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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