Hansard

I am pleased to have an opportunity to speak in this brief but welcome debate and I am delighted that a delegation from Orkney Islands Council and the renewables sector in Orkney is in the gallery.

Time constraints allow me to touch only briefly on key issues. I welcome the minister’s commitment to meet delegations from each of the island groups later this afternoon, which I hope will facilitate a more detailed discussion on the next steps in pressing for change that is urgently needed, as the minister said.

As we move to a low-carbon economy and address the need to decarbonise our energy system, fundamental reform of our energy markets is needed. As part of that reform, we must devise a more appropriate method of charging for transmission. I support the Government’s motion, but it risks portraying the current arrangements as anti-Scottish. That might be politically expedient, but it is untrue and not a little dangerous. As Ken Macintosh rightly pointed out, the current arrangements reflect historic realities and requirements. However, it is certainly true that if Orkney and the other island groups are to play their full role in helping Scotland and the UK to achieve their renewables ambitions, a revised transmission charging regime is needed, among other reforms.

The minister’s motion perhaps also slightly overplays the influence of this Parliament’s vote in April 2010, while underplaying the significance of the arrival at Westminster of a coalition Government that is committed to the fundamental review that is being undertaken through project transmit. In particular, the efforts of my Liberal Democrat colleague, Chris Huhne, are worthy of recognition—to be fair, the minister and his predecessor have been happy to acknowledge that on the record.

The minister reasonably acknowledged the strengths of the project transmit process and the progress that is being made through the emerging proposals, which should make developments in the north and west Highlands, for example, more viable. However, Scottish Renewables is right to highlight the risk of a potential discrepancy between indicative and actual transmission network use-of-system tariffs. The issue seems to arise because there is a lack of high-load-factor plants in Scottish charging zones with which low-load-factor plants can be balanced. Scottish Renewables has sought assurances from Ofgem on the issue, on which we must all remain vigilant.

Ofgem also points to proposed changes to user commitment charges, which have been cited as a barrier to entry by some smaller developers. Again, there seems to be a move in the right direction in that regard, although I agree with Rob Gibson that there are heavy liabilities for developers who are looking to connect in remoter locations.

Whatever progress has been made to date, there is still much to do. The issue is critical for the economic future of the islands that I represent, as well as Shetland, which is represented by my colleague Tavish Scott, and the Western Isles.

It is ironic that as the situation has improved for mainland developers in the Highlands, the competitive position of counterparts in the islands has—arguably—deteriorated. Orkney is only 6 miles from the Scottish mainland, but our transmission charges would be six times higher than those of mainland developers. The recent example of Fairwind Statkraft Orkney demonstrates that the disparity in cost is having an effect on companies’ preparedness to take forward potential developments in the islands.

The risk is that the issue diminishes our ability to play to our strengths. Andrew Scott of Pelamis Wave Power observed:

“The projects we now see under development off Orkney’s coast using Pelamis technology represent a route to commercialisation and the grounding of our supply chain here in the UK. Ensuring we can export electricity from these projects at sensible costs via stronger grid connections to the UK network is a fundamental pre-requisite to achieving this success.”

It has been suggested to me that the current lack of grid, securities and the charging issues that we are discussing all have the potential to dent our international reputation as the world’s leading location for marine renewables. Therefore, I applaud the work that is being led by Scottish Renewables and Highlands and Islands Enterprise, which is supported by developers, local councils, the Scottish Government and others, in identifying possible solutions to the current impasse. Their proposals are reasonable, practical and avoid setting unhelpful precedents for the future. They recognise the need to resolve the outstanding issues that the isles face through the transmission charging regime rather than through ROCs.

I cannot support the Labour amendment or the Tory amendment, but I welcome the debate and hope that Ofgem heeds the clear message that is emerging from it. I look forward to further detailed discussion with the minister and the island delegations later this afternoon about how we can unlock the potential of all our islands to be the powerhouse behind our renewables revolution.

14:45