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Scottish Grand Committee Debates

Scottish Energy in the 21st Century

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Scottish Grand Committee

Wednesday 13 February 2002


[Mr Edward O'Hara in the Chair]

Energy Policy

10.30 am

The Chairman: The first item of business is a statement on the future of energy in Scotland. Hon. Members will be aware that there is no time limit on the statement and subsequent questions, but in deciding when to bring questioning to a close I shall have regard to the fact that the ensuing debate on Scottish energy in the 21st century must end at 1 o'clock. I will also have in mind that the subjects are similar.

The Minister for Industry and Energy (Mr. Brian Wilson): I am grateful for the opportunity to make a statement to the Committee. There is a great deal in my portfolio of energy industry construction and the environment that is of current and immediate relevance in Scotland. This is a useful opportunity to bring hon. Members up to date on the issues and to answer some questions.

Publication of the energy review is imminent, which constrains what I can say about some of the topics that fall within its orbit. However, the starting point for Scotland, as for the United Kingdom as a whole, is that we currently have a healthy energy mix, and it must be our objective to maintain such a balance on which both security of supply and our environmental commitments depend.

The Government are doing more than at any time in the past to support renewable energy technologies; I have been an advocate of generation sources such as wind and wave for the past 25 years and it is a privilege to be in a position to do something about it.

Our world leadership in wind power technology was thrown away in the early 1980s because there was no government support for the creation of a domestic market. The Danes have been the beneficiaries and they now have a £4 billion a year, worldwide manufacturing industry. That success can serve as a model and as a warning that we must not allow the same thing to happen with those technologies in which we still hold a world lead. That is why I attach such a sense of urgency to wave power development, for example. The only commercial wave power plant in the world is on Islay; we should manufacture more of those plants, get them into position along our coastline and sell them world wide. That is why I am anxious to give early encouragement to the proposals from Wavegen and Scottish and Southern to establish a cluster of those units in the Western Isles.

It is all very well to move on to researching and developing offshore wave, the next generation of technology, and we are doing so, but if we are to have the manufacturing benefits and turn it from an

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aspiration into an industry, we must also start to put projects in place and make these long-talked-of schemes a reality.

I cannot stress strongly enough the link between power generation and manufacturing industry. Hydropower has existed for a long time, although sadly there is not as much in Scotland as there could and should be; an unholy alliance of landowners and environmentalists has prevented anything from happening for the past 40 years. I hope that that will soon change.

Already, the Government and the Scottish Executive have ensured the well- being of the existing hydro industry far into the new century by bring hydro refurbishment within the ambit of the renewables obligation. In employment terms, the main beneficiaries of that action will not be where the hydro power stations are located but in the constituency of my hon. Friend the Member for Ochil (Mr. O'Neill), where two engineering companies are largely dependent on engineering for hydro schemes. That is the kind of link that I want to identify and expand throughout the renewable technologies.

I am today laying the renewables obligation before Parliament. It offers a fantastic opportunity to develop a thriving industry, building on traditional Scottish expertise in offshore technologies and engineering know-how. There is no point in generating electricity from any source if there is nowhere to send it; that is a problem for those areas that are richest in renewables potential and for Scotland as a whole. Our capacity to be exporters of power is constrained by the inadequacy of the existing infrastructure.

I recognised that issue when I commissioned a feasibility study into the concept of a sub-sea interconnector along the western seaboard of the United Kingdom from Lewis—where there are such exciting plans for renewable energy generation—to south-west England. The report is available and will be published today. It is an excellent piece of work that will greatly assist in informing the debate. It sustains the validity of the sub-sea concept while being realistic about the costs and the difficulties.

The report also considers land-based options for strengthening the transmission capacity from north to south, alongside offshore ones. The optimum solution may lie in some hybrid of the two. The report was always intended as a preliminary feasibility study, and we are moving quickly to a comprehensive study on options for the development of one transmission system in Scotland and two such systems in the rest of the United Kingdom and Europe. We will do that in partnership with Scottish companies, the Scottish Executive, the National Grid Company, and the regulator. I expect conclusions and firms recommendations on the way forward to be available in six months. Whatever we do will extend to the north and west of Scotland, including the islands.

Events are moving quickly in the energy world. Since I initiated the sub-sea cable study, another factor has emerged to give fresh urgency to the issue. With my full support and that of the Scottish Executive, the regulatory body—the Office of Gas and Electricity

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Markets—initiated a consultation on the creation of a market in electricity throughout Great Britain; BETTA, the British Electricity Trading and Transmission Arrangements, instead of NETA, new electricity trading arrangements, if one prefers the jargon. If the benefits of the proposed arrangements are to be maximised for Scotland, the capacity to sell to the UK market must be increased. That points again to the enhancement of transmission capacity, without which we will not be able to come close to realising the enormous potential for expanding our renewable industries.

Real successes are being achieved in our offshore oil and gas industry, much of which flow from the excellent work done by PILOT, the body that brings together Government and industry to agree strategies for our offshore industries. My right hon. Friend the Secretary of State was the previous chairman, and I am the current one. My objective for PILOT, and for the work in my Department that flows from it, is to get the right licences into the right hands at the right time. That is the way to increase the number of new developments and to extend the life of the UK continental shelf.

Recent developments include the activation of Clare after more than 20 years, the scale of the Buzzard discovery and the use of new technologies by two small independent companies to reactivate the Argyll field. Those exciting projects point in the right direction. I will make an announcement this afternoon on onshore developments and the 10th onshore licensing round. Although I cannot pre-empt the details of that announcement, three of the licences are for areas in Scotland.

We are also having success with another stated objective that the Scottish Executive and I share. We are keeping as much of the decommissioning work at Dounreay in the regional economy. When I decided to end reprocessing at Dounreay and open up a new period of stability and certainty there, I made it clear that that should mean not only long-term jobs at the site, but a huge range of opportunities for companies in the area. The United Kingdom Atomic Energy Authority made it clear in its announcement yesterday that that is being delivered.

I have touched on only a few aspects of the wide and topical range of energy issues, and I will be pleased to answer hon. Members' questions. There is a lot of meat in my statement, and I will be pleased to flesh out the details. I am also happy to answer any questions on any other aspects of my portfolio.

Malcolm Bruce (Gordon): I thank the Minister for his statement, which, as he said, is timely. I am slightly disappointed that the energy review will be published tomorrow or Friday, just as the House goes into recess. It is unfortunate that we will not be able to debate the issue as quickly as we might. I appreciate that that may not be in the Minister's control, which is unfortunate in view of the importance of what will be said.

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I welcome the Minister's involvement with new initiatives over recent months. Can he provide a time scale for those developments—upgrading the infrastructure, for example? People will not invest without infrastructure. Will he comment on the concerns expressed by the fuel poverty lobby about the arrival of BETTA and the removal of price controls? The argument is that energy prices should fall, which helps the fuel poor, but concern remains that the choices are not as wide in Scotland as in England and that the timing should be simultaneous, rather than having one before the other. The Minister should be aware that NETA has caused considerable problems for the combined heat and power industry. Can he give an assurance that it will not have similar repercussions when it is applied in Scotland?

The renewables obligation is also welcome. Will the Minister undertake to keep it under constant review? Many people believe that Scotland can achieve far higher than the 18 per cent. target; perhaps even double it over a 20-year period. The renewables obligation must be kept under review in the light of capacity. I would greatly welcome the Minister's reassurance on that.

Mr. Wilson: I shall try to deal briefly with all the questions. On timing, a conspiracy theory is always round the corner, but introducing a document on Thursday when we are coming back next Wednesday does not seem like an attempt to bury it indefinitely—[Interruption.] Sorry, I mean the following Wednesday.


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Prepared 13 February 2002