11.1.  We have already drawn attention to the Government's long-term goal of putting the United Kingdom on course to reduce emissions by 60 percent from 1990 levels by 2050—a reduction in emissions to around 65 MtC/year, compared with today's CO₂ emissions of around 150 MtC/year. Achievement of this hugely challenging goal will only be possible if there is a well-resourced and well-co-ordinated programme of research and development.

The level and co-ordination of energy research

11.2.  It is regrettable that the papers supplied by the Government and Research Councils UK (RCUK), as well as oral and written evidence from other witnesses, fail to provide a clear picture of the United Kingdom research effort. For instance, annual direct Government funding for energy efficiency R&D in 2002-03 is stated to have been just over £10 million, though this was channelled through no fewer than five departments (Defra, DTI, ODPM, the Department for Transport and the Department for Education and Skills), as well as agencies such as the Carbon Trust, Energy Saving Trust and Environment Agency (p 26). However, this figure conflicts with IEA data, according to which United Kingdom spending on energy conservation R&D in both 2002 and 2003 was zero.

11.3.  Further funding is channelled through the Research Councils. The "Towards a Sustainable Economy" programme was assigned £28 million in the 2002 Spending Review, of which around £15 million will be used to fund the United Kingdom Energy Research Centre (UKERC) over five years from April 2004. The Tyndall Centre for Climate Change Research is another major joint Research Council project, with funding of £10 million over five years. The Engineering and Physical Sciences Research Council (EPSRC) jointly funds, along with the Carbon Trust, the "Carbon Vision" programme of research into low carbon innovation, to the tune of £14 million. Further funding streams are provided independently by the EPSRC, the Economic and Social Research Council (ESRC) and Natural Environment Research Council (NERC). Overall, we can only echo the conclusion of the Council for Science and Technology, that:

Funding of renewable and low-carbon energy initiatives in the UK is too fragmented. We recommend that there be institutional changes aimed at coordinating research funding, achieving greater leverage from participation in international programmes and evaluating the outcomes of government investment in the energy sector.[102]

11.4.  In the course of our inquiry, a significant increase in funding was announced as part of the 2005 Budget statement:

"Funding for energy R&D from the Science Budget will rise from a current level of £40 million per year to £70 million per year by 2007-08, with additional support for business via the DTI Technology Programme and The Carbon Trust. To underpin this investment, the Government will establish a UK Energy Research Partnership, bringing together public and private funders of energy research to enhance opportunities for collaboration and identify shared priorities for research."[103]

11.5.  This increase in funding for energy research is welcome—indeed, in our Report Renewable Energy: Practicalities we recommended that the Government review the level of spending on energy research.[104] However, the money already available is funding a wide range of programmes, networks, consortia—and while major initiatives such as the UKERC stand out, it is by no means easy to detect an overall pattern. The Royal Academy of Engineering argued that compared with the United States the United Kingdom funding structure for research was "complicated and horizontally stratified", to the extent that "total Energy R&D spend was not collected centrally in any of the recent UK Government energy reviews"—a point confirmed by the difficulty we have experienced in putting together a coherent picture of research spending. The result, according to the Academy, is that innovative ideas have to work their way up through the different funding source layers, "re-competing for resources at each stage" (p 327).

11.6.  The perception that energy research is unco-ordinated is not a new one—as far back as 2001 Sir David King's Energy Research Review Group recommended the establishment of the UKERC with a view to providing a better focus for research.[105] The Academy recommended that a "high priority" for the UKERC should be the preparation of a clear "roadmap for research". We are therefore pleased to note, both from RCUK's written evidence and from our discussion with Professor Jim Skea, Research Director of the UKERC, that the development of a single "research portal" and "road mapping" of energy research are among its first projects. As Professor Skea noted, such preparatory work is essential if we are to "try to identify future research priorities and the sequence of research problems which need to be solved if you are going to get to certain points in the future in the energy system" (Q 247).

11.7.  However, we are unclear what value the "UK Energy Research Partnership", which was announced in the Budget statement, will bring to the research effort. The proposal seems to have emerged from the blue—none of the evidence we received (which was prepared in the second half of 2004) mentions it. On the contrary, our evidence demonstrates that there are already abundant networks, consortia, partnerships, and so on, as well as the UKERC itself, all seeking to bring together the various funding agencies, researchers, and private companies.

11.8.  In contrast, while we were impressed by the way Professor Skea and his colleagues are going about their work, they are hampered by the nebulous quality of the UKERC itself. Professor Skea, with some understatement, noted that "given the history of energy research in the UK over the last ten to fifteen years or so, the competences that we have are rather distributed geographically". Partly as a result of this, the Centre has no physical presence—it is a "virtual" or "distributed" centre, a term Professor Skea admitted was "almost an oxymoron". Nor does the Centre have a legal personality, with the result that it cannot itself apply for European funds—it simply seeks to facilitate and co-ordinate the work of partner organisations, acting as a "kind of marriage broker". When it was put to him that the Centre, while better than nothing, was not as good as it might be, Professor Skea admitted that this was "a fair way of putting it" (QQ 235, 239, 236).

11.9.  In 2001 Sir David King recommended the establishment of the UKERC. The Centre is now in existence, but its staff are handicapped by the half-hearted way in which it has been established. A "distributed centre", dependent on Research Council support, cannot provide leadership for the many, widely dispersed energy research projects around the country. We therefore recommend that the Government, in addition to the forthcoming review of the first phase of the UKERC's work by the Research Councils, separately consider ways to strengthen the Centre, giving it greater autonomy, a physical presence and legal personality. Additional investment in the UKERC would in the longer term be money well spent.

11.10.  We are mystified by the announcement that the Government intend to establish a "UK Energy Research Partnership". We already have the UKERC, Research Councils, the Carbon Trust, and Regional Development Agencies. We believe that it would be more fruitful to strengthen the role of the UKERC, and that no case has yet been made for adding another layer of bureaucracy to the administration of energy research. We therefore look to the Government to explain the benefits of this proposal in greater detail.

11.11.  Even the extra funding announced in the Budget represents a modest increase from a very low base. Funding fell dramatically after the privatisation of the energy industries in the 1980s—the Council for Science and Technology note that by 2003 it had fallen to around five percent of the 1974 level.[106] IEA data show that by 2001 (the last year for which complete figures are available) United Kingdom spending on energy research, at just over £30 million, was little more than half that of Sweden, and about a tenth that of France. In contrast, spending in both Japan and the United States was of the order of US$3 billion. As a percentage of GDP, United Kingdom spending on energy R&D, which included no spending at all on energy conservation research according to IEA figures, was markedly lower than that in any of its major competitors, as is illustrated in Table 2. In the same year Sir David King's Review recommended that "Spending, over time, should be brought more in line with that of our nearest industrial competitors in Europe".

11.12.  Providing additional funding will only yield results if there is a strong research base in place. Professor Skea summed up the current position: "I do not think we have the capacity to double or triple our research funding in this area overnight and for there to be sufficient people there to carry it, but if there is a gradual increase in funding I think there are ways of … [improving] the effectiveness of our research". In particular, new researchers could be attracted from parallel fields, for example in materials research, while established skills could be brought from overseas. At the same time, Professor Skea emphasised the importance of "beginning to develop the courses" and getting post-graduates to start up in the field (Q 267).

11.13.  We welcome the increase in funding for energy research and development, from £40 million to £70 million by 2007-08, which was announced in the 2005 Budget statement. However, we note that funding for energy research in the United Kingdom will still be at a very low level compared to international competitors, particularly where research into energy conservation is concerned. Funding must rise much further if the Government's ambitious energy policy objectives are to be achieved.

11.14.  We therefore recommend that the Government signal their long-term commitment to a progressive increase in funding for energy research to at least average IEA levels as a proportion of GDP by 2020. We believe such a commitment is essential in order to encourage new researchers to enter the field, and to stimulate the development of the energy research base at all levels.

Research priorities

11.15.  The Government identified two kinds of research that would be necessary in the longer term: first, "incremental R&D", designed "to reduce the capital cost and transaction costs associated with existing energy efficiency technologies, and accelerate existing technologies". Such incremental R&D—which in reality will be as much a matter of development and demonstration as of original research—should have timelines of "3-5 years". Secondly, there will have to be "step change R&D", bringing forward "pioneering technologies which have potentially a major impact in the long term". Such research would have a lead time of "10-20 years", and examples cited by the Government included "integrated process control systems for low carbon buildings and new low carbon products"—related to both power generation and use (p 26).

11.16.  It is not the purpose of this report to speculate on possible "step-change technologies", though we are conscious that there are research programmes which look at such timescales. As RCUK pointed out, one of the major Carbon Vision projects is a £5.4 million "Buildings for Low Carbon Communities" consortium, which began in October 2004, and is intended to demonstrate how emissions from buildings can be reduced by 50 percent by 2030. Looking still further ahead, the Tyndall Centre sponsors research, co-ordinated by the Environmental Change Institute in Oxford, under the heading "the 40 percent house", which seeks to identify ways in which the RCEP recommendation of a 60 percent reduction in emissions by 2050 could be achieved in the domestic sector.

11.17.  Yet while researchers consider long-term strategies for achieving radical reductions in emissions from buildings, which make up half of emissions, the "incremental" phase of research—testing materials, insulation, construction techniques, and building up links with the construction industry, so that from development and demonstration such technologies can move to general commercial deployment—appears to be neglected. Dr Wyatt, Chief Executive of the Building Research Establishment, provided a devastating summary of the current position: "We are now really the only country in Europe—with 21 equivalents across Europe—and there are equivalents in Canada, Australia, New Zealand or wherever—we are the only country in the world where there is no co-ordination of … applied research … working with the construction industry to the industry." (Q 02)

11.18.  Dr Wyatt's description of how this situation has arisen was a damning indictment of the lack of joined-up Government. After the 2001 general election responsibility for funding construction research was moved from the Department for Transport, Local Government and Regions to the DTI, on the basis that "construction was an industry like any other industry". Since then the DTI has rationalised its sponsorship of research, bringing it under a single Technology Programme, which, as Dr Wyatt put it, is more concerned with "break-through science" rather than applied science. The result is that the BRE, as the largest centre of applied construction research, is "simply told we are as welcome as the aerospace industry to bid in to the nano-technology programme, and if that is unsuitable, that is hard luck". The result is that Government funding has been withdrawn from around 85 percent of relevant research projects.

11.19.  By means of Questions for Written Answer we have elicited figures for Government funding for applied construction research, which bear out Dr Wyatt's claim of a dramatic fall in funding following the move to the DTI in 2001, and in particular following the termination in March 2002 of the BRE Framework Agreement that eased the BRE's transition into the private sector. The figures given are in Table 3.

11.20.  These are shocking statistics. And as Dr Wyatt pointed out, this has happened with "no policy decision, no policy announcement, and no consultation with the industry. All that has happened is that the portfolio has moved from one department to another, and 85 percent of it fell down the crack in the process." (Q 502)

11.21.  The fall in government funding would not be so damaging if the private sector were in a position to make up the shortfall. Unfortunately it is not. The fragmentation of the construction industry, with 350,000 businesses employing around three million people, means that, in the words of a report by the former Chief Scientific Adviser Sir John Fairclough commissioned by DTLR in 2001, the vast majority of businesses "cannot be expected to engage with a strategic research agenda".[109]

11.22.  Sir John's conclusion even in 2001-02 was that "public investment in construction research seems to be inadequate when compared to the size and importance of the sector and its contribution to the UK's economic, social and environmental wellbeing". He noted that the public sector spent (at that time) some £25 billion per annum on procurement from the industry, and commented that "a relatively small upfront investment in well targeted research should yield very substantial benefit to the public purse". He recommended that available resources for construction R&D were "the minimum that the sector deserves", and called on the Government, as "guardian of the public interest and major client", to "facilitate longer term strategic thinking" about the framework for construction R&D.[110]

11.23.  None of this appears to have happened. Not only has research funding been drastically cut, but nothing appears to have been done regarding the development of a long-term, strategic vision of the priorities for construction research. In answer to a Question for Written Answer, the Science Minister Lord Sainsbury of Turville stated that following the Fairclough report "the Government challenged the Strategic Forum for Construction and nCRISP, the new Construction Research and Innovation Strategy Panel, to develop and own the strategic vision for the sector … There has been some progress towards this goal but more needs to be done".[111] This looks very much like confirmation of Dr Wyatt's claim that the Fairclough report had been "kicked into the long grass" (Q 502).

11.24.  Pressed on what the Government had done to implement Sir John's recommendation that they reconsider their level of investment in construction R&D, a further written answer largely confirmed Dr Wyatt's description, drawing attention to the fact that the DTI had now developed "a number of generic support products within the technology strategy, no longer linked to individual sectors such as construction". The Government also argue that "the onus is … on the sector itself to take advantage of funding opportunities as they arise"[112]. This approach appears to ignore the peculiarities of the construction industry that make co-ordinated, strategic action so difficult. Moreover, the Chancellor's announcement of new funding for energy research made it clear that the money would in part be channelled through the existing DTI Technology Programme, holding out little prospect that the new money will go where it is so urgently needed. In short, the DTI appear to have washed their hands of the matter. In such circumstances there is a strong case for making separate provision for construction research, and assigning responsibility to the ODPM, which has responsibility for planning, building standards and the delivery of affordable, sustainable housing.

11.25.  We were shocked by the decline in DTI funding for applied construction research since 2002. While drawing attention to the importance of incremental research, the Government have withdrawn funding for just such research in a sector that is both central to future energy efficiency improvements, and in which they invest over £30 billion in procurement annually. We therefore recommend that the Government urgently commission a follow-up to Sir John Fairclough's 2002 report on construction research, with a view to identifying ways to rectify the situation, and in particular that they transfer responsibility for construction research from the DTI to ODPM.

103   Budget 2005 (16 March 2005, HC 372), p 65. Back

104   Renewable Energy: Practicalities, pp 29-30. Back

105   Chief Scientific Adviser's Energy Research Review Group (http://www.ost.gov.uk/policy/issues/csa_errg/main_rep.pdf).  Back

106   Council for Science and Technology, op. cit., Annex A3. Back

107   Source: IEA. Totals for both GDP and R&D expenditure have been converted into US dollars using 2001 exchange rates. The strength of the dollar in 2001 means that the absolute figures for R&D expenditure for countries other than the United States are artificially depressed.  Back

108   Source: Written answers (HL Deb., 21 February 2005, WA 178, and 23 March 2005, WA 60). The figure for 2004-05 is based on current commitments at the time the answer was issued (23 March). As this was little over a week from the end of the financial year the figure is likely to be fairly accurate. At that stage commitments for 2005-06 were just £3 million. Back

109   Rethinking Construction Innovation and Research: A Review of Government R&D Policies and Practices, by Sir John Fairclough, 2002, p 11. Back

110   Ibid., pp 28-29. Back

111   HL Deb., 27 January 2005, WA 183. Back

112   HL Deb., 23 February 2005, WA 209. Back