ScottishPower join industry chorus for action

ScottishPower (Iberdrola) CEO, Keith Anderson, has joined those in the industry urging the government to make faster progress with energy market reform in the Energy Bill.  This is significant because Scottish Power, unlike SSE, has been generally supportive of the government’s plans.

He believes there are between 10 and 15 power plant developments with planning consent in the UK that could provide a huge boost to the construction industry. This includes ScottishPower approved sites at Damhead in Kent and Cockenzie in East Lothian. However, no one is building because of uncertainties on how the industry’s funding mechanisms will work. He said:

“Give the clarity now and let us understand the mechanism and you will see the investment come through in an orderly fashion.”

ScottishPower has already committed to spending £3.5 billion by the end of 2014 in projects ranging from grid infrastructure to onshore and offshore wind capacity. He highlighted that investment ripples down the supply chain to a number of other industries. He also identified investment in Scottish port facilities and infrastructure to encourage renewable energy companies to locate here, “If you do that port facility it gives confidence to the manufacturers that these projects are going to happen which gives them the confidence to invest.”

The main uncertainties include:

  • Contracts for difference (CfD) aimed at encouraging nuclear and wind power generation by stabilising returns to energy suppliers. But the Government has yet to set the strike price on the CfDs.
  • If the price of electricity falls below the strike price, generators will be compensated, but if it goes above the difference will be returned. The concern is that there might initially be variations in the strike price between energy technologies.
  • Detail is still to emerge on the operation of the capacity mechanism, where companies are paid for the electricity they make available as well as what they supply. This includes whether to restrict payments to new power plants because this could lead to companies shutting down older generation, hitting capacity. However, if older energy assets are included, the mechanism could be criticised for handing a windfall to the industry.

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