Subordinate Legislation
We now move to agenda item 3, which gives me the pleasure of welcoming the Deputy Minister for Environment and Rural Development, who is with Ben Maguire, the head of energy branch 1, and Karen Martin from the Scottish Executive constitutional policy unit. They are here to discuss the Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc) (No 2) Order 2001, which has been circulated to members of the committee with the usual covering note.
We shall follow our standard procedure for handling affirmative statutory instruments. I shall allow time in which members of the committee can question the deputy minister and officials about the instrument. The deputy minister will then move motion S1M-1949, which may be debated prior to a decision being made. I remind members that Executive officials may not contribute to the formal debate after the deputy minister has moved the motion. Only MSPs may take part in that debate, which will last no longer than 90 minutes. I invite the minister to make her introductory remarks.
Thank you, convener. The debate will concentrate on the Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc) (No 2) Order 2001. The Scotland Act 1998 recognised that, in some cases, it would be appropriate for Scottish ministers to be able to exercise executive powers in areas where primary legislation continues to be a matter for Westminster. That is commonly known as executive devolution. Section 63 of the Scotland Act 1998 allows functions in reserved areas to be transferred to Scottish ministers. The powers under the order are being transferred to Scottish ministers. Members will have seen the note prepared by the Executive, which explains the entries in detail. However, it might be useful if I gave the committee a brief resumé of the position.
Members will be aware of our commitment to increase Scotland's renewable energy resource in recognition of the tremendous potential for further renewables development that exists in Scotland and sits at the heart of our climate change programme. In meeting that commitment, we expect not only to reduce greenhouse gas emissions, but to attract investment, create jobs, support innovation and establish Scotland as a centre of excellence for renewable energy developments.
The transfer of general powers to allow Scottish ministers to impose on electricity suppliers a renewables obligation has already been undertaken. That obligation is still subject to consultation and will be specified in an order later this year, but the thrust of the Government's policy is to achieve by 2010 a 10 per cent share of the market for renewables. That implies a 5 per cent increase from 2003. The response to our preliminary consultation suggests that, although that target is ambitious, it is broadly welcomed.
It is intended that the obligation will be staged. We propose to introduce a system of certification that will allow suppliers to demonstrate that they have met the terms of the obligation within each specified period. The remaining powers to allow us to carry the programme forward are contained in the order.
Sections 32B and 32C of the Electricity Act 1989, inserted under the Utilities Act 2000, will enable us to put in place mechanisms for the issuing of certificates to qualifying renewables generators. The legislation will also enable suppliers to meet their obligations by means of a buy-out mechanism. The proposed cost of 3p per unit of that buy-out effectively places a ceiling on the additional cost of the obligation to the consumer, which we estimate will result in electricity costs increasing by 3.7 per cent of 1998 prices in 2010. We consider that that cost is justified. Promotion of renewables increases diversity, sustainability and security in the energy supply. It provides the potential of providing jobs as companies grow to meet the demand for renewables technologies.
The certificates that will be issued by the industry regulator will allow suppliers to prove that the renewable energy has been supplied within Great Britain and that they have consequently met the requirements under section 32 of the 1989 act. The provisions of section 32C permit suppliers, as an alternative, to buy out their obligation under section 32.
The draft order also transfers to the Scottish ministers powers to make certain savings orders in respect of the now replaced section 32 of the Electricity Act 1989, under which ministers exercise powers to make orders—the Scottish renewables obligation—to promote renewable energy. Although the powers have been superseded by the new section 32, the orders are still in place; section 67 of the Utilities Act 2000 makes provision for savings orders to be made in respect of them.
We are all aware that Scotland has a huge potential in renewable energy. The current target is that 18 per cent of energy be renewable energy. How far into the future will we be able to raise that target, given that industries in Scotland aspire to generating even more renewable energy than that? How does the Executive intend to support the development of wave power technology?
Our proposed increase of 5 per cent will take Scotland's use of renewable electricity to about 18 per cent by 2010. That will be an important contribution to meeting the UK target of 10 per cent by 2010. We think that the target is challenging but achievable. Setting a higher target would mean that Scottish electricity consumers would pay more than people in the rest of the UK for their green energy. That would be inappropriate and unfair. We acknowledge that there have been a significant number of demands for a higher target. However, 18 per cent is just a target; in the event, we may exceed it.
Scotland has an incredible capacity for wave energy. As members know, we are considering bids from interested parties. Ben Maguire will give details of the bids that have been made. We see wave energy as playing an important part in the development of renewables in Scotland.
Ben Maguire (Scottish Executive Enterprise and Lifelong Learning Department):
We have been discussing with Highlands and Islands Enterprise the possibility of establishing in the Highlands and Islands a marine energy test centre. I understand that Highlands and Islands Enterprise has recruited a consultant to examine four possible locations, one in the Western Isles, one on Islay, one in Caithness and one in Orkney. It expects to announce the outcome of that study within the next week or so.
Within what time scale do you envisage the test centre being set up? All the places that you have named would make ideal locations for such a centre.
I am sorry, but I do not know the details.
Maureen Macmillan's question leads on to some of the issues that I would like to understand more deeply. It is good to see that the draft order stipulates that powers for promoting renewable energy should be transferred to the Scottish ministers.
The minister made an important statement about Scotland's potential in this area, the opportunities for increasing renewable resources, the effect that that would have on jobs and the establishment of a marine energy test centre. I am not sure about the bids that were mentioned. From which fund are the four potential bidders bidding for money? From the budget process—in which we have all been involved—I understand that no money is available in the Scottish Executive budget for renewable energy promotion. I know that Scotland can access up to £100 million in the UK budget. How does the Executive intend to go about encouraging bids from the utilities or entrepreneurs in Scotland for money from that fund?
Scotland's potential for renewable energy may be far greater than what we would see as an appropriate share of the UK total under the other formulas that are applied to Scotland. We have 27 per cent of Europe's potential for renewable energy. How will we maximise our access to funds in future, for Scotland's benefit, if they are not available through Scottish ministers' expenditure powers?
The minister has come at a timely point. Ten minutes ago, the environment director general was with us to discuss these very issues. We are quite hot on these matters, as we have done a budget analysis of them. Bruce Crawford's contribution was not related directly to the SSI, but it was a useful point to make. Does the minister wish to respond?
The sum of £55 million will be available over the next three years throughout the United Kingdom to support renewables research and development. Obviously, Scottish companies can bid for that. It is a significant amount of money. We are currently considering the best methods of support for renewables. We have had an extensive consultation process to which we shall respond in mid-July. We shall be setting out our views and launching a further consultation process.
In mid-July, a formal public consultation will be launched. That process will include our response to the preliminary consultation that was held earlier this year. It will set out the detail of the proposed obligation, its scope, duration and those renewable technologies that qualify for support. As I said, we are currently looking at the results of the preliminary consultation.
How will the Executive encourage companies or individuals in Scotland to make the bids? I should like to understand the process. If the minister cannot explain it now, I shall be happy to receive details in writing. This will be an important issue for Scotland in the future.
I shall take up the matter with the minister. I am sure that she can respond in writing and a copy of her response will be circulated to members of the committee.
I should like clarification of the meaning of "certain savings orders". The minister said that the Utilities Act 2000 transfers powers to make certain savings order in respect of the now replaced section 32 of the Electricity Act 1989. I just wondered what that meant.
Karen Martin (Scottish Executive Executive Secretariat):
It means that, from the commencement of the order, anything that was done before in the area is not affected by the transfer from the minister of the Crown to the Scottish ministers.
So anything that has gone before will be protected.
Yes.
Thank you for that clear and useful explanation. If no one else has any questions, I invite the minister to move the motion.
Motion moved,
That the Transport and the Environment Committee recommends that the draft Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) (No 2) Order 2001 be approved.—[Rhona Brankin.]
Motion agreed to.