By Martin Kelly
A new report has shown that Westminster’s failure to ensure security of energy supply could lead to higher consumer bills – but that Scottish electricity generation has the potential to keep the lights on and bills down across the UK.
The new paper “UK energy policy and Scotland’s contribution to security of supply” shows that uncertainty caused by the Westminster Government, coupled with a failure by successive London Governments properly to prioritise security of supply, has led to a much reduced margin between electricity supply and demand – and that this margin is getting tighter.
The paper warns that this tightening energy gap will lead to higher energy bills – and that plentiful Scottish electricity generation can both help keep the lights on and bills down across the UK.
Sufficient reserves of generating capacity are needed to cope with peaks in demand and prevent price rises and blackouts. Latest Ofgem forecasts show that the UK’s safety margin could fall to just two per cent by 2015/16 – the winter after next. In contrast, the equivalent Scottish gap between demand and available supply is 20 per cent.
Energy Minister Fergus Ewing said:
“Having only two per cent reserve energy in the system is extraordinarily risky and could result in big bill price hikes. The laws of supply and demand and the cost of bringing more expensive power plants onto the grid to meet peak demand will drive up household energy bills the closer the UK gets to having no spare generation capacity. As the regulator Ofgem has pointed out, as installed capacity falls to near zero, prices can be expected to rise sharply.
“The more capacity you have available – especially from lower marginal cost generation such as renewables – the lower wholesale energy prices will be, again highlighting the value of Scottish generation to every household across these islands.”
The paper also highlights the growing risk of electricity blackouts due to the UK Government’s mishandling of Electricity Market Reform and high levels of investor uncertainty. It confirms Scotland is key to the rest of the UK’s energy reserve – with more than a quarter of energy generated in Scotland exported in 2012.
Speaking in November last year, National Grid Chief Executive, Steve Holliday, highlighted the harm UK Government policy was causing to the energy sector. Following reports that National Grid estimates for new power generation by March 2016 had dropped from 6GW to 2.5GW, Mr Holliday said it was “a function of the fact they [investors] haven’t got clarity around the framework in which they are investing at the moment”.
He added: “Scotland’s contribution to the UK’s renewable generation provides greater energy diversity to meet the challenges of energy security and makes it more likely that the UK will meet its legal environment targets by 2020”.
MSP Marco Biagi said: “This substantial paper shows that Westminster’s failures are risking higher bills for households across the UK – and it is Scotland’s energy generation that can help keep the lights on and bills down.
“Westminster’s mismanagement of energy policy and obsession with nuclear power is making an already tight margin between energy supply and demand even tighter and risks thousands of jobs in the process.
“Scotland’s incredible natural resources mean that we can ensure a reliable and affordable supply of electricity across the UK – and with the full powers of independence we can permanently cut £70 per year from household energy bills.”
However UK Energy Minister Ed Davey claimed the “broad shoulders” of the UK was a critical component which was helping Scotland realise its energy potential.
“The UK’s energy security is among the best in the world, backed by a large consumer and tax base that can afford to support our world-leading energy industries and make us such an attractive place to invest.
“The broad shoulders of the United Kingdom is unlocking the power of Scotland to take its place as one of the world’s great energy hubs – generating energy and generating jobs.”