Energy Bill

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Clause 37

Section 36: supplemental provision
Question proposed, That the clause stand part of the Bill.
Malcolm Wicks: This clause makes two supplementary provisions to the new RO sections of the Electricity Act 1989, as set out in clause 36. Subsection (1) aims to ensure timely delivery of a banded renewables obligation. We have set ourselves a challenging timetable in which to introduce our proposals to allow industry to take advantage of the benefits of the RO as quickly as possible. That is particularly important in the light of the EU proposals on renewables that were published recently. Our aim is to bring forward the renewables obligation order with the relevant change by April 2009, which was a commitment we gave in the 2007 White Paper on energy.
The nub of the point is this: to meet the timetable, it will be necessary to carry out a consultation before the Bill has fully passed parliamentary scrutiny. Subsection (1) allows us to consult on the draft renewables obligation order before the Bill receives Royal Assent and to take account of the responses to that consultation. The order will, of course, be subject to further parliamentary scrutiny and will be debated in both Houses before being passed.
Subsections (2) and (3) of the clause allow consequential amendments to be made by order to references in the Electricity Act 1989. The purpose of the provisions is to ensure that, once the legislation has been passed and Northern Ireland makes an order amending the Energy (Northern Ireland) Order 2003 to reflect the changes, references in the 1989 Act to the Northern Ireland order can be changed to refer to the correct numbering. Subsection (2) allows us to extend section 32K(2) to cover ROCs issued by the Northern Ireland authority under the old regime so as to extend provisions relating to the transition from the old regime to the new one in Northern Ireland. This is purely a tidying-up exercise to ensure the renewables obligation can continue to operate on a UK-wide basis.
Question put and agreed to.
Clause 37 ordered to stand part of the Bill.

Clause 38

Existing savings relating to section 32 of the Electricity Act 1989
Question proposed, That the clause stand part of the Bill.
Malcolm Wicks: Just a brief description—the purpose of this clause is to clarify the operation of section 67(1)(c) of the Utilities Act 2000. The Secretary of State has the power to preserve, modify, replace or otherwise deal with arrangements which relate to the non-fossil fuel obligation, the original support mechanism for renewable electricity before the RO was introduced. The non-fossil fuel obligation, or NFFO arrangements, were put in place through orders made under the original section 32 of the Electricity Act 1989. Under the NFFO, electricity suppliers enter into fixed-term contracts with generators for the purchase of renewable electricity. That ensures that renewable generators get a specified price, as set out in the contract for their renewable electricity. The last of those contracts runs up to 2018.
The 2000 Act replaced the NFFO regime with the RO and made provisions for the continuance of NFFO contracts. In particular, section 67(1)(c) provided a power whereby the original NFFO arrangements could be preserved, modified, replaced or otherwise dealt with. The amendment to section 67(1)(c) clarifies that the Secretary of State has the requisite powers to preserve, modify, replace or otherwise deal with arrangements which have replaced original NFFO arrangements. I move that this clause stand part of the Bill.
Question put and agreed to.
Clause 38 ordered to stand part of the Bill.

Clause 39

The Northern Ireland renewables obligation
Question proposed, That the clause stand part of the Bill.
Malcolm Wicks: This clause allows smooth implementation of a reformed RO in Northern Ireland to allow us to achieve our preferred option of a unified approach to the RO across the UK. First, subsection (1) allows the authority, Ofgem, to carry out work in administering the RO on behalf of its opposite number in Northern Ireland, Ofreg. This is the arrangement at present, which works well. The amendments made by this clause ensure that the authority can continue to act on behalf of the Northern Ireland authority even if articles 52 to 55 are amended by an order under article 56 of the Energy (Northern Ireland) Order 2003.
Secondly, the clause ensures that there are no unnecessary legislative barriers to implementing the reforms in Northern Ireland. The provisions in subsection (2) ensure that the Northern Ireland authorities can pass an order under article 56 to take account of the amendments in this legislation as well as the original sections of the Electricity Act 1989. It will enable the operation of a UK-wide RO regime. While it maintains the requirement to consult in the Province, the clause allows that consultation to be done in advance of the article 56 order, thus allowing timely implementation of reforms.
Charles Hendry: The Minister will recall that this morning he had a brief exchange with my hon. Friend the Member for East Devon about the rate of ROCs in relation to other parts of the UK, and some views were expressed that three or five ROCs might be provided in support of marine and tidal technology in Scotland. Will a ROC mean a ROC wherever that type of technology happens to be in the UK, or is there scope for varying levels of ROC support for different technologies in different parts of the UK?
Malcolm Wicks: I was saying this morning that it is not the case that in Scotland there are four or five ROCs for marine. There is a great deal of interest in the Scottish Executive in marine energy, understandably given the terrain, the Pentland Firth and so on. Our position is that it makes sense to have an RO regime that is common to all parts of the UK. That will be the burden of our current discussions with the devolved regimes. That position is sensible because we are a united kingdom, and because of investor confidence and so on.
Mr. Swire: Will the Minister elaborate on that a little more? I understand that he said earlier today that negotiations are continuing with the Scottish Executive. Given that, clearly, the Scottish Executive wish to provide greater incentive or more ROCs for marine technology and wave power north of the border, will the Minister try to increase the allocation in the remaining part of the United Kingdom to what Scotland wants, or will he try to persuade the Scots to reduce to what he wants?
Malcolm Wicks: The burden of our discussion will be to try and argue that, certainly in this area, it makes sense to have one uniform regime in which one ROC for marine somewhere is worth another ROC for marine somewhere else. That is what we are trying to do. Without that, we start to run into a good deal of confusion.
Mr. Swire: The Minister has slightly avoided my question, which was quite clear. Given that Scotland clearly wishes to move towards an allocation in the range of five ROCs for wave power and three for tidal power—the Minister has been talking about considerably less—will he try to persuade the Scottish Executive to reduce to what he wants, or will he persuade the rest of the United Kingdom to move up to what Scotland wants? Can the Minister put some time frame on when those discussions might reach some sort of compromise?
Malcolm Wicks: Those are discussions that we are having already. I cannot quite predict the time frame. I am afraid that I am rather left repeating myself: we would want a common regime. I do not want to say at the moment that the Scottish Executive should reduce to what we say—we have to have a proper discussion about that. But I see the advantages of uniformity. Ultimately, decisions on banding for Scotland are for Scottish Ministers. We are working with the devolved Administrations to try to get a unified system and it is too early to answer that question. It is very much in our minds at present. I am sorry that I cannot be of more help.
Mr. Swire: I am grateful, up to a point, to the Minister. But will he not concede that if the incentives were greater in Scotland—given that it is a devolved matter and it is up to the Scottish Executive to set their own levels—that would be a disincentive to investment in the rest of the United Kingdom?
Malcolm Wicks: I can see the point, yes. Ultimately, people will invest where there is a strong renewable resource, and I certainly concede that a great deal of the tidal and wave resources are in Scotland, but not wholly—they are around different parts of the United Kingdom shores. These are difficult matters. The issue is devolved. I see the need for some uniformity, and that is how we are negotiating.
Question put and agreed to.
Clause 39 ordered to stand part of the Bill.

Clause 40

Offshore electricity transmission
Question proposed, That the clause stand part of the Bill.
Malcolm Wicks: This takes us on to a new section of our legislation, concerning offshore electricity transmission. Clearly, given our discussion about the importance of offshore wind to our renewables strategy—and perhaps one day, hopefully, that of marine energy, wave and tidal—this is a significant and quite technical part of the Bill.
We are putting in place a framework to encourage the development of electricity generation from offshore. There are already plans to develop more than 8 GW of offshore wind in UK waters, and in December last year my right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform announced draft plans for developing up to a further 25 GW of offshore energy.
The UK has the best offshore wind resource in Europe, and an important part of the framework to utilise this resource is the effective development of offshore electricity networks, which are needed to ensure that electricity generated by offshore renewables can be delivered to shore. Under the Energy Act 2004, the Secretary of State already has powers to introduce a regulatory framework to govern offshore electricity networks connected to Great Britain. Those powers allow for the Secretary of State to make changes to existing industry codes, agreements and licences for the purposes of regulating offshore transmission and distribution.
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The Energy Act 2004 also amended the Electricity Act 1989 to provide for the authority—Ofgem—to make regulations facilitating the selection of an offshore transmission licence holder by a competitive tender exercise. The additional powers that we are seeking in the Bill supplement the Energy Act 2004 powers in relation to offshore transmission.
Since the Energy Act 2004 was passed, the Government have been working with Ofgem to develop the detail of the offshore licensing regime for Great Britain that will be implemented using the Energy Act powers. The regime we are developing will apply to the conveyance of electricity generated offshore by high-voltage lines, regulated as transmission. Once the regime comes into force, it will cover offshore lines of a nominal voltage of 132 kV or more.
We have been consulting with industry stakeholders and other interested parties on the policy options for the new licensing regime. The Government decided that an offshore regime that mirrors, so far as possible, the onshore regulatory regime—including a price-regulated approach—was most likely to assist the development of offshore renewable generation and would enable a co-ordinated approach to be taken to the building of new electricity connections needed to connect those projects to the Great Britain onshore grid. [ Interruption. ] I apologise; I confused the look of great interest with a possible intervention.
Mr. Swire: Will the Minister give way?
Malcolm Wicks: Yes, unless the hon. Gentleman thinks that it will be helpful if I explain further.
Mr. Swire: Will the Minister just pause for a second and then elaborate slightly on the planning issues? Did he say—or did I mishear—that the same planning requirements would be brought to offshore proposals? He has not mentioned tidal turbines and other ways of generating electricity—he is talking about cables at the moment—but is this the time to tell the Committee what planning requirements would apply to offshore tidal turbines and other ways of generating electricity offshore?
Malcolm Wicks: No, I do not think that this is the time. If there is an opportunity for saying more about that in due course, I might do so, but I am trying to talk about the grid mechanism. However, I will try to find a way of accommodating the hon. Gentleman’s question in due course if I can—not necessarily during this debate.
The purpose of clause 40 is to supplement the existing powers and enable the authority—Ofgem—that will have responsibility for running the tender exercise to select offshore transmission licence holders and to recover the costs it incurs through the process. At present, the authority is able to recover the costs of undertaking its duties and functions only through a combination of licence application fees and ongoing licence fees.
Clause 40 will allow the authority to fund its role in the tender exercise by requiring those parties that cause the authority to incur costs in running the tender process to contribute directly towards meeting those costs. We consider that approach to be a more appropriate than the existing cost recovery powers, as it increases transparency and ensures that the costs of running the tenders are met by those who participate in the tendering exercise and not licence holders generally.
Clause 40 will enable the authority, by regulation, to create new mechanisms to recover its costs in carrying out and administering tender exercises. Since the precise details of the tender exercise are still subject to consultation with industry stakeholders and other interested parties, clause 40 has been drafted to provide flexibility in relation to the form of payments to be required and the participants from which they can be recovered. However, we are clear about the broad objectives that we are trying to achieve through the use of these mechanisms. In particular, the mechanisms are intended to ensure that participants in the tender process are appropriately committed to the exercise and that the costs are met by the appropriate persons.
The authority has recently published a document that sets out proposals for a five-stage tender process that would lead to the selection of an offshore transmission licence holder and therefore the award of a licence. To prevent the excess recovery of costs, the Bill includes a provision—proposed new section 6D(5) of the Electricity Act 1989—that will require the authority to take steps at the end of each tender exercise to ensure that the total amount that it has obtained from the participants in the tender exercise does not exceed the actual costs incurred.
Subsection (3) constitutes a technical amendment to the Electricity Act 1989 to ensure that the definition of “relevant offshore line” includes electric lines that are located in GB internal waters.
Finally, clause 40 introduces schedule 2, which will give effect to proposed new schedule 2A to the Electricity Act 1989.
Charles Hendry: I am grateful to the Minister for his detailed explanation of the clause. Most of what he has described appears to be fairly technical and concerns the details of financial arrangements. To that extent, the Opposition support the Government’s approach, as there is clearly no point in having wind turbines across the North sea if they cannot be connected to the national grid.
As I said earlier, the Government have set ambitious targets for offshore wind generation. Will the Minister tell us a little more about what he thinks that will involve and how we will get there? He has talked about the fact that the Government expect about 8 GW to come through anyway; as of December, they have said that they want a further 25 GW on top of that. That is an enormous challenge. Does he believe that the measures are in place to encourage that, and if not, what additional measures are needed to make it happen? Some people say that, to meet that target, two turbines a day will need to be constructed; some say that ten will be needed. What is the Minister’s assessment of how many turbines a day will be needed to meet the target? It seems challenging.
Will the Minister tell us a little more about what he thinks the load factor will be for offshore wind? We understand that offshore wind probably has a higher load factor than onshore wind and that it may be 40 or 50 per cent. Is that also his assessment? To what extent has he had information about how offshore wind, when it does blow, ties in to when we need it most? Is there evidence to show that there is more wind in the winter, when there is greater electricity demand? Is there more wind in the morning and in the evening, when there is also a higher electricity demand? Is there a better match between offshore wind and when electricity is needed than there is, perhaps, with onshore wind?
The clause raises the whole question of the obligations on the National Grid, with regard to its connection of renewable energy sources. The problem at the moment is that it has to connect elements in the order in which applications are made. That causes significant problems. Some onshore wind farms already have planning approval but will not get a National Grid connection for some years. Equally, some onshore wind farms have been given their National Grid connection, although they will be stuck in planning for some years.
There seems to be general agreement that the way in which the National Grid operates should be changed, and it should be able to give priority access to renewables, both offshore and onshore. That has been covered in some of the representations that have been made to us. Scottish and Southern Energy said:
“In addition, the current regime for access to and charging for the GB transmission system is undermining Government policy by sending a signal not to invest in new generation in those areas with an abundance of natural renewable resource. Renewable generators with consent are being held off the grid due to the access regime. Transmission charges are extreme, volatile and unpredictable; hence potential investors cannot gain sufficient confidence to commit to substantial new generation capacity. The Energy Bill is an opportunity for the Government to align the regime for access to and charging for the GB transmission system with its wider energy policy objectives, and particularly it is an opportunity for the Government to address the access and charging issues for the UK transmission system that currently block renewable energy.”
Similarly, Royal Society for the Protection of Birds said that it wanted to give sustainable electricity priority access to the national grid. The British Wind Energy Association said:
“In particular Ofgem’s interpretation of its rules mean National Grid cannot invest in upgrading connection and cabling for new wind farms until developers are able to underwrite their costs. Companies are unable to do this until their schemes are approved and they have secured finance, which can take several years: under current arrangements they would then have to wait further for grid upgrades before they can generate. Ofgem fears that early investment in system reinforcement would result in stranded assets being built. BWEA believes that Ofgem must relax its rules regarding National Grid’s investments, allowing it to adopt a “predict and provide” policy towards connection and grid access issues.”
Finally, the WWF said in its submission that it would like the Bill to give renewable electricity generators priority access to feed their power into the national grid. Will the Minister tell us how far the clause goes in assisting the giving of priority access to the grid for renewable sources, particular those that are offshore?
Dr. Brian Iddon (Bolton, South-East) (Lab): I did not hear the hon. Gentleman clarify the Conservatives’ policy on onshore wind, but I note that their quality of life report said:
“Onshore wind is now at market competitiveness with internal rates of return (IRR) hitting 25 per cent., and so should receive no further support through the proposed banded competitive feed-in tariffs.”
I agree that the clause is about offshore transmission, but the hon. Gentleman has referred to onshore transmission and has indicated that there are some difficulties with onshore wind connection to the grid. Is that still a definitive statement of Conservative party policy regarding onshore wind?
Charles Hendry: I am very grateful for the opportunity to clarify this matter. The quality of life report was a submission written to the party board. It was never party policy. We asked various people with a great deal of expertise in those areas to make recommendations on what we should include. That recommendation has not been taken forward—others have, but the more we looked into that one, the more we recognised that the costs of onshore wind have gone up. We believe that the Government are right in continuing the ROC system with a single ROC for onshore wind. I hope that I have clarified where we stand on the matter.
The Minister will know that we have tabled a new clause in relation to Ofgem’s remit that could enable the issue to be addressed in terms of priority access. Some have suggested that a document—MOD 148—will provide the answers to that, but it would be helpful to have the Minister’s assessment for how the national grid should operate in those circumstances. It is clearly in no one’s interest to have people investing in renewable energy sources if they cannot connect them to the national grid.
Martin Horwood: I am grateful to the Minister for his opening remarks and, indeed, to the hon. Member for Wealden for his comments. I agree with much of what he said about the importance of priority access, and I thank him for his useful clarification that the well-regarded quality of life report is not actually Conservative party policy. We had suspected as much.
In some of his remarks, the hon. Gentleman strays off the subject of transmission, which is the subject of the clause. In Gloucestershire, we now very clearly understand the difference between generation transmission and distribution. Generation is where the electricity comes from; transmission is how it gets into the county; and distribution is what stops when the substation is flooded—that raises the general issue of critical infrastructure that I will return to.
The clause addresses a potential gap in policy. We are—not literally, I hope—in uncharted waters; a new area of policy with the development of things such as the super-grid. Obviously, new arrangements must be put in place to cope with these developments. We must look at whether the competitive tendering process is the right way to go. I was a little concerned when looking, as I always do, at the Minister’s impact assessment that he signed off on 9 January. It identifies problems that the policy is designed to address. One of those is the lack of a compulsory transfer scheme if commercial negotiations fail between asset owners. That is fair enough. The second problem that it identifies is that
“the Authority’s”
“existing powers of cost recovery do not enable it to recover its costs from participants in running competitive tenders to identify an offshore transmission licensee.”
That might be true, but it rather underlines the fact that the competitive tender process appears to have been taken for granted.
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As far as I can see, the impact assessment does not identify risks associated with that policy or compare it with other approaches. I was interested to hear the Minister say that different options had been consulted upon and explored, because normally they tend to show up in the impact assessment. However, on this occasion, that does not appear to be the case. One paragraph begins:
“What policy options have been considered? Please justify any preferred option.”
The answer reads:
“The Government has considered (1) the option of proceeding without further powers for the Authority, i.e. do nothing. Its preferred option is (2) taking new legislative powers to establish mechanisms to enable Ofgem to run an efficient and effective tender process and avoid potential delay from commercial negotiations failing to the transfer of property, rights and liabilities. Delays to establishing an effective transmission licensing regime would delay the further development of offshore renewable deployment.”
That is true, but essentially it identifies a financial risk to Ofgem and a problem with the process. It does not explore other options, such as extending the current regime without resorting to offshore renewable transmission.
The national grid was not developed on the basis of competitive tendering processes, but was the result of good old-fashioned central planning. It might be heresy for a new Labour Minister even to consider it, but perhaps it is not wise to think that critical infrastructure is always best developed by the lowest bidder, which is in effect what we will have, especially if that lowest bidder is not the National Grid, but a company developing untested technology on a large-scale.
The impact assessment does not address the risk of quality failings. I would be grateful, therefore, if the Minister could reassure me that serious quality risks were identified and considered in the various consultations and policy options that he explored in advance of drafting the clause. We in Gloucestershire now know the importance of critical infrastructure—if something goes wrong, it has a real impact on people’s lives.
I am concerned that the regime in clause 40, which is quite long, differs from other licensing regimes established elsewhere in the Bill. The Committee has discussed on a couple of occasions already consistencies and inconsistencies between different licensing regimes. In other places, we have been reassured that environmental concerns were paramount and that many conditions could be attached to licences concerning matters such as public health. However, on this occasion, we appear to have been presented with a provision fixed very narrowly in commercial terms and that assumes that the cost-effectiveness of the competitive tendering exercise is the only consideration. The impact assessment promises us 10 per cent. efficiency savings—I think—from the introduction of the competitive tendering exercise, but it does not mention quality risks.
I have some very specific questions for the Minister. What conditions does he imagine will form part of the tender specification in respect of the following: first, the environmental impact of new transmission infrastructure with particular regard to the marine Bill and how any tender would interact with marine management under that Bill; secondly, the proven experience of companies tendering for a contract in delivering high-voltage transmission in other arenas, particularly large-scale national infrastructure, such as offshore; and, thirdly, the importance of establishing that there is good technological grounds for the tendering company being able to establish an interconnection with the existing national grid? I should like specific answers from him, if possible, on those three matters.
As the Minister said, we are discussing 8 GW of capacity, possibly rising to as much as 33 GW of UK electricity generating capacity being placed offshore. He is now frowning from a sedentary position, but his exact words were, “8 GW and then a further 25”. Was that not right? Did he mean a total of 25?
Malcolm Wicks: I am in a sedentary position because that is the polite place to be. I was frowning at nothing that the hon. Gentleman said. When he says something really ridiculous, I will certainly frown.
Martin Horwood: I am very grateful to the Minister, and I shall try to avoid saying anything ridiculous.
The scale of offshore renewables is potentially huge. If Airtricity was planning a super-grid or a super-grid was delivered by any other company, it would be absolutely essential to get the thing right. The potential of offshore renewables is huge and they will be essential elements of the national infrastructure. Perhaps we should have a self-denying ordinance among all members of the Committee that we do not tell the hon. Member for Stone (Mr. Cash) that the European Union offshore wind co-ordinator even exists; otherwise I can imagine an entirely new debate on the European Union treaty taking place.
Malcolm Wicks: Again, it has been an interesting debate although very little of it has been about the clause even though the clause is important. It is quite detailed and relates to the carrying out and administration of tender exercises for selecting the holders of offshore transmission licences. It provides express powers for the authority to recover its costs in relation to such tenders, as I outlined earlier. On that—perhaps understandably—colleagues have hung several questions that are not strictly to do with the clause, but which really need a larger debate on environmental impacts.
Everything we do offshore, whether the oil rig or wind farm, involves the careful assessing of environment impacts. We would not give a licence in waters where dolphins might be under threat, for example. [ Interruption. ] No, it is not in the clause because that is not about dolphins. We cannot hang everything on the clause, although there might be opportunities for raising some issues. It is unfortunate that the hon. Member for East Devon has left the room, although he might be coming back at which time I shall answer his question.
The hon. Member for Wealden asked about electricity networks. Given our programme on offshore wind, it is clear that, during the next 10 to 15 years, the UK will need to deliver a significant increase in the proportion of our energy from renewable resources. The implications for that for offshore wind are considerable. It sets an unprecedented challenge for our electricity networks, and highlights the urgent need to tackle any barriers to grid access for renewable generators. That means considering the longer-term, technical and, indeed, regulatory challenges of high levels of renewable generation. I assure him that we are working closely with industry, the National Grid and Ofgem to ensure that the grid is fit for purpose in the quite challenging times ahead as we move to a low-carbon energy system in the UK and Europe. We particularly need to ensure that the system can efficiently accommodate the expected expansion in renewable generation to 2020 and beyond.
Together with Ofgem, the National Grid and the industry, we are undertaking a number of initiatives to address short-term, medium-term and long-term grid-related barriers to renewable generators. As we develop our renewable energy strategy, we will need to consider what further measures beyond the current transmission access review we should take to deliver grid access in support of our targets. The transmission access review led by Ofgem and my Department is examining the framework for grid access for renewables to ensure that it remains fit for purpose. An interim report was published last month and a final report and recommendations are expected in May of this year.
Charles Hendry: The difficulty the Minister has is that the Government have set the target. They have said that they want by 2020 the 8 GW that is planned already plus another 25 GW of offshore wind, so 33 GW in total. They must, in reaching that target, have worked out how that is going to be achieved, how many turbines are going to be necessary, what the construction rate is going to be and to make sure we have the skills available to erect them. My assumption is that that work has been done by his Department so that the Secretary of State can come forward with that target. As the work has been done, it would be good if the Minister could share it with the Committee.
Malcolm Wicks: We do not have a target for offshore wind. We are developing, through discussions with the European Commission, what our targets should be in 2020 for all energy coming from renewables. That is where we are.
The hon. Gentleman is thinking about the Secretary of State’s statement about our ambition for the development of offshore wind and how that will influence our licensing procedure. We cannot be in the business of saying there will be so many wind turbines or so many biomass plants. We have a licensing regime that we hope will facilitate a massive expansion of offshore wind. [ Interruption. ]
Charles Hendry: You are speaking.
Malcolm Wicks: Yes, I am speaking; it is sometimes difficult to remember. I am so impressed when the hon. Gentleman speaks that there is a bit of me shouting, “More!”. I must not frown at the fact that I do that.
The hon. Member for Wealden also asked me about load factors. Yes, offshore wind has a higher load factor than onshore wind. There is certainly a significant resource offshore. We are currently undertaking a strategic environmental assessment to assess some of the environmental impacts as we go forward with a potential 25 GW coming from this resource.
The hon. Gentleman also asked me about priority access for renewables. We have a proposed new clause on this issue, which we will come to later. I would be grateful if I could deal with that matter then.
The hon. Member for Cheltenham was interested in what other options we were considering. He mentioned, as a good central planner, the possibility of the National Grid doing this work. As he knows, National Grid has a long-held onshore monopoly business which is regulated by Ofgem. The new regime for offshore transmission provides the opportunity for new companies to enter the market and bring new and innovative solutions to grid-connect offshore.
Martin Horwood: I am grateful to the Minister for his comments and his explanation that the consultation was a bit more expansive than we might have guessed. We might not have guessed because there is no mention of those options having been discussed in the impact assessment. It simply looks at the option of doing nothing or having the current regime. Is it possible for him to place on the record or to supply to Committee members any details of the consultation that has taken place and of the risks that might have been identified with going down the competitive tendering route?
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Malcolm Wicks: I am happy to do that and I will write to the hon. Gentleman and send copies to the Committee.
I was again asked by the hon. Member for Cheltenham about the regulator recovering costs in the future. Certainly, there are similarities between what Ofgem will be doing with the competitive tenders for licences for offshore transmission owners and Ofcom’s function. The similarities are competition for licences, which I have said is very important; a process run by a regulator, which is key to this; a process set out in regulations; and the ability to require deposits, which can be refunded in whole or in part. However, there are instances in which the regimes differ, and clause 40 is by no means identical to Ofcom’s powers. Clause 40 has been developed to be fit for the purpose for which we intend it, namely, the offshore transmission regime.
The hon. Member for Cheltenham asked about the environment and I suggested to him that there was a wider debate to be had about offshore environmental issues. They do not actually relate to the clause. Participants who are building assets will need to secure consents for their lines, which will require them to undertake environmental impact assessments, just as is the case now. I hope that that satisfies him.
Martin Horwood: I regret to say to the Minister that he has not satisfied me, particularly about the new provisions coming in under the marine Bill. Although he keeps suggesting that some of the issues that I have raised do not relate to the clause, I think that they are perfectly germane to it because it establishes the licensing regime. Therefore, it is perfectly valid to ask what conditions tenders will be issued under. The environmental considerations are absolutely important. The regime established here today or by the passage of the Bill should be consistent with the new regime introduced in due course by the marine Bill.
Malcolm Wicks: I am trying to say that this is an important clause and that it is about the way in which licences for grids will be regulated and about certain issues of costs for Ofgem. It is not a whole clause saying for the first time, “Let’s build offshore wind and let’s consider the environmental impacts.” That is covered elsewhere.
I shall say something about planning because I was asked about it by the hon. Member for East Devon, but I was hoping that he would have returned to the room before I mentioned this. We expect that once the proposals in the Planning Bill and the draft marine Bill are in place, the following planning arrangements will apply. I say “expect” because the draft marine Bill has not yet been published and the Planning Bill is going through Parliament, and I do not want to prejudge anything. If both go through, as we assume at the moment, the planning regime will be as follows. Generating stations with capacity greater than 100 MW will be considered by the infrastructure planning commission and those under 100 MW will be considered by the marine management organisation, which will be part of the new regime of marine spatial planning. I should add that currently all stations with a capacity greater than 1 MW are considered by the Secretary of State. The connecting cables will be considered as part of the project being considered. Therefore developers will not have to seek planning permission for the cables separately. I hope that goes some way towards answering the hon. Member for Cheltenham, although I fear not far enough to satisfy him, because he wants to hang a whole debate about the marine environment on this particular clause.
Martin Horwood: I do not want to try the Minister’s patience, but I am not raising issues about the whole offshore generation of electricity here. I am specifically talking, as the clause does, about the transmission infrastructure and how that will impact on the environment and other issues about the proven experience of contractors and the interconnection with the existing grid. His answer to the hon. Member for East Devon goes some way towards answering some of that, although it is rather surprising that there will be this separate licensing or tender regime if it is simply going to be part and parcel of the main projects themselves. That is quite a surprising revelation.
Malcolm Wicks: No, I do not think it is. I think I am right in saying that the hon. Gentleman is more ambitious about this clause than I am. It is really dealing with some rather important matters, but in terms of environmental concerns, this clause does not establish the regime—much of it was established in the Energy Act 2004. These technical powers supplement that. The environmental impact will be considered through the planning process and any strategic environmental assessments, as I hoped I had made clear earlier. The environmental issues will be looked after and the fact that they are not mentioned in this clause is neither here nor there. We have legislative cover for that already.
The hon. Gentleman also asked about technical competence. We expect that participants in the process will have a proven track record in delivering major electricity infrastructure. The assessment of those in the process will need to take account of technical competence to ensure that the grid is fit for purpose. Existing UK and European players have expressed an interest in building offshore infrastructure.
I think I have dealt with impact statements and I have promised to write to the hon. Member for Cheltenham about the options we were considering and to copy that to other hon. Members.
Question put and agreed to.
Clause 40 ordered to stand part of the Bill.
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