COMMITTEE FOR AGRICULTURE AND RURAL DEVELOPMENT

OFFICIAL REPORT

(Hansard)

Inquiry into Renewable Energy and Alternative Land Use

22 May 2008

Members present for all or part of the proceedings:

Dr William McCrea (Chairperson)
Mr P J Bradley
Mr Allan Bresland
Mr Thomas Burns
Mr Willie Clarke
Mr William Irwin
Mr George Savage

Witnesses:

Mrs Olivia Martin )
Mr David Sterling ) Department of Enterprise, Trade and Investment
Mrs Barbara Swann )

The Chairperson (Dr W McCrea):

It is nice to welcome David Sterling, Olivia Martin and Barbara Swann this morning; we appreciate your presence and look forward to hearing what you have to say. You will be allowed to make a statement, after which we will ask questions — which are never too hard, so you need not worry.

Mr David Sterling (Department of Enterprise, Trade and Investment):

We are pleased to have this opportunity to set out what DETI does and to contribute our ideas to your work. Our discussion should take about 15 or 20 minutes.

I do not wish to sound as though I am getting my excuses in early, but I should say that I have only been with the Department for a couple of months, and I have learned quickly that energy is an extremely complex topic. Therefore, I will be relying heavily on Mrs Martin and Mrs Swann concerning matters of detail.

The Chairperson:

You are in the post and, therefore, you must take the heat.

Mr Sterling:

Absolutely.

By way of input to your study, the Department has provided the Committee with a paper, and we will touch on some of the issues that are raised in that. Energy is a transferred matter about which the Executive are free to set policy. The principal objective, for the Department and for the Utility Regulator, is to protect the consumer. DETI’s role is to develop and maintain a policy and legislative framework that is designed to protect all consumers.

A broad policy on energy was set out and framed in the strategic energy framework for Northern Ireland, which was published in June 2004. The framework document states that:

“The primary objective is: to achieve a competitive, sustainable, reliable energy market, at the minimum cost necessary in an all-island, UK and European context.”

Flowing from that are four specific goals that inform what we do:

“reduce energy costs relative to other UK/EU regions; build competitive energy markets; protect our future by enhancing the sustainability of our energy supply and consumption; and maintain the reliability of energy supplies.”

We promote a framework that keeps costs low, ensures that reliable and dependable energy supplies are provided, and balances competing goals.

Since that document was published we have made, what we regard as, significant progress. One of the highlights was the creation of the single electricity market (SEM) on 1 November 2007. Since then, £1·3 billion of wholesale electricity has been traded through the SEM. The retail and wholesale markets have been fully open since then.

Considerable progress has been made on alternatives to coal. Phoenix Natural Gas now has 113,000 customers, largely in the greater Belfast area, and Firmus Energy has around 3,000 customers in the north-west, after securing a contract to serve that region. The use of natural gas for home heating makes significant contributions to the reduction of carbon emissions. In that respect, we should not underestimate the impact of natural gas.

Progress on renewable energy has been made on several fronts. The Northern Ireland renewables obligation (NIRO) has been introduced; Action Renewables has delivered a programme of work; and the environment and renewable energy fund, which plans to invest in excess of £50 million over a period of years, has been established.

By 2012, we want 12% of Northern Ireland’s electricity to be produced from renewable sources, of which 15% should be from non-wind sources. At present, around 5% of electricity is produced from renewable sources. We have some way to go, but we are confident that we can achieve that target through existing installations and plans that are with the Planning Service.

In recent years, funding for energy efficiency has been increased. One major, topical concern is the cost of energy. Recently, it was announced that the cost of natural gas will increase, and it is anticipated that a similar announcement will be made shortly in relation to electricity costs. Before that, domestic electricity prices here had come closer in line with those in Great Britain. For some time, domestic customers here had been paying much more, but now we pay roughly the same as people in Great Britain. Businesses probably pay slightly more. I think that costs are lower in the Republic.

Our challenge is to address the global rise in energy prices and to focus on sustainability and the desire to reduce emissions. We must work with customers, people with environmental interests, and people in the energy industry to do that. There is still much to be done to achieve the four goals of reducing prices, having a competitive market, enhancing sustainability, and maintaining reliable supplies.

We are still heavily reliant on imports and fossil-based fuels. Some 99·9% of Northern Ireland’s primary energy requirement — electricity, heat and fuel — is imported and of fossil-based origin. Northern Ireland has 725,000 domestic electricity customers and 65,000 non-domestic or business electricity customers.

Northern Ireland has three main power stations: Coolkeeragh in the north-west is a combined-cycle gas turbine; Ballylumford is a combined-cycle gas turbine that uses a small amount of gas oil; and Kilroot is both coal- and heavy-oil-fired and uses a small amount of gas oil. The Moyle interconnector provides a means of trading electricity with Great Britain. There is also a North/South interconnector which allows for North/South electricity trade through the single electricity market. As you will be aware, there are plans for a second North/South interconnector, which would be situated further to the west. We also have a growing number of wind farms, which are mostly situated in the west where there is more wind.

The Department has a range of renewable energy policy drivers. Much of the Western World’s desire to increase sustainable energy and use renewable energy is based on reducing carbon emissions. We, too, consider that to be important, but using renewable energy in Northern Ireland will also lessen our dependency on imported fuels and provide a more secure supply for the future. Therefore, using renewable energy addresses two important policy goals.

A considerable number of European directives impinge on our work, such as the renewable energy directive of 2001, the biofuels directive of 2003, and the biomass action plan of 2005. EU directives on nitrates, water, waste management, and pollution prevention and control are also relevant.

The Northern Ireland renewables obligation is the main support mechanism to increase the use of electricity from renewable energy sources and legally obliges suppliers to source a specified, and increasing, amount of electricity from indigenous renewable sources, particularly wind. Mrs Swann will say more about that. We want to amend that obligation to reduce administration. There is also a renewable transport fuel obligation, which was introduced in April 2008 and provides an opportunity to increase the use of fuels from renewable sources for transport.

The strategic energy framework that I mentioned is due to be updated — we hope to have a new framework published for consultation later in 2008-09, which will address the issue of energy from renewable sources. That framework will be set the context of planned new EU targets on the use of such energy. The renewable energy directive proposes that 20% of EU energy — for electricity, heat and transport — will be generated from renewable sources by 2020. That will be exceedingly challenging because although we have made good progress on the use of renewable sources to generate electricity, there is much more to do on their use for heat and transport. The UK target in the draft renewable energy directive is 15% by 2020; at present, renewable sources generate 1·5% of our electricity, heat and transport — so there is considerable work to do.

We are consulting on the Northern Ireland renewable obligation with a view to refining it, making it more efficient and, perhaps, extending it to newer technologies that the Committee may be particularly interested in, such as dedicated regular biomass, dedicated biomass burning energy crops and anaerobic digestion. There is also a proposal for micro-generators to get double the renewable-obligation certificates.

We are also looking at ways of increasing the range of renewable technologies, which may benefit rural-based people who generate energy from renewable sources. Taking the lead in that area is the bioenergy interdepartmental group, which we head and which includes the Department of the Environment, the Department of Agriculture and Rural Development, the Department of Finance and Personnel, the Department for Regional Development and Invest NI. We are working with consultants with a view to producing proposals for bioenergy and hope that there will be a document for consultation later this year. At this point, I will hand over to Mrs Martin who will go into more detail and give the Committee a flavour of how our Department can contribute to the terms of reference of the Committee’s inquiry.

Mrs Olivia Martin (Department of Enterprise, Trade and Investment):

I will describe the range of technologies that represent opportunities for farmers and local communities to generate electricity and heat. Other people may have more to say on that subject later this afternoon.

As Mr Sterling mentioned, Northern Ireland’s main renewable source of energy is wind, which can provide farmers or landowners with a small opportunity to receive payment for the use of their land by the electricity generator. There is also scope for farmers to erect wind turbines for their own use, of which there have been a lot of examples. Technologies such as solar hot water panels and photovoltaic cells can provide a useful opportunity for farmers, and geothermal heat pumps can be a useful source of heat for small farms, as they can be for domestic consumers.

The area of most interest for rural communities in the development of renewable energy sources is bioenergy. Earlier, Geoff Smyth from the Carbon Trust mentioned the main technologies involved, such as energy crops, biomass, forestry and energy-from-waste, including anaerobic digestion. Those opportunities are being assessed through the bioenergy study, which we referred to in our written evidence and which Mr Sterling touched on just now. Mrs Swann will cover the study in more detail, but those are the main technologies involved.

I will now discuss the importance of electricity, heat and fuel to Government targets. We expect to meet the targets for electricity from renewable sources that have been set for 2012, and we are considering how to meet future renewable energy targets up to 2020, and the importance of electricity, heat and transport in our meeting those targets.

Mr Sterling mentioned the draft renewable energy directive, which, for the first time, includes targets for heat and transport. To date, the focus has been on generation of electricity from renewable sources, and at UK level it is around 5%, which is roughly the same level as that in Northern Ireland. However, as Geoff Smyth said, half of the final energy that is consumed in the UK is in the form of heat, and that produces around half of the UK’s carbon dioxide emissions. However, there is no real market for heat from renewable sources at the moment, and it is estimated that the level of heat produced from such sources is less than 1%. Northern Ireland presents good economic conditions for such heat due to a high proportion of the current heat demand that remains off the gas network. Therefore, we agree with the regulator’s comments that all Departments should examine the issue on a cross-cutting basis. The Department of Enterprise, Trade and Investment will definitely be seeking to address the issue in the coming years.

The UK renewable transport fuel figure is around 1% and the renewable transport fuel obligation will increase that figure. However, that matter is dealt with at national level. Therefore, DETI will be looking to the Department for Transport to cover the issue, because Northern Ireland imports all its fuel.

The UK renewable energy figure is currently around 1·5% — against a likely target of 15%. Some scenario planning has been carried out for meeting the target, and it has been suggested that electricity from renewable sources might need to increase to around 35% to 40% of consumption, if transport contributes around 10% and heat contributes around 10%. Alternatively, if transport remains at 10%, heat might increase to 15%, and renewable electricity would have to reach 30% to 35%. Those are merely scenarios at the moment, but they represent challenging figures, and any shortfalls in heat or fuel would need to be made up with an even higher contribution by electricity. As we have said, electricity from renewable sources is likely to be the primary focus because it will deliver most cheaply and easily towards meeting the targets. However, new work will need to be carried out on heat. As the EU directive sets national targets, a national response will be required. With that in mind, the Department for Business, Enterprise and Regulatory Reform in GB is drawing up a draft UK renewable energy strategy, setting out proposals on meeting those ambitious targets, and there will be consultation on the strategy this summer. We will have to ask the Executive for permission for that consultation to cover Northern Ireland because we believe that many of the issues are similar here.

With regard to Northern Ireland meeting the challenge of the EU directive, the Minister of Enterprise, Trade and Investment wrote to his Executive colleagues telling them about the directive and its implications and securing their engagement in cross-departmental work in advance of EU agreement. Implementation of the directive will facilitate the creation of a more enabling and supportive environment for renewable energy in Northern Ireland and Europe, and we are keen to secure cross-departmental support for the work. However, as Mr Sterling said, it is very much in our interests to produce as much indigenous energy from renewable sources as possible, regardless of whether the directive is adopted in its current form.

The Department of Enterprise, Trade and Investment, in co-operation with the Department of Communications, Energy and Natural Resources in the Republic, has undertaken a major study into the potential for the grid, which could be a barrier to further development to take on more electricity from renewable sources and accommodate different technologies. The results were published in January and confirmed that onshore wind was still the most economic and technically available source of renewable energy, and that the grid could accommodate up to 42% of electricity generated principally from wind.

However, in addition to the significant costs that would be required to reinforce the grid, it would also require long-term planning considerations in relation to grid strengthening, mainly in the west of Northern Ireland. Therefore, there are quite significant planning implications involved, and our Department will be working with the Department of the Environment on planning policy statement 18, which is on renewable energy, and on which consultation recently took place, to ensure that electricity from renewable energy sources can be accommodated. My colleague will now speak further about that.

Mrs Barbara Swann (Department of Enterprise, Trade and Investment):

The grid study has identified wind as the cheapest large-scale renewable source of electricity, and it is likely to be our primary focus. However, there is a need to broaden the range of renewable energy sources, as wind is intermittent and presents particular challenges when balancing the electricity grid. When the regulator spoke to the Committee recently, I am sure he stressed the importance of a readily dispatchable conventional and renewable electricity generation, which is needed to balance the intermittency of wind.

In that context, the grid study looked at wind and other types of renewable energy sources — including bioenergy, which is the one renewable energy technology that can contribute to all three sectors and to different markets. The Department recognised that potential last year when it set up the bioenergy interdepartmental group, and involved colleagues from the Department of Agriculture and Rural Development, the Department of the Environment, Invest NI, the Department for Regional Development and the Department of Finance and Personnel. That was the first co-ordinated approach to bioenergy and will enable the potential benefits of bioenergy to be utilised across a number of Government initiatives in the energy, agriculture, enterprise, transport and environmental sectors. It will also allow us to meet our renewable energy targets, as well as the targets for greenhouse gas emissions. However, it is important to make sure that that development is sustainable and is to the longer-term benefit of Northern Ireland.

Our group undertook an internal scoping study, and the terms of reference for an external study were submitted to the Committee as part of our evidence at the start of the inquiry. On behalf of the interdepartmental group, we appointed consultants to assess the potential for bioenergy. The results of the study are intended to inform a cross-departmental approach, on which consultation will take place during 2008-09. As the Committee has been given the terms of reference for the study, I will not go into details at this point. In essence, the study sets out to answer a number of questions: what is the current range of feed stocks; what are they currently being used for; could they be better used as sources of renewable energy; what resources could sustainably be increased, and at what cost? Economics are obviously a factor.

In parallel to the provision of feed stocks, we needed to identify the energy sectors — electricity, heat or transport — that would make use of bioenergy, and which markets, whether domestic and embedded, commercial or industrial, would be open to bioenergy. Bioenergy can contribute to a number of energy markets, but the issue is complex. There is no straight link between a bioenergy resource and what it can be used for; there are a variety of mixes. The presentation pack that we provided to the Committee contains several detailed diagrams showing that there is a range of feed stocks, supply chains, technologies and end-uses. It is not an easy fix along the way.

Given that range of variables, the study has proven to be quite complex, and work is ongoing with the consultants. However, it is hoped that the study will be available for the bioenergy interdepartmental group and our Minister’s consideration in June. The recommendations will help inform a cross-departmental approach, and consultation will take place later this year. At that stage, the results of this Committee’s inquiry will feed into that cross-departmental approach. Therefore, although the grid study identified wind as the main renewable energy source for Northern Ireland, there is also a more modest contribution from bioenergy.

The Committee also wanted to examine the range of support mechanisms for energy from renewable sources. At the local level, as has been mentioned, there is the Northern Ireland renewables obligation (NIRO), which obliges electricity producers to increase the level of electricity from renewable sources in their supplies. The NIRO offers one renewable obligation certificate (ROC) per megawatt hour. ROCs are a tradable commodity, valued at approximately £40 per megawatt hour. That system has offered long-term stability and has proved attractive in ensuring an increase in electricity generation from wind in Northern Ireland.

The Department has co-ordinated and administered the environment and renewable energy fund (EREF) — a two-year direct-rule initiative that is drawing to a successful conclusion. The project was instigated by former Secretary of State Peter Hain to enhance and accelerate the production of energy from renewable sources, and made available £59 million over two years to March 2008. The Department of Enterprise, Trade and Investment, the Department of Agriculture and Rural Development and the Department of Finance and Personnel are committed to the completion of several EREF projects beyond the EREF period and have secured additional Government funding for those projects.

Key projects included interest-free loans to renewable energy projects through the Carbon Trust and Invest NI; the Reconnect programme for householders; renewable energy projects in the public sector; a small biomass boiler at Stormont; significant work by the Housing Executive on insulation; the installation of solar panels and the warm homes scheme; a renewable energy centre of excellence here at the Agri-Food and Biosciences Institute, and energy-from-waste flagship projects.

Invest NI has played a key role in supporting renewable energy technologies — not through grants, but through technical and advisory support. Furthermore, Invest NI established a biomass group of approximately 30 companies, some from the farming communities, biomass suppliers and biomass boiler suppliers, who worked together to identify potential supply-chain issues. Invest NI also appointed the centre for competitiveness to conduct research on the bioenergy market and other emerging markets. That research aims to identify market opportunities and the sector’s capabilities in order to ensure best value and operation. Those projects will be included in the bioenergy strategy.

I am sure that the Carbon Trust outlined the range of UK-wide grant schemes during the previous session. As David Sterling mentioned, there is the review and reform of the Northern Ireland renewables obligation, which is likely to offer double ROCs for several technologies that could be used by rural communities, and — regardless of the technologies used — for micro-generation.

As Mrs Martin said, the UK heat market is small. Earlier this year, the Department for Business, Enterprise and Regulatory Reform (BERR) issued a call for evidence on heat. That Department will be developing a UK-wide heat strategy during 2008-09, and has been considering potential support mechanisms, including capital grants, feed-in tariffs and a renewable heat obligation. We want to work with BERR to develop potential for a heat market in Northern Ireland: Action Renewables has already conducted work on the matter.

Work on renewable energy would be funded by resources secured under the comprehensive spending review, which runs from 2008 to 2011. We secured approximately £28 million to supplement existing work on sustainables such as renewable energy, energy efficiency and sustainable energy, both in relation to research projects and capital projects. Therefore, this is a positive opportunity. Although the programme is still under development, bioenergy and heat will be included.

The Committee also wanted to consider fiscal and other incentives elsewhere. Members will know that fiscal policy is a reserved matter; however, studies have been undertaken at international level throughout the EU to examine the methods that different countries use to stimulate energy from renewable sources. Those methods include measures such as grants, interest-free loans, feed-in tariffs, tendering processes, the use of obligations and tax credits.

A couple of years ago, an EU study examined the different support mechanisms. It indicated that addressing the barriers to energy from renewable sources was equally important. Those barriers include lack of co-ordination; lengthy planning processes and poor access to the grid. Approaches to bioenergy differed, mainly because of the various types of feed stocks and different technologies used. A long tradition of biomass, stable planning conditions and a combination for heat development were considered important.

Undoubtedly, there is potential for farmers and rural communities to contribute towards increasing the levels of renewable energy sources not only to increase their own profitability but that of the wider community. Renewable energy sources are important at farm level to meet farmers’ own needs or to sell to the grid as surplus. There is an opportunity for farmers to work co-operatively in order to produce biomass for heating — adding greater value to their own produce — or to provide and sell heat through what is deemed to be called an energy-services company.

However, it will be important to ensure that the most economic use is made of the finite land resources in Northern Ireland. Research has shown that biomass is one of the most land-greedy energy sources; using almost three times the amount of land as other potential types of renewable energy. It is also essential that opportunities are of long-term sustainable benefit to farmers and rural communities, and do not upset the ecological or biodiversity balance. That is why colleagues in the Department of Agriculture and Rural Development and the Department of the Environment are working with us, and why our Minister has sought their co-operation, as we take forward a range of cross-cutting issues.

Mr Sterling:

That is a broad outline of the work in which the Department is involved, and how it seeks to provide the lead on the development of renewable energy. We have probably taken up more of the Committee’s time than we had planned. For that, I apologise. I will, therefore, not labour the conclusion, other than to point out that our Department is keen to take the lead in the area. We look forward to the Committee’s deliberations, and we envisage that its report will feed into policy development that will be undertaken in 2008 on the new strategic framework and the Department’s work on bioenergy. We are happy to take questions.

The Chairperson:

Thank you very much. We appreciate your attendance and presentation. Wind provides 97% of the renewable energy in Northern Ireland. Your written response indicates that you expect to meet the Government’s 12% target for electricity from indigenous renewable sources from mostly large-scale wind projects. That target includes a component for non-wind technologies. How will that component be realised?

Mrs Swann:

Small quantities of hydro-energy and biomass energy are generated, and they make up the difference between what is generated by wind and 100%. To date, the focus has been on wind, and that has been supported through the NIRO, which has been particularly successful. That is why we have turned our minds to considering how we could support other renewable energy technologies to deliver more towards meeting the overall targets.

The NIRO will assist the development of non-wind renewable energy technologies — it is not solely related to wind. We have used different mechanisms through the EREF to support some of the small forms of micro-generation. However, we look to NIRO to be the main supporting mechanism. It is being reviewed and reformed so that it can offer greater levels of support to other technologies; some on the biomass side, others on the marine and tidal side, which could offer greater incentives.

Mrs Martin:

If some of the energy-from-waste projects that are not yet in the planning stream were to come on-line, that would pretty much meet 15% of the 12% target.

The Chairperson:

Some of those technologies are not necessarily ready and must go through a planning process. In your presentation, you said that you will assist by taking actions, which are of equal importance, to remove barriers to planning and access to the grid. Will you clarify your written submission, in which the terms of reference for the study that was mentioned indicate that the report would be available from 7 March 2008?

Mrs Swann:

After the original tender documents were issued, we expected consultants to be appointed before Christmas. However, they were not appointed until January. As I have said, they have had to deal with a complex issue and are slightly behind schedule. We are working with them to finalise the report and get it moving. It has proved to be a more complex issue than anticipated for them to tackle.

We held a seminar in February in which the consultants sought information from a range of key players regarding feed stocks, various sources of supply and possible markets. We have continued to work with them on that as they have been gathering information over the last month.

The Chairperson:

It has not been a short delay; we are talking about three months from the original date of 7 February, to the new date, 7 June. There are always wonderful ways of going backward, but very little is ever done by way of coming forward.

Mrs Swann:

That period of delay is not as long as it looks as that process did not start until January.

The Chairperson:

That is a delay of a month, but that period has been extended again.

Mrs Swann:

The issue is complex and there is more involved than was envisaged. The consultants have been researching further work on our behalf, and we want to allow extra time for that. This is the first piece of evidence-based work that the Government has undertaken on bioenergy. Rather than try to rush it and produce something that is not sufficiently grounded, we are working with the consultants in completing their work.

The Chairperson:

The report was due to be made available from 7 March. Have you any idea when it is going to be available or will it be put on the long finger?

Mrs Swann:

It is certainly not on the long finger. As I said in the presentation, we expect to get the report in the next few weeks so that the bioenergy interdepartmental group will be able to consider it during June. The report’s findings will then feed into the broader cross-departmental approach that is envisaged to be issued for consultation later this year.

The Chairperson:

In response to an Assembly Question, the Minister of Enterprise, Trade and Investment, stated that the Department was considering options to increase its budgetary provision to maximize the number of applications for Reconnect grants. What stage is that at?

Mr Sterling:

That budget has been increased by around £1∙5 million to £4 million, and we hope to be able to fund in excess of 4,000 of those who have applied for support through the Reconnect scheme.

The Chairperson:

The Minister’s response was:

“There were adequate funds available to meet the demand for Reconnect grant claims up to 31 March 2008. DETI is considering options to increase its budgetary provision in 08/09 to maximise the number of applications supported, through reprioritisation of the Department’s capital budget.”

Mrs Swann :

Since its launch, Reconnect has received more than 9,000 applications. In its last four days, over 2,000 applications were received — there has been a lot of interest at the end of scheme.

The original budget from 2006-08 was £8 million. The Department has increased its provision from £1∙5 million to £4 million during 2008-09 through reprioritising its budget. That will allow approximately 2,000 further Reconnect claims to be paid.

The Chairperson:

Has the Minister secured that funding?

Mrs Swann:

Yes; the funding has been secured and has been increased from £1∙5 million to £4 million through reprioritisation. Colleagues are currently working through the applications.

Mr Sterling:

We have re-profiled expenditure on other programmes so that we can put more money into this area without compromising the delivery of other important programmes by the Department. It just means that some other things will take longer to do.

The Chairperson:

It is nice to see promises that were made be fulfilled, that is important.

Mr Savage:

Thank you for your comprehensive presentation. I have got answers that I have spent a long time looking for. In your submission, you list the terms of reference of your bioenergy study, which was due to report in March 2008. We are interested in hearing the top-line results and recommendations from that research. What assessment does it make of the economic viability of the bioenergy sector in Northern Ireland?

Mr Sterling:

As Mrs Swann mentioned, the consultants were appointed a month or so later than originally planned. That work is going to take a bit longer because of its complexity, so it is a little early for us to be discussing that study. We do not have the emerging findings — they are still very much in the analytical phase.

Mrs Swann:

We know, from the terms of reference, what the consultants are working towards. However, there are a number of complex issues that are still being considered and examined, such as whether the biomass that is available in Northern Ireland should be used for heat, or whether it should be used for heat and electricity generation, or whether we should be growing biofuels. The recommendations could range across supply-chain issues, or further research into a changing model with regard to bioenergy. It is still early days for that. The findings from the study are expected by June, and they will be shared with the interdepartmental group, the Minister of Enterprise, Trade and Investment, and the Committee for Enterprise, Trade and Investment. We will be happy to share the findings with the Agriculture Committee in due course.

The Chairperson:

All our questions were based around the study. Unfortunately, it seems that the answer to all of them will be that the study has not concluded.

Mrs Swann:

It is a work in progress, so it would be difficult to give answers to specific questions. The consultants have not finalised what they would feel to be recommendations for the interdepartmental group to consider.

The Chairperson:

In that case, the Committee will forward its questions to the Department. The Committee felt that there were certain questions that were vital to have on record. Unfortunately, we will not be able to get those questions on record today. However, they will be formally sent to the Department and the Committee will be grateful for your response. In the meantime, however, members may have questions of their own.

Mr Sterling:

It would be very useful if the Committee sent its questions to the Department. By feeding them to the consultants, the Department could ensure that the ongoing study addressed the concerns of the Committee.

Mrs Swann:

The recommendations from the study will be considered with those from this group, as well as work by Action Renewables on heat. Those strands will then be drawn together so that when DETI produces a draft cross-departmental strategy for bioenergy, it has the benefit of the informed considerations that have been taking place as part of your study and other studies.

The Chairperson:

Some of the Committee’s questions might not have been considered by the group. Therefore, if those questions are fed into the study while the group is still undertaking its work, everyone can benefit.

Mr P J Bradley:

What advice does the Department have for rural communities? Does the Department have procedures for going out to address rural communities that want to come together for particular projects? Do you see that as part of your role?

Mr Sterling:

The Department has to take account of the interests of all consumers, and, obviously, has a particular interest in the rural community. The bioenergy study, for example, is looking to identify ways in which the farming community can benefit from the increasing drive to use more renewables. I am not in a position at present to advise a rural group on any particular course of action. However, when the bioenergy study and the strategic energy framework are completed and have gone out for consultation, the rural community will see how it can embrace renewable technology, not just to reduce carbon emissions but to gain other benefits.

Mrs Swann:

Many of those issues have a cross-departmental impact. We have joined up with colleagues in the Department of Agriculture and Rural Development (DARD), the Agri-Food and Biosciences Institute (AFBI), and the College of Agriculture, Food and Rural Enterprise (CAFRE) to avail ourselves of their advice and guidance. They know the sector better than we do, and they are able to give direct advice. Organisations such as Invest NI have given technical advice to the farming community about biomass and biofuels. The Reconnect scheme and the environment and renewable energy fund were as open to the rural and farming communities as they were to others.

We look to DARD, AFBI and CAFRE to give further advice and guidance, but we are confident enough to say that opportunities exist in renewable energy for the rural and farming communities. However, there are a number of technologies and opportunities, and those must be researched to ensure that the best technologies and the best forms of renewable energy in individual circumstances are used, rather than a one-size-fits-all solution for the rural community.

The Chairperson:

The Chairperson of the Committee for Enterprise, Trade and Investment objected indignantly to our initiation of this study. However, our purpose is to determine the potential role for farmers and the rural community. The farming community has been facing a large dip in income over a period of time, and we want to find out whether there is something that the farming community could do to assist in the production of energy.

You mentioned DETI’s lead role in developing energy policy, based on the 2004 strategic energy framework. Your first point was about reducing energy costs. I wonder when that happened; maybe I missed it, or it passed over very quickly. Our purpose is to find capable people, who have land available, to assist in an important project which affects everyone. Farmers, the farmers’ unions and the industry in general approached us to determine whether there was anything that we could do. We want to be ready participants in the challenge that will have an impact on the whole community.

Mr Sterling:

We can understand the frustration in the rural community and among farmers. There is an opportunity there; why can they not just get on with it? It is important, however, to ensure that we do not encourage people to take projects on until we are sure that they are sustainable and viable in the long term. There are plenty of examples of people who have taken up new technologies that proved not to be viable in the long term. That is why this work is important, and why the Committee and DARD officials are heavily engaged in it.

Mr W Clarke:

The 15% target for renewables may be a case of picking the low fruit from the trees. That 15% is there for you: the private companies are setting up the wind farms. You have talked about waste management. What is the Department doing to lead the way? I do not see it leading the way in that regard. I am not blaming you personally, as you are new to the position.

Secondly, I have not heard any mention of transport. Fuel costs are escalating, but we are waiting for a report that will not be published until June. Can you give me a flavour of what the Department intends to do with regard to transport?

Mr Sterling:

The 15% target is set out in a draft EU directive as being the target for electricity, fuel and heat by 2020. That is to be the UK’s contribution towards an overall EU target of 20% use of renewables. At the moment, the UK figure is only 1·5%. By 2012, we should be delivering 12% renewables for electricity.

There is virtually no contribution from renewables to heat, and very little in road fuel. There is some biofuel about. I agree that we are starting from a very low base. With respect to heat and road fuel, I am not sure that there are low-hanging fruit. We work with other Departments: we have to. We will be unable to deliver, for example, the commitment on road fuel, unless we work with colleagues.

Mrs Martin:

With respect to low-hanging fruit, I repeat what Geoff Smyth said earlier: it has to be delivered at the lowest possible cost. If wind is that lowest cost —

Mr W Clarke:

But someone else is doing that; the Department is not taking a lead.

Mrs Martin:

We have the Northern Ireland renewables obligation (NIRO), which is the main incentive to change. Wind generation is still not competitive with fossil-fuel generation, although it is getting there. The NIRO is there to support wind generation. That is what the Department does to incentivise all types of renewable electricity generation — but primarily wind generation.

The grid study has shown that wind generation will be the most economic form of renewable electricity generation up to 2020. If, by then, we are to have 42% of electricity produced from renewable sources we will have to look away from wind, to other renewable technologies, to increase further the proportion of electricity generated from renewable sources.

Mr Sterling and the Committee are correct: much work remains to be done on heat. As biofuels are so deeply connected with fiscal policy and tax, strategy is organised on a national basis. We have researched Northern Ireland aspects of it, but it is the Department for Transport, with its renewable transport fuel obligation, that drives the increase in renewable fuels.

Mr Sterling:

One of the practical things that the Department does is work with the regulator to enhance the grid so that we can use what wind power can deliver. We will not maximise the potential of wind power without enhancing the grid.

Mr W Clarke:

Sorry, I want to return to transport. You say that the Assembly can set policy, but at the same time you are waiting to see what will be done across the water.

Mrs Martin:

The Department for Transport has completed its work, and the Assembly has agreed that similar measures will be taken in Northern Ireland through the renewable transport fuel obligation.

Mrs Swann:

That obligation has been introduced across the whole of the United Kingdom. Like the NIRO, it puts an obligation on transport fuel suppliers to increase the amount of renewable biofuels that they use. The obligation is set at a UK-wide level, as a member state contributing to targets set by EU directive. The target is set at 5% by 2010-11.

Mrs Martin:

There are no companies in Northern Ireland large enough to be bound by the obligation.

Mrs Swann:

The obligation applies where fuel tax is paid, and the bulk of the tax is already paid before oil reaches Northern Ireland. Therefore, the Department for Transport, and HM Revenue and Customs, consider that there are no obligated companies in Northern Ireland. The Department’s contribution will be to ensure that more biodiesel is available on the forecourts of petrol stations in Northern Ireland.

Northern Ireland is a small country. Some biofuels are produced here, though only on a small scale. At the moment, production is quite uneconomic. Biofuel may be produced from rapeseed oil; from imported and processed palm oil; or from used cooking oil. Used cooking oil is mostly collected, shipped out of Northern Ireland and sold in European countries where import duty on fuels is lower. It makes better economic sense, therefore, to ship it out of Northern Ireland than to keep it and process it here.

Mr W Clarke:

Why is that?

Mrs Swann:

Some European countries have introduced a higher incentive for biodiesel.

Mr W Clarke:

What is the Department doing about that?

Mrs Swann:

It is a UK taxation measure. The UK incentivises the use of biofuels through a 20% reduction in road fuel tax — from 48p to 28p — but other European countries offer a higher level of incentive. Therefore, the more attractive option for producers is to ship it out.

Mr W Clarke:

Throughout Europe, countries that have embraced renewable technologies are still going that extra mile. Is there not a lesson to be learnt from that? Should the Assembly not be pushing Alistair Darling for more incentives?

Mrs Swann:

Other countries use a different mix of incentives.

Mr W Clarke:

Obviously, ours are not right.

The Chairperson:

Taxation is not a matter for the Committee.

Mr W Clarke:

I have argued that the Assembly should have fiscal powers.

The Chairperson:

Unfortunately, taxation is not a transferred matter, so the Committee cannot consider it. I appreciate the point, but DETI cannot do anything about it.

Mr W Clarke:

It is an obstacle that has to be discussed.

We should be looking at effective public transport. The cost of public transport must be reduced to make it a more viable option. The way to do that is by introducing biodiesel and sourcing cheaper fossil fuel from somewhere such as Venezuela. Ken Livingstone reduced fares by 20% in London by doing that. Has the Department considered any similar initiatives?

Mr Sterling:

That is in the remit of my former Department, the Department for Regional Development (DRD).

The Chairperson:

Members, bear in mind that when we started this process we were ordered to restrict our discussions to matters that are the responsibility of DARD. This is the responsibility of a different Department, with a different Minister, and we must wait for him to act. The Committee is strictly commissioned, and the Assembly has ordered that we keep within the bounds of the inquiry, which relates to DARD.

Mr W Clarke:

That is fair enough, but I was simply asking the DETI officials what they think about that initiative.

The Chairperson:

Yes; but I must also say to the officials that it is not for them to comment on the responsibilities of another Minister or Department. I would have to rule out any such comments, because we must keep within the bounds of our inquiry.

Mr W Clarke:

I appreciate that, but if we approached DRD about it, the response would be that it is a DETI issue.

The Chairperson:

We are here to discuss a DARD issue.

Mr W Clarke:

We can ask questions, but where will we find the answers?

Mrs Martin:

This is not really an answer to your question, but our Minister has written to Ministers in relevant Departments who have an interest in the renewable energy directive, with a view to working together. Transport is definitely the responsibility of DRD, but DETI is in contact with DRD and we are starting the process of working together on renewable and sustainable energy, including how it can be used in public transport.

Mr Savage:

I have listened to all the witnesses this morning, and I find the subject very challenging because it is highly scientific and technical. Whoever can crack the nut will solve the energy problem. Your written submission refers to interest-free loans for people to work on renewable energy. Are those available?

Mr Sterling:

The loans came out of the environment and renewable energy fund, but I am not sure whether they are still available.

Mrs Swann:

That process is now complete. The loans were made available through the Carbon Trust and Invest NI. There were a range of interest-free loans for renewable energy projects within the industry. That has already closed; it was part of a particular scheme which has been completed. The only ongoing element of the environment and renewable energy fund relates to the Reconnect scheme that was discussed earlier, and the taking forward of a number of energy-from-waste projects.

Mr Savage:

In the agriculture world, there is an old saying: “Where there’s muck, there’s money”. There are people out there who can crack this nut if they have the chance and the opportunity. That is why I asked about interest-free loans — people are tied. A lot of them are tied because they cannot afford to take it to extremes. I know of two schemes going on which are very nearly there, but help and finance are needed to finish the job.

I have listened to the presentations very carefully this morning, and I think that the work that is ongoing between DETI and other people — and I include Mr Smyth from the Carbon Trust — if everyone can work together, this can be achieved in a very short time.

The Chairperson:

Would people from the farming community apply for those interest-free loans and grants to the Department of Agriculture and Rural Development, or would they apply to Invest NI?

Mrs Swann:

Those particular grants, if my knowledge serves me correctly, are related to industry — the Carbon Trust and Invest NI in particular. DARD has an existing array of grants, and is looking at other forms of assistance and support to be introduced through its next EU programme. I do not know the details of that, but if the applications are coming from the rural community, they would be more likely to go to DARD. If they are coming forward as a business where the farmer is adding value as a result of production, then that might be an eligible project within Invest NI’s remit.

The Chairperson:

It is a business — it is an agriculture business. I have quite an argument with other folks; farming is called an industry when it suits, and is not called an industry when it does not suit. It is an industry and it needs help, because in many ways, it has the answer to a lot of problems. If it did not have a plethora of hoops and barricades in its way, I think the farming industry could have a vital role to play in this whole issue.

Mr Savage:

Straight talk is needed here — we need to be black and white. The farmers do not need to be chased about, because there are many people living off the farmers’ backs. It is time that the farmers stood up for themselves. They are not going to be pushed about any more. We have arrived at a stage where we need a bit of straight talk and straight figures — what is achievable and what is not? There are big opportunities out there for the farming community. I have every confidence in it — that community can go a long way to help solve this problem.

The Chairperson:

Well, here is some straight talk — we have two minutes before these folks are finished.

Mr W Clarke:

How fuel-efficient are the power stations, and what are you doing to improve that? If I can squeeze in one more quick question, is the renewables industry happy with the extra £2∙5 million? I have been speaking with people in South Down, where a number of businesses have been set up, and they are concerned that there is not enough money there to pump-prime their industries.

Mrs Martin:

I cannot give specific efficiency data for the power stations. However, in general, a coal-fired power station is between 30% and 40% efficient, and combined-cycle gas turbines are around 50% efficient. That is standard for the age and model of our plants in Northern Ireland.

Mr W Clarke:

What are we doing to improve that?

Mrs Martin:

I will have to phrase my answer carefully. It is a market — the Utility Regulator may have said something along those lines. It is a market, so we look to the market to provide the most efficient and economic form of electricity generation for Northern Ireland. It is not within the Department’s remit to interfere with the market to that extent.

The Chairperson:

What about the second part of the question?

Mrs Martin:

I am sorry; I have forgotten what it was.

Mr W Clarke:

Is the renewable industry happy with the extra £2·5 million? Is that sufficient?

Mrs Swann:

The £2·5 million is the additional —

The Chairperson:

Mrs Swann had been talking about the extra money.

Mrs Swann:

The extension to the Reconnect programme.

Mr W Clarke:

The people that I have talked to in the industry —

Mrs Swann:

As opposed to the domestic users?

Mr W Clarke:

People who are actually trained to install —

Mrs Swann:

The installers?

Mr W Clarke:

They say that it is not enough.

Mr Sterling:

There is an issue there. The Reconnect programme was time-limited with a limited budget, which we actually increased. However, we will not be in a position to extend the scheme any further until it has been evaluated. We must, through an evaluation, determine whether the money that was spent was giving us a good return in terms of reducing emissions. Was it being targeted at the right people? We have huge problems with fuel poverty and other issues in Northern Ireland, and we must look at all the issues together to ensure that if there is to be any future investment, it will go to the right people and deliver the right sort of benefits. The evaluation will be conducted this year.

Mr W Clarke:

Is that the bioenergy study? Are they looking at —

Mrs Swann:

No. That will be a separate piece of work.

The Chairperson:

Will you write to us and tell us when that will happen, please? We have a strict timetable this morning, and other people are waiting to come in. Thank you very much.