Economy, Energy and Tourism Committee, 05 Mar 2008

Meeting date: Wednesday, March 5, 2008

Official Report 252KB pdf

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Subordinate Legislation

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Renewables Obligation (Scotland) Amendment Order 2008 (Draft)

We have two items of subordinate legislation to deal with. We are pleased to have here the Minister for Enterprise, Energy and Tourism, Jim Mather, who is accompanied by a couple of his officials. I apologise to the minister and his officials for keeping them waiting while we were dealing with our tourism inquiry. We will try to find an imaginative way of asking him a question about that, but we are still working out how that could be consistent with the issues that are to be discussed.

We must deal first with the draft Renewables Obligation (Scotland) Amendment Order 2008. I invite the minister to introduce the draft order. We will then ask some questions.

I remind the committee that wave and tidal power represent a huge opportunity for Scotland. I think that everyone accepts that. The resource has huge potential for us, and we have a number of innovative and enterprising device developers on our doorstep in Scotland. I believe that we have the shared political will to make things happen.

We also have the dual imperatives of tackling climate change and providing secure, sustainable power for our future. The Government has set challenging targets for renewable electricity generation, including the target of meeting 50 per cent of Scottish demand by 2020. In addition, the European Union's wider and most welcome target for renewable energy could require as much as 50GW of renewable electricity capacity across the United Kingdom by 2020. Those important targets embody what we believe the sector can achieve and provide, but they will be meaningless without the right levels of support. The Renewables Obligation (Scotland) Order mechanism is fundamentally important for the achievement of those goals.

The draft order that is before the committee today relates to the marine supply obligation mechanism that was introduced last April. The draft order will amend the level of wave and tidal requirements for the forthcoming obligation period to zero, which is the same level as at present. That may seem an odd thing to do, given our determination to support the sector. However, it is fully in line with the commitment given when the marine supply obligation was introduced that the level would not be raised above zero unless generation was taking place that would enable licensed suppliers to meet a new level. The proposed amendment is perfectly sensible because it will mean that suppliers, and thus consumers, will not face additional costs, with no wave or tidal capacity to show for them.

That does not mean that the MSO mechanism is a failure; on the contrary, the renewables sector and marine developers have warmly welcomed it. We know that projects and capacity are being actively planned on the basis that the MSO will support them over time. The signal that the MSO sends is vitally important, as is the confidence that it will remain in place.

It is clear that the sector faces huge challenges in getting the technology to the stage at which it can benefit from what is purely a market mechanism. However, there is tremendous dedication, determination and perseverance among those battling to develop, prove and deploy those machines. As a consequence, it is right that the Government remains committed to doing all that it can to aid that process. That means continuing to support vital infrastructure at the European Marine Energy Centre in Orkney; addressing environmental issues; enabling the process of establishing the best sites for early development; continuing to press hard for a sensible, flexible and fair approach to making grid capacity available for the devices; and, above all, ensuring that our obligation continues to offer the right levels of support in the right way over the right period of time.

I move,

That the Economy, Energy and Tourism Committee recommends that the draft Renewables Obligation (Scotland) Amendment Order 2008 be approved.

Thank you, minister. The one issue that the committee is puzzled about is why some of the explanation that you have just given was not in the Executive note provided to the committee and—more to the point—to the Parliament. Are you prepared to give us an explanation as to why the necessary information, which any committee would need, was not given to us in writing in advance?

I can only regret that that was the case. The background to making the draft order was clear-cut to me. I take firmly on board what you have said and will ensure that the situation is not repeated.

We are all interested in understanding the issue, after all.

Absolutely.

I understand the reasoning behind the draft order, but I want to probe a couple of points a little to get an understanding of the minister's interpretation of the matter.

First, there is a proposal to reduce the level of the obligation—the percentage of total supplies—to zero for the forthcoming year. As the minister said, that does not signal a failure. However, is it a signal that we were too optimistic in April last year in believing that the technology would allow the figure to be more than zero by this stage?

My second question is connected to that. We had an informal briefing this morning from the Royal Society of Edinburgh that confirmed publicly made estimates of when wave and tidal power are likely to be commercial runners—it was said that it would be eight years before tidal power and 10 years before wave power became commercially available. Does that mean that the minister expects ministers to come back for the next seven years to adjust the requirement to zero for each year, or is that interpretation too pessimistic?

We may well share a similar blend of optimism and realism with the previous Administration, but having that blend and passing it on to the industry are important. However, it is important that consumers do not pay extra for no tangible return in the short term. Sending successive optimistic signals and anticipating engineering and technological breakthroughs are entirely healthy, to encourage the evolutionary process that is taking place in Scotland, particularly up at EMEC, where—fingers crossed—developments could accelerate much more. When we consider that through the lens of our scrutiny and present it to colleagues in Brussels, as we did recently with Scottish and Southern Energy, we can see the appetite that exists, which feeds back into more people being more willing to invest more money to accelerate the process. Let us keep the blend of optimism and realism. If that means that we need to come back for a few more years to adjust the figures, so be it.

The minister mentioned the change to the obligation for 2008-09 to make the requirements for wave and tidal power zero. Will he comment on the changes that the draft order will make in subsequent years?

In the light of the UK Energy Bill, we are considering carefully whether banding—the award of renewables obligation certificates in higher multiples for different technologies—might replace the marine supply obligation. We must keep monitoring the situation, ensure that the right signals are in place and have the correct checks and balances to ensure that we have value for money in the process. We must also have the correct forward momentum to encourage more and more people to develop the technologies.

Will the draft order reduce the figures in schedule 1 to the Renewables Obligation (Scotland) Order 2007 (SSI 2007/267) for tidal and wave power in subsequent years, or will those figures remain the same?

The figures are just an indication. Clearly, we will monitor the situation going forward. You can expect us to have our finger on the pulse.

Okay. My question is: will the draft 2008 order reduce the figures in the 2007 order for subsequent years?

Could my official just—

I am afraid that officials cannot speak at this point.

There will be some adjustments. In the schedule to the draft 2008 order, some requirements are less and some are more, but the key point is that the total will remain the same.

You say that some are less. Which ones are more?

In 2007-08, the requirement is the same. In 2008-09, it will be less. The sequence seems to be: the same, less, more, less.

In which specific year is the requirement more?

I am being told that, in 2009-10, we will have an increase.

An increase from what to what?

From 9.1 to 9.7. The issue is pretty complex, but I understand that the end figure is a representative cap. The data concern a progression that finalises at that cap. The total remains the same.

As you mentioned, the requirement for next year is going down to zero. Having examined online the information relating to the 2007 order, my concern is that the wave and tidal requirements that we set in April last year appear to have gone down for 2009-10—from 0.1 to 0.06 for both. The requirements have also gone down for 2010-11, from 0.15 to 0.12. For 2011-12, the requirements seem to have gone down from 0.2 to 0.18. That was not mentioned in the Executive note or in your opening remarks. The impression was given that a change was being made for one year, but it seems to me that changes for a number of years have been made in the one order.

That is true. However, the figures in the draft order are illustrative and will kick in and formalise as and when the system moves beyond zero as the opening position. The figures should not be taken as definitive until we move beyond zero.

But if the figures in the table are only illustrative, why have they been changed from last year?

I do not have a good answer to that. [Interruption.] I am told that the table is purely illustrative and that it is supposed to be linear up to the cap. The key figure is the cap. The changing timeframe and the reindexation at zero at the start change that linear progression. You can expect us to confirm that in writing to the committee.

That is why we wanted an explanation in writing in advance.

Yes—touché.

I do not want to hog the conversation, but I have a final question.

I am not hugely satisfied and have some issues that will not be cleared up until I see an explanation in writing. If the figures are purely illustrative, why change the requirement from 0.15 to 0.12? Surely that change is based on something.

My final question is about the impact on business and relates to the Executive note. Under the heading "Financial Impacts", the Executive note states:

"The ROS creates small additional costs for electricity suppliers, which are then passed through".

If we are reducing the obligation for wave and for tidal and are not making any change to the total obligation, how are we creating additional costs for electricity suppliers?

The issue is that the obligation as a whole creates costs for electricity suppliers, but in this instance, by having the return to zero on the MSO, we are not further complicating the situation.

This is not specific to the draft Renewables Obligation (Scotland) Amendment Order 2008—the Executive note states clearly that it "creates small additional costs". We appear to be agreed that costs are not created by the changes to the figures—in some ways, they may reduce costs. There only two further changes that I can see: the replacement of references to the Department of Trade and Industry, because it no longer exists, with references to "the Secretary of State"; and a change to the initial drafting. What will be the additional costs to electricity suppliers as a result of the draft order?

The fact is that supply businesses have to do a bit of work to project forward what the implications will be. That is where the implications for cost could emanate from. Such businesses must have staff monitoring the situation, managing their position forward and understanding the implications. Change creates costs; the change creates a small cost for those businesses.

Is it not also true that the additional cost arises because, effectively, the public will have to subsidise the system for a period of time, and the subsidy that wave and tidal will require is currently higher than the subsidy that we give to onshore wind? As you rightly indicated, the administrative costs on suppliers are one of the reasons why there may well be additional costs to the consumer in the future as a consequence. Those costs will not arise for the consumer until such time as we generate any electricity.

That is the situation exactly. As we proceed with the consultation on the introduction of banding to the Scottish renewables obligation, which we will announce soon, that issue will come up because we are not convinced that the proposed banding level in the UK Energy Bill is sufficient. All those issues will crystallise and mature and we will be able to see the implications.

The committee next meets in Aberdeen on Monday. Given the questions raised by Gavin Brown, to which you kindly said that you would respond in writing, is there any chance that your officials could put together a letter for us for that meeting? Mr Brown has raised several questions that are clearly going to be tricky to deal with.

Absolutely. I agree with some enthusiasm, because I want increased clarity for my own purposes as well as for the committee's.

Would it therefore be acceptable to you if we decided on the draft order not today but on Monday in Aberdeen? That would still allow you to stick to your timetable.

Absolutely. I am more than happy with that.

Are committee colleagues content to deal with the draft order at Monday's meeting in Aberdeen, when we will have the answers to Gavin Brown's questions?

Members indicated agreement.

Is that acceptable, minister?

It is perfectly acceptable.

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Official Statistics (Scotland) Order 2008 (Draft)

We now move on to the second instrument, which is slightly ironic, given Gavin Brown's questions, because it is on statistics. We will have a little bit of shuffling of personnel; I see that the Government's chief statistician is coming to the table—you are not allowed to say anything, but I welcome you anyway. I invite the minister to introduce the order.

The purpose of the order is to extend the definition of official statistics that is found in the UK Statistics and Registration Service Act 2007 to include statistics that have been produced by three non-Crown bodies, which are the Common Services Agency for the Scottish Health Service, the Higher Education Statistics Agency and the Student Loans Committee.

During 2008, the Scottish Government intends to engage with a number of public sector bodies that produce statistics on Scotland to discuss whether bringing their statistics into the definition of official statistics would help to improve statistical standards. However, there is a pressing need to draw up an initial list to ensure that non-Crown bodies that currently produce national statistics have them included as official statistics.

The order that we are considering will therefore ensure that the statistics that have been produced by those three bodies are designated as official statistics, which will mean that they will fall under the remit of the statistics board that is now known as the UK Statistics Authority, and that national statistics that are produced by those bodies can continue to have official statistics status from the commencement of the new statistical system on 1 April 2008.

The UK Statistics Authority is the new non-ministerial department that was created by the Statistics and Registration Service Act 2007. It has the statutory objective of safeguarding and promoting the quality of official statistics, and it has welcomed Scotland's proposed approach.

The three non-Crown bodies have been consulted and have agreed that their statistics should be included in the definition of official statistics.

I move,

That the Economy, Energy and Tourism Committee recommends that the draft Official Statistics (Scotland) Order 2008 be approved.

Thank you, minister. I will ask the first question. What is the Government's direction of travel? Does the Administration intend to move towards a situation where, broadly speaking, all Government statistics will be under the proposed regime? If that is the case, what is the envisaged timescale for different bodies and for the Government?

The issue of a timescale is more challenging. We will try to do it as quickly as we can, but the process needs to be orderly, and the draft order is the start of that. We want there to be a close and open dialogue with those entities that are liable to produce such statistics.

On the publication of statistics—a matter about which ministers get very exercised, as I and others remember—international best practice is that statistics should be published and given right out there to the world and that the advance warning to ministers should be as little as three hours. Do you plan to follow international best practice on publication?

The Government pays strong attention to international best practice. It remains to be seen when we will get to the three-hour level, but there is a direction of travel that people are noting.

You are asking us to approve bringing three bodies into the regime. Will they have the three-hour deadline? If it is not three hours, what is the regime?

The regime might not be quite three hours at this point in time, but that is the direction of travel. Moving forward along the lines of our political aspirations, matching the UK Statistics Authority by having an independent body is certainly the further long-term direction of travel. We cannot be advocates of continuous improvement and not want best practice on statistics.

To an extent, we are playing an away game with the committee. Normally, such matters go to the Finance Committee. There are proposals with the Finance Committee to drive forward the process.

I have a technical question. I take it that the reference in the order to the Common Services Agency for the Scottish Health Service encompasses all the statistical information that is produced in the national health service in Scotland. Is that correct?

My understanding is that that brings in the main thrust, but that drilling down into specific health boards is work in progress. That is the direction of travel.

Does it include ISD Scotland and all the agencies that produce national statistics?

Yes.

I have only one question. It is probably a bit more than three hours since you were on the radio talking about tourism industry statistics. To divert you slightly, some people seem not to believe that we can reach the target of 50 per cent growth by 2015. Unfortunately, I missed your interview, which I am sure was excellent. Will you give us your view on whether the target is achievable?

It is very much achievable. It was a good interview and it is worth listening to, if I may say so.

I will catch it on the BBC.

I will try to move into full mode there.

I have just come from the opening session of Scottish tourism week, where the flavour of the room was that achieving the target is eminently doable. The industry now understands how we can get the 50 per cent extra growth, which is not just by a simple foot on the accelerator, but by considering how the industry can extend value, improve the visitor experience and create better career opportunities for young people. The industry is focusing on that and letting the revenue numbers and individual profitability of businesses almost take care of themselves. There is a real healthy attitude through the Scottish Tourism Forum and the tourism framework for change. Everyone who was at the session today is on the forward foot and is seeking to drive the industry forward.

At the end of the day, the 50 per cent target may well be seen in retrospect as modest. From the thistle awards and elsewhere, we can see that new businesses, which are coming through at a faster and faster rate, are premium price and high occupancy straight off. In my constituency in the past year, the new Machrihanish dunes golf course has been finished and is ready for business and the Victoria hotel in Rothesay, which sets the tone for Rothesay, has been refurbished and smartened up. On Saturday, I was on Mull for the opening of the Crerar Hotels pool, which is a joint venture between the community, the public sector and the hotel. There are many signals that things are going to happen.

Under the statistics legislation, official statistics include those of any Government department, so we will be able to track the growth in tourism that you expect through the statistical method.

I certainly hope so. I have just come back from the convention of the Highlands and Islands up in Shetland. Slipped into my visitor pack was a copy of "Shetland in Statistics", which I must say is good value at £4—it is absolutely rich. That community has its finger absolutely on the pulse of what is happening through its data. I come from the Peter Drucker school of thought that if you cannot measure it, you cannot manage it.

I kind of guessed that.

The more that we lean on statistics, the better. I am a real enthusiast.

Shetland is showing you the way. Are those the kind of stats that you hope that the industry as a whole will produce?

Yes, and local areas as well. I recently attended a small area statistics event at Our Dynamic Earth. I expected to speak to 20 or 30 people, but there were 240 people in the room. All were well-motivated statisticians from national Government, local government, the public sector, public bodies, et cetera, who were really interested in the issues. I am particularly interested to see the emulation of Shetland in Argyll and Bute—the cross-pollination in that, with people looking at the data and asking questions such as, "What could we do to get that graph that is turning up all of a sudden?"

I thank David Whitton for keeping the discussion moving forward.

Minister, you indicated that the SSI is the general direction of travel. Would you care to share with us—today, if you can—why you have chosen to put these three agencies into the process first? Can you also tell us whether you will choose exactly the same route for dealing with others that have to go into the process?

The American term is market readiness. These organisations have done the work and are well prepared, and the statistics that they have pretty much meet the standards and look as though they will improve over the piece. These agencies are doing the work and producing solid data and they are ready for the stamp of approval.

Can you give us some idea of who will be coming along soon and whether this is something that you are responsible for overall? Will other ministers go to other committees? Will that be the route for progressing further movement?

I suspect that, given the fact that the chief statistician works under my portfolio, the responsibility will continue to be here. I am not going to anticipate the other agencies that are coming forward, but more will be encouraged to come forward and enter the process to get the cachet of official statistics wrapped round their data.

So, statistics is under the umbrella of the finance and sustainable growth portfolio. Irrespective of what part of government they come from, the statistics will come through this route.

Indeed, they will.

How many different departments might be under consideration?

That is an important statistic. I will consult and get back to you on that. [Interruption.] I am advised that the number is open ended at the moment and will be considerable. We will start with the major public bodies such as the Scottish funding council and local government and move beyond that. Shetland Council will be at the top of the list at an early stage.

That is an admirable idea. Thank you for that explanation, minister.

Are colleagues content to recommend that the draft Official Statistics (Scotland) Order 2008 be approved?

Motion agreed to.

That the Economy, Energy and Tourism Committee recommends that the draft Official Statistics (Scotland) Order 2008 be approved.

Unfortunately, we are not allowed to do what I hoped that we might be able to do with the first instrument. Because the minister moved the motion on it earlier, we must decide on it today; however, we have the minister's statement on the record that he will provide an explanation and answer the points that Gavin Brown has raised. We will have to make a decision on the order this afternoon, as the minister moved the motion on it.

The question is, that the committee recommends that the draft Renewables Obligation (Scotland) Amendment Order 2008 be approved. Are we agreed?

With the minister's assurance that we will get the information that is sought.

On the basis of today's evidence, I am not content to agree the motion; however, it must be a committee decision.

There will be a division.

For

Tavish Scott (Shetland) (LD)
Brian Adam (Aberdeen North) (SNP)
Christopher Harvie (Mid Scotland and Fife) (SNP)
Lewis Macdonald (Aberdeen Central) (Lab)
Dave Thompson (Highlands and Islands) (SNP)
David Whitton (Strathkelvin and Bearsden) (Lab)

Against

Gavin Brown (Lothians) (Con)

The result of the division is: For 6, Against 1, Abstentions 0.

Motion agreed to.

That the Economy, Energy and Tourism Committee recommends that the draft Renewables Obligation (Scotland) Amendment Order 2008 be approved.

We will await Mr Mather's answers to the questions that Gavin Brown raised.

Meeting closed at 12:55.