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development assistance alongside the original UK focus. Round 6 is currently under consideration.

The BEIS portion of the International Climate Fund, jointly administered with DFID and Defra, includes a commitment to invest GBP 40 million on Energy Innovation projects. Officials are currently designing this in close consultation with other departments.

UK government funding for R&D collaboration with developed countries

The United Kingdom is launching R&D collaborations with developed countries, which include the United States, Canada, and South Korea. UKRI (both Research Councils and Innovate UK) have run several competitions with these countries. As part of future collaborations, BEIS and UKRI will discuss the possibility of co-funding calls. The draft International Research and Innovation Strategy has recognised the issue of a relative lack of funding for collaboration with developed countries within the broader international research context – and is proposing a new non-ODA fund to support such collaboration.

UK government funding for R&D collaboration with, in, or targeting developing countries (usually classified as ODA)

As part of the United Kingdom’s ODA funding, the government focuses substantial funding on RD&D in developing countries, part of a wider set of ODA activities that span the full spectrum from R&D to technical assistance and supporting innovation in market design and regulatory frameworks. UK ODA funding for international energy innovation is delivered through many programmes and organisations, namely: BEIS (the Newton Fund, Global Challenge Research Fund, and International Climate Fund), UKRI (the Newton Fund and Global Challenge Research Fund), and DFID.

European funding for UK organisations

EU funding for energy innovation is largely delivered through two programmes: Horizon 2020 (the European Union’s main R&D programme) and Euratom, as well as the European Regional Development Fund. The United Kingdom is a very active contributor to the ongoing work of the European Union’s Strategic Energy Technology (SET) Plan and provides the chair for two of its governance bodies (the SET Plan Bureau and its Joint Actions Working Group). The United Kingdom participates in ten (out of 15) temporary working groups for the implementation of the integrated SET Plan, and coleads the one on nuclear safety. In addition, the United Kingdom six participates in six ERA-NETs launched under Horizon 2020 (CCUS, Bioenergy, Wind, Smart grids, Ocean energy, and Solar energy). Regarding Horizon 2020, the United Kingdom is involved in almost half of all successful Horizon 2020 Energy project proposals, which enables UK organisations to benefit from the results of these projects and the networks created.

Assessment

The government wants to place the country at the forefront of the industries of the future and has ambitious goals on decarbonisation. These two goals are combined in the Clean Growth Strategy as part of the Industrial Strategy of the United Kingdom, in which research and innovation play a central role. The IEA compliments the United Kingdom for its international role in research and innovation. The United Kingdom has a strong position and a long history of international collaboration in this field. It plays a leading role in international initiatives such as, for example, Mission Innovation. The Global Innovation Index 2016 ranked the United Kingdom as the third most innovative country in

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the world. The Catapult programmes, which are now under the umbrella of UKRI, have been a success story in the UK since their launch some five years ago and are contributing to this.

The government expects to invest GBP 2.5 billion between 2015 and 2021 in energy RD&D. It aims at a strategy for a distinct set of energy technology priorities that reflect its resource base, technological competences, and commercial interests. The strategy covers all innovation phases: basic and applied research, technology development, and technology demonstration. It also addresses a broad field of topics. These are reflected in the RD&D funding allocations. The International Energy Agency (IEA) recommends a strong connection between the innovation portfolio and the overall energy and climate policy goals to give better support to achieving these goals. The approach of the UK’s TINAs and EINAs focuses on specific innovation areas within the energy portfolio aiming to identify options for support offering the highest impact.

Compared to other IEA countries, the United Kingdom is in the lower range of public spending on energy research and innovation per unit of gross domestic product (GDP). The current allocation of GBP 2.5 billion for energy RD&D seems slightly higher than historic budgets. It is unclear how much private parties are spending on R&D for energy and climate change. The government budget for research and innovation should reflect the challenges the United Kingdom takes on to 2050. The IEA advises the government to consider ways to increase the support for research and innovation efforts, both public and private, commensurate with the UK’s decarbonisation ambitions to 2050 and to match efforts of other IEA member countries.

The IEA welcomes Ofgem’s RIIO model and the support to innovation outputs. Ofgem’s budget of GBP 720 million coming from regulated tariffs to support smaller, more flexible, efficient and resilient networks is much larger than the budget BEIS has for all energy RD&D and should be reviewed in terms of outcomes and cost-effectiveness. In the light of the heated debates about energy bills for consumers, Professor Dieter Helm in his cost of energy review questioned Ofgem’s model to finance innovation through the distributors and consumer bills. As network operators are going to become increasingly system operators, their incentive will change and it is therefore timely to review this innovation funding.

Many countries are currently engaged in discussions on how to make their innovation approach more effective, in a way that maximises its contribution to the grand energy and climate challenges. A view that is gaining support is the approach of missionsoriented policy. The main difference to traditional innovation policy is that a missionsoriented policy does not focus on a technology, but on a goal. This comprehensive approach calls for an all-inclusive attitude of all the stakeholders, including government, to direct efforts to the energy transition. It also asks for attention to the need to consider other aspects besides technology development, such as behavioural issues, infrastructure, new business models, human capital, and the necessary market design. Without addressing these non-technological topics, technological innovations may not be implemented. The IEA encourages the government to adapt its research and innovation policy and incorporate a mission-oriented approach.

The IEA welcomes the installation of the EIB, which is intended to play a strategic role in coordinating energy research and innovation through all the innovation phases and across different institutions. The IEA notes that the EIB is mainly composed of internal,

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government parties and therefore suggests considering how to involve knowledge institutes and business in discussions of the EIB.

Innovations can have a large impact on society and technological development can go much faster than anticipated (e.g. cost reductions in offshore wind). This is why it is important to assess periodically the innovation portfolio and keep space to adapt it to new developments. Monitoring and evaluation are important instruments to make this happen. The IEA commends the United Kingdom for its systematic approach to monitoring and evaluation. The government has put a lot of effort into developing a suite of portfolio KPI performance metrics to measure the performance of the portfolio and provide accountability of the expenditure. The IEA calls on the government to continue this approach.

The United Kingdom plays an important role in international collaboration on research and innovation on climate and energy. This is well demonstrated by UK leadership in many areas.

In late 2016, the United Kingdom took a key position under Mission Innovation and has been leading the Mission Innovation Secretariat since 2017 and as Chair since May 2019. The commendable efforts by the United Kingdom have not only strengthened international energy innovation analysis under MI, but also supported co-operation through the IEA’s Committee on Energy Research and Technology (CERT) and the IEA’s Technology Collaboration Programmes (TCPs). The UK’s participation in 19 TCPs remains strong (However, it is lower than it was at the end of 2012 when the United Kingdom was part of 23 TCPs). The United Kingdom is very active in the EU’s Strategic Energy Technology (SET) Plan (having provided the chair of two of its governing bodies). The UK participates in ten SET Plan temporary working groups out of 15 and six EU energy related ERA-NETs). The UK is also active in the CEM (six initiatives and two campaigns) and in bilateral collaboration with different countries. The IEA calls on the United Kingdom to continue to participate actively and maintain a leading role in international research and innovation. The planned International Research and Innovation Strategy and specific International Energy Strategy will be able to shape these activities and align them with international opportunities.

Recommendations

The UK government should:

Adapt its energy research and innovation policy to incorporate a missions-oriented approach.

Focus on innovation areas within the energy portfolio to gain a higher impact from missions-oriented projects.

Take opportunities to ensure that the large expected uplift in UK R&D spending flows through to the energy sector, to reflect the ambitions the United Kingdom has towards decarbonisation up to 2050 and to match the efforts of other IEA member countries.

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Continue the UK’s leading role in international research and innovation, notably for Mission Innovation.

References

IEA (International Energy Agency) (2018), Energy Technology RD&D Budgets 2018, Paris, www.iea.org/statistics/.

UK Government (2015), Spending Review and Autumn Statement 2015, HM Treasury, London, https://www.gov.uk/government/topical-events/autumn-statement-and-spending- review-2015

UK Government (2017a), Clean Growth Strategy: Leading the Way to a Low Carbon Future, London https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_d ata/file/700496/clean-growth-strategy-correction-april-2018.pdf.

UK Government (2017b), Industrial Strategy, White Paper, London, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_d ata/file/664563/industrial-strategy-white-paper-web-ready-version.pdf

UK Government (2018), Clean Growth: The UK Carbon Capture Usage and Storage deployment pathway - An Action Plan, HM Government https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_d ata/file/759637/beis-ccus-action-plan.pdf.

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