Northern Ireland Assembly
Tuesday 5 March 2002 (continued)
My Department issued a consultation paper last autumn on the further exploitation of our renewable resources. The results of that consultation are currently being analysed. Harnessing new renewables potential must play a key part in progressing the energy agenda. My plans for the greater use of renewables, including revised trading arrangements and the possible introduction of renewables obligation, will be contained in the draft energy strategy statement planned for later this year. 3.15 pm My Department will also contribute to a study into the capacity of the electricity network to cope with increasing amounts of renewable energy, especially wind energy. My overall aim is to stimulate rapid deployment of renewable energy resources without an unacceptable increase in the price of electricity. The announcement from the Executive and the Irish Government last autumn supporting the north-west and South/North gas pipeline project was probably the main and most exciting achievement of the past 12 months. The Committee, working in the background, played no small part in helping to achieve that important breakthrough, and I pay tribute to its efforts. The regulator has recently granted a gas conveyance licence to Bord Gáis in respect of the project, and I shall shortly ask the regulator to invite expressions of interest for the distribution of gas into towns along the pipeline route. Many Members have been pressing for that as it will indicate whether there is any interest in supplying gas to those towns. On many occasions, I have made clear my commitment to the creation of a more integrated and competitive energy market on the island of Ireland, within a European context. I was grateful for the report published by IPA Energy Consulting last autumn. My counterpart in Dublin, Mrs O'Rourke, and I hope to announce an action plan arising from that report in the near future. An all-island market is not a panacea for the problems in the local energy market, nor will the benefits of an all-island market appear overnight. A great deal of careful consideration must be given to the wide range of technical, financial and legal issues involved. It is vital that the transition to an all-island market is properly planned, bearing in mind that there is almost a public monopoly in the Republic and a privatised sector here. We must also remember that an energy market of five million people is fairly minute. Through Great Britain, major links to the EU must be maintained if we are to get the properly open market that we need. The Committee has made an impressive number of detailed and wide-ranging recommendations. Approximately three quarters of them will fall to my Department for response, with the remainder falling to other Departments. My initial view is that many recommendations are sensible, including those on revised consumer representation arrangements, the greater use of renewable energy, the benefit of energy efficiency and the support for the extension of the gas industry. Others cause me more difficulty, including the recommendation that all new gas-fired power stations should be combined heat and power stations and the provision of grant aid to domestic consumers who are seeking to avail themselves of energy from renewable sources. I shall reflect on the Committee's report, and I shall seek the views of my ministerial Colleagues before preparing my formal response. It would be sensible if I were to take additional time to incorporate, where appropriate, the responses to the Department's energy strategy consultation paper, which will be issued in the next few days. Responses to that paper will be requested by 30 April. In his opening remarks, the Committee Chairperson set the scene for the report, but he and several other Members emphasised the issue of fuel poverty. The statistics are shocking - 28% of households fall into that category. An initial consultation paper on proposals for the new energy strategy and the accompanying legislation will include an invitation of views on a possible increase in the £2 levy, which is currently collected by NIE from customers for investment in energy- efficiency projects under the regulated scheme. We shall carefully consider recommendations in the light of responses and discuss them with the regulator - who has also recently consulted on the proposals - and with the Department of Finance and Personnel. A formal written response will be given to the Committee's report. I shall give details of an anecdotal case. In my constituency, Willowfield is a target area of the warm homes scheme, and it is twinned with Turf Lodge in west Belfast. A few weeks ago, I was present at the opening of a house that had all the benefits of the scheme. Gas central heating had been installed. Extra insulation, loft installation, low-energy bulbs and electric kettles, and a whole range of other things were also installed. That was a fantastic job for the elderly resident, who no longer had to worry about bags of coal. It was much cheaper. The sad thing is that there are insufficient applicants for the scheme. We have not got the message through to the grass roots. We were unable to implement the scheme in that area, even though funds were available. Therefore, money is not the only issue. We must get the message across to people. It is a fantastic scheme and a wonderful example of what can be achieved. There are savings in convenience, health and cost. The money is lying there, yet the Housing Executive is unable to spend it because of the insufficient number of applicants. That is something that we must take on board. Like other Members, I am pleased to see Mr Neeson in his place again. I am aware of his long-term interest in the gas sector. I appreciate that his constituency plays a significant role in energy in Northern Ireland. However, one of the technical matters that he raised was that of postalisation. That may be double Dutch to many people. When people criticise us, they sometimes forget that there is postalisation for electricity. Does anyone seriously believe that it costs the same to get electricity to Carrickfergus as it does to Belleek? Of course it does not. However, is anyone seriously suggesting that Belleek residents should be charged the economic rate for getting electricity to them? Dr McDonnell: Yes. [Laughter] Sir Reg Empey: From the safety of the Malone Road, that was probably to be expected. [Laughter]. It is not something with which most Members of the House would agree. Postalisation seems reasonable. Take the postal service. One stamp delivers everywhere, and it is exactly the same principle. The gas industry should not be discriminated against. Therefore, I fully support the concept. Some people say that this will have an adverse impact on electricity prices. I say that to bring in gas will have a beneficial effect on electricity prices overall. There is a large fuel cost element in our electricity bills, and increases in fuel costs are automatically transferred to the customer. The more efficient the power stations are, the less fuel they use, and, therefore, less energy costs are transferred to the customer. Gas-fired electricity generation is more efficient than the old methods used in the 1960s and 1970s. There are benefits to be gained. I agree with the Deputy Chairperson that the process of postalisation should take place. Dr Birnie raised several issues, including that of building regulations. That issue was also raised by Mr McMenamin. I shall come to that in a moment. Dr Birnie also said that I should deal with Northern Ireland companies' ability to build power stations and to supply electricity in the Republic. He said that I should raise that issue at the North/South Ministerial Council with my counterpart there. I point out to Dr Birnie that energy is not one of the matters dealt with by the implementation bodies. There are purely ad-hoc arrangements between our two Departments. I am happy to draw any of those matters to the attention of the Department of Public Enterprise in Dublin. That can be done through a phone call. Dr Birnie raised the issue of the Kyoto protocol and the nuclear side of things. I am aware of the concerns that people have about nuclear issues. One view expressed was that no electricity generated by nuclear power should come into Northern Ireland. Just as it is impossible to tell the difference between "orange" electricity and "green" electricity, so it is impossible to tell the difference between nuclear- and coal-based electricity. Unless some testing mechanism is developed, we shall not be able to distinguish between them. What comes through the Moyle interconnector ends up in a pool in GB, and we have no control over where the electricity is generated. Nuclear covers about 20% of generation in the UK, but if it is got rid of, it must be replaced with something else. If that is not renewables, it will be coal, oil or gas. I understand the difficulties, but there is no easy answer. The end result will be that more fossil fuels will be burned, instead of dealing with the nuclear issue. Dr McDonnell said that the basic objective is to have a good, reliable energy supply at a reasonable price. That is exactly what we want. However, there is a misunderstanding among Members about the contracts. The generators are not necessarily evil people who have scooped a fortune and have a licence to print money. The generators had to pay more for the power stations than they were worth, and that is why we have difficulty with those contracts. When privatisation was taking place in Great Britain, the money that the Government got for the power stations was equivalent to £109,000 per megawatt. In Northern Ireland they got £166,000 per megawatt. The Government got a significant premium for selling the generation capacity in Northern Ireland in comparison to what they received in Great Britain. That is why we have difficulties now. The power stations are being paid for availability. If they do not turn a wheel they are paid the same as when they are producing. People must understand the origins of that difficulty. Mr Wells said that the inquiry started as a stroll and ended up as a marathon. During his remarks, I formed the conclusion that staff in my Energy Division and others were making the same contribution that he thought he was making in Magherafelt, and I tried to picture some of them in uniform going around issuing tickets for bad parking. I understand and sympathise with him that it is very difficult to draw a crowd for some of those issues. However, that does not mean that they are not important, and he is right to concentrate on it. Mr Wells also said a lot about Orimulsion. I met the Venezuelans through their ambassador and a representative from their company. We must think also about the treatment and the working conditions of the people who produce Orimulsion. Much criticism has been directed at the state company in Venezuela, and what is deemed to have been the exploitation of the environment and the people who produce Orimulsion. Much depends on a major environmental assessment. Unlike oil, Orimulsion sinks. Therefore, if anything happened in Belfast Lough, Orimulsion would not float and be contained in the usual way - it would sink. I am not yet satisfied that a mechanism or procedure exists to deal with it in those circumstances. Whether those circumstances are better than what we have with oil, or whether they are worse, I am not sure. 3.30 pm However, much will depend on its environmental impact. I have an open mind on the Orimulsion option, as does Mr Wells, because it could possibly cost less and result in environmental improvements. I also accept the need to consider fuel diversity, so that we do not return to being wholly dependent on fuel oil, which was the position a few years ago. Any decision to convert to the triple firing of coal, oil and Orimulsion in Kilroot, and the accompanying refinancing of the existing contract to 2024, which would be required to allow the providers to recoup their investment, requires the agreement of the owners, AES Kilroot, and NIE. The decision would be subject to the satisfactory outcome of economic appraisals by the independent regulator and the granting of the necessary statutory consents from my Department under the Electricity (Northern Ireland) Order 1992, and planning approval. There is a long way to go, but I do not underestimate its significance. Ms Morrice spoke about the complexities of the industry. I have come to that conclusion independently, and I can assure the Member that it is highly complex. The targets for renewable energy have been set at 15% by 2010 and 35% by 2020. The responses to the recent consultation paper 'Renewable Energy in Northern Ireland - Realising the Potential' are currently being evaluated. In addition to that, the Department and NIE will sponsor a comprehensive study of the electricity network to determine the extent to which renewable energy sources can contribute safely to mainstream electricity supply. Part of the problem is that when the wind is blowing, a surge is created. When the wind is not blowing, the supply stops. There are technical reasons to be considered, which will be addressed in that comprehensive study. We will learn as we go, but the possibilities of renewable sources of energy will require us to smarten up and deal with that matter. Dr O'Hagan dealt with generator contracts and the all-island market, and the fact that we face a public sector versus private sector situation. With regard to the all-island market, my counterpart Mrs O'Rourke and I commissioned a study last year to assess existing arrangements, to identify barriers to trade and to consider the options for collaborative progress. We will have to await the outcome of that study before I can take matters further. Mr McClarty mentioned the European dimension. Major energy projects, including the Moyle interconnector and the Scotland to Northern Ireland pipeline (SNIPS), have had European support in the past. It is yet to be determined what the European situation will be with regard to the gas pipelines. The issue will be progressed, but I am not yet in a position to determine whether there will be a European dimension to that project. Mr McMenamin and other Members referred to the building regulations, which will affect the future. He also mentioned the lifespan of houses; I live in a house that is considerably older than that which he spoke about, but I am aware of the issues. Responsibility for building regulations rests with the Department of Finance and Personnel. I shall consult Dr Farren on the relevant recommendation and include the outcome of that consultation in my written response to the report. I shall deal with that matter later. Mr Clyde spoke about greenhouse gases and renewable energy. Mr Armstrong spoke about waste. One gets the impression that he has a connection with the agriculture industry, but he made a valid point that is high on the agenda, and which I take seriously. My Colleagues in the Department of Agriculture and Rural Development have a problem with the tightening of the regulations governing the disposal of slurry, and anaerobic digesters are a possible solution. Arthur Doherty spoke about lignite. If the power providers at Ballymoney make an application, it will have to be treated in the same way as other applications, but there are significant environmental concerns. A Government support fund of £60 million was announced in 1995 to help to reduce electricity prices. The use of that fund was determined by direct rule Ministers. An initial £15 million was spent to reduce the level of tariff increases in 1996-97. A further £5 million was set aside in 1997 to fund long-term energy efficiency programmes, such as the warm homes scheme, which are now managed by the Department for Social Development. The final £40 million was used to buy down some of the costs of generator contracts. Some £10 million was spent at Ballylumford and £30 million at Kilroot. Adam Ingram, the then Economic Development Minister, announced that decision in March 2000. My role was to confirm that this offered the best long-term benefit for customers from the final tranche of money. I did that in June 2001, when various tripartite legal agreements had been drawn up and VAT issues had been resolved. There is a great deal of misinformation about that fund. I thank the members of the Committee and Members of the Assembly for their participation today. We will take the comments seriously, and we will respond in full. I will be seeking the co-operation of Members and the Committee when I introduce the legislation that is necessary to implement as much as possible. I intend to have it done in the lifetime of this Assembly, but I will require the co-operation and goodwill of Members if I am to achieve that. The Chairperson of the Committee for Enterprise, Trade and Investment (Mr P Doherty): Go raibh maith agat, a LeasCheann Comhairle. I thank the Minister and the Members who participated in the debate. I am greatly encouraged by the Minister's support for the report. We covered a huge range of issues, such as bonds, renewables, nuclear energy, Orimulsion, fuel poverty, Coolkeeragh, the gas pipeline to the north-west, the 1992 contracts, human energy, postalisation, EU support, building standards, biomass, combined heat and power and the generation of heat and power from waste. Everyone who spoke touched on those issues to some extent. However, before I deal with the individual comments I thank the members of the Committee for the enormous amount of work and energy that they put in collectively over the past year to produce the report and to produce - and I reflect the Minister's words - this mature debate. It is a credit to the Committee that it has presented the report in the way that it has. I also thank the Special Adviser to the Committee for his enormous help as we waded through seven or eight drafts to come to this final conclusion. The Committee's Deputy Chairperson, Mr Neeson, spoke clearly about the licensing of the pipeline to the north-west and his support for that, and of Coolkeeragh and the absolute need for postalisation and support for the pipeline going through the towns in the north-west. He also mentioned Orimulsion, the strong environmental and Assembly guidelines to be met and the need for us to not put all our eggs in one basket. I will come back to the question of Orimulsion and the subject of bonds, because at times during the debate one might have thought that we had a slight difference of opinion on those subjects. We agreed to have a "triple lock" on the question of Orimulsion. Some Members approached the triple lock by way of unlocking it, others approached it by way of leaving the lock on. We recognised that that issue had potential, but huge issues with regard to the economy and the environment had to be dealt with. Likewise when we touched on bonds we correctly decided that, as the Minister was about to launch a fairly major inquiry - and he has many more resources than we have - we should await the outcome of his review. Dr Birnie spoke about the building regulations, nuclear power, and ESB's monopoly in the South, which is true. The Committee decided not to take evidence on the use of nuclear power, which we are unanimously against. We knew that we were leaving ourselves open to a challenge on that, but the political view was strong, and we stated that in the report. Dr McDonnell summed up the strong view of the Committee with the phrase "scandalous contracts". However, he also pointed out that even though the ESB has a monopoly in the South, NIE has an effective monopoly in the North and we are dealing with two big, strong companies as we move into this new era. He also said that this is but a stage in the debate, which is another strong point, as we will undoubtedly return to the matter often. Mr Wells talked about nuclear power, the triple lock in Orimulsion, fuel poverty and renewable sources of energy. He contributed a good deal to the debates on Orimulsion and fuel poverty, and I thank him for his clear views on those serious issues. Ms Morrice spoke on renewable sources, which became her main issue. We deferred to her views often and leaned on her sometimes to produce additional papers for the Committee - we thank her for that effort. She said that we are blessed - or some would say not so blessed - with high winds that we could harness and match to local skills that have always existed in the North. She made a key point when combining all those factors - that we should use the will, the political will and the confidence to tackle all those issues, match our human energies with our natural wind, with emerging skills and those that have existed here in abundance for some time. Dr O'Hagan talked about renewable sources and Orimulsion; she came up with a different perspective on the triple lock. She spoke clearly about the generation contracts and queried whether there is potential within EU legislation for legal options that might help us deal with the contracts. She also spoke of the abiding problem of fuel poverty and how we can overcome it. Mr McClarty spoke clearly about postalisation, his and the Committee's support for that, fuel poverty, his clear support for the north-west pipeline and the economic imperative for that to go ahead, together with the need for European support to build it. The newest member of the Committee, Mr McMenamin, talked about "warm homes", a simple phrase that sums up much of the debate on fuel poverty. He also spoke of the need to upgrade building standards and the need to try to expand the scope to opt-out on the climate change levy. Mr Clyde spoke of the cost of electricity, and it was that very question - "Why is the cost of electricity so high?" - that began our inquiry into energy. That core issue kept us focused on our deliberations. Mr Clyde also spoke about Orimulsion and the potential development of the biomass process given Ireland's agricultural background. 3.45 pm Mr Billy Armstrong talked about waste management and the potential for using waste to generate heat and power. He also spoke about the biomass and biogas processes. Arthur Doherty spoke about tilting at people who tilt at windmills, and left me wondering what he really meant by that. He was clearly against Orimulsion, nuclear energy and lignite but strongly supported the development of wind energy. The Minister described this as a mature debate. I thank him for that, because the Committee worked maturely and produced a mature report. He spoke of the gas network, the Moyle interconnector, the revised energy strategy and legislation within the lifetime of the Assembly. There were five key points: electricity costs; improving energy efficiency; renewable energy resources; gas network extensions; and the all-island energy market in an EU context. We all recognise that there are technical and legal issues. The Minister acknowledged that three quarters of the 45 recommendations were within his Department's remit. The Minister gave us more information about the problems associated with Orimulsion - such as workers in Venezuela who are badly treated, and some technical aspects, which we need to consider carefully. He also gave us more information about how those bad contracts came about in the first place. He blamed the direct rule Ministers, and there is no harm in that. I thank Members for the way in which they approached the debate and recommend the report to the House. Question put and agreed to. Resolved: That this Assembly approves the report of the Committee for Enterprise, Trade and Investment on their inquiry into the Energy Report (3/01R) and calls on the Minister of Enterprise, Trade and Investment to implement the Committee's recommendations at the earliest opportunity. Committee for Health, Social Services and Public Safety:
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