Remember the Hydro Boys

On Thursday this week, the Scottish Parliament will debate a motion from Annabelle Ewing MSP that remembers the contribution of the workers, many displaced persons from post-war Europe, who built our hydro power system.

S4M-10672# Annabelle Ewing: Remembering the Contribution of Those who Built the Dams and Tunnels—That the Parliament notes plans by Scottish and Southern Energy to develop a new state-of-the-art visitor centre at Pitlochry Dam and salmon ladder; recognises the contribution that this and other hydroelectric dams and tunnels throughout Scotland can make as tourist attractions as well as their primary function contributing to Scotland’s renewable electricity generation; respects the contribution made by the men, of many nationalities, who built the dams and tunnels, such as the Lednock “Tunnel Tigers”, who set a world record by tunnelling 557 feet in seven days in 1955 while working on the St Fillans section of the Breadalbane Hydro-Electric scheme; further recognises that this was hard, dangerous work and that a number of men lost their lives and countless others experienced injury or illness that affected them for the rest of their lives; understands that some of the public visitor information boards list several nationalities of workers in the tunnels but make no reference to Irish workers, and looks forward to the new visitor centre properly reflecting the contributions of all of the men who built the dams and tunnels.
 

When most people remember the building of Scotland’s hydro schemes, they think of the vision of Tom Johnston who got the projects going, despite political and landowner opposition. However, it’s also a story about people, many of whom paid the price with their lives. Emma Wood’s book ‘The Hydro Boys’ tells the story well.

In this debate we should not forget the human sacrifice of those who built the hydro schemes that serve us to this day.

Utilities and the Referendum

What is probably the longest campaign in political history comes to a conclusion today. We haven’t declared for either side, primarily because we split fairly evenly on the issue and our Editor isn’t saying.

That doesn’t mean we haven’t got a view on the issues. Oil, or rather the amount and value of it has been a central feature of the campaign. Sadly, the utility issues that we focus on haven’t had the same prominence. Water didn’t even get a mention in the White Paper and we had to tease a response out of the Scottish Government. Energy markets are a complex issue and not well understood by the media and the public at large.

Some of the contributions have been very poor indeed, if not downright misleading. One example was a piece on the BBC last week, when a Green MSP said vote Yes to stop us subsidising English nuclear. In the very next segment, the First Minister said if we vote Yes we will remain in the UK energy market. This of course means we will continue to subsidise English nuclear, just as the English consumer will subsidise Scottish renewables. A lot of our colleagues expressed their irritation with this nonsense, but the journalist who put the piece together clearly didn’t understand the contradiction.

While even those of us who are voting Yes would admit the energy case is weak, some of the UK analysis has also been poor. The UK government paper ignored their failure to properly address the capacity margins across the UK. Energy Market Reform has been badly planned and the Treasury interference in energy policy has been a malign influence on the development of a credible policy. Even those of us voting No, accept that the UK Government’s green credentials are in shatters and we all feel strongly that climate change, as the greatest threat to the planet, is being downgraded by Westminster.

In conclusion, we doubt if anyone was swayed one way or the other on utilities issues. While disappointed, we are not surprised. One of the reasons we established this site was to address the paucity of analysis in our sector. We hope our contribution to the debate was helpful.

Oil numbers and the referendum

As we approach the final week of the Scottish independence referendum, claims and counterclaims come fast and furious – hard data and credible analysis is in shorter supply!

For example, an independence supporting firm claims there is a new oil bonanza in the North Sea through the use of fracking. The extra reserves could apparently yield an additional wholesale value of £1 trillion to £2 trillion depending on oil prices. However, Dr Gordon Hughes, professor of economics at the University of Edinburgh, dismissed the report as “pure guesswork”. He added: “The question, which this report largely ignores, is whether or not it is economic to develop them. This game of trying to calculate Scotland’s oil and gas reserves has become almost a pointless exercise.”

Estimates on oil reserves and oil prices have been a key battleground in the referendum campaign. The problem for voters is that no one can give them a credible estimate of either. The Scottish Government uses highly optimistic assumptions on oil prices and the UK, or the OBR, use more pessimistic assumptions. The difference between these numbers is what pays, or doesn’t, for our schools and hospitals. The irony is that both estimates have been proved to be optimistic in the past.

You would have thought oil reserves would be easier to calculate. After all it’s a measurable commodity unlike prices that can fluctuate. However, we have a range of different numbers for voters to pick from. Oil magnate Sir Ian Wood suggests that remaining oil and gas reserves are about 16 billion barrels oil equivalent (boe). While industry representative Oil and Gas UK suggest a figure of 24 billion boe. As Ewan Mearns discusses in some detail, both of these numbers as they stand alone are totally meaningless. It’s not physical reserves we should be concerned about, but those reserves that are economically viable to extract. He concludes by saying:

“The focus on ethereal reserves is a mistake, the focus on direct tax income is a mistake. The focus should be on the continued existence of a multi-billion £ industry that provides jobs and prosperity for many and a single minded focus on doing nothing that may jeopardise the present or the future.”

This shouldn’t be good news for Yes vote backers the Green Party and quite a few environmentalists. As Peter Jones mischievously put it in today’s Scotsman, “It is becoming increasingly clear that if there is to be a boost, or more realistically a maintenance, of living standards, Scotland will need to produce every last ounce of oil and gas. Yet if we do that, we will also be helping planet-wrecking climate change.”

While the latest polls have at least woken up the rest of the UK to the debate in Scotland, they at least don’t have to make this difficult decision based on limited credible data. As the author Carol Craig put it in a thoughtful essay today, “If the No side is Project Fear then, for the most part, Yes is Project Pollyanna”.

Stronger regulation and a price freeze needed to curb power companies

Household energy bills are rising faster in the UK than in most other countries in the developed world.

New research shows that between 2010 and 2013, electricity prices rose by 23.5% and gas prices by 33.8%. Although electricity still costs less in the UK than in other EU nations the UK’s prices have risen much more sharply. In real terms, UK energy bills have risen by an average of 21% – around £221 per year. This figure does not take into account the latest round of price hikes.

In what is possibly the very worst excuse for not passing on falls in wholesale prices to consumers, the chief executive of NPower has said his firm has not reduced fuel bills because of the Labour party’s threat to freeze prices. This comes at a time when Ofgem has forecast that firms are set to nearly double the profit they make from every home. Ofgem estimate suppliers will make £102 from every dual fuel customer between now and next July, that’s up from their £56 forecast last year.

Labour has responded to NPower’s politicking by indicating that it would give a new energy regulator the power to revoke energy companies’ licences to help protect the interests of the public. Shadow energy and climate change secretary Caroline Flint accused the UK Government of presiding over a “broken energy market” and said Labour would hand a tough new regulator the capability to cancel energy companies’ licences where there were repeated instances of the most “serious and deliberate breaches of their licence conditions which harm the interests of consumers”.

She highlighted FoI figures that showed energy companies had continued to “mistreat their customers” and face another 16 probes into mis-selling, poor customer service and other bad practice, despite Ofgem issuing 30 fines, totalling more than £87 million since 2001. The new regulator would be charged with producing an annual scorecard for energy suppliers, reporting on the company’s performance and identifying areas of concern.

More pressure on companies comes from the UK government who have proposed penalties, including potential two year prison terms, for people who manipulate the gas and electricity markets. Manipulation or market abuse is very difficult to prove, but monitoring and data-collection methods are improving.

Given these developments the intervention of five former energy regulators into the debate is bizarre. They have suggested that too much regulation may have hindered competition among energy suppliers, maintaining high prices. Of course these are the very light touch regulators who contributed to the current state of the system.

The energy market has been a dismal failure and most of these developments still tinker at the edges. Stronger regulation and a price freeze is at least a step forward, but Michael Meacher MP sets out a more radical approach.

Ineos take a stake in Scottish unconventional gas drilling

As predicted by us and others, Grangemouth plant owner Ineos has taken a major step towards supplying the plant by unconventional gas from Scotland. The company has bought the majority share of a shale gas exploration licence for Scotland, increasing the likelihood of the controversial drilling technique used for extracting oil or natural gas from deep underground coming to Scotland.

There was considerable scepticism at the time of the investment that the plant would really be supplied by imports from the USA in the medium term. Now Ineos Upstream chief executive Gary Haywood has said: “We are one of very few businesses that can use shale gas as both a fuel and a petrochemical feedstock. Ineos is well-placed to become a major player in the UK onshore gas production sector.”

This will also put additional pressure on the Scottish Government to allow unconventional gas drilling in Scotland. Ineos will undoubtably again use the jobs argument to support their controversial business practices.

This will ironically bring them into line with the UK government, who are desperate to bring US style exploitation of shale to the UK. However recent research undertaken by US experts in the field, independent of the big oil and gas companies, have found a very different story. That data shows high early decline rates in existing shale-gas and shale-oil wells, so that high levels of drilling are needed just to maintain production. The Wall Street Journal has also revealed that large foreign investments in US shale-oil and shale-gas leases were drying up rapidly.

Some have taken comfort from the announcement by Scotland’s energy minister that he is opposed to UK plans to remove individual objection rights over drilling in residential areas. However, the headlines didn’t actually reflect what he said. His primary objection was that the consultation was being undertaken by Westminster not Holyrood. He also said:

“We are taking a cautious approach yes, we are taking an evidence based approach. We are looking at matters further and if we decide that it may provide opportunities for Scotland, then perhaps it should be done in a controlled considered way, in appropriate parts of Scotland.”

Not, by some way, a strong line against fracking. Ineos no doubt has a very clear view what ‘appropriate parts of Scotland’ are!

The New Economics Foundation has recently highlighted other arguments against fracking. The most frequent, though disputed, argument made in favour of fracking is that burning gas emits less carbon dioxide than coal, so shale gas provides a lower carbon bridge towards a more renewable electricity system. They point to several papers that have questioned this assumption, reporting high ‘fugitive emissions’ of methane during fracking. It also ignores the fact that the primary use of gas in the UK is not electricity generation, but domestic heating. Decarbonising the energy supply therefore requires action to reduce our reliance on gas, not embark on a new dash for gas.

Hazards magazine has also drawn attention to the health and safety risks to workers. US unions have noted that deaths in the oil and natural gas industry were up by 23% in 2012 alone. It traces the upward trend back to 2008 and the creation of fracking boom towns. In February 2014, a worker died when a Chevron fracking well in a small Pennsylvania town exploded. The fire burned for five days. Of course trade unions raising awkward safety issues have been a target of Ineos as well!

While it’s tempting just to say ‘we told you so’, the Ineos announcement is a significant development and makes the development of unconventional gas in Scotland much more likely.

Changing public attitudes to recycled water

In a wet Scottish August it may seem a little strange to discuss recycled water. However, severe water shortages in many parts of the world are driving the search for new ways of ensuring a clean water supply.

The technologies to produce high quality water from wastewater are improving all the time. While this could help relieve the strain on water supplies, public attitudes to the idea of using water that is recycled from sewage and other wastewater streams for drinking and domestic use is a major barrier.

Jonathan Bridge in the academic newspaper ‘The Conversation‘ argues that it is public attitudes to recycled water that needs treatment, not the water.

Public attitudes are not necessarily irrational on this point. Untreated sewage is dangerous stuff, and is still responsible for death and disease in many parts of the world. As says “Recent evidence on the prevalence of antibiotic-resistant microbes in treatment plants highlights the need for ongoing technical development to combat emerging threats to health and environment. Other concerns lie around persistent organic pollutants such as pharmaceuticals, which may be concentrated by repeated recycling of black wastewater.”

In the USA a report by the National Research Council (NRC) that reviewed current wastewater treatment technologies found that the possible health risks associated with exposure to chemical contaminants are minimal. They said, “Available technology can reduce chemical and microbial contaminants to levels comparable to or lower than those present in many current drinking water supplies.”

Water UK has also produced a useful briefing that explains how sewage is treated.

Water engineers also face the challenge of tackling real and perceived threats to water quality, mistrust of commercial utilities and government authorities, and a deep-rooted fear of contaminated water.

This is an easier sell in parts of the world where water supplies are under greatest pressure. Here environmental concerns, price incentives, fines and even national security have been used to convince people of the need to adopt wastewater recycling. Not a pressure we face in Scotland – yet!

Another step towards commercial fracking

Shale gas fracking has taken another step forward with the UK government opening the bidding process for onshore licenses. However, a license is only the first stage. Any actual fracking requires planning permission as well. At the same time the UK government has issued new planning guidance for England that places some restrictions on fracking in national parks and other environmentally sensitive areas.

Business and Energy Minister Matthew Hancock said: “Unlocking shale gas in Britain has the potential to provide us with greater energy security, jobs and growth. We must act carefully, minimising risks, to explore how much of our large resource can be recovered to give the UK a new home-grown source of energy. As one of the cleanest fossil fuels, shale gas can be a key part of the UK’s answer to climate change and a bridge to a much greener future.”

However, Greenpeace said millions of homeowners have been stripped of their right to stop companies drilling under their property and now communities will face a “fracking postcode lottery”. “The government has fired the starting gun on a reckless race for shale that could see fracking rigs go up across the British countryside, including in sensitive areas such as those covering major aquifers. Eric Pickles’s supposed veto power over drilling in national parks will do nothing to quell the disquiet of fracking opponents across Britain.”

On the same day, the Scottish Government’s expert panel reported that there are significant reserves of unconventional gas in Scotland, the exploitation of which could result in new jobs.

The chairman of the Expert Scientific Panel, Dr Chris Masters, said: “It is clear the development of unconventional hydrocarbons has had a profound effect on the economy of the United States with global repercussions in terms of gas and chemical feedstock prices. While it is unlikely that Scotland, or indeed Europe, would benefit to a similar degree, there could be a number of positive economic impacts.”

However, the panel did recognise public concerns over fracking and the need for detailed consultation with communities. The Scottish Government welcomed the report and has established a group to examine the findings.

Friends of the Earth Scotland said: “This report raises a number of very serious concerns including impacts on public health and climate. The analysis clearly demonstrates that even if all the environmental, health and regulatory issues could be overcome, there still wouldn’t be a US-style bonanza here, simply because the cost of extraction and the technical and geological challenges are too great. It is simply wishful thinking to imagine that it is possible to safely frack for unconventional gas in the most densely populated part of the country.”

One step forward for the industry, but still some way to go.

How councils can improve our energy system

Cities could play an important role in our energy system. In the energy chapter of the ‘Red Paper on Scotland’, I argued for greater public ownership of energy generation in Scotland by rediscovering the role local government used to play. This reflects what other countries regard as the norm, notably through the growth of renewables in Denmark.

And not just Denmark. Munich in Germany has a target to supply the entire municipality of 1 million people with renewable electricity by 2025. The city has already invested €900 million in renewable energy projects, and it has plans to invest a total of €9 billion to deliver its 2025 target. A group of councils, primarily in England, are also getting involved.

The IPPR has now published a report entitled ‘City energy: a new powerhouse for Britain’. This sets out how cities can become involved in energy and what central government could do to support them.

Cities could deliver the investment to decarbonise our energy system by raising their own finance through issuing green bonds and by making better use of their pension funds. In Scotland, over £24bn is sitting in local government pension funds, mostly invested overseas. Lancashire County Council has already done this.

Using this finance, city energy companies would deliver benefits to city residents rather than shareholders of the mostly foreign companies that dominate the Big Six. Currently, 50% of offshore wind and 69% of nuclear generation is owned by foreign state-backed companies. This means our consumer funded subsidies are going to foreign shareholders.

The IPPR report sets out a number of ways cities could get involved in energy, from becoming a licensed supplier down to joint ventures or partnerships. Aberdeen is one example of a Scottish council that is getting involved by becoming a global pioneer in the use of hydrogen produced using excess power from their nearby offshore wind farms.

The gains include cutting bills and tackling the fuel poverty endemic in our cities. Providing new investment to decarbonise our power supply, with generation that will help secure long term energy security. Not to mention jobs and sustainable economic growth.

In Scotland, this initiative should not just be limited to cities. Scottish Water is well placed to do more than the modest first steps it has taken in this area. Smaller, rural authorities could also get involved, either by linking with cities, or forming partnerships with other councils.

Local government led the way in the 19th Century by generating energy. It’s time to rediscover that role and the IPPR report shows how to do it.

More on Energy Commission report

Former energy minister Brian Wilson gives a typically blunt assessment of the Energy Commission’s report, in today’s Scotsman.

He says, “For the past half century, Scotland has been an exporter of electricity to the rest of the UK, due mainly to our nuclear stations. Last year, we exported more than a quarter of what was produced. The triumph of Nationalist policy will be to turn us into an importer. That matters less while we are part of the same state and market but would matter – and cost – a great deal if we were not.”

This point is also picked up in today’s Herald “it is not all one-way traffic along Britain’s interconnectors. Scotland has begun to import electricity from the rest of the UK. The amounts are not high. Over the past three years, some English-generated power has been required on 162 days. However, on 10 occasions, power was imported right through the day to meet Scotland’s needs and experts believe the situation will worsen as the country’s non-renewable power stations are due to close.”

As Magnus Gardham also reports, “In an article for the latest edition of the Royal Scottish Geographical Society’s magazine, The Geographer, Professor Paul Younger of Glasgow University argues that, with nuclear power stations Hunterston B and Torness due to close in 2023, and ageing, coal-fired Longannet not expected to last beyond 2025, there is barely enough time to build replacements that can provide the baseload, or constantly available, electricity essential when the wind fails to blow.”

While there is a perfectly respectable case for independence, these articles confirm that energy is one of the Scottish Government’s weakest points.

Energy Commission’s case for a single market

The Scottish Government’s Energy Commission has published its report on how the energy market and regulation could operate if Scotland votes for independence in September.

They confirm that a National Regulatory Authority will be required under EU law and the regulator’s duties should be clear and settled for a fixed period to give regulatory certainty.

The report argues that a Single UK Market can continue to work effectively and that there is overwhelming support for maintaining single markets in electricity and gas across GB because
this benefits consumers in both Scotland and the rest of GB and is consistent with the moves towards market integration across the EU. There would need to be robust arrangements governing any settlement with trade-offs that limit unilateral control affecting both partners. They point to working models in Ireland, Iberia and Scandinavia that show it can be done.

They also argue that there is a real opportunity to make a difference to fuel poverty through a fuel poverty agency tasked with targeting assistance, using smart meters and examining the role of the retail and distribution businesses.

This is without doubt a serious and detailed examination of the energy industry in Scotland and many of its conclusions will inform the debate, whatever the outcome of September’s referendum.

However, given the failures of the UK energy market as evidenced by the latest referral to the Competition Commission, it does have to be asked why an independent Scotland would want to join such a system? After all, Scottish Government ministers have been some of its fiercest critics. Joining a single market severely constrains an independent Scotland’s ability to correct the market failures that are all too apparent. The Irish model actually showed that it only works when both parties are pursuing similar policies.

Even if we did seek to join, there is no guarantee that rUK would agree. If they did, it is likely to be on their terms as a major partner. Subsidising Scottish renewables is not likely to be high on their list of priorities. Expecting the EU to come to the rescue on a level playing field, is naive in the extreme.

So, while this is a useful report it leaves open a number of key concerns. Scottish consumers and the industry need radical reform, including greater diversification of ownership. Making those changes will be all the more difficult stuck in the UK system.

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