Scottish Energy in the 21st Century

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Malcolm Bruce: I rest my case.

Mr. Wilson: That is a demonstration of my ministerial work load; I am back next Wednesday. I take the point. It is a weighty document and it will take time for interested parties to examine it. It is important to place it in the public arena. The energy review is a report to the Government, rather than a product of the Government. It will initiate a much wider and better-informed debate, which will be taken up in the House in the coming months. Because of major changes in the energy markets, a consensus has arisen on the need for an energy review. A day or two here or there is not the real issue.

I was asked about the time scale for upgrading the infrastructure. The answer can only be ''as quickly as possible.'' It is not entirely in the hands of the Government to determine, but the priority is to maintain the momentum that has been established by the renewables drive, especially by the proposal for a large wind farm in Lewis from AMEC and British Energy. The project is not feasible without the physical means to link it to the market.

Further imperatives are provided by the prospect of a British market in electricity and the understandable desire of the three Scottish companies to be part of a bigger market. They want the benefits of competition; the ability to sell to the whole of the UK. As the market in Europe increasingly liberalises, they may benefit further. I had a productive meeting with the three companies last week. Everyone wants to move forward quickly, to decide on the preferred options—cabling

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and strengthening existing transmission systems, for example—to estimate costing and to examine the best means of payment.

On fuel poverty and the effects of NETA, the hon. Member for Gordon correctly recognises that NETA has forced prices down. It has some drawbacks in that context that have to be addressed. He mentioned the effects on combined heat and power. NETA has not been going for long and has brought about a reduction of roughly 25 per cent. in the wholesale price of electricity. On the whole, it is beneficial in terms of the price of energy. There are specific issues such as the lifting of caps on prepayment meters. I am still having discussions with the regulator about that and hopefully we will get a synthesis of view.

On the renewables obligation, I have no difficulty with raising targets as high as anyone wants to raise them. There is not much point in setting targets unless we also will ourselves the means to achieve them. There is only one reason why there are higher targets now in Scotland than in the rest of the UK and it has nothing to do with what this or previous Governments did. It is because, 50 years ago, people had the vision to create the hydroelectric industry in Scotland. We owe our 18 per cent. target more to Tom Johnston than to any politician since.

We cannot rest on our laurels, saying that Scotland has the higher figure or the higher target. It is what we do now that really matters in changing things. I still detect a big gap between rhetoric and reality. We are all in favour in principle of renewable energy projects, but they all run into opposition, usually from those same people who would say that in principle they are in favour of renewable energy. There has to be some squaring of conscience with intellect and we have to get more of these projects going ahead.

The Chairman: Order. While I am sure that such comprehensive answers are appreciated, shorter answers would allow more questions to be asked.

Mr. Calum MacDonald (Western Isles): I welcome the Minister's announcement that the further study into the transmission network will look at overland as well as the sub-sea cable. Will he confirm that the Yorkshire interconnector, which is an important part of the Scottish-English route that is due to be completed later this year, was first the subject of planning applications as far back as 1990. It has taken 12 years to be developed to the stage where it is to be completed. Does he agree that although the overland alternatives are more cost effective, there are also big planning uncertainties? Does he agree that the sensible thing is to try to develop both the overland and sub-sea cable together?

Mr. Wilson: Yes. Planning must be taken into account in the study. For the reasons that I have just given, there is a high degree of urgency about this; not just in terms of renewables, but of British market arrangements. There is a significant difference between creating new infrastructure, with the inevitable planning difficulties, and the strengthening of existing infrastructure, which is what the companies are talking about.

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Mr. Michael Weir (Angus): I was interested to hear what the Minister had to say about wave and tidal energy, and I agree with much of it. What is lacking is time scale. When does he expect those projects to be up and running and producing energy? As he is well aware, most of the nuclear stations are coming to the end of their lifetime, so options have to be up and running in the near future. Will he tell us how much Government spending is likely to be put into wave and tidal energy following recommendation 16 of the Select Committee report?

Mr. Wilson: On wave and tidal energy, we have just announced support for a couple of projects with a strong Scottish bias. I agree with the hon. Gentleman. Those are major options and far too little has been done on them in the past. For as long as I have been around, people have been talking about Salter's ducks. But there are no ducks in the sea, generating energy. One problem is that there is a high concentration on research and development, but there has been less of a translation into production. That is why, working with the companies in recent weeks, I have managed to pre-empt that problem.

As I have said, it is fine for Wavegen to move on to research and development work on offshore wave power. That is excellent and should go ahead. My Department has put £1.7 million into the project, and the testing will go ahead off Orkney. All of that is fine, but a plant is already working and generating electricity on Islay. I have been to see it, and I do not think that even the most obsessive objector could find anything to complain about it; though I would never count on that. As far as I am concerned, we could have scores of those plants around the Scottish coastline to the immense benefit of the communities and our energy needs. There is also a big international market for that kind of generation, so let us get on with manufacturing them. I assure the Committee that if work keeps moving at the present rate, it will not be long before we get production moving and some facilities installed.

On the overall sum for wave and tidal power, £260 million is available in capital grants for renewables generally. To a large extent, that will depend on the projects that come to us. We are meeting the demand on wave and tidal at the moment; if there are more demands on that substantial pot, I will be pleased to hear about them.

Mr. David Stewart (Inverness, East, Nairn and Lochaber): I welcome my hon. Friend's statement. What prospects does he see for the oil and gas fabrication industry in Scotland? He will be well aware of my constituency interest, as we have lost more than 3,000 jobs in the industry. Does he see any prospect of the BP Clare field platform being built in Scotland, particularly at Nigg?

Mr. Wilson: As my hon. Friend said, there has been a bleak period for the fabrication industry. The number of job losses in his constituency peaked at 3,000. Many of the jobs would have gone in the normal course as the work trailed off, but the good news is that there is a big order to chase. Even only a few months

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ago, that did not seem likely, so we must ensure that UK companies have full competitive rights in the market. At the end of the day, however, it is a very competitive market and, whatever the Government do, it is for the company to judge where it will place orders. We cannot direct BP and tell it to go to this or that yard. What we can do is ensure that the yards have every opportunity to be competitive and to state their case. We must work with them to maximise the opportunity for the contract to stay in the UK, delivering as many jobs as possible.

A few weeks ago in Aberdeen, I brought together all the companies that could bid for Clare; not only for the major contracts, but for all the others that will be available. I hope that that will have sharpened those companies' minds and pens and that a lot of work will stay in the UK and Scotland in particular.

Mr. Peter Duncan (Galloway and Upper Nithsdale): The Minister rightly paid attention to the failure in the 1980s to develop the ancillary side to wind power generation and, in particular, to the failure to develop UK companies with turbine manufacturing capabilities. The Danish have taken the initiative. How do he and his Department of Trade and Industry colleagues believe we can reverse that trend? What specific initiatives will he introduce to see that Scotland gets the wind power generation industry it deserves?

Mr. Wilson: I have no wish to dwell on history. I want to go forward and make up the lost ground. There will be a big market in Scotland and the rest of the UK for wind turbine technology, as there will be for all of the technologies. The central question now is whether it can become a fantastic opportunity for our manufacturing industries or another devise for sucking in imports.

We are making some progress on wind power. I welcomed and co-operated closely in the decision of Highlands and Islands Enterprise to give what is a record level of support to Vestas development at Machrihanish. I pay tribute to Argyll and the Islands Enterprise, the Scottish Executive and the Scottish Office, which were all involved in a decision that will create a Scottish turbine windmill building industry. In that context, I particularly welcome the decision to offer subsidy for the Campbeltown to Ballycastle ferry, because it doubles the market at which Vestas can aim. I can vouch for the fact that it was always part of the encouragement to Vestas to say that we would move heaven and earth to get that ferry in place. That has been done, and I pay tribute to my colleagues in the Scotland Office.

Vestas is in place, and there is every prospect of an industry developing in Lewis, particularly off the back of the British Energy-AMEC proposal. There have been other expressions of interest, and others will appear. The opportunity is there, and we must work to maximise the UK and, specifically, Scottish content in

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the developments that take place. We will introduce further proposals on that in the near future, and that is something on which everyone can unite.

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Prepared 13 February 2002