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Lord Whitty: Subsection (4) relates to designation which is provided by an Order in Council, while subsection (5) indicates which of those designations would have administrative functions for the Scottish Executive. The original Order in Council is then subject to the negative procedure in the Bill as drafted. We are also making the other part of this subject to the negative procedure so that there is a consistency of process throughout the clause.

Lord Skelmersdale: I certainly understand what the amendment will do. I am asking what the Bill does, and why.

Lord Whitty: The Order in Council will provide the designation. The implications of the designation, which are a lesser issue, are that Scottish Ministers will have jurisdiction in relation to devolved matters within those zones. So the international waters element is dealt with by Order in Council, while the Secretary of State is then responsible for the administrative arrangements. However, they would both be subject to the same parliamentary process if the amendment is accepted.

On Question, amendment agreed to.

Baroness Miller of Chilthorne Domer moved Amendment No. 106AB:

"( ) The Crown Estates Act 1961 (c. 55) shall not have effect for the purposes of this section."

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The noble Baroness said: The purpose of this amendment is to explore the effect of the Energy Bill on the responsibilities of the Crown Estate as laid down in the Crown Estates Act 1961. It asks whether this Bill will need to amend those powers.

I have tabled the amendment because, under the terms of the Bill, the Crown Estate will be able to license areas of the sea bed in the renewable energy zones for the purpose of exploring and exploiting—that word again—the UK's wind, wave and tidal resources for the production of energy. However, the Crown Estates Act 1961 requires the Crown Estate Commissioners to maintain and enhance the estate's value and the returns obtained from it. In other words, the commissioners will have to operate a strict policy of maximising financial gain, regardless of community interests.

It is in particular regard to community interests in the northern isles and perhaps elsewhere in Britain, as they have been explained to me, that I have tabled the amendment. The fact that the Crown Estate Commissioners have to secure the best returns possible from rental of the sea bed is likely to mean that there will be a bias in favour of the much larger generators proposed for very extensive wind farms. Based on economies of scale, they will be able to generate much larger returns and more significant profits from which the Crown Estate Commissioners can derive greater charges.

This issue was first raised in Scotland, but it may have an impact in several areas. Local communities are interested in deriving benefits from wind, tidal and wave energy sources. Given that, it would be very unfortunate if the Crown Estates Act 1961 meant that those communities did not benefit as much as they should from the development of these resources in their waters. That will be the case if the Crown Estate Commissioners raise money from the estate. Any income derived will become a cash cow for the Treasury rather than feeding back into local communities. I beg to move.

7 p.m.

Lord Triesman: Amendment No. 106AB would exclude the Crown Estate from playing a role in the development of renewable energy zones. I consider that such a move would be short-sighted and we wish to resist this amendment. It might be helpful if I remind Members of the Committee of the role that the Crown Estate plays now in the process of developing offshore renewable energy.

The Crown Estate owns the sea bed out to the 12-mile limit of the territorial sea. Perhaps I may put it this way: it acts as the landowner for the sea bed. Developers who wish to construct, say, a wind farm must enter into an agreement with the Crown Estate for the lease of the area of the sea bed where the structure will be placed. Naturally, developers are charged a rental for the use of the sea bed in the same way that any landowner would also make a charge for

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use of his property. That, together with other Crown Estate revenues, is paid to the Consolidated Fund at the end of each financial year.

The Crown Estate and the DTI are working closely together in developing the framework for expansion of the offshore wind energy industry. Members of the Committee may know that as late as last July the Trade Secretary, Patricia Hewitt, invited the Crown Estate to hold a tender for sites for offshore wind farms in three strategic areas—that is, the Greater Wash, the Thames Estuary and the area broadly from the north Wales coast to the Solway Firth.

Those areas were selected by the DTI as offering the best prospects for wind development based on factors such as the prevailing wind resource, water depth and the capacity for grid connections. Just before Christmas, the Crown Estate offered leases for 15 sites to successful applicants. In due course those developers will apply to government departments, including the DTI, for the consents necessary for the projects to be built.

This co-operative arrangement is working very well and we see no reason to change it. The Government set the energy policy framework and regulate individual projects, while the Crown Estate manages the sea bed and gives the site leases. It makes very good sense for those arrangements to be adopted for the renewable energy zone beyond the territorial waters.

It is very important that there is a common regime in the territorial waters and for the renewable energy zone. We want to create a single level playing field for development no matter where projects are located. The effect of the amendment would be to have some differential arrangement in the renewable energy zone, although, from the way in which the amendment was spoken to, it is not clear that that is what the amendment proposes.

I think that I must correct the notion that there would be a conflict of interest in the way that the noble Baroness, Lady Miller, has described. The Crown Estate's rent must be the best consideration—I emphasise this—reasonably obtainable in all the circumstances as set out in the Crown Estate Act 1961. It must exclude any element of monopoly value attribution to the extent of the Crown's ownership of comparable land. But, critically, it must be the best consideration reasonably obtainable in all the circumstances. Plainly, that includes overall considerations about whether it is a proper site or whether the site would be developed in a way that would cause considerable difficulty or offence to people who live locally—for example, by the installation of over-large machines.

In the three areas that I mentioned, there was tremendous interest from developers in the round 2 tender for offshore wind farms. Many more developers applied for leases than it was possible to grant. There is strong evidence that the rental is not acting as a barrier to development, nor is it being exploited in a way that is likely to act as a barrier. Those who are serious in wanting to put up a wind farm will not be deterred by extortionate rental levels.

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The Crown Estate has given an undertaking that it will monitor and review the effect of the rental payments on the development of the wind industry. Should any kind of evidence emerge suggesting that the viability of future development is being impeded by the rental level, or that some unreasonable arrangement is being made of the kind suggested as a possibility by the noble Baroness, the Crown Estate will consider whether revision of the rental would be justified.

I hope that those are reasonable assurances that sensible people are co-operating in this, and that there are provisions in legislation which would stop the exploitation—to use that word again—of these resources in a way that would cause offence.

Lord Higgins: I was listening carefully to what the noble Lord said, but I have some difficulty in understanding it. Are we to understand that there are competitive tenders for any given tranche? If so, how is the concept of excessive charges or excessive rental levels to be established? I should have thought that if there were a competitive tender, that would be the appropriate amount. Is it a market process? Or are the Government, in some way, imposing a limit, saying that they will not charge the full amount that they could obtain in order to ensure that some development takes place?

Lord Triesman: No, my Lords. I hope that I have not given that impression at all, but if I have, I apologise. It is a tendering process, but it is also a process where the development must receive various kinds of planning consent. Those are unquestionably considerations that would have to be taken into account in the construct of considerations reasonably obtainable in the circumstances. There is a balance.

I am not sure whether that analogy is 100 per cent accurate, but I am trying to give the best illustration that I can in response to the noble Lord's question. It is probably like a proposal to develop a piece of land. A development might be proposed that would produce very high commercial returns but would be unacceptable on that piece of land. If it is unacceptable, of course that development cannot take place and those returns cannot be achieved.

Lord Higgins: I am grateful to the noble Lord. I had better read exactly what he has said. But, if, on environmental grounds, a limit is imposed on the amount that can be charged, several people may wish to have the asset at that price.

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