energy r&d a uk perspective

Energy R&D

A UK perspective

John Surrey and William Walker

Energy R & D is essential for countries wishing to lessen their dependence on imported oil and to widen their long-term options for energy policy. Accepting that energy R & D must be viewed in an international context, Mr Surrey and Mr Walker review the UK coal, gas, oil, nuclear and electricity supply industries' programmes, examine the role of government and suggest guidelines for a national strategy. They call for more positive direction of energy R & D by the Government in order to balance the interests of the nationalised fuel industries where they conflict or overlap, and to ensure consistency of energy R & D policy with industrial policies.

Mr Surrey is Senior Fellow, Science Policy Research Unit (SPRU), Mantell Building, University of Sussex, Falmer, Brighton, Sussex, BN1 9RF, and the adviser to the Energy Resources Sub- Committee of the UK Parliamentary Select Committee on Science & Technology. He is a member of the Editorial Board of ENERGY POLICY. Mr Walker is a Research Fellow at SPRU.

Responsibility for the views expressed in this article rests with the authors alone. They are not necessarily shared by the UK fuel industries, although we are grateful for the information they provided.

Studies of energy policy have usually been concerned with relatively short-term problems and have rarely included an assessment of energy R & D requirements. ~ However, OPEC's control over oil prices and availabilities, coupled with anxieties about resource depletion, have recently stimulated worldwide interest in R & D as a means of broadening the range of long-term options for energy policy.

Many countries are therefore reappraising their energy R & D programmes. Characteristically the biggest response to the energy 'crisis' has been in the USA, where the Federal government is committed to spending $10 000m on energy R & D over the next five years and has merged its responsibilities in this field under the new Energy Research and Development Agency. 2 France and Germany, 3 each with a relatively poor fuel resource base, are also placing heavy reliance upon technological solutions. But the UK, with ample resources of coal and offshore petroleum to cover her own needs for the next 20 years at least, has so far responded very cautiously with regard to both energy R & D and nuclear power.

In this paper we are concerned with questions related to energy R & D in the UK. What are the main programmes, and are they appropriate to the long-term aims of energy policy? What are the respective roles of industry and government, and is the existing institutional framework appropriate for these roles ?

'Energy R & D' is a somewhat ambiguous term as all technology is energy dependent. We define it as those R & D activities directly related to the exploration and development of fuel reserves; extraction, production, and conversion processes; energy transmission and distribution; energy conservation; and work on health, safety and environmental protection directly related to the supply and use of energy. This definition excludes R & D undertaken by the fuel industries which relates only indirectly, if at all, to energy applications (eg the non-nuclear work of the UKAEA and the non-energy R & D of the oil industry).

As the bulk of identifiable energy R & D in the UK is undertaken in the fuel sector, we shall concentrate on the energy R & D programmes of the fuel industries and the government. Much additional energy- related R & D is undertaken by manufacturing industries, especially those supplying fuel-using plant and equipment; but it is generally cloaked in commercial secrecy and is not separately identified in published R & D statistics. Further energy R & D is undertaken by the

90 ENERGY POLICY June 1975

Table 1. Government funding of nuclear energy R&D, 1969 and 1972 ($ million, at 1962 exchange rates).

1969 1972

USA 286 323

UK 134 124

France 187 166

FR Germany 164 283

Netherlands 20 21

Japan 63 157

Note: Comparable data on nuclear energy R & D were not available before 1969

Sources:USA: 'An Analysis of Federal R & D Funding by Function, 1969-1974', NSF, Oc- tober 1973 Japan: White Paper on Science and Technology, 1974 France, FR Germany, The Netherlands: EEC, 'Le Financement Publique de la Recherche et du De~veloppement dans les Pays de la Com- munaut~: 1968-1972' UK: Data supplied by the Department of In- dustry

1For example, the otherwise fairly comprehensive government review of UK energy policy in 1967 virtually ignored R & D requirements. Fuel Policy, Cmnd. 3438, HMSO, November 1967. 2See Annex 1 for details of the US Federal Energy Budget, 1973 to 1975. 3l-hroughout this article 'Germany' refers to the Federal Republic of Germany. 4For a summary of relevant work in the universities see Energy Research: The Research Council's Contribution, ABRC, September 1974. 5The OECD defines civil nuclear R & D as 'all civil R & D primarily concerned with nuclear sciences and technology, including high energy physics'. Comparison with other statistical sources suggests that nuclear energy R & D comprised over 70% of civil nuclear R & D in all OECD countries except the USA, where (until 1972) government funding of high energy physics was comparatively large.

Energy R & D - a U K perspec t ive

research associations and universities. The importance of this R & D should not be underestimated, even though the expenditures are comparatively small?

Two points need to be emphasised. Firstly, differences in resource endowments (including technological capabilities), industrial structures and political objectives, mean that different countries will have different R & D requirements. Secondly, developing new technologies is only one means of achieving the aims of energy policy. Others, such as changes in pricing and fiscal policies, administrative regulations and greater emphasis on exploration and resource development, may be more effective in inducing changes in the supply and use of energy, especially in the short term.

Although our focus is on energy R & D in the UK, it is necessary to provide international perspectives because:

• The energy crisis is international: many nations will be affected if world energy prices continue to rise and supplies are restricted, or if new energy technologies are developed and applied by one or several big energy-consuming countries.

• Know-how is an international commodity which can be acquired not only by in-house R & D, but also through licensing, exchange agreements and collaborative R & D. Multinational companies also contribute to the international diffusion of technology; and their predominance in the oil industry limits the usefulness of a purely national approach.

• With the possible exception of the USA, individual countries have insufficient resources to stay at the forefront in all areas of energy R & D on the basis of their own R & D efforts alone. R & D collaboration and licensing may enable costs and risks to be shared and lead times shortened.

• To the extent that UK industry has to compete internationally, energy R & D in the UK needs to be assessed against relevant foreign R & D activities.

With this in mind, the next section briefly compares R & D expenditures in the UK and other industrialised countries. Further sections discuss the R & D programmes of the UK fuel industries, and the role of government with regard to energy R & D.

International comparisons The first attempts to assemble internationally comparable energy R & D statistics were made in 1974 by the EEC and OECD. Before that, the only energy-related activity identified in the international statistics was government funding of civil nuclear R & D? As nuclear power typically forms the bulk of total energy R & D expenditures funded by governments, it is worth examining past trends.

Government expenditures on nuclear R & D, at constant prices, fell between 1969 and 1972 in the UK and France, increased somewhat in the USA and The Netherlands, and increased by three-quarters in Germany (see Table 1). In 1972, nuclear R & D as a proportion of total government R & D funding was highest in Germany and France, and considerably lower in Britain and the USA; over the preceding decade the proportional expenditures on nuclear R & D fell sharply in the UK and France, but rose markedly in Germany (see Table 2). In relation to GDP, government expenditures on nuclear R & D fell sharply in the

ENERGY POLICY June 1975 91

Energy R & D - a UK perspective

Table 2. Patterns of government R & O expenditures, 1961 & 1972: the UK compared with USA, FR Germany, France and the Netherlands (percentages)

UK USA FR Germany France The Netherlands

1961 1972 1961 1972 1961 1972 1961 1972 1961 1972

Civil Nuclear 14.7 8-8 7-3 5.1 15.6 15.7 24.8 14.6 12.2 8.2

Civil Space 0.7 1.6 11.8 18.1 0.0 6.8 0.6 6.7 0.2 3.3

Defence 64.8 44.0 70.6 52.6 22.3 15.0 44-2 27.8 4.2 4-4

Industry 6.3 16.0 0.8 3.7 n.a. 10.6 3.4 13.3 8.7 7-1

Agriculture 2.9 4.9 1.7 2.0 n.a. 4.9 2.1 3.5 11.1 7.4

Environment, health, welfare 0.8 7.4 6'5 15.2 n.a. 2.1 3.5 6.7 13.9 16.6

Advancement of knowledge 11.9 15.8 1-1 2.8 37.4 40.8 20.0 25.5 49.3 51.6

Other 1.5 1 "6 0-0 0.2 n.a. 4.6 1.9 1.9 0-1 1.5

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100-0 100.0 100.0

Source: OECD, Changing priorities for Govern- ment R & D, (DAS/SPR/73.35),'July 1973

8This is illustrated by French experience in the nuclear field. Despite high nuclear R & D expenditures throughout the Gaullist period to develop indigenous gas-cooled reactor designs, circumstances forced the French government in 1970 to switch to American LWRs manufactured under licence. rl-his is underlined by the significant amounts of private capital being invested in nuclear R & D in Germany.

UK and the USA, and to a lesser extent in France, but doubled in Germany (see Table 3).

In interpreting R & D statistics it must be borne in mind that difficulties arise due to exchange rate movements; that R & D costs differ between countries (roughly in proportion to salary levels); and that the published statistics cover government funding only and exclude company-funded R & D. Also, levels o fR & D expenditure are not necessarily synonymous with degrees of technological competitiveness .6

Nevertheless, it appears that, within Europe, the initiative in civilian nuclear technology has been taken by Germany, reversing the position up to the mid-1960s when the UK and France were in the lead. 7 Whereas government expenditure on nuclear R & D has increased in recent years in Germany, it has fallen in the UK and France due to the completion of expensive phases of development work on 'proven' reactor systems, a paring down of nuclear establishments, and lower priority for nuclear power.

From the more comprehensive estimates available for 1973 (see Table 4), the following picture emerges:

• Public fundin$ of energy R & D in 1973 was three times higher in the USA and more than a third higher in Germany than in the UK and France.

• In all five countries nuclear fission accounted for 60-80% of total government energy R & D expenditures; and there was a similar

Source: As for Table 2

Table 3. Government expenditure on civilian nuclear R & D as a percentage of GDP, 1961 - 1971

USA U K France FRG Neth. Japan

1961 0.14 0.18 0.22 0.08 0.07 0-03

1963 0.15 0.15 0.26 0-10 0.09 0.02

1965 0.13 0.13 0.30 0.12 0.09 0.01

1967 0.12 0.12 0.30 0-17 0.11 0-02

1969 0-09 0-10 0-22 0-15 0.10 0.04

1971 0.08 0.08 0-18 0-16 0-08 na


Energy R & D a UK perspective

Table 4. Public funding of energy R & D in 1973: the UK compared with USA, FR Germany, France and the Netherlands (million Units of Account, a percentages in brackets)

UK USA FR Germany France The Netherlands

Fast Breeders 73.5 (39.2) 264.5 (38.6) 72.2 (29.5) 75-7 (29.7) 20.0 (55.2) High Temperature Reactor 10-5 (5-6) 7.4 71.2 (29.1) 13.2 (5.2) 1.1 Proven Reactors 21.6 (11-5) 30.1 (4.4) 8-7 (3.6) 39.6 (15-5) 0.3 Exploration and extraction

of uranium and thor ium 0"2 2.9 ? 0 ? Other nuclear R & D 21.2 (11.3) 112.6 (16-4) 48.9 (20.0) 31-5 (12.3) 8.4 (23.2)

Total nuclear fission power 127.0 (67-7) 417.5 (60.9) 201.0 (82.0) 160.0 (62.7) 29.8 (82.3)

Developing indigenous fossil fuels 10.8 (5.8) 28.1 5-8 34.2 (13.4) 0.4

Coal Gasification 0 37.8 (5.5) 4-5 0 0.1 Coal Liquefaction 0-5 11.2 ? 0-1 0.1 Hydrogen Fuel 0 ? ? 1.0 0-1 Process Uses of Nuclear

Energy 0 ? 11-8 (4.8) 0.2 ? Other 0-6 ? 0-6 ? ?

Total: Subst i tute Fuels 1.1 49 .0 16-9 1.3 0.3

Fusion 7.2 (3.8) 76.3 (11.1 ) 18-3 (7.5) 9-8 (3.8) 2.1 Geothermal 0 4.5 0.1 0.6 ? Solar 0.8 4.1 0.3 0.9 0.3 Other 0 ? ? 0-1 0.1

Total: New primary energy sources 8.0 84.9 18.7 11.4 2-5

Transport and storage of energy 10.0 (5.3) ? 2-1 20.1 (7.9) 0-9

Energy uti l isation 24.1 (12-8) 32-8 (4.8) 0.3 19-7 (7-7) 1.3 Other b 6.6 (3.5) 73.3 (10-7) 0-2 8.6 (3.4) 1.0

G R A N D T O T A L 187-6 (100.0) 685-6 (100.0) 245.0 100.0 255.3 (100.0) 36.2 (100.0)

a 1 European U n i t o f A c c o u n t - £ 0 . 4 7 - $ 0 . 9 8 - DM 3.215 = F Fr 5.88 = Guilders 3.355

b Includes R & 0 on environmental protection & energy systems studies Sources: Inventory of R & D on Energy in the Public Sector, EEC (XII/648/74), 1974: US data derived fromAnnex 1

a'Proven' reactors here include LWRs, Magnox, AGRs and SGHWRs. a-I'he recent expansion of US energy R&D requires an estimated sevenfold increase in the annual supply of qualified manpower up to 1980 compared with the past 12 years. Energy R & D, OECD, 1975, p131.

concentration within fission R & D on the development of the Liquid Metal Fast Breeder Reactor (LMFBR).

• US expenditure on 'alternative energy source' R & D - coal gasification, nuclear fusion, geothermal and solar energy - dwarfed that of the European countries. Only in Germany was there apparently a drive to develop alternative technologies, especially nuclear process heat and coal gasification.

• Government expenditures on 'proven reactors TM continued at a relatively high level in the UK and France compared with the USA and Germany (however, a good deal of company-funded R & D on these reactors is undertaken in the latter two countries).

• Expenditure (public and private) on the High Temperature Gas Cooled Reactor (HTGR) has been most significant in Germany and the USA.

These observations provide clues as to the R & D 'strategies', implicit or explicit, that different governments have adopted. Taking the USA first, two points are immediately apparent: the scale of the Federal expenditures and their spread across numerous competing technologies. This 'crash programme' approach, reminiscent of the earlier Manhattan and Apollo programmes, will inevitably involve a substantial diversion and wastage of resources, but will later allow greater freedom of choice. It may also involve a drain of qualified manpower from other countries, as previously happened in the fields of medicine and aerospace. 9

Among the European countries, comparisons between the UK and



Table 5. R & D expenditures of the nationalised fuel industries in the UK, 1960-1974 (fiscal years)

1960 1961 1962 1963 1964 1965 1966 1967 1968

R & D expenditure a (£ million at current prices)

UKAEA (excludin9 non-nuclear R & D) 58.7 61-9 72.7 75.9 68.3 69-6 58-6 57.4

National Coal Board 3.71 4-08 4.17 3-77 British Gas Corporation 1.8 1.8 1.6 1.8 2.44 3.10 3.66 4.32 4.42 Electricity Supply Industry b 2.61 3.78 4.14 4.60 5.56 6.99 7.96 8.27 8.61

Estimated R & D expenditure at 1965 prices c (£million)

UKAEA 74.9 74.8 83.4 82.4 68.3 66.7 53-7 49.2 National Coal Board 3.7 3-9 3-8 3.2 British Gas Corporation 2.4 2.3 1.9 2-1 2-6 3.1 3.5 4.0 3.8 Electricity Supply Industry 3.5 4.8 5.0 5-3 6.0 7.0 7.6 7.6 7.4

R & D as proportion of sales revenue d (%)

National Coal Board 0.5 0-5 0.5 0.8 British Gas Corporation 0.7 0-7 0-6 0.6 0.8 0-9 1.0 1.1 1-0 Electricity Supply Industry b 0.7 0.7 0-7 0.7 0.8 0-9 0.8 0.8

1969 1970 1971 1972 1973

56.4 54.9 59.9 61-9 57.6 3.58 3"73 4.23 4.79 5-06 4.32 5"08 6.02 8"51 8.12 9.24 10.59 12.12 13.84 15.99

44.9 41.0 3 . 8 36-8 31.1 2-9 2.8 2.8 2-9 2.7 3-4 3"8 4.0 5.1 4.4 7.4 7.9 8.1 8"2 8.6

0'5 0.5 0.5 0"5 0.6 0.7 0.8 0.8 1.1 0.9 0.8 0.9 0-9 0.9 1-0

a Covers expenditure charged to revenue account only. Excludes items charged to capital account (usually small)

b Includes CEGB, Electricity Council, SSEB and North of Scotland Hydro

c Expenditures at current prices deflated by an index of salaries (non-manual employees, all UK industries). Table 124, Department of EmpLoyment Gazette. Note that this assumes that salaries account for the bulk of R & D expenditure

d Fuel and energy sales only. Excludes other sources of income (eg by-product sales, appliance sales, rents, servicing and testing receipts)

Source: Annual Reports & Accounts of the various Corporations

Germany are especially interesting. In effect, the UK has remained technologically independent, and the decline in UK government funding of nuclear R & D has led to increasing concentration as far as advanced reactors are concerned. In Germany, on the other hand, the decision in the 1960s to license US technology to meet short-term needs and the emphasis on collaboration as a means of sharing costs, have enabled German industry to build up a strong indigenous capability and government R & D funding to be concentrated on medium- and long-term technologies (the HTGR and LMFBR).

Inter- industry c o m p a r i s o n s

The nationalised fuel industries have a number of features in common with regard to R & D. All have central R & D establishments which account for the bulk of R & D expenditures; but each also undertakes some development and testing on a decentralised basis. All have central committees and liaison arrangements to supervise and coordinate the forward planning of R & D, and to review progress. All have 'customer-contractor' arrangements whereby the bulk of annual R & D expenditures is sponsored by engineering, marketing, or other 'customer' departments to ensure that the direction and level o f R & D expenditures relate to commercial applications. Typically, 10o25% of R & D budgets is left to the discretion of R & D departments for long- term basic and applied research.

Several features stand out when the R & D expenditures of the nationalised fuel industries are compared and contrasted (see Table 5):

• Two-thirds of the combined R & D expenditures of the nationalised fuel industries in 1973 was accounted for by the UKAEA. Electricity accounted for 18%, gas for 9%, and coal, 6%. As a significant proportion of the CEGB's expenditure was also on nuclear R & D, we estimate that nuclear R & D represented about three-quarters of the total.

• In the period 1961-65, before the UKAEA programme was pruned, nuclear R & D accounted for nearly four-fifths of the total.

• Using an index of salaries to express R & D expenditures at constant


Energy R & D - a UK perspec t ive

Table 6. Breakdown of the National Coal Board's expenditure on R & D, 1965-1974 (£ mill ion; fiscal years)

1965 1966 1967 1968 1969 1970 1971 1972 1973

Mining & preparation (MRDE) 2.38 2.56 2.57 2.23 2.18 2.17 2-40 2-73 2.97

Processes & products (CRE) 0.76 0.94 1.02 0.98 0.87 1.00 1.24 1-41 1-28

Scientific control 0.15 0.17 0.17 0.20 0.18 0.24 0.22 0.25 0-27

Medicala 0.24 0-23 0.23 0.23 0.23 0.26 0.27 0-30 0-37

Appliance development 0.10 0-10 0.10 0.07 0.06 0-03 0.05 0.05 0-11

Other b 0.08 0.08 0.08 0.06 0.06 0.03 0.05 0-05 0.01

TOTAL 3.71 4.08 4.17 3-77 3.58 3.73 4.23 4.79 5.01

a Grants to Institute of Occupational Medicine for research on respiratory diseases, especiall,/ pneumoconiosis

b Mainly grants for university research

(Note: Excludes items charged to capital account, incurred predominantly at MRDE)

Source: NCB Annual Reports and Accounts

1°These percentages lie between those of the aerospace, electronics, scientific in- s t ruments , pha rmaceu t i ca l s , and chemicals industries, where R & D represents over 3% of turnover; and those of the clothing, textiles, food, drink, prin- ting, and furniture industries, where R & D represents under 0.5% of turnover. C. Freeman, 'National science policy'Physics Bulletin, Vo120, London 1969.

prices, the UKAEA's real expenditure fell by roughly half between 1966 and 1973.

• Since the mid-1960s R & D expenditures as a percentage of sales revenue (excluding ancillary income) have remained fairly s table- around 0.9% for electricity and gas, and 0.5% for coal.~°

Those we interviewed in the fuel industries denied that the stability of these R & D-to-sales percentages was due to predetermined budget constraints. For an understanding of why the levels of R & D expenditure differ between the various fuel industries, we must examine their R & D priorities, the technologies involved, and the historical and other factors that have determined the role.of R & D within each fuel industry.

R & D in the coal industry

Throughout the 1960s the markets for coal contracted owing mainly to competition from oil, the end of steam traction on the railways, and the spread of smokeless fuel zones as a result of the 1956 Clean Air Act. An increasing proportion of coal output went to power stations and the iron and steel industry. The North Sea gas discoveries and the announcement of the Second Nuclear Power Programme in the mid- 1960s signalled further competition to that amply prov.. .ded by oil in most sectors of the energy market.Government policies reflected the need to close large numbers of uneconomic mines, while preventing an uncontrolled rundown of the industry and mitigating undesirable social and regional effects. The closure programme was accompanied by rationalisation of the NCB's R & D activities, with emphasis now being placed upon improvements in mining productivity and the diffusion of best-practice techniques.

In 1972 the NCB's annual R & D expenditure reached £5.0m, having remained around £4.0m since 1965 (see Table 6); but in real terms it had fallen significantly. Over four-fifths of the total in recent years was incurred by the Mining Research and Development Establishment (MRDE) at Bretby and the Coal Research Establishment (CRE) at Stoke Orchard. The remainder was for research on respiratory lung diseases, through the Institute of Occupational Medicine at Edinburgh; scientific control investigations to improve underground safety, including dust sampling; the early detection and monitoring of underground fire and water hazards; and the improvement of domestic and industrial coal-burning appliances.

The MRDE undertakes R & D to improve the safety and efficiency of underground operations and to improve coal preparation techniques. In addition to R & D on mining, tunnelling and underground transport, the MRDE tests machines developed by



11Notably on Remotely Operated Long- Wall Face (ROLF) machines. 12The NCB wants to augment its annual production capacity (currently around 113 m tons) by 42 m tons by 1985. This is estimated to cost £600 m over and above the £70-80 m a year required for 'ordinary continuing capital expenditure'. Coal Industry Examination, Interim Report, Dept of Energy, June 1974. ~rhis would produce a mixture of carbon monoxide and hydrogen (synthesis gas) as the basis for making substitute natural gas (hydrogen methanol). ~4Coal Industry Examination, Final Report, Dept of Energy, London, 1974.

mining machinery manufacturers. To support the mechanisation programme, the MRDE's work in the 1960s focussed on the remote control of face supports and steering mechanisms for power loaders. For some years high hopes were held for fully-automated methods, it Once a high level of face mechanisation (including power loading) had been achieved, the emphasis in R & D shifted to other aspects of the mining process - eg the elimination of stable holes at the face ends; mechanised ripping; packing and driving of roadways; automatic control of coal clearance from the face; better detection of faults in coal seams; the underground transport of men and materials; and improved coal preparation techniques.

The CRE undertakes R & D on coal products and processes, and new uses for coal derivatives and colliery waste. To retain coal's competitiveness in the domestic space heating market, major efforts were made to develop better smokeless fuels in the 1950s and 1960s. The biggest project, 'Bronowski Briquettes', suffered severe technical difficulties and the final output has been much less than planned.

In recognition of the industry's increasing dependence on the power station and blast furnace markets, much of the CRE's effort in the late 1960s was on fluidised-bed combustion and improved blending techniques, the latter to widen the range of coals suitable for metallurgical coke. Work on fluidised-bed combustion, to provide a more efficient, less polluting method of burning coal in power stations, began in 1964. After successful laboratory work and an expression of US interest in collaboration, the NCB unsuccessfully sought government assistance in 1970 to build a 20 MW prototype fluidised- bed unit. The National Research Development Corporation (NRDC) then acquired responsibility for further development work; and in 1973 the NRDC, NCB and British Petroleum formed Combustion Systems Ltd to develop the technology further.

Soon after oil prices quadrupled the NCB sought government approval to increase its investment to £1400m over the following decade to permit coal output to be held at 130-150m tons a year; t2 and for £40m of government financial assistance over the following five years to bring several new coal-based processes to the pilot plant stage. The latter proposals included a 20 MW fluidised-bed combustion unit (£4.2m); a coal liquefaction unit (£7.8m); a gas extraction unit (£4.6m); a unit to produce substitute natural gas (£4.0m); t3 a unit to produce low-Btu fuel gas (£4-3m); pyrolysis units to produce both liquids and gases (£9.3m); and further work on metallurgical coking coals (£5.2m).

These proposals were reviewed by the Coal Industry Examination group comprising government, NC B and trade union representatives. 14 Their report concluded that government funding of R & D might be justified for the conversion of coal to high-value products, where warranted by home market prospects; to maintain a lead for British technology where warranted by export prospects; to retain a specialised coal market in the face of changes in the supply pattern from British pits; and to help in obtaining know-how on favourable terms where foreign R & D is more advanced.

Three of the NCB's proposals - fluidised-bed combustion, coal liquefaction by solvent extraction, and pyrolysis - were judged as strong candidates for government support. But the NCB was urged to seek collaboration from firms with relevant expertise and commercial interests, and to coordinate its R & D with relevant work overseas.


~55595 m has been allocated for the development of Iow-Btu, sulphur-free gas processes; this sum will finance 13 pilot plants for initial operation between 1976 and 1979. Another $640 m. has been allocated for SNG processes; of this, $400 m is for one demonstration plant, and the remainder is for 10 separate projects. Energy R & D, OECD, Paris, 1975, p196-7. ~STwo thirds of Germany's planned expenditure on coal conversion processes from 1974 to 1977 (DM 616 m) is to be funded by the Federal government. The R & D will be undertaken largely by the coal industry and related research associations. Energy R & D, OECD, 1975 p195 and 197; and Rahmenprogramm Energieforschung, 1974-1977. ~TEven in the USA, no significant production of synthetic fuels is expected until the late 198Os or early 1990s. Without government subsidies, very little synthetic fuel production is expected to occur before 1985. Project Independence, Report, Federal Energy Administration, November 1974, p137-8. ~Eq'he need to explore and develop fun- damentally new mining systems and technologies was implicit in the recent creation of the New Methods Group at MRDE.


Further work on metallurgical coking coal was judged to be the joint responsibility of the NCB and the British Steel Corporation, especially as the new blends would need to be tested commercially in a large modern blast furnace. The NCB's work on coal gasification, for substitute natural gas (SNG) and low-Btu fuel gas, was considered unlikely to catch up with work in the USA and Germany; and it was noted that the British Gas Corporation (BGC) already has extensive knowledge of coal and oil gasification technology.

In the USA, Federal government subsidies totalling over $1200 m are being provided for the development of coal conversion technologies

- principally on gasification processes to supply clean power station fuels. 15 The depth and breadth of this programme suggests that the USA will be the first country to develop coal conversion processes on a commercial scale. Moreover, the prospects for their early commercial application are distinctly more favourable in the USA than the UK. US coal reserves are very large; mining productivity is high and costs are low; natural gas and fuel oil are becoming relatively expensive for power generation; and US pollution regulations restrict the combustion of high-sulphur coals.

In Germany too, the Federal government is heavily subsidising R & D on coal gasification, liquefaction, and advanced combustion methods? 6 The main German programme is on pressurised gasification combined with gas or steam turbines to give high thermal efficiencies in electric power generation. The Germans have built a 170 MW combined cycle power plant incorporating a modified Lurgi process, and are planning an 800 MW unit. Coal gasification represents a major potential application for the process heat of the HTGR, which the Germans are also developing.

As far as the UK is concerned, the wisdom of developing coal gasification and liquefaction technologies over the next five years depends on the expected availabilities and prices of North Sea oil and gas by the mid-1980s. A substantial development effort on conversion technologies over the next five years might be justified if the estimated costs of substitute natural gas and oil are less than the expected prices (in the mid-1980s) of oil and gas in premium uses.~7 What should not be overlooked, however, is that a significant increase in the relative prices of oil and gas would make coal combustion in the traditional non-

p r e m i u m markets much more attractive. The central question therefore is whether the NCB should pin its hopes on penetrating premium markets through coal conversion processes or give priority to improving the competitiveness of coal combustion in bulk heating markets, especially power generation.

Coal's competitiveness will continue to be governed largely by its price relative to oil, gas, and nuclear power. This will depend upon wage pressures within the coal industry and improvements in mining productivity and costs. It is doubtful whether R&D on coal conversion could compensate for a continuing decline in the traditional markets for coal. The declining potential of existing mining techniques for further productivity improvements underlines the need to develop more advanced underground operating methods.18

Owing to market and technological uncertainties, a major UK development programme on new coal processing technologies does not appear justified at present. A strong case exists, however, for continuing UK research in this field and for keeping in touch with relevant foreign R&D in order to permit flexibility of choice in the



191n June 1974 the NCB entered into a three year exchange agreement with the Office of Coal Research (Department of the Interior), which can be extended by mutual agreement. 2°The four central research establishments are the Midland Research Station, Solihull (SNG processes and industrial gas applications); the Engineering Research Station, Killingworth (transmission and distribution); Watson House, London (gas standards and approval work on gas); and the London Research Station (mathematical research, especially com- puter applications for grid control and distribution network analysis; the physics and chemistry of natural gas), 2lOver the past five years the main R & D priorities of the BGC have been fracturing and corrosion problems of steel pipe; network and control methods; on-line in- spection; high pressure and liquefied gas storage methods; leakage control, including the maintenance and replacement of gas mains; safety and efficiency of combustion; and the testing of components and appliances. 22The contracts for Southern Basin gas lay down a minimum annual quantity which must be paid for even if not taken. This is 60% of peak availability, whereas the load factor for domestic central heating averages no more than 35%. BGC Memorandum, Select Committee on Science and Technology (Energy Resources Sub-Committee), para 16, Minutes of Evidence, 12 June, 1974. In addition to contracts with the oil companies, the relative growth of firm and peak demand (which can be influenced by tariff changes) and the development of additional storage and transmission capacity will also determine the need for SNG.

future. The latter should be possible by virtue of the NCB's new role of coordinating coal R&D under the International Energy Programme and its research exchange agreement with the U S A . 19 By maintaining an active research and monitoring capability, the NCB should be well placed to launch a major development programme (singly or in collaboration), and to assess foreign technologies with a view to licensing, ifa clearer need arises.

The gas industry

The outstanding feature of the UK gas industry over the past two decades was the replacement of increasingly expensive coal carbonisation plant by steam reformers using light petroleum distillate, and then by natural gas following the discoveries in the southern basin of the North Sea in the mid-1960s. Within about five years, 1962-67, this transformation revitalised an industry with declining output and low investment and based upon Iocalised gasmaking and distribution, into a high growth industry supplying a 'premium' fuel through a national transmission network.

Pioneering work on coal and oil gasification was begun in the UK in the 1950s. Initially the aim with oil gasification was to supply peak loads economically. R&D therefore centred upon methods with low capital costs and operational flexibility. As petroleum prices fell and the relative costs of the traditional coal carbonisation process rose sharply, interest in oil gasification shifted to processes suited to base load operation.

Although the gas industry itself had undertaken much R & D on oil gasification, it nevertheless licensed the ICI Steam Reforming process (originally developed to manufacture hydrogen), because it was considered to be commercially proven. This process, using high pressure steam to reform light petroleum distillate in externally heated tubular reactors to produce a lean gas, became the main vehicle for the industry's transformation in the early 1960s. The lean gas from the ICI reformers was enriched to produce a town gas (500 Btu/ft 3) using rich gases from CRG (catalytic rich gas) or GRH (gas recycle hydrogenator) processes - - both developed by BGC - - and natural gas from Algeria and then from the North Sea.

Two coal-gasification plants incorporating the German Lurgi process were installed; but the industry subsequently abandoned R & D on coal gasification owing to the availability of cheap natural gas and oil.

With the advent of North Sea gas and rapid growth in gas sales, the industry's R & D expenditure rose substantially (see Table 7). An increasing proportion of this expenditure was accounted for by four central R & D establishments. 2° Conversion to high-Btu natural gas, transmitted at high pressure through a national pipeline system, caused the emphasis in R & D to shift from gasmaking processes to the new problems presented by natural gas - transmission, storage, distribution and utilisation. 21 Nevertheless, R & D continued on substitute natural gas (SNG) processes for peak load purposes (contracts with the oil companies supplying natural gas provided a strong incentive to maintain continuous offtake 22) and to insure against diminishing supplies of North Sea gas in the 1980s.

The most promising SNG process developed by the UK gas industry appears to be the CRG process based on steam reforming of light



Table 7. Breakdown of the British Gas Industry's expenditure on R & D, 1965-1974 (£ million; fiscal years)

Production

Treatment

Storage

Transmission

Distribution

Utilisation

General studies

Develop & testing appliances

Expend. on develop, by Area Boards

Production & Supply Div. & Regions

TOTAL

1965 1966 1967 1968 1969 1970 1971 1972

o o o o o o o I t I 0.16 0.13 0.11 I 0.23 0.52 0.81

0.15 el i I 000010 0.1 3 0.32 0.86 0.78 0.99 1.08 1.27

0.29 0.31 0.48 0.76

0.22 0-26 0.43 0.88 1.69 2.43 2.68 2.65

0.33 0.56 0.80 0.43 0.34 0-15 0.21 0.42

0-47 0.49 0.47 0.55 . . . .

0.92 1.26 1.46 1.21 . . . .

1973

1.14

0.21

1.05

1.06

2.88

0.58

. . . . 0.79 0"85 0.95 2.50 1.20

3.10 3.66 4.32 4.42 4"32 5.08 6'03 8.51 8.12

Note: (i) Items charged to capital account are ex- cluded. (ii) Bracketted data are due to changes in accounting classification.

Source: Annual Reports and Accounts of the Gas Council and British Gas Corporation

z3Since 1967 the gas industry has collaborated with the Osaka Gas Com- pany on a joint fluidised-bed hydrogenation programme. Pilot plants are in operation at Solihull (UK) and Hokko (Japan). By March 1973, 13 orders had been placed for CRG plants in the USA, and four in Japan. BGC Annual Report, 19 73/74.

petroleum distilate (at relatively low temperatures in adiabatic reactors) to produce a gas rich in methane. The addition of further distillate, which is gasified in a second reactor (hydrogasification), and methanation stages, and the removal of carbon dioxide, produce a pipeline quality SNG. R & D on this process now centres on catalyst and process developments to improve efficiency and to permit the use of a wider range of petroleum feedstocks. Meanwhile, the BGC has had considerable success in licensing this technology for use in commercial SNG plants being installed in the USA and Japan. 23

Fears that naphtha might become too expensive or unavailable have led the BGC to continue R & D on other gasification techniques not amenable to catalytic reforming - - mainly gas recycle hydrogenation (GRH) for vapourisable feedstocks, and fluidised bed hydrogenation (FBH) for heavy oils and crude. R & D support is also provided for plants demonstrating BGC processes, for the conversion of certain town gas plants for peak load SNG production, and for overseas plants incorporating BGC know-how.

While the BGC's interests in SNG processes focus mainly upon oil- gasification methods, it is also engaged on contract R & D on coal gasification at its Westfield Lurgi plant on behalf of a US consortium led by Continental Oil. This work involves R & D on methanation, a slagging gasifier process, and testing the suitability of various US coals for the Lurgi process.

Is sufficient work being done from the national viewpoint to develop SNG processes, coal- as well as oil-based, to provide insurance against the eventual exhaustion of UK natural gas reserves? Some of the uncertainties have been discussed in relation to the NCB proposals. Major uncertainties surround the scale of additional natural gas supplies (including the northern areas of the North Sea, possible future discoveries in other UK waters, gas associated with oil discoveries, and imports from the Norwegian sector of the North Sea) and how long natural gas supplies can be maintained at the maximum level.

Recent gas discoveries and imports from the Norwegian sector appear to have postponed the date when supplies could diminish until around 1990. Any new discoveries will postpone it further. But the need to develop SNG processes also depends critically upon the BGC's sales


Energy R & D - a UK perspect ive

strategy - in particular whether natural gas is reserved for high-price 'premium' uses or sold relatively cheaply for crude heating purposes. The former would imply a conservationist policy; the latter would maximise the growth of gas sales. Another key factor is the terms governing additional natural gas supplies: if future contracts favour continuous offtake, the development of SNG processes to supply seasonal peak demands might be more economic than the present policy of selling 'valley' gas cheaply to non-premium users, on interruptible tariffs, in order to maintain continuous offtake. This would depend upon the costs of meeting seasonal peak demands by SNG compared with high-pressure or liquefied storage.

As we have already argued, the main commercial development of SNG processes over the next decade will probably occur in the USA. By virtue of licensing its own oil-gasification know-how, its contract R & D on coal gasification, and membership of the Atlantic Gas Research Exchange Group (which facilitates the exchange of information between the BGC, the American Gas Association, and Gaz de France), the BGC should be able to keep abreast of foreign developments. As the Americans are putting so many resources into SNG developments, inward licensing may eventually prove to be the most cost-effective method of obtaining the know-how for commercial scale development. To capita!ise on its present position, the BGC should continue to do basic and applied research and to monitor foreign R & D carefully. Meanwhile, if the government approves the NCB's proposals for the pilot scale development of coal-based SNG processes, there would be every reason for the BGC, as the potential customer, to be closely involved.

The oil industry

Unlike the other fuel industries, the oil industry is dominated by large multi-national companies, vertically integrated from exploration and transport to refining and marketing. Most of their R & D is conducted in-house, and they frequently have laboratories located outside their parent countries (eg BP performs R & D in France, Germany, and USA as well as the UK), and the international nature of the industry ensures that there is a rapid transfer of technology from country to country.

For competitive reasons, the oil companies are generally reluctant to disclose details of their R & D activities. The annual reports of the big multinational groups give total R & D expenditures (eg in 1974 Shell and BP spent £88 m and £20 m respectively on R & D); but there is little indication of the allocation or objectives of these expenditures.

The bulk of R & D in the oil industry has been concerned with refining processes and products, and with a range of by-products only indirectly related to energy applications - eg petrochemicals, plastics and pesticides. With regard to refining, the oil companies have traditionally been concerned with process development, while equipment development (pumps, flow-meters etc) has been carried out by specialist contractors. In common with other fuel industries, the oil companies undertake some R & D to overcome teething difficulties with new plant and to improve the performance of existing plant.

In two respects the scope ofR & D in the oil industry has changed in recent years. Faced with increasing uncertainties over the price and supply of crude oil, there has been a worldwide boom in exploration in


Z41n 1973/74 the Dept of Energy con- tributed £1-9 m for R & D on off shore oil and gas through NERC, the Ship and Marine Technology Requirements Board, and the Chemicals and Minerals Re- quirements Board. In 1974/75 this sum is expected to rise to £4.1 m Report on Research and Development, Dept of Energy, 1974. Fo l lowing the recommendat ions by the Select Committee on Science & Technology in November 1974, the Government has decided to set up an Offshore Energy Technology Board to take over responsibility from the SMTRB for supervising public funding of R & D related to various aspects of offshore marine technologies. Dept of Energy, Offshore Engineering, Cmnd 6060, HMSO, May 1975.


areas with hostile operating conditions (eg the North Slope of Alaska, and the North Sea) requiring new survey, drilling, recovery and pipeline techniques; and there has been a widespread movement among oil companies to diversify into other energy areas, such as nuclear power, coal, solar energy, and the manufacture of substitute natural gas and oil. In both respects, the oil companies have had to contend with novel and expensive technologies, frequently beyond their range of technical expertise, sometimes overlapping with the commercial interests of other fuel industries. The result has been an increased interest in collaborative R & D with other industries, private and public. Thus Shell is participating in Gulf General Atomic's development of the High Temperature Reactor; an engineering company, SEAL (Sub-sea Equipment Association Ltd), comprising BP, Compagnie Franqaise du Petrole, Mobil and Westinghouse, has been set up to harness Westinghouse's expertise in space technology to underwater applications; and BP is working with the NRDC and NCB to develop fluidised bed technology.

Governments have generally not played an active role in oil-related R & D. To date, the oil companies have had sufficient resources to sustain the necessary R & D without seeking outside assistance.

If the UK Government has a role to play in this field, it probably lies in sponsoring background research on atmospheric and marine pollution, marine techologies, and resource assessment. Government funding in these areas has increased in recent years, but it remains somewhat fragmented, z4 Relevant work is done by the Institute of Geological Sciences, the Transport and Road Research Laboratory, and the Warren Springs Laboratory. There are no equivalents, however, to the Institut Franqaise du Petrole, which is subsidised by the French government and undertakes R & D and other activities (eg overseas consultancy)in association with the French oil companies; or to the Centre National d'Exploitation des Oc6ans (CNEXO) and the Office de la Recherche Scientifique et Technique d'Outre Mer (ORSTOM) - government laboratories responsible for offshore exploration and associated technologies.

Given the importance of offshore oil and gas to the UK, the possibility of bringing all aspects of government-funded R & D on marine and related technologies together within a new central laboratory, and under the responsibility of one Government department, deserves serious attention. A central laboratory could serve as an information source for the government and the oil industry, and as an advisory centre for engineering firms seeking to exploit the offshore market.

For various reasons it may become necessary to extract oil from even more inhospitable areas such as the north coast of Norway and the Atlantic Shelf. This would raise problems of international jurisdiction as well as technology. As the R & D would probably be very expensive, it might be desirable for the EEC or the International Energy Agency to sponsor joint R & D with member countries. A central laboratory could serve as a focus for UK activities in this field.

Nuclear R & D

In 1956 the UK launched the world's first civilian nuclear power programme based upon the Calder Hall gas-cooled Magnox design.


L~lergy R & D - a UK perspec t ive

Z~Early LWRs in the USA were under- priced by General Electric and Westinghouse (in particular the Oyster Creek plant of the Jersey Central Power and Light Company). Both manufacturers sustained large losses as a result. Duncan Burn, The Political Economy of Nuclear Energy. lEA Research Monograph No 9. Institute of Economic Affairs 1967. 26l'he original government announcement in March 1973 envisaged GEC having a 50% shareholding in NNC, the government 15%, and seven private companies the remainder. In April 1975 the arrangements were still not finalised, but NNC has recently agreed terms for the completion of AGRs under contract to its predecessors (BNDC and TNPG). On present indications it is likely that GEC and the government will each have a 35% shareholding in NNC, The Times, 19 March, 1975. ZTThe Choice of a Reactor System, First report from the Select Committee on Science and Technology, Session 1973/74, HMSO, 1974.

This programme was announced against a background of high energy costs, projections of a growing energy 'gap', anxieties over the vulnerability of Middle East oil supplies (heightened by the Abadan and Suez crises), and a military requirement for plutonium. The nine Magnox plants (4706 MWe) that were subsequently built proved sufficiently reliable in operation; but their total costs per unit generated were high relative to those of modern fossil fuel plants and those claimed for the first LWRs built in the USA. 25

Reappraisal was necessary; and in 1965 the CEGB chose the AGR design for Dungeness B. This was followed by the government's announcement of the second UK nuclear power programme based on the same design. Five such plants, incorporating 10 AGRs (6200 MWe) were ordered between 1965 and 1969. Like many LWRs subsequently ordered in the USA, the AGRs experienced extremely costly construction delays owing to managerial and technical difficulties (eg corrosion problems with the carbon dioxide coolant).

These delays, coupled with a dearth of home and export orders, necessitated an agonising further reappraisal of the UK nuclear power programme and the nuclear plant supply industry. In 1973 the government decided to merge the two remaining consortia (of the five originally established for the Magnox programme) into the new National Nuclear Corporation (NNC), under GEC management. 26

Anxious to avoid greater dependence on fossil fuels or being saddled with another 'unproved' reactor design - the CEGB announced a proposal in late 1973 to order 36 LWRs of American design (41 000 MWe) over the following decade. This proposal had the full support of GEC, which wanted to obtain a PWR licence from Westinghouse and to enter a joint manufacturing agreement with Framatome (the French licensee of Westinghouse).

Nevertheless, the CEGB proposal attracted a good deal of hostile comment from the press; and a Parliamentary inquiry drew further attention to the unresolved questions about the reliability of LWRs of the size proposed (1150 MWe). 27 Also in the background were doubts as to whether a programme costing approximately £10,000 m was justified in view of the comparatively slow growth of electricity demand, the prospects for supplies of North Sea oil and gas, and the government's wish to hold UK coal output at 130--150 m tons a year. In July 1974 the government rejected the CEGB proposal and announced the decision to build 4000 MWe of SGHWR plant (six 660 MWe units).

This cautious further commitment to nuclear power - probably the minimum necessary to keep the UK nuclear plant industry a l ive- avoided the dangers of relying upon LWRs and the social and economic implications of the huge programme advocated by the CEGB. It will also permit another reappraisal to be made around 1982, when the merits of alternative reactor designs should be somewhat clearer. Meanwhile, the chief tasks are to scale up the SGHWR to 660 MWe from the 100 MWe prototype at Winfrith which has been operating successfully since 1967, and to create a management structure capable of building the commercial SGHWRs efficiently.

Civil nuclear power in the UK has thus had a chequered history: three different reactor systems in 15 years; big fluctuations in domestic ordering; very costly construction delays; and difficulties in establishing a plant supply industry with genuine prospects of becoming competitive in the expanding world market.



Table 8. UKAEA expenditure and employment on civil nuclear R & D, a 1965-1974 (fiscal years)

1965 1966 1967 1968 1969 1970 1971 1972 1973

EXPENDITURE (£ million) Fast Breeder Reactor 16-4 14-8 17-8 20.7 26-7 26-3 30.2 32-8 31.9 Gas Cooled Reactors 14.8 13.8 9.8 7-3 4.7 3-2 5-3 5-8 4-7 High Temp. Reactors (b) (b) 0-7 11.7 3.3 5-2 5.0 4.0 2.7 Water Moderated Reactors 12.7 15-6 11.3 10.2 7-1 5-5 4.1 4.3 4-2 Support work 7.0 b 7-6 b 2.4 1-3 1-5 1-7 2.0 1.8 2-2

Total: Reactor programmes 50.9 51.8 42.0 41.3 43,3 41.9 46-6 48-7 45.7

Basic research 10.7 10.7 10-9 9,5 8.1 7.4 7-1 7.3 7.3 Radiological protection 1.3 1.6 0.6 0.7 0.7 0-5 0.6 0.5 0-5 Fusion 4-2 4-6 4.4 4.2 4.0 4.1 4.4 4.0 3.0 Grants to International Projects 1.2 0.9 0-8 1.7 0.3 1-0 1.2 1.4 1.2

GRAND TOTAL 68"3 69.6 58.6 57.4 56-4 54.9 59.9 61-9 57.6

EMPLOYMENT (no. of qualified scientists & engineers

Fast Breeder Reactor 670 660 675 690 735 700 735 775 750 Gas Cooled Reactors 425 395 360 305 225 180 175 165 130 High Temp. Reactors (b) (b) 85 135 275 305 270 210 160 Water Moderated Reactors 410 405 405 355 245 165 155 145 145 Support work 375 b 320 b 45 65 100 100 120 125 130

Total: Reactor programmes 1890 1780 1570 1550 1580 1450 1455 1420 1316 All other nuclear R & D 806 836 975 1095 1100 1095 1070 820 1030

GRAND TOTAL 2696 2616 2545 2645 2680 2545 2525 2240 2380

Source: UKAEA Reports and Accounts

28The precise degree of contraction of nuclear R & D expenditure, other than that on reactor development, is difficult to estimate owing to the hiving-off of certain activities from the UKAEA (eg, BNFL, the Radio-chemical Centre, and fundamental particle physics to the SRC). However it appears that background nuclear research receives much lower priority in the UK (20% of total) than in Germany (35% of total). Dept of Energy, Report on Energy R & D, op cit; SRC, Report 1973-74; Viertes A tomprogramm der Bundesrepublik Deutschland, 1973-76. 29l'he UK is collaborating with the Dutch and Germans on the ultra-centrifuge (through CENTEC and URENCO), and with the French and Germans on reprocessing spent reactor fuels (through United Reprocessors GmbH).

a Excludes non-nuclear contract work sanc- b Published sources do not distinguish tioned under the Science & Technology Act between R & D on the HTGR and support work 1965 until 1967

At the same time there has been a sustained contraction in nuclear R & D expenditure, an increasing concentration o f R & D resources upon the LMFBR, and a marked fall in R & D on other reactor systems (see Table 8). 28 The LMFBR accounted for over two-thirds of the UKAEA's expenditure in 1973/4 on reactor technologies. By the end of that year the cumulative UKAEA expenditure on the LMFBR was £244.3 m - almost as much as that on all other reactor systems together, and over 10 times greater than that on the HTGR. Expenditure on fusion has remained stable (around £4.0 m a year); but in real terms it has fallen substantially.

The UKAEA has considerable experience in various types of international collaboration. It has participated in international exchanges of information on problems of basic research, safety, health, and waste management. It has shared in successful Euratom and OECD exploratory research programmes; it has earned foreign exchange by providing services to foreign clients on a fee-paying basis. And it has participated in collaborative fuel processing ventures (notably ultra-centrifuge enrichment and irradiated fuel reprocessing). 29 However, in comparison with other European countries, the UK is noticeably less involved in collaboration regarding the most expensive area of technology - reactor development. This is in spite of the fact that the squeeze on government funding of nuclear R & D has been especially pronounced in the UK and that the UK market for nuclear plant remains small. Apart from the CEGB's stake in SBK (see below), collaborative reactor ventures have so far been confined to the European continent.

For their current commercial reactor requirements Germany and France are relying upon american LWR technology; and they have attracted foreign partners for their advanced reactor programmes.


Energy R & D - a U K perspec t i ve

3°SNR-3OO is being built by INB, jointly owned by Interatom (Germany), Neratoom (Nether lands), and Belgonucl6aire (Belgium). The operator of SNR-300 will be SBK, jointly owned by German, Dutch and Belgian utilities (with a small CEGB holding). Germany is meeting 70% of the estimated construction cost, (DM 1700 m), the Dutch and Belgians approximately 15% each. Note that the reason for seeking Dutch and Belgian collaboration was partly political (to allay foreign suspicions about a Ger- man programme involving large amounts of plutonium); and that some components for SNR-300 are said to be 30% more expensive as a result of collaboration. 31The Germans are building a 300 MWe HTGR to generate electric power (THTR 300). This is being built by Hochtemperatur-Reaktorbau GmbH (HRB), a joint subsidiary of Brown Boveri (Mannheim) and Gulf General Atomics (USA). This company is also designing an 1 1 60 MWe plant. In addi t ion, Gesellschaft for Hochtemperatur-Technik GmbH (GHT), a subsidiary of Kraftwerk Union, is designing a 300 MWe plant incorporating direct cycle helium gas turbines (HHT). The Swiss are collaborating on this project. The French, through the Commissariat de I'Energie Atomique, have an arrangement with Gulf General Atomics (USA) and a French consortium (Groupement pour I'Etude des R~acteurs ,~ Haute Temperature) for collaborative R & D on fuels, core physics and safety, with a view to building a 1200 MWe HTGR. 321n announcing the SGHWR programme in July 1974 the government made it clear that the HTGR could only be built in the UK as a result of participation in an international programme. Dept of Energy, Nuclear Reactor Systems for Electricity Generation July 1974.

With regard to the LMFBR, the Germans are building a prototype (SNR-300) with Dutch and Belgian partners; 3° and the French, having built a prototype (Ph6nix), are planning to build a 1200 MWe commercial demonstration plant (Super-Ph6nix) with German and Italian partners (RWE and ENEL). With regard to the HTGR, the Germans and the French are collaborating with Gulf General Atomics (USA). 31

For countries with small domestic markets, technological independence in nuclear power imposes high costs and risks. The markets of most industrialised countries are closed to direct foreign competition. Few domestic orders therefore mean that nuclear plant suppliers remain near the top of the learning curve where costs tend to be high and reliability relatively poor. Remaining outside the mainstream of international technological development risks not only exclusion from an expanding world market for reactor components and associated electrical and control equipment, but also increasing concentration of indigenous R & D as costs rise or governments reduce their funding. In these circumstances, foreign licensing and collaboration merit consideration to complement indigenous nuclear R &D.

Licensing foreign designs offers scope for reducing indigenous R & D costs, maintaining domestic employment, and exporting components and plants based upon internationally accepted designs. But it may prevent the development of designs tailor-made to domestic operating requirements and safety standards; and it involves at least temporary dependence on foreign technology.

From the viewpoint of safety, efficiency in utilising either uranium or thorium, and suitability for supplying process heat to various industrial applications, the HTGR has strong advantages. But it is unlikely that the UK could proceed to the commercial development stage purely on the basis of the experience gained from its participation in the 20 MWe OECD Dragon reactor; or that it could obtain satisfactory collaboration arrangements with the Americans or Germans, given the advanced stage of their own HTGR development work. In this situation there is much to be said for redirecting UK research on the HTGR with a view to obtaining a licence as soon as US or German designs are more clearly established. ~2 This would open a major technical option for the UK and reduce the risks of dependence on the LMFBR.

In addition to the UK, Germany, France, the USA and the USSR are building LMFBR prototypes; and the nuclear establishments in all five countries want to build commercial scale demonstration plants as soon as possible.

On the face of it, collaboration provides an opportunity to share the costs of development and production and to widen the potential market. But collaborative programmes in other fields have usually proved more expensive and less useful than expected, owing to diverse national objectives and consequent design compromises, managerial inefficiency, and the intrusion ofnon-commerical interests as a result of government involvement. To reap the potential benefits of collaboration requires careful planning to avoid some of the costly errors which have been made in the past. Generally, the more equal the participants, the less likely that collaboration will succeed. Experience with aircraft projects has shown that success is more likely if one participant is dominant, and can thereby assume overall responsibility


33German MPs are pressing for collaboration with the UK. During his visit to Lon- don in September 1974, the German Minister for Research and Technology (Matthoefer) investigated the possibilities for collaboration. Earlier negotiations to this end took place in the second half of 1971, but were interrupted by the regrouping of the UK nuclear industry under the NNC. R. Vielvoye, 'UK and Ger- many set to sign nuclear reactor agreement', The Times, 15 November, 1971. 34Caution is needed in interpreting such predictions because the demand for uranium depends upon many variables, including the future installation of nuclear power, the types of reactors, and plutonium recycling. For a recent assessment see L. G. Poole, World uranium resources', Nuclear Engineering Inter- national, February 1 975.


for design specifications and the allocation of contracts. In the nuclear field the various German and French collaborative projects with smaller countries, eg The Netherlands, Belgium, Italy and Spain, reflect this approach. In addition, collaborative R & D has been relatively successful for basic and applied research (eg CERN and Dragon), but less so for advanced development work (eg the Airbus and MRCA).

Assuming that the LMFBR continues to receive high priority, in principle it would be desirable for the UK to collaborate on the next stage of its development. 33 But it must be remembered that the European nuclear industries have no collaborative experience of c o m m e r c i a l reactor development and production, so large-scale collaboration must be approached with caution. Expensive mistakes are likely unless the lessons of collaborative ventures in other fields of advanced technology are taken into account. It is especially important that the participating countries should collaborate on the basis of common political and economic objectives.

Development of the LMFBR is usually justified on the ground that it will eventually breed more fissile material than it consumes. It has been predicted that insufficient uranium reserves will remain 20-30 years hence to permit the further expansion of nuclear power based upon thermal reactors? 4 The case for massive government funding of the LMFBR thus rests upon the assumption that it will open the way to a virtually infinite source of energy. In other words, the LMFBR is seen as providing an insurance against future uranium scarcity.

However, critics of the LMFBR argue that it will lead to an extremely dangerous accumulation and proliferation of plutonium; that a reactor without a moderator operates close to the margins of an uncontrolled fission reaction, with the attendant dangers of a core-melt and a catastrophic accident; and that the liquid sodium coolant poses severe metallurgical and engineering difficulties.

Putting all one's eggs in the LMFBR basket is clearly risky: the LMFBR may become too costly, or encounter insuperable technical difficulties, and it may prove to be socially unacceptable for large-scale commercial power generation. Since the principal justification for the high priority for LMFBR development is to insure against long-term uranium scarcity it is illogical that complementary - and perhaps more cost-effective - forms of insurance have so far received miniscule government funding. The main possibilities (besides increasing R & D on other breeder reactors such as the gas cooled and molten salt versions) are to redesign thermal reactors either to burn thorium - substantial reserves of which remain to be exploited - or to achieve higher efficiencies in their use of uranium; and to increase uranium exploration.

All these possibilities would give more time for LMFBR prototypes to be thoroughly tested before moving to commercial development and provide other options in the event of the failure of rejection or the LMFBR.

'Proven' uranium reserves in the non-Communist countries are heavily concentrated in a few countries which are either themselves nuclear weapons states (the USA and France) or have been considered 'friendly' to the Western nuclear weapons states (Australia, Canada, South Africa, the French dependencies in Africa). Exploration halted when nuclear weapons' requirements fell in the late 1950s, and only began to revive as more nuclear plants were ordered in the late 1960s.

It seems unreasonable to assume that further exploration would



3SThe need for a substantial increase in R & D covering all types of uranium and thorium resources, and recovery methods, is emphasised in Energy R & D, OECD, op cit, p51. 36Contracts have usually been awarded in past collaborations so that industries in each country participate in the design and construction of every sub-system of the product in question (in the interests of creating employment, maintaining or gaining technological expertise). For example, the landing gear and other sections of the MRCA are being developed in each case by consortia of British, German and Italian industries. This precludes a true division of labour. See W. B. Walker, 'The Multi-Role Combat Aircraft (MRCA): a case study in European collaboration' Research Policy, Vol 2, No 4, January 1974.

neither lead to more discoveries nor increase the number of supply sources? 5 However, there is a problem in providing government support to stimulate additional uranium exploration: many of the areas yet to be explored are beyond the jurisdiction of the countries with large nuclear power programmes. One solution would be to launch an international exploration programme funded multilaterally by the 'consumer' countries, perhaps organised through the International Energy Agency. Failing that, the UK could usefully offer funds to uranium-producing countries to increase their exploration activities in return for supply guarantees.

In the longer term, controlled nuclear fusion offers the possibility of opening up an infinite source of energy and avoiding over-reliance upon nuclear fission (although it will probably have its own safety problems). At present most fusion research is being conducted in the USA and the USSR. In Western Europe, fusion research has been funded partly through Euratom and partly by direct government expenditures. Proposals for an experimental Joint European Tokomak (JET), with estimated construction costs of about £50 m, are under consideration.

Given the high costs and long lead times expected for fusion research, it is clearly sensible that the UK's work in this field should form an integral part of a collaborative European programme. However, the fluidity of scientific opinion on fusion (eg, on the relative merits of magnetic and laser confinement) suggests that the proposed commitment to JET is premature and carries attendant dangers of inflexibility.

Any collaborative arrangements on fusion will need to take account of the severe technical problems (eg, superconducting magnets, the lithium blanket, and plasma stability at thermonuclear temperatures) which are beyond the technical resources of any one European country to solve. As various European countries are beginning to show a specialist ability in different problem areas, an international division of labour along these lines might be a more efficient means of developing the technology. Provided that this form of collaboration is politically feasible, it would avoid the overlap of expertise that has attended past collaborative efforts? 6

Finally, just as the Americans face a dilemma over their public science and technology agencies (notably the USAEC which is now largely merged into ERDA, and the National Aeronautics and Space Administration), so the longer-term role of the UKAEA will present the UK government with difficult choices.

Cutbacks in government funding have diminished the UKAEA's role over the past decade, although diversification has partly cushioned the effects. Its role will diminish further if the NNC and the CEGB assume a bigger share of UK nuclear R & D effort, if the government opts for foreign licensing in the 1980s, or if the UK obtains a partnership in a foreign LMFBR development programme instead of building a commercial-scale demonstration plant in this country. In any case, as nuclear power emerges from its present infant industry status, the government will have to decide upon the future role of the UKAEA and the extent of diversification.

The electricity supply industry When the present federal structure of the electricity supply industry in England and Wales was created in 1958 the industry was sustaining


37Forty-nine 500 MW units were ordered between 1960 and 1965; the 660 MW units that fol lowed were stretched versions of the 500 MW units. For an examination of technical progress in the UK electricity generating industry, see F. P. R. Brechling and A. J. Surrey, 'An international comparison of production techniques:, the coal-fired electricity generating industry', National Institute Economic Review, May 1966. 3e-l-he central laboratories are at Berkeley (nuclear R & D), Leatherhead (generation and transmission), and Marchwood (engineering).

Sources: Annual Reports and Accounts of the Central Electricity Generating Board, Electricity Council, South of Scotland Electricity Board, and North of Scotland Hydro Electricity Board

Energy R & D - a U K perspec t i ve

rapid growth and was set upon an ambitious programme of innovation. The first commercial Magnox nuclear plants were under construction and the industry was striving to achieve economies in capital and fuel by installing successive vintages of conventional steam plant. The high voltage grid, and centralised planning and operation of plant, gave every incentive to install larger, more efficient plants for base-load operation and to demote obsolescent plants to less frequent use. Consequently, the largest boilers and steam turbine generators on order in the UK rose from 60 to 660 MW in the decade ending in 1966. 37

Rapid expansion and innovation encouraged the CEGB to build up teams exercising considerable control over designs, specifications, and project management; and three central R & D establishments. 38 The latter now account for four-fifths of the CEGB's R & D employees: the remainder are in five smaller, regional laboratories providing technical support for power station operation and site trials.

Over the past decade the CEGB has accounted for around 80% of the electricity supply industry's R & D expenditure (see Table 9). The remainder has been shared between the two Scottish Boards (around 5%) and the Electricity Council (around 15%), the latter comprising R & D on distribution and utilisation undertaken at the Electricity Council's Capenhurst laboratory.

Two major problems have beset the CEGB since 1967. Nuclear and conventional steam plants alike have encountered long and costly construction delays; and maximum demand has grown much less than predicted, with the result that plant ordering has been very low owing to the need to work offthe surplus of plant already on order.

For the CEGB, these problems have meant high fuel costs in operating obsolescent plants at higher load factors due to the non- availability of new plant, and a heavy burden of overhead costs due to the excessive amount of plant under construction. Much of the CEGB's R & D resources have been diverted to troubleshooting on urgent problems. Approximately three quarters of the CEGB's R & D expenditure in recent years has been concerned with plant already in service, under construction, and about to be ordered. These problems have also engendered considerable uncertainty and indecision with regard to further innovation (eg the wish to reduce risks by concentrating on 'proven' technology was a major factor behind the CEGB's proposal to install 41000 MWe of LWRs).

For the plant manufacturers, the slump in CEGB orders, following the move to larger and fewer new plants, necessitated the far-reaching

Table 9. R&D expenditure by the electricity supply industry, 1965-74 (£ mill ion; fiscal years)

CEGB

Electricity Council

Scottish Boards

Total a

Charged to capital account by CEGB and Electricity Council

Ratio of R&D a to industry sales

1965 1966 1967 1968 1969 1970 1971 1972 1973

5-76 6.22 6.42 6.77 7-35 8-35 9.57 10-81 13.03

0.90 1.41 1.40 1.42 1.55 1.71 1.90 2.10 2.24

0-33 0.33 0.45 0.42 0.34 0.53 0.65 0.93 0.72

6.99 7.96 8.27 8-61 9.24 10-59 12.12 13.84 15.99

2.4 3.0 1.8 1.8 2.2 3.4 4.7 6'9 7.3

0"8% 0-9% 0'8% 0'8% 0"8% 0,9% 0.9% 0"9% 1.0%



39A.J.Surrey and J, H. Chesshire, The World Market for Electric Power Equipment: rationalisation and technical change, Science Policy Research Unit, September 1972.

mergers in the late 1960s and the eventual decision to create the NNC. Nevertheless, the remaining firms found it difficult to maintain sufficient R & D owing to the slump in domestic orders.

As far as R & D is concerned, the CEGB has three objectives: improving the performance of existing plant and avoiding construction and teething problems with new plant; keeping abreast of technology in order to be an 'informed buyer' in the choice of new plant; and investigating longer-term technical possibilities. The 'informed buyer' objective obliges the CEGB to undertake considerable R & D on boilers, turbine generators, and transmission equipment, /is well as background scientific work to understand the problems presented by different reactor designs - including those to which it is already committed (AGR and SGHWR) and those it may order later (LMFBR and HTGR).

Preoccupation with urgent problems reduced the R & D resources available to examine technologies with potential long-term importance. The chief project in this category, now abandoned, was on magnetohydrodynamics: this offered the prospect of a significant improvement in thermal efficiency compared with current best-practice plant. It would be wrong to imply, however, that the CEGB has forsaken long-term research, for it has done much background work on superconducting materials and applications, electricity storage techniques, and electrical generation from natural sources.

International collaboration has been of comparatively minor interest to the CEGB. It is true that it participates in a longstanding R & D exchange agreement with Electricit6 de France and Ente Nazionale per l'Energia Ellectrica (the state-owned Italian utility) on ultra-high- voltage transmission; but its value appears to lie mainly in goodwill and understanding. A more concrete form of collaboration lies in CEGB's DM 2m share in SBK, the consortium that ordered and will operate the German LMFBR prototype (SNR-300). This should enable the CEGB to gain valuable operating experience before ordering its own commercial-scale LMFBR.

Commercial secrecy inhibits the participants in exchange agreements from divulging technical information to each other - except that pertaining to research with no immediate commercial application. Whether nationalised or privately owned, big electric utilities share common interests with their plant suppliers whose survival depends on a tightly protected home market? 9 For big electric utilities collaboration with domestic plant suppliers has been more vital than international R & D collaboration, although the plant suppliers often have both inward and outward licensing arrangements with foreign firms.

Having a virtual monopsony for many types of heavy plant, the CEGB inevitably wields considerable influence over designs and specifications and over the direction and volume of the R & D of the plant supply industry. In the past it has been reproached for wielding too much control over its suppliers and for duplicating their R & D efforts. If the CEGB goes too far in dictating designs and specifications, or in duplicating R & D, it would weaken the technical initiative and responsibility of the manufacturers.

For some time in the 1960s, commercial secrecy on the part of the plant suppliers inhibited a pooling of R & D information with the CEGB. The Power Engineering Research Steering Committee (PERSC), with members from the CEGB and the manufacturers, was


4°The R & D subsidies involved were £1.65 m in 1971/72, £2.4 m in 1972/73 and £2.5 m in 1973/74. CEGB Annual Reports and Accounts. 41The relevant Ministerial powers derive from The Coal Industry Nationalisation Act 1946 (Sections I and 3); The Gas Act, 1972 (Section 3.3); and The Elec- tricity Act 1957 (Section 7). Report of Research and Development, 1973-74, Dept of Energy, op cit. 42Price agreements giving an agreed "nor- mal' profit are especially important for UK power transformer and switchgear manufacturers. H. J. De Podwin and B. Epstein, The British Power Transformer Industry and its Excursions into the United States Market. New York Univer- sity, Graduate School of Business Ad- ministration, No 58-60, August 1969.

L)zerg), R & D a UK perspective

established to remedy this. With the mergers and the decline in profits due to low CEGB ordering, R & D collaboration through PERSC seems to have improved. During the dearth of domestic ordering, the CEGB has helped to sustain the manufacturers' R & D activities by means ofR & D subsidies allocated through PERSC. 4°

Despite PERSC and fixed price arrangements (partly designed to support the manufacturers' technical capability), the inherent instability in ordering heavy plant - together with occasional differences of interest and judgement - suggests that it will remain difficult to strike the right balance in R & D between the CEGB and the manufacturers. The R & D choices are difficult and some duplication is probably unavoidable and perhaps desirable. Barring a complete pooling ofR & D resources under a jointly owned R & D organisation, the CEGB may well be faced from time to time with the need to subsidise the manufacturers' R & D activities.

R & D is of course only one aspect of the relations between the CEGB and the plant manufacturers. The CEGB exerts considerable influence on the overseas competitiveness of plant suppliers via the level and continuity of its demand for plant and equipment; and via its procurement standards and specifications. The loss of export markets in the 1960s, which made it all the more difficult to weather the slump after 1967, was not connected with the great surge in C EGB ordering in the early 1960s. And by virtue of its position of near monopsony in the UK market, the CEGB has an important role to play in ensuring that its plant Tequirements, standards, and specifications are, as far as possible, compatible with requirements for export markets. It is essential that the plant supply industry should re-establish competitiveness in the world market for the industry's long-term viability and to cushion the effects of cyclical domestic demand.

The role of government

Beneath the official umbrella of government supervision, the fuel industries maintain considerable autonomy with regard to R & D. With the exception of the UKAEA, whose R & D funding requires a separate Parliamentary vote, the government's role regarding the programmes of the nationalised fuel industries has seldom amounted to more than approving levels of R & D expenditures. Their conten t remains largely at the discretion of the industries concerned.

Overt government intervention has been shunned on the grounds that it would conflict with the autonomy of these industries and with the guidelines designed to instill commercial discipline; that it would shift managerial responsibility from the industries to the Minister; and that these industries in any case are obliged to take 'due account' of the national interest and to submit their R & D plans for ministerial approval. 41

Direct government influence on energy-related R & D in private industry has also been small. Unlike other advanced technology industries (eg, aerospace, electronics, and computers), the heavy electrical and other fuel plant supply industries have not attracted government subsidies for their R & D. Indirectly, however, their R & D has been assisted by fixed price arrangements, 42 and influenced by the technical and procurement policies of the fuel industries.

In view of the radical changes in the energy situation during the past few years, should the government play a more active part in determining national R & D priorities and coordinating R & D


Energy R & D -- a UK perspective

43Note ACORD has not been concerned with R & D on nuclear power and oil. Select Committee on Science and Technology (Energy Resources Sub- Committee), Evidence from ACORD, 12 February, 1975.

programmes? Should it adopt a more positive role in sponsoring energy R & D in private industry? These are the two central questions regarding the role of government, but they cannot usefully be discussed without examining the relevant government machinery. The main elements of this machinery are as follows:

• ACORD (Advisory Council on Research and Development) reviews the R & D programmes of the nat ional i sed fuel industries and advises the Minister on whether they adequately reflect the national interest and are properly coordinated. It is chaired by the Chief Scientist at the Department of Energy. Its members include representatives of the various fuel industries and individuals from the scientific establishment and private industry.

• ETSU (Energy Technology Support Unit) was established at Harwell (UKAEA) in April 1974 with the task of assessing new energy technologies on behalf of the Department of Energy. The salaries and support costs of the staff of 10 scientists are paid by the Department. Before ETSU was formed, very little systematic technology assessment in the energy field was undertaken within government.

• ACEC (Advisory Council on Energy Conservation) was established in October 1974 to advise the Minister on energy conservation matters, including any R & D implications. Its members are mainly from industry and the universities, working on a part-time basis. It has no full time qualified scientific or economic staff of its own (although it is entitled to look to the Department for such support as it requires).

• A committee of Chief Scientists representing different government departments is responsible for coordinating government interests on various aspects of energy R & D which cut across departmental boundaries (eg, transport, industry, and housing).

• A small scientific staff at the Department of Energy, under the Chief Scientist, also provides advice to the Minister on energy technologies and R & D; but much of their work is administrative (eg, in connection with matters arising from the public, Parliament, and international agencies such as the EEC and OECD).

On paper, this machinery is tidy, administratively convenient, and cheap in terms of public expenditure. But is it capable of formulating a coherent national energy R & D strategy and effectively scrutinising and coordinating the R & D programmes of the fuel industries?

It is true that ACORD permits a dialogue between the fuel industries and government officials on energy R & D matters, and that the nationalised fuel industries must submit their R & D plans to the Minister for approval. But against this must be set the inherent defects: the fuel industry members of ACORD have a strong incentive to defend their R & D plans from detailed scrutiny and criticism by government officials and other members representing competing commercial interests; ACORD is concerned only with the R & D programmes of the nationalised fuel industries; 43 the scientific staff at the Department of Energy are few in number and heavily burdened with administrative detail; and ETSU is small and removed from the centre of the stage on policy matters.

It is difficult to evaluate in detail the effects of the above machinery, as government policies on energy R & D are essentially beyond public scrutiny. The reports of ACORD and ACEC are not published, and


44j. E. Tilton, US Energy R & D Policy, Resources for the Future Inc. Washington, September 1974; and J. H. Holloman et al, Energy R & D Policy Proposals (Report submitted by the Center for Policy Alternatives, MIT, to the Ford Foundation Energy Policy Project), Mimeo, October 1973. 45G. Eads, 'US Government Support for Civilian Technology: Economic Theory versus Political Practice, Research Policy, Vol 13, No 1, April 1974.


government decisions in this field are rarely open to public or Parliamentary debate. However, as none of the R & D managers we interviewed in the nationalised fuel industries could recall an instance when his industry's R & D plans had to be changed at government request, probably the most that can be said for the existing machinery of government is that the obligation to defend their R & D plans in ACORD may deter the nationalised fuel industries from undertaking over-ambitious programmes.

Given the long-term national importance of strategic energy R & D decisions, the R & D programmes of the fuel industries require close scrutiny to ensure that they are complementary and an integral part of energy policy. They should also be open to public debate. In our view the present machinery cannot serve these purposes. We suggest that ACORD should be replaced by an R & D Policy Committee at the Department of Energy with clear responsibility for formulating a national energy R & D strategy, advising the Minister whether the programmes of the fuel industries are satisfactory within the wider policy framework, and recommending areas for direct government financial support. Its membership should comprise not only the Department's scientists, but also economists and administrators responsible for all facets of national energy policy. Each of the fuel industries should be separately consulted on the issues related to their own R & D programmes, but should not be directly represented on the Policy Committee. The Minister should then publish an annual report setting out the issues and priorities. This procedure would avoid the obvious shortcomings of ACORD; but it would not mean undue interference in the affairs of the nationalised fuel industries (indeed, it would be analogous to the long-established procedure for reviewing their investment programmes).

On the question of government involvement in energy-related innovation in private industry, the widely accepted principle is that governments should intervene where private firms are inefficient in their use of science and technology, or where there are serious imperfections in the market system - when there is a divergence between the commercial interests of firms and wider social and economic interests. 44 Government funding of industrial R & D may be justified in order to:

• Obtain social and economic benefits for the nation which are insufficiently taken into account by industry (eg, environmental protection, safety, and saving on imports).

• Support promising areas of R & D which are too costly or risky in relation to industrial cash flow, or where the discounted commercial benefits of R & D are significantly less than the prospective benefits to the national economy.

• Guard against dependence on monopolistic foreign suppliers of new technologies.

In practice, however, the criteria for government funding are seldom clear-cut; and it is usually difficult to identify these imperfections and to assess their economic and technical implications. 45

As borne out by numerous examples of failures of government- sponsored R & D in various countries, incorrect diagnosis of market imperfections may lead to public funds being wasted. The reasons for this general lack of success are complicated, but four stand out in the literature on the subject. First, innovation can only succeed



commercially if the innovators have an intimate knowledge of market demand. Industrialists are usually better placed than civil servants to recognise technical and marketing opportunities. Second, the prospect of government subsidy may tempt the innovator to pursue second-rate ideas or to be over-ambitious. Where innovators are confident of commercial success, they are generally reluctant to sacrifice profit through having to pay interest, or a levy, on a government loan. Third, government assistance has frequently been sought by companies with their 'backs to the wall' - it has been used as a means of sustaining unprofitable lines of business. Fourth, there is always the temptation for government to allocate funds to R & D for non-commercial reasons motivated by, for instance, the need to satisfy a powerful lobby, or the desire to sway a particular section of the electorate.

As far as the privately-owned energy-related industries are concerned (mainly the oil and plant supply industries), the government has given scant assistance to R & D. There seems little reason why this situation should change. This applies especially to public subsidy of the development end of the R & D spectrum. At the research end of the spectrum (up to and including exploratory development), where time- horizons are longer and profit less immediately foreseeable, there is a tendency for industry to underinvest in R & D (especially when cash- flows are being squeezed). To some extent, universities and the nationalised fuel industries fulfil the basic research function for industry. It is important nonetheless that a certain level of exploratory work should be carried out in the more utilitarian atmosphere of industry, both to ease communications with external scientific effort and to provide the groundwork for future innovation.

This is especially relevant to the electrical industry - where the slump in demand since the late 1960s has reduced the incentive to innovate- and to the oil industry. Has an adequate assessment of the background research capabilities of the electrical and oil industries been made? Is there sufficient energy-related research being carried out in universities, particularly in relation to oil technologies?

There is also a clear need for government funding of R & D on unconventional technologies, eg, hydrogen fuel and solar energy, which may have long-term significance. Given the extreme uncertainties, rigorous commercial assessment cannot provide the basis for deciding the best allocation of funds. The only workable criterion is technical promise - first identify the most promising areas of technology, then rely upon the entrepreneurial judgement of scientists to give the programme direction within an overall budget constraint.

The area in which the government has the clearest responsibility relates to the setting of standards, sometimes in direct conflict with the commerical interests of the relevant industries. These fall into two groups: standards relating to measurement, technical procedures and the like; and standards relating to health, environmental pollution and safety. The former has traditionally been the task of the government laboratories (the National Physical Laboratory and the National Engineering Laboratory), although in the energy sector it has usually been carried out by the nationalised fuel industries; the latter is the subject of a variety ofR & D programmes scattered across government laboratories, inspectorates and fuel industries.

Now that the UK is about to become a major producer of oil, the need has emerged for more positive government sponsorship of R & D to ensure that the relevant technical standards and procedures are kept



under review. A related need with regard to offshore oil and gas is for the government to acquire sufficient geological expertise to evaluate, independently of the oil companies, the size of the reserves, the possibility of using secondary recovery techniques, the costs of exploration and production, and the chances of new discoveries. As we have suggested, these activities might usefully be brought together within a new central laboratory.

Finally, what part should the government play in funding R & D related to energy conservation? Again we stress that R & D is just one of the available means of promoting energy conservation; and it is essentially a medium- and long-term measure. A more immediate impact is probably best achieved via fiscal inducements and administrative measures. Also, the problem is as much one of encouraging the diffusion of existing techniques as of developing new technologies. More efficient technologies will only be adopted if firms and households are aware of their advantages and if the investment is justified in terms of the total costs of the products or processes. In many cases, inefficient energy use stems from obsolescent capital equipment, and the fact that in many industries energy still accounts for a small proportion of total costs, thereby attracting little attention.

Given their existing economic ground-rules, it is clearly not the responsibility of the fuel industries to seek reductions in the growth of national energy consumption. Energy conservation is thus one area in which government policy may run counter to the commercial interests of the fuel industries. The government has an obligation to sponsor R & D (eg, building materials, the conversion efficiency of appliances, and electric vehicles) if it considers that industrial R & D on conservation technologies is insufficient. Where government-sponsored R & D is necessary to overcome imperfections in the market system, the industrial Research Associations could play an important role by virtue of their intimate knowledge of their respective industries and experience in the problems associated with the adoption of new technologies.

Guidelines for a national strategy

Threatened shortages of fossil fuels and uranium have given energy g & D a new political and economic significance, since it offers the industrial countries a means of regaining longer-term control over energy costs and supplies. After approximately 15 years of resting upon the assumption of continuing abundance of petroleum supplies, difficult choices on energy R & D are necessary. The difficulty stems from the major uncertainties surrounding the long-term energy situation (and hence the expected benefits of the new technologies); the social, economic and technical risks involved in pursuing some of the R & D options; and from the remorseless increase in the costs of technical change. In these circumstances the use of accounting, cost-benefit and other conventional aids to decision making are unlikely to provide a substitute for entrepreneurial judgement and reappraisals.

For the UK, caution - but not inaction - must be the byword in formulating a national strategy for energy R & D. Owing to North Sea oil and gas, and plans to stabilise coal output, the UK faces no overriding urgency to develop new energy supply technologies over the next decade or so. A 'crash programme' approach would therefore be singularly inappropriate.



4elf approval is given for the next stage of breeder reactor development, involving around £600 m mainly on a 1300 MWe demonstration plant, it would be by far the largest UK civilian R & D project over the fol lowing decade, D. Fishlock, 'A costs dilemma for research', Financial Times, 19 February, 1975. This is true irrespective of questions about how much of the costs of such a plant should be regarded as R & D and who should finance them. 47R & D is only part of the process of innovation. Because of the weakness of the industrial consortia in the 1950s and 1960s, and the decline in orders, the UKAEA's technological capability was not matched by equivalent strength on the production side. R & D policies will be thwarted unless proper account is taken of the organisation and technological capability of industry. 48-I-he Dept of Energy, Report on Research and Development 1973-74, op.cit, does not meet this requirement adequately. It describes small projects in detail, but skims over major items such as nuclear R & D; and it contains virtually nothing on the strategic objectives on which the allocations are based.

But the North Sea reserves will not last for ever; coal could become very expensive to mine; and the spread of environmentalist concern, of the kind experienced in the USA, could seriously affect the prospects for UK fossil fuels as well as the future growth of nuclear power. The emphasis in a national energy R & D strategy should therefore be on seeking insurance against possible adverse future situations (a contingency approach) rather than on trying to identify and back commercial winners at an early stage.

Such a policy must have two main ingredients. First, a strong, diversified programme of basic and applied research must be maintained to explore medium- and long-term technical options, and to keep abreast of foreign developments. As needs arise, this would provide the spring-board for commercial development. Second, the more costly development programmes must be conducted, wherever possible, on an international basis. The UK has insufficient resources to carry out a comprehensive energy R & D programme independently; and its domestic market cannot provide the necessary economies of scale. Despite its inherent difficulties, international collaboration is essential if costs are to be shared, markets expanded, and concentration of resources avoided.

Among present UK R & D programmes, the LMFBR gives greatest cause for concern, since it is absorbing the lion's share of government funding and its social and economic merits are debatable. A premature decision to proceed with a commercial-scale demonstration plant would carry grave risks, including the probability that it would dominate energy R & D funding for many years to come and perhaps exclude other R & D options. 46 The LMFBR decision should be taken in the context of other energy R & D choices, including the need to open other options (eg, uranium exploration and the HTGR) and the possibilities for effective international collaboration.

A consistent theme of this paper has been the need for more positive direction of energy R & D by the government in two respects. First, the R & D interests of the nationalised fuel industries sometimes overlap or conflict (eg, the NCB and BGC on gasification; the UKAEA and CEGB on reactor technology; and the NCB and CEGB on fluidised- bed combustion); they require careful balancing. But deciding where coordination and the avoidance of duplication are necessary is not simple. Conflicts may arise owing to different valuations of the eventual benefits; and some duplication may be desirable. Each case must therefore be decided on its merits and in relation to foreign R & D. Second, the government has the important responsibility to ensure that the strategy for energy R & D is consistent not only with national energy policy, but also with industrial policies. 47 Consistency will be difficult to achieve without an explicit energy policy and without a machinery to enable government R & D decisions to be taken within a framework of long-term energy policy objectives.

Strengthening the hand of government, however, is not sufficient. It will not guarantee the emergence of an 'optimal' strategy, nor that expensive mistakes will be avoided (especially in a climate of anxiety about future energy supplies). It must be accompanied by a parallel strengthening of public accountability, including publication of the details of energy R & D funding and the reasoning on which they are based; 48 and by greater opportunity for Parliamentary and public scrutiny and debate.


* Includes gas cooled, molten-salt and light- water breeders

a Includes reactor safety, waste management,

resource assesment. The biggest increase is on reactor safety

b Includes resource assessment, common technology, and synthetic fuels pioneer programme. The latter accounts for the bulk of the increase

c Includes thermal pollution and automotive emissions

Source: Project Independence, Report, Federal Energy Adminsitration, Nov. 1974, pp 436-437


Annex 1. US Federal energy R & D budget, 1973, 1974 and 1975 ($ millions; fiscal years)

1973 $m %

LMFBR 253.7 Other breeders* 5.6 High Temperature

Reactors 7.3 Light Water

Reactors 29.5 Uranium Enrich-

ment 50.3 Ot her a 60.1

Nuclear fission 406"5 (60.5)

Oil, Gas & Shale 18.7 Coal - mining 1.7

- health & safety 28-2

- gasification 37-1 - liquefaction 11 '0 - direct

combustion 1.5 -- other b 5.6

Fossil fuels 103.8 (15.5)

Fusion 74"8 Geothermal 4.4 Solar 4.0

New energy sources 83"2 (12.4)

Residential & commercial

Conversion, transmission, storage 11.0

Transport 21,2

Energy conservation 32.3 (4-8)

Sulphur oxides 19'0

Other fuel pollutants 8.8

OtherC 10-6

Environ mental control 38-4 (5-7)

Environmental & health effects

Basic research and manpower development

Miscellaneous 8-1 (1.2)

GRAND TOTAL 672-2 (100.0)

1974 1975 $m % $m %

357.3 473.4 4.0 11.0

13.8 41.0

29.0 21.4

57.5 66.0 68.9 111-9

530.5 (41.8) 724.7 (31.5)

19.1 41.8 7-5 55-0

27.0 27.7 54.3 116.0 45.5 198.5

15"9 36.2 14.2 72-1

183.5 (14.4) 457-3 (19.8)

101.1 168-6 10.9 44.7 13.8 50.9

125"8 (9"9) 264"2 (11"4)

15"0 27.9

23"8 55'0

27-2 45"7

66"0 (5"2) 128"6 (5-6)

43"9 94'0

13'1 57"0

8"5 27-5

65"5 (5"2) 178"5 (7.8)

169'7 (13.4) 303"4) (13.2)

100.8 (7"9) 183"1 (8"0)

28'8 (2-3) 62.8 (2.7)

1270.6 (100"0) 2302-6 (100"0)


energy r&d a uk perspective

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