More power: Scotland needs control of electricity policy

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Commentary by Fraser Wallace

Scotland has made significant progress with regard to the development of renewable energy systems. However, it is clear that to maximise the benefits of this opportunity it may need to take a radically differing approach from the rest of the UK.

Fraser Wallace
Fraser Wallace

Scotland is famous for its energy. The oil and gas industry has developed cutting edge technologies of worldwide significance and raised billions of pounds of revenue. More recently, alternative technologies have emerged as a principal font of excitement. Scotland’s wind turbines recently delivered more electricity than was needed in a day, grabbing the focus of the international media.

The rapid expansion of the United Kingdom’s renewable fleet saw renewables grow to the extent they generated 24.6 percent in 2015. In Scotland, the proportion of electricity consumption met by renewables is even greater- 57.4 percent in the same year. Scotland has shown global leadership in developing low-carbon electricity generating capacity. Costs associated with the wind industry have fallen significantly as the scale and number of projects has increased.

Essential priorities

A range of policies have been put in in order to reduce emissions of greenhouse gases, which are responsible for climate change. This priority formed part of the ‘energy trilemma’ for policy makers- the idea that Government has to ensure society is able to access clean energy, affordably and reliably. Currently, responsibility over energy policy is reserved to Westminster, although the Scottish Government does have some useful influence over policy implementation in Scotland.

Scotland has been fortunate to benefit from a plentiful renewable resource- anyone walking along the coast on a windy day will attest to that. Maximising the economic opportunity inherent from the Scottish climate will require more technology and more sophisticated electricity management systems. The Scottish Government needs the powers to accelerate this process.

Increasingly, combustion technologies such as coal and gas turbines are becoming white elephants. New, alternative (and green) energies are fully capable of being designed, built and operated in a manner that removes the economic or operational justification for construction of outdated fossil fuel generation plants. The future of power generation is already moving toward a diverse portfolio of renewables, albeit with a strong emphasis on wind and solar globally.

There are problems with the other ‘low-carbon’ power source, nuclear energy too. New plants are expensive, as exemplified by the back-door subsidy that was offered to the operators of Hinkley Point C, the UK Government’s proposed new generating station in the south of England. Other nuclear power plants under construction are already experiencing prohibitive cost increases. Proposals for new nuclear power plants highlight the UK Government’s priorities remain with centralised, large generating plant, seeking a perceived ‘security’ of supply’ even in the face of painfully high costs associated with the technology.

Scotland needs more modern thinking.

Falling costs

Initially supported by subsidy, the renewables industry is now operating at a scale that is delivering rapid cost reductions. In 2013, the (now disbanded) UK Government Department of Energy and Climate Change reported that the levelised cost of onshore wind could be favourable compared to nuclear and some gas turbine plants.

Since then, reputable economic platforms such as Bloomberg Finance have reported that costs for renewables have fallen further, with onshore wind energy emerging as the cheapest source of power. The Economist has warned of the risks of investing in an energy system which does not account for potential future commercial imperatives. It has also emphasised the cost-effectiveness of onshore wind.

Reliable renewables

Despite this, critics of non-traditional, ‘alternative’ energies remain. Some claim that wind energy cannot supply the ‘base-load’ of industry and domestic daily energy requirements. This is not true; traditional power technologies will find it increasingly difficult to compete in today’s market for two reasons.

Firstly, renewable technologies smother the market for fossil fuels by ensuring that only when demand is very high (above the level produced by wind energy) traditional technologies can sell their power. Fossil fuel technologies have to continue paying for inputs. For every unit of energy they produce, they have to burn a unit of coal or gas. That costs money. Their wind generating competitors do not face similar costs- the wind is free.

This means that when bidding into a national grid system, wind can consistently under-price its fossil fuel competitors. It has no ongoing input cost to pay for. Wind is the first energy onto the system.

Secondly, demand varies rapidly. Kettles boiling across the nation following the end of a popular TV show can cause massive spikes in demand. For this reason, ‘fast response’ is the essential quality of technologies operating in a wind-dominated system. That rapid-response is provided by fast-ramp gas fired generators currently. However, such gas technologies will struggle to compete with batteries, pumped storage or other demand and supply side responses in future.

Storing up potential

In Scotland, the country is not only leading in the generation of power, it is also leading in the development of technologies to manage renewables’ flexibility too. The Cruachan Pumped Hydro storage scheme has long been associated with grid management and it is heartening to see that a number of elected representatives have recognised the potential that further storage schemes offer. The Orkney Islands have been experimenting with using wind energy to create combustible hydrogen- which can be used to heat homes, fuel transport or generate power at a later point.

The Scottish Government has also made improving the efficiencies of buildings a National Infrastructure Priority too. There are significant issues with policies aimed at reducing demand across the UK, but it is commonly accepted that many of the UK Government previous policies – for example the Green Deal – have been a complete failure. Rates of installation of insulation measures remain far too low.

It is not just hardware and tangible materials that can push forward this improved management of energy. Software too, has the potential to permit use of energy when required, and shift demand loads away from peak times, reducing the strain on the grid and requirement for generation capacity. This is a key challenge which technology suppliers and software developers can hopefully address. The Scottish Government previously offered ‘the Saltire Prize’ as an incentive to develop new maritime energy schemes. A new competition should encourage development of new energy management software programmes. This would certainly create a stir in the already extant and vibrant software development community in Scotland.

Access to a greater resource has seen the wind industry commit significant effort to developing projects in Scotland. It is clear that the sooner innovation and supportive Government policy permit suitable deployment of energy storage and management systems augmenting the wind farm fleet, the greater the economic rewards for Scotland.

Opportunity is the mother of innovation, not necessity. It might be necessary for Governments all over the world to seek to combat climate change, but it is Scotland that is fortunate enough to have renewable opportunity in abundance. The Scottish Government can and should lead the way.

Note: All opinions in this article are personal

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15 COMMENTS

  1. Interesting stuff. There’s no doubt that the renewable industry will be our second oil boom. Will we be daft enough just to give all this one away as well?

    I would liked to have seen some mention of the costs to connect to the national grid for power companies up here compared to down south included though. It might finally dawn on some folk when they see that we’re looking to produce clean, cheap energy and then have to pay extra for the privilege of doing so. Just another of these union dividends they speak of.

    • Good point. The costs of connection are political in that tariffs are decided at Westminster. This must be factored into the GERS figures

  2. Until local affordable storage systems become available,we need to take back public control of energy transmission systems and have power supply companies who are Scottish based and will put Scottish consumer interests first.
    We shouldn’t have to pay for England’s expensive nuclear power unless there is no alternative or it costs less than home produced renewables.
    The energy “market” is rigged and not in favour of consumers.

  3. A good article.
    Both Dave Beveridge and bring into highlight the need for a distribution grid that delivers energy at equal cost irrespective of the point of need. This suggests to me that such a system should be publicly owned.
    I think there is a need for a more widely known system for people to invest in local alternative schemes. Such a system should allow for fairly small investors and particularly local investors to use this as a savings scheme, in the style of the ‘penny banks’ of centuries earlier, as well as for lump sum investments. There will have to be limits on the amount of the equity one individual can hold – and it ought to be individuals, mainly – and some system whereby shares can be sold back to the ‘collective’ to be available for sale to other individuals

  4. What a pleasure to read an intelligent and forward looking report into renewables. Scotland’s great renewable assets are our future oil wells, which will never run dry and never spoil the climate. The price of oil is neither here nor there, as we need to leave it in the ground.

    Storage is the key to matching our renewables supply with demand, but I really like the point that demand can be managed too, by shifting some demand to times when the energy price is lower. Modern software is the way forward, and it could allow users to minimise their costs.

    There are signs that even the Tories are beginning to see what poor value for money the nuclear power route is, and I hope that the EDF/Hinckley Point contract is never signed.

    The baby of the scene is wave energy, with enormous potential but no viable technology currently in large scale production. If our nation of engineers can crack that we have a really big opportunity.

  5. There’s a report of a successful tidal power development in Shetland.

    The corollary of Renewables must be limiting energy use. We have a legacy housing stock that is poorly insulated and wasting energy as well as unhealthy and uncomfortable to live in. This needs to be addressed urgently. We could also beef-up the Building Regs to Passivhaus standard for all new (and refurbished) homes.

  6. This just sounds like the usual bland PR type of article in favour of the renewables sector. What we (i.e. Scotland) need and what energy policy needs to ensure is low priced electricity to: 1) make all our industries (i.e. to increase trade, which leads to economic growth) more competitive, and; 2) to reduce the burden of high prices on domestic consumers and to eradicate fuel poverty. Policy really needs to prevent the current widespread ‘engineered’ interception of energy economic rents by all the usual suspects (i.e. before the end user receives any benefit), irrespective of whether policy is determined in Edinburgh or London.

  7. Alf,
    The Calvinist pessimism has been pretty firmly embedded in your psyche!

    However, I think you are right to warn of potential flummery and to focus on key questions as you have done. Personally, I am in favour of renewables and I think that Scotland is being hampered in the drive to develop the potential of the wind and tidal energy around our coast.

    • Alasdair, my “Calvinist pessimism” is perhaps born out of analysing the way the public sector ‘works’ over many years, and in the forlorn hope that the bureaucrats might one day avoid making a hash of pretty much anything they touch.

      What is this article really saying? Lets consider a few quotes, such as “Scotland is famous for its energy.” Well that’s just dandy. How about “Scotland has been fortunate to benefit from a plentiful renewable resource”. As I alluded to above, this has made zero difference to our nation’s competitiveness, or to alleviate fuel poverty – hence ‘benefit’ for whom? And what of – “wind can consistently under-price its fossil fuel competitors” and “Costs associated with the wind industry have fallen significantly “. Again, if this is so, and it may well be, why are there no visible benefits where it really matters – e.g. industry energy costs/competitiveness, and reducing domestic user energy costs?

      My “Calvinist pessimism” suggests to me that, even were Scotland independent, our elite unionist bureaucrats would still make a shop front of things, i.e. allowing the usual suspects (banks, big business etc) to intercept any financial benefits going, not forgetting landowners (need for land reform again?). If we were to develop a national energy ‘strategy’ we might be advised to begin with a ‘vision’ and work on from that – e.g. ‘to provide the lowest priced most sustainable energy in Europe’. Now that would be something to celebrate, and a good basis to start rebuilding what is left of the Scottish economy.

      • Alf,

        I am in substantial agreement with your final paragraph. While the might be difference between relating to renewables vs fossil fuels I think we are in agreement about the fact that the energy business is substantially a cartel, although some local cooperatives are beginning to get a tiny toehold.
        You have got to the heart of the issue when you get on to the vested interests and the fact that they have shaped government in its own sectional interest. For example, many landowners are benefitting from renewables sited on ‘their’ land.
        I am, in effect, echoing the argument of Broadbield below.

  8. I thought one of the arguments for Independence was that we might be able to do things differently. The UK is stitched up to the “usual suspects” and Scotland has very few levers, for example to alter the ownership of utilities such as energy which were sold off cheap. When we become independent it’s up to us to ensure that the political settlement is changed, the “usual suspects” power removed, for example by moving on from the impoverished elected representative system and introducing deliberative democracy involving ordinary citizens. If we don’t effect changes then we’ll only have ourselves to blame.

    • I’m substantially in agreement with you. But how do we do this? Come independence the big energy companies will still be with us. How do we establish replacements? Do we nationalise them? The national grid within Scotland should certainly be nationalised as a first step.

      • I would be in favour of nationalisation of electricity (much of it is already, except it’s owned by France) and other things which are public goods or natural monopolies. They should be run for public benefit not private gain, and I’d include the banks in that.

        Bill Mitchell has some articles on his blog on this: http://bilbo.economicoutlook.net/blog/?p=34043

  9. The energy business is indeed a cartel. A cartel of rigged prices no rigged profits extracted from a public many of who can neither het nor light their homes. And who owns our energy businesses and to where do they transfer price profits – Panama, the Cayman Islands, Bermuda.

    Power from the glen for the glens was an old saying. But maybe we don’t deserve the power. We’ve let the big business take it from us. So who is to blame – Mrs Thatcher, Theresa May.

    No it’s us and it’s high time we woke up

  10. I agree with most of the statements made but one thing I do realise is that ‘blue sky’ thinking should not be indulged just yet.
    The idea that we should just leave the oil in the ground is blinkered as there are far too many everyday items that we rely upon just now which require oil.
    To put this into a better context, the large drive shafts on the wind turbines require grease to allow them to stop seizing up which is mechanical engineering 101. Are we expected to use rapeseed/sunflower/olive oil as a replacement.

    The reason we use grease derived from oil is because it has a far better efficiency than the lubricants that were used as far back as the late 1800s.

    We need time to develop these better alternatives but until then, we may aswell continue with what we have and make a nice profit whilst doing so.

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