Ministers pass the buck again on energy prices

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.


Water leaks and the case for metering

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.

Brexit and energy

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.

brexit energy

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.


Election 2017: Labour’s manifesto offers a radical shift in energy policy

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.


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!

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.


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 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.