2. Overview of PIU report
PIU: £100m for Renewables
In November the Performance and Innovation Unit
published its recommendations on how to allocate the extra £100m that
Tony Blair had promised for renewables last March. It called for:
- £25m for offshore wind
- £15m to help farmers and foresters establish energy
crops
- £10m dedicated to innovative PV schemes
- £10m for PV and other technologies that can be utilised
directly on homes, businesses and community buildings.
- £10m for fundamental research on the next generation
of renewable energy technologies.
The PIU also called for: £5m for demonstration and
testing of wave and tidal technologies; £4m for advanced metering and
control technologies so that electricity grids can best harvest PV and
other small-scale technologies; and a further £18m for the development
and demonstration of advanced energy crop technologies for clean and efficient
production of heat and electricity.
Backing the proposals, the Prime Minister said: "I
am determined that we will reach our target of meeting 10% of our electricity
requirements from renewable sources by 2010. This money will help us reach
that target by encouraging the delivery of capacity on the ground. And
I also welcome the funding for solar, wave and tidal technologies, and
on blue skies research, which have such a vital role to play in helping
us meet our medium and long term renewable energy needs".
According to the Cabinet Office, ‘the
PIU team has made detailed spending recommendations in order to maximise
the gains from the extra money and where possible, funds will be injected
into existing schemes to minimise additional complexity and bureaucracy,
getting money directly and quickly to businesses and the community’.
On the £25m for offshore wind, it noted that
‘the UK has huge offshore resources
and wind energy is now poised for the move offshore. But the 'first movers'
will need carefully targeted support to take them through the challenging
early stages’.
On the £20m allocated for solar, and ‘other
technologies that can be utilised directly on homes and businesses’,
it noted that ‘£10 m will go to increased
support for innovative PV installations and £10m to support solar, biomass
heat and other renewable community projects’.
The £15.5m to help farmers and foresters establish energy crops, will
it says ‘help develop heat and electricity
markets and build up the necessary infrastructure for energy crops and
forest wood fuel’. In parallel, there
was £18m for development and demonstration of advanced energy crop technologies
for the production of heat and electricity, e.g. CHP.
The £5m for demonstration and testing of wave
and tidal technologies, was for an area ‘where
UK research leads the world, but where more experience is needed of full-scale
projects in the open seas’. And looking
further ahead, there was ‘£10 million for fundamental research
on the next generation of renewable technologies, and for associated technologies
such as energy storage’, plus £4 million ‘for
advanced metering and control technologies so that electricity grids can
best harvest PV and other small-scale technologies’.
Finally there would be £2.5 million ‘to
provide information and support to planners and local decision-makers,
and land use planning purposes generally’.
Not bad, as far as it goes. We summarise some of the
key recommendations in the next four sub sections.
For more details see www.cabinet-office.gov.uk/innovation
PIU Report
In its report, ‘Building for the Future of
the Environment’, the PIU say that its aim was to provide ‘an
extra boost to renewables by helping to get offshore wind off the ground;
developing heat and electricity markets for energy crops, demonstrating
new technologies, and building up the necessary infrastructure; doubling
the support available under the Government’s intended major demonstration
of innovative solar photovoltaics; encouraging and promoting smaller scale
domestic/community based renewable energy; and facilitating the connection
of renewable sources to the UK’s electricity network’.
In addition it would ‘take
forward the development of wave and tidal stream technologies, and almost
double the budget for fundamental research that will develop the next
generation of renewables’.
Not a bad set of aims, with the support for renewable
heat technologies being particularly welcome. So is the £5m for wave and
tidal current technology- even if the terms of the support are rather
contorted, as if the PIU is nervous about making too strong a commitment
to this novel area.
The £10m committed to community projects is also a
bit token - the focus is on small scale grant aided community projects,
rather than on local co-op or other community enterprises, which might
then support themselves. But it’s a start.
The £10m Blue Skies research programme is to be welcomed
- as the PIU say, the money will be spent on ‘fundamental
research into a range of technologies which could include innovative approaches
to solar PV, wave and tidal power, storage and the capture, storage and
transmission of hydrogen’.
The PIU add ‘Criteria
for allocation of this funding will be drawn up by DTI in collaboration
with the EPSRC and other Research Councils, but will recognise the uncertainties
associated with "blue skies" research, and not be overly prescriptive.
At the same time, research programmes will be co-ordinated as closely
as possible to maximise potential synergies and to avoid duplication of
effort’.
The next three sub sections summarise the PIU’s
analysis and recommendations.
PIU: OXERA Scenarios
In order to provide a context for deciding about the
allocations, the PIU commissioned OXERA to carry out an analysis
of the likely entry of renewable generation between 2002 and 2020 in response
to the Renewables Obligations. OXERA based their work on a model designed
to show the potential market penetration of a number of technologies following
the introduction of ROCs- the Renewable Obligation Certificates given
to companies who meet the obligation and traded between those who had
excess and those who could not meet the Obligation.
The OXERA work suggests that achieving the 10% 2010
target is, in principle, possible without any additional financial
support, although, the PIU notes, there could be problems, most obviously
due to NETA, but also due to planning delays. The PIU comments that ‘the
build rate for all renewable technologies- especially onshore and offshore
wind, which are likely to be the main contributors to 2010- will need
to increase by about two orders of magnitude’.
However, although ‘additional capital
grants will help to deliver an improvement’,
the PIU fears that ‘unless further action
is taken to make renewable energy schemes more acceptable to local communities,
and to facilitate the process of obtaining planning permission (in particular
for onshore wind) and connection to distribution networks, the required
build-rates are unlikely to be achieved’.
In particular the PIU note that ‘The larger
wind farms (above 1MW) awarded contracts under NFFO have encountered the
most severe problems in gaining planning permission and only 41% of projects
that have applied for planning permission under the later rounds of NFFO
(orders 3 - 5) have been successful. Biomass projects have also encountered
a number of difficulties gaining planning permission’.
It mentions the various revisions underway to the
planning system, but notes that, in the end it comes down to public
attitudes. ‘Public opinion surveys show
that the majority of the UK’s population support the development
of renewable energy. Moreover, there is considerable evidence that local
populations tend to become more favourably disposed towards local renewable
energy power plants once they are built. This, however, does not translate
into a "cultural" perception that Britain is supportive of renewables,
as would be perceived in (for example) Denmark, Spain or Germany. And
this support for renewables at a very generalised level has not prevented
opposition to individual projects at the local level.’
The PIU also sees some potential economic problems
ahead, if for example, the price of ROCs turn out to be lower than expected,
due perhaps to the import of cheap green power through the inter-connector,
or through links being made to wider emissions trading schemes or to a
European-wide ROC trading scheme.
Looking further ahead, to 2020, they say that
the value of ROCs could become even more of a problem unless the overall
RO capacity target was expanded. Fortunately it thinks that a target of
20% by 2020 is credible. In particular, in addition to a major continuing
contribution from offshore wind, it suggests that energy crops could make
a contribution over the short to medium term- up to 2600MW by 2020, in
one scenario. However, it adds ‘for
this to occur, considerable cost reductions will need to have been achieved
and the necessary planting schemes put in place over the period to 2010.
If these requirements are to be delivered, Government subsidy and facilitation
of contracts between growers and energy companies is likely to be required’.
The PIU also point out that ‘penetration
levels of much above 20% from intermittent generation sources (i.e. wind
and solar) and to a lesser degree hydro (which has a higher level of prediction
capability) could start to create additional issues for management of
the overall electricity system- initially additional costs. Though of
limited concern at present, this suggests that in the longer term, effort
should be devoted to technologies that maximise the value of intermittent
sources- in particular advanced network (and demand) management systems,
and energy storage’.
It says that these issues will be addressed in more
detail in the PIU review of energy policy.
Looking to the longer-term, to 2050, the PIU
note that OXERA’s quantitative scenario methodology is no longer
viable and instead OXERA made use of a ‘learning curves’ approach
coupled with general engineering assessments, as developed by the PIU
and by Imperial College. Within this context, it says that ‘the hierarchy
of technologies is wave and tidal stream, followed by offshore wind, then
energy crops and PV’.
Essentially what they are saying is that, as far as
the potential for learning and technological development is concerned
wave/tidal and PV offer the greatest opportunities. As a relatively mature
technology, onshore wind offers the lowest opportunities for further learning.
This assessment must however be modified by an judgement of the potential
for the technology to be used in the UK. This, the PIU says, tends to
work against PV, and in favour of wave/tidal and offshore wind, where
the UK’s potential resource is huge. In addition note has to be taken
of the likelihood of eventual commercial viability. The risk of economic
failure is seen as greatest for wave/tidal, which is the least developed
of the technologies. However, the PIU conclude ‘the
strong possibilities for learning and for use in the UK mean that wave
and tidal remains at the top of the OXERA hierarchy’.
Although the OXERA analysis does not provide assessments
of the export potential of the various technologies, the PIU say that
‘what it does suggest is that, even
if the total UK market for a particular renewable energy source appears
to be limited, there may be merit in developing a UK-based industry if
world markets are likely to be large. The technology for which this argument
is most relevant would appear to be PV’.
PIU: Rationale for Funding Plan
Offshore Wind
Offshore wind is
seen as a key technology, but the PIU notes that the economics are still
subject to many uncertainties. ‘Although it could become commercially
viable by 2010 under the RO, this will be dependent on projects getting
off the ground early in the decade’ .
In particular, the PIU feel that winning investor
confidence will be difficult due to uncertainties relating to, for example,
the NETA imbalance charges, the value of ROCs; and planning process
and public perceptions. This, the PIU says, means there is a strong
case for additional capital grant support. ‘If
one assumes that the 18 developments (of a maximum 30 turbines) which
pre-qualified in the Crown Estates licensing round use the currently
available 2MW turbines, this would represent 1080MW of capacity. Existing
funding should be able to support at least 300MW (at the maximum rate
of approximately 0.6p/kW). Up to an additional £25m is made available
to fund offshore wind installations. This should cover at least another
150MW, meaning that approaching half of the licensed capacity (or about
0.5% of electricity (or 5% of the Governments target) could be guaranteed
early progress’.
The PIU feel that ‘support
for a minimum of 450MW will be enough to reduce the risk element of
developing offshore wind, and to generate sufficient early momentum
for offshore wind to play its full part in meeting the 2010 target’.
But this should be ‘kept under review’.
Energy Crops
The other main component in the mix is energy
crops, which the PIU say could also become a significant renewable
resource over the next few years, although, as noted earlier, it also
sees major barriers related to the establishment of infrastructure and
to the contractual relationships linking the growers to the energy providers.
On the generation side, the PIU note that some existing funding is available
for electricity generation from energy crops through the New Opportunities
Fund, which the additional funding from the £100M are designed to complement.
It goes on ‘One area for funding will be
near-commercial electricity schemes, particularly those classified as
CHP. Up to approximately £10m will be allocated to support near commercial
energy crop and forestry woodfuel schemes. A further criterion is that
preference should be given to schemes which can be classified as good-quality
Combined Heat and Power (CHP). This should allow the development of
around 10 MW of steam combustion plant or (0.2% of the 10% target).
It is expected that these schemes will be a range of sizes, and no prescription
should be given for this aspect. This support for the nearer term technologies
will help to establish the growing of energy crops in the UK’.
Although it says that good-quality CHP has the benefit
of much greater efficiency (70% or more) than electricity generators
using energy crops (30-35%), the PIU recognises that ‘there
may be times when CHP is inappropriate (e.g. when no use for a heat-load
can be found), and projects in these circumstances
should not be ineligible’.
This funding will be administered by DTI, with
input from DEFRA and the devolved administrations. The PIU suggest that
‘one possibility for maximising the
value of the funding would be to make the establishment of contractual
relationships with growers a pre-requisite for receiving support’.
Clearly, the PIU see the development of infrastructure
that links growers and energy providers as vital. Although it recognises
that DEFRA is making available funding for planting grants, to sit alongside
other funding for energy crop generators,‘a potential gap relates
to the infrastructure required to harvest, store and supply the energy
crops once they have been grown’. In order to meet this gap,‘up
to £3.5m will be made available specifically to help fund market or
physical (harvesting, storage and supply) infrastructure. This fund
may be available for producer groups, in particular those non-SRC schemes
not covered by the existing DEFRA Energy Crops Scheme. The funding should
be administered by DEFRA directly alongside this scheme, in order to
ensure effective allocation. However, the amount available for infrastructure
should be ring-fenced’.
Finally, the PIU note that ‘another
aspect to energy crops not currently funded is the use of energy crops
for industrial heat applications. In the same way as early introduction
of energy crop CHP could help establish the energy crops industry in
the UK, industrial heat from energy crops would seem to provide the
potential for an easy win. This is already supported in part through
£3m from the NOF but receives no other direct support, and is not covered
by the Renewables Obligation. On this basis, and in view of the wider
benefits, up to £2m will be made available for industrial heat from
energy crops, to be administered directly alongside the existing NOF
money.’
This funding complements the community and household
fund (see below), and could, the PIU suggest, ‘support
a further 10 MW of heat-equivalent at a maximum 50% subsidy, in units
of 500kW or more. This is only equivalent to less than 1% of the 10%
target but is intended to pave the way for a much more substantial contribution
between 2010 and 2020’.
Community Projects
The PIU recognises that it is vital to find ways
to try to overcome the barriers imposed by local attitudes, and planning
processes. It argues that ‘there is
some concern that the majority of renewable energy projects are seen
as relatively large-scale and/or promoted by remote large companies
and somewhat inaccessible to households and individuals’
and claims that ‘initiatives on the
planning front will not help get renewable energy off the ground unless
the public extends its general support for renewable energy to support
for renewable energy in local situations. This makes community engagement
crucial, so that more people are either individually involved in renewable
energy schemes or able to see them’.
It goes on, ‘One
means of overcoming these concerns will be to make funding available
specifically for renewable energy schemes that engage local communities
or individual households’. It adds,
somewhat surprisingly, that ‘we have made good progress in developing
community schemes in the UK and currently there is a small amount of
funding available through both the Countryside Agency’s Community
Renewables Scheme and the New Opportunities Fund Green Spaces and Sustainable
Communities Scheme’ .
Well maybe, but not yet much to show for it compared
say to Denmark. Certainly, as the PIU go on, ‘more funding will
have a beneficial impact in this area’. To that end ‘up
to £10m will therefore be allocated to a programme spread over three
years, for which bids are invited on behalf of schemes with a strong
local community or household interest. The scheme will be administered
by DTI, working closely with the devolved administrations’.
Again, perhaps a little tendatiously, given the
low level of deployment so far, it adds ‘Community
schemes have proved very successful in allowing local residents to directly
gain from local developments and feel they have some ownership of them.
They have an important role in familiarising individuals with renewable
energy technologies and it is expected that these schemes will then
allow a number of larger schemes an easier path to gaining planning
permission’. Lets hope AAT (see Groups)
will benefit. They just had their bid to the DTI for funding turned
down!
The PIU conclude ‘no
restrictions will be placed on the types of technology employed, but
eligibility would be restricted to renewables deployed at the level
of households, or buildings/land owned by non-profit making organisations.
Care would need to be taken to ensure that this scheme does not duplicate
existing programmes’.
An example might be a "solar street", involving
the fitting of solar panels to the roof of every house in a street;
incorporating solar water heating into the design of new civic buildings;
installing a wind turbine to provide electricity to a school or hospital;
biomass heat projects for schools or farms.
On the planning side, it is recommended that
up to £2.5m be allocated to the administration of a series of regional
road-shows, to which regional and local authorities would be invited,
alongside those expecting to make planning applications. Other facilitation-type-schemes
could also seek funding through this fund. The purpose of these seminars
‘would be to share information and
best practice with respect to the treatment of renewable energy schemes’
The PIU say the DTI should administer this scheme.
Better network connection was also seen
as vital, to aid local schemes. The PIU say a useful approach will be
‘to demonstrate the new technologies
that can help make renewables more attractive’.
Up to £4m will therefore be placed into a fund, for which bids will
be invited from suppliers, brokers and Distribution Network Operators.
The purpose of this fund ‘will be
to facilitate the demonstration of new control, storage and metering
technologies, with a view towards active management of distribution
networks’.
PIU: Longer term options
The PIU argue that ‘even
as we take action to deploy renewable technologies and deliver on our
commitments, it is essential that we prepare for the longer-term by bringing
on technologies currently some way from commercial viability, and by undertaking
research into new technologies’.
It notes that ‘many of these issues will be
picked up in other work currently under way, such as the PIU review of
energy policy and the DTI-led review of energy R&D. However, it is
possible to identify now some areas where support will be important in
developing renewable energy sources for the longer-term’.
It goes on ‘There
would seem to be three key technologies that are currently some way from
commercial viability, even under the RO, yet have the potential to play
a very significant role in the long-term in the UK or elsewhere. These
are new energy crop technologies such as gasification and pyrolysis; photovoltaics
(PV); and wave or tidal power.’
New Energy Crops
The PIU say that, although energy crop technologies
are probably nearest to commercial viability in the UK, ‘there
is very limited experience of these technologies in practical application
in the UK or elsewhere. Without this practical application, it is difficult
to see how costs will fall over time. With other mechanisms in place to
set up the supporting infrastructure and contractual relationships for
the energy crops industry, up to £18m will be made available to prepare
the UK for the next stage of energy crop technologies. This fund will
be administered by DTI, working closely with DEFRA and the devolved administrations
and taking account of the administration of the NOF money already available
for energy crop technologies. It will also be applied in close conjunction
with any EU-wide funding programmes, in order to extract maximum benefit’.
Wave and Tidal Power
Wave and tidal
power, the PIU say,‘offer perhaps the greatest long-term scope
for the UK. The UK has a large potential wave and tidal resource and a
long history of pioneering R&D in these areas’.
However ‘The technology
is still in its infancy, with many competing designs, and considerable
uncertainty about whether and when commercially viable technologies will
be delivered. This presents both a threat and an opportunity. Without
support, the technologies may not develop at all, and their long-term
potential may not be realised. But because they are little developed,
the UK has an opportunity to exploit
a world-leading expertise at relatively low cost’.
It goes on ‘The
UK is still one of the world leaders in marine technology. Several new
companies have spun out of UK universities and some have been successful
in attracting commercial backing. However many analysts suggest
that, with more generous support available in other countries, the UK
may already be losing place in the marine technology industry. With more
proactive political support and considerably more resources (at present)
going into wave technology in Denmark, the parallel with the early development
of wind power is not difficult to draw’.
It adds ‘Some of
the more promising technologies are now moving beyond the laboratory and
very early prototype phases, and an increasing number of demonstration
devices are going into the sea in several countries. A few of these have
secured power purchase agreements, including support through the SRO in
the UK, and are effectively in pre-commercial demonstration. However there
is a clear need for further substantive field trials’.
The PIU note that the DTI "Technology Route-maps"
for both wave and tidal technologies focus on support for long term trials
of prototypes, alongside ongoing R&D into less advanced devices. And
that the DTI provide for up to 10 years of prototype field-testing. But,
the PIU say, ‘should any of the technologies
prove reliable and viable they would be able to move into what might be
termed the ‘early pre-commercial phase’ - fully operational
grid connected projects - much sooner.
It is not reasonable to expect such schemes to
be commercially viable under the RO, and additional support is necessary
to enable such schemes to be deployed on a modest scale. Up to £5 million
will be made available for grid-connected early pre-commercial wave and
tidal stream projects. The intention is to create a small niche
market that would bridge a potential "valley of death" for marine renewables’.
The PIU say that this money should be administered
alongside the existing DTI programme. ‘A
competition for funds, timed to provide a clear next step for those technologies
emerging from the DTI field trials (or elsewhere), will be the best way
to facilitate steady progression in wave technology. The competition will
run in 2 to 3 years time, but should be announced as soon as it is practicable,
to provide guidance and a competitive incentive for the emerging industry.
There may also be a case for using some of the budget to provide for accompanying
measures- such as contributing to the marine test station mooted by the
industry’.
Finally it says ‘It
is important that this support is viewed only as a step on the road to
commercialisation. The success of wave and tidal technologies should be
reviewed again towards the end of this funding programme, with a view
to additional support in future’.
Solar PV
The PIU sees PV as having ‘considerable
scope- in the UK and abroad’ so that
additional support is justified.‘Solar PV technology in buildings
is a long way from commercial viability in the UK. However, the costs
of PV have fallen substantially over the last 25 years, and are widely
expected to continue to do so as global markets expand. PIU analysis using
‘learning curves’ and market growth data reinforces the view
that PV could become an important and cost effective UK option for decentralised
power generation in the long term, probably around 2020. Some niche markets
could emerge much sooner, such as the use of PV as a prestigious and "green"
building cladding material for companies wishing to demonstrate their
environmental credentials. PV is already competitive in niche markets
in sunnier latitudes, in particular off-grid applications, and large important
global markets will emerge in the near future’.
In the "Opportunity for All" White Paper published
in Feb 2001, the Government announced a major PV demonstration programme
with industry and others, in line with those in Japan and Germany (70,000
and 100,000 roofs respectively). However, the PIU note, ‘even
a 100,000 roofs programme would not make a significant contribution to
the 10% renewables target by 2010 or to the CO2 reduction targets. The
rationale for such a support programme would be to encourage a strong
industry to develop in the UK over the medium-term, which would be competitive
in the potentially large export markets. The medium-long-term role of
PV alongside other renewable technologies will be considered fully in
the review of energy policy. The appropriate role of any long-term target
in encouraging the promotion of PV will also be considered. Other issues
for consideration include the role of PV as a niche urban technology alongside
micro-CHP and micro wind turbines, and its role alongside these technologies
in breaking down barriers to domestic generation’.
The PIU add ‘A key
UK strength is in architecture and building design. Innovative PV applications
in buildings have been pioneered by UK architects and building engineering
companies. We therefore propose that the UK PV programme should focus
on these strengths. The UK also has strengths in the development of new
PV materials and concepts, and these will be eligible for additional support
for ‘blue skies’ research’,
(see below).
To this end, ‘up
to £10m will be made available to add to the DTI’s existing £10m
PV demonstration programme. The detailed criteria for DTI’s existing
scheme are currently being finalised and a key criteria for this scheme
is likely to be that the scheme will run as a competition into which bids
would be invited for innovative applications of PV technologies. This
would be open to households, companies, builders and architects, and would
focus on new and exciting applications of existing PV technologies’.
Blue Skies Research
Finally there’s "Blue skies" research, which
the PIU see as preparing us for the longer-term, opening up new options
for renewables. ‘Over a 50 year time
period, it is highly likely that new technologies not currently anticipated
could come to play a significant role. New renewable energy devices may
emerge, but in addition, facilitating technologies, such as inter-seasonal
storage or compact energy storage for vehicles, could enhance the prospects
for renewable energy, especially intermittent renewables. As an important
step in expanding the knowledge base on which we depend to realise the
potential of renewable energy, up to an extra £10m will be given to the
Research Councils over the next three years. This will almost double current
levels of spending.’ And not before
time!
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