Select Committee on Science and Technology Third Special Report


Letter from Mr Brian Wilson MP, Minister of State for Energy and Industry, Department of Trade and Industry.

I am very pleased to write to you as the Minister responsible for energy and industry, enclosing the Government's response to the S&T Committee Report on the Inquiry into Wave and Tidal Energy. This response has been agreed by Michael Meacher, in view of DEFRA's interest in the environmental impact of renewables and responsibility for the Climate Change Programme.

I would like to pay tribute to my predecessor, Peter Hain, for all his work in this area. I agree entirely with the views he expressed when he appeared before you on 28 March 2001 to set out the Government's position on renewables in general and wave energy in particular and to reiterate his desire to work with the Committee to take forward the Government's sustainable energy policy agenda.

I am happy to be able to report significant progress with the development of wave and tidal stream technologies since the Committee produced its report in April this year. Most notable of these developments is my recent announcement of about £1.7 million of DTI funding for Wavegen to help this company with the development of its novel wave energy device. My officials are also making good progress with other project sponsors seeking government help and, by the end of the year, I expect DTI to be supporting three wave energy and two tidal stream projects. Hopefully, two of these projects will lead to demonstration plants being constructed and a programme of testing started in Summer 2002. In addition to these projects, DTI will be continuing to recruit new wave and tidal stream projects via the Sustainable Energy Support Programme call process.

As well as funding projects in the UK, I am pleased to be able to tell you that DTI's work with Portugal and Denmark has led to the International Energy Agency approving a new Implementing Agreement on Ocean Energy Systems at the October meeting of their Governing Board. DTI's participation in this new IEA agreement is already opening up new opportunities for the UK to collaborate with other countries because of our leading position in these technologies.

I believe that, since the programme was only restarted in 1999, the UK is making good progress with the development of reliable and cost effective wave and tidal current technologies. However, I am not complacent and continued effort on the part of government will be required to maintain progress. Your inquiry has already helped by focussing attention on the potential energy resources in the seas around the UK and the world at large, and I would like to assure the Committee of the Government's continuing support for the development of these technologies.

14 November 2001



In January 2001, the Science and Technology Committee announced an inquiry into wave and tidal energy and published a report on its findings in April. This note sets out below the Committee's recommendations and conclusions together with the Government response.

1. We welcome the growing recognition by Government of the energy potential of a range of offshore technologies. We hope it will lead to a coherent strategy for technology development and long-term investment (Paragraph 15). I am pleased the Committee has endorsed the Government's recognition of the potential energy resource in the oceans. This will be extremely helpful in gaining further support for the development of technologies that have the potential to extract this energy reliably and economically and incorporating them into the strategy for sustainable energy supplies in the UK.

2. Given the UK's abundant natural wave and tidal resource, it is extremely regrettable and surprising that the development of wave and tidal energy technologies has received so little support from the Government (Paragraph 17). Details of past support for programmes were provided in the joint memorandum to the Committee from the Department of Trade and Industry and the Department of the Environment, Transport and the Regions. The UK already has one of the few operating wave energy plants in the world, the LIMPET 500 electricity generating plant on the island of Islay in southwest Scotland. This project received support under the third round of the Scottish Renewables Order.

In April 1999, the DTI announced a new wave energy programme with significant funding (which has since been expanded to include tidal stream) to exploit the potential energy resource in the oceans. Since Mr Hain appeared before the Committee, work set in train over the past 18 months is coming to fruition. Officials have endorsed, or are in the process of endorsing, DTI funding for three major wave energy projects and two significant tidal current schemes, two of which will hopefully result in demonstration plants to be installed in the sea during the summer of 2002. The total value of these projects together is over £6 million to which DTI is contributing more than £3.2 million. This represents significant progress as the wave programme was only reactivated in 1999 and it demonstrates the Government's real commitment to the development of sustainable energy technologies in the UK.

3. Owing to the reliability and predictability of their output, there would be few problems for an electricity company in integrating wave and tidal energy into its supply (Paragraph 21). The extent to which wave and tidal energy can be regarded as reliable and predictable and provide electricity in response to the UK's electricity system requirements will need to be demonstrated as part of the work needed to prove the technologies.

4. There appear to be no major technological barriers to the effective development of wave and tidal energy, which could not be solved by transferring expertise and knowledge from the offshore industries, through more multi-disciplinary research projects and through the construction of large demonstrator models (Paragraph 26). The Government accepts that wave and tidal energy technologies are based on the novel application of science and engineering developed in other industries, particularly offshore and marine. The real challenge for ocean energy technologies is to demonstrate they can produce energy reliably and economically. DTI is committed to supporting development projects that are especially focussed on these aims.

5. The difficulties of Grid connections are probably the single most serious problem facing the successful exploitation of wave and tidal energy in the UK, and one which no single company can solve alone (Paragraph 29). The Government accepts that the companies in the electricity supply industry will need to act jointly to address this issue. Before this can be done, there must be greater certainty about the contribution wave and tidal stream technologies can make to the UK's energy supplies. A priority for the DTI's support programme on renewables and sustainable energy technologies is to promote the development of emerging technologies to the point where informed decisions can be made about their prospects. This is key to promoting confidence in new ways of meeting the UK's energy needs and providing the funds for major infrastructure investment.

6. We recommend that the Government should work with the National Grid Company, and other utility companies, to organise the strengthening of transmission lines required, if wave and tidal energy are to provide a significant amount of energy to the electricity market (Paragraph 32). DTI's support programme on renewables and sustainable energy technologies already includes work on embedded generation to investigate the issues surrounding the introduction of renewable energy. The utility companies, including National Grid, are active participants in this programme area. Although wave power may be connected at distribution voltage, if significant amounts of energy are involved, the issue is likely to involve transmission reinforcement in Scotland and possibly also on NGC's transmission system (see also the response to conclusion 5).

7. As we begin to contemplate the enormous cost of climate change, the external costs of electricity generation can no longer be ignored (Paragraph 36). The importance of the external costs of energy production and use has been recognised by the Government and has resulted in the introduction of the Climate Change Levy which is aimed at encouraging the production and use of less environmentally harmful forms of energy.

8. The Government should examine the implications of the discount rate on renewable energy schemes involving high initial costs (Paragraph 38). Government discount rates are reviewed from time to time, but they are only indicative and should only be used to compare projects and their outputs not value them absolutely. The real tests will be undertaken by developers and their financiers who will evaluate projects taking account of their own views of the cost of money and project risks.

9. The enormous potential export market for wave and tidal energy devices easily justifies the public investment now needed to ensure success (Paragraph 39). The Government recognises the huge potential ocean energy has to offer around the world, provided a range of reliable and economic technologies can be developed to exploit it. DTI's support programme is already encouraging industry by funding significant projects in this area.

10. Growth in the wave and tidal energy industry would help to offset unemployment in the declining offshore oil and gas, and shipbuilding, industries. Government investment in wave and tidal energy would thus bring significant economic and social side-effects (Paragraph 41). Maintaining the highest levels of employment is key to maximising the economic and social benefits to the UK's population. New technologies have an important contribution to make and the Government is committed to supporting industry with their development.

11. We recommend that consideration be given to a system of banding in the Renewables Obligation, with different prices being paid for different renewable technologies, to stimulate growth in key areas - especially promising, but as yet immature, technologies, such as wave and tidal energy (Paragraph 43). The Government's views on banding under the Renewables Obligation have been set out in its document "NEW & RENEWABLE ENERGY, Prospects for the 21st Century, The Renewables Obligation Preliminary Consultation" published in October 2000 and are repeated below.

"Industry has indicated a relatively high level of support for an approach that takes into consideration the different stages of individual technologies. As already stated, some technologies such as large scale hydro are already commercially viable, while others remain at a much earlier stage in their development, and require varying degrees of assistance to advance further to a stage where they could be commercially deployed on a large scale. A "banded" Obligation would address these differences by setting different buy out prices for different technologies, with those in need of the greatest incentive having the highest buy out price. Banding would impose an obligation on suppliers to supply a specified amount of electricity from specified renewable sources.

The Government has considered the arguments for a banded Obligation and is proposing to reject this approach. It takes the view that it would involve Government in choosing which specific technologies should be used to meet the Obligation. This runs counter to the market led approach that has been designed to ensure that suppliers will meet their Obligation by the most economic means. The Government does not want to segment or unduly distort the marketplace, or to send out the message that some renewables are more important to the UK's targets than others. Instead, it believes that competitive forces should be the drivers that shape the industry that emerges as a result of the introduction of the Obligation. It believes that, to help bridge the gap between initial demonstration and commercial viability, early offshore wind and energy crops projects should instead be supported through capital grants. In addition, a banded Obligation would amount to an unacceptably long term and inflexible commitment by Government to particular technologies. To implement such a policy would require Government making firm and irrevocable decisions as to which technologies should be used to meet the Obligation. This would fail to take future technological and market developments into account, and perhaps lead to resources being directed to areas of least need. The Government's preferred approach is sufficiently flexible to accommodate both changing circumstances and future developments, which are inevitable over the period of the Obligation. The Government will keep its policy under review while maintaining a dialogue with stakeholders."

12. The evolving conditions in the electricity market and their implications for renewable technologies should be kept under close examination by the Government to ensure that the market is increasingly favourable to renewables (Paragraph 44). Government is committed to the expansion of renewable energy in the UK and the electricity market will be kept under regular review to ensure that no artificial barriers are established. The electricity supply industry regulator Ofgem has recently issued a review of experience with the New Electricity Trading Arrangements to date, and of the impact of NETA on small generation (much of which is renewable). The Government will respond in due course.

13. We welcome the Government's decision to consult on the establishment of a one-stop shop for offshore renewable planning applications, and would urge it to act upon its findings as soon as possible (Paragraph 46). Government plans to have the consents process for offshore renewable energy operational by the end of 2001 in England and Wales. A separate but similar consents process will apply in Scotland and will be implemented in a similar timescale.

14. The adverse environmental impact of wave and tidal energy devices is minimal and far less than that of nearly any other source of energy, but further research is required to establish the effect of real installations (Paragraph 48). Whilst providing a clean, reliable source of energy, the installation of any artificial device into the environment will affect it in some ways. The real environmental impact of wave and tidal energy has to be determined to the satisfaction of all stakeholders if the technologies are to succeed. However any local impact should be balanced against the global effect of reliance on fossil fuel sources of energy; for every 1% increase in market share by a renewable technology, there is a 2% reduction in CO2 emissions. The Government is prepared to support the technology developers by sponsoring generic research into this very important area at an appropriate time in the development cycle.

15. There needs to be a more joined up, strategic approach between funding agencies, with sensible progress bench marking and milestones, to ensure that both technological and market deployment momentum are maintained (Paragraph 50). The DTI programme is an industrially led integrated programme which includes a strong link between the development of technical solutions and technology transfer and exports promotion. There are also well established links with the Engineering and Physical Sciences Research Council (EPSRC) programme on renewable energy to ensure its work on development of the underpinning science is fed in to projects supported under DTI's programme.

16. The current level of public spending on wave and tidal energy research is insufficient to give the technology the impetus it needs to develop fully. Targeted research funding for wave and tidal energy technology should be steadily increased year on year to create a critical mass of researchers in the field. We recommend that EPSRC introduce a managed programme for wave and tidal energy technology to achieve this (Paragraph 51). On 29 June, EPSRC launched a new Sustainable Energy Generation Programme to bring together its support for energy research under one heading. A key aim will be to identify a number of priority areas within which to support a small number of large research consortia (effectively centres of excellence). While wave and tidal energy will be considered in this priority setting process, EPSRC do not propose to set up a managed programme in this area, although they do expect it to form one of the "centres of excellence".

17. We recommend that the Government increase the amount of funding available for full-scale wave and tidal energy prototypes to prove the concept at a realistic scale. Testing on this scale is the only way in which companies can gain the extensive private backing they need if their devices are to achieve eventual full commercial realisation. The funding available should be comparable to that committed to demonstration models in other renewable technologies, such as wind. We recommend that a significant proportion of the extra £100 million of funding for renewables, recently announced by the Prime Minister, be made available for wave and tidal energy demonstration models (Paragraph 52). DTI is already supporting two projects under the renewable energy R&D support programme (one wave and one tidal stream) which their owners plan to deploy as demonstration plants next year. Three other projects with the prospect of achieving demonstration plant status within about five years are under consideration and are expected to receive government financial support in the next few months. These developments show that some wave and tidal stream concepts are well advanced and the Performance and Innovation Unit, which has been asked to make recommendations for allocating the extra £100m of funding to technologies, will, no doubt, be encouraged by the progress and take this into account when allocating funds.

18. We recommend that the Government establish, as soon as possible, a National Offshore Wave and Tidal Test Centre to facilitate the development of wave and tidal energy (Paragraph 55). The first steps have already been taken. A recent study, commissioned by Highlands and Islands Enterprise (HIE), considered potential locations for a Marine Energy Test Centre in the Highlands and Islands. The study was undertaken by a member of the UK Marine Foresight Panel and by METOC, a firm of maritime engineers. The objective of the study was to identify a preferred location for a Marine Energy Test Centre (METC). The study assessed five potential sites, and concluded that the preferred site was Stromness on Orkney. Stromness was considered to provide advantages over the other three sites in terms of the available resource (wave power and tidal currents), a shorter distance offshore to exploit these resources, the availability of onshore facilities (offices, storage and berthing), suitable connection to power lines and sheltered water for construction. The second phase of the project, a full-scale site survey and environmental impact assessment, will proceed shortly, funded by HIE and the Scottish Executive.

19. The UK is at the forefront of wave and tidal energy but other national development programmes will undoubtedly overtake ours unless the Government acts quickly and decisively to support the industry. Valuable lessons could be learned from the long-term approach adopted by the Danish Government toward the exploitation of renewables energy sources (Paragraph 58). There is already regular contact at official level with other countries, which have an interest in renewable energy generally and, specifically, wave and tidal energy. The DTI's Sustainable Energy Support Programme is already co-funding a project with the European Commission to demonstrate a tidal stream technology. Officials also participate in various International Energy Agency (IEA) Implementing Agreements aimed at promoting international collaboration in the development and deployment of renewable energy. In particular, DTI is a founder member of the new IEA Implementing Agreement on Ocean Energy Systems, which was approved at the IEA Governing Board meeting in October 2001. The Government wishes these links to be maintained and strengthened to reflect the growing importance the UK attaches to renewable energy development.

20. The Government's 2010 target for renewable energy is a very welcome step in the right direction. However, challenging longer-term targets for 2020 and 2050 should be set to facilitate planning of research and to stimulate the development of genuine renewable energy sources, such as wave and tidal energy (Paragraph 61). The Government recognises the need to set challenging targets for the introduction of renewable energy beyond 2010 and the role targets play in stimulating research and development into new technologies. The Performance and Innovation Unit and the recently announced Energy Review will both contribute to the development of a policy for the UK's energy supplies post 2010.

21. We believe it very important that the UK Government meets its domestic targets for carbon dioxide emission reduction and renewable energy production as an example to other countries. However, the greatest global contribution that the UK can make is through the development of viable, new renewable technologies, such as wave and tidal energy. The development of renewable energy alternatives is crucial and one in which the UK has both the ability and duty to take a leading role (Paragraph 62). The Government remains committed to meeting its climate change targets and to promoting the development of renewable energy. The Government has an existing target for 10% of all sales from licensed electricity suppliers to be provided from renewable sources by 2010. The Government is also providing significant levels of extra funds for the development on renewable energy technologies, including offshore wind and energy crops.

22. If the Government is serious about developing a UK wave and tidal energy industry, it must make a clear commitment via policy statements and funding. Such a commitment would reduce the perception of risk surrounding the technology and help to attract private investment (Paragraph 64). The Government has already made its position clear on wave and tidal stream energy by announcing a new programme of work in April 1999 to be included in the DTI's renewable energy support programme. This programme is deliberately industry led to address the real problems of introducing new technologies to the market, including risks and the need to attract private investment.

23. Our Report outlines the enormous potential advantages of wave and tidal technology as sources of energy: they use predictable, natural resources, which the UK enjoys in abundance; they are both far cleaner than nearly any other energy source currently available and with less negative environmental impact; and they are largely based upon tried and tested engineering and technology, in which the UK has an excellent skills base. We have recommended significant increases to public support for wave and tidal energy, to allow the technologies to develop fully. In comparison with other areas of Government expenditure these are very small amounts. Yet, the potential return on investment would be huge. The UK could finally harness some of the massive potential energy of its marine resource to supply part of its energy needs, and create a new multi-billion pound domestic and export industry, employing thousands of people. The UK has the resource, the technology and the skills base; we have a unique opportunity to seize the lead and develop a world-class industry. The urgent need to cut carbon emissions to counter global climate change and environmental problems now means that we must explore the potential of all significant sources of renewable energy. We can no longer afford to neglect the potential of wave and tidal energy (Paragraph 65). The Committee's report makes a sound case for investigating the contribution wave and tidal energy could make to the UK's energy supplies and help to mitigate the effects of climate change caused by burning fossil fuels. As the report identified, the UK has an excellent skills base, which can be used to address the significant challenges of developing and deploying technologies to harness renewable energy from the oceans. Many of these skills have already been utilised to successfully exploit Britain's offshore oil and gas reserves and, as this becomes a mature industry, these skills will become available to aid the development and deployment of offshore renewable energy industries and provide employment opportunities now and in the future.

It also endorses the Government's decision in April 1999 to embark on a new wave energy programme (which has recently been expanded to include tidal stream) aimed at developing technologies to exploit the potential energy resource in the seas around Britain. Although this programme has only been running for a short time it is already having an impact on the development of new ocean energy technologies. The DTI has recently announced £1.7 million of support for Wavegen to help with the development of their offshore wave energy concept and there are other projects already being funded or under active consideration. By the end of the year, this should result in DTI authorising funds for five development projects on wave energy and tidal stream, two of which are expected to be deployed in the sea as demonstration projects in 2002. Success with these projects will provide an impetus for developing wave and tidal stream energy still further and improve confidence in DTI's Sustainable Energy Support Programme as a means of assisting industry with development of new energy technologies. It will also be key to increasing business interest in these technologies as a basis for new industries that can exploit the significant energy resources in the seas around the UK and elsewhere in the world.

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