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 descriptionthe 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 powerthe Minister has been talking about
considerably lesswill 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
saywe 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
Scotlandgiven that it is a devolved matter and it is up to the
Scottish Executive to set their own levelsthat 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 whollythey 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 strategyand perhaps one day, hopefully, that of
marine energy, wave and tidalthis 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.
2
pm
The Energy Act
2004 also amended the Electricity Act 1989 to provide for the
authorityOfgemto 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 regimeincluding a price-regulated
approachwas 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 sayor did I
mishearthat the same planning requirements would be brought to
offshore proposals? He has not mentioned tidal turbines and other ways
of generating electricityhe is talking about cables at the
momentbut 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. Gentlemans question
in due course if I cannot necessarily during this
debate.
As a result
of our chosen regulatory approach, offshore renewable generators will
receive similar access rights to the grid as generation connected
onshore. The Government have also concluded that, because such
transmission assets are new and there are
no incumbent licensees, there should be competition for offshore
transmission licences that authorise the conveyance of electricity from
specific offshore projects, rather than awarding one licence for the
conveyance of electricity from all projects in an offshore area. We
believe that that competitive approach to licensing offshore networks
will give new parties the opportunity to enter the market, thus
bringing innovative solutions and helping to keep down costs for
developers and electricity
consumers.
The purpose
of clause 40 is to supplement the existing powers and enable the
authorityOfgemthat 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
provisionproposed new section 6D(5) of the Electricity Act
1989that 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 Governments 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 Ministers 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
Ofgems 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 Grids 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
forwardothers 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 Ofgems remit that could
enable the issue to be addressed in terms of priority access. Some have
suggested that a documentMOD 148will provide the
answers to that, but it would be helpful to have the Ministers
assessment for how the national grid should operate in those
circumstances. It is clearly in no ones 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
floodedthat raises the general issue of critical infrastructure
that I will return to.
The clause addresses a
potential gap in policy. We arenot literally, I hopein
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 Ministers 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
Authoritys
Ofgem
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.
2.15
pm
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
infrastructureif something goes wrong, it has a real impact on
peoples
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 savingsI thinkfrom
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 thatperhaps
understandablycolleagues 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.
The hon. Member for Wealden
asked for further details about the offshore transmission regime. We
always expected a significant contribution from offshore wind, but I
cannot go into detail about how
many wind turbines will be built over what period. We are the licensing
body; we look at environmental impacts; we provide a regulatory
framework. At the end of the day, it will be for commercial developers
to come forward with their own proposals and I cannot prejudge that in
any
detail.
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 States
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.
The
Government have consulted extensively with industry on the
establishment of the new regime and have concluded that the best
approach is the use of
competitive tenders to select offshore transmission licence holders. In
the consultation with stakeholders the extension of National
Grids onshore monopoly was not supported by any offshore wind
developers. A number of capable and experienced partners have expressed
an interest in becoming offshore transmission owners. We, therefore,
believe it is right to test the market by competitive tender to find
the best candidates to build these new offshore connections. National
Grid should be able to enter such tenders, provided that it does not
interfere with its role as the Great Britain system operator, which the
Government have already announced that they intend to extend
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?
2.30
pm
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 Ofcoms 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 Ofcoms
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, Lets build
offshore wind and lets 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 Ministers
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
regimemuch 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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