Clause 101 - Offshore transmission and distribution of electricity: extension of time for licence modifications and property scheme applications

Energy Bill [Lords] – in a Public Bill Committee at 10:30 am on 21st June 2011.

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

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Energy and Climate Change)

It is good to have you here, Mr Leigh, for this penultimate sitting of the Committee. I support the clause, which extends the Secretary of State’s powers under the Energy Act 2004 and the Ofgem powers under the Electricity Act 1989 to enable implementation of the enduring offshore electricity transmission regime with the generator build option beyond 2010. The clause is eminently sensible, and I applaud the Minister for bringing it forward, but I want reassurance from him on a matter on which I understand he has been engaged with the offshore wind sector of renewables, as well as the oil, gas and Crown Estate sectors.

My query is short and simple. I would have raised it last week had there been time, but this is the last opportunity for us to ask the Minister to put his thoughts on the record. What progress has he made with the sectors on resolving the outstanding issue of compensation to offshore renewables operators in the event of the termination of a lease or a lease agreement? Will such compensation include future profits, frustration costs and decommissioning costs where appropriate? Will he confirm that, as the offshore sector expects, an oral statement will be made to Parliament on the matter? If he does not have the details to hand, I am happy for him to write to me and other members of the Committee, but I hope that I have afforded him the opportunity to put his assurances on the record.

Photo of Charles Hendry Charles Hendry The Minister of State, Department of Energy and Climate Change

It is a pleasure to serve under your chairmanship again, Mr Leigh. We are well seized of the concerns expressed about the oil and gas clause in respect of the Crown Estates’ renewable leases and the impact that they could have on the financing of renewable projects. My Department has been working with the two representative bodies, Renewables UK and Oil & Gas UK, over the past few weeks, and progress is being made.

I should say something about the broader context of the framework within which the two industries, which both have important contributions to make to achieving our policy aims, can co-exist successfully. Our expectation is that suitable consultation, planning and phasing of the respective operations will, in most cases, allow both developments to achieve their objectives in full, or with only minor compromise. At the stage of formal consent, an application from either industry to develop the natural resources of our marine environment will be considered as part of the standard procedures of the relevant authority, and consulted on with interested stakeholders. Any user of the sea, including oil and gas and offshore renewable industry players, can make representations at a number of stages, including the formal consent process and the environment impact assessment, and we recommend that interested parties do that so that their views can be taken into account in decision making.

Circumstances could arise in which an oil and gas company might wish to proceed with a development that required the lease area of a renewables development to be reduced. The leases provide that such action can be taken if the Secretary of State so requests, but, as was made clear when the matter was debated in the other place, we do not envisage such powers being exercised except where there had been effective commercial negotiations between the companies involved and where a reasonable commercial solution had been proposed to the wind farm owner. I say categorically that, if the oil or gas company were not prepared to offer appropriate compensation, the Secretary of State would not intervene and the lease would not be affected.

As I said, we are working with the two industries to formalise the assurances that I have just given and to clarify the many detailed points that have arisen, but I do not consider that hard-wiring them into primary legislation at this stage would be the right way forward. I hope that I have given the hon. Gentleman the assurances that he seeks.

Question put and agreed to.

Clause 101 accordingly ordered to stand part of the Bill.