United Kingdom

United Kingdom

Harsh criticism of subsidy policy


British members of parliament (MPs) have launched a hard hitting attack on government spending on renewable research and development (R&D) over the past two decades. The amount of electricity generated by renewables does not justify the £340 million spent by the Department of Trade and Industry (DTI) on its research programme, they say. They also criticise DTI spending decisions on its £54 million wind energy programme.

The criticism comes from the influential Public Accounts Committee, a cross-party group of 15 MPs which monitors government spending. The attack is not directed at renewables in general, but at the way in which large sums of public money have been allocated for their development. The government's R&D programme, operated by the Department of Trade and Industry, currently aims to bring renewables to competitiveness by 2005. In its report the committee acknowledges the DTI has learnt about renewable technologies from the £340 million spent between 1975 and 1993 and accepts the government's duty to meet its international environmental obligations. However, the MPs doubt whether the "relatively modest increases in new electrical generation justify the large sums spent."

The report questions the effectiveness of the Non Fossil Fuel Obligation. This is the government's tool for subsidising renewables with the aim of bringing about 1500 MW (declared net capacity) of new renewable generating capacity by 2000 -- equivalent to 5% of Britain's 1992 electricity supply. Under NFFO, electricity utilities are required to purchase a proportion of their electricity needs from nuclear and renewable sources. In 1992-93, the first year of NFFO support, subsidies for renewables amounted to £30 million, while in 1993-94 the figure had increased to £60 million. The MPs find that NFFO subsidies could reach a maximum of £150 million a year. But they are concerned that less than 50% of projects with NFFO contracts under the first two NFFO orders are producing electricity, and half of the NFFO 2 projects may never go ahead -- mostly because of their failure to gain planning permits.

Turning to wind energy the MPs criticise the direction taken by the DTI and the Department of Energy -- its predecessor on energy matters. Too much time and money have been spent on developing large turbine technology and vertical axis machines. They point out that a quarter of the £54 million wind budget was spent on large-scale technology at a time when there was a commercial interest only in medium or small machines. This was due largely to the influence of the Central Electricity Generating Board, the main British pre-privatisation electricity generator, which tended towards economies of scale. Nearly £6 million went to develop vertical axis machines. The MPs note that "neither of these technologies are currently viable."

The MPs are "disappointed" that 84% of all wind turbine technology operating in the UK today is imported, despite DTI claims that some 70% of the wind budget was devoted to supporting British manufacturers. The role of the Energy Technology Support Unity (ETSU), which manages the DTI's renewables programme, came under fire from the MPs during their examination of DTI witnesses. The committee questioned the unit's independence from the nuclear industry. ETSU is a self-contained business unit within the Atomic Energy Authority. The MPs accept that there is no conflict of interests between ETSU's consultancy functions and the AEA's nuclear activities. However, they emphasise the continuing need for competitive tendering to cover the services it offers and they call for action by the DTI to clarify its role.

The government's hot dry rocks programme was also singled out for censure. The report criticises the DTI for being "reluctant" to drop the programme and for having nothing to show for the large sums spent. "Despite over £40 million being spent (É) there is no technology capable of exploiting this resource at a reasonable cost."

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