscape is still too complex.

Q186 Sir Robert Smith: You mentioned that division between Scotland and the UK, so DECC’s fund is £20 million and the Scottish Government has an £18 million fund. Do you think more could be done to co-ordinate those two funds?

Greg Barker: The Low Carbon Innovation Group is a lot more than DECC’s £20 million, but that bit which is dedicated to marine is £20 million. I have £18 million from the Scottish Government as the comparable amount.

Sir Robert Smith: £18 million, yes.

Greg Barker: Obviously, we also have the Energy Technology Institute allocating £21 million and we are waiting for the Technology Strategy Board, which is a partnership between the private sector and the public sector, so it is not totally Government.

Q187 Sir Robert Smith: But the £20 million and the £18 million are both aimed at promoting arrays, so we wondered if there was a way of co-ordinating those two so you have £38 million?

Trevor Raggatt: A lot of co-ordination is already going ahead. The Scottish Government has been closely involved, along with the other devolved Administrations, in the Marine Energy Programme and the Programme Board, which the Minister chairs, which helped to feed into the creation of our £20 million Marine Energy Array Deployment Fund. An announcement was made earlier in the autumn by the Scottish Government. They are planning to get advice on the design of their own fund from their Marine Energy Advisory Group, which is convening again this Thursday. We have been invited as DECC to be a part of that process, to ensure that the learning we have already received from our own design of our fund can be brought into that to make sure that the two funds align as closely as possible. As of yet, it is too early to say whether they will align as effectively parallel, very similar schemes, or if the Scottish Government will choose to use different types of instrument to create a complementary scheme, but certainly we are going to be working closely with the Scottish Government to make sure that happens.

Q188 Sir Robert Smith: Would a joint pre-qualification process be something that might come out of it?

Trevor Raggatt: It is too early to say. It would depend on the form of the different schemes. We are already working to put together the form of our scheme, which we hope to announce in the New Year. It would all depend on the precise instruments that the Scottish Government would choose to use, whether they go for a grant scheme or some sort of investment model. It is just too early to say right now.

Q189 Sir Robert Smith: On the Low Carbon Innovation Group, how formal is the relationship with the Scottish Government and Scottish Enterprise, or could it be more formal?

Greg Barker: We could certainly liaise more closely with them. We have a good working relationship at an official level and, despite the politics of this, on the ground there is a strong shared analysis.

Trevor Raggatt: My understanding is it is not an area that we lead in, but the Scottish Government are being invited to be much more closely involved in meetings of the group, so they have an active input in the actual workings of the group in terms of co-ordination.

Duarte Figueira: It is worth emphasising that the Marine Energy Programme Board has a very close relationship across the devolved Administrations, all of which play a part in its activities. Indeed, the second meeting was in Scotland where we discussed how we could work more closely together.

Greg Barker: We held that meeting in Edinburgh in the summer, and the Scottish Environment Minister was invited to attend. We had a very good session in Scotland and obviously the potential for a second Marine energy park between Caithness and Orkney is very great and there is a lot of momentum now biting at the heels of the southwest.

Q190 Dr Lee: A couple of questions on strategy. The £20 million, how did you arrive at that figure, in view of the fact that that is relatively modest when compared with the £2 billion a year in nuclear decommissioning? There is still £1 billion of DECC spending there. How was it arrived at to say £20 million for that but £1 billion for CCS? Is there a strategy as to why it is such a modest sum?

Greg Barker: We have a roadmap in terms of what is going to deliver what, in terms of our overall Carbon Abatement Strategy to reduce our emissions by 80% by 2050. Technology is assessed for its potential. The £20 million comes out of our innovation budget; it is a significant chunk of that innovation budget, in terms of innovation for CCS as opposed to other support for CCS. I am not aware of any other-my officials will correct me-but I think that is the largest, single spend on any technology from the innovation budget, per se. Is that right?

Duarte Figueira: We have announced £20 million for marine and we have announced £30 million for offshore wind.

Trevor Raggatt: In terms of the process that was undertaken to determine the level of funding for the marine fund, the Low Carbon Innovation Budget is overseen by a board, which operates within DECC, and there was a process undertaken and led by our Chief Scientific Adviser, David MacKay, to look at the various ways in which the innovation funding could be spent and to allocate priorities between that. The outcome of that process was £20 million for the Marine Energy Array Demonstration Fund. That was based on a lot of work we had done with the sector through the Marine Energy Programme and through the Finance Working Group, looking at the realistic levels of deployment that were likely in the period that is covered by this Spending Review period.

In terms of the number of projects likely to come forward at a small array scale, we felt that the £20 million budget was appropriate, alongside in particular our hopes that the UK would be successful in funding at least one marine project of a similar scale from the EU NER300 project programme. Of course, now that we have the Scottish money alongside that, that may allow us to do more, but we looked very carefully at what was able to be spent within the timescales that were available to us.

Greg Barker: The key barrier for the industry has not been the resource available; it has actually been the ability to deploy or spend it. The previous Government had the Marine Renewable Deployment Fund, which was £50 million of which only £2 million was spent during the five years that that operated. In the four or five years that that was up and running, it only managed to get £2 million of the £50 million out of the door.

Q191 Dr Lee: But they have been successful, with about £5 of private money for every £1 of state money. That is pretty good leverage for a technology scheme. It is the private sector who is interested in this. I guess my point is, if there is that level of interest, is there a danger that other countries will get ahead of the curve?

Greg Barker: Unlike other technologies, there are very real constraints on just how quickly you can deploy these technologies. These are our big engineering solutions. For example, there is no comparison to, say, the way in which you can scale up the solar industry. This is something that is very capital equipment intensive. I would say, look at the £2 million deployed with the MRDF over the last five or six years. If we can get £20 million deployed in the next few years that would be a tenfold increase in that particular funding stream.

Q192 Dr Lee: Specifically, why are we so religiously adhering to the 25% state aid cap?

Trevor Raggatt: It is something we are looking into at the moment. The fund will come under the research and development guidelines and the innovation phase, which array deployment occupies, is very close to market. We see this as being the last step before moving on to commercial scale and deployment and commercialisation. Because it is very close to market. the state aid rules require a lower aid intensity rate. Within the guidelines that is set at 25% for that type of innovation.

Q193 Dr Lee: That is for the EU?

Trevor Raggatt: For the EU. However, we have become aware of a recent scheme that was approved for Sweden for a 10 MW array.

Q194 Dr Lee: Yes. That is what I was going to go on to. It is more like 40%

Trevor Raggatt: It looks like that, yes, around about 40%. So we are looking to see if we can get sight of that approval to see what argumentation was put in place to allow that higher rate of aid intensity.

Q195 Dr Lee: The quote that I have here is: "It is compatible with the EU framework for state aid for research development innovation. It will currently bring immature green energy technology closer to the market without unduly distorting competition. In view of the limited expected market share of the aid beneficiary, the presence of several competing European projects and the expected growth of the markets concerned".

Trevor Raggatt: Yes. It is something that we were looking at very interestedly, because the way that the Commission approves state aid is very much based on precedent, and the fact they have set this precedent in the case of the Swedish scheme potentially allows us more flexibility. However, the way the DG Competition assess state aid is a very complex process.

We will also be looking to ask the Commission to allow us to not only give the MEAD fund, the £20 million fund, but also allow the enhanced level of ROC for the electricity generated out of the devices, alongside that grant funding. It may be that in Sweden there is no equivalent feed-in tariff or support system. It is something we are certainly going to explore with the Commission now that we have seen they have been comfortable in approving that sort of grant fund level, but a lot of the devil will be in the detail and it will be dealt with in the discussions over the coming few months.

Q196 Dr Lee: Is the feed-in tariff for marine after 2017 under discussion?

Greg Barker: It is not just under discussion, but it has been actively proposed under the Electricity Market Reform Proposals. We see a feed-in tariff in the form of a contract for difference as being something that could be transformational in terms of pulling through marine technology. The challenge is to have them in a position to be able to take advantage of that sort of financial incentive, because obviously they would only be paid for the electricity they are able to produce and guaranteed a price for it under the contract for difference. They need to be in a position to be able to produce it.

Q197 Dr Whitehead: In terms of the Marine Renewables Deployment Fund and its not great deployment, do you think there is a comparison to be made with what you have mentioned-the more or less standing start we have as far as marine renewable deployment is concerned-in terms of future projections? What happened in that period as far as the difference between marine renewables development, which had limited funding but was substantially deployed, and the Marine Renewables Deployment Fund, which was not used because the industry was not at the deployment phase point? Do you think your projections are accurate there?

Greg Barker: Dr Whitehead, you have accurately identified that part of the problem is that the vaulting ambition for the sector has in some way got in the way of actual progress, by underestimating the practical difficulties of getting from the standing start. We all want to leap ahead and concentrate on the broad sunlit uplands-if you can have uplands in the marine technologies-and talk about the 2020s and the 2030s, saying it is going to be a global industry, a world beater, and it is going to provide a huge degree of our electricity. All of that is true but, as politicians, we need to realise that there is a lot of work that needs to be done before we can start getting to that.

The industry shares our ambition, and what we need to do is not focus on painting the big canvas. The march from 2 MW to 100 MW is probably going to be the hardest bit of all. Once you get to 100 MW you are really then in take-off land. The 5 ROC incentive with a 30 MW project cap, in England we are unlimited in the number of projects we can have, but realistically we are not going to be inundated with projects. It is really tough to get this complex engineered equipment into the sea and get it working at scale. We have all sorts of interesting things but the difference between interesting proposition and deployment on that sort of scale is immense, and it is in the foothills that the battle is going to be won.

Trevor Raggatt: It is also worth remembering that the technology landscape now is fundamentally different from where we were back in 2004, 2005 when the MRDF was first being created. We have already said that in hindsight we realise the projections of the industry on how fast it would progress were rather overoptimistic, to say the least. Back in 2004, 2005 there were no megawatt scale devices being demonstrated. I think the first Pelamis was sort of being rolled out. Since 2009 SeaGen went in-the first megawatt scale tidal turbine in Strangford Lough-then in the last couple of years the Marine Renewables Proving Fund has brought along six devices, across both wave and tidal, with the last two due to go in at EMEC in the early part of next year. So we are now in a position within the sector where we see real credible megawatt scale technologies going into the water, which gives us a good launch pad for array deployment over the next few years.

In terms of the analysis that went into the creation of the fund, again we had much more access to real data. In the Finance Working Group of the Marine Energy Programme, I have to pay real credit to the sector and the way they co-operated with us in providing us with the evidence base on which we could do some really credible planning. We were given access to commercially confidential deployment plans that different technology developers and utilities and project developers have, to give us a really good view of the rollout that they see for the technology over the next five or 10 years. That gives us a lot more confidence now that the spending that we have allocated within the MEAD fund, which is allocated towards the second two years of the current Spending Review, matches where the most credible project development is going to be. We are, I hope, quietly confident but still keeping a close eye on making sure that the sector moves forward.

Duarte Figueira: To add to that, I think we are also in a different place in terms of the infrastructure we have in place to help deliver that. You visited EMEC, I understand, but we also have Wave Hub, as well as the Narec facilities, which provide drive train and testing facilities. We have a position where the industry can develop through an infrastructure that is in place, plus through the chairmanship of the Minister, we have the Marine Energy Programme Board, which brings together all the various parties in a way that is much more consistent and much more co-ordinated.

Greg Barker: I would not underestimate the extent to which we now have a very aggressive industrial policy. In the past, Ministers’ policy priorities have been elsewhere. They have been quite generous with the potential funding under the previous Government, but it has been very much a matter of, "Here is some money, go away and get on with it. Let us know how you get on." We do not have the luxury of unlimited funding now, but what we do have is a much greater commitment to bringing all the different pieces on the chessboard together in a much more coherent way. The creation of the Marine Energy Programme Board brings together all the stakeholders in one place, so there is a much greater sense of co-ownership of policy. They have managed to create marine energy parks that will bring clustering and a focus of economic development, the industrial potential, the training, the skills, and economic innovation opportunities all together in one physical place, on a hub and spoke basis. This is crystallising the opportunities. We have to do more with less in this current environment, is the honest answer. We have to make our budgets work, but I think just bringing that additional focus and having an ambitious industrial policy that is hands-on, really is paying dividends.

Q198 Christopher Pincher: I am clear on what you want to achieve with the Marine Energy Programme Board, but I am not still clear about the total amount of public money that is available to be spent. You and your officials have described how the LCIF funding order was arrived at-the £20 million-and you have mentioned the £18 million coming from the Scottish Executive. I think you also said you are waiting on £21 million. What is the total amount of public money available to support these initiatives?

Greg Barker: As you said, Mr Pincher, there is £20 million from DECC under the auspices of the Low Carbon Innovation Group, £21 million from the Energy Technologies Institute, £18 million now from the Scottish Government, and we are waiting for confirmation on the Technology Strategy Board’s piece. Then, the most important thing is the pull through you will get in terms of mobilising private sector finance that will come as a result of the 5 ROCs that are being offered up to a 30 MW cap. That piece of funding has the potential to offer the greatest leverage from private sector finance. On top of that, we also have the potential for the EU funding. I cannot give you a precise figure because we are still waiting confirmation of those numbers.

Q199 Christopher Pincher: It is north of £59 million, plus private sector investment, is it not?

Greg Barker: Absolutely. I do not have the figure off the top of my head. There must be a value attached to the 5 ROCs proposition, which would be hundreds of millions, if not more than that, over the lifetime of the programme.

Duarte Figueira: We made an assessment when we did the calculation for the 5 ROCs. We did not just rely on the modelling that was done for us by Arup and by Pöyry, but used the industry, as Trevor said, to help us provide a realistic deployment pipeline that would come through, which formed the underpinning for the 5 ROCs consultation. Over the period of the lifetime of the ROCs, that was 160 MW, that came to £1.5 billion.

Greg Barker: That is a £1.5 billion pot that is available just for starters for the industry and it could be significantly more than that, so that is quite a carrot.

Q200 Christopher Pincher: We will talk about ROCs some more in a moment, but quite a lot of money is available. What was the industry’s response? When the MRDF was scrapped, I think there was rather a damp response. What are you doing to engage and energise the industry? What do you propose?

Greg Barker: I think in your earlier hearing, Amaan Lafayette from E.ON told you that a lot is being done in Government. I have to say they are absolutely right. Overall, the response from industry, particularly articulated through the Programme Board as I have said, has been very positive. The response to the 5 ROC announcement was very positive indeed. This has been a long-time ask from industry.

Q201 Christopher Pincher: Can we just talk a little bit about the European dimension? I know you have touched on this already, but there are pots of money available in Europe. There is the NER300 fund, but I think there are 12 UK applications to the fund, four of which are for wave and tidal renewable projects. There is also the FP7, offering €50 billion worth-it is currently denominated in euros-of potential funding. What sort of support is the Government giving to industry to access those funding streams?

Greg Barker: You are absolutely right, Mr Pincher, there is a lot of money potentially available within the EU. DECC has been leading a lobbying effort with the European Commission that has secured support for the Ocean Energy Technology Demonstration under the EU’s Framework Programme 7, energy work programme for 2012, and we expect it to continue into the 2013 work programme. We are lobbying the Commission with the sector and other member states for marine energy to be included in the EU’s strategic energy technology plan-the SET plan, as it is known-which could open doors to new funding. Also, alongside the EU Ocean Energy Association, with some of our potential key European partners in this area, like Denmark, France, Portugal, Ireland, Spain, we launched the EU Position Paper on Marine Energy at last month’s Energy Council Meeting. The paper underlined the importance of marine energy to the EU as a whole, and it was a statement of our collective willingness to work together as a strategic partnership to build a European marine energy industry with an emphasis on jobs for growth. In addition to that EU work, which we are very much leading, there are other policy initiatives, such as the marine energy work stream that is coming out of the British/Irish Council to promote support for EU marine energy.

The actual sums are difficult to quantify at the moment, but we are putting a lot of effort into trying to get the same attention focus and support at the EU level for this sector as there has been for others.

Q202 Christopher Pincher: The European Investment Bank will be making its grants, I think at the end of this year-on 31 December. How likely is it that our four applications will be successful?

Trevor Raggatt: In terms of the NER300?

Christopher Pincher: Yes.

Trevor Raggatt: The process is actually that the EIB are doing due diligence for the European Commission, and we understand the latest from the Commission is that the EIB is due to report to them sometime around February next year. That will produce a ranked list of all member state projects in terms of their value for money. Member states will then be asked to comment on which of their own projects they would support going forward to the final stage of consideration by the European Union, and then the successful applicants will be announced towards the end of 2012.

Q203 Christopher Pincher: I see. So we have seven CCS projects, four for wave and tidal, and one for offshore wind. If you had to prioritise them what would you prioritise?

Trevor Raggatt: That will all be dependent on which come up within the ranking, but also on the overall value for money that they return to the UK. Under the process the UK should be guaranteed one project, and up to three. If there is only one project, there will be a hard decision to be made on the return that the projects make to the UK, but we are hopeful that if we can we would benefit from both marine and also CCS under the NER300, but it will depend on what comes out of the Commission’s due diligence and scrutiny.

Q204 Christopher Pincher: You can be certain we are backing this, and I am batting very hard for all marine. Do you envisage the Green Investment Bank lending to marine renewable projects, or do you have a different set of priorities for any investment the GIB might make into renewable technology?

Greg Barker: No, I think the GIB could be an important supporter of the sector as the sector begins to mature. It is not one of the key priorities for the Green Investment Bank, as stated, but in terms of the amounts of money that realistically we would be thinking of attracting, it would be entirely sensible and feasible for the GIB to allocate part of the 20% of its portfolio that can be used outside the priority sectors that have been given by the Secretary of State for BIS. I would expect that to be the case. Obviously it is up to the bank to make individual investment decisions and for the board to allocate those, but it is early days. The bank will not be in the business of giving grants or subsidy; it is more likely to be in the business of leading the market proposition, so stepping in at the point where it is coming to market, but where it needs to accelerate and scale up investment ahead of where the market would be at a given time.

Q205 Christopher Pincher: Does that not advantage wind over marine technologies? It affects the change more.

Greg Barker: It does not advantage. The fact of the matter is that wind is at a much later stage of development-much further along the deployment curve. Costs are much lower and have come down, so it is a totally different proposition. In the near term, particularly in the current decade, wind is going to see a much greater level of commercial deployment and will take a very substantial chunk of the burden of helping us meet our renewable targets by 2020. That is not our expectation of marine at this stage of its development. It is really into the 2020s that marine comes into its own.

Q206 Christopher Pincher: Is it not the case that the cost has come down partly because of the subsidy? The GIB should therefore not look at marine renewables as somehow more costly, because wind has a state cost associated with it anyway.

Greg Barker: Absolutely, but they are not in the same position so I would not expect the Green Investment Bank to look at wind and marine as an either/or situation. They are at totally different stages of their industrial development. It is entirely feasible, given that we are establishing in the Green Investment Bank a permanent financial institution, to envisage a big draw on the Green Investment Bank to support the deployment of offshore wind, particularly in the current decade; but as you get into the 2020s, the pull from the offshore wind, which will start to mature, will be significantly less. It is at exactly that point that the marine industry will be scaling up, so timing-wise it works rather well. There is a certain degree of impatience in that everyone is expecting the Green Investment Bank to do everything immediately, rather than seeing it in the context of a permanent institution that is going to be a constant part of the renewables landscape in perpetuity.

Q207 Christopher Pincher: When do you expect the GIB to be able to fund marine renewable projects? In 2015? 2016? After that?

Greg Barker: I do not have a formal view on that, but I think the large-scale opportunities will be later in this decade at least. There will not be a large commercial proposition for them to scale until we have deployed the first arrays, so we have to get the projects that are in the pipeline up and running first. I do not rule out at all some focused, targeted early support, but to be comparable to what we anticipate for the offshore wind industry, where it may be supporting bond issues, for example-bond issues that are going to be multi-hundred-million pound offers into the market, and the Green Investment Bank could be coming in to take a strategic slice of that-we are not really going to be in that scale of development for quite some time. However, we fully intend to get there.

Q208 Albert Owen: You mentioned ROCs a couple of times to other colleagues here, and it was very much welcome. When we were up in Orkney, we spoke to developers and members of the industry and certainly they were pushing for it. We had only been back a week and you announced that it was going ahead, so perhaps we had some influence in that role but we will not take the credit. There is no proposed cap on the number of projects. Why not?

Greg Barker: We have been realistic about the likely number of projects coming through, and if we achieve all of those we will be doing well. I would like to achieve more than that, but that has not been the nature of the industry. As I said, this is a very engineering, capital-intensive industry that cannot just spring up by importing kit.

Q209 Albert Owen: But you put a cap on at 30 MW. Why did you decide to do that as opposed to capping the number of projects?

Greg Barker: Because what we want to see is the maximum use across a range of technologies; we do not want to see just one technology deploying at scale. We looked at this, and if we had thought there was a dangerous likelihood of a runaway train in marine, in the way that we have seen in the last three months in solar, then we would have considered that. I do not think we need to, and there is no need to put a cap on when it is not necessary and to take an arbitrary figure.

Q210 Albert Owen: You have got one cap.

Greg Barker: We have a cap on the project-30 MW.

Albert Owen: Exactly.

Greg Barker: That has broad support from the industry. We discussed this with the Marine Energy Programme Board, and they were also very much of the view-not unanimously, but certainly it was a strong view-that they wanted to see a range of technologies competing for funding. As you can imagine, we spoke at length with the Treasury about this and, given the fairly good sight that we have of the project pipeline, we did not feel that a cap was necessary.

Q211 Albert Owen: One thing the industry has talked about to raise confidence is continuity. They are not sure what the level of support is going to be post-2017. Why 2017? You said it is underdeveloped, and we are not sure how it will develop. Are you confident in your analogy about the uplands? Are you certain that by 2017 the industry, in your opinion, will be mature enough to stand on its own two feet? Is it going to go the Green Investment Bank? Are there other forms? Why 2017?

Greg Barker: No. That is when the ROC programme extends to. We expect that by 2017 new projects coming on stream will be funded by the contract for difference feed-in tariff.

Q212 Albert Owen: Will that be equally as attractive as 5 ROCs?

Greg Barker: I hope it will not need to be. I hope the industry’s costs will have started to come down by then. Obviously 5 ROCs is not a long-term sustainable proposition. It is a big push to get the industry going and to encourage costs to come down, so if we were still having to offer 5 ROCs in 2017, that would not be a huge sign of success.

Q213 Albert Owen: But you do not know.

Greg Barker: We do not know.

Q214 Albert Owen: The industry does not know.

Greg Barker: No.

Q215 Albert Owen: But it wants to know.

Greg Barker: We would all like to know, but we do not have-

Q216 Albert Owen: No, hang on, I asked the question: what is the likely support going to be in 2017, and you said the contract for difference. What does that mean in cash terms?

Greg Barker: We do not know. What are the likely costs? Can you tell me what the costs are in 2017?

Q217 Albert Owen: No, I am not the Minister and I do not make these policies.

Greg Barker: No, but I do not know. We can only offer support-

Q218 Albert Owen: You are critical of the previous Government for not knowing and for going blindly into this thing, but you say yourself you do not know because it is under development, and I accept that. But the industry wants to know, because it is slow developing, what kind of arrangements are going to be made available post-2017. I think that is fair under any road map.

Greg Barker: They will know well before 2017. The fact of the matter is we are-

Q219 Albert Owen: Can you say roughly when? "Before 2017" is not really a considered answer.

Greg Barker: I mean significantly before-2013-14.

Q220 Albert Owen: In 2013-14, there will be a review of ROCs? Or will that be the next phase?

Greg Barker: No, ROCs will be coming to an end in 2017. Next year, we will legislate for the most profound reform of the electricity markets since privatisation with our electricity market reform programme, and that will be contained in the Energy Bill. We are going through a process of consultation, and we have published a White Paper. There is a lot more to it than just marine; that is one of the pieces on the board. The industry as a whole-not just marine-want certainty, and any change creates a hiatus, but we believe that getting on to a higher trajectory of ambition and on to a more effective funding mechanism and support system for the industry will be worth that hiatus, which is unavoidable at the stage when you migrate from one system to another. By 2013-14, the industry will have absolute certainty about what the forward long-term funding arrangements will be-well before we come to the end of the ROC regime. We are not in a position now, in 2011, to say either what the costs will be or what the funding will be.

Q221 Albert Owen: So you are confident that by 2013-14 the industry will be aware of the rates of return?

Greg Barker: Yes, that is right.

Q222 Albert Owen: That is the answer I am looking for. You do not expect a massive rush for ROCs in 2017 because the other scheme you indicated was not attractive?

Greg Barker: Correct.

Duarte Figueira: Of course what we have done, by creating a transition process, is enabled the industry to make a one-off choice between feed-in tariffs and the ROCs up to 2017, so the industry will have the security of the ROC regime until 2017.

Q223 Albert Owen: Many people in solar thought that as well.

Greg Barker: No, they were not being offered the choice.

Q224 Albert Owen: The industry said that next year there would have been a review; they were expecting that to happen.

Greg Barker: No. They were not expecting to have a choice between funding mechanisms. What my colleague was saying is that there will be a window under which marine developers will have a choice whether to take ROCs for the lifetime of their scheme or whether to go with the contract for difference, and there will be a phased-in approach, so it is a double-

Q225 Dr Whitehead: After 2017 or up to 2017?

Greg Barker: Up to 2017. I guess from 2014 to 2017 there will be a window when you have both schemes available as we are in transition.

Q226 Dr Whitehead: CFD will phase in, what, 2015?

Greg Barker: 2014.

Q227 Dr Whitehead: Okay, but we will only know about it in 2013.

Greg Barker: We know the perils of setting rates of return for technologies. Eighteen months in advance, as witnessed by the solar FIT, to try and anticipate what the cost base would be and then accurately set the correct rate of tariff this far out would just be impossible.

Q228 Albert Owen: Sorry, the difference with FITs is this is long-term development-we all acknowledge that-and they want some certainty. You have said that in 2013-2014 they would have the new rates and they will have a choice of whether to stay with ROCs in 2017.

Greg Barker: You can only set the rate when you know the costs, and we do not.

Albert Owen: I will leave it at that.

Q229 Sir Robert Smith: You will only know the cost when you have a fair idea of roughly what the ballpark is of the costs?

Greg Barker: Yes. The reason we are bringing in contract for difference is to deliver that transparency, certainty and longevity that the industry needs, and that is what the hallmark of our policy process is to deliver with greater certainty to industry.

Q230 Ian Lavery: One of the major barriers to development of wave and tidal energy is new grid connections and obviously the lack of grid connections. It is a particular problem for smaller generators-the requirement to underwrite the cost of the new connections is extremely problematic. Will the Government, now or in the future, consider providing some sort of support in this area, possibly by taking on some risk in the construction of new grid connections?

Greg Barker: Certainly, Mr Lavery, I agree that this is a big issue and it is one that we take very seriously. We think the policies are in place now to ensure grid connections are delivered on time, and under the new enduring connect and manage regime, five tidal projects have already had their connection dates brought forward by an average of six years. As for marine energy being given sufficient priority in the grid build out, it is obviously for network transmission owners to propose the scale, location and timing of new network investment, based on information such as each individual project’s timescale. The vast majority of marine generation projects planned so far would connect to the Scottish Hydro Electric Transmission network in northern Scotland, which has submitted publicly available plans to Ofgem for network development 2013-2021, which include the network potentially required to accommodate marine energy.

Q231 Ian Lavery: Ofgem is currently reviewing the charging system as part of the Project TransmiT. It is critical that Ofgem give specific focus and consideration to the long-term climate targets and potential for economic opportunities, and that they work on grid connections, as I have just mentioned, and charges. Are you confident that this will be the case?

Greg Barker: Obviously there is Project TransmiT, Ofgem’s independent review of transmission charging, which takes in a greater work stream.

Duarte Figueira: Just in terms of transmission charging, obviously Project TransmiT is due to report quite shortly. They will be looking at whether carrying out this independent review of transmission charging will be suitable for delivering not just the renewable energy but all the low carbon energy that is required, as well as preserving security of supply. What we need to do now is to await the outcome of Project TransmiT, as well as the outcome of the work Ofgem are doing on grid liabilities and user commitments. We must wait to see what comes out of it in terms of providing renewable projects with the transmission charging regime and a grid liability regime that they think is appropriate. It is then, after the regulatory process has wound its way, for Government to have a look at that. Both these exercises are nearing completion, and in both cases we need to see the outcome before we take the matter forward.

Q232 Ian Lavery: Can you give an update on the work of the Electricity Network Strategy Group’s vision for the future, in particular when the report will be published and to what extent wave and tidal energy might feature in the report itself?

Duarte Figueira: For those Members who are perhaps not as familiar with it, the ENSG process was carried out originally in 2009 and brought together all the various parties that were involved in electricity transmission planning; it also took in the transmission operators, to give an analysis of what would be the requirements of the grid for 2020, not just in terms of onshore but also reinforcing the onshore grid for offshore transmission coming ashore. That work is being renewed at the moment-being carried out again. The members of that group, which is chaired by DECC and Ofgem, include the transmission operators, which will give an assessment of what they think needs to be done to the transmission system to reinforce it, to make sure that the renewable energy can connect to the main centres of population.

As a result of that, a lot of the information that will be looked at by the ENSG2 process will be the same information that the transmission companies are providing to Ofgem for the next regulatory review. What we will see is a single picture through ENSG2, which is due to come out early next year, which will provide a picture of what reinforcement of the transmission network needs to happen. That is in train and it is due to report early next year. It is a joint DECC/Ofgem project and it will give a picture of what is required for all technologies.

In the case of marine, as has already been said, a lot of the connections in the next few years will be done under the SHETL transmission operator in northern Scotland. A lot of those are already in the plans that have been submitted to Ofgem. They include various options on how to connect other marine projects that are being developed in Scotland in particular. All that has been taken into account in the process that is going on at the moment.

Q233 Chair: In the past, the NAO criticised DECC for not monitoring all the renewables, including funding provided by other Departments and devolved Administrations. You actually provided this information in your written evidence to us. Does that mean you are now collecting it on a regular basis and monitoring it?

Trevor Raggatt: Monitoring and appraisal is written into all of DECC’s funding plans at a basic level. I referred to the Innovation Programme Board earlier. When they approve projects and schemes to go forward it is necessary to prepare a number of business cases, and part of that business case includes a formal monitoring plan. So all of the processes that we have in place will be monitored using the various Treasury guidance on that, and that will feed back into the understanding of how those have operated both from an ongoing but also at the end of the schemes.

Q234 Chair: Does that process mean you have eliminated risk of overlap between different funding sources doing things that are duplicating?

Trevor Raggatt: I wouldn’t say "eliminated", but again, this is very closely related to the work that the Low Carbon Innovation Co-ordination Group is doing. One of the focuses of that group, across all technologies, is to ensure that where there are different funding streams operating in similar policy or technology areas, that those are complimentary rather than competitive. I think a good example of that is DECC’s Marine Renewables Proving Fund, which was launched in 2009, again to push prototype development through to a point where array deployment could begin.

Alongside that, about six months after the Proving Fund was launched, the Technology Strategy Board launched a couple of calls for research into marine energy. They specifically designed those to be complimentary to the Proving Fund, so that the work that was going on under the Proving Fund could effectively act as a foundation or a test bed for the further work aimed at cost reduction through technology development and through operations, and so forth, under the TSB. So that would sit completely alongside the work of the Proving Fund but not overlap. I think the work that the Low Carbon Innovation Co-ordination Group is doing has been very helpful in ensuring that we don’t have overlaps but we have complementary things working alongside of each other.

Q235 Chair: In relation to the Scottish Government, when you are announcing support for schemes and they are announcing it, do you have specific discussion in advance before that takes place?

Trevor Raggatt: It is difficult to give a clear answer to that because under the devolution settlement the Scottish Government has its own powers and it also has its own political imperatives. What I would say is that officials work very closely together and are in close discussions about all the sorts of options that may be being kicked around, or may be being worked up at any point in time. We do try to link very closely what we are doing and again ensure it is complementary. I think a good example of that is that the Scottish Government announced their £18 million fund and they also asked us to co-operate in the design of that fund, in the way they had been co-operating through the Programme Board on the design of our £20 million fund. It is a different situation and not one that I as a civil servant can comment on in terms of how the political imperatives work with each other, but at an official level we certainly try to ensure everything is as joined up as possible.

Q236 Chair: In relation to the £20 million low carbon innovation funding, how are you going to measure success?

Trevor Raggatt: Spending to profile, particularly given the lessons learned from the MRDF, will be one. It should be pointed out that this is ultimately a late stage innovation programme, so it falls within R&D, and there are uncertainties and technology risks amongst any of these sorts of projects. I think there will be a range of measures as we go forward-simple procedural ones, like meeting project milestones and spending to planned budget schedules as we go on, which will allow us to ensure that things stay on track; as well as meeting the overall objectives of the scheme-getting arrays deployed, which then operate and act as a stepping stone for further commercial deployment. Then, in the longer term, we will be looking back at how successful in hindsight the scheme was, and how quickly the commercialisation and the early commercial deployment of the sector are accelerated. Monitoring and appraisal is an ongoing and a long term process, so there will be a number of measures that are very short term, procedural and ongoing, but there will also be a number of measures such as getting the devices in the water and then the knock-on effects on a much longer term basis.

Chair: We have more or less come to the end our time. Thank you very much indeed for coming in again. We look forward to seeing you again before long.