House of Lords - Economic Affairs

The Economics of Renewable Energy - Economic Affairs Committee Contents

Memorandum by Research Councils UK (RCUK)

EXECUTIVE SUMMARY

The Research Councils support a full spectrum of energy research and postgraduate training and seek to expand UK university and institute research capacity in energy related areas. The Research Councils' Energy Programme builds on a substantive portfolio of activities bringing together researchers from many disciplines to tackle the research challenges involved in developing and exploiting energy technologies and understanding their environmental, economic and social impact.

Research supported includes areas of direct relevance to the economics of renewable energy (eg improving energy yield from second-generation biofuel crops) through to underpinning support that has an impact on the economics of renewables (eg development of technologies, siting of facilities, environmental impacts, economic models, social aspects).

The provision of skills is key to the continued economic viability of the renewables sector. Funding from the Research Councils maintains and develops the skills base in renewable energy through a combination of both responsive and strategic approaches across all of the main renewable energy themes. The Research Councils all support studentships in renewable energy and the number of students has increased markedly since 2004, in particular through Towards a Sustainable Energy Economy (TSEC) and the Sustainable Power Generation and Supply (SUPERGEN) consortia.

The Research Councils recognise the importance of strong partnerships and engagement with research users such as industry and government in order to meet their needs and increase knowledge transfer and economic impact. The business focus that industry partners bring includes the long-term economic viability of renewable energy in the UK. The Research Councils' Energy Programme is also one of the funders of the Energy Technologies Institute, a public-private partnership working to accelerate the development and commercial deployment of a focused portfolio of energy technologies.

RCUK INTRODUCTION

1. Research Councils UK (RCUK) is a strategic partnership set up to champion the research supported by the seven UK Research Councils. Through RCUK the Research Councils are working together to create a common framework for research, training and knowledge transfer. Further details are available at www.rcuk.ac.uk

2. This evidence is submitted by Research Councils UK on behalf of all the Research Councils and represents their independent views. It does not include or necessarily reflect the views of the Department for Innovation, Universities and Skills (DIUS). The submission is made on behalf of the following Councils:

— Biotechnology and Biological Sciences Research Council (BBSRC).

— Economic and Social Research Council (ESRC).

— Engineering and Physical Sciences Research Council (EPSRC).

— Natural Environment Research Council (NERC).

— Science and Technology Facilities Council (STFC).

RESPONSE TO THE INQUIRY

3. Our response to the inquiry comes in two parts:

— Summary of Underpinning Activities. Whilst not specifically addressing the economics of renewable energy, the wealth of underpinning activities supported by the Research Councils will have a direct impact on the economics. A summary of these activities has been included as a separate section to avoid repetition when responding to the specific questions.

— Responses to Specific Questions. Here we have identified activities supported by the Research Councils' Energy programme that are relevant to a specific question. The individual research groups we have identified may be able to provide a fuller response to some of the questions outlined in the inquiry.

SUMMARY OF UNDERPINNING ACTIVITIES

4. The principal Research Councils supporting energy research are BBSRC, EPSRC, ESRC, NERC and STFC. The Councils have a joint Energy Programme[118], coordinated by EPSRC. The Programme's vision for energy research is to position the UK to successfully develop and exploit sustainable, low-carbon and/or energy-efficient technologies and systems to enable it to meet the Government's medium and long-term energy and environmental targets.

5. Expenditure on energy research by the Research Councils has increased substantially in recent years, from about £40 million in 2004-05 to approximately £77 million in 2007-08. Within this, Research Council spend on renewable energy research has increased from £8.3 million in 2000-01 to £13 million in 2004-05 and £30 million in 2007-08 (Table 1).

Table 1

SUMMARY BY FINANCIAL YEAR OF THE RESEARCH COUNCILS EXPENDITURE (IN £,000S) ON RENEWABLE ENERGY ACTIVITIES


	2000-01	2001-02	2002-03	2003-04	2004-05	2005-06	2006-07	2007-08

Wind	£260	£330	£490	£481	£242	£125	£1,140	£767
Solar	£4,125	£4,666	£3,927	£3,834	£4,179	£4,065	£3,685	£6,572
Fuel cells & Hydrogen	£981	£1,463	£1,984	£2,687	£2,393	£2,705	£3,074	£6,183
Wave & tidal	£300	£605	£616	£830	£995	£1,026	£1,080	£1,015
Bioenergy	£622	£752	£927	£1,177	£1,249	£2,023	£2,646	£6,579
Geothermal	£40	£64	£63	£73	£79	£106	£124	£347
Storage	£837	£888	£809	£730	£466	£789	£1,193	£1,713
Networks	£919	£1,114	£1,388	£1,804	£2,390	£3,666	£4,037	£3,336
Other renewable	£267	£432	£587	£453	£1,220	£1,315	£2,380	£3,500
Total	£8,354	£10,314	£10,791	£12,069	£13,213	£15,820	£19,359	£30,012

6. The Research Councils' main funding mechanism for renewable energy research is through the directed activities of each Council which include, for example, the Sustainable Power Generation and Supply (SUPERGEN)[119] Programme, the Towards a Sustainable Energy Economy (TSEC)[120] Programme and through the Research Councils Institutes.

7. SUPERGEN is a multidisciplinary initiative led by EPSRC involving BBSRC, ESRC and NERC and with funding from the Carbon Trust. The initiative builds critical mass in energy research to help the UK meet its greenhouse gas emissions targets through a radical improvement in the sustainability of power generation and supply. Researchers work in consortia, multidisciplinary partnerships between industry and universities, focused on major programmes of work.

8. TSEC (funded by BBSRC, ESRC, EPSRC and NERC) adopts a multidisciplinary, whole-systems approach to energy research and is a broad-based programme that aims to enable the UK to access a secure, safe, diverse and reliable energy supply at competitive prices, while meeting the challenge of global warming.

9. The UK Energy Research Centre (UKERC) (funded by ESRC, EPSRC and NERC, and coordinated by NERC) is a key component of the Research Councils' directed activities and was established as part of TSEC. UKERC's mission is to be the UK's pre-eminent centre of research, and source of authoritative information and leadership, on whole system energy research including renewable energy[121]. UKERC seeks to bring together government, industry and the research community; be a networking centre to co-ordinate UK research, facilitate industry collaboration and promote UK participation in international projects; be a centre of excellence in research and training and help maximise returns from research investment. UKERC is making a separate submission to this inquiry.

10. Additionally a substantial portfolio of renewable energy research is also supported through the Councils' responsive mode activities, which proposals to be submitted in any research area within or across the individual Councils' remits. All applications, whether responsive or under directed programmes, are peer reviewed and judged on the basis of scientific excellence.

11. The Councils maintain a balanced portfolio of studentships across the main renewable energy themes and strategically intervene where appropriate. For example, increased numbers of project studentships have been encouraged in the SUPERGEN and TSEC programmes, including multidisciplinary studentships within UKERC. Research Councils also fund PhD studentships in the renewable energy area through responsive routes.

12. The Councils recognise that strong partnerships and engagement with research users and stakeholders including government is needed to facilitate knowledge transfer and economic impact. The business focus that industry partners bring includes the long-term economic viability of renewable energy in the UK. Within the Energy Programme, and specifically the engineering and physical sciences portfolio on renewables, 45% of projects involve collaboration with industry, resulting in £12.7 million of direct and indirect support to UK universities over the lifetime of the projects.

13. The Research Councils are working closely with the Technology Strategy Board (TSB) and the Energy Technologies Institute (ETI) to ensure the effective translation of knowledge into innovation and new and improved products and services. EPSRC is one of the public funders of the ETI[122], a 50-50 public-private partnership established in December 2007 aiming to accelerate the development and exploitation of new energy technologies. ETI is making a separate submission to this inquiry.

RESPONSES TO SPECIFIC QUESTIONS

1. How do and should renewables fit into Britain's overall energy policy? How does the UK's policy compare with the United States, Australia, Canada, and other EU countries?

14. The main driver for the Research Councils' Energy Programme is to support a full spectrum of energy research to help the UK meet the goals set out in the 2003 Energy White Paper. Research related to renewable energy is one of the key priorities for the programme.

15. ESRC has commissioned comparative research at City University into the use of renewables demonstrations and trials in North America, Europe and Japan, to examine their effectiveness in terms of accelerating innovation, and the impact of external policy factors.

16. Complete assessment of the economic benefits of renewables has to be made in terms of changes to traditional generating costs and impacts. This assessment must take into account environmental impacts and capacity. For example, NERC's Centre for Ecology and Hydrology (CEH) is involved in monitoring the atmospheric deposition of sulphur and nitrogen from existing power generation and use[123] and the movement of radioisotopes released through normal nuclear power production[124], and data from the latest Countryside Survey will be used to update estimates for capacity for biofuel crops.[125]

17. The fit of renewables into Britain's energy policy is being modelled by UKERC in its UKERC Energy 2050 model[126]. The model investigates the interplay between different energy sources and parameters influencing selection (eg availability) with different scenarios being presented and interpreted for environmental impact.

2. What are the barriers to greater deployment of renewable energy? Are there technical limits to the amount of renewable energy that the UK can absorb?

18. Various activities supported by the Research Councils involve investigating technological, social, economic or environmental barriers to renewable energy deployment. Some examples are outlined below.

19. The Energy Research partnership (ERP), in which the Research Councils are represented, has undertaken a review of the innovation chain for 12 key technology areas. This highlighted gaps and barriers in the innovation chain and produced specific recommendations to overcome these.[127]

20. UKERC has produced a number of road maps[128] that attempt to identify the sequence of research (and other) problems to be overcome before new technologies can be commercially viable. For each roadmap, key forward actions are identified, relating to R&D or wider policy aspects.

21. As part of TSEC, research undertaken by Dr Karsten Neuhoff at the Electricity Policy Research Group[129] at the University of Cambridge suggests resource constraints are not an obstacle to the large-scale deployment of renewable energy technologies. Neuhoff's economic analysis does however identify barriers to the adoption of renewable energy sources resulting from market structure, competition in an uneven playing field and various non-market place barriers.

22. The Marine Energy Research Consortium[130] (SUPERGEN) led by Edinburgh University is increasing knowledge and understanding of the extraction of energy from the sea to reduce investment risk and uncertainty. This will increase confidence for future stakeholders in the development and deployment of the technology.

23. The National Oceanography Centre Southampton (NOCS) [NERC/Southampton University] conducts wave climate research in the North Atlantic and British shelf seas, and this is valuable for assessing the "available resource" for wave energy and some of the risks for all offshore installations (including wave and offshore wind). NERC's Proudman Oceanographic Laboratory (POL) conducts offshore wave modelling and near-shore wave measuring—research which could underpin the development of offshore wave power technology.

24. NERC's Research and Collaborative Centres conduct a substantial amount of research relevant to the development of tidal power schemes. Particularly notable is POL's contribution to the DTI's Renewable Energy Atlas[131]. NERC also supports ecological and biodiversity research which would be relevant to the siting of tidal barrages and CEH assessed most of UK's estuaries for the environmental impact of barrage schemes in the 1980s.

3. Are there likely to be technological advances that would make renewable energy cheaper and viable without Government support in the future? Should, and how could, policy be designed to promote such technological advances?

25. The Research Councils support research into a range of technologies that could result in cheaper renewable energy. By working closely with the TSB, the ETI, and partners in industry, the Research Councils seek to enable the rapid exploitation of these technologies, examples of which are given below:

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— A £4.2 million project at Imperial College, New and solar renewable routes to hydrogen energy, seeks to exploit low temperature natural biological and photocatalytic processes to develop alternative, and cost effective, methods for harvesting solar energy to produce renewable hydrogen fuels directly, and to explore how these could be embedded within novel, integrated energy production systems, incorporating fuel cell and hydrogen storage technology.

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26. ESRC-funded research by Professor Gordon Walker at the University of Lancaster and Professor Bob Evans at the University of Northumbria has shown that small-scale community renewable energy projects can contribute to a revitalisation of local economies and help alleviate poverty.

4. Has Government support been effective in leading to more renewable energy? What have been the most cost-effective forms of support in the UK and other countries and what should the balance be between subsidies, guaranteed prices, quotas, carbon taxes and other forms of support? Should such support favour any particular form of renewable energy over the others? For instance, what are the relative merits of feed-in tariffs versus the UK's present Renewables Obligation Certificate (ROC) regime?

27. We interpreted this question to be on subsidies related to renewable energy generation and as such have no comments to add.

5. On top of the costs of building and running the different types of electricity generators, how much investment in Britain's transmission and distribution networks will different renewable energy sources require compared to other forms of generation? Are the current transmission and distribution systems capable of managing a large share of intermittent renewable electricity generation and, if not, how should they be changed? Are the rules about how we connect capacity to the grid supportive of renewables?

28. Alternative generation methods present many specific challenges when compared to the centralised generation model currently prevalent. These include remote location of renewable resources, variable power production, and distributed generation models. The Research Councils' Energy Programme supports a range of activities focussed on the effect this will have on future transmission and distribution networks, examples of which are outlined below.

6. How do the external costs of renewable generation of electricity—such as concerns in many affected rural areas that wind farms and extra pylons spoil areas of natural beauty—compare with those of fossil fuels and nuclear power? How should these be measured and compared? Is the planning system striking the right balance between all the different considerations?

29. Attempts to externalise the complete costs of energy were made in the 1990s in projects such as ExternE[140] in which the University of Bath and NERC's CEH (then Institute of Terrestrial Ecology) participated. The study identified the importance of and difficulty in defining a valuation system for comparing electricity-generating systems. One approach examined was the use of Life Cycle Analysis (LCA). UKERC is completing a review of LCA for different generating systems (biomass for heat and power, biofuels for transport, carbon capture and storage and offshore power)[141].

30. Public acceptability is increasingly recognised by policy makers, the research community and other stakeholders as a necessary condition of reaching government energy targets. The "Beyond Nimbyism" project, supported through the TSEC "Managing Uncertainties" theme, addresses the issues of public acceptability, perception and engagement and how they affect technology development and diffusion[142]. It seeks to examine a range of technologies which are expected to figure in the UK renewable energy profile to develop a sophisticated understanding of public responses to such technologies in different contexts.

7. How do the costs of generating electricity from renewables compare to fossil fuel and nuclear generation? What are the current estimates for the costs of "greener" fossil fuel generation with carbon capture and storage and how do these costs compare to renewable generation? What impact do these various forms of electricity generation have on carbon emissions?

31. We have no comments to add for this question.

8. How do the costs and benefits of renewable electricity generation compare to renewables in the other key forms of energy consumption—transport and heating?

32. UKERC's ongoing study "Life Cycle Assessment in the Bioenergy Sector"[143] is carrying out a systematic review of LCA studies of the use of bioenergy crops for different purposes. The project has identified the components of supply chains within different studies and has extracted the values used to describe those components in approximately 150 studies (75 biofuel, 75 heat and power) to investigate the variation in parameters and attempt to explain some of the discrepancies in conclusions drawn from studies. The work will be completed and published by late summer 2008.

9. If the UK is to meet the EU target that by 2020 15% of energy consumed will come from renewables, will most of this come from greater use of renewable sources in electricity generation? If so, why? Should British support for renewables in other countries be allowed to contribute towards meeting the target for the UK?

33. We have no comments to add for this question.

10. How would changes in the cost of carbon—under the European emissions trading scheme—affect the relative costs of renewables and other sources of energy? Would a more effective carbon emissions trading scheme remove the need for special support of renewable energy?

34. We have no comments to add for this question.

11. What are the costs and benefits of the present generation of biofuels? Will there be a second generation of biofuels and, if so, what are the estimated costs? What are, or are likely to be, the carbon emission impacts of first and second generation biofuels, and what are the other relevant environmental effects?

35. Life sciences research supported by BBSRC underpins the development of new and improved bioenergy crops, and improved methods to extract usable energy from them. In March 2006 BBSRC undertook a review of Bioenergy[144] which examined the contribution that its science base could make to renewable energy and biofuels. However, establishing the economic costs and benefits of biofuels was beyond the scope of the review.

36. Bioenergy has a key role to play in the replacement of fossil fuels with renewable, low-carbon alternatives. Natural plant photosynthesis is a much more efficient process than can be derived from equivalent technologies, and at the moment we have a poor understanding of what happens once a plant captures this energy.

37. Biofuels are the only renewable source of liquid fuels for transport. Ethanol and butanol are suitable petrol substitutes for fuel and manufacturing in some situations. Present "first-generation biofuels" are derived by fermenting sugars from food crops, such as maize, sugar cane or wheat, and by using land that might otherwise be used in food production. Countries such as Brazil are investing heavily in this area to exploit their natural resources, but such production is only really viable where land and labour are cheap or on a vast scale, and has limited viability in Europe. It can also lead to damage to the environment and the exploitation of less developed regions.

38. An ESRC-funded research project at University of Essex is comparing innovation processes, challenges and obstacles for transition to a bio-economy, with a particular focus on bioethanol in Brazil, the USA and Europe.[145]

39. The current focus of UK development of biofuels is on the use of willow and Miscanthus as feedstocks for co-firing, use of oil seed rape for biodiesel production and use of various crops for bioethanol generation. Short rotation coppice willow is already being grown as an energy crop in parts of the UK but crop breeding has the potential to greatly improve yields, making it economically viable for a much wider range of growers. The SUPERGEN "Biomass and Bioenergy" consortium brings researchers and breeders into contact with growers and power providers to ensure that new crop varieties are tailored to the needs of British agriculture and the energy industry. Rothamsted Research (a BBSRC sponsored institute) is a key partner in the project.

SECOND-GENERATION

40. Biofuel technology development is still in its infancy. First-generation biofuels are derived from simple extraction of oils or fermentation of available sugars, with the remaining energy content of the plant unexploited. "Second-generation" biofuels are being developed that are derived by converting woody materials into oils, alcohols or gas, thus using the whole plant much more efficiently. However these require the application of complex biotechnology to be realised.

41. BBSRC is now committing £38 million to bring together the UK research community and expand capacity. This funding is in addition to the figures quoted in Table 1, and includes an £18 million Bioenergy initiative to focus on second-generation biofuels whilst also enhancing international interactions. The funding will expand the capacity and skills base allied to turning laboratory excellence into products and processes, and will bring the research community together as well as increase engagement with the emerging industrial base.

42. The UK has the expertise and capacity to make a significant contribution to bioenergy, particularly sustainable second-generation biofuels. This will require ongoing and increased investment in research and development to contribute to both UK and global solutions. In addition to delivering environmental benefits, the opportunity for the UK to be associated with the likely development of biofuels as a major international commodity can bring economic advantage. BBSRC's plans to develop improved links with Brazil is one example of how these aims can be progressed through international collaborations.

43. In addition to the use of biofuel crops, biorefining also offers both longer-term potential alternatives to petrochemicals (such as the use of microbes to produce liquid or gaseous fuels), and also of using plants in the production of chemical feedstocks for manufacturing, thus freeing up fossil fuels for other uses. To derive the full benefits from such research these processes need to be developed at the industrial scale.

44. The bacterium Clostridium acetobutylicum makes butanol, a replacement for petrol. Researchers including those at the University of Nottingham now have the complete genome, and are funded through the Systems Biology of Microorganisms (SysMo) programme[146] to undertake an extensive analysis of the biological processes of butanol production. This will make it easier to improve the yields of butanol on a commercial scale.

CARBON EMISSION IMPACTS AND OTHER ENVIRONMENTAL EFFECTS

45. The development of "second-generation" sources are particularly important because they do not necessarily replace food crops and can be grown on marginal land with otherwise low productivity. Further basic bioscience research is needed to develop plants which grow faster and convert carbon dioxide to biomass faster and using less fertiliser. By combining new approaches with breeding solutions, new crops research has the potential to significantly reduce carbon emissions compared to first generation biofuels such as ethanol from corn in the US. Additionally, soils research is increasingly providing an understanding of the impacts of cultivation of biofuel crops on greenhouse gas emissions, and how to minimise these.

46. The TSEC-BIOSYS Consortium[147] (BBSRC, EPSRC and NERC) coordinated by Imperial College aims to provide authoritative and independent answers on technical, economic, environmental and social issues related to the development of bioenergy in the UK. Specific issues include the potential role of bioenergy in satisfying UK energy demand, the potential contribution of bioenergy to UK Government objectives, and the economic, social and environmental implications of large-scale bioenergy development. The project will integrate research findings from the SUPERGEN Bioenergy and Distributed Generation consortia, the EPSRC-funded Sustainable Urban Environments (SUE) programme, the cross Research Council Rural Economy and Land Use (RELU) programme, DEFRA bioenergy crop networks, and Carbon Vision activities, as well as relevant information from EU and international bioenergy activities.

47. The Rural Economy and Land Use (RELU) Programme funded by BBSRC, ESRC and NERC, with additional funding from SEERAD and Defra, includes biomass research[148]. The project brings together a wide range of experts from various institutions, including BBSRC's Rothamsted Research and NERC's CEH, to study the social, economic and environmental implications of increased land use for energy crops. The aim is to provide an integrated, interdisciplinary scientific evaluation of the implications of land conversion to energy crops, focusing on short rotation coppice (SRC) willow and Miscanthus. The project has attracted additional funding from DEFRA. A second RELU project will start later this year to analyse the environmental risks and conduct cost-benefit analysis of anaerobic digestion in on-farm energy production.

48. CEH has projects underway examining the carbon, greenhouse gas and nitrogen balance of three first-generation biofuels (SRC willow, Miscanthus and wheat) in studies supported by NERC's Integrating Fund[149] and the Ecology and Hydrology Funding Initiative. The impacts and constraints from hydrology have been studied in a number of projects (including TSEC Biosys[150]).

June 2008

118 www.epsrc.ac.uk/ResearchFunding/Programmes/Energy/default.htm Back

119 www.epsrc.ac.uk/ResearchFunding/Programmes/Energy/Funding/SUPERGEN/default.htm Back

120 www.nerc.ac.uk/research/programmes/sustaineconomy/ Back

121 www.ukerc.ac.uk Back

122 www.energytechnologies.co.uk Back

123 http://www.ceh.ac.uk/sci_programmes/biogeo.html Back

124 http://www.ceh.ac.uk/sections/ecp/Radioecology.htm Back

125 Countryside Survey http://www.countrysidesurvey.org.uk/ Back

126 http://www.ukerc.ac.uk/MediaCentre/UKERCPressReleases/Releases2007/0711Energy2050.aspx Back

127 http://www.energyresearchpartnership.org.uk/files/UK%20Energy%20Innovation.pdf Back

128 http://ukerc.rl.ac.uk/ERR001.html Back