Enterprise and Culture Committee, 01 Mar 2005

Meeting date: Tuesday, March 1, 2005

Official Report 171KB pdf

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Subordinate Legislation

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Renewables Obligation (Scotland) Order 2005 (draft)

Item 2 is subordinate legislation. Allan Wilson, the Deputy Minister for Enterprise and Lifelong Learning, will move motion S2M-2403, that the Enterprise and Culture Committee recommends that the draft Renewables Obligation (Scotland) Order 2005 be approved.

Fairly technical provisions are before the committee today. I am accompanied by Neal Rafferty, who will be familiar to you and who is from the Scottish Executive Enterprise, Transport and Lifelong Learning Department's renewable energy team. He may be able to assist with any technical issues that concern the committee.

Members will be familiar with the background to the renewables obligation, which is a vital mechanism for us to achieve increased generation of renewable energy. It is important that that work continues as intended and that we remain responsive to the needs of the market here in Scotland and in the United Kingdom more generally.

We are proposing three changes to the existing order. First, the draft order extends eligibility to electricity from renewable sources from Northern Ireland and therefore introduces UK trading. There is a reciprocal provision in an order that is being made under Northern Ireland legislation. That will be of benefit to suppliers in the Northern Ireland market, but it will also give opportunities to suppliers and generators on this side of the water.

Secondly, the draft order raises the percentage of electricity that is to be generated from renewables to 15.4 per cent by 2015-16. That measure is designed to increase investor confidence in the stability of the renewables market as we move forward into that period. I believe that the increase will stimulate investor confidence in our intent in that regard.

Thirdly, the draft order secures the obligation buy-out fund by introducing mutualisation and changing the buy-out recycling procedure. That is principally a response to market demand. Mutualisation will protect generators and suppliers against shortfalls in the buy-out fund, while the change to the recycling provisions offers transparency and reduces uncertainty for suppliers in the market. Other amendments include the introduction of surcharges for late payments to the buy-out fund and the introduction of flexibility for small generators. Those are mainly technical amendments that are designed to improve the operation of the ROS mechanism.

More generally, as the committee will know, work is under way on a more fundamental review of the operation of renewables obligations in Scotland. Among other issues, we will consider how the ROS mechanism might offer increased support for emerging and more expensive technologies. That action is a response to the committee's recent report on renewables.

In conclusion, the draft order is designed to improve the operation of the existing obligation and I am sure that it will increase market confidence in the mechanism.

I move,

That the Enterprise and Culture Committee recommends that the draft Renewables Obligation (Scotland) Order 2005 be approved.

Do any members wish to speak?

I would probably be failing in my duty to the Subordinate Legislation Committee if I did not draw to the attention of the Enterprise and Culture Committee the fact that a minor problem with the drafting was identified. Rather than withdraw the draft order, ministers have agreed to come back with an amendment to it at the earliest opportunity. The Subordinate Legislation Committee was content with that assurance and I am sure that this committee will watch for that amendment to come through.

Members were apprised of the situation in the clerks' briefing.

Indeed.

My question might be obtuse—the minister might have covered it—but I wonder where the draft order that we are discussing today sits in relation to the overall review of the renewables obligation certificate structure, because the committee has flagged up its desire for extra incentives to be given to marine energy, for example, through that system.

I made passing reference to the current review, which should be seen as separate from the amendments that are contained in the draft order that we are discussing, which amend the operation of the existing ROS mechanism. The review will cover the concerns of members of the committee to ensure that emerging technologies—which, it could be argued, are more expensive—are properly catered for in the forthcoming renewables obligations.

On Friday, an announcement was made on the new proposals for BETTA—the British electricity trading and transmission arrangements. I think that I am right in saying that the draft order does not impact on those proposals, but I would like confirmation that BETTA does not impact on the draft order and that the draft order does not impact on BETTA.

No is the short answer. I discussed that yesterday with the National Grid Company. I wanted to ensure that the arrangements that we had in place would secure a smooth transition to BETTA, which, as the committee knows, is crucial to the future of Scottish renewables generating capacity and Scottish generating capacity more generally. The draft order will have no impact on that process, although the renewal of the renewables obligations and the review of those obligations will have an effect in the fullness of time.

No other members wish to speak or ask questions. Do members agree to recommend approval of the draft order to the Parliament? I assume that the committee is unanimous in making that recommendation.

Members indicated agreement.