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Renewable Energy Scottish Executive Consultation

Scotland's Renewable Energy Potential - Beyond 2010

The UNISON Scotland Response

November 2002

Executive Summary

  • UNISON is Scotland's largest trade union and a major trade union in the energy industry as well as our wider membership interest in safe, reliable and secure supplies of electricity.

  • The consultation paper seeks views on the proposal to generate 40% of Scotland's electricity from renewable sources by 2020.

  • UNISON Scotland believes that any proposal to expand the generation of electricity from renewable sources has to be seen in the context of the Scottish energy industry as a whole. This industry is vital to the Scottish economy and is in serious difficulties. This response sets out those problems and in particular the impact of the UK government's energy review and the proposed new trading arrangements.

  • UNISON Scotland supports the expansion of generating capacity through renewable sources with more challenging targets.

  • We believe the 18% target by 2010 is achievable.

  • We do not believe the 40% target by 2020 is achievable. The scope for additional onshore wind power is limited by available sites and likely to be slowed by public opposition, however misguided that opposition may be. Other technologies remain unproven and therefore do not, at this time, justify such an optimistic assessment of their potential.

  • The additional costs are substantial and we are unconvinced that these will be offset by the introduction of BETTA. It is unclear how the additional transmission costs will be funded on a parity basis across the UK.

  • The economic benefits highlighted in the paper fail to take account of the substantial job losses in conventional power stations, which provide high quality employment.

  • UNISON Scotland would therefore urge the Scottish Executive to adopt a balanced energy strategy which includes a mix of capacity which would include a larger element of renewables when proven capacity can be delivered.

Introduction

UNISON is Scotland's largest trade union and a major trade union in the energy industry. Our members in other sectors including local government also have an interest in this issue. In addition our wider membership is concerned to ensure that Scotland has a safe, reliable, clean and secure supply of electricity. We therefore welcome the opportunity to respond to the Scottish Executive's consultation document on Scotland's renewable energy potential.

Background

The Scottish Executive is currently committed to raising the overall proportion of electricity generated by renewable sources in Scotland to 18% by 2010. This compares with a current output of some 13%. In the UK as a whole only 3% of electricity is currently generated by renewables and the UK government has adopted a target of 10% by 2010.

The Executive initially indicated a target of 30% by 2020. In this consultation it is proposed to generate 40% of Scotland's electricity from renewable sources by 2020. There are currently some 30 renewable energy projects in Scotland and this will need to expand considerably if the proposed target is to be achieved. The Executive's vision is to place Scotland in the vanguard of a new sustainable energy industry. They also see this as having significant economic benefits.

The main lever at the disposal of the Executive to achieve these targets is the Renewables Obligation (Scotland) or ROS. This puts a legal obligation on electricity suppliers to meet targets set by the Executive. They have also relaxed planning guidelines and produced reports and surveys to promote the industry. The additional costs will be consistent with those in England and Wales, which the Executive claims will ensure that Scottish energy customers will pay no more than comparable customers in England and Wales. Savings resulting from the introduction of British Electricity Transmission and Trading Arrangements (BETTA) which are planned to start in 2004 will apparently offset the extra 4-5%.

The Executive published a report Scotland's Renewable Resource 2001, which claimed that Scotland could generate 60GW of electricity through renewables. This is equivalent to 75% of the current UK electricity generating capacity and ten times Scotland's needs. They do however, recognise that this potential might not be realised for a variety of reasons.

Scotland's Energy Industry

Any consideration of Scotland's renewable energy potential has to be viewed in the context of the Scottish energy industry as a whole.

The energy industry is one of Scotland's key resources. Three of Scotland's largest companies (ScottishPower, SSE & British Energy) are in the sector and other major UK companies including Centrica (Scottish Gas) and Transco have large workforces in the country. Many smaller companies and their staff rely on the industry. It's a major Scottish export, provides high quality employment and makes a major contribution to the Scottish economy.

Scotland's energy industry is under threat. Jobs are being lost, investment is going overseas and a so called regulated, competitive market leaves consumers utterly bewildered.

Two developments, the government's Energy Review and the planned introduction the British Electricity Trading and Transmission Arrangements (BETTA), highlight the problems.

Energy Review

The Government has published the PIU UK Energy Review and has completed a further consultation which will culminate in a White Paper early in 2003. The context of the review is the need to maintain security of supply whilst reducing greenhouse gas emissions in accordance with our commitments under the Kyoto protocol. The government remains obsessed with liberalised and competitive markets that have contributed to the current crisis in the industry.

UNISON Scotland supports the development of a Scottish Energy Strategy within the context of the UK review. Scotland has a distinct energy position within the UK because of its unique integrated electricity industry, different generation structure and the opportunity to develop extensive renewable energy resources. In addition there is a split in responsibility for energy issues between the UK and Scottish Parliament.

We believe that a Scottish energy strategy should be based on a planned market for energy combined with security of supply as well as social, employment and environmental objectives. The key principles should be:

 

  • A balanced electricity generation policy from a number of sources to minimise volatility and ensure security of supply. In the present ‘competitive' market no company will invest in new generation capacity or even modernise existing plant. Security of supply (remember California) will eventually become a real issue for the UK.

  • For the foreseeable future a continuing role for gas and coal generation at current generating levels, subject to the introduction (with government research support) of clean coal technologies. The dependence on gas (from insecure overseas supplies) envisaged in the PIU report is unsustainable.

  • Given Scotland's current dependency on nuclear generation there is no medium term viable alternative to nuclear if Scotland is to meet its climate change obligations. However, replacing only the first facility due for closure should reduce our nuclear dependency. This replacement would also be subject to resolving waste management issues.

  • There should be an increase in the targets for generating electricity from renewable sources supported by government funding. The Scottish Executive's targets appear to be extremely challenging given the state of technology, the availability of suitable sites and increasing local opposition to wind farms in particular. Wind and wave power appear to be the most viable medium term options and the necessary transmission infrastructure should be strengthened to support these developments.

  • Scotland should aim to continue to produce a surplus of energy for export, recognising the importance of the industry in providing high quality jobs.

  • Demand for electricity should be reduced by the promotion of energy efficiency with new resources for local government and revised targets including new building standards. This should be coupled with a better co-ordinated drive against fuel poverty. Government targets for the growth of Combined Heat and Power should be increased with appropriate support.

  • The privatisation and liberalisation of the energy market will not deliver a planned energy policy and has not enabled alternative generation to make a significant new contribution to our energy requirements. The integrated Scottish electricity industry remains the most efficient method of delivering Scotland's energy needs.

See UNISON Scotland's detailed contribution to the Energy Review consultation, A Scottish Energy Strategy at www.unison-scotland.org.uk/response/energystrategy.html

BETTA

The UK energy minister has announced plans to take Scotland into new UK electricity trading arrangements known as British Electricity Trading and Transmission Arrangements (BETTA). This is essentially the English system long favoured by the energy regulator Ofgem with their well publicised hostility to the integrated Scottish electricity system.

The justification for this move appears to be based on a description of the electricity market in Scotland which is unrecognisable by the either the industry or consumers. We already have a competitive market in Scotland closely linked to the New Electricity Trading Arrangements (NETA) which apply south of the border. This means wholesale prices are essentially the same both sides of the border. It is distribution, transmission and metering costs that account for any difference in price and that is due to geographic and demographic factors. BETTA has no impact on these issues. In fact the regional pricing mechanisms under BETTA could result in higher prices for Scottish consumers.

In the real world, customers in Scotland (as in the rest of the UK) regularly switch suppliers. For example Ofgem's figures show that a third of ScottishPower's electricity customers have switched and many others switch and return on a regular basis. Despite this ‘competition' most customers wish they hadn't bothered. Ministers would do well to ask real customers if they think the competitive market is working. UNISON members deal with thousands of calls every day from confused customers. These customers are bombarded with a bewildering array of marketing ploys and often end up unsure who is providing their energy and without a bill for months. Others are the victim of high pressure sales tactics and blatant mis-selling. All of these systems and the regulatory empire developed by Ofgem is costing a fortune. Money that would be better spent on Scotland's crumbling utility infrastructure.

And there are other losers. Disadvantaged customers have been abandoned as all the companies seek to cherry pick the affluent direct debit paying customer. Competitive markets do little for fuel poverty. Twelve years after privatisation fuel poverty still affects one in three Scottish households.

The Scottish economy is also a loser. Scotland's energy companies have been forced to incur huge costs separating their businesses into ever smaller (and uneconomic) units. Not to mention the confused customers who have to deal with five or more companies to get the simplest job done. The only real gainers have been the logo designers and the sign writers!

Whilst Ofgem focuses on the allegedly dominant position of Scottish electricity companies, in the real UK market there is the inevitable consolidation into a smaller number of larger suppliers. Everyone is forced to seek economies of scale to pay for marketing initiatives and to cut the costs of generation, and distribution. Scottish companies attempting to gain scale are faced with unfair competition from European companies who operate in protected home markets. These companies can afford to pay high prices for customers and generating capacity when it comes on the market. As a consequence the UK energy market is rapidly being taken over by German, French and Italian companies.

Ministers (including the Prime Minister) may bemoan the actions of our European ‘partners' - but in practice have done very little to create a level playing field across the EU. In fairness to the Europeans it is hard to blame them for not wanting to impose on their citizens the shambles wrought by the UK system!

The harsh reality is that the endless regulatory initiatives from Ofgem have been a costly failure. To cover up this failure they are promoting yet another initiative, BETTA. The integrated Scottish electricity system has nothing to do with most of the issues identified by ministers. It is just the latest scapegoat for policy and regulatory failure.

Scottish Renewables Targets

As stated above UNISON Scotland strongly supports the expansion of generating capacity through renewable sources. We agree that targets should be more challenging than at present.

UNISON Scotland believes that the 18% target by 2010 is achievable. It is a modest increase on current generating capacity and well below that planned by other European countries. Scotland ranks only 10th out of 13 in a table compiled by the Scottish Renewables Forum. It does not require a substantial upgrading of the transmission and distribution networks and could be achieved by utilising proven technology. The only significant barrier to this target has been the introduction of the New Electricity Trading Arrangements (NETA) in England and the proposals to extend these to Scotland under BETTA. We would urge the Scottish Executive to oppose the introduction of BETTA currently planned for 2004.

We are not convinced that a 40% target is achievable by 2020. Apart from the impact of the new trading arrangements most of the best sites for wind power have already been taken. Other alternative technologies remain at this stage largely unproven both in terms of reliability and economic cost. The 60GW capacity identified in Scotland's Renewable Resource 2001 is in our view theoretical and unlikely to be realised in practice.

In addition public opposition to wind farms is growing from local groups concerned over the environmental impact. The creation of a group called Winds and Turbines Corrupt Habitat (WATCH) and other vociferous local groups is evidence of this. UNISON believes that many of these objections are unfounded and would point to a recent Mori survey in which nine out of ten tourists said that wind farms made no difference to their enjoyment of Scotland's beauty spots. However, it is inevitable that this opposition will slow up the development of wind farms in particular.

The reliance on BETTA to offset the additional costs may well be misplaced. There is little or no evidence that BETTA will make any significant difference to energy prices in Scotland. In addition the necessary UK legislation was not announced in the Queen's speech.

The additional costs of renewable energy are substantial. A recent study for the DTI has shown that the system costs would be £143m per year for 20% renewables rising to £325m for 30% penetration. These figures rise to £398m and £921m if the additional renewable generation were met entirely from intermittent generation like wind farms.

Ofgem policy on the current interconnectors will not encourage future investment. This coupled with the low price of electricity means that power companies will be reluctant to invest. Given the current Ofgem arrangements for price capping the regulated wires businesses, it is not clear how this cost could be achieved without a greater burden being placed on Scottish consumers.

UNISON agrees that there are economic benefits to Scotland in pursuing a renewables strategy. However, the numbers in manufacturing are small and the operations of renewable energy facilities are not labour intensive. A major shift from conventional power stations would probably result in a net loss of jobs and certainly in the quality of employment.

Even if the 40% target were achievable it would still leave a significant shortfall in current capacity. The Executive therefore needs to take a realistic view of other generating capacity. UNISON Scotland would urge the Executive to adopt the balanced generating policy set out above. In particular to support investment in clean coal technologies which will extend the life of Scotland's coal fired power stations. New conventional capacity cannot simply be switched on overnight. It should also be remembered that renewable energy does not provide constant base load capacity. It would therefore be a very high risk strategy to rely largely on unproven renewable technologies.

Conclusion

Current energy policy has immense consequences for Scotland. Our energy companies are forced to cut thousands of quality jobs and customers suffer from the worst excesses of liberalised markets. Whilst the Scottish Executive seeks to switch economic development support from inward investment to indigenous companies - UK government energy policy drives our companies overseas.

Scottish companies are switching investment to North America in the inevitable search for shareholder value. Their unofficial attitude appears to be that if the government is happy to hand over the industry to the Europeans, they will go where they can get a fair return on investment.

The time has come to call a halt and bring some sanity back to Scotland's energy structures. Liberalised and competitive markets are not the panacea that some in government believes it to be. We need a planned energy policy that provides safe, secure and sustainable generation, which contributes to the economic future of Scotland and eliminates fuel poverty.

In this context the Scottish Executive consultation paper has serious limitations. It treats renewable energy in isolation to the rest of the industry. Whilst this may reflect the crossover between reserved and devolved powers, joined up government would be preferable. In conclusion, UNISON Scotland welcomes the Executive's support for renewable energy. However, we believe the proposed 40% target is unrealistic and possible undesirable, unless it is part of a balanced energy policy.

 

For further information please contact:

Matt Smith, Scottish Secretary
UNISON Scotland
UNISON House
14, West Campbell Street,
Glasgow G2 6RX
Tel 0845 355 0845 Fax 0141 342 2835

e-mail matt.smith@unison.co.uk

 

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