There is broad cross party support for Carbon Capture and Storage (CCS) as an important component of our climate change strategy. The problem is turning policy support into action, in our so called energy market.
I was in London today, participating in an interesting discussion on these issues. I have spent some time, with others, over the years trying to persuade a string of energy ministers and energy companies to adopt CCS, with little success.
CCS is the process of capturing and storing carbon dioxide (CO2), typically caused by burning fossil fuels in power generation and heavy industries, before it is released into the atmosphere. It can be used post-combustion by capturing the gases, or pre-combustion, which involves converting the fuel into a mixture of hydrogen and CO2. It generally captures around 90% of emissions.
Once the CO2 has been captured, it is compressed into a liquid and then pumped underground to be stored into depleted oil and gas reservoirs or coalbeds. Something we have plenty of in Scotland and the North Sea.
The CO2 can be used to produce commercially marketable products, known as carbon capture storage and utilisation (CCSU). Some are reasonably well established like enhanced oil recovery (EOR). Others are still being researched.
CCS is the only technology that can help reduce emissions from heavy industries – essential for tackling climate change. When combined with bioenergy technologies for power generation (known as BECCS – bioenergy with carbon capture and storage), CCS has the potential to generate ‘negative emissions’, removing CO2 from the atmosphere. The potential downside is that these technologies can be expensive, at least until scaled up.
Some environmental groups are concerned that these technologies will be used as an excuse for climate change inaction, or to allow companies to continue to burn fossil fuels. However, the IPCC report published this week is clear that we may not be able to limit warming to 1.5C without removing carbon dioxide from the atmosphere, and that means CCS. We certainly cannot afford to close it off as an option.
There are more than twenty large scale CCS plants globally. In the UK, a £1 billion competition to develop CCS was dropped in 2015 after a long delay, losing the UK’s early research advantage. The Clean Growth Strategy of October 2017, renews a commitment to the technology, with promised investments of up to £100 million. As the Permanent Secretary at the energy department put it giving evidence to MPs earlier this year:
“We think it is very likely to play an important part in the overall effort to decarbonising the economy at the lowest cost. Lots of international studies, as well as our own studies and scientific work here, show that CCUS is likely to be a key part of the overall solution.”
However, he went on to say:
“This is much more about innovation. We are not, at this stage, talking about actual deployment of a live, fully functioning, fully scaled CCS project.”
In other words, little actual action to create the scale we need to meet climate change targets. There is a small stick involved in energy generation – by 2025 the government will phase out coal burnt in power plants not fitted with CCS.
The Scottish government is supportive of CCS in its energy strategy, but it isn’t in a position to fund a full scale project. It is to fund a feasibility study – the Acorn Project aims to create a CCS project at St Fergus in Aberdeenshire. It is also supportive of developing Hydrogen, primarily as a replacement for gas used in heat, plus some transport options. Hydrogen gas at scale will, at least initially, require natural gas (methane) as the source feedstock and as such in order to be low carbon, CCS will be a necessary system requirement.
It seems clear to me that CCS remains an essential component of any climate change strategy. Scotland is well placed to take a lead, but this has to be on a much larger scale than is currently envisaged. A collective international effort is also needed to speed up research, development and deployment of CCS.
The U.K. Government has a key role to play, but it appears only to be interested in tinkering around the edges. The failed energy market will simply not deliver on the scale required. So, it is time for a planned energy strategy, with public ownership at its core, that can take the necessary action.
Is the electricity sector facing major disruption due to technological innovation, including the falling costs of renewables and energy storage, along with tougher environmental policies and regulatory reform?
Antony Froggett argues in a Chatham House report that as technology and installation becomes cheaper, non-hydro renewables accounted for 61% of all the new installed power capacity across the world in 2017. While the construction of wind and solar was initially stimulated by decarbonisation policy, now it is driven by economics. As renewables continue to be deployed, they become ever cheaper to build and install. Solar is already at least as cheap as coal in Germany, Australia, the US, Spain and Italy. By 2021, it is also expected to be cheaper than coal in China.
However, integrating this new power may become costly. Centralised coal or gas power stations, can more easily be switched on and off to ensure supply meets demand. This is more challenging when renewables are involved, as the sun doesn’t always shine, and the wind doesn’t always blow.
Electricity storage systems could be a key part of the solution and the development of electric vehicles, to address climate change and localised pollution, should drive down the price of batteries. Similar batteries can be used for home storage linked to solar panels.
Digitalisation is likely to be another disruptive change. Smart meters allow energy firms to better monitor and understand their customers, which enables even more flexibility. Algorithms like those already used by Google and Amazon could result in energy supplies tailored to individual households and times of day. Blockchain technology could also enable a peer to peer energy market, allowing neighbours to sell excess power to one another.
Before we get too carried away there are a few challenges. A Westminster parliamentary group recently reported that people who have smart meters installed are expected to save an average of £11 annually on their energy bills, much less than originally hoped. As many of us warned, the piecemeal rollout has been hit by repeated delays and cost increases, with suppliers now almost certain to miss the 2020 deadline. I have a none too smart meter that doesn’t work because I switched supplier – and I am not alone.
The relentless rise of renewables is also not guaranteed. The International Energy Agency (IEA) has reported that fossil fuels increased their share of energy supply investment for the first time since 2014, to $790bn, and will play a significant role for years on current trends. Investment in coal power dropped sharply, but was offset by an increase in oil and gas spending. Fossil fuels’ share of energy investment needs to drop to 40% by 2030 to meet climate targets, but instead rose fractionally to 59% in 2017.
As the New Economics Foundation has highlighted, the number of new solar installations per month in the UK has plunged from an average of over 9,000 between 2010 and 2016, to under 1,000 at the end of 2017. The decline correlates with the Government’s slow suffocation of the Feed-in-Tariff over the last seven years. When these changes were being prepared, the UK government were made well aware of the consequences, yet stubbornly decided to proceed.
Squabbling in the renewable industry won’t help to drive a coherent government strategy either. Iberdrola, who own ScottishPower, has voiced its frustration at the UK Government blocking onshore windfarms from competing for renewables subsidies and have attacked technologies like tidal lagoons as, ‘Moonshot green technologies’. The company behind the proposed Swansea scheme responded by saying; “Having once bemoaned the incumbency of fossil fuels, it’s disappointing that some in the renewables sector have adopted this bad habit” – ouch!
Offshore wind clearly has significant potential and is a proven technology. Plans to lease the seabed to encourage a new generation of offshore wind farms in Scotland’s waters have been published by Crown Estate Scotland. This has the advantage of putting the leasing income into the public purse, rather than big landowners.
The IEA also reported that governments are increasing investment in energy markets, either directly through state-owned firms or indirectly via investments policies and regulation. Firms like ScottishPower are often short of capital investment, which makes them reluctant to back technologies that are not proven to be economically viable.
This is where Scottish and National Investment banks have a role to play as well as direct public finance. The public policy question is why should we use public money to ‘nudge’ big power companies, when a public sector operator could do the same job, within a planned energy strategy?
The creation of a Scottish public sector energy company is very welcome initiative, but the suggested model lacks ambition and is unlikely to tackle the failed energy market.
On 10 October last year the First Minister announced the Scottish Government’s intention to set up an Energy Co. by the end of this Parliament in 2021. They commissioned consultants Ernst and Young LLP to prepare a Strategic Outline Case, which has recently been published.
The strategic case for Energy Co. is based on the significant challenges that exist in the Scottish energy market, including high electricity prices, a lack of consumer switching and significant levels of fuel poverty. The strategic case demonstrates that the creation of the Energy Co. has the potential to successfully address some of these problems.
Their analysis indicates that the pre-tax profit margins made in the retail energy market are limited. This may present challenges to the Energy Co. in a highly complex and competitive market. However, if the Energy Co. is able to provide competitive pricing, together with positive and trusted branding as a public provider, it would be well positioned to develop a sufficient customer base. Particularly with disengaged customers that would otherwise have remained on an uncompetitive tariff.
Energy Co. could also encourage energy efficiency more successfully than existing suppliers. Promoting energy efficiency as a way of reducing energy consumption, as opposed to reducing energy costs, is another means of tackling fuel poverty. Energy Co. also has the potential to support economic growth by supporting local energy generation and efficiency, using the lower cost of capital available to government and local authorities.
The paper suggests a number of delivery models ranging from using an existing supplier, a Government company or a hybrid option involving municipal energy companies. The operating model could be a simple ‘White Label’ branding of an existing supplier, to a full capability licensed company. The former would have low start up costs and risk, while the latter is more costly in year one, but has greater flexibility and operating scope.
In fairness to the consultants it may have been the brief, but the report is very modest in scope. There are also a number of uncertainties, not least the impact of Brexit and the effect that will have on the current market arrangements. Energy regulation is reserved to Westminster and while the Tories are taking baby steps in reforming the market, Labour is developing much more radical options.
Setting up another retail option in a crowded market is a very limited model. As with municipal energy companies, they need to be in generation and energy efficiency as well. I would also argue that distribution networks could be more local on European models, but that option isn’t currently available. The ‘Topco’ model in the paper has some merits in developing common billing and other systems, but we should be wary of over centralisation, which would negate the innovation and localism of municipal energy.
Having energy efficiency as a National Infrastructure Priority hasn’t added much so far, although the Scottish Government has just published a new Route Map to an Energy Efficient Scotland. In addition, one of the brand selling points of Energy Co. ought to be its low carbon offer. Sadly the paper is pretty light on this. The same can be said of how it deals with heat, just as important going forward as electricity.
Developing a new state Energy Co. within the constraints of the current energy market and EU restrictions will always be challenging. We need a much more radical approach to energy reform including public ownership of the transmission and distribution system, public investment in new forms of generation linked to a new industrial strategy, as well as public energy supply companies.
The risk in this Strategic Outline Case is that we end up with a modest dabble in the market that fails to address the real problems facing Scotland’s energy sector.
World Water Day, on 22 March every year, is about focusing attention on the importance of water. This year’s theme, ‘Nature for Water’, explores nature-based solutions (NBS) to the water challenges we face in the 21st century.
Water is a human right according to the United Nations, which in 2010 declared that every man, woman and child should have access to clean drinking water and safe sanitation. As the most precious life source the earth has to offer, without which humans cannot survive, the recognition of water’s importance to human beings as equal to their right to life and dignity goes without saying.
In Scotland, we take the provision of clean water from our taps and the safe removal of waste water for granted. Sadly, this is not the case in many parts of the world:
- 2.1 billion people lack access to safely managed drinking water services.
- By 2050, the world’s population will have grown by an estimated 2 billion people and global water demand could be up to 30% higher than today.
- Around 1.9 billion people live in potentially severely water-scarce areas. By 2050, this could increase to around 3 billion people.
- 1.8 billion people use an unimproved source of drinking water with no protection against contamination from human faeces.
- Globally, over 80% of the wastewater generated by society flows back into the environment without being treated or reused.
This February, the European Commission published the Re-cast of the Drinking Water Directive. We have been waiting four years for this first concrete outcome of the European Citizens Initiative, following the Commission’s unambitious Communication in 2014. The proposed Directive, as the ETUC and others said at the time, is a step forward, but misses the opportunity to recognise the Human Right to Water. Now we have to mobilise allies in the European Parliament, the European Social and Economic Committee and the Committee of the Regions to push the European Union to commit to really implementing the Human Right to Water. Hopefully it will happen before Brexit, but I wouldn’t hold your breath.
In Scotland, we have the benefit of a largely public sector water service. Despite Scottish Water’s persistent reference to ‘the company’, they are in fact a public corporation. This public service delivers a quality service more cost effectively than private companies in England, despite the additional costs of managing water in Scotland. The private sector has crept into a few corners of the service through competition measures in the non-domestic market and through ruinously expensive PFI schemes. However, the core service remains in public hands.
There is a case for greater democratic accountability and moving away from the regulation model that seeks to copy the private sector model in England and Wales. We could also do much more with water as an economic asset, something envisaged in the Hydro Nation concept. Sadly, that vision hasn’t been realised in full. I hope that is something Scottish Labour and other political parties will consider in the run up to the next Scottish Parliament election.
The sharks are always circling around Scottish Water and we need to remain vigilant. Scotland’s water is not for sale.
There are few surprises in the Scottish Government’s new energy strategy. It followed a consultation conducted at the beginning of last year which drew over 250 substantive responses.
The general principles of the Scottish Energy Strategy remain as set out in the consultation. It aims at keeping prices as low as possible, encouraging low-carbon energy development and security of supply. The six key priorities are to be implemented ‘over the coming decades’ include:
- Promote consumer engagement and protect consumers from excessive costs
- Champion Scotland’s renewable energy potential, creating new jobs and supply chain opportunities
- Improve the energy efficiency of Scotland’s homes, buildings, industrial processes and manufacturing
- Continue to support investment and innovation across our oil and gas sector, including exploration, innovation, subsea engineering, decommissioning and carbon capture and storage
- Ensure homes and businesses can continue to depend on secure, resilient and flexible energy supplies
- Empower communities by supporting innovative local energy systems and networks
Paul Wheelhouse, Scottish Energy Minister, said: “Scotland’s first Energy Strategy will strengthen the development of local energy, empower and protect consumers, and support climate change efforts while tackling fuel poverty. This strategy will guide decisions of the Scottish Government over the coming decades. We want to make sure, within the scope of our devolved powers, good stewardship of Scotland’s energy sector – something we have called the UK Government to step up to for years.”
This Strategy sets two new targets for the Scottish energy system by 2030:
- The equivalent of 50% of the energy for Scotland’s heat, transport and electricity consumption to be supplied from renewable sources.
- An increase by 30% in the productivity of energy use across the Scottish economy.
There is undoubtably a lot of support for the ambition in these targets and principles. The challenge with any long term targets, which stretch outwith the normal political cycle, is delivery. In this respect the strategy remains weak on the road map for delivery. In fairness, the Scottish Government doesn’t control all the levers of energy policy, and even if they did, there are a lot of unknowns. Not least technological change, market change and of course the dreaded Brexit.
One area where more could be done in Scotland is over community energy. The targets and actions are modest and there is still little clarity over the scope of the proposed national energy company. Scotland should be championing municipal energy.
There will be an Annual Energy Statement, which sets out progress made towards targets, statistics and developments, together with an assessment of technological changes and system developments. This will at least provide an opportunity to measure how much of the ambition in the strategy is being turned into practical action.
Just when you thought the fracking debate in Scotland was settled, the battlefield shifts to the courts.
Ineos Shale has applied for a judicial review of the Scottish Government’s decision to continue its moratorium, citing “serious concerns” about its legitimacy. They claim there was a ‘supportive regulatory and planning backdrop’, which frankly is a little difficult to identify. Unless there is more in those meetings with the First Minister than we have been told! Encouraging noises from the previous energy minister may not be enough to convince a court.
The Scottish government argues that it took a “careful and considered approach” while coming to the decision, with “detailed assessment of evidence”. They certainly took a long time and the public response to the consultation was overwhelming.
Judicial review is primarily about process, and on those grounds the Scottish Government approach looks pretty robust. However, it does reopen the debate about the merits of addressing this issue through legislation rather than through planning. Even if the Ineos legal challenge was successful that option remains open. I suspect the best that Ineos can hope for is to make the government jump through some more hoops.
As Keith Baker from Glasgow Caledonian University argues in today’s Herald, the studies show that the costs and risks far outweigh the largely short term economic benefits. He said, “If the Scottish Government is to meet its target of reducing national emissions of greenhouse gases by 80 per cent by 2050, it will need to achieve a significant reduction in the use of all fossil fuels over the next decade, so it is absolutely right to conclude that allowing unconventional extraction is a major step in the wrong direction, and to use its devolved responsibilities for planning to legislate against the development of fracking sites”.
He also argues that while safety is probably a secondary issue, the Precautionary Principle should still apply, given the damage even a low level of contamination could do to traditional industries like whisky.
The plan to frack in Scotland is primarily for industrial use, not as a contribution to energy supply and there are alternative sources of gas. The Scottish Government’s new energy strategy claims biogas and biomethane produced through Anaerobic Digestion (AD) will have a significant role in decarbonising Scotland’s energy system. Existing sites already produce enough gas to supply the equivalent of 85,000 homes.
Charlotte Morton, chief executive of Anaerobic Digestion and Bioresources Association (ADBA), said: “The Scottish government has set itself ambitious but necessary targets for generating renewable energy in its new Energy Strategy, and renewable heat and electricity produced through AD can make an important contribution to these goals, as well as reducing emissions from landfill, creating rural jobs, and helping to restore degraded soils. There are now over 50 operational AD plants spread across Scotland, recycling a range of wastes including animal slurries and manures, food waste, grass silage, sugar beet, and various grains and wheats from Scotland’s famous distilleries.”
I suspect Ineos will find that judicial review is costly, time consuming and rarely successful in Scotland. Particularly when challenging what was a lengthy and detail government process. The courts rightly recognise that difficult political decisions are for parliament, not the courts to decide.
Even if successful, it doesn’t mean fracking will be allowed, it will simply force government and parliament to adopt a different approach.
As the statutory target to eliminate fuel poverty in Scotland has come and gone, will a new strategy do any better?
The Scottish Government has published a consultation paper on a new fuel poverty strategy for Scotland. The consultation looks at the existing approach and legislative framework and sets out proposals for a new Fuel Poverty Strategy in Spring next year. Targets will be enshrined in a Warm Homes Bill later in 2018.
The number of households in fuel poverty fell slightly in the latest Scottish House Condition survey thanks to falling fuel prices. However, still almost one third of homes suffer under the current definition and the numbers are likely to rise again with the latest fuel price increases.
The new definition excludes housing costs and is intended to focus attention on low income households, rather than the 47% of the current fuel poor who are not income poor. There will still be challenges in reaching the standard heating regime because households self-disconnect, due to low incomes. Cuts in social security will exacerbate this. While the new definition is certainly more complex, it does target efforts on the right group. Although with insecure work, varied incomes are more common and many households are likely to fall in and out of the definition.
There are three main elements to tackling fuel poverty – the price of fuel, energy efficiency/use and household income. The first is largely reserved, although energy policy is a factor. Energy efficiency is devolved and household income has devolved and reserved elements, including social security.
This means the strategy rightly has a focus on energy efficiency. Ambitions are fine, but investment is better. The Scottish Government cut funding to £45m in 2007/08; largely because they thought the problem had been resolved. It has now recovered to £129m, although this is well below the £200m Energy Action Scotland warned was needed to meet the 2016 target.
There are some particular challenges in Scotland. Not only are we a cold country, but fuel costs in rural areas are significantly higher. Typically, £2,200 in remote rural areas, compared to £1,400 in the UK as a whole. There are particular challenges in island communities. We also have large areas off the gas grid, which matters for heating.
It is also important that we retain efficient area based schemes that strengthen communities, rather than just micro targeting individual households. The proxies used to identify fuel poor households generally work, but need to be flexibly applied to reflect local needs.
The consultation paper is again strong on ambition. Objectives like ‘Households are able to enjoy a warm home’ is hard to disagree with. Achieving this apparently requires plenty of partnership working and linking in to other strategies. While this is probably true, it does feel rather process driven – hard targets, programmes and investment are in short supply.
A number of the organisations currently working in ‘partnership’ complain about short term funding. They build up expertise and services and then the funding comes to an end. Publicity, online and telephone services have their place, but for hard to reach households it requires an advisor in the household. There has been an improvement in skilling staff like social workers and community nurses, since some of the early schemes UNISON did with the Keeping Scotland Warm partnership. However, we could do more in signposting people towards specialist advice. Local authority services are under particular pressure due to cuts.
The new statutory target is to eliminate fuel poverty (new definition) by 2040, with a review at 2030. There is considerable scepticism of the description of this as ‘ambitious’, given the long timescale. We should have learned a thing or two during the past 16 years, to make another 23 year target a bit excessive.
The problem is that achieving this target depends on a range of variables, particularly fuel prices and incomes. None of these are likely to be addressed without a serious political commitment to eliminate poverty more generally.
Green energy has received considerable public subsidy. Is this just a short term start up, or will it be necessary in the long-term?
The Scottish Government has announced that twelve projects aimed at creating local, green energy solutions have been awarded a total of £2.6m through a Scottish government support scheme. These include district heating schemes and projects in remote areas. Dr Sam Gardner, acting director at WWF Scotland, said: “A transformation in how we heat our homes and offices, how we travel to work and school, and how we power our industries will generate many social and economic benefits.”
Ofgem has also announced that ScottishPower will get regulatory funding (which means the consumer pays) to upgrade the existing grid to cope with new technologies. It comes as electric cars are increasing in popularity, with forecasts that by 2025, one in six cars sold will be an electric model. With the Scottish and UK governments also pledging to phase out the sales of new petrol and diesel vehicles, it has sparked concern that the existing electricity infrastructure could be overwhelmed.
Scottish Renewables argues that green energy is delivering significant economic and social benefits north of the border. They point to 7,500 jobs linked to wind energy. UK Government figures show new onshore wind projects would be cheaper than new gas plants, and almost a third cheaper than the price agreed for the new Hinkley Point C nuclear power station. That means using a mix of renewable technologies, including onshore wind and solar power, is the cheapest way of modernising our energy system.
There has been no shortage of Scottish Government planning support. Two-thirds of wind farm developments, which are rejected by local councils, have then been pushed through by Scottish ministers on appeal. A total of 17 applications were refused by local authorities over the past year, but 11 of these decisions were then overturned by ministers.
The drive for localised community wind schemes has slowed down on financial grounds. Cuts in support from Westminster have resulted in a lot of planned schemes being mothballed due to uncertainty over their financial viability. The problem is proving a major stumbling block in the drive to increase the amount of green power going into the mix.
A group of Scottish academics argue that falling costs for renewable energy developments, means projects could now be set up without subsidies if Scottish ministers were to provide long-term guarantees, over 15 to 20 years, based on a the wholesale price of electricity. They claim this would pose little risk to taxpayers, but could offer a big boost to communities trying to raise money to fund investments with long-term paybacks.
However, the real boom is in offshore wind, which is winning the big contracts at a price 10% below the cost of Hinkley Point nuclear plant. Although there is some doubt how many will actually be built. The problem is that these contracts are being awarded to the big energy players, further concentrating energy in the hands of the few.
Onshore wind is now an established technology, the same cannot be said for wave power. Research from the University of Strathclyde says plans to exploit wave power as the energy of the future has been undermined by a string of “failures” despite £200 million of investment. Matthew Hannon said: “The report’s findings are aimed primarily at government and industry in a bid to help improve the effectiveness of future wave energy innovation support in the UK and accelerate the technology’s journey towards commercialisation.”
Hannah Smith, from Scottish Renewables, called on government to “provide a viable mechanism to ensure the sector’s continued development”, adding failure to do so “would risk losing Scotland’s lead in this global industry”. In other words, this technology does need financial support.
The UK government has also snubbed an application to provide support for the expansion of the MeyGen tidal development off northern Scotland casting the future of the project into doubt.
In this context the authors of a new TUED working paper argue that inadequate levels of investment in renewable energy across the world are a major obstacle standing in the way of the transition to a new, renewables-based energy system. They argue that we must deal with the systemic and institutional roots of low investment. These roots trace back to the privatisation and liberalisation of electricity markets that began in the UK in the 1980s, became EU policy in the 1990s, and have since come the dominant policy approach in many parts of the world.
In short, the market alone will not deliver the green energy future we need to meet our climate change obligations.
Will the planned merger of SSE and NPower retail businesses do anything for the failing energy market?
SSE and Innogy have agreed to merge Innogy’s British retail business Npower with SSE’s household energy and energy services business to form a new independent retail energy company. The merger will turn the Big 6 into the Big 5, reducing competition in the sector.
Details on the merger are in short supply with even the staff being given some pretty bland information. The main trade union, UNISON, said:
“This bolt from the blue will have left many of the companies’ employees feeling decidedly anxious. With the merger only just announced, there’s no detail yet as to the number of jobs that may go, the posts most affected, or the sites at risk. But staff at SSE and NPower, although feeling understandably nervous as to what the future holds, should rest assured that UNISON will leave no stone unturned as it works to protect jobs across the two companies.”
We do know that the new company will not be controlled by either Innogy or SSE. Innogy will hold a minority stake of 34.4% n the business, while SSE plans to demerge its 65.6% stake to its shareholders upon completion of the transaction. SSE’s business retail division won’t be included in the deal.
The companies deny that the proposed price cap was the driver, but accept that it might have quickened the pace. This doesn’t quite match with media briefings. A source quoted by Reuters said the management at Innogy are “no longer willing to accept the losses” from its retail arm Npower. The Telegraph was told that, with the government proposing a cap on energy bills, SSE executives viewed their supply business as “more trouble than it’s worth”.
Some argue that given the growing share of the market going to smaller providers this merger isn’t very important. Ed Kamm of First Utility put his view rather bluntly:
“This smacks of two dinosaurs coming together to survive…It can’t be a good thing that the company with the highest percentage of SVT customers and the company with the highest SVT rate, are coming together.”
Rebecca Long Bailey, shadow secretary of state for business, energy and industrial strategy is concerned over the impact, she said:
“The energy market is broken in the UK. A merger of two of the biggest players which may diminish competition should, therefore, be subject to proper scrutiny. If the relevant legislative thresholds are met, then the Competition and Markets Authority should seek to satisfy themselves that there will not be a substantial lessening of competition through this transaction. This is why Labour want to set up local publicly owned companies to rival the big six and increase competition.”
It is certainly the case that profit margins in the energy retail sector are tight and therefore companies might wish to focus on more profitable parts of the business. Although the regulator has their eyes on some of these as well, networks in particular. However, given the dominance of the big suppliers and the weakness of the market, it is right that the competition elements are addressed by the CMA.
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.