19 December 2012

S4M-05150 Marine Renewables (Pentland Firth and Orkney Waters)

The Deputy Presiding Officer (John Scott): The final item of business is a members’ business debate on motion S4M-05150, in the name of Rob Gibson, on marine energy constraints in the Pentland Firth and Orkney waters. The debate will be concluded without any question being put.

Motion debated,

That the Parliament notes with alarm the recent report from Scottish Renewables suggesting that the costs of grid connection and transmission for the delivery of electricity produced from marine renewables in the Marine Energy Park area, which comprises of sites in the Pentland Firth and Orkney waters, are set to soar; understands that this follows new charges from Ofgem that will result in a transmission regime that will increase costs by 91%; notes that the estimates of the projected annual connection charges for the Pentland Firth and Orkney Waters area have increased from £56 million in 2011 to £107 million by 2020; understands that this contrasts with an annual subsidy of some £2 million that would have been available had these been commissioned in the waters off south-west England; believes that clean green energy brings massive potential for renewables and that the sector is already delivering jobs and investment in the Pentland Firth area, and expresses strong concern that, because of a UK regulatory system that it considers unfit for purpose, there is continued discrimination against the marine renewables sector in Scotland that could hinder the sector’s development.

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Stewart Stevenson (Banffshire and Buchan Coast) (SNP):

I hope that we will base our deliberations tonight on fact. Mary Scanlon has just asserted as a fact that the estimates are wrong. That is an interesting thing to say. I hope that she will compensate us if the figures are higher than the current estimates.

I represent an area of Scotland with significant energy interests, both thermal and renewable, and a planning application is in for a 6GW alternating current to direct current converter in my constituency as part of a new generation of electricity transmission. At higher amperages, direct current is a more effective way of transmitting electricity with lower losses than alternating current. In addition, it requires only a single cable instead of two, thus reducing the cable costs.

In my area in the north-east of Scotland, and elsewhere, we expect to have a role in the future of renewable energies in providing offshore engineers and servicing offshore facilities. We already have the experience of decades of oil extraction from the Scottish sector, and the decades to come of further oil exploration mean that, from the outset, an engineering infrastructure is available that offshore renewable energy businesses can exploit. That is a major leg-up for an infant industry, minimising some of the start-up costs. However, inappropriate transmission charges, which will hit the life of projects, could scupper all those advantages.

Liam McArthur says that there is a logic behind the existing charging system. The problem is not the logic; rather, it is the limitations in its application. The present system—that is the Ofgem system—which arithmetically and systematically determines the outputs depending on the inputs, is cost reflective but, as a cost reflective system it fails—not because of the arithmetic, but rather because too many of the costs of energy production and transmission are excluded from the calculation. The carbon cost of thermally based generation is excluded, and that is one cost that will rise dramatically over the years to come.

It is simply perverse in an industry that makes long-term investments—typically a power station is 60 per cent of the way through its life span before it crosses into profit—that only short-term matters influence the calculations of the revenue costs that will make or break the calculation about whether projects go ahead.

Do not get me started on the underwriting of nuclear stations’ decommissioning—or, perhaps, even building—by Government. It is what is put into the calculations that makes the real difference. It is perfectly reasonable to consider cost reflective approaches, although I would prefer the French approach, which is simply to have a level playing field. That is a perfectly sensible way to do things when we are talking about national infrastructures.

The bottom line is that we must have wider policy objectives that go beyond simply costing the network—we must look at the network in the context of the whole energy system and of social needs. If we do that, we can still have a logical system that is cost reflective. We can have a system that means that we get a square go at this new industry in the islands and the remote areas of Scotland that will be so important to future energy provision in Scotland and the British Isles, and through substantial exports over the DC network that is being proposed and built all across Europe.


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