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The Renewable Energy Research, Development and Demonstration Programme

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The Renewable Energy Research, Development and Demonstration Programme NATIONAL AUDIT OFFICE REPORTBYTHE COMPTROLLERAND AUDITORGENERAL The RenewableEnergy Research,Development and DemonstrationProgramme ORDEREDBY THE HOUSEOF COMMONS TO BE PRINTED 20 JANUARY1994 LONDON:HMSO f8.15 NET 156 THE RENEWABLE ENERGY RESEARCH. This report has been prepared under Section 6 of the National Audit Act 1983 for presentation to the House of Commons in accordance with Section 9 of the Act. John Bourn National Audit Office Comptroller and Auditor General 14 January 1994 The Comptroller and Auditor General is the head of the National Audit Office employing some 800 staff. He, and the NAO, ace totally independent of Government. He certifies the accounts of all Government departments and a tide range of other public sector bodies: and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources. THE RENEWABLE ENERGY RESEARCH, DEVELOPMENT AND DEMONSTRATION PROGRAMME Contents Pages Summary and conclusions 1 Part 1: Introduction 5 Part 2: An overview of the direction and management of the programme 9 Part 3: Three case histories: Landfill Gas; Wind and Hot Dry Rocks 16 Glossary 28 Appendices 1. National Audit Office questionnaire sent to participants in the 30 Renewable Energy Field 2. Renewable Energy in the United States of America 33 3. The development of Renewable Energy in Denmark 36 THE RENEWABLE ENERGY RESEARCH, DEVELOPMENT AND DEMONSTRATION PROGRAMME Summary and conclusions 1 Renewable energy is the term applied to all types of self-replenishing energy sources. An increasing interest is being shown in developing them as a means of creating greater diversity of energy supply by displacing established sources of energy, including fossil fuels, and making environmental gains such as reducing “global warming”. 2 The United Kingdom is well endowed with a number of renewable energy resources. Depending on such factors as future energy prices and technological developments the Renewable Energy Advisory Group estimated that renewable energy could contribute between 5 and 45 per cent of our 1991 electricity supply by around the year 2025. Although they considered that a plausible figure would be around 20 per cent of the 1991 electricity supply figure, this would only be achieved under severe pressures of need and economics. Factors such as environmental constraints could further reduce the contribution. 3 The Government has for a number of years pursued a programme of research, development and demonstration with the objectives of: . stimulating the full economic exploitation of alternative energy rasourcas in thn United Kingdom; . establishing and developing options for the future; and . encouraging United Kingdom industry to develop capabilities for the domestic and export markets. 4 The Government’s current policy is to stimulate the development of new and renewable energy technologies where they have prospects of being economically attractive and environmentally acceptable. The major element of the commercialisation of renewable energy resources is funding provided through Non-Fossil Fuel Orders under the Electricity Act 1989. The National Audit Office examination focussed on the renewable energy research, development and demonstration programme and the fieldwork was well advanced before the Minister’s announcement in July 1993 of further Orders under the Non-Fossil Fuel Obligation. It therefore did not cover in depth issues relating to the Non-Fossil Fuel Obligation which also provides a major source of funding for the nuclear industry. 5 The renewable energy research, development and demonstration programme has cost fZ232 million to date (E340 million in 1992-93 prices), 95 per cent of which is administered by the Energy Technology Support Unit (the Unit) of the United Kingdom Atomic Energy Authority on behalf of the Department of Trade and Industry (the Department). 1 THE RENEWABLE ENERGY RESEARCH, DEVELOPMENT AND DEMONSTRATION PROGRAMME 6 Against this background the National Audit Office examined: (a) the effectiveness of the Department’s overall approach to meeting their objectives through planning, evaluating and managing their renewable energy research, development and demonstration programme; and @I] the achievements of the Department’s approach in relation to three specific resources: landfill gas, wind and hot dry rocks. The National Audit Office’s main findings and conclusions are set out below. The Department’s 7 Following the Coal Review White Paper (Cm 2235) published in March 1993, the overall approach Government announced their intention to work towards a figure of 1,500 to the programme megawatts of new electricity generating capacity from renewable energy sources for the United Kingdom as a whole by the year 2000. The Government’s main instrument for working towards the 1,500 megawatts figure is Non-Fossil Fuel Orders under the Electricity Act 1989. Consideration is being given to using separate capacity bands for each ofthe main renewable technologies. The National Audit Office would encourage such an approach as it would effectively provide progressive interim objectives and the contribution towards them required f?om the major technologies involved as a means of measuring progress towards the 1,500 megawatts figure [paragraphs 2.2-2.3). 8 There were differences in perception between the 34 respondents to the National Audit Office’s questionnaire and the Department about the effectiveness of the assistance and advice provided by the Department to potential applicants for European Community funded programmes. 9 Officials from the Commission of the European Community said that United Kingdom applicants needed to improve the quality of their applications for funding. However, analysis provided by the Department indicated recent improvements in the quality of funding applications. The National Audit Office acknowledge the extent of support provided by the Department and their recent initiatives to establish a closer relationship with the Commission. For their part the Department accepted the need to build upon the progress they have already made to ensure the effectiveness of applications for funding from the Commission’s programmes [paragraphs 2.9-2.11). 10 The Department faced a considerable challenge in determining priorities between the multiplicity of potential renewable resources and the diversity of technologies involved. It was therefore necessary to develop systematic strategies for allocating the available financial resources. The National Audit Office concluded that the major review undertaken in 1982 which had established the methodology for assessing resources and technologies had been soundly based, despite the unavoidable difficulty encountered in comparing the diverse technologies at different stages of development. The review had provided a useful starting point in determining the priority for funding between the different programmes and technologies, and had established the basis for later assessments of the programme and of the regular reviews of the specific technologies (paragraphs 2.12-2.16). 2 THE RENEWABLE ENERGY RESEARCH, DEVELOPMENT AND DEMONSTRATION PROGRAMMX 11 The programme has always been influenced by the market and main participants. Thus, prior to the 1989 Electricity Act it was strongly influenced by the requirements of the Electricity Generating Boards primarily for large scale developments capable of bulk electricity generation. A third of total available funds had been committed to a relatively small number of projects and technologies, with the remainder of the funds being used to support a variety of other projects across a range of sizes and technologies (paragraphs 2.17-2.18). 12 Projections suggest that there is a significant export potential for many renewable energy technologies. The National Audit Office noted that technologies for key overseas markets - for example, small non-grid connected wind turbines - have generally not been supported. The Department acknowledged that they had not placed emphasis on the fulfilment of the programme’s objective concerning export potential. But they had given support to some renewable energy projects with export potential through other Government programmes, and they believed that the programme’s support to the home market would lead to export opportunities. The Department proposed to address this issue in their forthcoming review, including whether other Government programmes might continue to provide the most appropriate mechanism for assisting certain renewable energy projects (paragraphs 2.19-2.21). 13 A Renewable Energy Advisory Committee had been established to advise the Department on the overall technical and commercial aspects of the programme, and individual committees had been set up for each major area of technology. There was widespread awareness amongst the respondents to the National Audit Office’s questionnaire of the Advisory Committees’ roles, but there was concern about the infrequency which some independent members of committees had changed, which potentially could lead to set opinions being perpetuated to the detriment of new ideas. Although there is often only a limited pool from which available specialists can be appointed, since 1990, the Department have instituted a policy of reviewing the overall composition of each committee to ensure appropriate membership (paragraphs 2.23-2.25). 14 The Unit employs around 250 staff of whom about 100 are directly employed on the technological aspects of
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