New Clause 2 - Adjustment of transmission charges for electricity

Climate Change and Sustainable Energy Bill – in a Public Bill Committee at 2:00 pm on 9 February 2006.

Alert me about debates like this

‘(1)Section 185 of the Energy Act 2004 (c. 20) (adjustment of transmission charges) is amended as provided in subsections (2) to (4).

(2)In subsection (1)(a), for “of Great Britain” substitute “in Great Britain”.

(3)After subsection (3) insert—

(4)In subsection (11), for “more than ten years after the commencement of this section” substitute “later than 4 October 2024”.

(5)Subsection (7) of section 185 may be satisfied in relation to any order to be made under that section after the commencement of this section by publications and consultation taking place wholly or partly before that commencement.’.—[Malcolm Wicks.]

Brought up, and read the First time.

Photo of Joe Benton Joe Benton Labour, Bootle

With this it will be convenient to discuss Government amendment No. 15.

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

It is a pleasure to serve under your chairmanship, Mr. Benton.

New clause 2 will increase the support that can be given to renewable generators on the Scottish islands of Shetland, Orkney and the Western Isles. It builds on a power in the Energy Act 2004 enabling the Government to adjust the charges that renewable generators in a specified area of Great Britain must pay to use the transmission network, if the charges would otherwise deter renewable development in that area. Of course, the Scottish islands have great potential for renewable development—enough, I am told, to power the cities of Glasgow, Edinburgh and Aberdeen. I have been to the Western Isles on two occasions, and I saw   the potential for renewables on those wonderful islands. I very much hope that I will have the chance to visit some of the other islands in due course.

Renewable generation has important environmental benefits. The Government have made clear their commitment to supporting the development of such generation, which can help us to tackle one of the biggest challenges we will ever face: climate change. It can also bring important social benefits. Renewable development on the Scottish islands can provide a real boost to local communities. Indeed, a delegation of councillors from the islands came to see me some months ago to make the case for extending the benefits that we can give to renewable projects on the islands. I was impressed by what they told me about the community support for some of those projects and the way in which benefits can be channelled into local communities.

The power that we took under the Energy Act 2004 enables us to reduce the transmission charges that renewable generators on the islands will have to pay. Without that reduction, renewable generation on the islands would probably not be viable. The existing powers allow us to adjust charges for up to 10 years from the commencement of the provision in October 2004, so as things stand, any scheme would have to end in 2014. However, it became clear in the recent consultation exercise that renewable projects on the islands are unlikely to be operational before the beginning of the next decade. A scheme ending in 2014 would give insufficient support and would not make those projects viable. The new clause will enable us to extend any scheme to 2024, which will enable us to give the projects the support that they need to go ahead.

The new clause also makes a couple of technical changes. It will ensure that a scheme can be applied to separate islands and that the consultation requirement in the 2004 Act can be satisfied by consultation taking place before the provision in the Bill is commenced.

In summary, the Government are committed to encouraging renewable development. The new clause will give further support for renewable generation and ensure that the potential in the Western Isles, the Shetlands and the Orkneys is not wasted. I have listened carefully to the representations of colleagues representing the islands and to the local councillors who came to see me. I think that the provision is an important proposal. Amendment No. 15 is consequential, and is required to make the long title of the Bill reflect the inclusion of the new clause.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

The Minister will not be surprised to learn that I have talked about this issue on many occasions on the Floor of the House. I start by warmly welcoming the new clause; he has genuinely listened to what has been said by those on the Western Isles and northern isles, and it will make a great difference to generators in those island areas. I will not burden the Committee by going over the evils of the transmission charge regime introduced by Ofgem, which on the whole will do great damage to renewables in the north of Scotland.

I want to ask the Minister one or two questions. Can he be more specific when he talks about the territorial extent of the Western Isles and the north of Scotland? For example, the Pentland firth, which sits between the Orkneys and Caithness, has huge potential for tidal and wave power. It is not clear to me whether the proposal will affect only schemes that are actually in the islands, or whether it will also benefit schemes in the Pentland firth.

The Minister also talks about extending the period for a further 10 years. Am I right in thinking that the scheme is still based on the area and that it will run for a total of 20 years? Will the extension be based on the area rather than on a particular proposal? For example, if someone comes along in 10 years and wants to set up a scheme in the area, will they still have only 10 years rather than 20?

I appreciate that the Minister has listened and has done something for the northern isles, but I draw his attention to The Herald this morning, which has printed comments made by one of his predecessors, Brian Wilson, on Ofgem’s proposals. In fact, the headline is “Ofgem could stem tidal energy flow”, and he talks about the discriminatory charges against power carried from the periphery. I am not sure that we in Scotland like to be called the periphery, but none the less that is a good point that I have raised with the Minister on many occasions: the way in which the charges are structured militates against renewables.

The Minister has now done something about the islands, and I appreciate that, but he has done nothing about the mainland. The same problems affect the mainland and offshore installations such as the Beatrice installation on the Moray firth, promoted by Talisman Energy, which will not get any additional benefits as a result of the provision. If we are serious about renewables we must attack such problems.

I have no great faith in Ofgem from my own meetings and discussions with it during the passage of the Energy Act 2004. I raised many such issues and will not go through the detail again, but I ask the Minister to consider my points.

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs)

I do not intend to detain the Committee on the new clause, except to say that I broadly welcome what the Minister has said. The hon. Member for Angus (Mr. Weir) has raised some valid points and I look forward to hearing the Minister’s reply.

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

So I had better give the reply, I think, to the best of my knowledge. I will have to pass on the issue of the exact territorial extent. Will the hon. Member for Angus allow me to write to him on that issue? I recognise its importance but, geographically, I will have to take some advice. I have boasted that I have been to the Western Isles on two occasions, but unfortunately the second was when his party, using wind power, blew away the Labour candidate who I was supporting, my good friend Mr. Calum MacDonald. I did not investigate all the territories on that occasion.

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

I understand that point—at least, I am certainly going to make out that I do. As I say, I have only been to the Western Isles and the other areas I will explore. I shall write to the hon. Gentleman on that important point.

A 10-year extension means that we could cover any project up to 2024. I hope that that clarifies that issue. On the issue of the mainland, I anticipated the question and prepared my answer earlier; I hope that it fits the bill. The question of the mainland, alongside that of the islands, was one of those raised in our consultation. We are still considering the responses that we received. However, we made it clear in the consultation that the evidence provided so far by independent consultants suggested that exercising the power on the mainland would result in little additional renewable generation, with most of the benefit going to projects that would have been developed anyway. That would not represent good value for electricity consumers, who will ultimately have to pay for the scheme. That is our current position.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry) 2:15, 9 February 2006

I understand the point that the Minister made about the area scheme regarding extension to 2024. If someone starts a scheme now they will get the benefit up to 2024, which will allow them a significant payback period. If they were to start the scheme in 2012, however, they would get only 12 years, which would not give the same payback scheme. Although we are talking about a 20-year period, the full payback period will apply only to a scheme started now or within the next year. Is that the case?

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

Under the original Act, we envisaged a 10-year period. As a result of the development of future projects, we listened and thought it appropriate to extend by another 10 years. I am a Fabian and a gradualist. The hon. Gentleman has got another 10 years—or rather the Scottish isles have. I cannot go further than that. That might not satisfy him, but that is the current position.

Question put and agreed to.

Clause read a Second time, and added to the Bill.