Official Report: Minutes of Evidence

The Chairperson (Ms Lo): I welcome Bruce Harper, environmental policy adviser, and Dan Kennedy, policy adviser, from the Department of the Environment. I remind everyone that the session is being recorded by Hansard. I ask the two gentlemen to give us a quick briefing on the issue, please.

Mr Bruce Harper (Department of the Environment): Thanks very much. I will quickly take you through the background to the regulations. They stems from a 2012 European directive on energy efficiency. The European Commission had determined that it was not going to meet its target of a 20% reduction in primary energy by 2020, so it brought out the directive, which will largely be taken forward by the Department of Enterprise, Trade and Investment. The reason that the DOE is taking forward a small part of the directive is that, to a large extent, we already regulate those installations affected, in most cases for air quality, but in some cases for energy efficiency.

The regulations will affect large heat users, so anybody using over 20 MW. To put that into context, that is 10,000 kettles. Large heat users include dairies, power stations, hospitals, universities and things such as glassworks. What they will have to do is undertake a cost-benefit analysis through either cogeneration or by getting somebody to use the waste heat by piping it to somebody else who has an economic use for it.

There are some exemptions. We work closely with the other devolved Administrations in Scotland and Wales. If you have only a small amount of heat, you will not have to do a cost-benefit analysis. If you have the heat, but there is nobody within a reasonable distance to whom you can economically transfer that heat, you also will not have to do the cost-benefit analysis.

We estimate that that will affect around 22 installations over the 10-year period from 2014 to 2024. Are there any questions?

The Chairperson (Ms Lo): What is the cost to those organisations and institutions?

Mr Harper: We looked at that. AMEC consultants took forward an impact assessment on behalf of the Department of Environment, Food and Rural Affairs (DEFRA), and they estimate that it will cost between £10,000 and £40,000 to get a cost-benefit analysis done. In addition, there will be some minor costs — in the region of £400 to £600 — from administering the cost-benefit analysis. For the regulator, the costs will be somewhere in the region of £600 and £800.

The Chairperson (Ms Lo): That is a lot of money. Universities and others are already under financial constraints.

Mr Harper: It does seem like a lot of money. However, we looked at how much of a burden it would be, and we found that it is a fraction of 1% of the gross operating surplus. Therefore, we do not think that it will be an unreasonable burden.

The Chairperson (Ms Lo): Why is it so expensive to do that analysis?

Mr Harper: That is an excellent question, and I wondered about it myself. That is what the consultants came up with as their most reasonable estimation of the cost.

The Chairperson (Ms Lo): If they recommend any upgrade, will that mean further costs?

Mr Harper: Yes, but large heat users will be required to go ahead with the upgrade only if it is going to save them money. They will have to undertake a cost-benefit analysis, and if that shows that they will be saving money by selling their heat to somebody nearby, they will be required to do that, but only because it will be saving them money.

The Chairperson (Ms Lo): Do members have any questions?

Mr Boylan: It was very nice of Europe to bring the directive in.

The Chairperson (Ms Lo): There is not much that we can do. We have to go along with it.

Mr Harper: It is a European directive.

Mr Boylan: You could write to Europe and thank it for the directive.

The Chairperson (Ms Lo): If we do not approve it, we will face infraction fines.

Mr Boylan: Is there any money to assist businesses that are affected?

Mr Harper: Not that I am aware of. There are big benefits from energy efficiency: it makes the economy more competitive and reduces our dependence on imported fuels, which protects us against shocks in the price of those fuels. It also has the environmental benefit of there being fewer CO2 emissions and fewer pollutants from burning fuel.

Mr Boylan: In future, if there is a directive that impacts on business, perhaps there should be financial assistance to facilitate business to adapt to the changes. That is something that we should consider in the future.

Lord Morrow: You mean from Europe.

Mr Boylan: From European yet. It is a European directive.

The Chairperson (Ms Lo): From Europe, not from our Government.

Lord Morrow: The directive —

The Chairperson (Ms Lo): Any subsidies or grants would come from the EU, but they would be applied through DETI.

Mr Boylan: Put simply, there is a European directive that impacts on businesses, the costs of which are outlined. Surely there should be some financial assistance provided, or some other assistance. Obviously, the benefits will be long term, but there should be financial assistance made available.

The Chairperson (Ms Lo): That is something that should be argued for, but probably by DETI and the Committee for Enterprise, Trade and Investment rather than us.

The Committee for the Environment has considered the draft statutory rule — the Pollution Prevention and Control (Industrial Emissions) (Amendment) Regulations (Northern Ireland) 2014 — and recommends that it be affirmed by the Assembly. Do members agree?