Sammy
Wilson: I appreciate the point that the Minister made
regarding the cost; I suppose that he can give only an estimate.
However, will he address the issue that I raised about how secure the
current contracts will be with the advent of a single electricity
market? Will it be possible for the operator to revoke those contracts,
or will they be guaranteed to run to end of the relevant
period? 5.30
pm
Mr.
Hanson: I shall return to that point in a moment, if the
hon. Gentleman will allow me to do so.
As I mentioned, the
£34 million cost over the 10-year period will be taken into
account with the£30 million of savings. The hon.
Gentleman made a good point with regard to the current operators, with
whom the matter is being discussed. The memorandum of understanding, if
agreed with the Irish Government, will take into account all those
matters. The Order in
Council that proposes the memorandum will be subject to
consultation.Clause 25 simply gives to the Government the
power to make that agreement, but the agreement and its potential
implications for existing operators regarding savings or otherwise and
for the relationship between
the Irish and British Government will all be subject to the order, which
will itself be subject to
consultation. To get
back to the basics, the clause will give my hon. Friend the
Under-Secretary legal backing to negotiate the memorandum of
understanding with the Irish Government and to introduce an Order in
Council to bring that into
effect.
Mr.
Robertson: I realise that this is a specialist area, and I
appreciate the Minister’s attempts to explain a difficult and
complicated situation.
I shall reiterate what I was
trying to say: the regulation is one thing, but the actual opening up
of the market is another. The existing long-term contracts present a
bit of a problem because they could end up keeping the price of
electricity high, but as the hon. Member for East Antrim said, it is
important to honour those contracts. I hope that the Minister will
speak to his hon. Friend the Under-Secretary, because it is important
that we move as quickly as is fair towards an open market in
electricity, and not just harmonisation of
regulation.
Mr.
Hanson: I anticipate that the current contracts will
operate certainly until 2010. After that date, they will be a matter
for discussion and consultation; discussions on the single electricity
market and how it will operate and affect contractors in the future are
under way already with existing
operators. Clause 25
will give my hon. Friend the Under-Secretary the power to negotiate the
memorandum of understanding and to bring it back here after
consultation for execution by this House and implementation beyond that
date. I understand the concerns that current operators will have, and I
hope that the reassurance of 2010 will be of assistance to them. Those
matters will be subject to consultation, at which stage the hon. Member
for East Antrim, with his constituency interest, is welcome to make his
points. Question
put and agreed
to. Clause 25
ordered to stand part of the
Bill.
Clause
26Financial
assistance for energy
purposes Question
proposed, That the clause stand part of the
Bill.
Mr.
Robertson: On this occasion, I shall attempt not to stray
on to the issue of Russian gas
supplies. Let us
compare the renewables market in this country with that in continental
Europe, where the supply of renewable energy is far more prevalent.
Continental Europe generates far more electricity from renewable
sources than we do. As hon. Members might well be aware, the renewables
obligation covers Great Britain, but we manage to generate only about
3.5 per cent. of our electricity from renewable sources compared with
the target of 10.4 per cent. by
2010. Now that it is
2006, that target looks very ambitious, but it does not seem awfully
high when we consider the necessity of moving towards the cleaner
generation of electricity, for which the necessary technology has been
around for some time. For Northern Ireland there is
the non-fossil fuel obligation, but that will be set at only 6.3 per
cent. by 2012, which is not terribly ambitious. At the moment, the
figure is about 3 per
cent. I accept that
there are problems with the promotion of renewable energy in Northern
Ireland that do not exist elsewhere in Great Britain, where there is
perhaps more potential for the generation of renewable electricity. In
encouraging renewable electricity in Great Britain, the Government have
made the mistake of depending far too much on windmills. Although they
have their place in electricity generation, several problems are
associated with them. The biggest is that they are
intermittent—when the wind does not blow, we get no electricity.
That might seem like an obvious statement, but the wind tends to blow
only 30 per cent. of the time, so we get electricity only during that
time. The great problem with electricity is that it cannot be stored,
so if the wind blows twice as hard one day, we cannot get twice as much
electricity and store it for a day when the wind does not
blow. For two years, I
have tracked the Government on energy issues and shadowed the Minister
for Energy and I think that we need a much broader approach to
developing renewable energy. There is far too much emphasis on wind
power—
The
Chairman: Order. I am sorry to stop the hon. Gentleman
again, but I am anxious not to have a general debate on the merits of
wind power versus nuclear or otherwise. The clause touches on promoting
wind farms in Northern Ireland, and his comments must relate to the
Northern Ireland
situation.
Mr.
Robertson: Thank you, Mr. Atkinson. Having visited a wind
farm in Northern Ireland, I felt slightly qualified to discuss the
issue. I am merely trying to suggest that the Government take a much
broader approach to developing renewable energy in Northern Ireland
than they have in Great Britain. The approach that they have taken in
Great Britain has left us struggling to meet the targets, and I do not
want the Government to fail to meet the modest targets in Northern
Ireland. If they are serious about developing renewable energy in
Northern Ireland, they need to be much more focused than they have been
in Great Britain.
Sammy
Wilson: I have a couple of points relating to the purposes
of the financial assistance and the aims listed in subsection (2) of
the clause. Those aims are admirable, but the existence of a single
energy market poses a particular threat. The biggest player in that
market will be the Electricity Supply Board—the electricity
generating body from the Irish Republic. Contrary to the current
situation in Northern Ireland, it will be not only a generator, but a
supplier, transmitter and distributor, and it will control at least
half the market. Given that the electricity that goes into the pool
will be based on half-hour transmissions, such a large supplier will
have the potential to distort the price to its own advantage, which is
particularly worrying.
What steps will be taken during
the negotiations to deal with that issue? Attention must be paid to it
to ensure that one large player, which will not only supply the pool,
but buy from it, does not distort the market. What steps will be taken
to ensure that that does not happen? The danger is that ESB could drive
out some of the smaller generators by influencing the price. As the
hon. Member for Belfast, South said, the energy market on the whole
island—in Northern Ireland and in the Irish Republic—is
quite isolated. Some power can be brought in through the interconnector
from Scotland, but by and large the island is quite isolated, so the
loss of one generator could greatly distort the market and greatly
increase price volatility. That is one of the reasons why I said at the
start that although in theory a single energy market would be
welcome—
The
Chairman: Order. I am sorry to interrupt the hon.
Gentleman again, but we are again straying rather wide of the clause.
As its title says, it is about financial assistance for energy
purposes. I should be grateful if he related his speech to that
subject.
Sammy
Wilson: Thank you, Mr. Atkinson. I was dealing with
subsection (2), whose first purpose
is “to secure a diverse
and viable long-term energy
supply”. If steps are not
taken to address the power and influence that can be exercised by one
supplier and distributor controlling 50 per cent. of a single market,
that purpose will not be achieved. It will be possible for that one
supplier to influence the price and affect in the long term the number
of generators in the
market. I should
appreciate some guidance from the Minister on what discussions have
been held on the matter. One way around the problem is a fairly
generous capacity payment mechanism, whereby generators would be paid
to keep some surplus capacity so that peaks and troughs could be dealt
with and sufficient generating capacity would exist during peak periods
to ensure greater price stability. I do not know whether discussions
have been held along those lines, but that is one solution that
generators have suggested. They have a vested interest in being paid
for surplus capacity, of course, but it would be equally beneficial to
consumers in that it could even out price peaks and troughs during the
year or the
day. Attention must be
given during negotiations to the ESB’s ability to distort the
market and to affect the working of something that should be beneficial
to consumers, rather than going in the long run against some of the
purposes in clause
26.
Dr.
McDonnell: I am conscious of the time, but I feel that it
would be remiss of me not to welcome the clause warmly, as I welcomed
clause 25. Renewable energy and diversity of supply are important
issues for us in Northern Ireland, and from where I stand, I see a gap.
The Government must have the ability to intervene to develop the market
and to encourage those who are uncertain about investing in renewable
energy to move forward.
I do not wish to delay the
Committee unduly, as other business is on the schedule, but I want to
endorse strongly the broad principles of the Bill and urge the Minister
to see that those principles are applied to
ensure a stronger renewable energy sector. We need diversity of supply,
because the present circumstances do not do enough to encourage and
create that market. I warmly welcome the
clause. Mr.
Hanson: The clause is important for the reasons that hon.
Members have mentioned. Developing renewable energy is crucial to the
alternative energy sources required to help improve Northern Ireland
for the future. At the moment, Northern Ireland is at99 per
cent. of the quota on imported fossil fuels and other energy sources.
We need to examine alternative
energy. For that
reason, my right hon. Friend the Secretary of State announced early
this year that he would allocate a £259 million support package
to develop alternative energy sources during the next few years. The
clause gives legal effect to the amendment of existing legislative
powers so that financial assistance can be provided for energy
purposes. It will enable the Department of Enterprise, Trade and
Investment to assist in a wide range of energy provisions, including
renewable development. I hope that it will be welcomed by all hon.
Members. The target
in Northern Ireland is for 12 per cent. of electricity to be supplied
from renewables by 2012. I accept that that is an ambitious
target.
5.45
pm
Mr.
Robertson: The Minister has access to far more information
than I have. I was told that the obligation was for 6.3 per cent. with
an aspirational target of12 per
cent.
Mr.
Hanson: Indeed. The renewables obligation is 6.3 per
cent., but the Government target is to try to make it 12 per cent. by
2012. We need to support renewables effectively. I welcome the hon.
Gentleman’s support for the Government’s attempt to
develop renewable energy. Far be it from me to reflect that, as I
recall it, when the £59 million that the Government are
allocating was announced in the Budget, the hon. Gentleman voted
against it. I welcome the fact that he is committed to supporting
renewable energy, but I wish that he was committed not only in his
aspirations but in his voting.
Having said that—let us
not be churlish—the hon. Gentleman said that wind power is
important. Yes it is, but that is not all that the Government intend
bringing forward under the Bill. If the clause becomes law, we intend
to give powers to the Secretary of State to ensure that research on
generating energy from waste products is undertaken, with a £15
million fund; there will be accelerated deployment of solar power; and
over the next couple of years, the Housing Executive will be installing
600 solar heating systems in social housing and increasing to 10,000
the number of homes that receive energy from solar power through a
number of energy efficiency measures under the warm homes scheme. We
will also build market capacity with an investment of £2.5
million, and we are underpinning the knowledge economy by investing in
such areas. I would certainly say that the clause is important. It
gives legal backing to the power to achieve those results.
The hon. Member for Antrim,
South mentioned ESB—an important point. [Hon.
Members: “East.”] I apologise; I meant to say
the hon. Member for East Antrim. I know the difference between Antrim,
South and Antrim, East; I have seen both of them kicking around in the
park on several occasions. It was a slip of the tongue.
As the hon. Member for East
Antrim said, ESB will have nearly 60 per cent. of the generating
capacity in the new market, and we need to consider how to prevent ESB
from abusing its market power. The dominance of ESB is a challenge to
the operation of the new markets, and the Irish Government too are
considering the position of ESB in their review of the Irish
electricity sector. The Department for Enterprise, Trade and Investment
has taken a close interest in the matter, and the Under-Secretary of
State for Northern Ireland, my hon. Friend the Member for Basildon,
will be considering it
carefully. In
recognition of ESB’s current position, the regulators are
developing a market power strategy to address the potential for market
abuse by participants that control a dominant segment of the generating
plant capacity. Again, I hope that that will be a matter for further
discussion, and I am sure that, if required, my hon. Friend the
Under-Secretary will support a meeting with the hon. Member for East
Antrim to discuss the matters further.
I commend the clause; it is
valuable, and I am grateful that hon. Members in all parts of the
Committee support it.
Question put and agreed
to. Clause 26
ordered to stand part of the Bill.
| 
