Deja vu over election energy price row

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!

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Coal may be declining, but renewables are being held back

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.

Will sound and fury over energy prices deliver action?

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?

A progressive environment and energy policy from the Scottish Conservatives

The Scottish Conservatives have published an environmental and energy policy paper; ‘Global Challenges – Local Leadership’. It’s not what you might expect from a Conservative paper, in fact it has a broad range of proposals that many in the environment movement and energy sector could agree with.

It’s mostly an environment paper, but it has sections on energy policy and energy efficiency. I understand that a more detailed energy paper is being prepared.

The environment sections include proposals to develop a circular economy, something that has broad support, but includes some practical ways of achieving it. There are some rather general proposals to restore the natural landscape, with a headline commitment to establish more national parks. Similarly with biodiversity, including plans to encourage regenerative farming. The transport section focuses on incentives for electric cars, a bit on active travel, if a somwhat light on public transport.

Let’s look at the energy section in a bit more detail.

They want to source at least 50% of Scotland’s energy from renewables by 2030, with individual targets for the heat, transport and electricity sectors. That’s a good target and at least a recognition that grand aspirations need milestones if they are to be delivered.

Develop the required regulatory framework and innovative governance solutions to support the growth of district heat networks. Support for district heat is crucial if we are to reduce emissions in the heat sector.

Work with key stakeholders (including the UK Government) to invest in energy storage, interconnection and demand-side response to ensure more system flexibility. A bit vague, but storage is vital if our intermittent generation is going to work without regular imports from England.

Establish a Sustainable Energy Innovation Centre to make Scotland an internationally recognised centre of excellence in innovative energy management and energy storage. A decent proposal as we have all too often given up technology leads. Of course it was the UK Conservative government that pulled the plug on Carbon Capture and Storage.

Support research and development in organisations involved in emerging renewable technologies, particularly tidal, to secure a viable route to market. Yes, but this fails to recognise the weakness in the so called energy market. Ironically, the UK Conservative’s have been one of the most interventionist government’s in recent times.

Ensure that Scotland’s public sector leads the next chapter of our energy evolution by implementing policies to maximise the use and deployment of renewable energy across the whole public sector estate. Spot on, but this needs spend to save investment that has ground to halt due to Tory austerity. It also needs councils to lead the way with municipal enterprise as in much of Europe. Probably a step too far, even for this progressive Tory policy statement!

Commit to supporting new nuclear power plants at Hunterston and Torness. It is doubtful if we actually need two nuclear power stations in Scotland, but one would certainly provide much needed base load generation. The simple fact is that no one is going to build any nuclear power stations in Scotland.

Encourage public participation in, and the sharing of economic benefit from, renewables through the introduction of a Scottish Renewable Energy Bond. Pooled ownership of renewables and of local energy systems will share the benefits more fairly among Scotland’s communities. This would be a reasonable addition to the community energy toolbox. However, real community ownership needs more than bonds.

Possibly the most radical part of the strategy is in tackling fuel poverty. The proposed increase in the energy efficiency budget line gradually to reach 10% of the Scottish Government’s capital budget allocations, is serious money. They also want to deliver a transformative change in energy efficiency across Scotland – with all properties, where practical, achieving an EPC Band ‘C’ rating by 2030.

Overall, the paper is fairly high level and doesn’t have a great deal of detail. However, most of the proposals would attract fairly broad support and by Conservative standards is more radical than we might have expected.

A better energy system is possible

Let’s imagine a different energy system. One that not only delivers clean decarbonised energy, but is increasingly local and run democratically in the interests of the people not big corporations.

I have been at the Trade Unions for Energy Democracy (TUED) conference looking at these very issues. TUED is a global, multi-sector initiative to advance democratic direction and control of energy in a way that promotes solutions to the climate crisis, energy poverty, the degradation of both land and people, and responds to the attacks on workers’ rights and protections.

Let’s start with decarbonisation. One speaker interestingly suggested that we should stop referring to ‘climate change’ and call it what it really is – global carbon gas pollution.

Climate agreements are aiming to keep global warming below 1.5%, but on current effort we are heading for 3.4%. The UK is simply not doing enough, but no country in the world is slowing down carbon emissions. For the UK a major effort is needed to meet a carbon budget cut of 57% by 2030 and at present the UK government has no real plan.

The UK Government does have new industrial strategy. However, it focuses on minimising costs rather than looking at potential of low carbon industry. There is little about cars, solar, offshore wind or efforts to re-skill workforce. We need to redirect energy and industry policy to climate change objectives – coupled with action on just transition, the role of state in regulation, social partnership and investment. Above all to escape from the dead hand of the Treasury.

Having regularly trekked down to London to see successive energy ministers, I still believe dumping the Carbon Capture and Storage (CCS) project was a huge error. Without it what is the solution for heavy industry in the UK? We also need to think about how we redesign heavy industries to achieve a just transition. For example, steel being reused rather than recycled, same for bottles, to save energy.

There are some positive signs in the development of UK Labour energy policy. The shadow energy minister, Alan Whitehead, has had a long term interest in energy, it’s not just any old portfolio. He wants to put climate change at the centre of policy. He recognises the need for just transition, the role of trade unions and new ambitious targets with meaningful delivery plans. Aiming for a million new jobs shows real ambition. The detail is to be worked up by a new Commission being launched later this month.

Decentralising the industry can be done by incentivising community energy projects on a much larger scale and through municipal energy companies. These should be about much more than retailing energy. They should be generating electricity, promoting demand reduction and energy efficiency as well.

The roadmap to public ownership isn’t about recreating a command and control nationalised industry. We don’t need to nationalise coal plants that are being phased out already or wind farms at the latter end of their 20-25 year lifespan. We do need public ownership of the transmission and distribution grids. Distribution grids don’t have to be the large regional model we use in the UK. Germany has 803, based on local councils. Spain has 335 and Sweden 184. This shows we can operate on a smaller scale, but we need more innovative councils in this field, prepared to consider vertically integrated municipal energy companies.

Work by David Hall shows that we could achieve a decentralised and more democratic energy system at a cost of £24bn, with annual benefits through lower prices of £3.2bn per year. We could also look at basing compensation on non-amortised assets as they have done in Catalonia. All of this needs a workforce strategy, otherwise we won’t have enough expertise to develop it.

I updated the conference on where we are on all this in Scotland – recognising that energy is mixed responsibility between Holyrood and Westminster. We have made significant progress in decarbonising electricity generation, with 42% from renewables and 35% from nuclear. We export 30% of the electricity we generate, even if intermittent sources mean more imports than before. The biggest energy demand is for heat (53%), 80% of this comes from gas, even though 400k households are still off the gas grid.

The Scottish Government is consulting on a draft energy strategy, which aims to deliver decarbonised security of supply at an affordable price. There is to be a new 2030 ‘all-energy’ target for the equivalent of 50% of Scotland’s heat, transport and electricity consumption to be supplied from renewable sources – together with the complete decarbonisation of electricity generation. Energy efficiency is a National Infrastructure Priority and this is to be achieved through the Scottish Energy Efficiency Programme (SEEP).

We haven’t made enough progress in decentralising local energy. It’s mostly big players with some local gain, financed through the local energy challenge fund. The Scottish Government wants to do better and has two new targets: 1 GW of community and locally-owned energy by 2020, and 2 GW by 2030 and at least half of newly consented renewable energy projects will have an element of shared ownership by 2020.

Targets and ambition are of course important, but delivery is even better. The draft strategy is vague on how to deliver the strategy. There are no targets for energy mix and few measurable milestones.

The Scottish Government does get the importance of linking energy policy to climate change and has also published a draft climate change plan, which will lead to new Climate Change Bill. However, this is even weaker on delivery. Poor performing sectors are largely avoided because it is politically difficult – including, transport, agriculture and domestic heat. We need measurable action on active travel, car use, housing efficiency, district heating and soil testing. They are also adding to the problem with the proposed cut in Air Passenger Duty.

Just transition hasn’t been given enough attention in plans. Some initial work has been done on this by trade unions and environmental groups. They have recently published an 11 point Just Transition Plan that includes a Just Transition Commission, training, secure jobs, a new industrial strategy, and action on procurement. This should also be built into the activity of the Fair Work Convention.

Energy policy is undergoing a huge change. Even a Conservative government has recognised the need for state intervention in a failed market. We should grasp this opportunity to imagine a very different energy system, which delivers for people and the planet.

Fracking consultation

The Scottish government’s public consultation on whether unconventional oil and gas extraction (UOG) should be allowed in Scotland, has variously been described as biased by the fracking industry and kicking the issue into the long grass by opposition parties. A final decision is expected to be made later this year.

The moratorium on UOG has been in place since January 2015, while the government has been examining the evidence. The moratorium outlaws the process of fracking, or hydraulic fracturing, for shale oil and gas and coalbed methane. Fracking involves injecting a mixture of water, sand and chemicals at high-pressure into rock fissures deep underground to release gas trapped inside. Wales also has a moratorium, but it is permitted in England, where horizontal drilling has been given the go-ahead in Yorkshire.

The consultation paper says Scotland’s key reserves are to be found in the Midland Valley, 2,000 square kilometres of land across the central belt. The British Geological Survey has described reserves here as “modest” – around six billion barrels of shale oil and 80 trillion cubic feet of shale gas.

fracking-map

Supporters of shale gas say it is an important energy source that could become a major new industry for Scotland. They point to the economic study commissioned by the government that found allowing shale gas extraction could generate up to £3.9 billion in tax revenues, create more than 3,000 jobs and produce the equivalent of 18 years of Scottish gas consumption. However, the study also warned that low oil and gas prices would make it uneconomic.

Critics claim fracking poses serious safety risks to people and the planet through effects such as toxic air pollution, contamination of water, and seismic events. It has also been blamed for reduced house prices. However, critics focus on the need to develop clean energy sources rather than another dirty fossil fuel that undermines Scotland’s climate change action plans.

Politically, the Scottish Parliament voted narrowly in favour of a full ban on fracking last summer. SNP MSPs abstained, but the Scottish Greens, Liberal Democrats and Labour joined forces to defeat the Tories. Scottish Labour MSP, Claudia Beamish, also has a private members bill out for consultation that would ban fracking.

The Scottish government is seeking the “widest possible range of voices” to take part. So this is the chance to speak out and make sure you get your say in this important decision. The www.talkingfracking.scot website will run for the duration of the consultation. Discussion tool-kits have been created to help communities and other groups participate in the consultation and are on this site. The consultation closes on 31 May 2017.

The arguments for and against fracking will continue and the research evidence on safety and economic benefit is somewhat short of being conclusive. The key issue is do we want a Scotland that focuses on clean energy, or return to dirty fossil fuels. On those grounds alone, there remains a strong case to ban fracking.

Draft Scottish Energy Strategy

The Scottish Government has set a 50% renewable energy target in its new draft energy strategy.

The consultation paper highlights the huge huge shifts in electricity generation in recent years, following the closure of Longannet. There has been a big increase in new supply of renewable electricity.  However, that leaves Scotland with a different kind of energy challenge; one where heat and transport take on even greater significance than electricity.

Choices about the local supply and consumption of energy are broadening, and the patterns of energy use are also changing.  There are opportunities to shape Scotland’s future energy system, and to help tackle the challenges of climate change, affordability of energy, and the efficiency of energy use.

In parliament this afternoon the energy minister, Paul Wheelhouse said:

“To maintain momentum, a new 2030 all energy renewables target is proposed in our energy strategy, setting an ambitious challenge to deliver the equivalent of half of Scotland’s energy requirements for heat, transport and electricity from renewable energy sources. I hope that members will welcome this landmark proposal given the support shown for such an ambition last month in this chamber during the debate on support for Scotland’s renewables sector.”

The plan aims to deliver:
• a modern, integrated, clean energy system, delivering reliable energy supplies at an affordable price, in a market that treats all consumers fairly; and
• a strong, low carbon economy – sharing the benefits across our communities, reducing social inequalities and creating a vibrant climate for innovation, investment and high value jobs.

energy-plan-1

The ‘whole system’ view seeks to describe where Scotland’s energy comes from and how it is used. Energy efficiency is to be the cornerstone of this through the SEEP programme.

The ‘stable transition’ is driven by the need to further decarbonise the energy system, in line with emissions reduction targets. However, this still involves a ‘strong oil and gas sector’ and a commitment to support carbon capture. That will be challenging given that the UK government made a complete hash of pilot schemes, as highlighted by the National Audit Office recently.

The ‘smarter model of local energy provision’ means moving away from central provision to local innovation. There is considerable opportunity to create decentralised or distributed energy systems, but progress so far has been pretty slow in real community ownership. 35% of Scotland’s electricity generation still comes from our two nuclear power plants.

energy-plan2

The strategy repeats the commitment explore the potential to create a government owned energy company (GOEC) to help the growth of local and community projects – although still no detail. This will include empowering communities to use the income from energy development to support other communities develop their energy potential. They will also explore the creation of a Scottish Renewable Energy bond in order to allow savers to invest in and support Scotland’s renewable energy sector.

It is important to emphasise that this is an energy strategy, not just an electricity generation plan. So heat and transport use are also important issues.

On jobs, the paper claims the renewable energy industry employs 14,000 people, with up to 43,000 in the wider low carbon and renewable energy economy. To put that in context, 125,000 are employed in oil and gas production.

There is a separate consultation published today on unconventional gas (fracking), so no decision. The paper places considerable emphasis on new energy sources and it is very difficult to see how dirty fuel from fracking fits into this strategy.

Overall, the ambition in the strategy will certainly be welcomed, although there will be some concern that the new strategy is no clearer than the old one on how it will be achieved. In particular, there is no detailed breakdown of what the future energy mix will actually be. Much of Scotland’s energy policy also remains reserved, and the strategy, predictably, if largely fairly, highlights a number of damaging decisions.

There will be a four month consultation closing on 30 May 2017.

Public sector water ‘most trusted’ service in Scotland

Scotland’s public sector water industry rates the “most trusted” sector among Scottish consumers at 68%. In contrast, private sector energy is one of the “least trusted” at 36%.

This is set out in a report by the consumer group Which? on consumer attitudes in Scotland. The report shows some interesting contrasts between the views of consumers north and south of the border.

Public spending cuts topped consumer concerns in both tables, but the concern was much greater in Scotland at 74%, compared to 62% elsewhere in the UK.

Energy prices are a bigger concern in Scotland at 67%, compared to 56% in the rest of the UK. However, 68% have not switched supplier in the past five years and only a quarter who considered it actually switched. Most though the price difference wasn’t worth the hassle.

Nine out of the ten most financially distressed constituencies in Scotland are in Glasgow. Western Isles is the least distressed.

Only 10% of consumers had a problem with public services in the last two years.

So good is public sector water delivery that Scottish Water’s expertise is in demand worldwide. The public corporation’s international arm has generated more than £8 million of turnover, in total, since it was established in 2012. It recorded a £200,000 profit last year.

Maybe public ownership is the right approach for other utilities!

water-consumer-choice

Keeping the lights on

Keeping the lights on remains a controversial issue with competing views on short term capacity against long sustainable generation.

A group of MPs in the British Infrastructure Group (BIG) argue that Britain could be facing nationwide festive blackouts next winter unless radical changes are made to the UK’s electricity network. They claim that UK government targets for closing coal power stations and expanding renewables to hit climate change goals have rapidly reduced the UK’s generating output. This means severely reduced capacity margins, which are “so tight that National Grid’s emergency power deals have become the norm”. Their report argues that margins have fallen from around 17% during the winter of 2011-12 to around 1% this winter – leaving households with a £30 bill, twice government estimates.

The group’s chair, Grant Shapps MP said:
“While nobody questions the noble intentions behind these interventions, it is clear that a perfect coincidence of numerous policies designed to reduce Britain’s carbon dioxide emissions has had the unintended effect of hollowing out the reliability of the electricity generating sector”.

Unsurprisingly, given the MPs and their funders, they support a market led solution. Shapps said: “A radical rehabilitation of electricity markets is required to bring both consumer prices and capacity concerns under control in the short term”. The government should “work to make it profitable for private companies to invest and innovate in our electricity markets once again”.

National Grid has published the 2016 Electricity Ten Year Statement (ETYS), based on the Future Energy Scenarios (FES), of future transmission infrastructure requirements.

They calculate that future changes will potentially require transmission development with new nuclear plants and high volumes of renewables — connecting towards the periphery of the network.
In contrast, the ageing, traditional plants are usually located close to the demand. This also means more interconnectors around the country. They conclude:

• Potentially higher north-to-south power flows, from Scotland to England, mainly due to future growth in both offshore and onshore wind generation connections in Scotland
• Potentially higher flows across the North of England and the Midlands border, mainly due to future growth in renewables and interconnectors within the North of England region and closures of generation in the Midlands
• Potentially higher power flows from the periphery of the network, mainly due to unprecedented growth in generation, particularly in East Anglia, Humber, the Scottish Highland, the eastern Scottish coastal network and Wales, coming from offshore renewables and Nuclear generation
When there are future high power exports into Europe from the South of England, the current capability of that particular transmission region will be stressed

They also say that the closure of ageing nuclear plants will lead to an increased reliance on renewable plants in Scotland. This will result in higher south-to-north power flows, across the North of England and southern Scotland transmission system, when intermittent renewable plants are unavailable.

In the short term, the latest capacity actions will result in a series of new battery power-storage plants and two small new gas power stations designed to bolster energy supply and head off the threat of shortages. However, hopes of an ambitious “dash for gas” were dashed when no new gas power station of a significant scale won a subsidy contract in the bidding process.

Analysts at Barclays banking group said: “Overall we believe the auction will largely be viewed as a disappointment by the UK government in terms of securing the significant levels of new gas generation capacity they hoped for in order to ensure security of supply”. The £22.50 per kilowatt price is well below the £35-£45 needed to encourage big new gas plants.

Dr Alastair Martin of Flexitricity said the auction results showed the government needed to rethink its push for new gas: “After three years, the capacity market has still failed to deliver a single new-build gas plant.”

Batteries took a much larger share than in previous years, with about 500MW awarded to new storage plants. They can provide a quick response to shortages.

This was welcomed by environmental groups, as dirty diesel generators won a smaller share than in previous years. However, they were disappointed that coal did well, despite the government’s promises to phase out the polluting fuel by 2025. Existing large coal, gas and nuclear power stations will provide 85% of backup power in 2020-21. A WWF spokesperson said: “I do think there is a real danger of coal continuing to linger round on the system, crowding out investment in the more flexible generation our system needs.”

ScottishPower’s Neil Clitheroe said, “Diesel was the winner last year, and coal is the winner this year. Clearing 20 times more old coal than new gas signals a willingness to sweat these assets until the bitter end”. Somewhat ironic after the company’s decision to close Longannet early!

Overall, the energy ‘market’ is still struggling to settle a long term solution to the UK’s energy needs. Generation changes will certainly require new transmission capacity. There is also little consistency in the type of generation needed to manage potential short term shortages.

Tackling fuel poverty

There has been a welcome drop in the number of households in fuel poverty in Scotland. However, it’s still a long way from the eradication that was supposed to happen this year and still higher than the first year statistics were collected in 1996.

Some key points from the report:

  • Between 2014 and 2015 the rate of fuel poverty declined by 4%. In 2015 there were around 748,000 fuel poor households representing 30.7% of all households.
  • Around 203,000 households, or 8.3% were living in extreme fuel poverty in 2015.
  • Just over half of the reduction in fuel poverty rates can be attributed to the drop in energy prices and around a third to improvements in energy efficiency
  • On average the private and the social housing sector have similar rates of fuel poverty: 30 and 33% respectively. There is more noticeable decline in fuel poverty in the social sector, reducing the social-private gap which was seen in the SHCS sample for 2014.
  • In 2015 37% of Scottish homes were in EPC band C or better and half had an energy efficiency rating of 65 or higher (SAP 2012). This is similar to 2014.

Norman Kerr, Director of Energy Action Scotland said:

Just last month the statutory duty under the Housing (Scotland) Act 2001 for the Scottish Government to eradicate fuel poverty expired and the target was missed.  Two working groups were tasked to advise Scottish Ministers on their next steps and they have made over 100 recommendations.  It is now vital that the Scottish Government uses this advice to develop a new strategy, set a new fuel poverty target and increase funding for its programmes in the upcoming Budget Statement. The progress to date on solving the problem of cold, damp and unaffordable to heat homes must not be lost, but can and should be built upon.”

With energy prices remaining relatively low, spending on energy efficiency remains an important element of a fuel poverty strategy. Twenty businesses have written a letter, with the backing of the Existing Homes Alliance, calling on ministers to increase spending on energy efficiency in next year’s budget to £190m. They say this would allow for existing schemes to be expanded and provide confidence to the sector at the start of the new Scotland’s Energy Efficiency Programme (SEEP).In the longer term, the alliance wants spending to be ramped up to an average of £450m a year over ten years.

Another measure that would help with eliminating fuel poverty is ending the price differential between pre-payment meters and direct debit. Prepayment customers represent just 15% of the domestic market, but account for over 30% of all fuel poor households.

A recent UK analysis shows that removing the price disparity between tariffs could lift between 95,000 (12%) and 181,000 (23%) of fuel poor prepayment customers out of fuel poverty and reduce the gap for the remainder.  The widespread adoption of SMETS2 smart prepayment meters (Smart PPM) could deliver real competition in the prepayment market, driving down prices towards parity with direct debit payment.

The reduction in fuel poverty in Scotland is welcome, but there is still much to do when nearly a third of households remain in fuel poverty. This is the time to develop a new strategy and invest in energy efficiency.