Official Report: Minutes of Evidence
Committee for Enterprise, Trade and Investment, meeting on Tuesday, 10 November 2015
Members present for all or part of the proceedings:Mr Patsy McGlone (Chairperson)
Mr Steven Agnew
Mr A Cochrane-Watson
Mr Gordon Dunne
Ms M Fearon
Mr P Girvan
Mr William Humphrey
Mr Fearghal McKinney
Mr M Ó Muilleoir
Witnesses:Mr Peter Baillie, Northern Ireland Renewables Industry Group
Ms Meabh Cormacain, Northern Ireland Renewables Industry Group
Mr James Smyth, Northern Ireland Renewables Industry Group
Ms Lucy Whitford, Northern Ireland Renewables Industry Group
Economic Benefits of Onshore Wind Energy: Northern Ireland Renewables Industry Group
The Chairperson (Mr McGlone): With us today we have Ms Meabh Cormacain, who is policy and communications coordinator at the Northern Ireland Renewables Industry Group (NIRIG); Ms Lucy Whitford, head of development for Ireland at Renewable Energy Systems (RES); Mr Peter Baillie, managing director of Energia; and Mr James Smyth, contracts director at W&H Alexander Civil Engineering. Thank you for attending. Meabh, you have been before Committees before. You will make your case: we will not have four separate cases made, because the pressures of time are on us and the Assembly agenda is moving very fast. After you make your case, members will have questions. In the interests of efficiency, we do not require four different answers or four differently angled answers to those questions.
I made sure that you got the correspondence, which you otherwise would not have seen. As you have learnt — you were here for the whole session — we did a lot of scrutiny during that, and we would be indebted to you for your interpretations of what is before you. Meabh, I take it that you will lead off.
Ms Meabh Cormacain (Northern Ireland Renewables Industry Group): I will. I beg forgiveness: I am not qualified to talk about specific projects, so I will give you a brief overview and then ask my colleagues to provide a little more detail on certain aspects.
Ms Cormacain: We will try to stick within those time lines.
Thank you to the Committee for the opportunity to be here today. NIRIG represents the large- and small-scale onshore and offshore wind, wave and tidal sectors in Northern Ireland. We are an industry association that works on consensus, support for policymaking and best practice across renewable technologies. We are here to discuss the findings of this report, which members will have received a summary of in the post recently. It is the first report of its kind for Northern Ireland: it focused on the economic benefits of large-scale onshore wind, and we chose a specific methodology because it aligns with a similar report that was published in the UK for 2012 and 2014. This is the first such report for Northern Ireland.
I will spend a couple of minutes on that, and then my colleagues will discuss some of the issues that have been raised by the earlier departmental briefing to the Committee.
As I said, the economic benefits report was commissioned using nine local case studies, so it was very much based on what is happening on the ground with large-scale projects across Northern Ireland. It is similar to UK-wide reports, and we did that so that we could compare and contrast effectively the Northern Ireland situation with that in other parts of the UK. There are findings at a very high level, and I am sure that you have had a chance to look through it. I can also provide the full-scale report afterwards if you want to get into the detail. In a nutshell, one of the key findings is that Northern Ireland benefited to the tune of £32 million last year as a result of the large-scale onshore wind sector. That was then subdivided into the impact at a local council level, so, of that value, £9 million was felt at a local council level.
There are increasing levels of investment coming in to the local economy. Compared with reports done in 2012, the proportion of local investment is increasing, and I think that that represents what our members are doing about trying to ensure that there is greater local content of wind farm developments. It means that almost half of spend and investment on wind farms in Northern Ireland, 49%, is kept in Northern Ireland. There is some detail within that; for example, in the operations and maintenance phase, which is the longest phase, two thirds of investment is kept locally.
There is a figure there that you will not see in the report, but I did work it out because the report is based on per megawatt figures. I thought that it might be easier to think in turbines rather than megawatts. If the average turbine in a wind farm in Northern Ireland is, say, 2·3 megawatts, that turbine represents £2·7 million worth of investment to Northern Ireland. That is not the cost of purchasing the turbines, which, by and large, are manufactured elsewhere. The local benefit of each turbine on a wind farm in Northern Ireland is £2·7 million. You will not find that figure in there because I did have to work it out using a calculator.
Those are the high-level findings of that report. I have deliberately kept it brief to give my colleagues the chance to discuss some of the specifics of that. To close my own section, I will say that our members want to invest in Northern Ireland. They want to invest in renewables in Northern Ireland, and they want to continue to bring benefits to local communities in Northern Ireland. We want to keep jobs in renewables in Northern Ireland. Policy uncertainty will prevent us from doing all three of these, so we are here today to ask for a rapid decision on the policy that is right in front of us, which is the NIRO closure. I will hand over briefly to Lucy and then Peter and James.
Ms Lucy Whitford (Northern Ireland Renewables Industry Group): RES is Northern Ireland's largest independent renewable energy developer, and we have been working in the sector since the early 1990s. We have developed and/or constructed more than 37% of the wind farms that currently operate in Northern Ireland. We are based in Larne, with 25 members of staff, covering lots of disciplines from the early site finding through development and into the construction phase of projects and also growing our operational business, which involves looking after and keeping running the turbines across Northern Ireland. We have over 83 megawatts of wind that has secured planning permission, and we have 112 megawatts consented to or under construction. We have invested £25·6 million on one specific project that working on with Alexanders, which has gone into construction. That is a project that we expect to get the NIRO support for, and we have taken the investment decision already to go into construction. What we hear today leads to uncertainty, and, following on from Meabh's point, certainty is absolutely key here.
In addition, we have a number of other projects that could come forward under the NIRO, equating to another £28 million. The figures that I have quoted exclude business rates, local economic spend and community benefits, which in total across these projects would be an additional £28·9 million. Overall, in this NIRO period, which is up to April 2017, working on the proposals to date, RES would like to invest £82·5 million.
As a review, at the end of 2014, there was approximately 614 megawatts in operation. Figures vary. We heard the Department talk about a figure of 650 megawatts with consent. If you use a 600-megawatt figure and multiply that up, according to my calculation, in terms of commitment and investment in the NIRO, what we are talking about at risk here is over £900 million. That is very significant.
The uncertainty since the summer has really damaged investor confidence and is impacting on financial investment decisions as we speak. Peter will cover a bit more of that. It makes it difficult for us to move forward on projects, particularly projects that were already in construction. There was a little discussion today on the grid and on our Altaveedan project, which is the one that we are working on with Alexanders. We have a commitment to NIE of £1·7 million. That is an investment decision that has been made. It is a commitment that has been made that we cannot get back, never mind the development spend and the construction spend that we are undertaking.
Mr James Smyth (Northern Ireland Renewables Industry Group): As the contractor, I am speaking from the coalface. Alexanders is a family-owned business. We are located in Omagh in County Tyrone. We have 55 full-time jobs, with approximately 25 continuous subcontract jobs. These range from professional people, civil engineers, quantity surveyors and health and safety officers to excavator drivers, labourers, tradesmen, joiners, plumbers, electricians etc. We have built a total of 35 wind farms throughout Ireland and the UK. We are exporting our knowledge outside of Ireland and Northern Ireland and constructing wind renewable projects in Scotland and England.
We have made a heavy investment in employees in training, such as first aid and environmental training, and in work placement students from second- and third-level education. We have invested heavily in specialist plant and machinery. For example, the terrain where these projects are built is often difficult, so we have invested in six low-ground pressure excavators that are unique to this type of work. We have placed a lot of reliance on renewable projects and the associated infrastructure. That is what our business is geared towards. We have aimed our business at that. It is a niche market that we have found ourselves in. Currently, we are employed on four projects, three in Northern Ireland and one in Scotland.
What I am here today to say is that the Government's decisions over the past months are starting to affect us and our supply chains. It means that a lot of risk is being pushed onto us, as contractors and companies, and the people below us. To give you an idea without going into depth, as contractors, we are finding that, because of indecision within government, there are prolonged procurement and tendering periods, which means more cost to us and more uncertainty. As well as that, when we do get projects, developers and people like that must protect themselves. They build in clauses, such as termination for convenience clauses. We have to accept those. That is then passed to our supply chain, should it be designers, civil designers, quarries, concrete plants etc. We cannot guarantee that these projects will see the finish line.
What we are saying is that it is anticipated that, as a result of the current ruling, opportunities for projects, and jobs for that matter, are going to start falling off towards the end of this year because everybody is looking towards the targets in March 2017. Current resources are significantly reducing. Most of our work, as a company, is geared towards this. Civil engineering and construction and building has fallen off since 2007.
We have found that this is probably our lifeline and our supply chain's lifeline to continuing civil engineering and construction works. Again, it is good solid work. It provides solid engineering and construction jobs and is a lifeline in the downturn. It is important for the area that we are based in, which is west of the Bann, where there is very little direct foreign investment, and we see these projects as that mechanism. I will hand over to Peter.
Mr Peter Baillie (Northern Ireland Renewables Industry Group): I would like to say a few words. There is just one little correction. I am the managing director of Energia Renewables rather than the Energia Group. Some of you will know Tom Gillen my colleague, who is the managing director of the Energia Group.
I just want to speak very briefly about the financial uncertainty as the result of a NIRO closure not being implemented at this stage. We have five projects at the moment that meet the eligibility criteria. We have commenced construction on one of those, and another four are about to commence. Banks in Belfast this morning are trying to put in place financing agreements. Those banks want certainty that the projects will be eligible for the renewable obligation. The delays in that are putting on hold decisions to make payments, including payments to NIE for cluster substations that have already been committed, because we need certainty that that is going to go through, and our lenders will not lend us money until they see that enacted. So, we are very concerned by the delays.
We understand that the Committee wants to look for solutions for small scale and so on, but, from an investment point of view, turbine orders need to be placed now. There is a 12- to 15-month lead time. For example, we have a project at Long Mountain, near Rasharkin. That is a 28-megawatt project, which represents over £40 million of investment. The turbine order is £16 million to £17 million. That has to be placed before the end of this year, but we are hoping to sign that by the end of this month. We are following the decision around the NIRO very closely.
To date, we have invested £30 million in the five projects that I mentioned. That is increasing to £60 million by the end of December, and it will go up to £100 million by the end of quarter 1 next year. We cannot fund that without certainty. We need the banks to lend us a significant amount of that, which they are prepared to do, but they need to see this enacted. Across those sites, 250 jobs will be supported with local and Irish contractors, Alexanders being one of them. The wind farms will contribute £700,000 per annum in local authority rates and community benefits of £150,000 per annum. So, the local communities will benefit from that. All that is at stake without a timeline for a decision on this issue.
Obviously, there are other spin-off benefits in local areas with other employment, such as hotels, suppliers and so on. So, our message today is that we need an urgent decision on the NIRO closure. We have already seen a number of amendments proposed to the GB Bill, but our message is that time is running out on this issue. There is no easy safety net. We will reach a point where the investment decision will come too late without access to the finance that we need, and that finance needs to be underpinned by the enactment of the NIRO closure.
Ms Cormacain: I have a little spiel here, which I will go through just to conclude. There is a lot of uncertainty in the sector, and, Chair, you referred to what happens after 2016. As it stands, there is no support for any renewable technology after March 2016, apart from, potentially, some grace periods. That makes Northern Ireland one of the few places in Europe where there is nothing to encourage renewables investment. It important to bear in mind the need for a long-term vision, and we understand that the strategic energy framework will be under review shortly. That is the time to recommit to the long-term vision of sustainable energy for Northern Ireland, but, very specifically, today, the first step is for you to, please, do your utmost to provide clarity as quickly as possible for the renewables industry. I will respond to the DECC letters.
Ms Cormacain: We have had quite a lot of discussion with our small-scale members. We probably represent about 90% of the large-scale sector in Northern Ireland and a smaller percentage of the small-scale sector, but we do represent small scale. It is fair to say — I will not lie — that a lot of our members across the sectors are not very happy about the early closure of the NIRO. However, the absolute crux of the matter was to establish what was the most important thing. The most important thing is that we need a decision quickly. There are two deadlines —
The Chairperson (Mr McGlone): Sorry, to interrupt you, Meabh. You could get a quick decision that is the wrong one for a whole lot of other people. I listen to what you are saying very clearly, but we have to consider others as well. You heard earlier from the Department. You heard the case that we are trying to work through and achieve a solution that stands up. We are seeking solutions here. We will try to do that in the Committee. It depends on the Department. We do not want to bung a hole over here to create a flood over there.
Ms Cormacain: I understand that the Committee has the interests of many companies and businesses and investment in Northern Ireland at heart. We represent the small- and large-scale wind sector. The consensus that we got back — it is in our consultation response, and we are saying it again today — is that we have two deadlines. There is the deadline for understanding what the eligibility criteria will be and what the grace period looks like. That is the first thing; that is the detail that we are discussing at the minute. The second deadline is the cut-off date for getting a project through the door before you have no access to the NIRO. The longer we take to reach that first deadline, the more likely it is that we will fail to hit the second deadline. We have to bear in mind both of those. Our small-scale members are saying the same thing: we would need to know now what the criteria are. We need to know, in legislation, what is going to be possible. If we do not know now and we wait another six months, we will not be able to build out; we will miss the second deadline altogether. Missing the second deadline is, effectively, the death knell for a project at the stage of major commitment.
The Chairperson (Mr McGlone): If you have listened to the same small-scale developers as many of us have, they are very severely committed and have been hit by the knock-off date of 30 September. Anyway, we can go into that. You hear where we are coming from in trying to seek solutions. We have been landed, essentially, with a mess.
Ms Cormacain: I would not disagree.
Ms Cormacain: That was it; our understanding from the DETI presentation earlier was that there was a lot of inflexibility as regards the agreement to socialise costs if policy changes. It is very difficult for us to know exactly every nuanced detail of what has been going on in meetings or letters back and forth, but, from my reading of this — I am not sure whether anyone else on the panel wants to jump in — DECC seems committed to ensuring that, if we do something different in Northern Ireland, the Northern Ireland consumer pays. That is a policy decision that we will not make; we will not offer judgement on that. If we do something different, and the Northern Ireland consumer pays, that is a decision for here. If there is flexibility, I would like to think that we would have heard about that before now. It has been almost half a year at this point. We do not seem to be getting any more flexibility now than we were getting back in June. The longer the conversation goes on, the harder it is to understand what could and could not change. As you said, it is messy.
Ms Whitford: Chair, would you mind if I came in?
Ms Whitford: A lot of the discussion was potentially about smaller-scale projects that may still not have consent. That applies across the board for small and large; a large number of projects, probably from the larger scale, still have not got consent. There is so much investment in the consented projects, which are the projects already seen to be eligible. The £900 million figure that I calculated and quoted would more or less cover all onshore wind. That is the kind of investment figures that we are talking about. Potentially, they could be lost because of no certainty. I think there are two steps. There is a step about the eligibility, projects that need certainty and that we are making investment decisions on. I expect that the smaller-scale developers, landowners and farmers are making those decisions, as are the large-scale ones.
The landowners that we are involved with want to see our projects go forward on the larger scale, but it is important to note that lack of certainty creates a risk to all of onshore wind. It is not just about the eligibility and those projects that are at risk if the NIRO closure does not go forward.
Mr Baillie: In terms of the small-scale projects, first of all, as Lucy has said, they need the certainty that the large-scale developers need as well. They need to access funds. Those projects cost in excess of half a million each, and maybe a lot more if there are grid connections. The second thing is that, for a lot of small-scale projects, the problem is not so much with planning but with grid and the availability of grid. That dispensation times out anyway, so there is a real question around how many birds there actually are in the bush as opposed to birds in the hand. Projects that are eligible today are birds in the hand. There is a socialisation deal on the table today that those projects need in order to invest. In terms of the pipeline of projects, probably a much smaller percentage of those projects would actually be able to meet the eligibility criteria through grid connections than there would be in the planning process, for example. So, we are not sure what the real level of loss of projects would be. We would be concerned that we would end up fighting for something that, going forward, does not amount to very much, whereas we are at risk of losing what we do have.
The Chairperson (Mr McGlone): But if you do not fight for it at all, you will not get anything. Anyway, that is just an observation. There are a couple of other members who want to come in.
Mr Agnew: Thank you for the presentation. I am going to be annoying and ask about numbers. To begin with the Department's numbers, it seems to think that a decision will secure 600 megawatts but the decision not to continue to 2017 with the one-year grace period would cost approximately 50 megawatts. Are those roughly similar figures to what you are working on?
Ms Cormacain: It is not a million miles away. It is very hard to know exactly, because, with the DECC Energy Bill still being batted back and forth between the House of Commons and the House of Lords, things are inserted and removed, so it is impossible to say, but it is definitely not a million miles away from our figures that we would have guessed between the small and the large scale.
Mr Agnew: So it sounds reasonably accurate. That is a point, actually, on the potential changes, and we have seen the defeat in the House of Lords, but, obviously, the proposal in the consultation is what is likely to come forward in our legislation. Whilst there will be nuanced differences across the UK, is it your understanding — if we make an early decision, even if there are beneficial changes made to the sector in GB — that in Northern Ireland we will have to follow a fixed position?
Ms Cormacain: We understand that it will have to follow a fixed decision, but the point was made earlier that the policy that we see, as laid out in the Energy Bill, is changing a little bit. I think it was John Mills who said that the nine-month investment hiatus is something that, it appears to be accepted, could be included within the Northern Ireland legislation as well — the issue of the projects at planning appeal. That could be included. I also understand that, just because grid and planning are slightly different here as well, there could be minor tweaks, but tweaks only.
The difference is that the Energy Bill is primary legislation. We are not likely to see that written in stone until March next year, which does make it difficult, because there is the small chance that something amazing could come through before the rest of the UK. We really do not think that is likely. We actually have a power in Northern Ireland — alone among the other regions of the UK — to make a decision. It is secondary legislation. It is a closure order that could be passed here relatively quickly.
We do not have to wait six months for Royal Assent to the Energy Bill. We can do it now, whereas the rest of the UK will still be waiting, and developers elsewhere will be unsure of exactly whether they can reach financial closure, because there will be that uncertainty. We can do it quicker than anywhere else.
Mr Agnew: The Department gave a figure of 20 job years for each megawatt. Is there a breakdown of the number of jobs per megawatt, whether that is job years or just concrete jobs?
Ms Cormacain: It is hard to comment on those figures without seeing the methodology behind them. We have said that, from looking at the case studies in Northern Ireland and based on the economic benefit report, it varies, depending on which phase of the project you are talking about, whether it is early-stage development, the construction phase or operation and maintenance. Operation and maintenance, for example, is a lower number of jobs per megawatt but is over a 25-year period. It is therefore proportionately a lot higher. Jobs per megawatt for the large-scale sector, based on what we have seen, is about two jobs per megawatt based on the current large-scale projects that are operational. That is our methodology, but it is very difficult to compare and contrast, because we do not know the figures for other technologies.
Mr Agnew: That is presumably why they are working in job years. You make the point that there will be different jobs and temporary jobs.
Ms Cormacain: Yes, the construction phase is much more intense.
Mr Baillie: For our projects at the moment, there are four construction jobs per megawatt.
Mr Agnew: What is the per-megawatt investment figure? You said that just under 49% of the investment stays in Northern Ireland.
Ms Cormacain: Again, directly from the report, per megawatt overall, the investment is £1·75 million for large-scale onshore projects, but, of that, £1·18 million is kept in Northern Ireland. That is the £1·18 million per megawatt for Northern Ireland. If you equate that to a turbine, you get the £2·7 million figure.
Mr Agnew: Does that include rates and community benefit?
Ms Cormacain: The figures that you hear are perhaps from different places. The DETI cost-benefit analysis and the 40% target in June this year did not include rates, landowner payments or community benefits, whereas our report does. Therefore, there are some differences.
Mr Agnew: That is useful, because there are a lot of figures being bandied about. It is good to have consistency, and it is good to hear that your figures do not differ widely from the Department's.
I will come back to the issue of delay. You have been very clear that you are seeking an early decision. You have heard the Committee's proposal to seek to have direct engagement with Amber Rudd, and for that engagement to include our Minister, if possible. I can only imagine that, although it might improve outcomes and what the final deal looks like, it might add further delay. Would you rather see proposals in the consultation, as imperfect as they are, agreed soon rather than have continued negotiation? I think that that is the message that I am hearing.
Ms Cormacain: It is the consensus.
Ms Cormacain: Yes, it is the consensus among NIRIG members.
Ms Whitford: If the discussion were to end up with a non-socialised cost, we would be in a very difficult and different position. That is for small- and large-scale projects. Yes, there is a delay, and that is a very real concern, but I would worry if there were to be something in there about non-socialised costs. The socialised cost has been a real focus of the Committee over the months.
The Chairperson (Mr McGlone): One thing has cropped up, Mr Baillie, and I am interested in drawing on your experiences. It concerns NIE and its capacity to deliver the grid connections. A worry was expressed to me that, because of an overload of applications, NIE will potentially refuse applications. The worry is that that overload, or over-demand for such applications, would be such that NIE could not conceivably deliver within the time frame that would reasonably be expected by the regulator and others. Have you had that experience or heard that issue raised?
Mr Baillie: NIE is very stretched by what is already covered by the eligibility requirements — the 600 MW of large-scale and small-scale wind connections that have to be connected before 31 March 2017. That is a massive challenge for it, and it is already stretched in trying to deliver that.
In addition, I understand that it has something like 650 or 800 further applications for grid connections that it is currently trying to process. That is placing a huge burden on NIE as well. As far as that pot of further applications that have still not been made into connection offers is concerned, the question is how many of those it could deliver in the timescales. That is the point that I referred to earlier. Our view is that it will be very difficult for NIE to deliver a lot of the applications that are in there by 31 March 2017, given what else it is already committed to. If people get an offer, and that offer gives them a date after March 2017, the connection will not be eligible, under any circumstances, for socialisation. It is critical that NIE can do that, but its resources are very stretched.
Mr Girvan: Apologies that I did not get to hear your full presentation, but I think that I have got the gist of where you are coming from.
The industry at large is in a quandary, not just in Northern Ireland but in the rest of the United Kingdom, because of what is going on with DECC and how that will pan out across the United Kingdom. What engagement have you had with the System Operator for Northern Ireland (SONI) about ensuring that we do not have a feed-in tariff? I am getting mixed messages. One group is telling me that wind energy is not necessarily making it turn down turbines, whereas there are other lines of renewables that it can accommodate.
As well as that, I want to find out about the feed-in tariff. If it still existed, there would still be an ability to put up turbines and get that feed-in tariff amount. If that feed-in tariff were on a level playing field with the rest of the United Kingdom, would that give some long-term assurance to the industry?
Ms Cormacain: I suppose that there are two points there. I am not sure about your first question, which was about SONI. Is it about accepting applications?
Ms Cormacain: My understanding is that SONI and NIE are obligated to accept and process connection applications within a 90-day period. To my knowledge, that still applies.
Mr Girvan: There is no indication that SONI will cap that or say exactly what the Chair has said, which is that there will be a point at which it will use the argument that it cannot provide or —
Ms Cormacain: I do not know.
Mr Girvan: SONI seems to be investing even more in solar connections than it is investing in grid connections for wind. That is the point that is coming across to me. There seem to be fewer problems being thrown up for those who wish to apply for connections for solar farms.
Ms Cormacain: I am just guessing, but that may be connected to the small-scale turbines.
Mr Girvan: No. I am talking about large solar farms of 125 or 250 acres. There seems to be less reluctance to connect those to the grid than there is for wind turbines.
Mr Baillie: There are a number of issues there. For solar power, it depends where you are connecting on the network and whether there is strength in the network for a capacity to connect. Wind farms typically connect on hillsides, and so on, which are maybe more remote.
The application process is exactly the same for solar farms and wind farms, and NIE processes applications in the same way. There may also be issues that the developer has with the level of constraints or curtailment that might occur. Those might look different for solar, which operates during the daytime, when there are higher levels of demand, as opposed to wind, which operates around the clock, with perhaps lower levels of demand at night. However, NIE's process for connections is the same for solar as it is for wind. That perception, which comes partly from smaller-scale wind projects, is as a result of the 11 kV network being very weak. There are very limited opportunities for small-scale wind projects to connect at many points, so there is frustration at not being able to get connection offers that are viable or at not being able to get them in time, whereas solar farms that are perhaps connecting beside a new node or a transmission hub are able to get a connection.
Ms Cormacain: We understand that there was a consultation done in 2012 on powers to introduce a small-scale fit for Northern Ireland. An announcement was made last year that that would wait until DECC consulted on a GB fit, with the request that Northern Ireland be included, or certainly considered for inclusion, by DECC in a UK-wide fit, rather than there being a GB fit. As the departmental officials said earlier, the decision was made when those proposals came out from DECC in August 2015. Quite abruptly but very clearly, DECC said that it had considered extending the small-scale fit to Northern Ireland but was not going to. That was the DECC decision on the small-scale fit. That was certainly the proposal, but we have not heard a final decision yet. Looking at that —
Mr Girvan: For clarification on that matter, have you looked into how feed-in happens in other jurisdictions, such as Scotland and Wales?
Ms Cormacain: It is the same across the rest of the UK.
Ms Cormacain: We are on our own. The other point to make is that my colleagues at RenewableUK were working very closely with us on the issue of the small-scale feed-in tariff. The support for all technologies has been slashed to the point at which the question that could be asked is this: would we want to enter into that particular small-scale feed-in tariff scheme at the levels that the UK Government are proposing?
There is a secondary consideration, which is the value of the GB small-scale fit and what DECC's decision will be on those levels for the future. Overall, as I said, there is nothing at the minute for Northern Ireland after 2016. As an industry, we are very concerned about that. We should all be concerned about it from a sustainable energy point of view, and how on earth do we decarbonise if we do not have renewable technologies? Are there schemes that we need to be looking at? Do we need to be getting innovative? Do we need to be looking at Northern Ireland-only solutions or at all-Ireland solutions, given that we are already in an all-island electricity market? Do we throw our oar in behind what the UK is doing? A discussion about what happens next is one that we all need to have, and quickly.
Mr Girvan: I appreciate that time is of the essence, and, from an industry point of view, I understand exactly your quandary. Nobody knows where you are going, so you have to restore commercial confidence in the banks and other funding sources. Does the small-scale feed-in tariff make wind energy a viable alternative in the absence of any additional incentives?
Mr Baillie: I will clarify one thing that Meabh said, just so that everyone is aware. The current level of support for small-scale is four renewables obligation certificates (ROCs) or the equivalent of the feed-in tariff in GB. The proposal in the consultation is to reduce that to the equivalent of one ROC, which, I believe, for a small-scale project, would make it non-viable.
Mr Girvan: That is all that I want to hear. Thank you.
Mr Dunne: Thanks very much for coming. We have all had a considerable amount of correspondence from your organisation and believe that you have presented a strong case. Obviously, we are in a very difficult position and are trying to weigh up all our options.
The other thing that always comes to mind is the considerable lead-in time that there has been for your projects. In our experience over the years, it is years in many cases. If you lose out here, we will have lost out on a considerable amount of work that has been done, as well as investment in time and many other resources. Can you highlight a programme that comes to mind that underlines the considerable lead-in times that there have been for some of your projects?
Mr Baillie: There were 10 years from inception to operation of the wind farms that we built in Crighshane and Church Hill outside Killeter, near Castlederg. That is probably on the lower side of the cycle time. It will vary between eight and 12 years, or it may even be 15 years in some cases. Therefore, there is a very long cycle time for a wind development project. The projects that we are seeing now under the NIRO have been going for a minimum of 10 years.
Ms Whitford: I will add one example. We have the Castlecraig project, which is near Drumquin. It received planning consent in 2011, having been in development since early 2006. In fact, it was at the planning and development stage earlier than that. The project's planning consent runs out next May. We want to make a £28 million investment in that project. It is being delayed through the grid clustering approach. A number of projects are going into that cluster. We really need to make a start on the construction of that project in the very early part of next year, but it is very hard to make those investment decisions if there is no certainty. It comes back to how critical the investment decisions of industry, small and large, are in projects that have received consent, have grid connection and have met the eligibility criteria.
Mr Girvan: Are there other models used in the private sector that have similar power generation for which there have been incentives to extend the network to allow more accessibility? Has state aid been used to facilitate that on any occasions?
Ms Cormacain: For grid connections, I do not know. I suppose —
Mr Girvan: I am looking at it from an infrastructural point of view.
Ms Cormacain: I am not an expert on EirGrid's infrastructure plans, but there has been significant infrastructure undertaken in the Republic of Ireland, at transmission level, on an ongoing basis for a decade or more. That has cost, but it has ensured that the infrastructure —
Ms Cormacain: It will have been consumers. It was primarily at a transmission level to strengthen the backbone, but, as a result, the Republic of Ireland has seen announcements such as the Apple one of a €850 million investment in Galway. I do not know the details, but perhaps that would have been much more challenging without having had prior grid investment in that part of the country.
I am not sure about your question on state aid, but I can try to find out.
Mr Baillie: NIE has a settlement under its RP5 price control, which is soon to become RP6. As I understand it, it had specifically asked for moneys to upgrade the smaller parts of the network. That was not allowed, but NIE has flexibility, within the capital sum that it is allowed to spend, on where it invests that, and it is running behind on its investment programme. NIE therefore has scope to do certain things, although it had specifically asked to upgrade the smaller network in order to facilitate more of the small-scale people. That was rejected by the Competition Commission and the regulatory settlement last time around, because of the impact of cost and the impact on customers.
Mr Dunne: The risk to your projects will be very high if we cannot get this over the line.
Mr Baillie: Absolutely. We have said that we are approaching a point at which we will have to make these commitments. If we do not have the funding to make them, we will not be able to do that, and that will put at risk those projects and the jobs that go with them.
Mr Dunne: It is true to say that the projects that you represent will have a considerable input to the renewable energy sector here.
Mr Baillie: Yes. Our Energia projects are 73 MW, and we are talking about 600 MW in total coming here, if all the projects that are eligible can get built. There are a lot of challenges with a number of those projects. Therefore, 600 MW is effectively what is at risk now.
Mr Dunne: How does that compare with what we have already had brought online from —
Ms Cormacain: Some 629 MW is connected at the moment, from large-scale onshore wind projects.
Mr Baillie: Yes, it is nearly the same again. Part of the reason for that is the cluster methodology that has been referred to. A lot of projects have been on hold while the grid connections, as clusters, are being developed. At least 15 wind farms connect to clusters, all of which have been held up while the infrastructure was developed. That is why you are getting such a big lot coming forward at this stage.
Mr Ó Muilleoir: Thank you, folks. The good news is that we will stop for lunch. We will not be here for much longer, I hope.
You are really in a cleft stick, and we have a lot of sympathy for you. You make a strong case about the need for certainty and a swift decision. You are right: you have been very active in lobbying all of us for support for the renewable industry and for some decisions on the future.
However, when, for example, we were lobbied by Mr Gillen, what he did not say was, "What we might do is screw the small guy. We might shaft the small people and leave them behind, and we will be OK". That disappoints me. I hope that you did not know that that was one of the options, because, at the time, when we said to Energia and others, "This is a strong case. We need to improve our renewables output, so we will back you", no one said that we were going to leave behind the small man or woman. I am not up for doing that. I am certainly not up for doing it at the metaphorical point of a gun from DECC in London, which is saying, "You have to do it this way, or we are going to blow up the whole scheme".
Therefore, on the consensus that you mentioned, it would be helpful if you could bring to this Committee, or introduce me to, a small-scale developer who is in favour of going with the ultimatum that we have received from DECC, which the Minister has accepted. In his letter last night, he said, "It is her way or the highway". I have a letter here from Iain Lees, who represents Geini — that is Iain Lees of PricewaterhouseCoopers (PwC) — and Geini is not in favour of it. I have a letter from Simple Power, and it is not in favour of it. Yesterday, I met Wind NI and Renewable NI, and they are not in favour of it. Are you telling me that the consensus that you bring here includes those people?
Ms Cormacain: Of those you mentioned, not all are our members.
Ms Cormacain: They have not joined.
Ms Cormacain: It depends at what level they join at, and whether they join through RenewableUK or the Irish Wind Energy Association. We represent those two trade associations, and there are different levels of payment, based on the size of your company and whether you join as a sponsoring member or as a —
Mr Baillie: We are members of the Irish Wind Energy Association, and we are a sustaining member. That means that we have a seat at its council table. Our annual fee is about €21,000. A small-scale member can join for probably €500.
Mr Ó Muilleoir: The point that I am making is that those firms are probably not your members because they are exactly what we are talking about: small-scale people.
Mr Ó Muilleoir: Sorry, I just want to find out whether there is anybody in your ranks who is a small-scale who backs the decision that you have made.
Ms Cormacain: As I said, shortly after I finished my presentation, it would be fair to say that a lot of our members, small-scale and large-scale, are not particularly happy with the situation. To put it bluntly, we do not want to be in this position, and that goes for large-scale members as well as small-scale members. There has been a lot of different opinion as to whether 30 September, 31 October 2015, 31 December 2015 and 30 March 2016 are all appropriate dates, and whether it should be different for clusters, small-scale projects, those in planning appeal, those with planning applications and those without permission. There has been a huge amount of detail, discussion and perspectives among all our membership. What we were able to get consensus on was knowing sooner rather than later. Within that, I am sure that you have heard that our members have different perspectives on those dates and on the detail of whether this project or that project should be eligible, and that is absolutely fine. We represent the consensus, not individual projects. When we got down to it, we had to go with what we could agree on, and this is what we were able to agree on.
Mr Baillie: Wherever you draw a line, there will always be people who are not happy and want more. From the small-scale developer's point of view, if the line had been drawn on 18 June, there would have been an absolute disaster. With the line drawn where it is, a number of those developers, although they would like to see more, are seeing a significant number of projects. I know of one company that is seeing 60 small-scale projects getting through on that eligibility that would not have got through on 18 June.
As I said, wherever you draw a line, people will always want more, and that is understandable. There is a balance to be struck between getting certainty and seeing whether something more can be got for small-scale people. However, again, the context is that DETI is telling us that DECC is saying that it is all or nothing.
Ms Whitford: From a company perspective, we have smaller-scale projects. I am referencing a development pipeline of 177 MW. We had to take a decision on what projects were achievable under what we saw coming through DECC and being replicated through DETI. We have taken the investment decisions on what projects we can develop.
We then face a hiatus, because we do not have anything post the NIRO. We therefore feel that we need to have closure and certainty here so that we can move on to the next stage and develop the next steps for Northern Ireland. As renewables across the board, we all face this question: what is next?
Mr Ó Muilleoir: The reality is that, for the small-scale developer, there is no next step. Energia will emerge whole, and fair play to you, but the small-scale people such as those whom I met yesterday will be wiped out. As such, I am not in favour of it, but I appreciate you coming here to put your case.
The Chairperson (Mr McGlone): Thank you very much for coming along and giving us your professional opinions. We will be in touch as this develops.