 House of Commons |
Session 2007 - 08 Publications on the internet General Committee Debates Energy |
Energy Bill |
The Committee consisted of the following Members:Chris Shaw, Committee
Clerk
† attended the
Committee
Public Bill CommitteeThursday 6 March 2008[Mrs . Joan Humble in the Chair](Morning)Energy Bill9
am
Clause 64Decommissioning
notices relating to offshore renewable energy
installations
Question
proposed, That the clause stand part of the
Bill.
Let me make a
very brief introduction to the clause. As hon. Members know, one of the
themes in the Bill is the decommissioning of various infrastructure
involving oil and gas drilling and exploitation, as well as gas storage
in the future. The Bill also focuses on the decommissioning around
carbon capture and storage in the future, decommissioning relating to
nuclear, which we discussed at useful length recently, and the
decommissioning of renewables.
The clause concerns renewables
and their eventual decommissioning. The Government are committed to
ensuring that renewables play an increasingly important role in the
UK’s energy mix. It is anticipated that a large proportion of
the renewable electricity in the future will be generated offshore. The
reforms of the renewables obligation, as we discussed in part 2, are
intended to support that growth by providing increased levels of
support to the offshore wind
industry.
As
a signatory to the United Nations convention on the law of the sea, the
Government have international obligations to ensure that redundant
offshore installations are removed from the sea bed to ensure safety of
navigation and to ensure the protection of fisheries and the rest of
the marine environment.
Charles
Hendry (Wealden) (Con): I am grateful to the Minister for
giving way quite so early. Can he tell us how many turbines he is
considering in relation to this? In particular, the Government have
talked about 33 GW of offshore wind, so that is the 8 GW plus
25 GW. Does he expect that to be the installed capacity or the
available power? In other words, if there was a 40 per cent. load
factor, one would need more than that to get 33 GW. Therefore, is that
the total capacity or the actual output?
Malcolm
Wicks:
Perhaps I can come back with the details later. The
Secretary of State has indicated that, in a future licensing round,
that kind of capacity will be available. It will be subject to
environmental assessment and so on, so it is difficult at this stage to
predict precisely the number of offshore wind turbines. As I understand
the developments—and this is a matter for the commercial
sector—we may well see much larger
wind turbines in the future. There is a lot of work going on offshore
and I know that our new Energy Technologies Institute is interested in
the implications of offshore wind and whether future technology might
be different from the onshore wind turbines that we have had. If I can
return to the hon. Gentleman’s specific question at some stage,
I will.
In line with
the “polluter pays” principle, sections 105 to 114 of the
Energy Act 2004 introduced a statutory decommissioning scheme for
offshore wind and marine energy installations. The provisions in
chapter 2 of the Bill are intended to strengthen the decommissioning
scheme in the 2004 Act. The clause will add associates of the developer
into the list of persons from whom the Secretary of State may require a
decommissioning programme.
Clause 65
ensures that funds set aside for decommissioning cannot be accessed by
creditors in the event of a company becoming insolvent and will be
available only for the purpose that they were originally set aside for.
Clause 66 ensures that the Secretary of State has access to the
necessary information when making a judgment on the suitability and
financial viability of a decommissioned programme put forward by an
operator.
As I
mentioned, clause 64 amends the Energy Act 2004 by adding
associates of the developer, such as a parent company, to the list of
persons from whom the Secretary of State may require a decommissioned
programme. The ability to require a decommissioned programme from an
associate follows practice in the offshore oil and gas sector, which is
set out in section 30 of the Petroleum Act 1998. It seeks to ensure
that the costs of decommissioning can be met without recourse to the
taxpayer in cases where the developer does not have the financial
resources to meet those costs, but the associate does. The issue of not
having recourse to the taxpayer is central to our decommissioning
programme.
Steve
Webb (Northavon) (LD): As the Minister says, the clause
defines an associate, and again we have the issue of definition. When
we queried the threshold last time, the Minister said that we would
come to it—I think with reference to oil and gas but it applies
here as well. Under the clause, an associated company would own more
than half of the share capacity, but under the nuclear provision, it
would be 20 per cent. of capacity. Does the Minister not think that
there is a risk of companies organising their business to get under the
50 per cent. threshold here? If it was necessary to add a 20 per cent.
threshold for nuclear, why does the same consideration not apply to
this clause as
well?
Malcolm
Wicks:
I think, as we discussed when we considered the
nuclear issue, that the issues at stake when it comes to nuclear are
mighty big ones in terms of the decommissioning costs. As we noted,
hundreds of millions of pounds are involved, and then there is the
sheer importance of an effective decommissioning of a nuclear plant and
of disposing of the waste in the ways that we have discussed. That
might be why we were advised to be more rigorous when it comes to
nuclear, but the provisions here, by looking at associated companies,
are prudent in terms of safeguarding the taxpayer.
Provided
the associate has adequate financial resources, the new power will
enable the Secretary of State to approve a decommissioning plan that
would otherwise have had to be rejected if it had come from a developer
with inadequate financial resources of its own. The clause will provide
greater clarity and certainty for developers and investors by giving
the Secretary of State more options to approve decommissioning
programmes in a wider range of circumstances, with a wider range of
developers. As a result, we will have firmer foundations for growing
the robust and internationally competitive offshore renewables sector
that we all wish to see.
For the purposes of the
provisions in this chapter of the Bill, the clause includes a test used
to define associates. A company—let us say company A—is
an associate of another company, B, if A controls B or if a third
company controls both A and
B.
In
summary, these provisions will further improve the business environment
for offshore renewables by providing the Secretary of State with
greater flexibility in approving decommissioning programmes. They will
now allow the Secretary of State to look to a controlling associate for
a decommissioning programme where the developer does not have
sufficient assets of its own. That is already the case for oil and gas.
These new provisions should allow more programmes to be approved, which
in turn will assist more offshore renewables projects to
proceed.
On associate
definitions, definitions are consistent with the oil and gas regime.
The difference from the nuclear regime reflects, as I was saying, the
greater liabilities and we mentioned as an example somewhere between
£600 million and £900 million. The hon. Member for
Northavon is interested in the noughts and there are quite a few
noughts there.
I
think that that is the answer—we just need greater rigour and
greater safeguards when it comes to nuclear energy, so we have
£600 million or more compared with, say, £10 million for
offshore wind energy. I do not think it is a full answer to the hon.
Member for Wealden’s question but it might help if I say that at
the moment there are currently some 394 MW of installed offshore
renewable energy generating capacity in the UK, with a further 3.1 GW
of capacity consented. There is a further 2.1 GW of generating capacity
under consideration, with another 3 GW expected from developers that
have been issued with round 1 or round 2 licences from the Crown
Estate.
On the hon.
Gentleman’s question about 33 GW in the future, we are not in a
centrally planned state, so one cannot predict that that will be the
amount. We have tried to facilitate those kinds of developments, but I
am advised that it is roughly 2 MW per turbine at the present time.
However, as I indicated, the feeling I get from industry is that in
future, some of these offshore capacities could be much larger, so the
number of turbines would therefore be smaller than the current
arithmetic might
dictate.
Charles
Hendry:
It is a pleasure to serve under your chairmanship,
Mrs. Humble. It is also a great pleasure to find that our
friends from the Liberal Democrats are here with us today, still in
their
posts.
Charles
Hendry:
Exactly. Had I had a chance to get to it earlier,
I would have done so. However, whether the Liberal Democrats are here
to abstain in person or whether they will be voting against one another
remains to be seen.
We have
touched on some important issues during the Minister’s speech.
We have to get a greater understanding of the order of magnitude that
we are looking at. He says that we do not live in a centrally planned
economy—sometimes it feels a bit like that, but I realise that
we cannot determine exactly how many turbines there should be. However,
there is a fundamental issue as to whether the Government’s idea
for 33 GW is for installed capacity or total output. If it is total
output, one needs many more turbines to deliver that, because the load
factor offshore is typically about 40 per cent. If one wants to get 33
GW of output, 80 GW of installed capacity is needed. So, we are looking
at a massively different order of magnitude. To understand the
decommissioning process, we need greater clarity on this
issue.
Mr.
Hugo Swire (East Devon) (Con): Does my hon. Friend share
my concern about the lack of attention that has been given to the
possible effect on our very busy shipping lanes—particularly
between Britain and France—if there is to be an explosion in the
number of offshore wind
farms?
Charles
Hendry:
In some cases, I am relatively relaxed about it.
Many of the offshore turbines will be built on sandbanks, which is the
logical place to put them—shipping should not be going where
there are sandbanks. In most cases that would be all right. However, if
one looks at the potential numbers, an enormous amount of the turbines
would have to be put into deep waters. To take that a stage further, 33
GW of output, if it was 2 MW per turbine, is 16,000 turbines. If one
needed the 80-plus GW to deliver that amount of
output—
Charles
Hendry:
Right. Now that raises an entirely different
challenge for the Minister, which is that if one has only 33 GW of
installed capacity, the total output from that will be about 8 GW. The
Government cannot meet their European commitments with 8 GW of wind
power. If we are getting only 8 GW of power from
them—[
Interruption.
] Sorry, I mean 12 GW; I
bow to the economics graduate maths of my colleagues. We will be unable
to get close to the European commitment of 15 per cent. of our energy
to come from renewable sources by 2020. The Government cannot have it
both ways—we need greater clarity from them on
this.
We are, however,
still looking at a huge number of turbines. If one wants 33 GW of
installed capacity, at 2 MW per turbine that will come out at
16,000 turbines. Even if one goes to the highest expectation for how
powerful those turbines could be, which is potentially 5 MW, one is
still looking at an enormous number of turbines—7,000. The
physical construction programme implications of that—how many
can be built each day—present a major challenge.
The Government
now have a gaping hole between the renewables that they think they can
achieve and what will be their commitment to the European Union to meet
their 2020 target. I hope that the Minister can give us some assurances
on how we can deliver this, because the Government are trying to have
it both
ways.
Some
other issues need clarifying. Who will be responsible for inspecting
offshore renewable installations to ensure that they are still safe? We
are looking, potentially, at thousands of offshore turbines. They will
have sophisticated remote monitoring systems to show how they are
working and how much electricity they are generating. However, that is
not the same as having up-to-the-minute information on the safety of an
installation. Just this week, we saw pictures in the papers of a wind
turbine disintegrating in the force of the wind. What will happen if
they start to break up? How will the process work for requiring the
immediate dismantling of the residual elements of a turbine? A
fractured turbine is a much greater danger in relation to shipping and
others issues than a turbine with all its blades in
place.
Presumably,
this also relates to underwater installations. How will they be
monitored and by whom? Who will determine that such installations have
stopped working permanently and are genuinely at the end of their
lives? Will there be a certification of worthiness, so that an
inspector can say that an installation’s useful life is over,
even if the operator does not
agree?
9.15
am
Charles
Hendry:
That is always going to be a risk in our current
environment. One needs to be able to react quickly when there is a
terrorist atrocity and to ensure that the installations affected have
been made safe and decommissioned effectively.
Will the Minister also tell us
more about how the decommissioning fund will work? Over what period
will the operator contribute to the fund? Will there be a standard
formula or different options? How much will need to be put into the
fund before a wind farm starts operating? Who will manage the fund, and
who will establish how much needs to be put in and whether it needs to
be topped up from time to time?
The final point relates to the
Severn barrage or potential Severn lagoons. I am not certain whether
that counts as an offshore or between-shore installation, but it would
be useful to know from the Minister whether it is covered. I assume
that a Severn barrage would be designed and constructed to be
permanent, and not to be decommissioned at all. The hope is that it
would be generating power over many decades, with parts replaced as
necessary. Therefore, does there need to be a decommissioning fund for
a project such as the Severn barrage or would it be exempt from the
rules that the Minister is
suggesting?
Steve
Webb:
Good morning, Mrs. Humble. In this
section on offshore renewables, it seems appropriate to ask a couple of
questions about the connection between offshore renewables and the
grid.
The Government’s model,
as I understand it, is that if I want to set up an offshore wind
turbine, I might be responsible for the connection to the mainland. I
am not sure about that. Presumably, in the context of the clause, I
would be responsible for decommissioning the connection when I am
done—not just the turbine, but the infrastructure. As it is
critical for the roll-out of wind turbine networks, how is that
interconnection process going to
work?
If an operator
not only has to get a turbine out there and running, but is also
responsible for the connection to the mainland and from there to the
grid, and if that is a purely private obligation, that could be a
serious disincentive to the roll-out of offshore wind power. If there
were some concept of a grid—a trunk network akin to the
motorways—perhaps with the state paying, or at least ensuring
that it was non-competitive, there would be more of a boost to the
offshore renewables we are talking
about.
The Minister
has not yet been clear about where that infrastructure will come from.
Decommissioning arises only if the private sector provider has put in
the infrastructure. I may be hazy about that as I am new to the issue,
but I get the sense from the industry that there is considerable
concern that the roll-out of offshore renewables will be hindered if
the Government require the offshore renewable developers also to put in
place the infrastructure to bring the power onshore. If there is an
area offshore where several providers—several energy
companies—are in place, is it rational to expect them to have
their own separate infrastructure to bring the power onshore and,
indeed, from the point where it touches land to the point where it
accesses the grid, or is there any scope for sharing? If everybody has
to do everything for themselves, there is great multiplication and
additional decommissioning costs at the end of the process.
Earlier in
the Bill, we looked at renewables obligation certificates and giving
extra incentives to different sorts of technology. Presumably, that is
a key part of the Government’s renewable energy strategy, so
they will want to remove barriers. How does the Minister see the
infrastructure working and being operated between these offshore
renewable installations and the mainland and then the grid? Who would
own it, who would provide it and who would decommission it in the
context of the
clause?
Malcolm
Wicks:
Again, this has been a useful debate and happily,
small sections of it were relevant to the clause. I say that because
there could be a debate about offshore wind, but this is not that
debate; this is something rather narrower about
decommissioning.
Let me try to
be helpful, because the hon. Member for Wealden was interested in
capacity and how it relates to generation. I am advised that 33 GW of
capacity equals about 8 GW of generation, so I hope that that is
helpful. I am trying to work out the arithmetic and I think that is
where we are, for the obvious reason that the wind does not blow all
the time. Let us just make the obvious point, because I get a lot of
correspondence from constituents of MPs saying, “What happens
when the wind stops?” Basically, because of the national grid,
there is a mix of energy sources and we need the base load and so
on.
Let
me say at the outset that we have never said that where we are now with
our planning will necessarily get us to the European target, although
of course if we move towards real capacity offshore, as we hope to,
that will help. As I said in earlier sittings, in the light of the
European target, which is likely to be 15 per cent. or
thereabouts—we are still discussing that—we are now
developing a new renewable energy strategy. We hope to be able to
consult on that and to issue a paper sometime during the summer. I see
it in two phases. What we have done in the past, and what we were
planning prior to the Euro target of 2020 gets us quite a long way, but
it does not get us to the 15 per cent., or whatever it will be. That
will require something of a revolution, which is good because we need a
wider revolution in terms of decarbonising our economy, so we are
working hard on what steps we now need to take. I certainly recognise
that the gigawatts and how that translates into generation will not, by
itself, enable us to hit our
target.
Charles
Hendry:
I will not go into further extended discussion
about gigawatts as I realise that the Committee’s eyes are
glazing over, but does the Minister agree that to get 15 per cent. of
our energy from renewable sources translates into about 35 to
40 per cent. of our electricity having to come from renewable sources?
That is what independent people are generally saying: in order to reach
the European target of 15 per cent., a much higher proportion—35
to 40 per cent. of our electricity—will have to come from
renewables.
Malcolm
Wicks:
I would not want to be tied to a certain
percentage, but I think the hon. Gentleman has the right order of
magnitude. In terms of hitting our European target, whatever it turns
out to be—let us say, for the sake of argument, 15 per
cent.—clearly the easiest way of doing that is in terms of
electricity. Obviously we want to make progress in other ways, on motor
transport for example, but the easiest way is in terms of electricity,
so the implication for the future proportion of our electricity
generated from renewables is significant. Therefore, I agree with the
hon. Gentleman on that.
Let me deal
with some other issues. The hon. Member for East Devon asked about
shipping. Principal shipping lanes will be avoided. We are not going to
plant wind farms in the middle of a big, obvious shipping lane. For
non-principal lanes, developers would need to reach a commercial
agreement with those who use them. I hope that the hon. Gentleman is
reassured that we have that issue in mind. In terms of the safety
inspection of offshore installations, I think—although sometimes
I am wrong, so I will check—that it is the responsibility of the
Health and Safety Executive. If I am wrong about that, I will correct
myself in due course.
The hon. Member for Northavon
asked about a fund with regard to offshore decommissioning. Our
judgment is that unlike with nuclear power, that is not necessary
because of the orders of magnitude. Earlier I contrasted what may be a
£10 million figure with the much larger number of noughts needed
for nuclear, and we do not think that that is necessary. It is
important for the Secretary of State to be sure that there is financial
security at the start of the life. That is where we need the
reassurances.
I am
not sure whether the hon. Member for East Devon is a supporter of
offshore wind or not—
Malcolm
Wicks:
Good. The hon. Gentleman is understandably worried
about terrorist attack. We are all worried about that, and a number of
measures are in place—it is not just an issue for offshore wind.
However, because of the wide range of areas covered, a terrorist attack
on a single or multiple wind farm, or other renewable station, would
not have a significant impact on generating capacity. That is not to
say that we are relaxed about it—of course we are not—but
given the scale involved, I do not think that it is a big
issue.
The hon.
Member for Northavon asked about grid transmission. We had an earlier
discussion about the new regime on transmission under clause 40. On my
understanding, the regime that we are putting in place does not require
or even allow the installer to run the grid to shore. That will be
subject to competition; it is a new regime and other companies will be
players in installing those grids.
Mr.
Swire:
With regard to offshore connectivity to the main
grid, is it envisioned that that will be by underground power lines or
by overhead power lines? If they will be overhead power lines, what
effect will that have in areas of outstanding natural beauty, which are
often around the coast where the power will be coming
onshore?
Malcolm
Wicks:
I may need to come back to the hon. Gentleman on
the exact arrangement there. Certainly, the power lines will run under
the sea, but I will come back to him about what I suspect may be
slightly different arrangements for when they come onshore. In terms of
areas of outstanding natural beauty, the lines will only affect that of
fishes and other sea creatures, as they will run under the sea. I am
advised that such power lines tend to be underground, but it would
depend on particular licensing and
consents.
Mr.
Swire:
The Minister will be aware that there is a real
issue here. Of course I appreciate that the power lines will be under
the sea when they are offshore, but they have to come onshore at some
point in order to connect to the grid. My question is simple. When the
power comes onshore on our coastline, will it still be underground? If
it is overground, there will be huge cables and pylons and so on, and
they are unsightly and would disfigure our coastal landscape. This
warrants more than a slightly flippant remark about it endangering fish
and other such life.
9.30
am
Malcolm
Wicks:
I want to try to deal with the point, but I think
that I can best deal with it later, if there is an opportunity to do
so, or in correspondence. I can well imagine that the arrangement might
be rather different, depending on matters such as terrain and proximity
to the grid and so on. I shall have to come back to the hon. Member for
East Devon on this issue; I do not think that there is one particular
answer. I have visited a number of such sites and I am trying to
remember the arrangement, but I suspect that it will vary. I appreciate
that the hon. Gentleman wants to protect natural beauty. I do not know
whether that is a cue for my hon. Friend the Member for South
Thanet.
Dr.
Ladyman:
I will try to be helpful to my hon. Friend. One
of these lines has been planned to come ashore in my constituency, on a
site of special scientific interest. I can assure him that it will be
under the ground, hidden from view, and that it will not emerge until
it gets to the substation. I warn him, however, that my local fishermen
are worried about the effect of magnetic fields on the sex life of
skates, so he might have to deal with that at some
point.
Malcolm
Wicks:
Some humour! I thought that it was quite good. I
thank my hon. Friend the Member for South Thanet for his intervention,
but it is far too early in the morning to pursue that particular issue.
To help the hon. Member for Northavon, we discussed the matter of
transmission earlier. We are pursuing an approach based on competitive
tendering for offshore transmission, so the person who builds the
installation will not have the responsibility for wiring it up to the
shore and protecting natural beauty. We expect that all round 2
projects will want to connect directly to the shore—round 2 is
where we are at the
moment.
On the hon.
Gentleman’s point about the grid, in future, given the issues
surrounding the gigawatts and the number of wind turbines, ideas about
some kind of grid become quite interesting. We discussed the idea of a
European grid—not across the whole of Europe, but where
appropriate. Some kind of hub and spoke offshore transmission system,
with multiple developers using a single line to shore, is likely to be
what we will want in certain areas. That line would be owned by the
people involved in the process, and they would have the decommissioning
responsibilities for that as well.
I am now advised that I can be
more precise on health and safety. The Health and Safety Executive took
over administrative responsibility for the health and safety of, among
other things, offshore electricity installations in 2006. It is worth
noting that the formal statutory transfer of those types of
electricity-related safety functions forms part of the Bill. We will
probably come on to issues affecting electricity safety this afternoon.
I think that I have dealt with that point, which is again about
offshore lines connecting to
shore.
Subject to the
normal consent process, the developer will make a proposal that we will
consider. In doing so, we will consider issues such as visual impact
and
impact on environment when deciding whether to grant consent under the
Electricity Act 2004. I shall try to come back to the hon. Member for
East Devon on the practicalities of what happens currently, but I may
not be able to do so
immediately.
Charles
Hendry:
I raised the issue of the Severn barrage. The
Minister has not yet come back on that point and I would be grateful if
he did so. Will he also tell us how this aspect of the Bill relates to
hybrid facilities? We had a discussion in an earlier sitting about the
Eclipse Energy project, which you may be familiar with, Mrs.
Humble, as it is just off the coast of your constituency. It will be a
combined renewable wind and gas facility. When the wind is blowing, the
facility will be used to create electricity; when it is not, the gas
from a significantly depleted gas field will be used to honour the
project’s electricity commitments. Will that fall under two
separate decommissioning funds or is there some element in these
measures to take account of such hybrid
facilities?
Malcolm
Wicks:
I do not think that there will be one specific
regulatory regime for hybrids. There are already regimes in place; the
Bill will reform and improve those regimes, but again I am sorry that I
will have to come back to the hon. Gentleman on how the two regimes
will work together. That is a detailed and important question, and I am
glad he asked me about
that.
The
Severn barrage is—like the hon. Gentleman, I hesitate to say
“offshore”—a rather especial project. The
Government have indicated their interest in it in principle, as he
knows. Following the work of the Sustainable Development Commission, we
are proceeding to investigate that, but it is going to take quite a lot
of study, not least in terms of the ecology and environmental impact.
We are looking at the kind of studies that we will require; it is not
going to be built
tomorrow.
I
am not a lawyer, but my guess would be that, were the project to
proceed, it might require new legislation. No doubt, as part of that,
we would look at some issues concerning eventual decommissioning. In my
mind’s eye, I can see a movement in 150 years’ time to
save the Severn barrage. The successor to the hon. Member for East
Devon might say that it is an area of such natural beauty—so
loved and featuring on postcards and photographs—that it must be
saved, even though, after so many years, it may not be fit for its
original purpose, but I jest, at the risk of annoying
him.
Question put
and agreed
to.
Clause 64
ordered to stand part of the
Bill.
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