Belfast Telegraph

Why we need bright ideas to solve energy problems

By John Simpson

Electricity users and electricity policymakers will be reading the small print in the Chancellor's autumn budget statement this week. There is expected to be some clarity on the way in which incentives in Great Britain are trimmed or reduced for investors in energy from on-shore wind plant.

In recent years, the subsidies for on-shore wind energy plants have been too expensive. The rewards to investors, through the Renewable Obligation Certificates (ROCs), have proved so successful that the updated assessment is that customers are paying more than is necessary to incentivise production of renewable electricity.

The policy in GB is to switch to a less extensive and better-directed effort from renewable energy sources.

The changes applicable in GB will not only change the basis for incentives to investors, but, in a somewhat controversial dimension, will bring forward the end date for the present subsidies (ROCs) regime. In GB, potential investors under the existing scheme will cease to qualify if they have no firm contractual base, from April 2016 (with a period of grace for the completion of the project) followed by a 20 year operational agreement.

Northern Ireland policymakers, now led by minister Jonathan Bell, have been caught with a serious dilemma. Northern Ireland policy was expected to follow changes in GB, which (until the General Election) envisaged a phased withdrawal of ROCs after March 2017.

The position in NI has, until now, been facilitated by an agreement with the GB department which has 'postalised' or shared the UK-wide costs of paying for ROCs. If the Westminster minister, Amber Rudd, is to agree to retain this cost-sharing arrangement, then she has made a decision that can only continue if NI keeps in step with the GB changes.

For Minister Bell, the decision by minister Rudd poses an uncomfortable choice. He would like to agree a NI waiver for approved new investors, possibly until April 2017.

His London counterpart is reluctant (more than reluctant, it seems) to accept a special waiver or opt-out for NI.

Either NI agrees to a parallel scheme to GB or NI goes it alone.

If NI goes alone into a changed scheme for on-shore wind energy, then NI customers will pay higher prices. The cross-subsidy of the GB scheme would no longer exist. The cost of going alone is variously estimated, but might be near to £50 per household each year: that might cost over £37m pa.

Minister Bell is naturally reluctant to lose the benefit of the system of postalised charges. He is also acutely aware of a number of potential investors for whom an earlier cut-off date for the existing ROCs scheme will be a loss of potential attractive earnings.

Secretary of State, Amber Rudd, is proving unsympathetic. Her defence lies in the application of the policies that the Conservative Party made clear in election promises earlier this year.

Jonathan Bell still hopes for a compromise scheme that would leave the door open for most of the NI potential investors, both small scale, usually on farms, and larger-scale projects. However, he is sanguine enough to realise that the cost of going alone into a local renewable energy subsidy scheme is likely to be unacceptable when compared to the current shared costs current scheme.

The policy dilemma on how to pitch the subsidies for renewable (wind) energy sits alongside a series of serious energy related questions. The argument about the impact of energy costs on the economics of manufacturing industries has been painfully illustrated by the Michelin decision.

The minister now has a number of energy questions where he needs constructive help. Will he commit local customers to £37m higher costs each year for renewables? Will be do anything to avoid the £15m extra costs of NO north-south interconnector? Will he soon finish paying £24m each year, whilst waiting to repair the Moyle interconnector?

Clear thinking required.

Company Report: Ards Holdings

Ards Holdings is the parent company for well-established operational construction company Gilbert Ash. The financial results are heavily influenced by the trading performance of that subsidiary.

In 2014 Ards Holdings registered a continuing, if smaller, operating profit. The active workload in the construction sector has been falling. The company reports that the group has been engaged in business throughout the UK, as well as in Ireland and elsewhere in Europe.

In 2012, pre-tax profit was affected by an exceptional cost of £5.2m which at that time was attributed to costs arising on a number of then current contracts. Without those exceptional costs, pre-tax profit would have been £798,000.

The group has recently also been involved in contracts in retail and commercial fit-outs and has sought business in the sale of conservatories and sunrooms.

The group reports that market conditions remain highly competitive. The directors are encouraged by the present order book and expect a significant increase in turnover in 2015. They point to a focus on developing the business in Great Britain where they have identified an increase in the number of tender opportunities.

In a further sign of a possible upturn in the construction market the directors point to the emerging risks of a shortage of skilled labour alongside long lead times for key material supplies in Great Britain.

The company has not allocated an dividends in the last two years. In 2012, £0.53m was paid, but since then no further dividends have been recorded.

Average employment peaked in 2007 with an average of 192 staff. Since then numbers have fallen steadily until 2013 when they reached 110. More recently the average number has risen to 119 people.

Belfast Telegraph