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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