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Scottish Energy Strategy
 
A Discussion Paper

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1. INTRODUCTION

There is currently a wide debate in Scotland and the UK about future energy policy. This reflects the challenges governments across the globe are facing as they attempt to counter the effects of global warming, and is also set against a background of important changes that will affect the future supply of energy in the UK

To consider long term UK energy requirements, the Government has established an Energy Review which is being carried out by the Performance and Innovation Unit of the Department for Trade and Industry under the Chairmanship of Brian Wilson, Minister for Industry and Energy.

Scotland is currently self sufficient in energy but it will need to make changes to adapt to the new conditions. This discussion paper prepared by UNISON Scotland's utilities service groups sets out the current position and some of the issues, which need to be considered in developing a strategy for Scotland's energy needs.

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2. BACKGROUND

    2.1 Climate Change

    The challenge of global warming and the UK's commitments under the Kyoto Protocol mean that the UK has to reduce its emissions from a basket of gases. Methane, nitrous oxide, sulphur hexafluoride, perfluorocarbons, hydrofluorocarbons, as well as carbon dioxide by 12.5% below 1990 levels by 2008-12, and the government has set itself a domestic target of 20% below 1990 levels by 2010.

    The government therefore has to look at how it can provide sufficient, affordable energy whilst meeting its Kyoto targets. It will need to change the way energy is supplied, decrease demand by making more efficient use of energy, bringing in new technologies and changes to the whole infrastructure of the industry. Major programmes are being introduced to promote the development of renewables and increase energy efficiency. However, with our current nuclear power stations (which produce low carbon energy) due to decommission on the next 10 20 years, our emissions could begin to rise again.

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2.2 Changing Global Conditions

Until a year ago the UK had plentiful energy supplies, there was ample capacity and infrastructure and prices were falling. This outlook changed with the sharp increases in oil and gas prices, the petrol crisis, the recent electricity crisis in California (which had a 20% overcapacity 6 years ago) and forecasts of a less balanced fuel mix.

At present the UK has a good balance of energy from coal, gas and nuclear, plus a small amount of renewables. In recent years the trend has been to move away from coal burning to mainly gas fired power stations, and this, coupled with the nuclear station decommissioning will leave gas as the major fuel for electricity production. North Sea gas and oil production is due to peak in 2005, which will lead us to become reliant on gas imports as early as 2006/7. While this is not seen as a particular problem at present, it does raise questions about the security of supply that have not been evident in the UK for the last few decades.

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2.3 Energy Review

On 25 June 2001 the Prime Minister announced that he had asked the Performance and Innovation Unit of the Department for Trade and Industry to undertake a review of the longer term, strategic issues surrounding energy policy for Great Britain. The aim of the review was to look at meeting the challenges of global warming, whilst ensuring secure, reliable and competitive energy supplies.

The review will cover the whole of the UK, including Scotland, since energy is a reserved power. However, the Scottish Executive will have considerable input, since environmental issues are devolved powers, as are the promotion of renewable energy and energy efficiency. In addition, new power stations, overhead lines and gas pipelines all need consents from the Executive.

Members of the review team come from a cross sector of government departments, including the DTI. Treasury, DEFRA, Scottish Office, etc. The team aim to present a report to the Prime Minister by the end of 2001. The conclusions of the review will help to form future policy on security of the energy supply and on climate change and will address the government's response to the Royal Commission on Environmental Pollution.

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2.4 New Electricity Trading Arrangements

From April 2001 the previous "pool" of energy has been replaced by the New Electricity Trade Arrangements (NETA). This change has come about as a result of the Utilities Act and is essentially a bi-lateral commodity trading system. The aim of the new arrangements is to create greater competition in the electricity market. There has been a period of settling down to the new arrangements with no certainty as to the likely impact on long term energy prices. Energy price is a key determinant for investment in new generating capacity.

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    2.5 Renewable Energy

Renewable energy is the creation of power from the natural energy flows of the planet, achieved by using the wind, waves, solar heat and light and the energy of plants (called biomass energy). On 3 August 2001 the Scottish Executive committed Scotland to deliver 18% of its energy from renewable sources by 2010 (10% for England and Wales).

2.5.1 Wind Power

The UK (and Scotland in particular) has the biggest and best wind resource in Europe (23%) yet is one of the lowest users. The potential for development of wind technology, both onshore and offshore is massive. It is estimated that the potential for offshore wind power alone is greater than the UK's current generation capacity and output. A number of Scottish companies including British Energy and ScottishPower have taken advantage of government grants to develop off shore wind farms although most opportunities are in England as our coastal waters are too deep and wind speeds too high. ScottishPower is a major developer of onshore wind farms including new facilities at Hare Hill and a proposed farm on Eaglesham Moor. In the USA ScottishPower takes the output from the world's largest wind farm (300MW) in Oregon.

2.5.2 Hydro Power

Until recently, only new, small hydro power schemes were designated as renewable energy, but this has now been altered to include larger, existing schemes. This remains an important contributor to Scotland's generating capacity.

2.5.3 Tidal and Wave Power

The UK has some of the biggest wave and tidal power resources in the world but again has not begun to exploit them, with only one small device operating in Scotland. Major capital investment would be required to introduce this form of power on a large scale.

2.5.4 Biomass Energy

Biomass energy utilises material from crops, wood, waste to produce fuel. The UK has developed leading technologies such as gasification and pyrolysis, and great potential is envisaged. However, due to long term growing periods for the material, a guaranteed market would be needed.

2.5.5 Solar Power

Harnessing the power of the sun is a very important source of energy in much of the world, but so far has not been much used in the UK to any treat extent. However, trials are underway in the UK to assess viability for this form of energy.

2.5.6 Nuclear Fusion

Research programmes are underway across the globe to try and capture and utilise the nuclear forces that heat the sun. Taming this resource could solve all the world's energy requirements for an indefinite period. Scientists believe this technology is within reach, although research is still at an early stage.

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2.6 Other Low-Carbon Energy Options

2.6.1 Cleaner Coal Technologies.

Despite the recent change in the ratio between coal burning and gas fired power stations there is still coal being produced in the UK and cheap, plentiful imports are available. Research to develop cleaner coal is currently ongoing. Longannet Power Station uses coal which has a low sulphur content 'sweetened' by other supplies. Cockenzie operates within existing emission limits but will need significant investment if current capacity is to be maintained when new emission limits are introduced.

2.6.2 Carbon Sequestration

One of the options for producing cleaner coal and other fossil fuels is to capture and store the carbon underground, thus providing carbon-free fuel. Again technology is being tested for such schemes.

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2.7 Energy Efficiency

Energy efficiency reduces the demand for energy. A wide variety of schemes operate in Scotland operated by the public, private and voluntary sectors. Local authorities have particular responsibilities in this field through HECA. This issue is closely linked to measures to alleviate fuel poverty, a campaign actively supported by UNISON Scotland.

Energy efficiency standards for equipment and buildings could be made much tighter encouraging investment in new technologies. Countries such as Holland levy 2% on the price of gas and electricity and then invest that money to achieve a 20% target reduction in carbon emissions. Similar schemes in the UK are at a much more modest level.

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2.8 Combined Heat & Power (CHP)

CHP utilises the waste heat created when generating electricity. Schemes utilising CHP have up until recently been used in industry and commercial applications, but tests are being carried out to assess its potential for domestic use. CHP dramatically increases the efficiency of such plants. However, there are price disincentives to the development of CHP in the UK and few planning incentives. Despite this Scottish companies including ScottishPower have invested in these systems.

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2.9 Nuclear Power

Current government policy on nuclear power has been for existing stations to continue to operate so long as it is economic, safe and environmentally acceptable for them to do so. Nuclear power produces neither carbon nor any of the other greenhouse gases so is at present a carbon-saving form of fuel. Nuclear power can also add to the security and diversity of energy supplies the government is aiming at.

However, the are strong arguments against nuclear generation from a wide section of the public. They argue that is too expensive to produce (the UK's last nuclear reactor cost £2.3bn to build) and that disposal of nuclear waste is still unresolved. It would add considerably to the unit cost of production if it had to be borne by the generators, and consequently there is considerable hostility and scepticism from the public. Solving the waste disposal problem would counter some of these concerns and a consultation paper on this issue is expected in the near future from DEFRA, which will hopefully point the way to future policy. The issue has been addressed in Finland, and the industry hopes that similar progress can be made in this country, following the paper's publication.

Current proposals being put forward by BFNL and British Energy (Scottish Nuclear) which produces Scotland's nuclear energy, are to build at least 4, preferably 6 new nuclear stations on the sites of existing ageing Magnox reactors currently in process of being decommissioned. These would be much cheaper and quicker to build (Dungeness in Kent took 10 years to build) and would slot into the gridlines currently in place for the existing plants. British Energy believes that the logic would be for, say, a new Hunterston 'C' to be ready and waiting for when Hunterston 'B' in Ayrshire closes, using the same transmission lines and, more importantly, the same labour force, within a community that has accepted nuclear power for many years.

These proposals would, however, be opposed from environmentalists who would be concerned that any subsidies for the development of new nuclear stations would be taken away from funds for research on renewables.

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3.0 ELECTRICITY GENERATION IN SCOTLAND

The electricity industry in Scotland is mainly composed of two companies, ScottishPower and Scottish & Southern Electric which each generate, transmit, distribute and supply electricity within their respective areas. In addition, British Energy, which is primarily a generator, sells most of the electricity it generates at its two nuclear power stations at Torness and Hunterston 'B' to Scottish Power and Scottish & Southern, under the Nuclear Energy Agreement signed at the privatisation of the industry. This agreement is currently being challenged by ScottishPower in the courts.

At present Scotland has a wide mix of energy generation, including nuclear (Torness and Hunterston 'B'), gas (Peterhead), coal (Longannet and Cockenzie), hydro and a limited amount of wind power, in the following proportions (figures 1999/2000):

    Nuclear

    50%

    Coal

    19%

    Gas

    17%

    Hydro

    11%

    Others (incl renewables)

    3%

ScottishPower and Scottish & Southern are both subject to government targets for reducing carbon emissions and will both have to aim for the target of 18% of their output coming from renewables by 2010 under the Renewables Obligation (Scotland) recently announced by the Scottish Executive.

Regarding Hydro Power, in recent years Scottish & Southern has been undertaking a £20m refurbishment programme on its larger existing hydro stations throughout Scotland, adding between 5 and 10% to the efficiency of each plant. Until recently there were fears that the larger existing stations between 10 and 50 MW would not be eligible for support under the Renewables Obligation Scotland or qualify for exemption under the Climate Change Levy, and the refurbishment programme ceased. However, in July 2001 the Scottish Executive announced that support would be extended to older stations up to 20 MW and new build of any size, resulting in the refurbishment of a further 30 stations. The DTI is also to increase funding of research and development into hydro generation.

In addition, both companies are to use Scotland's wind resources by starting to build wind farms. Scottish Power so far has three small capacity wind farms in Scotland and has recently announced plans to build two more at Eaglesham Moor and Black Law Mine in Lanarkshire. The Eaglesham project that will be the largest in Europe should increase the whole of Britain's wind power capacity by 60%. Scottish & Southern Electric so far have one farm in Argyll and there are three run by National Wind Power (a subsidiary of Innology). Several small independent companies are also entering the market. These will all be assisted by the announcement that Vestas, the leading Danish wind turbine company is to commence manufacturing in Machrihanish, in Argyll.

Scottish Power has plans to move into offshore wind farms. In April Crown Estates which owns the UK seabed announced 18 new sites for offshore development, including one in the Solway Firth. Offshore developments experience better wind conditions, lower turbulence, cost less and have low environmental impacts than onshore wind farms.

Very little investment has been carried out on tidal and wave power so far, with only one small plant operating off Islay. However, the Scottish Executive recently unveiled plans to provide funds for the Scottish Marine Energy Test Centre in Orkney, which will assist in evaluating technology for power from marine sources. In a linked arrangement the DTI have provided £1.6m for Wavegen to build a mini-power station off Stromness.

Scotland is starting to utilise energy from biomass sources. One new plant has opened in Fife that manufactures energy from poultry litter. There is a project in Barony Colliery in Ayrshire which aims to grow willow energy crops, using West of Scotland Water's waste products, with the aim of attracting a multi-million pound biomass power station development, hopefully in the Barony Colliery area, since it is a potential location for the development. Scottish Power and West of Scotland Water also have a new development to produce granules of waste derived fuel for burning alongside coal at Longannet Power Station.

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4.0 ISSUES FOR UNISON

It is clear that over the next few decades the supply of electricity in Scotland will change beyond all recognition. The government's energy review states that competitive markets will continue to be central to energy policy. Whilst competition is the government's answer to everything it does not address the real need for a planned energy strategy for Scotland.

The key issue is the replacement of the 50% of Scotland's energy, which is generated by the nuclear industry, and the 19% generated by coal. If one or both of the current nuclear stations are not replaced the shortfall has to be made up in some other way. If it is not Scotland will cease to be an exporter of energy and then become a net importer of electricity. Security of supply and a California type problem is now a real issue.

The decommissioning of the nuclear power stations will lead to a loss of jobs, if there is no decision taken to replace those currently operating. Likewise, any run-down of coal-fired plants could also jeopardise the number of jobs required. Renewable energy is being heralded as creating lots of jobs, but these will mainly be in the construction industry, and will not replace the amount of staff required to run the large power stations.

Energy efficiency and the problems of fuel poverty are also inextricably linked to this issue and impact on UNISON members' outwith the utilities service groups. UNISON has argued strongly for stronger powers and resources for local authorities to promote energy efficiency.

However, it is doubtful that energy efficiency and renewable energy can completely bridge Scotland's looming generation gap. This may be more realistic if Torness and Hunterston's life span can be extended to 2016 and 2029 as suggested by the Scottish Executive in their recent submission to the energy review. If not this raises the possibility of Hunterston C and the inevitable controversy such a proposal would generate.

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5. VIEWS

The utilities service groups have prepared this paper to encourage a better understanding of the issues facing the industry. It may appear to be a long-term problem but power stations and other energy measures take many years to bring to fruition.

The utilities service groups are of course primarily concerned about the long-term future of the industry and the impact on the job security of our members which is rightly the primary consideration of any trade union. However, we recognise the wider citizenship issues involved and therefore wish to actively encourage views from all unison members.

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For further information please contact:

Dave Watson, Scottish Organiser (Utilities) d.watson@unison.co.uk

Diane Anderson, Organising Assistant (P&I Team) d.anderson@unison.co.uk

UNISON House, 14 West Campbell Street, Glasgow G2 6RX. Tel. 0141 332 0006

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