Reform Scotland

Power of Scotland: Energy Policy in Scotland – Stuart Paton

This post by Stuart Paton, which first appeared in the Sunday Times on 13 September 2015, is a summary of a chapter from a forthcoming publication, ‘Reforming Scotland’, produced by Reform Scotland.

The recent outrage expressed by the First Minister and Scottish Energy Minister over onshore wind farm subsidies and planned closure of Longannet power station highlight the ambiguities and inconsistencies within Scottish energy policy. The Scottish government has a commitment to zero emissions from electricity generation by 2020, yet an outright rejection of nuclear power. The government shows unbridled support for the offshore oil and gas industry (but not onshore) and coal fired power at Longannet, despite these positions being counter to the government’s green credentials on electricity generation. They have fervent evangelism for the beauty of the Scottish countryside yet wholesale support for industrial scale windfarms which are having a dramatic effect on the landscape. They support continued onshore windfarm development despite currently installed and planned capacity already reaching the 100% renewable target. They are an avowedly social democratic government which says it wants to reduce inequality but, through its commitment to zero emissions, adds a burden to all household fuel bills and provides significant income to wealthy landowners.

Three specific recent examples highlight the glaring inconsistencies in policy and the blatant politicising and anti-Westminster rhetoric which seems to drive current Scottish government policy.

Firstly, the recent change in windfarm subsidies announced by the UK Energy Minister and denounced by the Scottish First Minister, in a balanced considered manner, as ‘wrong headed, perverse and downright outrageous’. The Scottish government’s response can be countered on a whole range of levels. Firstly, the Conservatives highlighted this as a manifesto commitment and have actually somewhat delayed its implementation. Secondly, Scotland is already on course to generate 100% of its electricity consumption from renewables by the 2020 target date without any further windfarms being consented. Thirdly, if the onshore wind industry is bringing down costs as fast as it claims, then it should not be the recipient of the vast bulk of subsidies. And finally, despite the claims of the government, windfarms are bitterly opposed by a large proportion of people directly affected by them and by those seeking to protect the Scottish landscape, including the John Muir Trust and run completely contrary to the Scottish Government’s stated aims to protect wild land.

Secondly, the Scottish government’s response to the accelerated closure of Longannet power station. Railing against the UK government for closing the power station is misguided as this is driven by the pressures of reducing CO2 emissions and, to some extent, capacity charges which are impacted by increased Scottish based wind power generation. A more suitable response would be to consider replacement of base load capacity by encouraging a new clean gas fired power station at Longannet, which would mitigate the employment effects, and support for nuclear power.

Thirdly, in relation to the oil and gas industry, it is overly simplistic for the Scottish government to blame Westminster policies for all the problems. The risks were highlighted in the Wood Report, published in early 2014 before the drop in oil prices and action is being taken by the industry, through the newly formed Oil and Gas Authority, and Oil and Gas UK under new leadership. It is completely disingenuous for the Scottish government to wholeheartedly support the industry while pushing renewable energy production. To see this in context, the CO2 emissions generated by consuming the UK’s daily oil production is equivalent to 30 times Scotland’s annual electricity generation. At the same time, while supporting the offshore industry, the government is stalling development of the onshore oil and gas industry. The key issues onshore can be managed with a robust regulator similar to that offshore. Further, the greatest onshore oil and gas potential lie in formerly industrial and coal mining areas. In principle, there must be a basis for agreement which makes sense for local communities, developers and government to allow unconventional exploration and thereafter development to take place.

One area where the Scottish government should be commended is its approach on domestic heating and power. The main domestic fuel for heating and cooking is mains gas which accounts for 50% of domestic energy usage. The relatively low CO2 emissions from gas means that it is appropriate for continued use for the forseeable future.  The Heat Policy Statement issued on 14th June 2015 is well considered balancing the role of government and private sector. These policies have a direct impact on energy usage and the cost of energy and should be encouraged and developed. The recent award of a £250,000 to 5 separate geothermal feasibility projects is a good example of this approach. If the Heat Policy Statement is implemented, one could envisage a fundamental change to domestic heat and power, from a cost, total consumption and CO2 emissions perspective, in the foreseeable future.

Given the issues highlighted above, there is a compelling need for a rigorous, consistent energy policy in Scotland, which would be best addressed through a high level national energy commission. What should be the key guiding principles for this energy policy?

  1. Climate change. First and foremost there should be a focus on achieving the target on carbon free electricity production. However the Scottish government’s current approach which essentially relies on onshore and, to a lesser extent, offshore windfarms is far too narrow for the reasons stated above and also, vitally, because it does not provide base load capacity. The government should change its stance and strive for the construction of a new gas fired power station, say at Longannet, and new nuclear power stations, most likely at the existing sites at Torness and Hunterston. This will likely have to follow the British government’s approach and largely be dependent on foreign investment. However, the necessity of providing low carbon emission, base load capacity makes support for nuclear electricity generation essential.

As discussed above, the challenge of climate change requires changes in domestic heating, domestic insulation and transportation as well as electricity generation. The Scottish government is already playing an active role in this area, through support for local generation, domestic heat generation and improved insulation, which should be extended.  These initiatives will also play a significant role in dealing with fuel poverty both through providing cheaper sources of power and allowing households to use less energy.

The development of carbon capture and storage (CCS) allows the continued long term use of gas fired power stations. Having been actively discussed for a decade, the proposed CCS project being developed by SSE and Shell at Peterhead Power Station has recently been approved by Aberdeenshire Council. With the expertise in geology in Scotland from the oil and gas industry, the apparently favourable geology and decommissioned gas fields, Scotland could become a leading developer of this technology both for its own power stations and for export.

  1. Fuel Poverty is a key issue for Scotland, particularly in rural areas where households often rely on oil for heating. Fuel poverty can be alleviated through some of the same approaches as for reducing carbon emissions.
  1. Security of supply. Many of the issues and proposals identified above not only target the challenges of climate change and address fuel poverty, but also address issues of security of supply. Building two new nuclear power stations and the development of shale gas improve security of supply both in terms if reducing requirement for importing power but also in terms of base load supply.
  1. Technological development. Within the framework outlined above, there should be three focus areas for technological focus. Onshore unconventional development and CCS development can benefit from existing expertise in the offshore oil and gas industry and the existing supply chain. In addition to the local impact, both technologies could generate significant export earnings. Thirdly, the construction of nuclear power stations in Scotland could invigorate the expertise already existing at Douneray.

In summary, Scotland has to develop its energy policy beyond a fixation on wind power and political point scoring with Westminster. The challenge of climate change does require a decarbonisation of energy but support for nuclear power, unconventional gas, and increased emphasis on reducing energy usage, are all required to meet the challenges of the coming decades.  This cannot be achieved by the current government’s approach but needs a coordinated, consistent and robust policy formulated through a national energy commission.

Stuart Paton is an adviser to the oil and gas industry and former chief executive of Dana Petroleum.