Committee for Enterprise, Trade and Investment

Report on the Energy Act 2011 Legislative Consent Motion

Background

1. The Energy Bill 2011 was introduced at the House of Lords on 8 December 2010, the Second Reading was held on 22 December 2010.
2. The EU Renewable Energy Directive requires that 15% of the UK’s energy consumption be from renewable sources by 2020. Northern Ireland is expected to contribute to this target and in this regard there is a target for renewable heat consumption (10% by 2020) in the recently published Strategic Energy Framework. It is envisaged that a renewable heat incentive would help reach the UK and NI targets.
3. A renewable heat incentive (RHI) is a government scheme that will make payments to those installing renewable heat technologies that qualify for support, year on year, for a fixed period of time. It is designed to cover the difference in cost between conventional fossil fuel heating and renewable heating systems (which are currently more expensive), plus an additional rate of return on top.¹ The payment for renewable heat generation varies depending on the size and type of the technology. England, Scotland and Wales have statutory powers to implement a renewable heat incentive via last minute amendments to what is now the Energy Act 2008 – similar powers were not extended to Northern Ireland in the Act.
4. In the 2010 Spending Review, the coalition government announced funding of £850m for an RHI scheme. Northern Ireland has been offered £25m (pro-rata basis). It is expected that the incentive will be launched in June 2011.

Committee Consideration

5. The Committee for Enterprise, Trade and Investment has been scrutinising the issue of renewable heat since the 2008-2009 session. The Committee has long been aware of the fact that the Department had no powers to legislate for renewable heat in Northern Ireland, therefore there was no way to create a mechanism for incentivising renewable heat generation in Northern Ireland. However, the Committee has continuously urged the Department to bring forward proposals that would allow Northern Ireland to legislate for renewable heat. Written briefings from the Department that the Committee received regarding a RHI in Northern Ireland is included in annex 1.
6. During the Committee Stage of the Energy Bill (recently given Royal Assent is now the Energy Act (Northern Ireland) 2011), the Committee considered the possibility of including powers in the Bill to legislate for renewable heat. This, however, was not feasible due to the remit of the Bill and protracted timescales that would be involved.
7. In the 2009-2010 and 2010-2011 sessions, the Committee undertook work and completed an inquiry into renewable energy entitled, “Inquiry into Barriers to the Development of Renewable Energy Production and its Associated Contribution to the Northern Ireland Economy.” During DETI’s oral evidence on the inquiry, officials addressed the issue of an RHI and specifically mentioned funding that was made available in the 2010 Spending Review for an RHI. Officials went on to say that Northern Ireland had been offered £25m specifically to implement an RHI, but that this required Executive approval.
8. Members noted the information and made an explicit recommendation in the renewable energy inquiry report relating to an RHI. Recommendation 12 specifically stated that, “In the short-term, Government policy on biomass should concentrate on renewable heat to assist in meeting the Strategic Energy Framework target of 10% of heat from renewable sources by 2020. DETI should also give favourable consideration to the Treasury offer of £25 million for a Renewable Heat Incentive for Northern Ireland.”
9. The Minister for Enterprise, Trade and Investment wrote on 2 February 2011 to notify the Committee that she was going to seek the agreement of the Executive and to obtain consent of the Assembly through a legislative consent motion for the Energy Bill 2011. This is a means to extend powers to Northern Ireland to legislate for renewable heat (and an RHI), as quickly as possible before the end of the mandate. If this legislative consent motion is not achievable, then DETI will have to bring forward primary legislation in the new mandate to allow the powers.
10. The Committee commissioned Assembly Research for background information on the Bill at the meeting of 3 February 2011. The research paper is included in annex 2 and details information on:
    • Information on the DECC Energy Bill (2011)and Energy Bill (2008)
    • How a renewable heat incentive is legislated for within the Energy Bill
    • How a renewable heat incentive is applied in the UK and RoI 
    • Benefits of a RHI in a selection of other EU member states
11. The Committee received oral evidence from Departmental officials on the legislative consent motion at its meeting on 24 February 2011. Key issues discussed included an economic appraisal for a renewable heat incentive scheme in Northern Ireland, a consultation with the public and the projected timescales. A copy of the Hansard transcript is included in annex 3.
12. Having considered the evidence, the Committee agreed to support DETI in seeking the Assembly’s endorsement of extending powers to Northern Ireland to legislate on renewable heat.

¹ DECC website, http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/policy/incentive/incentive.aspx