Renewable Energy Generation: Island Communities

(Limited Text - Ministerial Extracts only)

Tuesday 4th July 2017 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)]

Sir David, it is as ever a great pleasure to serve under your constituency—under your chairmanship; I am sure your constituents feel the same about your activities on constituency days. In my first Westminster Hall debate, you were a mere Mr Amess. I am delighted you are here.

The right hon. Member for Orkney and Shetland (Mr Carmichael)—I remember when he was my right hon. Friend—is a gentleman in the true sense. The way he has conducted the debate, on a subject in which he has a lot of interest and expertise, and the way he speaks up for renewable energy generation in island communities, is truly commendable. As he is fully aware, he has me at a little disadvantage, as I have been in the job for precisely three weeks. I am not yet the expert he is, but I would like to make it clear to him and other Members that I have listened carefully to every word and intend to set out the Government’s position in what I hope he will accept is the right way at this stage.

We know that the islands have long been a hotbed for innovations in renewable energy generation. The Burgar Hill wind turbine site in Orkney, for example, hosted some of the most innovative experimental turbines in the ’80s and early ’90s. As has been said, the European Marine Energy Centre, which is also located on Orkney in the right hon. Gentleman’s constituency, has since its creation more than 10 years ago maintained its position as the world’s leading wave and tidal stream testing facility. The fact that it has hosted the prototypes for almost all the world’s leading devices, including the Atlantis turbines deployed in the Pentland Firth last summer, is a testament to its premier global status.

I also understand that the grid infrastructure necessary to support the proposed wind farms on the remote islands of Scotland could, if built, act as a springboard for further development of our wave and tidal sector and give this emerging industry a further boost towards commercialisation, helping to maintain the UK’s leading position in these technologies. The challenge for the wave and tidal sector will be to innovate and to reduce its costs sufficiently that it can compete with other renewable technologies. Those costs have fallen significantly during the past few years, and we fully expect that downward trajectory to continue. This is now a very competitive market, and developers will need to respond to that challenge; the sector can no longer take high subsidies for granted.

As the right hon. Gentleman is aware, my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy visited the Western Isles this year to learn about this issue at first hand. The hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil) kindly hosted the Secretary of State’s visit, and I shall take this opportunity to thank him again for what my right hon. Friend described as a productive and informative trip. I know that it will not help or please the right hon. Gentleman unless some action is taken, as he has pointed out to me.

The issues are clear, and we know what the gains are. I shall go through the issues in no particular order. The first is ensuring healthy competition to support the best projects and get the best value for the consumer, while recognising that it may take a certain volume of projects to justify building the all-important new island-to-mainland links. I am aware that those are a vital piece of the overall picture, with their own timeframes and set of complex decisions, so there are really two areas of decision.

The second issue, as the Secretary of State made clear, is ensuring that local communities, which have been enthusiastic about this industry, receive appropriate benefits for hosting these projects.

[Mr Bob Seely (Isle of Wight) (Con)]

Excuse me, Sir David, if I do not quite get some of the etiquette right.

I thank my hon. Friend the Minister for what he has said about the importance of the popularity of tidal and other energy-efficient projects. It is right to say that islanders can play an important role, but does he agree that energy policies should take into account other policies such as regard for the landscape? Wind turbines were very unpopular with many of my constituents, because of the damage that they did to the landscape in areas of outstanding natural beauty, but solar panels are more popular. Should wave and tidal power take off, there would be, again, an aesthetic element as well. It is wonderful to have these things, but that should not be at the expense of a tourism economy in a place such as the Isle of Wight.

[Richard Harrington]

I thank my hon. Friend for his intervention. Time does not permit me to answer in full, but I would be happy to meet and discuss this subject with him on behalf of his constituents.

Thirdly, we have to define what is meant by “island wind projects” in a legal context, and that is being done; we are working through the issues. The right hon. Member for Orkney and Shetland is very aware of that matter.

Last but not least, we need to give clarity to the developers of island projects while being fair to developers of other projects elsewhere and to consumers across the UK.

[Brendan O’Hara (Argyll and Bute) (SNP)]

This issue is also very dear to my hon. Friend the Member for Na h-Eileanan an Iar (Angus Brendan MacNeil), who has been unavoidably delayed while travelling here today. He is very concerned, as I am. Given the promises made in the Tory manifesto and by Tory candidates at the general election, when will the Government act to introduce an island CfD? The lack of a CfD and the locational pricing model are severely hampering the industry on the islands, and this is a vital sector that we need to survive.

[Richard Harrington]

I can assure the hon. Gentleman that we are aware of that issue and we are fully on it. I am happy to meet him if he would like to discuss it separately, but I have only five minutes left now and I do not want to break into the time for the key points that I need to raise.

There is a range of options for overcoming the issues that I have outlined, and I hope that by taking a pragmatic approach we can do so quickly. We need to understand the costs of the projects and the impacts on consumers’ bills. My officials have begun the process of updating the evidence base to set an appropriate strike price—the maximum that these projects could get paid for each unit of electricity that they produce. We must not forget that any additional costs that arise as a result of awarding support contracts are ultimately paid by households and businesses in their electricity bills.

Our approach to supporting new renewables, of competitive auctions with limits on the maximum price that we will allow, ensures that we support only the more cost-effective projects. That approach is not new but has been applied very successfully to other technologies, such as offshore wind. The industry is confident that the renewables support auction currently under way, whose outcome is expected in the coming months, should lead to a significant further drop in price. Whatever approach we take will need to work in this context of quite rapid price changes, and we want to see the outcome of our current auction before making decisions regarding the remote Scottish islands.

We have been through very clearly the importance of local support. Not everyone in the islands will support the development of the wind farms, but I am told that the majority of residents do. I understand that a poll of 1,000 Isle of Lewis adults commissioned by Lewis Wind Power found that seven in 10 supported having wind farms on their island. That is encouraging, but such support should not be taken for granted. It needs to be rewarded in the way that has been discussed—through community benefit funds and other systems. The Scottish Government have informed my officials that all the developers on the islands have committed to pay at least £5,000 per megawatt of capacity per year into such funds for the lifetime of a wind farm. That means that the Viking wind farm on Shetland, for example, could provide up to £1.85 million every year to the community. That money could be used for all sorts of projects: schools, local support groups, scout groups—the list is endless. Developers are also offering communities the opportunity to own a stake in projects, which is something that the UK and Scottish Governments are keen to see more of. Beyond direct income, we should also acknowledge the other benefits that these projects could bring. For example, jobs will be created not just during construction but throughout the lifetime of the projects.

Wind energy can play an important role for the country as a whole in producing the electricity we all need to support the running of our economy and our daily lives and in helping to reduce the harmful emissions associated with our energy systems. We all appreciate the commitment that island communities will have to make to ensure that we have access to long-term clean power. That is why it is absolutely right that they should benefit from hosting the projects.

We recognise that there are different ways of delivering the benefits, but of course it is important that any commitments that developers make are real and go beyond warm words. The Scottish Government are considering this issue closely, and I very much welcome that work. I look forward to meeting the right hon. Member for Orkney and Shetland and a group of developers, which we discussed outside the Chamber. That is a very good idea, which I am keen to progress as soon as possible.

I hope that my response today, in the short time that I have had, provides some reassurance to Members, as well as to the constituents we all represent, that the Government will support the development of onshore wind projects in the remote islands of Scotland, where they will directly benefit local communities.

Another very good point made by the right hon. Member for Orkney and Shetland is that we are not starting from scratch. We know that, and I do not mean just the manifesto commitment, but everything that went before.

[Mr Carmichael]

I understood the Minister to say earlier that the Government would not come forward with firm proposals until after the conclusion of the current round of contract for difference auctions. Is that indeed the case? May I ask him to take that away and consider whether it is really necessary? At the very least, given the pressures of time on us here, we should have everything ready to go once we reach that point.

[Richard Harrington]

I am very prepared to consider that point as the right hon. Gentleman has asked me to do. I hope that hon. Members will bear with us as I and my officials tackle the issues that I have outlined. I hope to come back very shortly with a decision. I say “very shortly” because I want that on the record and because of the respect in which I hold the right hon. Member for Orkney and Shetland. In the meantime, I will shortly be meeting the hon. Member for Na h-Eileanan an Iar to discuss these issues further, and I would be happy to meet any other Members of this House.

Question put and agreed to.