The Government welcomes this inquiry and particularly the Sub-Committee's focus on the practical steps needed to achieve a move towards renewable energy sources to meet the targets in the White Paper. It provides an opportunity to explain in greater detail the work done and in progress since the publication of the White Paper. We shall endeavour to take account of the views expressed in the course of this inquiry and of the Sub-Committee's final conclusions.

  The Government's strategy for meeting the 10 per cent renewables electricity by 2010 target has the following main components:

—  We have legislated through the Renewables Obligation Order 2002 to incentivise electricity suppliers to produce an increasing proportion of their output from renewable sources (or pay the buy-out price)—10 per cent by 2010. We recognise, however, that this Obligation needs to be underpinned with additional support for those renewable energy technologies that are not yet commercially competitive.

—  We are assisting the development of renewables projects through capital grants schemes which total nearly £350 million over the years to 2006. Most of that investment is aimed at the new technologies of offshore wind farms and energy crops. Other technologies are being supported through research and development funding.

—  We have devised a strategic framework to facilitate a major expansion of offshore wind energy.

—  Renewables electricity has been exempted from the Climate Change Levy.

—  We are developing renewables planning through issuing updated planning policy guidance and supporting renewables planning initiatives.

—  We have created a new business support team—Renewables UK—to help UK industry capture as much of this market as possible.

—  Research and innovation investment will play an important role in ensuring that sustainable technologies and solutions are developed and implemented which enable the targets to be met.

  Note:

  Prior to the implementation of the Renewables Obligation and the launch of the capital grants schemes, development of renewable energy in England and Wales was driven by the Non-Fossil Fuel Obligations (NFFO). NFFO provided a guaranteed market for electricity generated under each contract and priced at a premium rate. Scotland and Northern Ireland had implemented similar mechanisms to promote renewable energy generation within their region. The Scottish Renewables Obligation (SRO) preceded the Renewables Obligation (Scotland) Order in Scotland and the Northern Ireland NFFO (NI-NFFO) applied in Northern Ireland.

  By 2005-06, we will work with industry to bring forward renewables technologies into the marketplace, supported by well-targeted Government funding. We are currently conducting a review of renewables innovation spending across Government. This review will consider the level of Government spend on renewables innovation to achieve the 2010 target and create options for achieving the 2020 domestic emissions target and putting UK on a path to the cutting carbon emissions by 60 per cent by 2050. It will examine which are the key renewable technologies for the delivery of the 2010 renewables target and the 2020 emissions target, what are the barriers to the development and deployment of these key renewables technologies and what Government measures are needed to facilitate delivery of the targets and aspirations, and the level of resources needed. We will let the Committee know the outcome of the review at the end of this year.

  Research Council investments of £28 million for basic and strategic research in support of sustainable energy will help to identify and develop "whole system" solutions to meet 2010 and longer term targets. This includes the establishment of UK Energy Research Centre and National Energy Research Network (to provide a focal point and greater co-ordination of energy researchers across the UK). The "Towards a Sustainable Energy Economy" programme builds on ongoing Research Council investments in "blue skies research" and in programmes such as SuperGen, Carbon Vision (in collaboration with the Carbon Trust), the Sustainable Technologies Initiative and the work of the Tyndall Centre. The SuperGen programme has provided support for research consortia in: Marine Energy; Hydrogen Energy & Storage; Networks and Power Control; and Biomass & Biofuels. Further research consortia are being established in: Photovoltaic Technologies; Plant Life Extension Technologies; Fuel Cell technologies; Energy Storage & Recovery; Distributed Systems; and Organic and Sensitised Dye PV. In recognition of the socio-economic challenges faced in developing renewable energy, ESRC has commissioned relevant work through various programmes including the Sustainable Technologies Programme and the Centre for Social & Economic Research on the Global Environment. Details of technologies and related issues being addressed by Research Council through these investments in energy research are set out the separate submission from RCUK.

  The Committee has indicated an interest in four particular aspects and the remainder of this memorandum is structured as a response to these points.

1.  COST-EFFECTIVE TECHNOLOGIES AVAILABLE NOW FOR THE GENERATION OF RENEWABLE ENERGY, AND THOSE THAT ARE LIKELY TO BECOME AVAILABLE IN THE NEXT 10 YEARS OR SO

Wind Energy

  Both onshore and offshore windfarm development will be critical to the achievement of the Government's 10 per cent target for renewables generation by 2010. Wind turbine technology has now evolved to a mature stage and is an extensively deployed technology having reached fully commercial status. Its technological status, together with its availability, mean that it will inevitably make a major early contribution to the Government's renewable energy targets.

  The UK was initially slow to develop its resource, despite having one of the best wind resources in Europe. However, since the introduction of the Renewables Obligation in April 2002 capacity has increased significantly and this is illustrated by the fact that rate of deployment in 2002 was the highest ever achieved in the UK with over 87.7MW of capacity installed bringing the total capacity to 522MW. Against this background the BWEA reported that a total of 525MW won planning permission in 2002, almost exactly the total amount built during the previous 11 years. This trend has continued into 2003 with current UK wind energy capacity totalling 547.6MW with consent having been given to projects, both onshore and offshore totalling over 900MW. With a total electricity demand of around 400TWh in 2002, 1,474GWh was supplied by wind energy, representing 0.37 per cent of total electricity demand. While wind energy therefore only contributes to 0.4 per cent of electricity currently, the new projects both approved and in the pipeline are expected to make up the bulk of the growth towards the 2010 target.

  The major barrier to onshore wind deployment is in the area of planning with issues relating to civil and military aviation interests and public perception major contributors. Work to help understand the effects of wind turbines on radar systems together and investigation of measures to mitigate the effects of wind turbines on radar is currently being undertaken. This is discussed in more detail below.

  The major barrier to offshore wind is the higher cost and uncertainties related to the operating environment. The Government has put in place a number of measures to address these issues in the form of offshore windfarm capital grants designed to bring forward a number of pre-commercial demonstration projects and an enhanced programme of industry based research and development being provided under the DTI's New and Renewable Energy Programme. Research and Development in the offshore area has been particularly focused on foundation design and installation techniques.

  The Government is sharing the risk to meet the challenge of offshore development. The DTI launched its Offshore Windfarm Capital Grants Scheme in October 2001 with the aim of supporting the early deployment of a significant number of offshore windfarms. The scheme to date has offered £102 million to assist industry to build the first offshore wind projects with seven successful developers so far having received grant support totalling £64 million. The first of those projects, North Hoyle, off the coast of North Wales, is expected to commission in November.

  Capital grants and the Renewables Obligation have a big role to play in providing a favourable economic climate for offshore wind. But it is also important to have the right planning regime in place. This is not only to ensure that Government is able to make the right decisions about consent applications in a timely manner, but also to enable efficient development of the onshore transmission system to link up to new offshore electricity generation. The Government is therefore addressing this issue for the second round of offshore consents. In addition, the Government will be introducing legislation as soon as the legislative timetable allows to enable renewable energy development beyond territorial waters. Draft legislation is currently being prepared. The purpose of the draft legislation will be to provide a comprehensive framework to give developers the legal certainty necessary to develop renewable energy projects beyond territorial waters, and to enable Government to regulate such development.

Wave and Tidal Energy

  Electricity generation from waves and tidal streams, if it can be successfully developed, offers the prospect of a more reliable source of renewable energy than wind, the UK having one of the best marine energy resources available. Wave and tidal technologies are still further from commercialisation than other renewable energy sources, with a number of competing designs.

  In general, shoreline wave energy conversion is technically developed but not fully commercially proven. It is still some way from being fully competitive commercially. Furthermore, there is at present insufficient operating experience, and schemes need to demonstrate long-term performance and reliability. Offshore wave technology is still mainly at the research and development stage. Much work is needed to tackle key development issues, reduce uncertainty and verify the concepts, although the leading developers are now beginning to progress to large-scale demonstrations of their technologies. However, the UK has recently made significant progress with development projects aimed at harnessing the energy in marine currents with two full-scale demonstrations to date.

  Since the Government decided to introduce support for a wave energy programme in 1999—the programme was expanded in 2000 to include tidal technologies—great strides have been made in the development of marine systems. The DTI has provided support under the New & Renewable Energy Programme, with in excess of £12 million having been committed to research and development in this area. Currently the DTI's programme supports seven projects which have or will lead to full-scale demonstrations. It is important that we ensure that this progress is sustained and that is why a further £7 million has been set aside (subject to state aids approval and identified need) over the next two years to support development in this area. The need will be considered in the course of the renewables innovation review. Additionally, DTI has provided support of up to £1.2 million towards the construction of a Marine Energy Test Centre in Orkney. The Scottish Executive has committed £2.125 million to the centre this financial year. The centre will be invaluable in the research & development and commercialisation of marine energy devices. The centre will commence operation later this year.

  Although the development of these technologies is reducing predicted energy costs, studies have shown that these costs are still not fully competitive with electricity supplied from the grid at today's costs. Further innovation is needed to overcome the technical challenges that hinder this competitiveness. Although a number of the current developers have plans for large scale pre-commercial demonstrations of their technologies by 2010 it is unlikely that these technologies would be deployed commercially on a large scale until later.

  Despite these technologies being further from commercialisation than some others, they do have the potential to provide a significant contribution to the overall energy mix in the longer term (post 2010). The Government is determined that they should play as full a part in the expansion of generation from renewables as possible.

Hydro

  Hydro power is a commercial technology and accounts for a significant proportion of our renewable output. Total electricity generated from renewables in 2002 amounted to 11,444GWh, 41 per cent of which was from large-scale hydro generation. The position in the UK is one where most of the economically attractive sites for hydro schemes have already been exploited and highlighted environmental concerns are limiting the further deployment of this technology.

  Despite this position there is evidence that there are plans for new hydro and that many existing hydro stations have been refurbished, improving their output and extending their operating life by many years, through refurbished hydro up to 20MW capacity being eligible for the Renewables Obligation.

  The Government is continuing to fund research and development under the DTI's New and Renewable Energy Programme, mainly into the environmental issues connected to hydro schemes: this is the main barrier to new developments.

Biomass

  Unlike some other renewables, biomass is capable of providing continuous output once a robust fuel supply infrastructure is in place. However, biomass is burdened by the necessity of simultaneous development of energy recovery technologies and fuel supply (eg energy crops). The Government expects the combination of the Renewables Obligation, capital grants and co-firing to stimulate interest in bioenergy. This is further supported by grants made available through Defra's Energy Crops Scheme. More modest grants are available to farmers in Scotland, Wales and Northern Ireland through the Forestry Commission/Forestry Services Woodland Grants Scheme. Defra will launch the Bio-energy Infrastructure Scheme in 2004, following State Aids Clearance.

  NFFO Orders in England and Wales relating to biomass projects have so far delivered around 70MW in operating capacity. The most significant development is the 36MW straw-fired plant located near Ely, Cambs. Commissioned in 2000, this is the largest straw-fired generator in the world. Other bioenergy projects utilise a range of fuels including poultry litter and agricultural wastes. Development of projects under NFFO has been disappointing for a mixture of reasons: most notably availability of fuel supply (in some energy from waste projects), economics and planning. We are working with Defra to address these issues.

  Despite its recent problems it is hoped Project ARBRE (Arable Biomass Renewable Energy) in Eggborough, North Yorkshire will be brought to commercial operation by the plant's new owners. Following the setback in August 2002 when the plant was put into administration, there is renewed optimism that the project will become the UK's first commercial power station to be fuelled entirely on wood. The project is expected to generate around 8MW exported to the grid, with a significant portion of locally-grown energy crops in the fuel mix.

  Electricity generation plant fired by a fuel supply of 98 per cent or more (by calorific value) biodegradable material is eligible for the Renewable Obligation, regardless of the energy conversion technology used. The conversion of mixed waste into fuel oil or gas by advanced conversion technologies like gasification and pyrolysis is also acceptable under the Obligation, although Renewable Obligation Certificates are only issued for electricity generated from the biodegradable fraction. Mass burn incineration of mixed waste is excluded from the Renewable Obligation. Eligible biomass fuels are confirmed in the Obligation.

  To help encourage the development of energy crops, the co-firing of biomass with fossil fuels, subject to inclusion of energy crops from a specified date, is permitted under the Obligation. We are currently out to consultation on our proposals for the revision of the detailed co-firing provisions and this consultation closes on 21 November. The proposed changes aim to get our co-firing and energy crops policy back on course, without destabilizing the Renewables Obligation. The consultation paper is at http://www.dti.gov.uk/energy/renewables/policy/roorderamend2003.pdf

  The Bioenergy Capital Grants Scheme was launched in February 2002. The £66 million scheme, jointly funded by DTI and the National Lottery's New Opportunities Fund, was competitive and over-subscribed. Twenty one projects have been offered grants under the scheme, which range from the installation of heat cluster technology and small-scale combined heat and power (CHP) with electrical output less than 1MW, to larger scale projects over 20MW deploying state-of-the-art thermal combustion and advanced conversion technology. It is not known yet whether all these grants will be taken up. A priority of the scheme is to increase usage of energy crops, which must account for at least 50 per cent of the fuel mix in some technology areas. Under the DTI tranche, developers are required to spend the grant within three years once all consents are in place. Developers offered support by NOF have until 2010 to execute spend.

  Support for fundamental research and development is set to continue through the £19 million DTI's New and Renewable Energy Programme at least up to 2004-05. Already, the programme has supported important work to expand our knowledge of energy crops and advanced conversion technologies and grants will be offered to new projects that will further the potential of biomass.

Photovoltaics

  Photovoltaics (PV) are not yet cost-effective in the UK, except in a number of niche applications, eg navigational aids, remote monitoring, consumer products, but by the end of the 10 year Major PV Demonstration Programme in 2012 it is hoped that they will be approaching commercial viability in building related applications. The PIU Renewables Strategy Review estimated that costs might have fallen to 16p/kWh by 2010, which would give a reasonable payback period to consumers.

  Potentially any south facing roof or wall could be used for PV, but the practical resource is limited by the amount of shading and other obstacles. Even so, the available roof/wall space is sufficient to generate 75TW hours per year. Only a fraction of this resource has been used to date because of the cost of the technology, and barriers such as planning and connection which are now being addressed.

Fuel cells

  Fuel cells are an energy conversion technology which may utilise renewable or non-renewable sources of energy. Fuel cells generate electricity from the electrochemical reaction between hydrogen and oxygen, with water vapour as the only waste product. The oxygen is usually taken from the air. The hydrogen may be generated from the reformation of fossil fuels such as natural gas or by the electrolysis of water. Some types of fuel cell are capable of carrying out reformation internally, without the need for a separate reformer, and may be regarded as running directly from natural gas. Other types may use methanol as a fuel. If hydrogen is generated from electrolysis and the electricity is generated using only renewable energy sources the result is a carbon free energy chain, often referred to as "the hydrogen economy".

  Fuel Cells were discovered in 1837 by Sir William Grove and successfully used in the US space missions of the 1960s, but their high costs have precluded terrestrial application until recently. Although costs of the stack and the associated balance of plant need to come down significantly there is growing acceptance that the long promised commercialisation phase is finally underway. However the timing is very dependent on both the type of fuel cell technology and the application. Niche, high value stationary power applications—remote power and uninterruptible power supply (UPS) are beginning to be commercial in some parts of the world. Portable power supplies where fuel cells would replace batteries in consumer products such as mobile phones, laptop computers and power tools are expected to be introduced within the next two to three years. In both these areas there is a clear consumer benefit in terms of the availability and reliability of power which would justify the higher price.

  The first "mainstream" application for fuel cells—where the price of the power would need to be competitive with conventional alternatives—is expected to be stationary power or combined heat and power (CHP) generation. Applications are envisaged at the micro level—individual householder systems, as well as larger systems (200kW—1MW) for blocks of flats, commercial and industrial properties. This would be distributed generation, where the electricity would be generated near the point of use (avoiding transmission losses). Such systems are currently being demonstrated (particularly in Europe) and fully commercial systems are expected within the next five years.

  There is some potential interest in the use of fuel cells coupled with electrolysers as a means of energy storage for intermittent renewables such as wind or photovoltaics, but success would be critically dependent on the economics.

  The use of fuel cells to replace the internal combustion engine in passenger cars represents the greatest techno-economic challenge faced by the technology, and most industry experts do not expect to see significant penetration of fuel cell vehicles to occur before 2015-20. Limited demonstrations, particularly of buses and depot serviced urban delivery vehicles are likely before then and a limited market for such vehicles could develop if assisted by regulation on urban air quality.

  Fuel Cells UK was launched in May 2003. It will help the emerging UK sector by helping promote and raise the profile of the fuel cell industry in the UK. It will also act as a central contact point for national and international companies and the research community. It will be led by a steering group including representatives from leading UK fuel cell companies, Government and academia. Fuel Cells UK will work closely with new and existing initiatives in the UK and across the world.

2.  THE NUMBER OF SITES POTENTIALLY AVAILABLE FOR SUCH TECHNOLOGIES, AND THE OBSTACLES TO TAKING THESE UP IN TERMS OF PLANNING AND OTHER CONSENTS

Planning

  The Office of the Deputy Prime Minister expects, in October, to consult on draft planning guidance for renewable energy projects (Policy Planning Statement 22) in a consultation exercise. During the consultation process, we will develop a good practice guide for planning authorities as a companion volume to PPS 22. The final version of PPS 22 will be published in May 2004, to encourage local authorities and developers to use renewables and encourage a strategic approach to the deployment of renewables projects in the regions.

  The Scottish Executive has already revised Scottish planning guidelines NPPG6 in 2000 and PAN45 in 2002 to give clearer advice to renewables developers.

  Scottish Ministers will be consulting later this year on the consents procedure for developments of over 50 MW under Section 36 of the Electricity Act 1989 in order to improve the process.

  Similarly, the National Assembly for Wales has revised Welsh planning guidelines for renewable developers. Planning Policy Wales was issued in March 2002. A Tripartite Working Group, involving officials from the DTI, the Wales Office and the National Assembly for Wales is currently evaluating the bid by the National Assembly for Wales for the consenting powers under section 36 of the Electricity Act 1989 to be transferred from central Government to the devolved administration.

Statistical information on planning

  We are working to improve statistical information on renewables planning in the UK. There are currently two main sources of Government statistics on the status of planning applications: information collected as part of the DTI's renewables programmes scheme and information collected by the DTI and the Scottish Executive on consents given under Section 36 of the Electricity Act and (for England and Wales) the Transport and Works Act 1992.

  The information from the DTI's renewables programmes scheme is collected under two main categories—NFFO and non-NFFO. These categories cover most of the applications made under planning procedures for onshore renewable technologies. Total figures given in Table A below show the current status (approved, refused, withdrawn or to be determined) of onshore applications made in the years 2001, 2002 and 2003 in the UK.

  Information on the progress of applications for all offshore and some onshore technologies is categorised under Section 36 Onshore, Section 36 Offshore and Transport and Works Act 1992 Offshore. Applications for onshore developments of over 50MW are considered under Section 36 of the Electricity Act 1989. Offshore developments over 1MW require consent either under Section 36 of the above Act or the Transport and Works Act 1992. The Transport and Works Act applies in England and Wales but not Scotland. Table B below gives information on the current status of applications made under these Acts.

  For the three years in question, the success rate for NFFO (SRO & NI-NFFO) projects is highest in Scotland (73.33 per cent), followed by England (60 per cent), Wales (42.86 per cent) then Northern Ireland (0 per cent). The percentages for refusals are 8 per cent (England), 0 per cent (Scotland), 42.85 per cent (Wales) and 0 per cent (Northern Ireland).

  When considering application success/failure over the past two to three years, it should be borne in mind that we are effectively in a transition from NFFO to non-NFFO (in effect, to the Renewables Obligation in England Wales and Renewables Obligation Scotland in Scotland. Northern Ireland does not have a Renewables Obligation in place) applications and many of the latter will have been submitted, but have yet to be determined.

  Table C below gives a longer-term view, covering NFFO and non-NFFO projects, for the period from 1990 to 2003.

  For NFFO (SRO & NI-NFFO) projects, the success rate of applications is highest in Northern Ireland (95 per cent) followed by England (82 per cent), Scotland (74 per cent) and Wales (61 per cent). The percentages for refusals follow a similar trend (0 per cent, 10 per cent, 9 per cent, 23 per cent).

Ministry of Defence action

  We will report progress on Ministry of Defence action to improve windfarm approval rates in February 2004. The Ministry of Defence have already introduced a helpline for developers and are working to introduce new, faster processing arrangements for applications. By March 2004, the Wind Energy, Defence and Civil Aviation Working Group will revise the current interim guidelines for windfarms into a permanent set of guidelines.

Regional assessments

  The initiative for new power station proposals clearly rests with private sector companies. The Government seeks to set a framework and create a favourable climate against which proposals needed by the market can then come forward. The Government seeks to provide an overview. Of the renewable technologies the most developed has been hydro and onshore wind energy. In addition to reviewing the planning guidance the Government has also had carried out regional assessments. This work by OXERA for DTI identified the potential of each region and was intended as a starting point for developing regional targets. Scotland and Wales and some regions have taken this further and developed sub-regional targets. The assessments for Scotland and Wales and for each region were:

	TWh by 2010	% of 2010 10% Target
Scotland	3.6	11.1
Wales	4.4	13.4
East of England	4.3	13.3
East Midlands	2	6.1
London	0.6	1.9
North East	2	6.3
North West	3.2	9.7
South East	3.3	10.1
South West	2.5	7.8
West Midlands	2.9	8.9
Yorkshire & Humberside	3.6	11

  We expect developers to bring forward proposals against the backcloth of these assessments; the Government will monitor the situation. The Government does not identify sites within these regions and there is no list of potential sites for developers. Such an exercise would mean the Government assuming a commercial expertise it does not have and at the same time effectively pre-judging any subsequent planning application. Inevitably some proposals will be rejected by the planning system but by building in regional commitment, by giving a clearer picture of potential and establishing the role that regional areas can play in creating the low carbon economy, there is real prospect of shifting the debate from one of "we need renewables here/we don't need renewables here" to one of what is the appropriate location. Planning will still be a concern, there will always be those totally opposed, and Government will need to continue to work at improving the climate against which renewables proposals come forward.

  The first round of offshore wind farm development could bring forward 1.5GW of generating capacity if all the projects go ahead. To date seven projects have received development consent with a further six projects under consideration. The developers chose their own site and applied to the Crown Estate for an agreement for lease which gave them security over the site. These lease agreements are finalised once the developer has obtained the necessary consents for the project from the relevant Government Departments.

  The experience of the first round showed that developers are keen to put in place wind farm projects offshore. To optimise further exploitation of the potential wind resource in a responsible manner the DTI has adopted the strategic planning framework which was outlined in its November 2002 consultation document "Future Offshore—a strategic framework for the offshore wind industry". The main element of this framework is that wind farm development will be focused in defined areas of the sea. This enables the potential impact of wind farms in these areas on the environment and other marine users to be evaluated before being offered for development. This approach also facilitates greater efficiency in the provision of offshore transmission cabling which could be shared by several projects in the same area. The allocation of sites to developers within these broad areas will be made on the basis of competitive bidding rounds.

  The DTI has selected the Greater Wash, Thames Estuary and the North West (from the North Wales coast to the Solway Firth) as having the greatest potential for offshore wind farm development, based on wind resource, water depth and access to onshore grid connections. A strategic environmental assessment of these three areas has been undertaken to assess the potential impact of development on a range of environmental factors.

  As a result of this evaluation the DTI requested the Crown Estate in July 2003 to conduct a second round of offshore wind farm site leasing. Developers have been invited to tender for projects in the three strategic areas but areas of special environmental sensitivity have been excluded from the tender round, bearing in mind the much larger scale of development proposals which are being planned for the second round. This approach has the benefit of excluding from development sites of particular sensitivity early in the planning process so that developers do not waste resources on projects which are unlikely to receive planning consents.

  The DTI has commissioned a study of the UK's total offshore renewable energy resources which encompasses wave and tidal resources as well as wind. This study will identify other locations which offer promise for future development and will inform decisions about future strategic environmental assessment programmes. It is possible that future licensing rounds for offshore wind farm projects will be arranged in the three strategic areas which are currently being offered for development.

Rate of build

  Annex A sets out the position on projects for which consent has been applied. It is not entirely comprehensive but demonstrates that, taking England, Wales and Scotland together, there are projects totalling over 3,500MW in the pipeline. Of these, projects totalling over 2,200MW have received consent, and of those, five projects with a total capacity of 220 MW are currently under construction. These include the first two offshore wind farms. As the tables show, more projects—in particular offshore wind farms—are expected to start construction in 2004 and 2005.

  We are working on a further analysis and this together with a report on the conclusions of the renewables innovation review (referred to on page 2) will be sent to the Committee.

Manufacturing and Installation Capacity

  We are supporting the development of a UK supply chain in the renewables sector. The baseline level of employment in the sector will be determined by a Renewables UK Supply Chain Gap Analysis, which is underway. This will identify UK renewable energy industry's strengths and weaknesses, ranking gaps and identifying priority areas to be addressed by key stakeholders and diversification opportunities for industry. It will also provide estimates of future jobs per MW for both mature and emerging technologies, skills requirements, design, manufacturing and service capability, investment and R&D needs and other factors that will influence growth. The report will be released on 18 November and we shall send the Committee a copy.

Providing the Supporting Infrastructure (Such as Access Roads and Extensions to the Electricity Network)

  The provision of an adequate electricity infrastructure, both distribution and transmission, is of critical importance to the application on renewable technologies and the achievement of the Government's renewable targets and aspirations.

  The Government is committed to introducing the British Electricity Trading and Transmission Arrangements by April 2005 and legislation will be brought forward as soon as Parliamentary time allows. BETTA is necessary to enable all renewable generators to have access to a GB wide market through a transmission system operator that is independent of generation and supply interests. BETTA also provides a mechanism to ensure that the costs of investment in the grid infrastructure, including that needed as a result of our renewables targets, can be recovered appropriately.

  The work of investing in the electricity distribution networks is being taken forward by the companies, and is being considered by Ofgem as part of its ongoing work of setting the new distribution network operator price controls, which will apply from 1 April 2005. The DTI and Ofgem, together with the transmission companies, have established the Transmission Issues Working Group (TIWG). The TIWG commissioned two studies that identified significant infrastructure upgrades that may be required as a result of future renewables development proposals. The role of the TIWG is also to identify, well in advance, the issues required to be resolved in order to meet the needs of the Government's renewables targets.

  Much of the renewable generation such as onshore wind, early offshore wind and biomass, required to meet Government targets will be connected at distribution voltages, ie 132kV and below. Currently, distribution networks are designed to distribute energy from the transmission system to customers, and are not designed to facilitate the connection of large amounts of renewable and other small generation. There is a need, therefore, to transform the passively managed radial nature of the existing distribution networks into actively managed networks which can accommodate the bi-directional energy flows and other issues associated with significant amounts of generation.

  Resolving these technical issues will require considerable innovation by network operators and owners. To encourage this innovation and overcome a number of non-technical issues, we must ensure that distribution network operators have adequate business incentives to connect generation to their networks. In addition, there is a need to ensure that appropriate connection charging arrangements are developed so that unnecessary barriers to the connection of generation are removed. Ofgem are currently addressing these issues through the 2005 Distribution Price Control review and their review of connection charging arrangements.

  Progress in overcoming existing technical, regulatory and commercial barriers to the development of distribution-connected generation is being monitored by the joint DTI-Ofgem Distributed Generation Co-ordinating Group.

  Whereas most renewable generation is likely to connect to the distribution networks in the medium term, much of this will be in remote locations and there is a need to ensure that the electricity transmission network is capable of handling the energy flows implied. In addition, future offshore developments may be connected directly to the transmission network via offshore collector "hubs". The DTI, together with Ofgem and the network operators, is currently monitoring via the TIWG the development of the transmission network needed to ensure the achievement of the Government's renewable targets and aspirations.

3.  LOGISTICS OF PROVIDING STAND-BY CAPACITY FOR TIMES WHEN INTERMITTENT SOURCES ARE NOT AVAILABLE

  The Government's renewables targets and Energy White Paper aspirations are likely to be met predominately by wind generation, which is intermittent in nature. What capacity value should be assumed for wind generation is the subject of some debate. It is dependent on the level of penetration.

  Key research is continuing on storage technologies that will support intermittent generation. The DTI is funding research into the impact of the Regenesys storage technology on facilitating the integration of intermittent renewables.

  The fact that UK wind farms sites are dispersed throughout the country, and are located in areas with a high wind resource, will tend to reduce the overall intermittence effects of wind generation. The additional balancing costs associated with intermittency will vary with penetration—NGC have recently estimated additional balancing costs at round £1.5/Mwh and £2.38/MWh for 55 and 105 wind penetration respectively.

  It should be remembered that even traditional generating plants, such as gas or nuclear, undergo occasional shutdowns for essential maintenance. This type of generating loss is more difficult to cope with than the intermittency of wind, because the amounts of electricity involved are typically of a greater magnitude. When this type of shutdown is compared to the intermittency of dispersed wind farms, then the variation in output from wind generation is minimal.

  The capacity factors of all generation stations vary, and are taken into account in estimating the contribution made by each technology. In the UK, it is estimated that the capacity factor for wind farms varies from about 35-40 per cent at low wind penetration to something like 20 per cent for a wind penetration of 26GW. The capacity values of plant is a significant issue in determining overall nation plant margin requirements and NGC have estimated that, maintaining traditional standards of generation security assuming that 20 per cent of electrical energy requirements where met entirely from wind, would require a plant margin of some 49 per cent. The capacity factor of wind generation has little or no bearing on the energy produced by that generation or its contribution in terms of reduction in carbon emissions. Energy produced by wind generation is dependent on availability and load factor and is not influenced by some notional capacity factor or contribution.

  Analysis for the White Paper shows that the electricity system could cope with an increasing reliance on renewable generation. But the study also highlights that as the proportion of intermittent generation increases, the cost of maintaining stable supplies also increases. We accept that these costs need to be managed and new ways found to minimise them. We are already funding research into this through the DTI's Renewable Energy and the Engineering and Physical Sciences Research Council's Supergen programmes. As part of our current capital grant programme we allocated in 2002 an additional £4 million to facilitate the demonstration of new control, storage and metering technologies.

  It will be necessary to ensure that future electricity market and trading arrangements include incentives to bring sufficient plant capacity forward in order for reliability of supply to be maintained.

4.  INTERMEDIATE MILESTONES THAT SHOULD BE SET ON THE WAY TO ACHIEVING THE WHITE PAPER'S AIMS

  The White Paper sets out a detailed and long-term strategy for achieving its objectives including over 130 commitments and the means for delivering them.

  We have published an implementation plan on the Sustainable Energy Policy Network web site http://www.dti.gov.uk/energy/sepn/index.shtml. This sets out details on the 10 individual workstreams (one of which covers renewables) and lists some 100 key milestones for implementing the commitments in the Energy White Paper as well as the names and contact details of the officials responsible. The website is updated regularly to show progress on implementing the milestones. The White Paper already sets out the steps to be taken to accelerate the take-up of renewables. We expect the industry to respond to the framework established by the Government and demonstrate they can achieve our goals for renewables at an acceptable cost.

  The key intermediate milestones in the renewables workstream are described earlier in this memorandum. These concern both developing renewable technologies, and UK capacity, and addressing the barriers to the deployment of renewables.

  We are currently consulting on a technical review of the working of the Obligation to ensure that the Obligation is working as originally intended, by focussing on adjustments to the co-firing rules that allow power stations to burn biomass alongside fossil fuel in order to increase electricity generation from energy crops through co-firing. The technical review also addresses the scope for assisting solar and other micro generators. The consultation document can be found on the DTI website at www.dti.gov.uk/energy. In 2005-06, we shall review progress on the Renewables Obligation and will elaborate a strategy for the decade to 2020, including the impact of the Emissions Trading Scheme.

  The table shows approvals from November 2000 (when the stricter consents policy was lifted) and state of play on applications for stations over 50MW.

  2 TWA Order = Transport and Works Act Order