- The Presiding Officer (Tricia Marwick):
The next item of business is a debate on motion S4M-04082, in the name of Fergus Ewing, on electricity market reform.
- The Minister for Energy, Enterprise and Tourism (Fergus Ewing):
I begin by saying that I was sorry to see the departure of Charles Hendry as Minister of State at the Department of Energy and Climate Change—my counterpart in the United Kingdom Government. I have worked closely with Charles Hendry, who has, it is fair to say, been a friend of Scotland. He was assiduous in attending with me, and co-hosting on some occasions, important events in Scotland with regard to renewable energy. When I heard the news that he was, as he put it, retreating to the back benches—he was too gentlemanly to say whether a jump or a push was involved—I was in Aberdeen, and it is fair to say that his reputation among the oil and gas sector was extremely high. This is the first appropriate opportunity that I have had to say that we had an excellent working relationship in Scotland, in London and in Brussels.
I welcome the opportunity to bring the UK Government’s proposals to reform the electricity market back to the Scottish Parliament at an important stage in their development. The Scottish Parliament first debated the proposals in January 2011. Much has happened since then, including a Department of Energy and Climate Change white paper and a draft UK energy bill to implement the reforms. Throughout, Scottish ministers have worked closely and constructively with our UK counterparts to shape the reforms to ensure that they work for both Scotland and the UK.
For us, the message is simple. The Scottish energy sector is essential to our present and future social, environmental, industrial and economic wellbeing and growth. The reforms will be fundamental to the energy sector in both Scotland and the rest of the UK. It is accepted on all sides that we must get them right and we must deliver them together.
The scale of generation and transmission investment that is needed to deliver a sustainable low-carbon generating future is significant. Up to £110 billion is likely to be required by 2020—more than double the current rate of investment. The electricity market reform programme sets out to address that challenge by incentivising investment in low-carbon generation while ensuring security of supply in a cost-effective way. We now know broadly how the reforms are intended to operate, so it is right that, today, members have an opportunity to scrutinise the proposals.
Over the past few years, we have seen real and tangible investment confidence in the energy sector in Scotland, and our ambitious renewable energy and climate change targets are playing a key part in creating and sustaining that confidence. The design of our electricity market and regulatory frameworks is also key to investor confidence. That is why we are working closely with our UK counterparts for closer integration of the UK electricity markets in the years ahead. We must maintain momentum across our energy sector, and to do that we have two priorities—to tackle inequalities in the transmission charging regime and to ensure that the electricity market reform proposals work in ways that help us to realise our energy potential.
We remain determined to see real, tangible and enduring reductions in the high transmission charges that generators face in the areas of highest renewable energy resource in Scotland. We continue to work on that.
- Murdo Fraser (Mid Scotland and Fife) (Con):
The minister will have seen the terms of the Labour amendment in the name of Rhoda Grant. One concern that we in the Conservative Party have is that we do not support the socialised system of transmission charging, which we fear would increase costs to consumers, particularly in remote areas. Can the minister assure us that, in supporting the Labour amendment, we would not be committing ourselves to that approach?
- Fergus Ewing:
I am happy to support the Labour amendment, which refers to a “fair and equitable” system. We are currently working on such a system, so I am happy to provide an assurance. Since January, we have put forward a compromise proposal, and we believe that there should be a compromise. In other words, to be explicit, we no longer advocate the postage-stamp, socialised charge for which we originally argued. We have moved from that and recognise that there should be a compromise.
Indeed, I am happy to say to Murdo Fraser that we hope to continue to work closely with our Westminster colleagues on the matter. I discussed it with Greg Barker—on the ferry to Orkney, as it happens—and it is under active consideration, as Rhoda Grant knows, by people such as Angus Campbell, the leader of Western Isles Council, and his colleagues, the leaders of Orkney Islands Council and Shetland Islands Council. I have also worked closely with Liam McArthur, Tavish Scott, Dr Alasdair Allan and all the other relevant representatives. We are all determined to find a fair and equitable compromise solution.
On that basis, I hope that all parties in the chamber will be able to support the motion and the amendment, which will send out a dignified but nonetheless clear signal that Scotland wishes to go forward together to find a fair solution. I am grateful to have the opportunity to clarify those matters for Murdo Fraser.
I turn to the detail of the proposals. Under the reforms, the renewables obligation will be replaced by a new support mechanism, a contract for difference—CFD—to provide long-term price certainty for low-carbon generation. As I outlined a moment ago, the RO is a vital component of our efforts to increase Scotland’s renewable electricity production. The Scottish Parliament has exercised devolved power over the RO judiciously, effectively and successfully to create a strong and effective framework of support. We have targeted that support to reflect Scottish priorities, such as our enormous wave and tidal energy potential.
We believe that, properly designed, the CFD market mechanism can work to give similar and effective support for renewables technologies and for carbon capture and storage. However, let me be clear that the CFD must be at least as effective as the current support framework. It must be at least as capable of delivering new industry capacity as well as new jobs. It must also replicate the discretion and flexibility in the RO system to target support where it is needed—what, in the EMR debate in January 2011, Liam McArthur summarised as
“Scottish discretion, to capitalise on Scottish strengths.”—[Official Report, 13 January 2011; c 32224.]
We are some of the way towards that in the CFD proposals. The Scottish ministers will have, I am pleased to say, a statutory role in the forthcoming UK energy bill, which will set out the design, delivery and operation of the contracts for difference framework. However, more work is needed on how that will operate in practice and how powers similar to those that the Scottish Parliament currently holds can be replicated in the decision making about setting long-term price levels for different types of renewable energy.
We are also clear that the Scottish ministers must have a statutory role in the on-going monitoring and governance arrangements for the body that will deliver the CFD, which is National Grid.
There is more work to do with our UK counterparts, but we shall continue to work with the UK Government to ensure that our role in those processes is clear and enduring. Of course, we are clear that our support for the proposals is contingent on securing a proper role for the Scottish ministers and the Scottish Parliament in the new arrangements.
The other parts of the EMR propose a UK-wide emissions performance standard to cap emissions from unabated fossil fuel plant. Although discussions on the detail continue, we are minded to support UK-wide application of the emissions performance standard at the level set out in the proposals, namely 450g per kilowatt hour.
Again, there is more work to do with the UK Government to properly reflect our devolved powers in relation to the application, enforcement and monitoring of the EPS and to ensure that the powers of this Parliament are fully and fairly respected in the forthcoming UK energy bill.
The reforms propose a capacity market during the transition to a low-carbon generating mix, by incentivising short-run plant that can come on supply quickly to generate and maintain security of supply and accommodate increased renewable energy on the grid. There is more work to do to understand how that will operate for gas generators in Scotland, while encouraging demand-side response in areas where Scotland has strengths, such as pump-storage hydro.
As well as positives in EMR, there are concerns. Industry leaders have made it clear that, to make investment decisions, they need clarity and certainty on support from the Government. On one level, there are arguments that the electricity market reform process has created delays, confusion and uncertainty. SSE has said of EMR:
“These proposals are too complex—they are unworkable”.
Scottish Power, RWE and others have suggested that we are seeing an investment hiatus because of uncertainty, and the Westminster Energy and Climate Change Committee, which is chaired by Tim Yeo, has been critical of the workability and legality of some of the proposals.
The Scottish Government has concerns that there is currently the possibility that EMR may deliver subsidy support for new nuclear power, possibly at the expense of renewables in Scotland. The Scottish Government’s position on new-build nuclear power stations remains clear: we do not propose or favour new nuclear power stations. Major questions exist about the levels of EMR support that may be given to new nuclear build, and there must be more transparency in the support negotiations. The Westminster select committee has echoed those concerns. It has said:
“the proposed process for setting the nuclear strike price lacks sufficient transparency”
“could be highly damaging to the low-carbon agenda and ... undermine consumer trust in energy companies.”
A possible consequence of the levy control framework within which Her Majesty’s Treasury is pressing DECC to deliver EMR is that new nuclear projects will absorb a significant amount of the overall levy control framework budget at the expense of renewables. We are concerned to ensure that there remains sufficient incentivisation for renewables.
In conclusion, the proposals have significant implications for our energy sector and the Parliament’s devolved powers. There are significant opportunities for Scotland, but also significant challenges. EMR must deliver for both Scotland and the rest of the UK a system that does not undermine the huge progress that we have made to date, which supports our ambitions, and which delivers support to the technologies of the future. The Scottish ministers will work ceaselessly to help to achieve that and work constructively with the UK Government to ensure that the proposed reforms support our renewable energy and climate change targets and priorities. I urge members to support us in that vital work.
That the Parliament notes the UK Government’s electricity market reform (EMR) proposals; supports the objectives of supporting investment in low-carbon generation, delivering a balanced energy mix and meeting renewable energy and climate change reduction targets while minimising costs to consumers; believes that the reforms must build on Scotland’s strengths and successes, protecting and enhancing industry and investor confidence in renewables, demand-reduction measures and carbon-capture and storage technologies; welcomes the proposals for statutory roles for Scottish ministers in the proposed framework of support for low-carbon generation, in setting the strategic direction of Ofgem and in monitoring and enforcement of the Emissions Performance Standard, and believes that the UK and the Scottish Government should work constructively to deliver a strong, thriving, competitive and integrated electricity market.
- Rhoda Grant (Highlands and Islands) (Lab):
I associate myself with Fergus Ewing’s comments about Charles Hendry. I have certainly heard such comments repeated elsewhere, and have no difficulty in associating myself with them.
I welcome this debate on electricity market reform. The driver behind that reform is the aim of providing a secure, affordable and low-carbon electricity supply. EMR has been an on-going process for some time and is crucial to Scotland and our renewable industry. Stakeholders need certainty about the proposals so that they can have confidence in the funding structures and make progress with development plans.
We support the motion, but we have lodged an amendment to add emphasis to a couple of issues: grid connection charging for our islands and the impact of the energy market reform on fuel poverty.
In Scotland, we have targets to eradicate fuel poverty by 2016. The Scottish Government is under an obligation to meet those targets, but energy market reform also has a part to play. The electricity market is currently dominated by the big six. Market domination is never healthy, and the big six’s hold over the market extends from generation to transmission and sale. That makes it very difficult for new entrants to come into the market.
Choice is important to those who suffer fuel poverty, as it means that they can access cheaper electricity. Encouraging new entrants could mean that providers that target fuel poverty, such as social enterprises, enter the market. We need to use the opportunity to encourage community generators and not-for-profit organisations into the market, as the current market works against those who suffer fuel poverty.
Companies offer dual-fuel discounts, for example, but they are not open to people who are off the gas grid. Areas that are off the gas grid are often the places where fuel poverty is most prevalent.
People who are in fuel poverty cannot access cheaper online tariffs or discounts for paying by direct debit. In its briefing for the debate, WWF Scotland talked about demand reduction, but that is not included in the energy bill. WWF Scotland points out that
“A Bill designed to address the electricity market is incomplete if it only focuses on supply and pays no attention to demand.”
Demand reduction is crucial to fighting fuel poverty. We know that energy prices will continue to rise so, to tackle fuel poverty, we need to reduce consumption. We must address those issues under energy market reform.
The other issue that our amendment raises is grid connection charges. The pricing structure as proposed in project transmit has been largely welcomed, because it is an awful lot fairer to renewable generation and to Scotland. However, huge problems remain with the proposed grid access charges for our islands. I confirm to Murdo Fraser that our amendment does not ask for socialised charges; we ask for fair access for our islands.
Our islands could become the renewable generators for the whole country. Wind speeds there are higher, so onshore wind facilities are much more productive. One of the largest wind farm developments is planned in Shetland. That is a joint project between a community trust and SSE. It provides the opportunity to boost the local economy for many years to come, but it will be disadvantaged if grid connection charges are much higher.
- Mary Scanlon (Highlands and Islands) (Con):
Does the member agree that the Office of the Gas and Electricity Markets has not reached a conclusion following its consultation on grid connection charges for the islands? Its view is most likely to be issued towards the end of this year or perhaps next year.
- Rhoda Grant:
That is why we have incorporated the issue into the debate. It would help if the whole Parliament sent a strong message to Ofgem about the charges, so that it looks for a solution to the problem. I do not pretend that finding a solution is easy but, if we send a united message, Ofgem may work together with us to find a solution for us.
Other islands that would benefit from a better charging regime are in Orkney, where we have the world-leading wave and tidal energy research and development centre. At that centre, prototype devices generate electricity for the grid now.
Orkney sits beside the Pentland Firth, which is Scotland’s first marine energy park. If Orkney is to capitalise on onshore and offshore generation, we need fair grid connection charges. If taking marine energy onshore on the mainland is markedly cheaper, Orkney is likely to lose out, and Caithness could also have a problem, as it could become overpressured by substation development.
The Western Isles have the potential to turn around their economy through onshore and offshore renewables. However, if connection charges are too high, they are likely to lose out on that benefit. The area could be the best site for wave and tidal power, so stalling that development could impact on the whole country.
As I pointed out, islands stand to generate more. The Westminster Government must address the charges, but perhaps we also need to look at renewables obligation certificate banding, because of the importance of the island generators. I have written to the minister about that and I hope that he will keep that under review.
If we do not sort out grid charging for islands, that will delay the upgrade of the grids to the islands. Cable prices are rising quickly, so any delay will mean an even higher cost. That means not only that projects are stalling because they cannot get a grid connection but that further expense will be incurred in the future. There are similar delays elsewhere because of poor infrastructure in our rural areas. We need to increase the pace of grid improvement, to ensure that development is not stalled.
Security of supply is a driving force in energy market reform. Much of our generation structure is old, and our transmission systems are creaking. A move to low-carbon generation means that generation occurs where there are low-carbon resources, such as renewables. Previously, the role of the grid was largely to move high capacities within urban areas, but that has changed markedly, because the grid is now required to carry high loads from reasonably remote areas, which previously required little capacity. I have often heard it said that our rural grid system is like a piece of wet string; massive investment is needed to upgrade the grid. That is part of the intention behind electricity market reform.
Another main intention is to reduce carbon output in electricity production. Most of our generators are old and need to be replaced. There is no point in replacing like with like, which would not cut our carbon output. We need to use the new contracts for difference to make a step change. I think that everyone welcomes contracts for difference, but the devil is in the detail and we do not have the detail. There are concerns that contracts will be auctioned and that tested forms of low-carbon generation will beat the more expensive forms of renewable energy that are being developed.
The plea from the generators is for market stability. The UK Government and the Scottish Government can give clear statements about the support that will be available to renewables in future, so that developers can have confidence about moving forward. It is good that the Scottish Parliament is sending a clear message. There needs to be buy-in from all political parties, so that support continues regardless of changes of Government.
I applaud the aims of energy market reform, which are about ensuring that we have secure, low-carbon, affordable electricity. I think that the Parliament can unite behind those aims.
I move amendment S4M-04082.1, to insert at end:
“, ensure that grid connection charges are fair and equitable, that Scotland’s islands are fully able to contribute to meeting renewable targets and that electricity market reform has regard to the requirement to tackle fuel poverty.”
- Mary Scanlon (Highlands and Islands) (Con):
I thank the minister for his kind words about Charles Hendry, which I am sure Mr Hendry will appreciate. I hope and trust that the partnership will continue with the new minister. We will support the Labour amendment, given the minister’s assurances—he will understand our apprehensions.
The Energy Act 2011 resulted in better opportunities to compare prices. We also have the green deal, the Green Investment Bank, which is based in Edinburgh, and more. The draft Westminster energy bill is undoubtedly complex and technical and will require considerable scrutiny from the Energy and Climate Change Committee. It is right that the Scottish Parliament should also play its part in scrutinising the bill.
I thank the Minister for Energy, Enterprise and Tourism for his constructive approach to the debate and the bill. I regret that the joint briefing with his Westminster colleague, which was scheduled for Monday this week, was cancelled, due to the reshuffle down south. Partnership working between Scotland and Westminster has been good and I trust that that will continue.
The First Minister said in his letter in response to the draft UK energy bill:
“The EMR provisions are crucial to Scotland’s future energy mix ... The Scottish Government agrees with the principles underpinning the EMR ... these reforms build on the successes we have achieved to date through the effective use of our existing powers and an increasingly productive, pro-active and valuable alignment of political and policy will with industry and investor effort.”
I acknowledge those comments. That is undoubtedly how devolution was intended to work.
We welcome the approach to price certainty and the statutory requirement to consult the Scottish ministers on the design and delivery of the contracts for difference framework, which the minister mentioned. Although much remains to be done on the bill, it is refreshing and encouraging to hear that the Scottish Government is working so positively with Westminster.
The domination of the UK electricity market by the big six, which Rhoda Grant mentioned, only two of which are based here, gives rise to concern, particularly given the vertical integration from generation to supply. An MP said:
“Vertical integration allows a utility company to generate the electricity under one arm of the company, which it sells through an intermediary—often offshore—which they also own, and then on-sells to another arm of the corporation, which supplies it to us as the consumer. The result is a total lack of transparency in the true cost of electricity”—[Official Report, House of Commons, 3 November 2011; c 373-4WH.]
The process also prevents competition and is, as Rhoda Grant said, a barrier to new entrants. The bill presents an opportunity to address those issues.
I ask the minister to tell us whether electricity storage, which is not in the bill, has been discussed. Given the vertical integration of the big six companies, I hope that they are looking at electricity storage, as suggested by the Institution of Mechanical Engineers in a paper that it presented in Parliament this week. Power systems must be operated so that supply is equal to real-time demand and system losses at all times. It therefore makes sense to look more carefully at electricity storage, particularly given the intermittent nature of wind power. Storage would also increase the efficient utilisation of those and other assets on the network. I understand that storage systems can be installed at a community level as well as to the grid. The institution’s report suggests that a detailed analysis of electricity storage should be done urgently. Has the minister discussed the matter with his Westminster counterparts?
The Westminster Energy and Climate Change Committee is not alone in being critical of the complexity of the bill. Ian Marchant, the chief executive of SSE, stated in evidence at Westminster that the legislation
“is an exercise in job creation for lawyers and economists.”
I hope that the bill will bring much-needed clarity and transparency to the current complexity.
The bill has many positive features, including the desire to keep household energy bills as low as possible, and Ofgem’s work to make the markets as simple and fair as possible is on-going. It is believed that the result of EMR will be a 4.3 per cent decrease in domestic energy bills between 2016 and 2030.
I am also pleased to note that the bill reflects the UK Government’s ambition to shift future energy generation away from large fossil fuel power stations towards a more balanced range of energy production methods—of course, members on this side of the chamber would not rule out nuclear as one of those options. That shift is to be achieved through a range of measures that I am sure will be examined in the fullness of time.
We favour the bill. Although it is highly complex and we are still waiting to see it in its final form, the commitment to reducing carbon emissions, securing energy supply and cost effectiveness are all measures that I am sure everyone will approve of. Those measures are absolute necessities, and it is good to hear that both the Scottish and Westminster Governments are committed to working together on this important issue.
- John Wilson (Central Scotland) (SNP):
I welcome the motion in the name of the minister, Fergus Ewing, and the debate initiated by the Scottish Government. I trust that the debate will assist in increasing the pace of the reforms in the electricity market, especially as the Scottish Government has placed the low-carbon economy at the heart of its economic strategy.
The objectives of the UK Government’s draft energy bill place significant emphasis on security of supply with regard to electricity and increasing investment. It would be remiss of me not to put on record my concerns about how the consumer has not been best served so far in the current marketplace for electricity. The consumer should be at the heart of any reform process, not viewed as an inconvenient afterthought.
In the period from 2006 to 2011, consumers’ electricity bills increased by 54.9 per cent. That has resulted in many people making tough decisions about how they spend their money in these most difficult times. Any future policies must ensure that the issue of fuel poverty is tackled.
In looking at the details of the UK draft energy bill, I have concerns about the mechanism for contracts for difference. That seems to me to be akin to the financial derivatives that were used in the mortgage market. It could be argued that such financial engineering might not be the best approach to adopt. There is a need for clarification of the proposed mechanism, especially when the whole purpose of the reform process is to provide price certainty and vital investment.
When it comes to growing a low-carbon economy, all of us can do more. That applies not just to us, as individuals, and the energy companies, but to the Government and the policy focus that it can deliver. Electricity market reform forms a vital part of the development of a low-carbon economic strategy that will aim to make Scotland more capable of resisting the volatility associated with ever-increasing energy prices. Growth that is sustainable in the long term is vital in taking our country forward. A robust electricity market should be part of that sustainable and growing future.
Of course, the future of Scotland’s energy needs should not include new nuclear generation as part of the energy mix. The UK Government continues to believe that nuclear power is a financially viable option, despite the decommissioning costs and the financial subsidy that is demanded by the nuclear industry.
The debate is opportune. Scotland will play an increasing role on the global stage, given that, as a country, we have the potential to produce a quarter of Europe’s offshore wind energy. The prospects for Scotland’s economy are dependent on the utilisation of renewables, particularly in a context in which the global low-carbon economy is forecast to grow to £4.3 trillion by 2015.
As I have said previously in the chamber, Scotland is constrained under the current devolved settlement. That is made even more apparent by the transmission charging regime. The present system discriminates against Scottish interests, as is demonstrated by the fact—which other members have mentioned—that Scottish energy generators have to pay through the nose to connect to the UK national grid.
I am hopeful that the draft UK energy bill will better signpost a future of increased investment by developing the principle of a capacity market in respect of energy generation. That will help to ensure that companies have sufficient capacity to focus their attention on growing the market and the economy. An associated development is the substantive aim of making Scotland a leading centre of low-carbon investment. I am optimistic that other companies will follow the example of Samsung Heavy Industries and invest in Scotland.
The debate is timely and I look forward to many of the issues that have been raised being taken forward in the coming months and years. I hope that the UK and Scottish Governments can develop a reform agenda in the electricity marketplace programme that provides real benefits for the people of Scotland and ensures that Scotland can play a major role in Europe by becoming a powerhouse for future energy production.
I support Rhoda Grant’s amendment, because I think that it is extremely important that we look at grid connection charges and how they affect our communities in the Highlands and Islands. Tackling fuel poverty is also particularly important. We cannot continue to have a policy that results in electricity prices rising at a time when household budgets are decreasing. Dealing with fuel poverty should be at the heart of any energy strategy that is taken forward by the Scottish Government or the UK Government.
I support the motion and the amendment.
- Claudia Beamish (South Scotland) (Lab):
I associate myself with the remarks of John Wilson on fuel poverty, which is one of the most important issues for the Parliament to resolve. Therefore, I am pleased to support our amendment, which was lodged by Rhoda Grant.
The UK Government’s electricity market reform proposals set out some important aspects of the context in which we shape the generation, transmission, distribution and supply of electricity. I am eager to speak in the debate to highlight some positives and to help to expose some of the remaining areas of concern.
As other members have highlighted, a clear sense of direction is essential to provide certainty for the future of the electricity market. However, there remain questions to be addressed and issues to be tackled if we are to move forward in a fair and inclusive direction towards a low-carbon economy. Climate change is the biggest long-term challenge and electricity market reform must set the context for moving forward fairly in the quest for the targets under the bill.
Is there healthy competition in the market? The big six are indeed vertically integrated companies and, on the supply side, they provide energy to 99 per cent of all domestic consumers. That cannot be right. As highlighted by Rhoda Grant and Mary Scanlon, no new entrant has ever reached the critical mass to break through past the big six.
Are consumer electricity prices as fair as possible for customers? There are many who think not, and I agree with them.
An Institute for Public Policy Research report argues that Ofgem
“should enforce its existing policy that suppliers must offer tariffs that reflect their costs”
more robustly. The report also highlights how
“the ‘Big 6’ can overcharge their less price-sensitive customers in order to offer heavy discounts to others; discounts which new entrants and smaller suppliers struggle to match, thereby reducing competition in the market”
yet again. Co-operative Energy—I highlight that electricity supplier, because I am a member of the parliamentary Co-operative group—which offers a simple single tariff to consumers is a good example of the challenge that is faced by new entrants.
Is there overcentralisation in the market? Large-scale renewable generation—both onshore and offshore—is essential in meeting our obligations under the Climate Change (Scotland) Act 2009 and moving to a low-carbon economy. I believe that there is agreement on that across the chamber.
In its briefing for the debate, Scottish Renewables highlighted its concern that the auction process under contracts for difference may harm renewables in general, and especially Scotland’s nascent marine renewable energy industry, which would be unable to compete with other low-carbon technologies that have been established for longer.
Some rural communities have voiced concerns about onshore wind energy. The revised Scottish Natural Heritage cumulative effect guidelines must address some of those concerns, and the Scottish Government’s community benefit register must lead to a more transparent system of community benefit.
Communities and co-operatives that make joint applications with companies often have a different perspective from that of some communities that object to applications from large companies.
Rhoda Grant highlighted the waste of energy and transmission losses through unused heat.
EMR sets the structures within which the big six can operate vertically. Disappointingly, however, it does not do justice to the opportunities to facilitate localism and decentralise energy generation. Many communities across Scotland want to take the power into their own hands and the climate challenge fund has helped with that.
Along with other members of the Rural Affairs, Climate Change and Environment Committee, I visited Gigha and saw for myself the benefits of community ownership. The financial and social benefits are also highlighted in Fintry and many other communities in Scotland. As acknowledged by other members, Sarah Boyack and others have also worked hard to facilitate the microgeneration movement.
The pleas of Friends of the Earth, WWF and others to the UK Government to—in the words of Friends of the Earth—
“use the opportunity of EMR to break the stranglehold of the ‘Big Six’”
have been largely ignored in all aspects of electricity supply and generation.
Do the current proposals for reform of the electricity market address demand reduction? In 2011, Friends of the Earth stated in its consultation response to the UK Government:
“the Government needs to ensure that EMR puts reducing electricity demand on a par with generating more power.”
Friends of the Earth has also stressed that an overall demand reduction target should have been set, but that has not happened. EMR does not create a robust framework for smart technology, nor in my view does it make any significant contribution to addressing fuel poverty.
The UK Government’s green deal, which runs parallel with EMR, is welcome in the context of demand reduction but fails to address the challenges of improving hard-to-heat homes. Other central fuel poverty issues can be tackled in Scotland—and must be, especially given the latest shocking statistics estimating that 800,000 Scots, or almost a third of all households, are now living in fuel poverty.
The Scottish Government and those of us across the chamber who are united in tackling this issue have a responsibility to make a difference now. Scotland’s unique combination of factors—colder winters; more stone-built houses that are difficult to heat; and rural areas with no mains gas, which forces consumers into buying whatever is locally available and usually from the big six—has led to higher levels of fuel poverty and all of those issues must be taken into account if any UK electricity market reform is to be successful and implemented fairly for consumers in Scotland.
- Stewart Stevenson (Banffshire and Buchan Coast) (SNP):
Unlike Charles Hendry, I am definitely not a retreatee. I very much welcome the opportunity to engage in a wider range of subjects.
Electricity market reform is both necessary and urgent. For Scotland, a reformed market in these islands and across Europe must create the conditions for the creation of a physical and economic infrastructure that allows the export of a key product from our fastest growing 21st century industry: renewable energy.
History tells us that economic development is driven by access to energy. The most important factor for us over the past few hundred years has been access to coal and oil—and, of course, an education system that gave us the engineers to drive new industries based on access to energy. Some of this ain’t new. The first wind turbines were in operation in 200 BC and the first wind turbine in the world to generate electricity was installed in Marykirk 135 years ago, in July 1887, by the Scottish academic James Blyth.
Unlike the previous source of energy on which we relied, modern renewable energy is kind to the environment. We now have power generation in which the environmental costs are exceeded by the benefits, that does not result in workers and residents inhaling particulates pollution and that does not create the oxides of sulphur and nitrogen that damage lungs and plants or the CO2 that warms the planet. However, because investment in power generation is investment for the long term, investors need long-term confidence about the fiscal environment within which they will operate. After all, they cannot easily transfer generating equipment to another part of the world if the Government changes the rules. In that respect, power generation is quite different from other manufacturing industries. Manufacturing power is locked to local sites and gives us long-term economic benefit if we provide long-term certainty.
The Climate Change (Scotland) Act 2009, which was unanimously passed by Parliament, is one of the underpinnings that has given the renewables industry the confidence to invest. Whatever the political vicissitudes that might affect any party in a democracy, or whatever the nature of future Governments in Scotland, we made a shared commitment that others now rely on and from which our economy gains.
We can already see the effect of reneging on deals. The Kyoto protocol represented an international agreement to create what was essentially a carbon market and ensure that the environmental cost of human activity carried an associated economic cost. When the United States resiled from its international obligations under Kyoto, the international carbon market all but collapsed. The European emission trading scheme has taken up some of the slack but for a number of European countries, notably Poland, the loss of Kyoto revenue not unreasonably makes it difficult to strengthen targets in Europe while others turn their back on duty.
Indeed, I was leading the UK delegation in Durban for the 17th Conference of the Parties to the United Nations Framework Convention on Climate Change when the United States spoke to plenary. Such was the hostility to the US delegate that he had to shorten his speech and leave the podium much earlier than anticipated. When we sacrifice long-term necessities by trimming to short-term needs, we sacrifice trust; trust that it can take a lifetime to build can be sacrificed in a second.
I welcome the positive collaboration on this agenda between the Scottish Government and the Westminster Government and, indeed, the international engagement that our ministers are having with countries across Europe.
What are my personal tests to measure success in EMR? First, consensus across jurisdictions and political parties—long-term stability. Secondly, equal access to networks, which was usefully highlighted by the Labour amendment today—supporting community and industrial-scale generation. Thirdly, progressing the carbon reduction agenda and supporting the climate change acts in Scotland and Westminster—saving the planet. Fourthly, delivering affordable energy—tackling fuel poverty, as John Wilson and Rhoda Grant mentioned. Fifthly, building our economy—gaining reward for effort.
However, there are signs of difficulty. Westminster has an unhealthy focus on gas. Yes, the CO2 from gas generation is much less than that from coal, but without carbon capture and storage the emissions remain too high. John Selwyn Gummer, now Lord Deben, chairs the UK Committee on Climate Change. His committee has just written to the Westminster Government to make clear that a focus on gas is a focus on climate failure. Let us hope that he maintains close relations with his political colleagues and gets that message across.
Carbon capture and storage is not the long-term answer; we shall have to do more. However, it can deliver substantial intermediate-term benefits. China is not normally regarded as a climate champion, but it is building better wind turbines by using its access to rare earths to cast better magnets. In my constituency, we are ready to follow its lead. It has seven carbon capture plants that are already operational.
Martina Navratilova once said:
“It’s not how I play when I’m at my best that means I win; it’s how I play when I’m at my worst that makes me a champion.”
Similarly, on the climate agenda, it is how we respond when the economic, social and environmental challenge is at its greatest that will determine our success or failure in combating global warming.
I am delighted to support the Government’s motion and the Labour Party’s amendment.
- Kevin Stewart (Aberdeen Central) (SNP):
I echo the many kind words that have been said about Charles Hendry. As an Aberdeen MSP I have come across Mr Hendry and I know how highly he is regarded in the oil and gas industry. It is a great pity that when we find a good energy minister—and they have been few and far between—they disappear quickly in the revolving door that seems to be in place for energy ministers at the Department of Energy and Climate Change.
I thank the organisations that have taken the trouble to provide MSPs with briefings. I am happy that there will be a statutory role for the Scottish ministers in the process, and that the Scottish Government will be a partner rather than a consultee. That is a great move, although I would rather that we had full control of energy in this Parliament.
It is extremely important to draw attention to WWF Scotland’s words about nuclear energy in its parliamentary briefing and I make no apology for reading out that section of the document. It says:
“WWF believes the Energy Bill risks distorting the investment environment towards nuclear at the expense of renewables. Recent developments in the UK’s nuclear market suggests that it is extremely unlikely that much nuclear capacity will be built in the UK over the next 20 years. This is exemplified by the recent withdrawal by E.ON and RWE from the UK’s Horizon Joint Venture and the doubling of construction costs of building reactors in France and Finland, both of which are between 4 and 5 years behind schedule. The effect of the current package of reforms could be an energy bill that falls short of providing the framework for renewables and yet nuclear still doesn't move forward due to spiralling costs - a lose-lose situation.”
I agree with WWF Scotland. Beyond its words, in other parts of the world we have seen a move away from nuclear technology. We are seeing it in Japan and Germany. I hope, although I may hope in vain, that the UK Government does not gamble with nuclear at the expense of the renewables industries that we want to be developed—we can be at the forefront of those industries.
- Murdo Fraser:
In addition to the submission from WWF Scotland, did Mr Stewart read the submission from EDF Energy? It said:
“Companies such as EDF Energy are planning to bring forward investment in new nuclear build, renewables and high-efficiency gas (through CCGT)”.
Perhaps the situation is not as bleak as Mr Stewart paints it.
- Kevin Stewart:
I have not seen that submission. EDF must have missed me out when it circulated it—perhaps because it is aware of my views, I do not know.
I disagree with Mr Fraser. I think that it will become even more difficult for anyone to enter the nuclear market unless there is that huge degree of subsidy, which I hope does not continue. I believe that we should be at the forefront of renewables and should be forgetting technologies such as nuclear power.
Fuel poverty is a major issue in my constituency, as it is in the constituencies of others. We should be minimising the costs of energy to consumers, and I hope that we can achieve that in the reform that is going ahead.
I also agree with the speakers who have talked about the transmission charging regime, because it needs to be changed if our island communities are to take full advantage of their position. Ms Grant mentioned the Shetland wind farm development. During a recent visit that was undertaken by the Local Government and Regeneration Committee, I saw the site of that development, and I hope that it can go ahead and that there will be reasonable transmission charging, so that Shetland can benefit to the great degree that it should.
We have, in Fergus Ewing, a minister who will have the ability to bring those matters forward in discussions with the Westminster Government. I know that he is no patsy and that he will ensure that Scotland’s best interests are at the heart of the discussions that he will have on electricity market reform.
I support the motion and the amendment.
- James Kelly (Rutherglen) (Lab):
I welcome the opportunity to take part in this debate on electricity market reform. Some members have spoken about the complexity of the reforms. This is an important debate for two reasons: electricity and energy policy affects people’s lives, and cuts across a number of the portfolio areas that we deal with in the Parliament.
The challenges that face successful electricity market reform involve keeping the lights on, reducing carbon emissions, tackling fuel poverty and using energy as a way of boosting and growing the economy. There are also serious questions about how energy policy would operate in an independent Scotland.
One of the key issues is security of supply. It is a fact that we operate a mixed energy policy, particularly in Scotland. I think that some of the SNP speakers have turned a blind eye to the fact that 30 per cent of our electricity comes from nuclear sources. It has been interesting to see the SNP’s journey; it very much set its face against nuclear power until it came into power in 2007, when it accepted it. Indeed, extensions to nuclear power stations have been quite readily accepted by SNP ministers. In fact, Mr Ewing recently opened the new visitor centre at Hunterston. That journey is the result of an acceptance of the reality that, at least in the current situation, we need nuclear power in order to support the base-load.
- John Wilson:
Does Mr Kelly accept that the costs of nuclear generation are prohibitive and that, if the amount that the UK Government is currently investing in decommissioning plants—it is more than £3 billion—was invested in renewables, that would safeguard the renewables industry and the country from potential contamination from nuclear waste?
- James Kelly:
Mr Wilson makes a pertinent point about cost. Any model for electricity generation must be cost based. Ahead of today’s debate, we were bombarded with briefings, some of which were referred to by the previous speaker. Those briefings quoted different costs, but I will not endorse any of them now, because we need to flush out the costs that are related to each source of generation so that we can establish how to proceed. The SNP has set a target of generating 100 per cent of electricity in Scotland from renewable sources by 2020, but we have heard reports about 53 objections to a planning application. Perth and Kinross Council has said that it costs it £1 million to deal with applications.
- Roderick Campbell (North East Fife) (SNP):
Will the member give way?
- James Kelly:
I am sorry, but I want to make progress.
There is a concern that, even with renewables, progress is not as fast as the SNP Government would like. We need a realistic cost-based model. I say that not to be boring or dogmatic, but because the costs are passed on to the consumer. The Labour amendment makes an important point about fuel poverty. Many people in Scotland, including pensioners, are suffering from fuel poverty. We have to get the model right, so that we deliver electricity at as low a cost as possible to consumers.
- Margo MacDonald (Lothian) (Ind):
Is the member implying that the fuel poverty that families in Scotland are experiencing is not in any way the fault of the energy supply companies?
- James Kelly:
I am certainly not implying that—Margo MacDonald misunderstands me if she thinks that. It is unacceptable that the profits of some of those companies should rocket while people throughout Scotland and the rest of the UK suffer hardship, in part because of their bills.
As I said, there are important issues for the SNP about how energy policy would operate if we separated from the rest of the UK. Currently, Scotland consumes 10 per cent of the electricity in the UK, but 30 per cent of the ROC certificates are issued in Scotland. It is clear that there would be a cost in moving to a separate Scotland. Some reports have quoted a cost of £4 billion. In that case, Government ministers would have to decide whether to pass on the cost to businesses and consumers or whether to take the money out of the Scottish budget. There are real issues to examine as we move forward to debate the issue of separation from the rest of the UK.
There is no doubt that the issue is complex, but it is important that the proposals that are brought forward should, at heart, serve the consumer so that, as Margo MacDonald mentioned, we can deliver realistic electricity bills to customers throughout Scotland and the UK.
- Gil Paterson (Clydebank and Milngavie) (SNP):
The debate comes at an important time and is welcome.
When we discuss energy matters, there tends to be a focus on how the energy is produced and distributed, rather than on how it impacts on ordinary persons. I will attempt to focus on the production of electricity and on how the general population is affected.
Our production of electricity should be based on a model that is safe and that helps to deliver the climate targets that are set by the Scottish Government. With no country able to avoid the effects of climate change, the world as a whole has an interest in debating such matters—as we are. In the relatively short period of time of a devolved Scotland, we have taken a leading role in tackling climate change that has not gone unnoticed in other countries. We must continue to be an example, which is why I am delighted by the support that the Scottish Government has given to the renewable energy sector.
It has been said before countless times, but it is important to continue to highlight that Scotland is in the unique situation of having an abundance of energy resources from tidal to wind to marine. We must ensure that we maximise those resources so that future generations can benefit. That is why the decisions that we make as a Parliament and as a country are fundamental. The next generation of Scots relies on us. The future is in renewables and investment should continue to be directed at supporting that industry, which ensures that jobs come to Scotland and is therefore a double priority.
I share the Scottish Government’s concerns that nuclear power may be subsidised by the general public. That is the wrong approach to take, especially if the subsidy harms investment in the renewable energy sector in Scotland, which is growing and bringing with it local investment in jobs in hard-hit areas. We have a duty to ensure that the hard work and investment that have already been delivered by renewables are not harmed.
A lot has been said about nuclear power, not just in the chamber but across Scotland and the rest of the world. The issues regarding nuclear waste are well documented, but my concerns are particularly about the danger of human error. Who would ever have imagined that Japan, arguably the world’s most technologically equipped nation, would simply forget to protect the generators and pumps from tsunamis? Even more alarming, it is a country with 2,000 years of written history and experience of dealing with tsunamis. The lesson is that the law of averages says that human error will happen, therefore nuclear should not be an option.
I applaud the sentiments and the ambition of the electricity market reform proposals put forward by the British Government. Although I may be critical of some elements of the proposals, I believe that the issue is too important to allow party-political allegiances to undermine the whole process.
That said, further areas of concern need to be addressed by the British Government before we can move forward. The complexity of the reforms is one of the main concerns, with a fear among the industry that investment may decrease as investors are scared off by the proposals. Indeed, even the Westminster Select Committee on Energy and Climate Change has voiced concerns in its report on the proposals. It even went so far as to say that the consumer—in other words, ordinary people—will not benefit from the proposals.
As the economic downturn continues to impact on people, we must do everything in our power to alleviate suffering. The rising cost of electricity has a detrimental impact on the budgets of families and individuals. I share the concerns of other members across the chamber that fuel poverty could impact even further.
As we leave a summer in which there was little cheer on the economic front for families, we approach the time of the year when household bills will increase. Families and individuals, especially the elderly, will be forced into making choices about their welfare.
- Mary Scanlon:
Although there is still a way to go, does the member welcome the work that Ofgem has done to ensure tariff simplification, provide clearer comparisons between energy companies to make it easier to switch supplier, and set fixed standing charges?
- Gil Paterson:
I welcome those developments, but I say that through gritted teeth because I do not really hold up Ofgem as a model of controlling the way in which energy impacts on people who really need Ofgem’s assistance. My view is that Ofgem has been mute and not very effective.
I recommend that members support the motion and Labour’s amendment.
- Liam McArthur (Orkney Islands) (LD):
The tone of the minister’s speech and his generous remarks about Charles Hendry were indicative of the approach that he has taken since taking on the energy brief. He has been assiduous in trying to work across the parties and with ministerial colleagues at Westminster. I welcome that approach, which reflects the need to de-risk—in a political sense—the whole process, and the minister’s recognition of, as he said earlier today, the value that stakeholders place on there being as much consistency as possible across the UK. Who knows? If he is still in the energy brief 12 months from now, we may be able to coax him away from the rocks of the separatist agenda of some of his colleagues—epitomised by the siren in chief, Kevin Stewart.
The Government’s motion reflects the general support that exists for the underlying principles of EMR. Stewart Stevenson set out the context well. Over the next decade, 20 per cent of existing power generation is likely to come offline as we look to decarbonise the transport system. Indeed, demand could double by 2050. Without reform there is a serious risk of blackouts or reliance on expensive imports. Reform can also attract and lever in more than £100 billion of investment
However, reform will not be easy, particularly given the timeframe. The fact that the UK Government has gone out to pre-legislative scrutiny on the bill is an important and welcome step on its part.
E.ON’s briefing calls for
“clarity, urgency, stability and simplicity”.
Such things might be easier said than done, given that EMR reminds many of the Schleswig-Holstein question. Nevertheless, those features are necessary if we are to unlock investment. Appropriate infrastructure and an appropriate charging regime are also key. Rhoda Grant’s amendment ably sums up those needs and the importance of the islands, such as those that I represent, which are critical to the achievement of our renewables objectives by not only Scotland but the UK.
- Margo MacDonald:
I have forgotten what the Schleswig-Holstein question is.
- Liam McArthur:
Only three people understand it: one is dead, one is mad and one cannot be bothered explaining it.
Orkney is at the centre of marine renewables—indeed, it is the powerhouse of renewables—yet discriminatory charging is hampering future investment and distorting decisions about the location of such development. That problem must be resolved, and I think that it must be resolved through the draft energy bill because I fear that Ofgem’s connection and use of system code process may not deliver what is needed.
Despite the overall general welcome that it has received, aspects of the draft bill need further consideration. Decarbonisation of transport and heat will lead to electricity demand rising significantly but, as some members have said, we should not lose sight of the importance of energy efficiency and conservation. WWF makes an interesting point about the need to have enabling powers for energy efficiency in the bill. That suggestion appears to have merit.
Contracts for difference have attracted most comment, perhaps. They are an attempt to make investment in clean energy more attractive by removing long-term exposure to price volatility, establishing a strike price for generators and insulating consumers from large fluctuations. That is key to addressing fuel poverty, which Rhoda Grant, John Wilson and a host of other members have rightly sought to emphasise.
There is recognition of the concern about how contracts for difference will operate. A single auction for contracts appears to favour more mature technologies, but it is vital that we secure a technology mix. For example, marine renewables are an essential part of that mix. The implications for that sector and others must be taken seriously. I am not sure whether the solution is an extension of ROCs, but I certainly want those concerns to be fully addressed as the bill progresses.
It is clear that the role of a counterparty is key in underwriting contracts. Scottish Renewables and SSE have pointed to the need for a credit-worthy counterparty as a means of reducing the costs, and more work is needed to provide the necessary assurances and confidence.
Scottish Renewables has referred to National Grid’s role as being that of a system operator that is able to issue contracts based on targets and geographical location. I am aware that concerns have been raised around constraints on the network and how those will be managed in future.
That issue has already come into sharp focus this week in Orkney, where SSE has announced that any future installations above 3.7kW
“will be dependent on grid reinforcement, smart network management or changes to demand requirements”.
Rumours about those constraint problems have been circulating for a while. There is some sympathy for SSE’s position, but—as one constituent observed to me—SSE appears to have been managing its way into a crisis in recent months and years. I invite the minister to look seriously at that issue, and I would welcome the opportunity to discuss the implications with him.
There could be opportunities to meet demand requirements through the so-called G83 process, which allows microrenewables to be connected to and feed excess power into storage appliances inside the house.
- Fergus Ewing:
I would be delighted to meet Liam McArthur to discuss that issue—I was keen to make that suggestion, but he has taken it from me. I am keen to find some imaginative solutions to that problem, of which I was recently made aware.
- Liam McArthur:
I am grateful to the minister. The meeting could also touch on the issue of teleswitching, which was raised with the chair of the Scottish fuel poverty forum as a possible way of using some of the renewable resource that is currently constrained off the grid to address fuel poverty in my constituency. Given the concerns that have been raised about barriers to entry, another issue is small community-scale supply businesses.
I welcome the debate and its tone. There is an opportunity to set us on the right track: to decarbonise electricity generation, improve security of supply and contain future price rises. While urgency and clarity are needed, we must ensure that we get this right.
I commend the minister, the motion and the amendment to the chamber. I hope that we can continue in this vein.
- Roderick Campbell (North East Fife) (SNP):
The reform of the electricity market is as essential in Scotland as it is across the whole of these islands, and I welcome the proposals to ensure security of supply and affordability.
It is clearly right that Scottish ministers have a statutory right to be consulted when the UK Government takes forward its proposals given the importance of matters in Scotland, which is fast becoming the energy powerhouse of the British isles, even if energy is both reserved and devolved.
We certainly need to work in partnership rather than just as a consultee. It is imperative that Scottish interests are at the heart of all decision-making processes on electricity markets, including in the key area of formulating the Ofgem strategy and policy statement.
I support the Scottish Government’s view that Scottish ministers must be closely involved in contracts for difference, which will, it is hoped, provide lasting arrangements for price support for emerging renewable technologies. It is vital that in any transition from renewables obligations to CFDs, support for renewable generation is maintained. We must ensure that the Scottish Government is involved in the detail, which is as yet unclear.
Furthermore, the provisions in the draft energy bill that relate to offshore transmission are important in preventing difficulties for contractors who are both generators and engaged in transmission, and in order that such vertically integrated suppliers are able to test their transmission with impunity. Changes to the Electricity Act 1989 will be required, and I hope that that can be resolved quickly through legislation at Westminster.
In its report, “Powering Scotland”, which was published 10 months ago, Reform Scotland made several recommendations on the future of the energy market, including the recommendation that energy policy should be formally devolved to the Scottish Parliament so that the Scottish Government can formulate a clear energy policy that meets Scotland’s needs. For the present, however, we must ensure that we are operating as effectively as possible within the limits of the devolution framework, while recognising the importance of the UK electricity market as a whole.
There has been considerable concern that the intention behind the UK Government’s plans for the draft energy bill and its overarching reform of the energy market is to provide new subsidies for nuclear power. As the Scottish Government and many other organisations—including Reform Scotland—have stated, Scotland does not need new nuclear power stations, and nuclear energy does not merit a boost in funding. As my colleague Kevin Stewart said, WWF Scotland has described the UK draft energy bill as “a lose-lose situation”, given that nuclear is being phased out in the long term in any event.
For the avoidance of doubt, I say to Murdo Fraser that I, too, have not seen any briefing from EDF.
Why should nuclear power be subsidised when, aside from the enormous costs associated with installation and the reliance on regular imports of uranium from overseas, there are the costs of security and decommissioning and, ultimately, the costs to the taxpayer and the environment of storing radioactive waste? Nuclear power also gets extortionately expensive when things go wrong. The UK Government’s proposed insurance limit for operators is €1.2 billion, but the costs of the Fukushima disaster last year are widely projected to reach around €200 billion. Suppliers of nuclear energy simply could not afford to insure their facilities to a level commensurate with the risk without Government help.
It is surely short-sighted to bolster the nuclear industry—even ignoring the arguments on the impact of European Union state aid rules—when to do so beyond the lifespan of current reactors might be at the expense, as other members have suggested, of nascent and truly sustainable Scottish renewable energy sources. In that respect, I agree with the House of Commons Energy and Climate Change Committee that
“policy and financial support for nuclear”
should not be
“rolled up with that for renewables.”
In relation to emissions performance standards, in its recent report the same committee is as scathing as ever about the proposals. However, control and regulation of emissions are devolved matters, and I hope that whatever model of EPS is considered appropriate for Scotland is consistent with delivery of our world-leading climate change legislation.
The aims of both the Scottish Government and the UK Government, over the course of electricity market reform, must be to ensure that consumers get the best deal possible. In the long term, we can achieve that only by promoting sustainable energy production. The only truly infinite resources that Scotland has for energy production are human talent and the power of wind and water. Scotland must continue to prioritise matching and marrying the two to create a world-leading energy industry and to ensure that the world-leading renewable energy target of generating the equivalent of 100 per cent of electricity from renewable resources by 2020 is met. I am delighted to learn that that ambition has been hailed by the UK Government’s Secretary of State for Energy and Climate Change, Ed Davey, even if it has not been endorsed so warmly by his Conservative colleagues—including some of those in this chamber.
Rising production costs are, in many ways, unavoidable but the success of the vertically integrated big six suppliers in the electricity market depends on competitiveness. It is essential that the UK and Scottish Governments work together to ensure that the imminent reform of the electricity market allows for effective competition. That could only be a good thing for household bills.
Last but not least, we must also recognise the interests of consumers, particularly those who are in fuel poverty, whom many members have mentioned. Perhaps a more effective recognition of their interests is required in the reform debate.
- Iain Gray (East Lothian) (Lab):
Telling someone that you have volunteered for a debate on EMR is a bit like telling them that you were once a physics teacher—their face immediately rearranges itself into an expression that says, “Oh, really? How dull.”
We have only to look at the objectives of the reform to see how important it is to decarbonise electricity generation at a time when every news bulletin brings further disturbing news of the impact of climate change; to guarantee security of supply at a time when every day our leisure, our work life and our industry depend more and more on technologies that are all powered by electricity; and to control the cost to consumers of the reform at a time when 800,000 Scottish families are fuel poor. When we add to that the fact that electricity is an important added-value export from Scotland and the potential—rightly recognised by the Scottish Government—that we can use new technologies to reindustrialise our country, we can see that there is nothing dull at all about EMR.
In fact, it is not putting it too strongly to say that our way of life depends on getting EMR right. The consequences of getting it wrong are already becoming obvious. SSE turned away from some of its proposed hydro investments immediately in response to ROCs decisions by the UK Government. In my constituency, 1,000MW of capacity at Cockenzie power station is about to disappear in April, with no investment decision on the horizon in spite of the Scottish Government having already consented to a combined cycle gas turbine replacement. Iberdrola has the investment decision on hold, as it awaits EMR decisions.
We are currently in a worrying position. The proposals do not really reform the market. In particular, they would leave the wholesale market unreformed and would not restore any balance between the interests of the consumer and those of the big six energy companies. However, because of the complexity of the contracts for difference system, the lack of clarity on counterparties and a lack of confidence in the proposed capacity market auctions, the proposals have also failed to gain the confidence of the companies, with Ian Marchant of SSE calling them a train wreck.
Cockenzie is one example of a hiatus in investment that either results from EMR concerns or for which EMR is the excuse. Either way, EMR is not delivering what we need, and we will not resolve those issues by allowing it to become a polarised battleground over competing low-carbon technologies.
The Scottish Government’s position on nuclear is clear. I think that it is wrong because Torness in my constituency generates reliable base-load electricity—15 to 20 per cent of Scotland’s electricity, day by day—without producing carbon emissions and provides 500 highly skilled and well-paid jobs for my constituents, but there is no doubt that the Scottish Government is entitled to take the view that it does on nuclear. However, it should not—as the minister did not—use EMR to try to impose that view on the rest of the UK, lest it undermine its entirely legitimate arguments that EMR must deliver a market that supports renewables.
At the same time, the UK Government must not allow any hint of dogmatic and irrational anti-renewables voices—especially anti-wind voices, including that of the new UK Minister of State for Energy in a previous life—to skew EMR against renewables and unfairly in favour of nuclear. In the long term, renewables technologies hold out the prospect of electricity generation without dependence on finite fuel supplies. Balance must be the aim.
The Scottish Government should be supported in arguing for transmission charging, contracts for difference and a capacity market that all incentivise renewable generation throughout Scotland, including our islands. However, I add my voice to Mary Scanlon’s and argue that, in its discussions, the Scottish Government should also raise the profile of energy storage.
Scotland has a long tradition in energy storage, not least at the Cruachan pump storage station. However, there are only 2,800MW of pump storage in the whole UK and such installations are in a poor position in the current regime because they pay charges as generator and customer.
In its briefing yesterday—to which Mary Scanlon referred—the Institution of Mechanical Engineers was extremely clear that EMR as it stands will not incentivise new storage or new storage technologies, although many more thousands of megawatts will be required.
- Fergus Ewing:
I clarify for Iain Gray that the Scottish Government believes that it is important that the capacity mechanism under EMR should support and incentivise storage.
- Iain Gray:
I think that the Scottish Government does believe that—indeed, there is a reference to it in the motion, which I welcome. My point was simply to try to raise the profile of storage in the debate: storage matters particularly for Scotland—as the minister understands—because it is part of the answer to genuine concerns about the intermittency of many renewable technologies.
Yesterday, we were shown a picture of a pilot cryogenic storage plant that is situated in Slough but which was engineered and manufactured in Inverness. There are real opportunities in storage. Indeed, we could say that the whole EMR process is fraught with opportunity. However, the minister is right that any loss of momentum is fraught with danger. Therefore, we should unite behind the motion and the amendment.
- Dennis Robertson (Aberdeenshire West) (SNP):
When I first got the brief on electricity market reform and realised that it was complex and technical, I asked myself, “Why am I speaking in that debate?” However, this is a very important debate, especially for the Aberdeenshire West constituency. I have said in the chamber and to the minister many a time that Aberdeenshire West, in conjunction with Aberdeen city, is the lead not only in oil and gas but in renewables, not only in Europe but probably in the world.
Many members have already spoken about the importance of EMR and getting it right. I have great faith in our minister going to Westminster as an equal and a partner in the dialogue to get it right for Scotland and to do what he does best: to talk up Scotland.
I associate myself with John Wilson’s eloquent comments and those of other members on fuel poverty. The consumer should be and needs to be at the heart of EMR, because it is the consumers who ultimately pay the price. We cannot add to fuel poverty in Scotland.
I want to change tack slightly. The minister gave the industry confidence in his statement on the renewables obligation. His statement will give the industry confidence to invest in Scotland and it will give confidence to our universities and colleges to bring forward our young people and give them the skills that will be needed for the renewable energy programme for Scotland’s future. I know that a great deal of work is currently being done in Robert Gordon University, the University of Aberdeen and the colleges. People are working together, looking at the renewables sector and looking ahead to try to ensure that we have the workforce for the future development of renewables in Scotland.
We need to take the opportunity to reform. The transmission charging is a scandal, and we have the opportunity to look at fairness and equity. It is in the gift of the EMR process to ensure that that happens. I urge the minister to do what he can to ensure that the transmission charging is equal and fair so that our renewables sector can lead the way in our islands.
Rhoda Grant eloquently said that it is our potential that will make this country great in the future. I echo her words. We have to move forward; we cannot look back. In my opinion and that of many members, we cannot allow nuclear power to be subsidised through the EMR programme. The EMR programme is for the future, and renewables are the future for Scotland.
I support the motion and the amendment.
- Patrick Harvie (Glasgow) (Green):
I understand the minister’s desire for a motion that would give rise to a consensual approach to renewables, and I am grateful to him for agreeing to some minor changes to his motion, particularly for removing explicit support for the principles of EMR and a reference to investment in thermal generation, and for including a reference to demand reduction. Those changes are just about enough for me to vote in favour of the motion.
I will also happily vote in favour of Rhoda Grant’s amendment. However, I would honestly have preferred a debate that allowed the full expression of the serious concerns that exist about the direction in which the UK Government is taking electricity market reform. My amendment, which was not selected for debate—members will have to turn to the back rather than the front of the Business Bulletin if they want to read it—set out some of those concerns, including about demand reduction and the favourable context for fossil fuel and nuclear generation that will be set. The amendment also set out the proposals for a decarbonisation target and a Scottish emissions performance standard.
It is pretty clear that the direction of EMR will set the agenda for a dash for gas and new nuclear power stations. In its briefing, SSE states that the contract for difference
“is a ‘one-size fits-all’ support mechanism which is suitable for nuclear, but not for renewables”
or carbon capture and storage.
“The latest design proposals actually increase, rather than reduce, risks and costs for renewables developers”.
WWF Scotland has expressed similar concerns. It notes that
“The Scottish Government ... has a commitment to ... a ‘largely decarbonised electricity ... sector by 2030’”,
and it calls for such a commitment for the whole UK to be included in legislation.
Stewart Stevenson referred to the letter from the UK Committee on Climate Change that was published today, which calls for a carbon intensity target for the power sector to be included in legislation. The committee states:
“Extensive use of unabated gas-fired capacity ... in 2030 and beyond would be incompatible with meeting legislated carbon budgets.”
It also criticises the
“apparently ambivalent position of the”
“Government about whether it is trying to build a low-carbon or a gas-based power system”.
We should take those concerns seriously.
We should look at the option of an emissions performance standard for Scotland, which WWF has suggested. The UK Government’s proposal is set at such a high level—at 450g of CO2 per kilowatt hour—that it will lock us into high-carbon energy generation and another generation of fossil fuel power stations for years to come. The House of Commons Energy and Climate Change Committee called that proposal “pointless” and said that it could endanger our effort to meet our climate change targets.
Under existing devolved powers, the Scottish Government has the power to develop a Scotland-specific EPS that is consistent with Scotland’s priorities and Scotland’s greater ambition, on which we kept congratulating ourselves when we debated the climate change legislation. If we are serious about that ambition, let us set a serious emissions performance standard.
As well as gas, there is the threat of new nuclear power stations—the organisations that I quoted have suggested that. Some might say, “If England wants to do that, that is its affair—Scotland already has the position that we won’t have new nuclear in Scotland.” However, the reality is that we will still be part of an integrated electricity market and that the cost of the immense subsidies for nuclear power will be borne by consumers in Scotland, too. From our position of opposition to new nuclear stations in Scotland, we must challenge the UK Government’s position.
I support the comments by Mary Scanlon and Iain Gray about storage. It is clear that a more renewable electricity supply will need more storage. Greater incentives should be provided for the creative investment that is needed.
I am sorry that the votes on the motion and the amendment tonight will not allow us the opportunity to record those criticisms. It is important that the Scottish Government continues to make the case for change in its discussions with the UK Government. It is also important to remember the context in which that is happening—that of the UK Government’s appointment of Owen Paterson and John Hayes to positions of importance to the subject.
I draw members’ attention to the comments by Roger Harrabin of the BBC. Since those two gentlemen were appointed, he has repeatedly asked the Department for Environment, Food and Rural Affairs and DECC whether those men accept the conclusions of the Intergovernmental Panel on Climate Change, on which UK and Scottish climate change policy is based. He has not had a reply and he says:
“DECC press office simply ignore the question, whilst a source at Defra told me it wasn’t a priority for Mr Paterson to answer”.
Both those men have spoken out strongly against wind power and have at least flirted with climate change denial. If they pursue the dash for gas and a new nuclear agenda at the expense of renewable energy in the UK or in Scotland, George Monbiot is right that their appointment represents
“a declaration of war on the environment”
by the Prime Minister. That is the context in which the Scottish Government will have to raise the issues with its counterparts down south.
- Murdo Fraser (Mid Scotland and Fife) (Con):
I commend Fergus Ewing for the consensual manner in which he approached the debate. Energy market reform is a complex and technical subject, in which I think few of us would profess great expertise. It was curious how few members were prepared to debate the relative merits of having different counterparties to contracts for difference—Iain Gray came closest to getting into the technicalities, as perhaps befits a former physics teacher.
I do not think that there are great differences between political parties in what we are trying to achieve, with the exception of some more contentious areas, such as new nuclear power, about which I will say more if time allows. We heard some good speeches. Stewart Stevenson, in his return to the back benches, made a well-considered contribution to the debate, and John Wilson made excellent points, which I agree with, about the need to put the consumer at the centre of the policy and address growing concern about fuel poverty by attempting to keep energy bills down as much as we can.
Conservatives had some concerns about the terms of the Labour amendment, which brings in the separate but related issues of transmission charging and project transmit. When we debated the issues just before the summer recess, the Scottish Conservatives made clear our concern about a move to a socialised system, which would spread the cost of transmission across all consumers and, according to figures from Ofgem, result in a substantial rise in bills for consumers in remote parts of Scotland, particularly in the north. We made it clear that that was not an approach that we could support. I am grateful to the minister for the clarity that he provided in his speech and to Rhoda Grant for clarifying that the amendment does not propose a socialised approach. On that basis, we are happy to support the Labour amendment.
As members said, the purpose of energy market reform is to remove our current system of subsidies through ROCs and feed-in tariffs and replace it with a new system, which will be based on contracts for difference. I think that a person would need to be something of an expert in economics and finance to be able to explain exactly how that might work in practice, so I will consider the principles behind the approach rather than the detail.
I think that all members agree that there is a need to decarbonise the electricity supply. DECC has stated its intention to improve security of supply, recognising the rising demand for electricity and a general upward trend in prices. So far, so good. I think that we all recognise that the cheapest form of electricity is that produced by burning fossil fuels. If costs were the only factor to be borne in mind, we would simply continue to do that. However, I do not think that any member thinks that that is sensible, partly because of the impact of carbon on the atmosphere and partly because of issues to do with security of supply.
That means that we must look at lower-carbon sources of electricity. It means that we can continue to burn fossil fuels, with the addition of carbon capture and storage—although, of course, that increases costs and reduces efficiency. It also means that we can go for nuclear power, which I have always supported as a low-carbon source of power, although I accept that other members take a different view. Although nuclear is more expensive than conventional generation, most experts consider it to be cheaper than renewables. John Wilson talked about the “prohibitive” cost of nuclear—I think that I quote him correctly—but he was at the Economy, Energy and Tourism Committee when we heard a briefing from Scottish Government officials, whom I would not expect to have a pro-nuclear bias, who told us that the lifetime costs of nuclear, including decommissioning, are comparable with the lifetime costs of developing onshore wind.
On the hierarchy of costs, the costs of onshore wind, which is the most mature renewable technology, are reducing, but they are still substantially more than the costs of conventional generation, which is why onshore wind continues to be subsidised. Indeed, we heard earlier in the minister’s statement that levels of subsidy, albeit marginally reduced, will continue. Even more expensive is offshore wind, which energy market reform is seeking to encourage.
It is clear that what is being proposed by DECC is only the start. There is a lot more discussion to be had, but I hope that we can agree on the general principles, as the minister’s motion appears to do.
I agree with the many members who talked about the need for greater certainty. It is clear that the investment community is scared off by uncertainty about future levels of support—I was interested in the number of SNP members who were prepared to make that point. They also completely missed the related point that there is another level of uncertainty. That, of course, is about the future of our energy market across the United Kingdom, and it is based on our constitutional future. If members had read the submission from SSE to the Economy, Energy and Tourism Committee precisely on that point, they would have seen that there is as much investor uncertainty about that point as there is about the future of energy market reform.
- Stewart Stevenson:
Is the member aware that decades have passed since the installation of a cable connecting France and England, which demonstrates that it is entirely practical to have different jurisdictions collaborating in matters of energy policy?
- Murdo Fraser:
I do not think that it is a question of collaboration. The question is that, if we are to develop renewables in large numbers and they require subsidy, and if we are to become a country of 5 million rather than 60 million consumers, we will need to consider carefully where that money will come from. If we could enter into forward contracts with the rest of the United Kingdom in advance of separation, that might work, but we need to see that in practice and there is no sign of that emerging. However, I know that the UK Government and DECC have been engaging constructively with the Scottish Government, and I hope that that continues.
An interesting point that nobody has mentioned about the proposed bill is the UK Government’s proposal that local authorities keep business rates paid by wind farm operators. That is clearly of great interest in many parts of Scotland, not least in Perth and Kinross in my own area, and I hope that the Scottish Government is prepared to look at that approach. I am sure that my colleagues on the Economy, Energy and Tourism Committee will be interested in it.
The bill deals with the need for tariff reform. It is vital to drive down bills, make it easier for consumers to switch companies and make lower tariffs more transparent, as Rhoda Grant fairly pointed out.
We need greater efficiency. On that—I do not say this often—I agree with Patrick Harvie. The cheapest form of energy is that which is not used at all, and we need to do much more on demand reduction, rather than leave ourselves having to produce ever more electricity at ever increasing costs.
There is a lot of detail to go through but, in spite of the differences, there is much common ground. I hope that the UK and Scottish Governments can work together to find solutions.
- Ken Macintosh (Eastwood) (Lab):
A favourite Woody Allen film of mine is “Zelig”, in which the eponymous hero pops up in improbable places alongside President Woodrow Wilson, Babe Ruth and even Hitler at the Nuremburg rallies. That character came to my mind over the summer when I took the opportunity to visit the nuclear power station at Hunterston for the first time—for anyone who has not been there, it is a beautiful place, as those from Ayrshire will know. Who should I find there but Fergus Ewing, the SNP Government’s Minister for Energy, Enterprise and Tourism?
We know that SNP ministers and often the grand panjandrum himself, the First Minister, are a ubiquitous presence at virtually any opening, even if it is of minor significance, but this is the same SNP that has remorselessly played on anti-nuclear sentiment for years. There are many SNP members—from their speeches today, I count Kevin Stewart, Gil Paterson, John Wilson and Dennis Robertson among them—for whom opposition to nuclear power is an article of faith, but there he was, not quite luring us in, sweeties and lollies in hand, the unembarrassable energy minister, heart swelling with pride as he welcomed us to a brand new nuclear-powered Scotland.
It has been a pleasure today to continue to make common ground with the minister and members across the chamber in—nuclear aside—a consensual debate on electricity market reform. As a country and a Parliament, we are rightly proud that we have taken a lead in setting ambitious climate change and carbon reduction targets. The principles underpinning the UK Government’s reform certainly point us in the right direction to meet those targets, but we have to will the means to make those changes happen. That is not necessarily going to be a straightforward process. As Scottish Renewables highlighted, it has
“concerns about the complexity of the proposals, the introduction of new risks to investors and the risk of timetables slipping.”
The bill has a number of weaknesses that have been highlighted this afternoon, too. In spite of its being called electricity market reform, the draft bill does little to reform the electricity market to make it work in the interests of the consumer, rather than the big six. That point was made by several members, including my colleague Iain Gray, and it was made forcefully by Mary Scanlon. Those six huge companies dominate not just in electricity supply but in the tariffs that are offered to consumers. As my colleague Rhoda Grant highlighted, we need a system that encourages new entrants, particularly at local community level.
Similarly, the draft bill contains few measures on demand reduction, which is essential not just in meeting climate change targets but in tackling fuel poverty, as Claudia Beamish said. There are a number of other concerns, all of which will need to be addressed by the UK Government.
Several members highlighted issues that require leadership and commitment from the Scottish Government, too. Perhaps the most prominent of those, which we have highlighted in our addendum to the motion, is ensuring that grid connection to our islands is “fair and equitable”. In response to their interventions, I reassure Mary Scanlon and Murdo Fraser that that does not amount to advocating the so-called socialised system of charging. From the minister’s remarks, it sounds as though we are all singing from the same hymn sheet on the issue. To take the Western Isles as an example, more than 600MW of new renewable energy generation is under active consideration or development in the Outer Hebrides. If we are to meet our carbon targets, help our island communities and ensure basic fairness, it is essential that the interconnector to transport that electricity to market goes ahead.
The review of transmission charges is yet to be finally signed off. Project transmit has offered some welcome improvement on the previous charging regime, but it appears that any further adjustments to its broad conclusions will be modest. I thought that Liam McArthur described well the distorting effect of an imbalanced transmission charging regime. If we want the projects in the Western Isles, Orkney and Shetland to go ahead, we need the Scottish Government to produce a specific renewables obligation certificate for island wind power.
One of the reasons for using ROCs to promote renewable energy generation is the benefit that they provide to what are still fragile local economies, not just on the islands but across Scotland. It is not simply the income from wind turbine towers that benefits villages; it is the fact that local people are in control and are participating actively in decisions that affect the sustainability of their communities. In many cases, such community-owned renewables can also have a direct impact on fuel poverty. The huge hikes in fuel prices of recent years have plunged more and more people into difficulties and made them unable to pay their heating and electricity bills. John Wilson made that point particularly effectively.
Although electricity market reform aims to create cleaner electricity and to improve security of supply—to ensure that the lights stay on—it remains relatively weak in addressing fuel poverty. There are incentives to improve the energy efficiency of our homes, but it is questionable whether the people in greatest need will be those who take greatest advantage of them. The Scottish Government needs to continue to look at how we identify and then help those low-income and fuel-poor households that are most at risk. That should include looking at projects that allow communities to generate their own electricity.
I began by referring to the minister’s new-found love for all things nuclear. He followed that up in his statement on the renewables obligation review by making a virtue of seeking consistency across the UK, so it is little wonder that it has been such a consensual debate. From the way in which he neatly sidestepped my colleague James Kelly’s question, I gather that he may not entirely share our view that there is undoubtedly a union dividend from a single UK energy market. However, it is clear that there is a commitment to working together across the parties and across the Parliament.
I would like to make one final point, which follows on from the minister’s statement. There is a need for greater clarity on, and a need to reassure communities across Scotland about, electricity generation from incineration or burning waste. It is not right that waste operators are trying to get round local planning controls and avoid accountability to local residents by applying directly to Scottish ministers for section 36 consent. Such projects are often speculative money-making exercises that have been disingenuously disguised and dressed up in environmentally friendly language. A stronger line from the Government that those projects are in line neither with its zero waste strategy nor with its renewable energy strategy would not entirely remove the threat from developers, but it would certainly give communities greater confidence that such applications are unlikely to succeed.
As he often does, Stewart Stevenson made a particularly powerful and thoughtful speech, down to his topical tennis metaphor. He talked about the need for long-term fiscal certainty and security if we are to secure long-term investment in renewables. We are indeed in this for the long term and, although there remain many complexities to resolve, I believe that if we can maintain this level of shared purpose, we can deliver a secure future for consumers, for our businesses and for our environment. I commend the amendment and the motion.
- Fergus Ewing:
I have thoroughly enjoyed this debate. We have heard a large number of very useful contributions across the chamber and I will try to reply to many of those in a moment.
In drafting the motion with others, I set out to try to provide the wording that would allow Parliament to unite, because we have more common ground on this subject than one might think. The debate has illustrated that point, and I am confident that all parties will unite at decision time. I am grateful to members in all parties for the work prior to the debate and their contributions to it.
I also wish to make an undertaking and a reflection. The undertaking is that I will ask my officials to study all the contributions, not just in the debate but in the question and answer session on the statement about renewables obligation contracts that preceded it. There were some points from members—such as those made by Claudia Beamish—that I do not think I answered with sufficient clarity earlier and also some contributions to the debate which merit some thought. After all, the purpose of debates in the Parliament is not just to fill the time or just to allow us to express our views; it is also to allow the Government to formulate better policy for the future. The debate will allow us to achieve that and those who have made positive contributions—the vast majority if not all contributions—will do that.
Patrick Harvie pointed out that demand reduction is not in the motion, but I think that we all subscribe to it, as does the UK Government. It is not directly relevant to EMR as such, but we are all entirely committed to demand reduction for the reasons that Murdo Fraser and Patrick Harvie gave.
- Mary Scanlon:
When the minister is asking his officials to respond to contributions in the debate, can I ask him also to ask them for a response to the paper on electricity storage from the Institution of Mechanical Engineers that was presented to the Parliament this week?
- Fergus Ewing:
You can and I will. The Scottish Government’s policy on electricity generation is that we should seek to deliver a number of objectives. Our contributions in the debate have illustrated that these are the objectives that we all share. First, there must be a secure source of electricity supply. It must include an element of variety in order to be secure. Secondly, electricity must be affordable for consumers. Thirdly, electricity generation must be largely decarbonised by 2030, for the reasons that Stewart Stevenson so eloquently set out. Finally, it must achieve the greatest possible economic benefits and competitive advantage for Scotland, including opportunities for community ownership and community benefits.
Many members set out very clearly the need for more measures to tackle fuel poverty. Mary Scanlon, Rhoda Grant and Claudia Beamish set out the arguments, as did Kevin Stewart and John Wilson. The case was well made. We need to take a variety of measures to tackle fuel poverty, involving the electricity companies, the Government and policy formulation.
I will give two examples of how the success in onshore wind power can help to tackle fuel poverty. Some amusement was had at my expense, I think, in Mr. Macintosh’s contribution—I certainly enjoyed it—regarding my very pleasant visit to Hunterston, where I was delighted to open the new centre for education so that young people will be allowed to see how all forms of electricity are generated. It is good for the purposes of education to have knowledge about all techniques, irrespective of who approves or disapproves. I enjoyed my day out in Hunterston.
The reason I mention that is that EDF is also behind renewables projects, including the Stornoway wind farm, to which consent was recently granted by moi. [Laughter.] It is, after all, a French company—c’est bon. [Laughter.] I had not actually intended to say that, but there we are—shucks, as they say.
According to reports that I have read, the community benefit from that wind farm project will be £2 million a year. Surely that is enough to make serious inroads into tackling fuel poverty in the Western Isles, where, as Dr Alasdair Allan has told me—and as Claudia Beamish argued this afternoon when she referred to rural areas that are off-gas grid—the situation is among the most serious in our country. If that money can be harnessed to tackle fuel poverty, that must be a good thing. Equally, I am told that the combined community benefit from the Shetland Viking project will be between £20 million and £30 million.
Of course, it is up to the local people and their representatives to decide how those windfalls are deployed, but surely such projects will have huge advantages and create golden opportunities to tackle fuel poverty in this country once and for all. I commend the speeches on that topic.
- Murdo Fraser:
I am most grateful to the minister for giving way. If the operators of that wind farm are going to pay £2 million per annum, is he able to tell us the profits that they will make in order to afford such a very generous sum?
- Fergus Ewing:
That is the sort of intervention that I would have expected from a proto-communist. Up to now, I thought that the Conservatives were in favour of companies making profits. I am afraid to say that I have not studied the EDF balance sheet, but I was pleased to see that its community benefit tariff is close to the £5,000 per megawatt yardstick provided by the Forestry Commission, SSE and RWE. Indeed, I think that we are all pleased about that—well, just about all of us.
With regard to storage, I will read Iain Gray’s extremely worthwhile speech and ask my officials, too, to read it. He is absolutely right and, as other members, including Mary Scanlon, to begin with, have mentioned, storage—hydro, in particular—is a perfect complement to wind power, which is intermittent in nature. I am delighted that, in my constituency, Highview Power Storage has installed a compressed liquid nitrogen energy storage system that, in a cross-border partnership, has been manufactured in Inverness and assembled in Slough.
In other disciplines, I am pleased to say that an exciting initiative involving hydrogen is taking place in Aberdeen. Our academics and universities, to which Dennis Robertson rightly paid tribute, and indeed our colleges lead the world in the advancement of technology in many renewable energy areas. As an example of the breadth of the work in Scotland on renewables, I will mention Professor Martin Tangney and his work on biofuels.
As we move to the close of the debate, I am conscious of the amount of claim and counter-claim over whether wind power is more expensive, so I will go over the facts with the chamber to ensure that we are in agreement. First of all, the renewables obligation cost to the average household is £15 a year, which we estimate will rise to £50 by 2017. On the other hand, between 2004 and 2010, volatile fuel prices from fossil fuels added almost £300 to bills. The canard that onshore wind is more expensive is precisely that.
Of course, this is not a pick-and-mix package. The success of onshore wind has led to the rationale behind Ofgem and National Grid’s investment of £7,000 million in improving and strengthening our grid. Without strengthening the grid, there can be no offshore wind, wave or tidal power. Onshore wind power has led to the rationale behind the grid improvements; in turn, that rationale has led to the potential to exploit our wave and tidal energy, which has given us the opportunity to be the world’s pioneer in marine energy. This is no pick-and-mix, and I think that that argument is gradually becoming understood. As President Barack Obama has said, the country that leads the development of new forms of energy will be the country that leads the world economy. That sounds like a good enough ambition for us all to share this evening.
- The Presiding Officer:
That concludes the debate on electricity market reform.