Committee for Enterprise, Trade and Investment Report on its Consideration of the Legislative Consent Memorandum Concerning the Energy Bill

Committee for Enterprise, Trade & Investment Report on its Consideration of the Legislative Consent Memorandum Concerning Provisions in Part 1 of the Westminster energy Bill Dealing with Electricity Market Reforms 

Background

1. Electricity Market Reform (EMR) is intended to help achieve the UK Government’s objectives on decarbonisation, renewable energy, security of supply and affordability.  The EMR Project is intended to develop and deliver a new market framework that will enable the cost effective delivery of secure supplies of low carbon energy.

2. Formal consideration of EMR commenced when the Coalition Government published its White Paper “Planning our electric future”.  The Legislative Consent Memorandum (Appendix 1) will extend, provisions for the statutory framework and enabling powers for EMR to Northern Ireland.

Committee Consideration

3. At its meeting on 24th November 2011 the Committee considered a written briefing from the Department (Appendix 2) which included developments with the coalition Government’s White Paper entitled, “Planning our electric future: a White Paper for secure affordable and low-carbon electricity”, (Appendix 3).  The White Paper confirmed:

  • A move to a Feed-In Tariff with Contracts for Difference (FIT CfD) for large scale renewables (above 5MW) in 2014-2015;
  • The closure of the Renewables Obligation for England and Wales to new generation from 1st April 2017;
  • The introduction of an Emissions Performance Standard (EPS) and a Capacity Mechanism; and
  • A new institutional framework to administer the FIT CfD and Capacity Mechanism.

 

4. The written briefing outlined the Department’s position including:

  • Work being undertaken by the Department to examine how the costs associated with introducing and administering the FIT CfD in Northern Ireland could continue to be spread across all UK consumers as currently applies to the Northern Ireland Renewables Obligation (NIRO);
  • Work being undertaken by the Westminster Department for Energy & Climate Change (DECC) in the development of an Energy Bill, the scope of which, for practical reasons, could be extended to include Northern Ireland for the FIT CfD;
  • The reasons why DETI continued to operate the NIRO when the rest of the UK moved to a small scale FIT in 2010;
  • The reasons why the EMR makes it necessary for Northern Ireland to move away from the NIRO to a small scale FIT, which would be progressed through the DETI Energy Bill;
  • The possible use of the DETI Energy Bill to introduce an EPS;
  • Confirmation that it has been agreed with DECC that the Capacity Mechanism will not have to apply to Northern Ireland as a capacity mechanism is already in place through the Single Electricity Market (SEM); and
  • Treasury plans to introduce a UK-wide Carbon Price Floor and problems associated with its introduction in Northern Ireland.

 

5. The Minister wrote on 16th January 2012 (Appendix 2) to inform the Committee that a study had been undertaken on behalf of the Department and the Utility Regulator’s Office to analyse the impact of EMR on incentivising renewable electricity in Northern Ireland.  The Executive Summary of the Report, entitled “Electricity Market Reform – Analysis of Policy Options for DETI and NIAUR”, is included at Appendix 4.  At its meeting of 26th January 2012, the Committee agreed to receive an oral briefing from the Utility Regulator on the proposals to assist in clarifying some of the technical details and on the impact of the possible future adoption of a FIT with CfD.  The Committee also agreed to receive an oral briefing from the Economist, John Simpson in order to obtain an independent economic perspective on the proposals.

6. The Committee received an oral briefing from John Simpson on 9th February 2012 and from the Utility Regulator on 12th March 2012.  The Hansard transcripts of these briefings are included at Appendix 5.  Arising from the briefing by Mr Simpson, the Committee had a number of questions for the Utility Regulator and for the Department.  The responses to these questions are included at Appendix 

7. The Minister wrote on 15th May 2012 (Appendix 2) to confirm to the Committee that, subject to an LCM, DECC’s Energy Bill would extend to Northern Ireland for the purposes listed at paragraph 3 above.  The Minister also confirmed that she would announce:

  • The closure of the NIRO to new generation and additional capacity after 31st March 2017;
  • Extension of the NIRO to 2037 to ensure that all stations accrediting up until 2017 receive the full 20 years support; and
  • Her intention to introduce the enabling powers for a small scale FIT in the forthcoming DETI Energy Bill.

 

8. The Minister also informed the Committee that she would seek the establishment of a single administration system across the UK for the FIT CfD as only 10-15 contracts would be expected in Northern Ireland annually.  Members subsequently received an oral briefing from the Department on Electricity Market Reform at its meeting on 14th June 2012.

9. At its meeting on 15th November 2012 the Committee received an oral briefing from the Department as part of pre-legislative scrutiny of its plans to introduce an Energy Bill to Northern Ireland to cover provisions for (among other things):

  • The development of an energy efficiency obligation;
  • A small scale FIT CfD; and
  • A higher priority to be given to sustainability in the statutory duties of the Department and the Utility Regulator.

 

10. Members noted that respondents to the NIRO consultation had agreed a small scale FIT would be an appropriate means of incentivising small scale renewable installations.  The Hansard Transcript from the briefing is included at Appendix 5.

11. The Westminster Energy Bill (Appendix 3) makes provisions covering a number of areas.  These are summarised in the Legislative Consent Memorandum at Appendix 1.  However, it is only the Electricity Market Reform Programme to which the LCM relates.

Committee Position

12. Having carefully considered the proposals in the LCM, the Committee is of the view that this Legislative Consent Motion, coupled with the forthcoming Northern Ireland Energy Bill, is the most appropriate means to extend to Northern Ireland the statutory framework and enabling powers for the Electricity Market Reform Programme to encourage low carbon electricity generation for ensuring security of supply.  The Committee therefore supports DETI in seeking the Assembly’s endorsement of the Legislative Consent Motion:

That this Assembly endorses the principle of the extension to Northern Ireland of the provisions in Part 1 of the Energy Bill, as introduced in the House of Commons on 29 November 2012, dealing with Electricity Market Reform.”

List of Appendices

Appendix 1 –The Legislative Consent Memorandum

Appendix 2 – Departmental Papers

Appendix 3 – Westminster Government Papers

Appendix 4 – Report on Electricity Market Reform

Appendix 5 – Hansard Transcripts

Appendix 6 – Responses to Committee Questions

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