Marine Renewables (Pentland Firth and Orkney Waters)
The final item of business is a members’ business debate on motion S4M-05150, in the name of Rob Gibson, on marine energy constraints in the Pentland Firth and Orkney waters. The debate will be concluded without any question being put.
Motion debated,
That the Parliament notes with alarm the recent report from Scottish Renewables suggesting that the costs of grid connection and transmission for the delivery of electricity produced from marine renewables in the Marine Energy Park area, which comprises of sites in the Pentland Firth and Orkney waters, are set to soar; understands that this follows new charges from Ofgem that will result in a transmission regime that will increase costs by 91%; notes that the estimates of the projected annual connection charges for the Pentland Firth and Orkney Waters area have increased from £56 million in 2011 to £107 million by 2020; understands that this contrasts with an annual subsidy of some £2 million that would have been available had these been commissioned in the waters off south-west England; believes that clean green energy brings massive potential for renewables and that the sector is already delivering jobs and investment in the Pentland Firth area, and expresses strong concern that, because of a UK regulatory system that it considers unfit for purpose, there is continued discrimination against the marine renewables sector in Scotland that could hinder the sector’s development.
17:03
I thank members who signed the motion in order that the debate could take place.
A report from Scottish Renewables in September revealed that the costs of grid connection and transmission for delivering electricity that is produced from marine renewables in the marine energy park area, which comprises sites in the Pentland Firth and Orkney waters, could soar due to new charges from the Office of the Gas and Electricity Markets, under a transmission regime that has yet to be finalised.
The projected annual connection charges for the area seem likely to increase from £56 million per year to a possible £107 million in 2020. I have strong concerns that the continued discrimination against Scottish marine renewables could blight their development in a United Kingdom regulatory system that is unfit for purpose.
The UK regulator, Ofgem, stresses that an improved ICPR—investment cost-related pricing scheme—should reflect the costs that are imposed when transmitting electricity from a location where it is produced to where it is consumed, because the cost of building and maintaining the network must be met by the generator or the consumer.
Ofgem’s project transmit sets not charges but the methodology. However, I take issue with its approach on several grounds. It could lead to the Pentland Firth inner sound MeyGen tidal project, on the coast of Caithness in my constituency, which is aimed at producing 500MW, bearing an estimated £8.3 million annual hook-up charge in 2020. Another local charge, in addition to the main grid charge, would affect the Orkney waters schemes across the Pentland Firth.
That contrasts with the annual subsidy of about £2 million-plus that would apply if such projects were commissioned in the waters off south-west England, as the long-mooted Severn barrage would be. That is because Ofgem favours, through the locational charges, schemes that are closer to consumers.
Nuclear-generated power is imported from France to southern England via the interconnector at no charge. No locational charge is added in the French electricity system so, wherever electricity is produced in France, it costs the same price to export.
Ofgem has not proposed a fundamental change from the Thatcherite model that favoured large thermal power stations that are close to large populations. It is clear that it does not have the whole UK in mind. That approach excludes the areas with the most wind, the strongest tides and the biggest waves—the north of Scotland and our northern isles and Western Isles.
The signals from the UK Government are not aimed at recognising the north’s infinite clean energy potential. It is significant that David Cameron vetoed the appointment of David Kennedy—the UK Committee on Climate Change’s chief executive—as permanent secretary at the Department of Energy and Climate Change because David Kennedy had questioned the Chancellor of the Exchequer’s dash for gas and said that green energy would be cheaper over time.
The Financial Times of 13 December quoted David Kennedy as saying that UK Committee on Climate Change’s research revealed that household bills could be as much as £600 higher per annum in coming decades. He said that promoting the use of green energy
“is like taking out an insurance policy—you pay £100 now to avoid having to pay £600 later”.
Prime Minister David Cameron welcomed the announcement in November of incoming renewables jobs with Areva as “brilliant for Scotland”. In The Press and Journal of 20 November, he said:
“I am determined that Britain competes and thrives in the global race and this shows that the UK remains an attractive place for foreign investment.
Growth of the renewable energy sector”
is “good for our economy”.
That stands in contrast to his rejection of the UK Committee on Climate Change’s concerns that the dash for gas takes us in the wrong direction.
The bottom line is that the UK Government has not sent Ofgem strong signals to set up a fair system of transmission charging—hence the need for two committees to be set up to work on ways to cut costs for far-north developers. Last July, an industry-led CUSC—connection and use of system code—group was set up to seek a formula to stabilise charges at current levels on the north mainland and to maintain them at about £20 per kilowatt in 2020 after £10 billion of grid investment, while securing the maximum possible cost-reflective reductions for the islands.
Although some of the islands will immediately become part of the main interconnected transmission system, they were deliberately excluded from the volume-based charge proposal that Ofgem made. We await the solution, which might cut access costs by 10 per cent. However, that is not enough to make some schemes economically viable.
Will the member give way?
I do not have much time, so the intervention had better be quick.
Rob Gibson mentioned the CUSC panel, which is not due to present its findings to Ofgem until spring 2013. How can he be conclusive about costs when they have not been considered and the findings have not been produced?
I will come to the fact that two reports are to be produced in the spring. It is clear from the evidence that the industry influence from large producers in the south is not prepared to budge in the direction that we require to help the north.
The intergovernmental island grid group was set up by Ed Davey and has met once. It was established by DECC—its renewables deployment team rather than its regulatory arm—with membership that includes Highlands and Islands Enterprise, the island councils, the Scottish Government, SSE and National Grid. Ofgem is also represented as an observer. The group will look at the needs case for an additional policy fix and options for implementing that fix. Island renewables obligation certificates, a cap under section 185 of the Energy Act 2004 and finance-related options such as European Investment Bank financing of island links are in the group’s remit.
Another non-starter was proposed by Brian Wilson, a former UK energy minister. He suggested in the December edition of The Press and Journal energy section that there is
“a clear solution to the impasse—which would be for the Scottish Government, with DECC agreement, to set a new “offshore islands” ROC band, at half-way between onshore and offshore levels.”
Significantly, Wilson goes on:
“That would both fund the cable”
from the Western Isles
“and avoid the need to challenge Ofgem’s orthodoxy on locational charging.”
I must point out that ROCs were created to support technical project development and not to set fair access and transmission charges for the grid.
If we are not to be “Swimming against the tide”, as a Scottish Renewables report in September put it, then a UK and then a European grid connection and use policy is essential. Meanwhile, many projects await an end to the current wrangling and want to end the uncertainty and have a fair access agreement, which cannot happen until the committees report in the spring.
Ofgem suggests that a socialised model of charging for grid access could increase bills for Scottish consumers by £7 billion, or around £25 to £30 per year for consumers. However, surely the battle against climate change and the need to combat fuel poverty will not be met by short-term fixes. Economically viable wind, wave and tidal power will cut fuel poverty, if they can play their part.
The Pentland Firth and Orkney waters scheme awaits the green light to deliver Scotland’s clean power revolution and contribute to our own and European electricity security.
I call the other constituency member, Liam McArthur, to be followed by Mike MacKenzie.
17:11
I congratulate Rob Gibson on securing a debate on an issue that, as he said, could have a bearing on whether we achieve our ambitions to be a global powerhouse in marine renewables. It would be remiss of me not to point out, particularly with Orkney Islands Council represented in the public gallery this evening, that the islands that I represent are at the heart of efforts to realise that ambition but stand to lose out on significant job and wealth-creation opportunities if the issues that the debate highlights are not addressed urgently.
It is perhaps just as well that we are not required to vote on the motion. There is a great deal of agreement between Rob Gibson and me on the issue, but the wording of the motion causes me some difficulty. However inadvertent it may be—although I do not believe that it is—creating the impression that the current regulatory regime governing transmission charging is somehow anti-Scottish is a little disingenuous. Whatever its failings, of which there are many, there is a logic behind the current system of charging. The problem is that that logic no longer holds for what we wish to achieve in decarbonising the economy and how we produce energy.
It is right to characterise the locational system of charging that seeks to incentivise large-scale energy production close to cities and areas of major demand as outdated and no longer fit for purpose. However, it is wrong to imply that it is somehow a ploy to deny Scotland a chance to fulfil its renewables potential. Indeed, as I am sure Paul Wheelhouse’s colleague Fergus Ewing would be the first to acknowledge, there is a recognition among his counterparts at Westminster of the problems that are created by the current charging regime and, more important, a willingness to make changes.
What those changes should be and how they are to be achieved are, inevitably, trickier issues to resolve. However, I think that the case that has been marshalled in Scotland, drawing together a wide range of interests and expertise, has increased substantially the likelihood of a successful outcome that reflects the realities of where our best renewable resources are allocated and which enables us to harness those resources in a competitive and cost-efficient manner.
I acknowledge the work that has been done on the issue by Fergus Ewing personally. We may not see eye to eye on many things, but I do not doubt Mr Ewing’s commitment to securing a better deal for the islands on this issue. His willingness to work constructively with my colleague Ed Davey at DECC and to use the broad coalition of support in Scotland to make the case for change has been impressive, and I am grateful to him for that. In addition, I am still optimistic that our collective efforts, including those of the three island councils, will prove successful. That optimism stems in part from the willingness of those in the UK coalition Government, particularly my colleagues Chris Huhne and Ed Davey, to make strides in the right direction. Nevertheless, I recognise, as Rob Gibson intimated, that there is resistance from many quarters, not least parts of Ofgem and generators who benefit quite well from the current set-up.
As well as reviewing Ofgem’s remit, UK ministers have taken forward project transmit, which may not have delivered the results for which many of us hoped but which has provided an opportunity to develop and articulate the argument on why charges for renewables development in the Pentland Firth and Orkney waters need to be brought more in line with those for equivalents on the mainland.
The Scottish Renewables report “Swimming Against the Tide: the impact of TN UoS charging on marine energy development in Scotland” vividly highlighted the cost comparisons in relation to grid charges and the dramatic effect that charging island-based developers for local works, including undersea cabling, will have. However efficient and productive wave and tidal devices become in the energetic waters around Rob Gibson’s constituency and mine, it is hard to see how they can be competitive if they are faced with an increase in charges of more than 120 per cent by 2020, as Scottish Renewables estimates they will be.
Such disparity places at serious risk the ability of our islands, including Orkney, to fulfil their potential, thereby undermining Scotland and the UK’s ability to deliver on climate change and renewables targets. Given the global lead in wave and tidal energy that we currently enjoy, there is a risk of scandalously wasting an opportunity to create thousands of jobs, attract millions of pounds of investment and develop a wide range of skills and expertise that would put us in the box seat in building the sector internationally.
The sector’s potential was evident last week when Orkney-based Scotrenewables Tidal Power announced a further £7.6 million of private investment in its tidal energy device. It was particularly pleasing to see a company such as ABB Technology Ventures coming on board with Fred Olsen and Total, which demonstrates the confidence and commitment of some of the major industrial players in the future of wave and tidal energy.
The announcement reinforced the need to get the high cost of charging for island-based developments sorted, soon. As developments progress towards commercial deployment, investors will want to take decisions about where they can get the best return. The window of opportunity for taking action is closing.
What action should be taken? There seem to be various options. Like Rob Gibson, I hold out little hope of project transmit and the CUSC group delivering anything more than marginal improvement on the current position. Another option would be to use enhanced ROCs for the islands to compensate for the additional burden of charges. Such an approach has the benefit of being relatively simple, which is no mean feat in the area of policy that we are considering, and might enjoy support from Mr Ewing as well as from a number of developers. I have always felt that the transmission charging problem would be better dealt with through the charging regime but, given what is at stake and the timeframe in which we are operating, a solution that works is better than no solution at all.
I look forward to hearing about the work of the Scottish island renewables steering group, which Ed Davey has set up. I thank Rob Gibson and congratulate him again on securing what I hope will be a useful debate. I look forward to hearing what the minister has to say and, more important, to 2013 and a resolution to a long-standing issue.
17:17
I congratulate Rob Gibson on securing this debate on an issue that is important not just for the Pentland Firth and Scotland’s islands but for all Scotland and indeed for the UK. It is estimated that the Pentland Firth accounts for about 50 per cent of the UK’s tidal resource, and tidal energy is the most reliable of renewable energy resources.
Perhaps the most useful Christmas present that my wife buys me every year is a set of tide tables. I am an islander, who begins his journey to the Parliament in a rowing boat, so knowing the state of the tide is important to me. It is fortunate that tides are predictable. Predictions can be made more than a year in advance, with accuracy to within a few minutes for any given location.
It is the predictable and unceasing nature of our tides that makes tidal energy so vital, and Scotland is leading the world in tidal and wave energy research at the European Marine Energy Centre in Orkney. However, the biggest impediment to bringing devices into commercial production is the disincentive to invest that is presented by the imposition of unfair transmission charges.
Paragraph 62 of European Union directive 2009/28/EC, on the promotion of the use of energy from renewable sources, says:
“The costs of connecting new producers of electricity and gas from renewable energy sources to the electricity and gas grids should be objective, transparent and non-discriminatory and due account should be taken of the benefit that embedded producers of electricity from renewable energy sources and local producers of gas from renewable sources bring to the electricity and gas grids.”
The directive continues, in paragraph 63:
“Electricity producers who want to exploit the potential of energy from renewable sources in the peripheral regions of the Community, in particular in island regions and regions of low population density, should, whenever feasible, benefit from reasonable connection costs in order to ensure that they are not unfairly disadvantaged in comparison with producers situated in more central, more industrialised and more densely populated areas.”
Paragraph 7 of article 16—I thank you for your indulgence, Presiding Officer, but this is important—says:
“Member States shall ensure that the charging of transmission and distribution tariffs does not discriminate against electricity from renewable energy sources, including in particular electricity from renewable energy sources produced in peripheral regions, such as island regions, and in regions of low population density. Member States shall ensure that the charging of transmission and distribution tariffs does not discriminate against gas from renewable energy sources.”
That all seems perfectly clear to me, and the EU position seems to be unequivocal.
I wrote to Ed Davey about the issue on 9 April last year. He eventually replied to me on 3 August. That was despite the reassurance that was given to me when he appeared before the Economy, Energy and Tourism Committee in June that he would deal with the matter forthwith. Perhaps I am slightly cynical, but he eventually replied a week after I wrote to his boss, David Cameron, to complain about his failure to reply.
Mr Davey said that Ofgem is comfortable that there is compliance with that directive, but it seems to me that the insistence on punitive transmission charges for Scotland’s islands is in complete contravention of both the letter and the spirit of the directive. Just last week, we heard Ofgem warning Mr Davey that the lights might go out in England as early as 2015. Neither Ofgem nor Mr Davey has much to be comfortable about. In reviewing the daft transmission charges, perhaps they will take into account the fact that, currently, they are denying not only Scotland’s islands but the whole of the UK the benefit of Scotland’s renewable energy.
17:22
I, too, congratulate Rob Gibson on securing the debate. The issue is very worrying not only for the Pentland Firth but for all our islands that have the potential to develop renewables commercially.
Historically, grid charging has been set to reflect the price of transmission. The further the transmission, the greater the charge has been. That encouraged traditional methods of generation to be built as close as possible to points of need, and that made sense because power is lost the further it is transmitted. That has meant that most of our larger power stations have been close to population centres, but it has become recognised that that policy disadvantages renewable energy. There is some wind generation close to our cities, but the vast majority of it tends to be in our more remote rural areas, which are exposed to high wind speeds. The same will be the case for wave and tidal energy. The Pentland Firth—our marine energy park—has the potential to generate huge amounts of energy, but transmission charges might hamper development.
Project transmit was set up and has sought to deal with the issue of renewables, and it has been widely welcomed as a big step forward for mainland areas, but the charges that are being proposed would disadvantage our island communities. For example, charges on Orkney would be much greater than those in Caithness because a subsea connection will require to be built, and the cost of that cable will become part of the transmission charge. The unintended consequence of that is that Caithness could become overdeveloped when power is taken back to the shore. By contrast, Orkney, which is the home of wave and tidal power, will lose out on many of those developments because it will be much cheaper to transmit power from Caithness than from Orkney. As we harness those sources of power, we cannot choose where the natural resources are. Therefore, we need to ensure that such generation is not disadvantaged by grid access charges.
Project transmit dealt with many of the anomalies of the old system. It took into account, for example, the intermittency of wind power, and that change was beneficial for that type of generation. However, it failed to find a solution for our islands. Orkney, Shetland and the Western Isles are potentially a rich source of renewable energy, if it is affordable to export that energy from the islands. That failure is equally worrying if we take into account the fact that some of our largest community-owned renewables companies are based on those islands, and the potential of renewable energy to kick-start the economies of some of our more remote and disadvantaged communities.
We urgently need a solution also because of the massive inflation in transmission cable prices. The cable costs have doubled in a very short space of time. In the Western Isles, Scottish Hydro Electric Transmission Ltd has had to revise its costs to such an extent that it needs to go back to the developers.
Does the member agree that the reason for the inflationary increases in cable costs has a lot to do with the prevarication in getting those cables in place and that, if that had been done two or three years ago, a lot of those costs could have been avoided?
I agree, which is why I was making the point that speed is of the essence. While SHETL goes back to the developers in the Western Isles to re-evaluate the current cost, those costs are rising in the background, which means that when the developers come back to SHETL, having completed the re-evaluation, they may have to go back again. That creates a vicious circle until the point is reached when it is no longer financially viable to run projects. I totally agree that there is a degree of urgency in that regard, and the situation is the same for the northern isles, so we need to speed things up.
I know that the Minister for Energy, Enterprise and Tourism is involved in discussions with the UK Government, and I believe that there is a will on the part of both Governments to find a solution to the problem. I look forward to receiving an update and perhaps an early resolution to the problem so that we can tap the energy sources that our islands provide.
17:27
I thank Rob Gibson for bringing to the chamber a debate on transmission charging for Orkney waters. As usual, I declare an interest as my son works in the renewables industry.
I also thank Mike MacKenzie for raising the same issue in relation to project transmit that I raised in the debate in April, which is the fact that the charging must be in accordance with the two EU directives on renewable energy and the internal market, both of which enshrine the principle of non-discrimination between mainland and islands. When we have accurate charges, those directives can and must be tested.
I regret that I cannot fully support Rob Gibson’s motion, especially as we are occasional travelling companions on the long journey north and south, and I hope that he will not hold it against me. I agree with one sentence of the motion, as I believe very much that
“clean green energy brings massive potential for renewables and that the sector is already delivering jobs and investment in the Pentland Firth area”.
Scottish Renewables is an industry body that claims to
“work with members to lead the debate”.
My view is that it should perhaps, for once, listen to its members and be better informed before making announcements. I am quite sure that the renewables industry wants accuracy from the organisation that represents it in the public and political domain. I say that on the basis that the claims in Rob Gibson’s motion are taken straight from the Scottish Renewables statement.
The motion
“notes with alarm ... the costs of grid connection and transmission ... are set to soar”
following
“new charges from Ofgem”.
Scottish Renewables should know that Ofgem does not set or approve the level of individual charges. It obviously does not know that, so it should perhaps listen and learn.
The announcement from Ofgem in May 2012
“does not equate to a formal decision that will result in changes to the current cost reflective method of calculating transmission charges.”
Will the member take an intervention?
No. Can I just get started?
As I said in the project transmit debate in April, the CUSC panel has been given strong direction on the issues to resolve—we are in the middle of this, not at the end of it—including a direction to address how links to the Scottish islands, which are currently at the proposal stage, will be treated in line with cost-effective and non-discriminatory principles. The tariff levels produced by Ofgem consultants in December 2011 were not a confirmation or even an indication of the actual tariff or charge level. Those can be provided only by National Grid Electricity Transmission plc. Ofgem has not received the industry’s proposals to develop—
Will the member take an intervention?
Please let me finish. I am the only one—apart from Rhoda Grant—who is bringing some facts into the debate.
Ofgem has not received the industry’s proposals to develop a new methodology; neither has it stated that an approved methodology will deliver a precise level of charge, according to the briefing paper that all MSPs received this week. The claims made by Scottish Renewables and repeated in the motion have no basis in fact. It would appear that the figures used by Scottish Renewables and cited again in the motion come from updated capital costs submitted by SHETL. However, those figures are not fully accurate, as Ofgem has not yet received the design and the cost of the proposed island link from SHETL. The word “estimate” is used in relation to the figures cited—it is a Scottish Renewables estimate and not a true figure. The true figures have not been produced by National Grid.
Can you draw to a close, please?
As I said, the CUSC panel is due to present its findings to Ofgem in the spring of 2013. It will then be for Ofgem to approve or reject the proposal. I regret very much that figures are being used that are estimates by Scottish Renewables—they are not accurate. I regret that because I have very serious concerns that those figures could scare investors from our islands with ill-informed comments and inaccurate statements.
I regret that you are out of time.
The industry is far too important to the economy to be misrepresented.
17:32
I hope that we will base our deliberations tonight on fact. Mary Scanlon has just asserted as a fact that the estimates are wrong. That is an interesting thing to say. I hope that she will compensate us if the figures are higher than the current estimates.
I represent an area of Scotland with significant energy interests, both thermal and renewable, and a planning application is in for a 6GW alternating current to direct current converter in my constituency as part of a new generation of electricity transmission. At higher amperages, direct current is a more effective way of transmitting electricity with lower losses than alternating current. In addition, it requires only a single cable instead of two, thus reducing the cable costs.
In my area in the north-east of Scotland, and elsewhere, we expect to have a role in the future of renewable energies in providing offshore engineers and servicing offshore facilities. We already have the experience of decades of oil extraction from the Scottish sector, and the decades to come of further oil exploration mean that, from the outset, an engineering infrastructure is available that offshore renewable energy businesses can exploit. That is a major leg-up for an infant industry, minimising some of the start-up costs. However, inappropriate transmission charges, which will hit the life of projects, could scupper all those advantages.
Liam McArthur says that there is a logic behind the existing charging system. The problem is not the logic; rather, it is the limitations in its application. The present system—that is the Ofgem system—which arithmetically and systematically determines the outputs depending on the inputs, is cost reflective but, as a cost-reflective system it fails, not because of the arithmetic, but rather because too many of the costs of energy production and transmission are excluded from the calculation. The carbon cost of thermally based generation is excluded, and that is one cost that will rise dramatically over the years to come.
It is simply perverse in an industry that makes long-term investments—typically a power station is 60 per cent of the way through its life span before it crosses into profit—that only short-term matters influence the calculations of the revenue costs that will make or break the calculation about whether projects go ahead.
Do not get me started on the underwriting of nuclear stations’ decommissioning—or, perhaps, even building—by Government. It is what is put into the calculations that makes the real difference. It is perfectly reasonable to consider cost-reflective approaches, although I would prefer the French approach, which is simply to have a level playing field. That is a perfectly sensible way to do things when we are talking about national infrastructures.
The bottom line is that we must have wider policy objectives that go beyond simply costing the network—we must look at the network in the context of the whole energy system and of social needs. If we do that, we can still have a logical system that is cost reflective. We can have a system that means that we get a square go at this new industry in the islands and the remote areas of Scotland that will be so important to future energy provision in Scotland and the British isles, and through substantial exports over the DC network that is being proposed and built all across Europe.
17:37
First, I thank Rob Gibson for securing this members’ business debate on what is such an important subject, and I thank members from across the chamber for the many thoughtful contributions. Nobody could leave here in any doubt about the exciting potential of renewables in our islands and, indeed, the importance of the issue to Scotland.
We have had a number of debates about transmission charging in the chamber in the past two years. I firmly believe that change is coming, but I also share the frustrations expressed today about the fact that the wheels of change are grinding particularly slowly. We need to see faster progress.
The energy industries of Scotland are something to be truly proud of, but members should not take that just from me:
“Scotland leads the world in energy. From wind, wave and tidal to the oil and gas industries, Scotland is seizing the opportunity its abundant resources have to offer.”
Who said that? It was none other than Ed Davey, Secretary of State for Energy and Climate Change, on 9 December this year.
It is a shame then that Mr Davey’s coalition Government presides over a charging scheme that, as we have heard, punishes most those areas where Europe’s greatest renewable energy resources lie. Those are the areas in which the most dynamic efforts to innovate in marine renewable energy are being made, and Orkney is a classic example of that. Clearly, the Pentland Firth—which is where Rob Gibson’s interest lies—has huge potential to power not only Scotland but Europe, as Stewart Stevenson has said.
Efforts across the world are being made to innovate in marine renewable energy and those innovations are happening in Scotland right now. I should perhaps not be too hard on Mr Davey. As Fergus Ewing said, he has helped to establish an intergovernmental group on islands charging in which Highlands and Islands Enterprise and the island councils have key roles to play. That group will not only examine the impact that transmission charges have on the business case for renewables in our island groups but—I think that Mary Scanlon was alluding to this—look to identify potential solutions, not all of which may lie within the narrow prism of transmission charging.
The Scottish Government, Highlands and Islands Enterprise and the island councils have been involved in discussions in putting the case forward for our islands. The group will look at the other issues and, in particular, the increased installation costs that we know many rural communities face in order to implement their projects.
I thank the minister very much for his positive remarks. Can he confirm that the group that involves Scottish and UK ministers, HIE and so on will not be able to form any opinion until the CUSC panel has produced its findings in spring next year?
That is my understanding of the situation, although the specific issue is not within my portfolio.
We should not forget that for some time the First Minister has been most vocal in demanding a more equitable system of charging. Project transmit—Ofgem’s review of transmission charging—might never have come about had it not been for the First Minister’s consistent challenging of a system that suits outmoded ideas about the future energy mix and which benefits thermal generators in the south of England, in particular.
When the status quo for transmission charging was ruled out by Ofgem at the conclusion of project transmit in May, I believe that we in Scotland were entitled to a degree of satisfaction. Unfortunately, however, that satisfaction was tempered by what was not contained in the direction from Ofgem. A move away from the charging status quo was welcome to many generators on the Scottish mainland, but project transmit failed to deliver a meaningful conclusion for the islands. That has merely prolonged the uncertainties that have existed for far too long and left our island communities—including many of our crofting communities in places such as Orkney, which I know are keen to explore renewables—with a real sense that they are in danger of being left behind.
How can that possibly be the right approach when it is estimated that we have 25 per cent of Europe’s offshore wind and wave potential and 10 per cent of its tidal potential? I take to heart Mike MacKenzie’s point about the Pentland Firth having a huge share of the UK’s tidal resource. The formation of the intergovernmental group by Fergus Ewing and Ed Davey represents recognition that the current charging regime is not the right approach. More must be done, and it must be done quickly, coherently and positively.
We do not rule out any reasonable solution. Indeed, the Scottish Government has sought to use its currently limited powers to seek a solution. By varying the support that is available under the renewables obligation mechanism, we have been able to provide levels of support to renewables generators that are different from those that are provided in the rest of the UK in order to reflect our strategic assessment of the required regime.
I am grateful to the minister for giving way, although I think that some of his comments about Ed Davey have been less than charitable.
Has the Government considered EU regulations and whether a legal challenge can be mounted? I presume that that issue has been looked at and that either no grounds for a challenge have been found or there is something that could be prosecuted.
I have a high regard for Ed Davey as an individual, but we must speak up when we feel that the UK Government—not necessarily Ed Davey himself—has not been responsive enough to our requests.
I will get back to Mr McArthur on the point that he has just made, but I am conscious of time and I need to press on.
We have exercised our powers carefully, as has been demonstrated in recent times by our introduction of higher levels of support for wave and tidal power. We understand the transformational potential of those technologies, which relates not just to the energy that they will produce but to the opportunities that they offer in bringing together skills from our existing offshore energy industries and our onshore engineering sector. By harnessing those skills, we will lead the development of new and revolutionary technologies.
To reap the economic benefits, we are committed to developing technologies, not only through a sensible application of renewables obligation certificates but through the broader range of actions that underpins this developing sector. That is why Scottish Enterprise established the £70 million national renewables infrastructure fund for developing facilities in support of the offshore renewables supply chain. It is focused on securing vital elements of the offshore wind supply chain, such as turbine and jacket manufacturing.
In the Highlands and Islands, public and private sector investment exceeding £70 million is already under way or has been committed to a range of port developments, including those at Nigg, Scrabster, Hatston and Lyness, to further support offshore renewables.
As I heard in Doha, giving the right signals and demonstrating political consistency and leadership has been a critical factor in many companies from around the world coming to Scotland and seeing it as the location in which to develop energy technologies for the 21st century.
As regards the use of section 185 of the Energy Act 2004, we remain to be fully convinced that, as it currently stands, it can bring the certainty that we and marine energy developers seek. The fact that the powers are short term and partial is not ideal in the context of the nascent technologies that are currently being tested around our coasts. Revising the section 185 power to make it effective will form part of our discussions during the passage of the new electricity legislation. The Scottish Government recognises that Ofgem has yet to conclude its deliberations on the charging regime, as Mary Scanlon said, and that it has a most important role to play in protecting consumer interests.
Investment in low-carbon technologies also makes economic sense when it is set against future cost volatility. Only last week, the UK Committee on Climate Change demonstrated that between 2020 and 2030 annual household energy bills would increase by only around £25 if the UK power sector largely decarbonised. In contrast, a trajectory of rising carbon and wholesale gas prices, which the coalition Government might lock us into in a dash for gas, would increase those same bills by £120 in the same period—an almost fivefold increase for consumers.
High transmission charges across Scotland, but in particular in the islands, are a relic of the old energy world and outmoded economic thinking. The real world is one in which vast renewable resources occur at the periphery of our country. An enormous opportunity is within our grasp: those resources could help the whole of Europe to meet its electricity needs.
Such resources can bring economic opportunity and innovation to rural communities and provide plentiful energy while minimising the exposure to unpredictable shifts in global energy costs that we would see if we were to remain wedded to carbon-intensive electricity generation. All we need now is a charging regime that recognises the geographic reality. The Scottish Government—working with island councils, HIE and indeed DECC—will continue to press for that now and in the future.
I congratulate Rob Gibson once again and thank him for giving such an important subject an airing in the chamber. Let us all hope that London is listening.
Meeting closed at 17:46.