Official Report (Hansard)
Date: Thursday, 14 November 2013
Committee for Enterprise, Trade and Investment
The Deputy Chairperson: Before the Committee today are John Boyd, the technical sales consultant from Glenfield Renewables; and Richard Love, the chair of the Northern Ireland Solar Trade Association. Gentlemen, you are both very welcome. I apologise for the long wait, but I know that you will appreciate the Committee's interest in Invest NI. We are grateful that you were able to wait and hope that you found that session interesting.
We want to hear about your issues, because we read your letter with interest and genuinely want to hear more. If you would like to make a short presentation of 10 minutes or less, we will then move on to members' questions.
Mr John Boyd (Glenfield Renewables): Thank you, Mr Chairman. I take this opportunity to thank you and members of the Committee for the invitation to explain further our letter of last week and to voice the concerns of the solar industry at the effects that the proposed changes by Northern Ireland Electricity (NIE) will have on the industry and those employed in it.
I introduce Richard Love, the chairman of the Northern Ireland association of installers, who will present the paper.
Mr Richard Love (Northern Ireland Solar Trade Association): Glenfield Renewables and many of the key installers, manufacturers and distributors in Northern Ireland are members of the Solar Trade Association. As the name implies, we represent the solar industry in Northern Ireland. It is a young and fast-growing industry that employs over 500 individuals. Since the Department of Enterprise, Trade and Investment (DETI) introduced the banding policy of four renewables obligation certificates (ROCs), we have seen growth of 2,435% since 2010. In 2010, there were 55 small-scale renewable installations of solar photovoltaic (PV); in 2013, there were 1,339 installations of over 7 MW.
We are asking the Government to offer stability to our thriving industry in order to enable businesses and residents in Northern Ireland to benefit from the reduced electricity cost that solar PV presents. For those not familiar with solar PV, it transforms daylight into useable electricity for businesses and anybody with a grid connection.
The Northern Ireland Executive set a target of 40% renewables to be achieved by 2020 of all energy used in the country, while the rest of Europe set a target of 20%. The fact that Northern Ireland's target is double that of Europe's needs to be commended. Solar PV has a large part to play in achieving that target. In the public sector, there are currently large-scale ground-mounted installations in various stages of development, as well as multi-site PV installations in the residential market in the public sector.
I have experience as a director of Paul O'Brien Solar Installations. To date, we have installed 4,500 systems in England and Wales, and I have seen the problems. Lack of stability has affected the industry, creating many job losses and reducing investment. In October 2011, for example, the Department of Energy and Climate Change (DECC) informed us that the feed-in tariff (FIT) scheme would be halved, and it gave the industry about seven weeks to react to the announcement. That meant that many projects were cancelled overnight, and there were massive job losses in the industry. The decision was later challenged in court and found to be unlawful, with a new date of April 2012 — a full six months after the original announcement — being set for a reduction in the FIT rate.
In 2009, there were 43 installations in the sub-50 kW category of installation in Northern Ireland. Now, we are looking towards an estimated 1,400 installations with a 7 MW target being installed by the end of the year. The industry has tripled in size over the past two years. From research and development in association with the universities to the manufacture and assembly of all the components, such as panels, inverters, rails and consumable units, there is no reason why solar PV cannot take a larger part in Northern Ireland's energy landscape. Jobs could be created in the installation and distribution sector, and there would be obvious benefits through the reduction of electricity bills for Northern Ireland residents and businesses. Electricity bills in Northern Ireland are the highest in Europe. Whether an installation is free or paid for, solar PV offers businesses a competitive edge by reducing overheads. It also helps residents who are struggling with their fuel bills.
The main focus today is on the imminent reduction in the size of the G83 connection application. G83 is a connection to the existing grid of a micro-generator — we are obviously talking about solar PV — that is conducted post-installation. So you put a PV installation on a roof, or ground-mounted, and you apply to NIE, post-installation, to have it connected and to have an import/export meter installed. This is a conditional connection, and the current limits are 6·5 kW in a single-phase supply and 20 kW on a three-phase supply. Anything larger than that requires a G59 connection, which involves a six-month process of NIE considering the implications of the connection. NIE is proposing to reduce those sizes, from 6·5 kW to 3·68 kW on single-phase supplies, and from 20 kW to 11 kW in three-phase supplies. We had a meeting with Aidan Bradley of NIE on 1 October, who informed us that the reduction on those sizes, which is happening because NIE has to meet the Electricity Safety, Quality and Continuity Regulations (ESQCR) that were due to be in force at the end of 2012, would happen in mid-December and that a public announcement would be made in the following days. To date, that announcement has not been made, which has created a lot of uncertainly in the industry about those upcoming changes.
Two days ago, there was more correspondence from Aidan Bradley to Glenfield Renewables, which stated:
"We are finalising details of the G83 reduction and intend to make a formal announcement in the next week or so. It is likely there will be a transitional period of a few months so the new limits will not apply till at least mid-January. Full details will be provided when the formal announcement is made."
Again, it moves the goalposts and changes the time frame in which those announcements will be made.
All the proposed installations above 3·68 kW in a single phase will now require a G59 application and a three- to six-month process. Although NIE must respond to the application within 90 days, while also charging a fee for that application, it is not a commitment for connection. It is just a response rather than a processing of the application.
Yesterday, in an interview with the BBC, NIE stated that there is a problem with grid saturation across Northern Ireland. Those are potentially 50 kW installations that can help farmers and commercial buildings to reduce their high electricity bills, and they could be refused and reduced to 20 kW. With the imminent reduction from 20 kW to 11 kW in three-phase supplies, will customers and installers be told that, if they apply for 50 kW, they could get only 11 kW installed? They would have spent £1,953 on an application and would have to wait three to six months.
If we adopted some different practices, some key points could help the solar industry to sustain itself and prevent shrinkage. G59/1/NI is the process that NIE utilises for an installation of anything above 20 kW or 6·5 kW on a single phase. That requirement does not allow you to use the existing inverters that we use for smaller installations. Instead, it states that you must install a G59 relay, which is equipment that reduces the potential export back onto the grid. That additional cost is about £1,200. It is worth noting that distribution network operators (DNOs) in England and Wales utilise a different process, which is that, although you need consent, you could use an inverter that was suitable for a smaller installation. As long as it has a time frequency set, there is no need for a £1,200 piece of equipment with a G59 relay inserted. If you take that onto a 4 kW installation utilising NIE's method of connection, that will add £1,200 for the new bit of kit and £632 for the application fee. That will add approximately 25% to 27% onto the retail price of a solar system, which is a change that the solar industry, especially the residential element, cannot sustain.
We ask that NIE adopts all the other UK DNOs accepted method of grid connection, which is the G59/2 method. Although that requires consent, it will allow us to use equipment that does not require extra costs.
Processing times is another issue. Although all other DNOs utilise the processing of a G59 application within 14 days, NIE chooses to respond within the 90 days set by the Utility Regulator, and there is no guarantee of connection after those 90 days. We have certainly seen occasions on which NIE has breached the response time of 90 days. We ask that it look at adopting the general practices of other DNOs of a response time of 14 days, which will assist with removing uncertainty for customers. I refer you to a presentation by NIE on 20 October 2011, when it stated, in relation to the volume of grid applications that it had received:
"Due to the ROC incentive mechanism interest and inquiries have increased tenfold in this area over the last 2 years. We have put more resources in place and we have recruited further resources. We will deploy whatever resources are required to meet the volume of work going forward."
In reality, NIE has not deployed the required resources to meet the volume of work and applications received. Ninety days for a response to an application and charging customers considerable fees will see many customers avoiding committing funds to a lengthy application process that has no guarantee of acceptance.
With the consultation period, we potentially had a two-month time frame when NIE announced on 1 October that it was going to implement these changes. It has now created a bit of havoc in the industry. Customers are being told that they need to connect now before it changes, and we are now being told that these changes will come in mid-January. This information is still not published. When a forced change of the solar industry was happening at the end of 2011, with only six weeks' notice, there were massive job losses across the industry. Projects were cancelled overnight. This was challenged in the High Court, and the solar industry won. That reduction was managed over a six-month period. We ask NIE to give us the same time — six months — to adjust to those changes.
With other DNOs, there are no fees for a G59 application. The current NIE fees are £632 for a 6 kW/20 kW system, which will typically add between 8% and 10% to the cost of a residential installation. Couple that with the need to install a £1,200 relay, and you are looking at anything between 25% and 27% on the retail price. If there must be a change and a charge to the DNO for an application, we ask that NIE reduce its processing times and adopt the same application process of a G59 as is commonly recognised in the rest of industry in other DNOs.
As highlighted by the BBC interview and NIE's heat map, a potential problem with grid connection is that the network here was constructed in the 1960s and 1970s, and it will struggle to take any large amount of electricity to flow in the other direction. I understand that, and, obviously, the grid needs to be protected. However, although other DNOs will entertain products such as the energy and micro-generator manager (EMMA), which is an Irish product that effectively stops the export of any electricity, NIE will not accept these products. Products such as EMMA are fully compliant with the UK distribution code BS 7671 and also the ESQCR requirement, which is why NIE is reducing the size of the G83 applications. As highlighted in the BBC interview, if a product can stop the over-saturation and is suitable for all the other DNOs, why can NIE not investigate the potential of this product to allow customers and businesses with larger connections to reduce their bills and the grid to be protected from over-saturation? It needs to be looked at, and the fact that it is being ignored is unfair to the solar industry here.
We have asked the Utility Regulator to support the industry, which, as I said, has generated over 500 jobs. It has reduced electricity bills for hundreds of businesses and residents, and we ask that support comes from the Government to stem the potential job losses and the shrinking of our industry. We want to build on our success, push it on and not allow the success to peak and then fall away. If we were to adopt the common practices of the vast majority of DNOs, such as the G59/2, workable process times of 14 days, no fees attached and the acceptance of export controllers to prevent over-saturation of the grid, we would ensure that our industry does not have to suffer large job losses, and residents and businesses would not turn away from solar PV because of the uncertainty and increased cost that these new charges will create. The UK has reached half a million solar installs a day, and the solar industry in the UK is now relatively stable. We ask that the Government, NIE and the Utility Regulator provide the same stability for our growing solar industry and ensure that solar continues to contribute heavily to the target, set by the Northern Ireland Executive, of 40% energy generation from renewables. Thank you for your time.
The Deputy Chairperson: Thanks for the presentation, Richard. I just have to correct something that you said at the very start of the presentation that I cannot get out of my head. We do not have the highest electricity prices in Europe — far from it. For domestic pricing, we are among the middle three. For industrial and commercial users, we are second only behind Italy. However, I do not think that you can come out with the broad claim that we have the highest electricity prices in Europe. I just wanted to clarify that. Can you give us the rationale for NIE proposing these changes?
Mr Love: The Electricity Safety, Quality and Continuity Regulations (Northern Ireland) 2012 set the laws for all grid operators and the standards that their grids have to adhere to. NIE is reducing the size that are automatically accepted for grid connections to protect itself from the electricity that is coming from solar installations, because if that electricity is not used by a business or a resident and goes back into the grid, it could overload the substation. If there are brownouts, blackouts and so on, it would obviously incur a massive cost. So the changes are being enforced on NIE. However, those changes can be managed in an easier way with, as I said, the adoption of technology, which is widely accepted by DNOs, that stops the export of electricity potentially harming a substation that is near to a solar installation.
Mr Douglas: Thank you for your presentation. I think that the Chair raised part of my question. I do not see the information in your submission. How many consumers will be affected in Northern Ireland?
Mr Love: To date, there are 1,089 installations accredited in the sub-50 kW category. The average size of installation is 5·2 kW peaks. Our current regulations require a G83. After we install a system, we apply to NIE to install an import/export meter with a conditional offer. Reducing the size from 6·5 kW to 3·68 kW ensures that the average system size will require NIE consent for grid connection, for which there is a three- to six-month wait. As I said, the additional costs of the extra equipment needed to comply with the specific regulations that NIE utilises will add 27% to the price. Installers and manufacturers cannot swallow those kinds of costs, so it will need to go onto the customer.
Mr Douglas: You spoke about the cost going up by 27%. How does that compare with the cost in other regions here, and even in Europe?
Mr Love: I can speak only to England and Wales. The costs of solar PV installations are similar across all three countries. In England and Wales, they do not need to adopt that additional cost of, as I said, £1,200 for the relay or a processing fee. This proposal will put the retail price for the residential market here up by between 22% and 27%.
Mr Douglas: Is that sum purely a processing fee?
Mr Love: Yes.
Mr Douglas: Do you think that it should do away with that? Is that all you get? It is to do with processing the application, and that £600-odd goes directly to NIE.
Mr Love: Yes. It is a processing fee. The largest part of the additional cost that makes up the 27% for a 4 kW installation is the need for an extra bit of equipment called a G59 relay. Other DNOs accept that the inverters that are currently used and are acceptable do not need to have the extra £1,200-costing relay installed. We are simply saying that we should adopt what is OK for the vast majority over here and do not put those extra costs on to the consumer.
Mr Douglas: Did I hear you say that 90 days was too long to wait to have a G59 application authorised, yet they were actually taking up to five months? What is causing those delays? Have you spoken directly to NIE about that?
Mr Love: We have spoken to NIE about the delays. It has stated that it has received a huge volume of applications and that the Utility Regulator has set a standard of 90 days as the maximum term within which NIE can respond. We have asked the Utility Regulator to reduce that term down to a suitable period that matches the rest of the UK, which is within 14 days and with no fee.
Mr Douglas: What do you want the Committee to do? It strikes me that we need to speak to NIE. Time is moving on, and you were talking about the consultation as well. What would you want us to do on your behalf?
Mr Love: I would like the Committee to work with DETI and the Utility Regulator to ensure that legislation is put in place that sustains the industry. I would like NIE to adopt practices that are common with other DNOs in England and Wales. I would like it to allow the industry to continue to grow — certainly not to shrink or lose jobs because of the uncertainty of grid connection.
Mr Agnew: Thank you for coming today, gentlemen. This is an issue that I am aware of and concerned about. Indeed, I was speaking to a colleague about it just yesterday.
In making the overall argument about the sustainability of the industry, it is not good enough for you to say what would be good for your industry. The Committee has to make a wider argument that it is good for the people of Northern Ireland. At the end of the day, that is what the Government are there to do.
It seems that in the UK there was an attempt to reduce the subsidy instantaneously without consultation, and that was found to be unlawful. I can see that from NIE's point of view this is a pain, to put it in simple language, because some of this is quite technical. It would be interesting to hear from you, in the light of our having to meet our 40% renewables target, about the potential for solar PV here. When it comes to renewables in general and when you compare micro wind generation with wind farms and microgeneration from solar PV with solar farms, which, to the best of my knowledge, have not taken off in a big way here although some people are seeking sites, what are the advantages of microgeneration? What is its potential for meeting our 40% target? From NIE's point of view, it is just a pain. Why should we be saying to NIE that this is important and can play a significant role in Northern Ireland's energy infrastructure?
Mr Love: If you look at the consumption loads of the energy requirements in the majority of countries, daylight hours are when electricity is used most. Solar obviously works only in daylight hours, while wind and tidal technologies work at all times of the day and night. Solar PV is a static technology. It is installed on a roof, commissioned and then connected to the grid by NIE. It is a simple technology for maintenance. The panels need to be cleaned every year and can be installed quickly and efficiently, with fewer moving parts than many other renewable technologies. I would say that that is where the focus should be — on it being a simple technology to install.
Mr Agnew: I want to talk about other benefits. I am always very conscious of joined-up thinking in governance, and we talk a lot about fuel poverty, so, although in some ways, to get a return on investment, it might make more sense to invest in a solar farm or a wind farm on pure economic terms, social impacts are very important for government. As to benefits to the householder, the free solar PV proposals have come in. Is there an assessment of what householders could be saving on their fuel bills? We talk a lot about fuel poverty in the Assembly, often as it relates to business and high energy costs. Those are some of the arguments that you need to make to government as a whole as well as to the Committee. What do you see as the benefits, economic and social, of solar PV, particularly microgeneration?
Mr Love: There is a reduction in bills for the residential market, where there was no previous solar installation, of anything between 20% and 40%, based on the household usage. That figure can be increased with utilisation of timers on different bits of equipment at different parts of the day. Customers could install immersion heaters that stop any exported electricity, covert it into heat and put it into their hot presses, which helps with the high cost of oil heating and other methods. Solar PV has less of an impact on the house. I would say that roofs are generally underused. PV is in the airspace above a roof, and, generally, the inverters are installed in the roof space below the roof. It is such a simple technology, and it is reducing bills. Regardless of whether it is a free installation model or a paid installation model, it gives a household a chance to reduce its bills. Anything that can help tackle fuel poverty, regardless of whether it actually provides heat or electricity, reduces household bills month in, month out.
Mr Agnew: Finally, you just heard the conversation with Invest NI. Do you know where we are with job figures for the solar industry in NI, and do you have projections of where we could be, should we be able to resist the change from NIE?
Mr Love: No. What I am doing is trying to fight a fire and saying that those imminent changes are going to cause massive job losses. There are examples of changes to a young solar PV industry — such as in England and Wales, where they use the FIT mechanism — that have seen companies close down and job losses. How do you tell the installer who was previously working five days a week for you that you may have one or two installations this week but that the other four potential installations will have to wait for three to six months for acceptance for a grid connection? What does he do? How does he pay his bills, and so on? I just want stability. That is all that I am arguing for here. That is where I think government would like to get involved in helping to push the industry forward.
Mr Mitchel McLaughlin: Thank you very much for the presentation. Obviously, from a standing start, significant progress has been made in the industry. You used the phrase "massive job losses". It may mean a massive impact on the particular sector, but how many jobs are we talking about?
Mr Love: If the average size is 5·2 kW per installation, and that had to be cut down to 3·68 kW, I can estimate only that that reduction is 60% of the original average size, so perhaps you would see 40% job losses. I cannot back up those figures; I can estimate only what will potentially happen.
Mr Mitchel McLaughlin: OK. Do you have any idea how many people are employed in the industry?
Mr Love: Yes, there are approximately 500.
Mr Mitchel McLaughlin: OK. You referred to the legal challenge in England. Did that go beyond the High Court to the appeal courts?
Mr Love: It did, yes.
Mr Mitchel McLaughlin: Did the industry challenge it?
Mr Love: Yes, representatives of the solar industry challenged it.
Mr Mitchel McLaughlin: Did they appeal and lose?
Mr Love: No, DECC appealed, and the High Court found that the six-week period to announce a massive change was unlawful. On March 12, it found the challenge unlawful, and a new date of 1 April was put in place.
Mr Mitchel McLaughlin: There are four issues that you are drawing to our attention, and you are looking for some relief and some support. Did that court process not examine any of those? Those issues effectively will restrict the growth of your industry if applied.
Mr Love: The reduction in the incentives and obligations with the tariff highlights a massive change to the industry, and the four points that I raised are practices carried out by NIE that were not carried out by other DNOs. If it were to adopt the practice of the other DNOs, there would be no concern for any other major change in the industry, and we can continue to thrive and grow and assist with the 40% target that is in place.
Mr Mitchel McLaughlin: What about a challenge to what is proposed? The Utility Regulator's position is very significant, because he appears to have approved and supported this. The design of an installation does not normally include the export controller.
Mr Love: No.
Mr Mitchel McLaughlin: That is an added extra.
Mr Love: Yes. What the export controller does is, while the grid is struggling to —
Mr Mitchel McLaughlin: I understand its function. I am examining the issue and will support what Sammy said, in that we should perhaps bring people in to explain their side of the argument. If the industry were to respond by indicating that export control would be part of the package, you would address that technical basis that they have advanced for. In other words, there is a technical solution rather than a financial solution, or a restrictive solution. Do you see that point? If there is a genuine technical issue with brownouts or blackouts that has to be addressed, it should not be done as an add-on. Your industry, in the interests of its own development, should anticipate that problem and provide a solution.
Mr Love: If, when NIE conducts its test on the grid, the test shows that a 50 kW system could be put back into the grid, and if it then deems that an export controller could avoid that problem, NIE would need to say, "Yes, we will accept the grid connection, but we need you to limit the export". That would need to come from NIE and with its consent, at which point the installer would add that extra cost and install the controller. We are looking to work with NIE, not against it. We do not want to destroy the grid; we want to do whatever is necessary to protect it.
Mr Mitchel McLaughlin: OK. I am exploring whether we can make it as easy as possible for NIE to accept a mutually acceptable solution. It does not deal with the processing fees or the time, but we can address those separately. However, if we start to reduce the issues and the case for imposing the changes, that will be in the long-term interests of your industry.
Mr Boyd: It is important to understand that the biggest majority of people installing small-scale microgeneration are not interested in exporting their electricity. They are putting it on for their own use to reduce their electricity overheads and household bills, and that applies to the agriculture industry as well up to 50 kW. People in that industry are not interested in putting up large-scale windmills and exporting their electricity. The residential market in Northern Ireland is purely for personal use at home.
Mr Mitchel McLaughlin: Yes, predominantly, but situations arise in which people have a larger installation and may find it advantageous to sell electricity to the system.
Mr Boyd: Yes, commercial installations will specifically build that installation around the option of exporting it, but we find that the majority of the microgeneration industry — that is, the domestic market up to 5 kW — is happy enough to use all its electricity and avoid export, because of the small price that it is getting for its export.
Mr Mitchel McLaughlin: I suspected that that would be the case and that we are talking about mostly microgeneration.
We will, of course, explore this. We should ask NIE in, and it can tell us just how many potential brownouts or blackouts it is worrying about. We can also examine whether it is putting sufficient resources into processing applications and permissions or whether it is restricting the growth of an eco-friendly industry. It smacks of restrictive practice.
Mr Boyd: Ideally, what we would like to see in simple terms is a non-return valve on the electricity service so that it flows only one way and small microgeneration is kept within a building for personal use.
Mr Mitchel McLaughlin: Yes, but, of course, you will not turn away business if somebody wants a bigger installation.
Mr Boyd: Oh, no, not for commercial use.
Mr Mitchel McLaughlin: I strongly support Sammy's suggestion that we invite NIE to explain itself, and possibly the Utility Regulator, whose responsibility, as I understand his role, is not necessarily on the consumer's side but on protecting the industry. However, there is a need for the regulator, so I would be interested to hear how he approaches this conundrum.
The Deputy Chairperson: Would you be happy with a written response in the first instance? I believe that our forward work programme is very busy.
Mr Mitchel McLaughlin: OK, and we can take it from there.
The Deputy Chairperson: I do not think that we are due to get the regulator or NIE back for the electricity review. We have already had them.
The Committee Clerk: No.
Mr Mitchel McLaughlin: It takes 90 days for it to process a letter from us.
Mr Boyd: You may have to pay an application fee.
Mr Mitchel McLaughlin: I might have to get an export control.
The Deputy Chairperson: You raised the NIE stuff that was in the news yesterday. This is about the wider issue of microgeneration. I am sympathetic, as, I presume, is the Committee, to the plight of rural dwellers who own farms that benefit from such schemes as a type of subsidy. The industry is benefiting from that as well, and I suppose that we all support microgeneration.
However, we have to look at wider society, and not at just small segments of society. Is it in society's best interests for there to be individual wind turbines all over the place and to have some houses with small levels of solar panels on the roof, or would it be better for society financially if those things were done on a larger scale?
Mr Love: Investors and developers of large-scale solar sites have typically avoided Northern Ireland because of the problems caused by having reduced hours of daylight — we are similar to levels in Scotland. Moreover, grid connection has always been a problem over here. Large-scale solar will potentially not get connected, because it is producing too much for the transformers in the substations to cope with. We can work only with what the grid can support, and that is where small-scale solar is the answer.
The Deputy Chairperson: Far be it from me to be cynical, but how much of NIE's stuff yesterday was in response to the determination of the Competition Commission?
Mr Love: It is a response to the Electricity Safety, Quality and Continuity Regulations, which stated that NIE's grid had to adhere to standards that were due to be implemented at the end of 2012. NIE has not implemented those standards as yet. Those standards are in reaction to a regulatory paper that was published and due to be implemented at the end of last year.
The Deputy Chairperson: That is grand. Those are all the questions that we have for you. Will you send us an electronic copy of your presentation? Are you then happy for us to send that on to NIE and the regulator for their response?
Mr Love: Of course.
The Deputy Chairperson: We will also provide them with the Hansard report of today's session to better inform us as to why they are doing these things.
Mr Love: OK.
The Deputy Chairperson: Gentlemen, thanks very much.