Enterprise and Culture Committee, 21 Jun 2005

Meeting date: Tuesday, June 21, 2005

Official Report 242KB pdf

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Subordinate Legislation

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Electricity (Applications for Consent) Amendment (Scotland) Regulations 2005 <br />(SSI 2005/295)

Agenda item 3 is consideration of subordinate legislation. We are joined by Neal Rafferty and James Thomson from the Scottish Executive.

We want to highlight a problem with the regulations, but first I will let Neal Rafferty introduce them and make some comments.

The regulations amend the fees that are payable for applications to construct generating stations in Scotland. Over a year ago, a commitment was given by the then Deputy Minister for Enterprise and Lifelong Learning, Lewis Macdonald, to increase the fees that are payable for such applications in order to ease the pressure on local authorities. The number of applications has increased remarkably since the Electricity (Applications for Consent) Regulations 1990 (SI 1990/455) were made, and a review was overdue. We consulted on the matter relatively recently and as a result we made a few small changes to what we had originally proposed, although I understand that the committee wishes to raise another question this afternoon.

A number of members have highlighted a problem in relation to hydro power in the Highlands and Islands. We want to discuss that problem with you and get some kind of commitment from the Executive. Is that the point that you want to raise, Chris, or is your point on a different matter?

My point is not specifically about the Highlands and Islands.

No, but it is about hydro power.

Yes. It is about small-scale generation of hydro and marine power.

Three members want to raise points, so I will take them in the order in which they put up their hands: Chris Ballance, Christine May then Murdo Fraser

What is your thinking regarding small-scale generation schemes, particularly hydro but also new marines? How do you react to the proposal that there should be one band for developments of between 1MW and 10MW and another band for developments of between 10MW and 50MW?

I am grateful for the advance notice of the point that was to be raised today. That gave me a chance to look into it.

As I said, a few changes were made when the consultation was completed. The issue that you raise was mentioned by a minority of respondents to the consultation. First, it is worth while making the point that the costs and complexities of dealing with an application are not necessarily a function of its size. That has been shown in the past—for example, with the developments at Shieldaig and Cuileig in the Highlands. In particular, the Shieldaig application ran for many years and it was difficult and costly to deal with. The fact that a development is on the small side does not mean that it will not create issues and attract high costs.

Secondly, the higher fees that will now be paid by all applicants will produce a benefit for the applicant and for everyone else involved. The system will be speeded up; applications will be dealt with more efficiently and speedily by local authorities and, by extension, by the Scottish Executive. There will be a return on the higher costs that people will be asked to pay.

The third point worth making is that the new fee, which as you have said applies to small hydro developments as well as developments much further along the spectrum, is far closer to the fees that are already paid for applications under the Town and Country Planning (Scotland) Act 1997. At the moment, a hydro scheme that is below 1MW can pay up to £13,000. We are proposing that the cap of £15,000 would apply to hydro schemes in excess of 1MW. The two are commensurate.

Although that specific point was well made, we felt that the evidence was not sufficient to suggest that such a step would debar certain applications and did not feel that the case for the change was strong enough. However, if practical experience shows that there is an issue to address, we will certainly want to review the matter as quickly as we can. We are aware of the views of the industry and of industry stakeholders who are affected by these changes, because we are—and will remain—in very close touch with them.

Do you accept that the Executive has a plan to encourage renewable energy schemes, particularly those on a small scale?

Absolutely.

I presume that you also accept that financial returns from small-scale renewable energy schemes are much smaller than those from larger-scale schemes.

That is a logical conclusion.

As a result, increasing the fee by 300 per cent will impact disproportionately on exactly the type of small-scale renewable energy project that the Executive is said to be trying to encourage. Does this matter not need to be reviewed as soon as possible?

I am probably going to repeat myself here. The fees for those applications will rise, but only to bring them into line with the fees that people already pay to local authorities for applications for schemes that are smaller than those that would come before the Scottish Executive and that would fall within the scope of the regulations. Moreover, as a result of these increased fees, there will be a return to large and small developers.

We are not convinced that increasing the fees will create obstacles for small-scale projects, but if such an obstacle becomes evident we are absolutely committed to reassessing the situation and to making the changes that would remove it.

And you accept that renewable energy companies feel that increasing the fees is a detrimental step that will create obstacles.

We know that the Scottish Renewables Forum has taken that view and, as I said, a minority of respondents to the consultation made the same point. However, we must wait until we have had some practical experience of the regime before we accept that that is the case.

By what date will you have that experience?

It is difficult to say at the moment. The new regulations must be given a few months to bed in but, in any case, I cannot possibly set out a timescale at the end of which we will be ready to look again at the matter or to make changes. However, I can say that we will stay in close touch with all the industry stakeholders who have raised the matter with us. If it becomes clear that the increase is acting as a barrier to progressing applications, we will want to do something about the situation.

But you will review the situation—

We will review the situation in the light of practical experience.

Within the coming 12 months at the most?

That sounds like a reasonable estimate.

In your initial response to the question, you suggested that you had evidence that some small-scale hydro projects could be as costly to the planning and regulatory framework as many larger projects. Do you have any idea of the proportion that you are talking about?

No, I am afraid not. What I meant in my initial response was that, during my time in the energy and telecommunications division, there have been small-scale projects such as the Shieldaig hydro scheme proposal, which ran on for many years, raised a wide range of deeply complicated and troubling issues and then was withdrawn and retabled. It put the local authority in question and the Executive to a great deal of expense and highlights the fact that the complexity of such developments is not always a function of their size. I am not necessarily able to produce compelling figures to back up that assertion, but practical experience shows that that can be the case.

Thank you for that, because I think—and this is directed more at my committee colleagues—that we would not want a situation to arise in which a small-scale project with relatively modest costs and a relatively uncomplicated application was faced with a fee that was significantly higher than the current fee, which might make that small-scale scheme non-viable.

To add to what Christine May said, I appreciate that there will be situations in which the cost of dealing with a particular application will be in excess of the fee. However, the Executive is committed to pursuing renewable energy, and there has to be a balance between that public policy objective on the one hand, and the cost to public bodies on the other. I spoke to a developer of hydro power today who is well known to me, who said that he felt that the tripling of the cost for small-scale hydro schemes—the sort of schemes that he is dealing with—would make some of them unviable. We should ask the Executive to reconsider the fee level that applies to schemes under 10MW. I fear that the introduction of those fees will mean that those schemes are simply not viable and that it will be a bar on their development.

The instrument is subject to the negative procedure, so we are invited to consider the issues and report back to the Parliament. There is sufficient concern about the regulations that we should express that concern to the Executive, and ask it to consider—sooner than 12 months, because that might be after the horse has bolted—revising the proposals and coming back with replacement regulations. That would be the sensible approach, rather than to risk damaging some potential projects.

I entirely agree. It would be detrimental to decline to accept the regulations as they stand, although they have flaws. Nevertheless, an issue that was raised in the renewable energy inquiry was the great difficulty that was caused to local authorities by dealing with a lot of the hard work with nothing back. We should accept the regulations as they stand, but draw clear attention to the flaw. I have one other suggestion. I wonder whether we could call for comments from the industry to the committee, rather than to the Executive.

I am happy to do that. However, the regulations come into force on 1 July, so we need to make those comments now. I suggest that we invite the representatives from the Scottish Executive back after the recess to tell us the results of their reconsideration. At that stage, we could take up Christine May's suggestion and decide whether we need to invite other people from the industry.

Thank you, convener. Are you suggesting that the regulations should be annulled?

No. It would be extremely difficult for us to annul the regulations. I suggest that we make the comments that we have agreed, and that we ask the Executive to consider the points made and report back to us at the end of the summer recess. In the light of that report back, we can decide what further action—if any—the committee would want to take. Is that agreed?

Members indicated agreement.

Adam Smith College Fife (Establishment) Order 2005 (SSI/2005/298)

The order relates to the establishment of the Adam Smith College as a result of college mergers. I take it that everybody is happy with the order and that there are no particular issues that we need to raise.

Members indicated agreement.

The Falkirk College of Further and Higher Education (Change of Name) Order 2005 (SSI/2005/317)

Similarly, the next order relates to Falkirk College and its merger with Clackmannan College. I take it that everybody is happy with that.

Members indicated agreement.

We should thank Mr Reid from the Executive, who sat through the whole meeting in case he was needed for that item.

Thank you. It is murder sitting through these meetings. [Laughter.]

That will go down well in the Official Report.

Absolutely. It is near the end of term—we can get away with comments like that.