Clause 26

Northern Ireland (Miscellaneous Provisions) Bill – in a Public Bill Committee at 5:30 pm on 25 April 2006.

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Financial assistance for energy purposes

Question proposed, That the clause stand part of the Bill.

Photo of Laurence Robertson Laurence Robertson Shadow Minister (Northern Ireland)

On this occasion, I shall attempt not to stray on to the issue of Russian gas supplies.

Let us compare the renewables market in this country with that in continental Europe, where the supply of renewable energy is far more prevalent. Continental Europe generates far more electricity from renewable sources than we do. As hon. Members might well be aware, the renewables obligation covers Great Britain, but we manage to generate only about 3.5 per cent. of our electricity from renewable sources compared with the target of 10.4 per cent. by 2010.

Now that it is 2006, that target looks very ambitious, but it does not seem awfully high when we consider the necessity of moving towards the cleaner generation of electricity, for which the necessary technology has been around for some time. For Northern Ireland there is  the non-fossil fuel obligation, but that will be set at only 6.3 per cent. by 2012, which is not terribly ambitious. At the moment, the figure is about 3 per cent.

I accept that there are problems with the promotion of renewable energy in Northern Ireland that do not exist elsewhere in Great Britain, where there is perhaps more potential for the generation of renewable electricity. In encouraging renewable electricity in Great Britain, the Government have made the mistake of depending far too much on windmills. Although they have their place in electricity generation, several problems are associated with them. The biggest is that they are intermittent—when the wind does not blow, we get no electricity. That might seem like an obvious statement, but the wind tends to blow only 30 per cent. of the time, so we get electricity only during that time. The great problem with electricity is that it cannot be stored, so if the wind blows twice as hard one day, we cannot get twice as much electricity and store it for a day when the wind does not blow.

For two years, I have tracked the Government on energy issues and shadowed the Minister for Energy and I think that we need a much broader approach to developing renewable energy. There is far too much emphasis on wind power—

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Order. I am sorry to stop the hon. Gentleman again, but I am anxious not to have a general debate on the merits of wind power versus nuclear or otherwise. The clause touches on promoting wind farms in Northern Ireland, and his comments must relate to the Northern Ireland situation.

Photo of Laurence Robertson Laurence Robertson Shadow Minister (Northern Ireland)

Thank you, Mr. Atkinson. Having visited a wind farm in Northern Ireland, I felt slightly qualified to discuss the issue. I am merely trying to suggest that the Government take a much broader approach to developing renewable energy in Northern Ireland than they have in Great Britain. The approach that they have taken in Great Britain has left us struggling to meet the targets, and I do not want the Government to fail to meet the modest targets in Northern Ireland. If they are serious about developing renewable energy in Northern Ireland, they need to be much more focused than they have been in Great Britain.

Photo of Sammy Wilson Sammy Wilson Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Education)

I have a couple of points relating to the purposes of the financial assistance and the aims listed in subsection (2) of the clause. Those aims are admirable, but the existence of a single energy market poses a particular threat. The biggest player in that market will be the Electricity Supply Board—the electricity generating body from the Irish Republic. Contrary to the current situation in Northern Ireland, it will be not only a generator, but a supplier, transmitter and distributor, and it will control at least half the market. Given that the electricity that goes into the pool will be based on half-hour transmissions, such a large supplier will have the potential to distort the price to its own advantage, which is particularly worrying.

What steps will be taken during the negotiations to deal with that issue? Attention must be paid to it to ensure that one large player, which will not only supply the pool, but buy from it, does not distort the market. What steps will be taken to ensure that that does not happen? The danger is that ESB could drive out some of the smaller generators by influencing the price. As the hon. Member for Belfast, South said, the energy market on the whole island—in Northern Ireland and in the Irish Republic—is quite isolated. Some power can be brought in through the interconnector from Scotland, but by and large the island is quite isolated, so the loss of one generator could greatly distort the market and greatly increase price volatility. That is one of the reasons why I said at the start that although in theory a single energy market would be welcome—

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Order. I am sorry to interrupt the hon. Gentleman again, but we are again straying rather wide of the clause. As its title says, it is about financial assistance for energy purposes. I should be grateful if he related his speech to that subject.

Photo of Sammy Wilson Sammy Wilson Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Education)

Thank you, Mr. Atkinson. I was dealing with subsection (2), whose first purpose is

“to secure a diverse and viable long-term energy supply”.

If steps are not taken to address the power and influence that can be exercised by one supplier and distributor controlling 50 per cent. of a single market, that purpose will not be achieved. It will be possible for that one supplier to influence the price and affect in the long term the number of generators in the market.

I should appreciate some guidance from the Minister on what discussions have been held on the matter. One way around the problem is a fairly generous capacity payment mechanism, whereby generators would be paid to keep some surplus capacity so that peaks and troughs could be dealt with and sufficient generating capacity would exist during peak periods to ensure greater price stability. I do not know whether discussions have been held along those lines, but that is one solution that generators have suggested. They have a vested interest in being paid for surplus capacity, of course, but it would be equally beneficial to consumers in that it could even out price peaks and troughs during the year or the day.

Attention must be given during negotiations to the ESB’s ability to distort the market and to affect the working of something that should be beneficial to consumers, rather than going in the long run against some of the purposes in clause 26.

Photo of Alasdair McDonnell Alasdair McDonnell Shadow Spokesperson (Work and Pensions), Shadow SDLP Spokesperson (Health), Shadow Spokesperson (Education), Shadow Spokesperson (Treasury)

I am conscious of the time, but I feel that it would be remiss of me not to welcome the clause warmly, as I welcomed clause 25. Renewable energy and diversity of supply are important issues for us in Northern Ireland, and from where I stand, I see a gap. The Government must have the ability to intervene to develop the market and to encourage those who are uncertain about investing in renewable energy to move forward.

I do not wish to delay the Committee unduly, as other business is on the schedule, but I want to endorse strongly the broad principles of the Bill and urge the Minister to see that those principles are applied to  ensure a stronger renewable energy sector. We need diversity of supply, because the present circumstances do not do enough to encourage and create that market. I warmly welcome the clause.

Photo of David Hanson David Hanson The Minister of State, Northern Ireland Office

The clause is important for the reasons that hon. Members have mentioned. Developing renewable energy is crucial to the alternative energy sources required to help improve Northern Ireland for the future. At the moment, Northern Ireland is at99 per cent. of the quota on imported fossil fuels and other energy sources. We need to examine alternative energy.

For that reason, my right hon. Friend the Secretary of State announced early this year that he would allocate a £259 million support package to develop alternative energy sources during the next few years. The clause gives legal effect to the amendment of existing legislative powers so that financial assistance can be provided for energy purposes. It will enable the Department of Enterprise, Trade and Investment to assist in a wide range of energy provisions, including renewable development. I hope that it will be welcomed by all hon. Members.

The target in Northern Ireland is for 12 per cent. of electricity to be supplied from renewables by 2012. I accept that that is an ambitious target.

Photo of Laurence Robertson Laurence Robertson Shadow Minister (Northern Ireland) 5:45, 25 April 2006

The Minister has access to far more information than I have. I was told that the obligation was for 6.3 per cent. with an aspirational target of12 per cent.

Photo of David Hanson David Hanson The Minister of State, Northern Ireland Office

Indeed. The renewables obligation is 6.3 per cent., but the Government target is to try to make it 12 per cent. by 2012. We need to support renewables effectively. I welcome the hon. Gentleman’s support for the Government’s attempt to develop renewable energy. Far be it from me to reflect that, as I recall it, when the £59 million that the Government are allocating was announced in the Budget, the hon. Gentleman voted against it. I welcome the fact that he is committed to supporting renewable energy, but I wish that he was committed not only in his aspirations but in his voting.

Having said that—let us not be churlish—the hon. Gentleman said that wind power is important. Yes it is, but that is not all that the Government intend bringing forward under the Bill. If the clause becomes law, we intend to give powers to the Secretary of State to ensure that research on generating energy from waste products is undertaken, with a £15 million fund; there will be accelerated deployment of solar power; and over the next couple of years, the Housing Executive will be installing 600 solar heating systems in social housing and increasing to 10,000 the number of homes that receive energy from solar power through a number of energy efficiency measures under the warm homes scheme. We will also build market capacity with an investment of £2.5 million, and we are underpinning the knowledge economy by investing in such areas. I would certainly say that the clause is important. It gives legal backing to the power to achieve those results.

The hon. Member for Antrim, South mentioned ESB—an important point. [Hon. Members: “East.”] I apologise; I meant to say the hon. Member for East Antrim. I know the difference between Antrim, South and Antrim, East; I have seen both of them kicking around in the park on several occasions. It was a slip of the tongue.

As the hon. Member for East Antrim said, ESB will have nearly 60 per cent. of the generating capacity in the new market, and we need to consider how to prevent ESB from abusing its market power. The dominance of ESB is a challenge to the operation of the new markets, and the Irish Government too are considering the position of ESB in their review of the Irish electricity sector. The Department for Enterprise, Trade and Investment has taken a close interest in the matter, and the Under-Secretary of State for Northern Ireland, my hon. Friend the Member for Basildon, will be considering it carefully.

In recognition of ESB’s current position, the regulators are developing a market power strategy to address the potential for market abuse by participants that control a dominant segment of the generating plant capacity. Again, I hope that that will be a matter for further discussion, and I am sure that, if required, my hon. Friend the Under-Secretary will support a meeting with the hon. Member for East Antrim to discuss the matters further.

I commend the clause; it is valuable, and I am grateful that hon. Members in all parts of the Committee support it.

Question put and agreed to.

Clause 26 ordered to stand part of the Bill.