There is no shortage of activity on energy policy and we haven’t even heard the outcome of the Scottish Government’s energy strategy consultation.
Let’s start with fracking. The Scottish Government has announced that the existing moratorium would continue ‘indefinitely’, which is an effective ban given their planning powers. This follows a similar ban on underground coal gasification. It will be the subject of a vote in the Scottish Parliament, but that should be a formality, as only the Tories support fracking.
Claudia Beamish MSP still has her members bill which would put in place a stronger legislative ban. The problem with using planning powers is that the moratorium could be overturned very easily, unlike legislation. I suspect the government has decided to go down the moratorium route to avoid compensation claims from INEOS, who now have drilling licences that they can’t use. However, as the minister said, fracking, “cannot and will not take place in Scotland” – and that is the practical effect.
The overwhelming majority of people in Scotland will welcome this decision. A staggering 99% of the 60,000 respondents to the consultation supported a ban. Apart from INEOS, we had a grand rant from Jim Sillars, who claimed that people didn’t know about the consultation. Well, 60,000 respondents would indicate that claim is mince, not to mention the noise campaign groups having been making on the issue. Jim also expects trade unions to put pressure on the government to rethink the ban at the STUC. I wouldn’t hold your breath on that Jim, most unions are opposed to fracking.
And you won’t win us over with nonsense claims about how fracking will end fuel poverty. Scotland’s geology means so little fracked gas could be extracted that its use would be for industrial, not domestic heating. Even if it could be extracted in any quantity, the cost would be prohibitive. That is why the investment is drying up for drilling in England and the companies are going to the UK Government with their begging bowl.
The next big announcement by the FM was the establishment of a state owned national energy company. Details on this are a bit scarce, but the announcement points, at least initially, to a retail operation. This is not exactly an original idea, with operations like Robin Hood Energy in Nottingham, Our Power Energy run by housing associations and the People’s Energy Company based in Musselburgh.
A national energy company is something UNISON supported in its response to the energy strategy consultation. However, we envisaged a more radical option that involves generation and transmission as well as retail. We also support a big role for municipal energy – generating electricity, managing distribution grids, running energy efficiency schemes as well as retail sales. This is very common across Europe and seriously challenges the ownership model in Scotland, something the Scottish Government has been unwilling to do. The big energy companies’ reaction to the announcement last week, indicates that some modest retail competition doesn’t worry them very much.
The UK Government’s stop-start efforts to introduce a price cap on energy bills, has once more run into trouble. The minister claimed the cap would be in place this winter, a suggestion that was promptly contradicted by Ofgem. The legislation could take a year and then many months more for Ofgem to implement it. Shambles doesn’t even begin to describe this.
All the usual suspects have been dragged out to tell us how wonderful the market is – all we need to do is get into switching supplier. Meanwhile, in the real-world consumers are increasingly supporting real public ownership options as set out the Labour manifesto. The TUC joined that call at its recent Congress, unanimously backing a motion that supports returning the energy sector to public ownership and democratic control. The motion also called for a mass programme of energy conservation and efficiency, a just transition strategy and investigating the long-term risks to pension funds from investment in fossil fuels.
The last few weeks have seen some important energy policy decisions that could help reshape our energy strategy. However, that will only happen if we are bolder and resist tinkering around the edges.
Scotland may lack many resources, but water is not one of them. This summer was the third wettest since records began with rainfall up 50% on previous years.
Water is delivered to our taps by Scottish water, a public service of the type envisaged for the rest of the UK in John McDonnell’s speech to the Labour Party conference this week. Despite the extra costs of managing water and wastewater in Scotland, it does so at below average cost.
However, UK sales of bottled water continues to grow, exceeding cola for the first time this year. The total sales of bottled water are expected to increase to 4.7 billion by 2021. As Stephen Jardine put it in an excellent article in The Scotsman, “It is a remarkable testament to the power of marketing and our own collective stupidity.”
He actually spotted a bottle of Fiji Artesian Spring Water in a shop. Fiji is nearly 10,000 miles away!
Our water generally tastes good and the Drinking Water Quality Regulator tells us it is very safe, excepting a few private supplies. Compliance with the standards set out in our legislation and in the EU Drinking Water Directive in 2016 was 99.91%.
One concern is that plastic microparticles are finding their way into our drinking water. Tiny pieces of plastic can find their way into seawater where they can be eaten by marine animals and so end up in human food. Even more worryingly, new research suggests plastic particles are also commonly found in drinking water. European nations including the UK, Germany and France had the lowest contamination rate in the survey, but this was still 72%. The average number of fibres found in each 500ml sample ranged from 4.8 in the US to 1.9 in Europe.
We don’t know what impact such particles have on the human body, but they could cause inflammation and act as a carrier for other toxins to enter the body. So, while we don’t have clear evidence that plastic microparticles in drinking water have a negative effect on health, we urgently need to find out more.
Cloudy water is a common consumer concern. This doesn’t necessarily mean the water isn’t clean, any more than crystal clear water means it doesn’t contain bugs. Researchers at Drexel University in the USA analysed existing studies from North America and Europe that investigated the link between drinking-water turbidity and acute gastrointestinal illness. Of the 14 studies included in the review, ten found an association between water turbidity (as measured at the water treatment plant) and the incidence of acute gastrointestinal illness. This means we should at least treat it as a proxy for risk.
The Scottish Government has published its fourth annual report on the Hydro Nation. While there are a number of worthwhile initiatives, it remains a long way short of the vision first articulated by Alex Salmond as First Minister. The report identifies a few, generally small scale, projects abroad. There is some academic research and a few technology projects, but nothing on the scale originally envisaged.
Finally, the Water Industry Commission has been setting out its thinking on the next price review. In particular there is a concern that insufficient attention being paid to asset maintenance. It says: “The price setting process has sought to ensure that the regulated company faces a hard budget constraint over the regulatory control period. While this has been very successful in improving operational efficiency, it appears that insufficient attention has been paid (by both regulator and regulated company) to futureproofing levels of service.”
It is doubtful if a base assumption of a 2% increase in prices will do much to address these concerns. Maintaining a high quality water service requires investment. Who knows, we might even rediscover some of that Hydro-Nation vision.
As we await a decision by the Scottish Government on fracking in Scotland, the debate rages on. One side arguing that we need new sources of gas rather than becoming dependent on imports, while the other points to the environmental impact and the need for another dirty fuel when we have abundant sources of clean energy.
This week a new factor has been added to the mix. John Underhill from Heriot Watt University says that both sides assume that fracking would actually work in Scotland and other UK sites. They pay little attention to whether the country’s geology is suitable for fracking. The implication is that because fracking works in the US, it must also work here. When in fact, Professor Underhill argues that the UK’s geological history suggests this is probably wrong.
He explains why in an article in The Conversation. In short, the geology of the UK is very different to the US. This means that even where a shale source in the UK may have high organic content and thick and favourable mineralogy, the complex structure of the basins will be detrimental to ultimate recovery. The inherent geological complexity of the sedimentary basins has not been fully appreciated or articulated. As a result, the opportunity has been overhyped and reserve estimates remain unknown. We are some 55 million years late – geologically speaking!
Other recent studies have attempted to model risks like earthquakes. A paper, published in Geomechanics and Geophysics for Geo-Energy and Geo-Resources (perhaps not everyone’s bedtime reading!), tries to predict how far from a geological fault it is safe to frack a well without causing an earthquake. Given the length of time fracking has been going on in the USA, it’s surprising that there aren’t already guidelines that cover this kind of risk. However, it partly reflects our limited knowledge of the complex underground landscape and how fracking interacts with it. Because of the complexity and variability, a detailed understanding of the geology of what’s below the Earth’s surface is very incomplete.
The fracking industry is also struggling with 21st Century challenges like finance and public opposition. British banks are reluctant to finance the mostly small drilling companies and a briefing produced by Barclays sets out the environmental and wider public opposition to fracking. The industry group OESG set out their concerns in a meeting with the then UK government minister.
This reflects long standing doubts about the financial viability of fracking. Doubts which won’t be helped by further questions about the technical viability of fracking in the UK. MSP’s have already voted in favour of stopping fracking in Scotland and Scottish Labour MSP, Claudia Beamish has launched a members bill on the issue.
The bottom line remains that fracking advocates have failed to reassure the public on environment grounds, financial viability is doubtful and we simply don’t need another dirty fuel.
As widely predicted, UK government action on energy bills has turned out to be another damp squib. Ministers passed the buck yet again to Ofgem who have published plans for a ‘fairer and more competitive’ market. As if we haven’t heard that before!
As the Editor of Utility Week put it: “If the government is convinced that an absolute energy price cap for 17 million UK households is both expedient and desirable, it should take responsibility for delivering it – and sooner rather than later. The industry is not going to tie a noose around its own neck.”
Despite the abundance of energy supply in the UK, we still pay more than the European average. This Ofgem infographic shows how energy bills are broken down.
We are told the solution is more switching in an allegedly competitive market. However, there has been a warning that more small energy firms could go bust this winter because of increasing price volatility. David Bird of Co-operative Energy said that the regulator needed to set financial stress tests for new market entrants, to reduce the risk of firms folding and customers being left in the lurch.
On a more positive note it looks as if there may be some action on charges for pre-payment meters.
Santander has recently highlighted how much of our declining pay packets go on largely unavoidable household bills. It looked at bills for gas, electricity, water, etc – and found they have risen far ahead of average wage rises. Since 2006, average pay packets in Britain have gone up by 19%, while the average gas bill has risen by 73% and electricity by 72%.
These are very large real rises, and all the grimmer for families and pensioners on very tight budgets – not to mention public sector workers suffering years of pay restraint. These are must pay bills that leave families with harsh choices about what to cut elsewhere.
This bitter pill is made all the less easy to swallow when the boss of one of Scotland’s biggest energy companies has been given a 72% pay rise, soon after arguing against consumers having their bills capped to save them £100 a year. The company also increased the price of its standard variable tariff by 6.9%.
Alistair Phillips-Davies, the chief executive of SSE will be paid £2.92m in 2017 after receiving the maximum possible bonuses for leading a “robust performance” by the supplier last year. The pay rise is even bigger than the 40% rise awarded to the chief executive of the Scottish Gas owner, Centrica.
Former energy minister Brian Wilson is not as convinced as the First Minister that ScottishPower is “an exemplar to our world-leading energy sector” as she opened their new HQ in Glasgow. He argues: “Such testimonials should be tested rather than asserted. Neither ScottishPower nor SSE have built a single power station since privatisation. Scotland has been turned from exporter of electricity to importer. These companies have been the biggest beneficiaries of onshore wind subsidies – without building a single turbine in Scotland. I’m not sure that is such an “exemplar” record, even leaving aside what customers think of them.”
Then we can add energy networks into the mix. They have been accused of exploiting consumers to enjoy a £7.5bn windfall of unjustified “sky high” profits. Citizen’s Advice reckon the companies that transmit electricity and gas around the UK, including National Grid, were reaping average profit margins of 19% from their monopolies. That compares with the 4% margin that big six suppliers make selling power and gas to householders. They have called for a one-off £285 rebate to every household. Don’t hold your breath on this one, but the companies can expect a tougher price controls next time around.
In a useful analysis of the issues the HofC library argues that the key issue for Parliament will be how to make consumer markets such as energy work effectively. Can consumers be encouraged to find the best deal or does Government need to be more active?
The simple truth is that markets have failed, not least because consumers have better things to do than spend hours battling the complexity of energy pricing. Government intervention is long overdue.
We may not be short of water in Scotland, but that’s no excuse for losing more than a third of drinking water before it reaches the taps.
According to the latest figures from Scottish Water, 500 million litres a day are lost. This is despite a six-year, £3.5bn upgrade programme that is due for completion in 2021. There has been year-on-year decreases in leakages and Scottish Water has consistently exceeded its targets. However, these figures just shows how much we still rely on Victorian infrastructure for this essential public service.
If it keeps raining and the reservoirs are full, why does it matter? Well, as Scottish Green Party leader Patrick Harvie says “It’s not just a waste of water, it’s a waste of energy and money that’s gone into getting that water where it needs to be and in the right conditions. The challenge is immense when you’re dealing with Victorian infrastructure.”
Patrick Harvie added: “There’s a huge amount of further investment needed. The leakages have been cut, but that shouldn’t be a reason for complacency. It’s one of the many reasons why we absolutely have to keep Scottish Water in the public sector and resist the efforts to flog it off, privatise it or change it’s structure in some way.”
Leakage from the pipes isn’t an excuse for us as consumers to waste water. Many of us will have had smart meters installed to measure our gas and electricity usage. Water infrastructure is often overlooked when smart metering issues are considered or discussed and the sector has arguably been slow to harness the power of new technology. It is often seen as an “invisible utility” which is taken for granted, except during a period of drought or during pollution incidents.
There is evidence that smart meters could curb domestic water use, even if the take up so far has been modest. However, Scottish Water is not convinced and neither is the Scottish Government, which would have to fund them.
The biggest English water company,Thames Water, would face a supply shortfall of 133m litres per day by 2020, rising to 414m litres per day by 2040 if the trend for increased demand continues. As a result they have embarked on a smart metering installation programme that will see 414,000 smart water meters installed in London by 2020. By 2025 they will be dealing with 35 billion hourly meter reads every year.
In England and Wales, consumers have a right to have a meter installed and more than half have done so, claiming it makes them more water aware and results in significant savings on their bill. Research by the UK’s Water Industry Research body has found that the average family reduces their water usage by 10% to 15% after a water meter is installed.
Of course, the only people switching to a meter are those who think they will save money. Families with lots of young children and those with medical conditions (such as incontinence, weeping skin problems and renal failure) which necessitate high water usage are also likely to receive higher bills with a meter.
Another downside is that if there are leaks, you pay the cost of the leaking water until it’s fixed. There are some shocking examples of this with massive bills. One of the reasons water companies in England are so keen on metering is that they claim it helps them identify such leaks.
The advantage of the Scottish system is that charges are broadly progressive, being based on council tax bands rather than water use. Meters can put pressure on those who legitimately use large amounts of water to reduce their usage, with potential risks to public health. This has been the experience in the energy sector with self disconnection through pre-paid meters commonplace.
When the current infrastructure programme is completed and leakage reduced, it may well be that domestic meters will come back on the policy agenda.
As the Brexit negotiations begin, we shouldn’t forget the impact they could have on existing and future energy policy in Scotland. An issue that got precious little attention during the referendum campaign.
The UK currently operates within an EU wide regulatory framework, including the single electricity and gas market. Other directives cover energy services, security and the Euratom treaty on nuclear power. The main aim is to create non-discriminatory access to networks and the creation of wide area wholesale markets. It is claimed that the current integration results in savings of around 5% of costs, with full market coupling and shared balancing resulting in further gains of 2.3% of wholesale electricity costs.
Leaving the EU does not change the UK’s key energy policy objectives that include low prices, energy security and environmental targets. The use of interconnectors to mainland Europe is an important link to energy markets and for energy security. At least eight cables are being laid to trade power between the UK, Ireland, France, Belgium, Denmark and Norway, tripling the existing number of UK interconnectors. Huge investment has been committed to the projects under way, and ones even further afield have been suggested, such as a cable to bring Iceland’s volcanic power to Scotland.
Another question mark will be over the single electricity market in Ireland and integration into the GB system. There are related concerns over freedom of movement for energy workers, withdrawal from the EU carbon pricing system (ETS) and collaboration on energy research. MP’s have been particularly critical over the consequences of withdrawing from nuclear cooperation through the Euratom Treaty.
This slide gives National Grid’s fairly pessimistic take on the consequences.
The ‘no deal’ approach would mean a reversion to WTO rules at best, but the WTO would provide very little help in terms of energy market access. It might be possible to include energy in trade deals with Canada and the USA, over energy sources like LNG, but energy is realistically an issue with close neighbours.
Equally, if we remain within the system then the tricky issue of judicial oversight rears its head. It is hard to envisage a deal that does not bind the UK to ECJ decisions.
Brexit also has implications for the Scottish Government’s independence plans. Scotland is a net energy exporter, but it also increasingly relies on imports from England, particularly when the wind isn’t blowing. The counter to unionist claims that Scotland would be cut off from the GB system, is EU market access requirements. However, if the UK isn’t bound by those directives, then neither would a future rUK government. Of course in the short term there is probably a joint incentive to reach a deal. The longer term might be more problematic.
As with other areas there are also opportunities with Brexit. Outwith the EU the UK could develop different subsidy regimes, state intervention and redesign the wholesale market. All is not well with our energy market and it could be argued that we could be more flexible outwith it.
In summary, those who support the current market based approach argue that the UK negotiators should focus on barrier-free trade that would maintain the ‘benefits’ of the internal market and high-level cooperation on energy matters. Sceptics point to the extra cost and inflexibility of the current system and argue that a lighter touch engagement with the EU would free up the UK to adopt a different approach.
Not for the first time, energy policy has received very little attention in this election campaign. In Scotland, key elements are reserved so you might expect a bit more attention to be paid to it, rather than debate devolved issues that MPs have no real say over.
The Tories are not proposing any major changes to their current energy policy, other than over energy prices. The radical change is in Labour’s manifesto, which attacks privatisation and fuel poverty, based on three key principles:
- To ensure security of energy supply and ‘keep the lights on’.
- To ensure energy costs are affordable for consumers and businesses.
- To ensure we meet our climate change targets and transition to a low-carbon economy.
None of these are particularly controversial; the radical meat comes later in the manifesto.
Labour would introduce an immediate emergency price cap to ensure that the average dual-fuel household energy bill remains below £1,000 per year. The SNP manifesto also has a price cap commitment. This was 1970’s socialism according to the Daily Mail, until the Tories started to use similar language. In practice the Tory manifesto commitment has been diluted to a targeted cap. So much so that the industry now welcomes it.
The big Labour idea is to take energy back into public ownership to deliver renewable energy, affordability for consumers, and democratic control. This will be done in stages, starting with the energy supply networks license conditions. Then by creating locally accountable energy companies and finally purchasing regional and national grids. As Stephen Hall, from Leeds University notes, this is not quite as revolutionary as it appears. This is happening in the US and Germany, often badged as municipalisation. It is a long way short of command and control nationalisation.
To help tackle other aspects of fuel poverty, Labour will insulate four million homes to help those who suffer in cold homes each winter. This will cut emissions, improve health, save on bills and reduce winter deaths. There should be Barnett consequentials for Scotland from this. Homeowners will be offered interest- free loans to improve their property and Landlord regulations will be changed in England. Labour is committed to similar measures in Scotland. As the Energy Saving Trust says:
“There’s no sugar coating it. From a home energy point of view the Labour manifesto is much more encouraging than the Conservative one.”
Labour will ban fracking because it would lock us into an energy infrastructure based on fossil fuels, long after the point in 2030 when the Committee on Climate Change says gas in the UK must sharply decline. Putting to one side the safety and environmental issues, we simply don’t need another dirty fossil fuel. The Tories are proposing incentives in England to promote fracking and the SNP are consulting over the current moratorium in Scotland.
Labour views emerging technologies such as carbon capture and storage as the way to help to smooth the transition to cleaner fuels and to protect existing jobs as part of the future energy mix. However, the manifesto is silent on the role of gas plants in delivering flexible generation. The current capacity market has not provided an incentive to build new plants; instead it has delivered the dirtiest possible coal and diesel generation.
The commitments to renewable energy projects, including tidal lagoons, are viewed as part of Labour’s industrial strategy, to create manufacturing and energy jobs, as well as contributing to climate- change commitments. With backing from a Labour government, these sectors can secure crucial shares of global export markets.
The Liberal-Democrats would also reverse Tory cuts to support for wind farms and solar PV. They also support energy efficiency measures. However, their support for community energy and new entrants into energy retail are firmly wedded to market solutions.
Under a Labour government nuclear will continue to be part of the UK energy supply, which puts them at odds with the SNP. Labour will also seek to retain access to Euratom, to allow continued trade of fissile material, with access and collaboration over research. As part of the Brexit negotiations, Labour will prioritise maintaining access to the internal energy market. This is also important to the SNP’s independence plans, which rely on access to energy systems outwith Scotland.
The SNP energy policy is currently the subject of a consultation and I have set out the UNISON response to that consultation here. In the event of a hung parliament, outwith the Tories, most parties could support the ambition in the paper and it is fair to say that Scotland has led the way on cleaner energy. Its weakness is the shortage of specific actions and milestones, a criticism shared by the renewables industry.
Most party manifestos express their support for renewable energy and energy efficiency. The radical shift in this election is the commitment to new ownership models in the Labour manifesto. The election of Labour government this week would mean big changes for the sector.
For a factual comparison of the party manifestos on energy and climate change, see the Carbon Brief’s helpful chart.
Energy prices have taken an early place in the general election debate, even with a bit of deja vu.
Work and pensions secretary, Damian Green, has said the Conservatives would allow Ofgem to impose a price ceiling for customers on standard variable tariffs, saving families about £100 a year. When Ed Miliband proposed a similar cap, the media parroted the Conservative line – that such a policy was dangerous, anti-business leftist extremism. The Daily Mail carried the headline “back to the bad old days” and claimed “Red Ed revives 70s socialism”.
Now, only a few years later, May has hijacked the policy. The Mail’s coverage this time round is ludicrous. “Crackdown on energy rip-offs” they announced – “Mrs May is set to announce a cap on soaring bills”. This simply demonstrates the absence of an even political playing field, with 80% of the print media owned by five billionaires. They are desperate to prevent greater redistribution of wealth, greater regulation and other policies Labour is likely to propose for the benefit of ordinary people.
The media hypocrisy can’t hide the industry reaction and this may point to a watering down of the policy. Lawrence Slade from Energy UK, said the move would be “giving up on competition. Intervention on this scale will additionally create huge uncertainty around government intentions, potentially putting at risk the billions in investment and jobs needed to renew our energy system.”
ScottishPower’s Keith Anderson said putting an upper limit on prices could leave people who are not on fixed tariffs feeling that they have been offered some protection and so don’t need to shop around for a better deal. He reckons the key to ensuring that more energy users get the best deals lies in getting people off standard variable tariffs and requiring them to engage with the market. The best way to achieve this would be to ban SVTs.
There is some logic to his approach. The energy market has served the “switchers” relatively well in recent years, with the cheapest fixed price deals falling from £1,100 in 2014 to around £800 today. By contrast, SVTs paid by non-switchers have increased dramatically since 2006, and continue to increase.
Another tweak to the market is proposed by the Policy Exchange. They argue government and Ofgem do not have to set prices or examine the detail of energy supply costs. They simply set a cap on the differential between the highest and lowest price charged by each supplier.
However, all this really means is let’s give the failed energy market yet another chance. We shouldn’t forget that even the feeble CMA investigation identified several features of the market that were not working properly, leading to consumers paying £1.4 billion more than they would in a fully competitive market.
Labour MP Andrew Gwynne, said the Tories’ promises on energy bills should be taken with a huge pinch of salt. “The Tories don’t stand for working people. Their record is one of failure and broken promises, letting ordinary people down at every turn.” Or as Ed Miliband tweeted: “Where were these people for the last four years since I proposed cap? Defending a broken energy marketed that ripped people off.”
Hard to disagree with that!
Last Friday was probably the first time the UK has not used coal to generate electricity since the world’s first public coal-fired generator opened in 1882 in London. That is undoubtably a notable milestone towards a low carbon energy system, but it doesn’t mean an end to fossil fuel electricity generation.
There may have been no coal generation last Friday, but less than a quarter came from renewables. Around half of British energy on Friday came from natural gas, with about a quarter coming from nuclear plants.
The number of workers in Scotland employed in the low carbon and renewables sector has risen to 58,500 according to the latest figures, generating a turnover of £10.5 billion. 48% of all UK employment, and 53% of all UK turnover, in onshore wind was north of the border. In low carbon electricity generation, Scotland represented 33% of all UK employment, and 28% of turnover.
However, industry body Scottish Renewables warned its members were expecting their workforce to shrink by 16.9% over the next 12 months. Jenny Hogan, Scottish Renewables’ policy director, said one of the main problems was the UK Government refusing to allow onshore wind and solar energy to bid against fossil fuel companies for long-term contracts to supply electricity. She said:
“These results show that changes to and closures of support schemes are having an impact on our members and on the numbers of employees within their businesses. Onshore wind and solar are the two cheapest forms of electricity, but ministers are refusing to allow them to access long-term contracts for power, which will result in a marked slowdown in investment and a decrease in employment.”
If renewables are going to play a larger role in Scotland’s generation mix then we need more storage. In the longer term batteries may play a role, but for now the proven technology is pumped hydro. However, the industry argues that a lack of certainty around long-term revenue is holding back growth.
SSE senior policy manager, Kate Gillingham, says her company’s planned new facility at Coire Glas, near Loch Lochy in Scotland, is “a major infrastructure investment, with large upfront capital costs and significant lead times. However, the current market conditions do not provide sufficient revenue certainty to enable investment decisions on a new build project”.
This view is supported by ScottishPower whose head of UK hydro at Scottish Power has said there needs to be “some way of unlocking investment” to help fund projects like the upgrade of the Cruachan hydro pump scheme. Ross Galbraith said:
“We’re really keen work on and look at how we can support and mitigate the risks of large-scale investment associated with pump storage. Depending on the option we choose, Cruachan 2 will cost somewhere between £300 million and £500 million. The lead-time for construction is significant, so we need to find a framework to mitigate the risk of that investment.”
So, coal generation may be in decline, but UK government policy and the daft energy market is holding back clean renewable energy.
More sound and fury over energy price rises, but will it mount to anything more than another round of switch urging?
Five large energy companies have announced price increases up to 15%, including Scottish Power and SSE. Many of the medium and small companies have also moved to increase prices. Energy bills now account for 10% of spending in the poorest households, compared with just 5.5% in 2004.
The energy regulator Ofgem says there is no basis for this increase because of the way companies hedge increases in costs. Another way of saying that they bring prices down slowly, but put them back up again at the first whiff of an increase in wholesale prices. The CMA report found customers had paid £1.4bn a year in “excessive prices” between 2012 and 2015, with those on standard variable tariffs (70% of the total) paying 11% more for their electricity and 15% more for their gas than customers on other tariffs.
Even pro-market MPs are beginning to recognise that switching isn’t the solution. A Westminster motion this month urged: “Government to consider solutions which recognise that many people lead busy lives where switching their energy supplier may not always be a high priority”.
Conservative MP John Penrose (Weston-super-Mare) talked about the relative price cap idea – a maximum mark-up between each energy firm’s best deal and its default tariff. Even the Prime Minister has said the energy market is not working as she signalled that the government will go beyond encouraging customers to switch suppliers when it publishes its upcoming consumer green paper. She said: “Energy is not a luxury but a necessity of life. It is clear to me that the market is not working as it should.”
The chief executive of Citizens Advice, Gillian Guy, said: “The prime minister is right that the energy market is not working for everyone. Over 2 million low-income families and pensioners in Britain are paying £141 more each year because they remain on their supplier’s standard variable tariffs.” She said the prepayment meter price cap should cut bills for millions when it comes into force in April. “Extending the cap to standard variable tariff customers eligible for the warm homes discount would be an important first step to protecting many more of those who pay over the odds for their gas and electricity.”
Of course we have heard all of this before. The question is, will there be any action next month, or more hand wringing?