The next item of business is a statement by Fergus Ewing on the Scottish Government’s response to the planned closure of Longannet power station. I will give a few moments to allow members to change seats. The minister will take questions at the end of his statement and therefore there should be no interventions or interruptions.
15:02
This statement concerns the economic consequences of the planned closure of Longannet power station in 2016, and the response of the Scottish Government, our agencies and partners.
We need to acknowledge that Longannet remains open and will continue to operate over the coming winter. Highly skilled staff and contractors will stay in place to produce much-needed power over the winter months when electricity demand is highest. While spare capacity across the United Kingdom remains perilously low, Longannet plays an essential role in keeping the lights on across these islands.
Just over a fortnight ago, on 18 August, Scottish Power confirmed that Longannet would close on 31 March next year, so ending 46 years of power production at the Fife station. Facing high transmission charges and rising costs of carbon, Scottish Power has concluded that electricity production at Longannet is no longer commercially viable. For the same reasons, the company has also decided not to progress development of the planned 1,000MW gas-fired generating station at Cockenzie in East Lothian, which was consented in 2011.
Those announcements are deeply regrettable and they reflect very badly on a system of transmission charges—introduced to Scotland in 2005 by a UK Labour Government—that makes it increasingly difficult to operate existing thermal plant in Scotland or to invest in cleaner replacements. The outcome of UK energy policy and regulation is totally irrational when new, cleaner thermal capacity is the very thing that is needed to safeguard our energy security.
Despite the huge scale and range of Scotland’s energy resources, energy policy remains largely a reserved matter, and the Scotland Bill will not radically shift the status quo. We must suffer the effects of policies devised in Westminster that undermine our own energy objectives, which are to maintain a balanced, low-carbon energy mix based on renewables, flexible thermal generation—fitted with carbon capture and storage—and greater energy storage. Although we have raised our concerns repeatedly with the Prime Minister, absolutely nothing has changed.
Before I outline our response to the planned closure, I want to underline the huge significance of Longannet. It is the largest power station in Scotland and the second largest in the UK, with capacity to power 2 million homes. The station directly employs 236 people in highly skilled work and sustains a large and valuable supply chain with hundreds of associated jobs in the coal, transport and service sectors. We know, for example, that around half of the coal that was produced in Scotland in 2014 was destined for Longannet.
It is against that background that I turn to the response of the Scottish Government, our agencies and our partners. As concerns over the station’s future increased earlier in the year, both the Deputy First Minister and I visited Longannet to meet company and staff representatives. I also met the leader and depute leader of Fife Council in March and, without pre-empting Scottish Power’s decision, we agreed to develop a joint response in the event of closure.
On 25 March, I made a parliamentary statement following the news that Longannet had lost out on National Grid’s voltage control contract. Since then, I have had two formal meetings with Scottish Power, Fife Council and workforce representatives to assess the situation and consider ways to secure the best possible outcomes for all those who are affected. Those meetings in May and June set the foundation to build a collegiate and co-ordinated response.
Our initiative for responding to redundancy situations—partnership action for continuing employment—has offered immediate support for directly affected employees. PACE will continue to work closely with the company and workforce representatives to provide a tailored package of support. That extends to any employees who are indirectly affected, for example in supply chain companies. By providing skills development and employability support, PACE aims to minimise the time for which people affected by redundancy are out of work. Our statistics show that 72 per cent—nearly three quarters—of those who have received PACE support have obtained employment within six months.
We have also established a new task force to develop a joint, multi-agency action plan to mitigate the impacts of the closure locally and across the supply chain. The Longannet task force, which I co-chair with David Ross, the leader of Fife Council, comprises elected parliamentary representatives, local authorities, trade unions, businesses and Government agencies including Scottish Enterprise and Skills Development Scotland.
At our first meeting, on 24 August, we agreed our focus and committed to produce an economic recovery plan. That will support workers to find new jobs, mitigate the effects on the supply chain, produce a master plan for the long-term future of the Longannet site and consider how best to create sustainable employment in the local area.
On Monday this week, 31 August, I hosted a supply chain event in Dunfermline to hear directly from a cross-section of businesses about the closure’s expected impact on them and their staff. I listened to businesses from across Scotland that face losing substantial income, including small, family-run businesses that are concerned for their very survival. The event outlined the range of support that is available from the public sector for skills, training and business development. Our agencies are committed to working closely with affected businesses to help them through this worrying time and to support people who could be facing redundancy. That is a process of on-going engagement with the business community, and our economic recovery plan will be informed by the needs of business.
The coal sector, which is already challenged by low coal prices and reducing demand, will find the effects of Longannet’s closure especially hard. The Scottish coal industry has put forward proposals to the UK Government for restoration coal. That initiative would introduce a carbon price support exemption for legacy opencast coal sites to incentivise the restoration of those sites and, in turn, bring the land back into use. That has potential to mitigate the Longannet closure’s job impacts on the coal sector and help to sustain activity.
The UK Government committed to discussing restoration options for opencast coal sites with the Scottish coal task force in the chancellor’s 2015 budget statement. Following that, I have written to the UK Government on three occasions to accelerate discussions. As a result of that, UK Government officials agreed to meet key industry players and Scottish coal task force officials last Friday, 28 August. The exemption proposal was discussed at length during that meeting, and the Scottish coal task force now awaits the UK Government’s formal response.
In conclusion, I have outlined a series of initial actions that the Scottish Government, our agencies and partners are taking to mitigate the effects of Longannet’s closure. Well before Scottish Power’s closure announcement, discussions had begun behind the scenes. We fought hard to achieve a different outcome for Longannet while the UK Government refused to lift a finger. We engaged the Prime Minister and National Grid principally on the ground of Longannet’s unique contribution to Scotland’s energy security and resilience.
Longannet’s power is needed for the coming winter, and the station could, under the right circumstances, have operated successfully until at least the turn of the decade. Now that the closure has been announced, I assure members that the Scottish Government will continue to do all that we can to secure the best outcome possible from this disappointing situation. That is our duty to the employees affected, their families, the main supply chain companies that are impacted and the immediate and surrounding communities of the Longannet plant.
The minister will now take questions on the issues raised in his statement. I intend to allow around 20 minutes for questions, after which we will move to the next item of business.
I thank the minister for the advance sight of his statement.
The announcement was a shock and a body blow to all the workers in Longannet, local communities in Fife and businesses across Fife and central Scotland. Did the minister ask Scottish Power, which is a global energy player, for a delay in the closure programme to enable all possible options to be explored? My understanding is that the transmission charges gap has been closing. We would certainly have supported that being looked at.
Given that 50 per cent of Scottish coal goes to Longannet, it is not just the jobs at Longannet that are under threat; jobs in the supply and freight chains right across Scotland are under threat. In light of the widespread concerns about restoration to which the minister referred, what is the current position on the sites that were already challenging, and how will the closure of Longannet impact on delivering the restoration projects that we urgently need across the country?
The announcement cuts across efforts to achieve a just transition to meet our energy needs. It is clear that colleagues who represent local communities will have detailed questions about the investment that the Scottish Government will put into a future for all those affected but, given that this week’s programme for government highlighted the importance of thermal generation to Scotland’s electricity mix and the importance of carbon capture and storage for our energy mix going forward, will the minister review the Scottish Government’s energy strategy to ensure that we have a bridge to the future and that the jobs and experience of those affected by the early closure of Longannet across the whole supply chain are not lost?
I will endeavour to answer as many of the member’s questions as I can.
Of course we urged Scottish Power to do everything possible to keep the station open. We did that over a long period and in a number of meetings, including ones at Longannet.
I have to point out to the member that it was, in fact, the Labour Government in 2005 that introduced the system of charging. It is a matter of fact that is not really disputed that that system of charging means that, as the company explained, the additional amount that it had to pay in transmission charges for access to the grid, compared with what it would have paid were it located in Kent, for example, was of the order of £40 million a year. In other words, the Scottish surcharge was £40 million. That followed from the system that the Labour Government introduced.
The member said that she believes that the gap was narrowing. I think that I can attribute that particular line of argument to a certain Brian Wilson, who wrote a piece in The Scotsman that I found somewhat on the splenetic side for my liking. Sadly for him, the facts were clearly set out in a response to that article by Keith Anderson, who, as the chief executive of Scottish Power, is in a better position to set out the facts of the matter. Far from the gap narrowing, Mr Anderson says in a letter that was carried by The Scotsman that the gap would not be £40 million but £50 million in 2017, so Mr Wilson’s argument was wrong.
Sadly the Scottish surcharge means that, as many expert commentators from whom I can readily quote have said, it is not commercially viable to set up a new thermal plant in Scotland at the moment because of the Westminster penalty, nor to continue operating existing Scottish thermal plant. I will be happy to explain that to other members during the course of this afternoon.
I thank the minister for the advance copy of his statement and for the invitation to join the task force, the establishment of which we welcome.
The reasons for the early closure of Longannet have been much debated in recent weeks. The minister focused on transmission charging while glossing over a range of other matters, not least of which is this Government’s obsession with wind power. He does not mention that the SNP’s preferred alternative to the current transmission charging regime would, according to the Office of Gas and Electricity Markets, add a staggering £8 billion to consumer bills, hitting hardest in Scotland where fuel poverty is already too high.
As a representative for Fife, I want the priority now to be about what can be done to help the workforce and retain skills. There are opportunities to create jobs in the area from developing underground coal gasification, but the licence holder, Cluff Natural Resources, announced two weeks ago that it is putting its development plans on hold, citing political uncertainty. Should the minister not be trying to attract investors to Fife rather than scaring them away?
The problem with attracting investment in new power stations was clearly set out by a commentator on BBC Radio Scotland’s “Newsdrive” on 17 February. Referring to the current transmission charging system, he said:
“it does discriminate against Longannet, and that’s a matter of concern for me.”
That commentator, of course, was one Murdo Fraser MSP. He was joined by Alex Johnstone, who is not here today, but who said:
“I support the Scottish Government’s argument that a more favourable charging regime would be welcome, and I hope that that will come forward.”—[Official Report, 25 February 2015; c 44.]
Well, it has not. Finally, and just to complete the trio, Mr Brian Wilson said:
“The Ofgem decision on locational charging is just one part of the jigsaw, but it sends a clear signal. Their view is that generation should take place close to markets, preferably south of The Wash”.
That is not an argument that Mr Wilson has rehearsed recently.
Mr Fraser referred to £8 billion. I must correct him, because the witness who gave evidence to the Economy, Energy and Tourism Committee referred not to £8 billion but to £7 billion, but what is £1 billion between such commentators? The difficulty with the argument is that it is entirely wrong. Experts have subsequently confirmed that, rather than the £7 billion referring to extra costs for the Scottish consumer, they were largely based on wholesale costs attributable to the whole of the United Kingdom. That figure is therefore completely useless.
The stark fact is that Scotland generates 13 per cent of the electricity but pays 42 per cent of the transmission charges. Imagine if income tax in the UK was set at different rates: 13 per cent in England and 42 per cent in Scotland. That is an exact parallel to the additional tariff that is facing the company. If that were the case, Mr Fraser and his colleagues would be the first to condemn it.
Is it not the case that, if we could move Longannet to central London, instead of paying a £40 million penalty in transmission charges, it would receive a subsidy of £11 million? After 10 years of campaigning against charges that Brian Wilson as the energy minister for a Labour Government introduced, followed by the Conservative and Liberal Administration and now by a Conservative Government, we have received a slight modification of those charges, but nothing like what is required to eliminate the clear discrimination against Scottish electricity generation. If France, Germany, Belgium and the Netherlands can pursue electricity policies without such discrimination, why can we not unleash Scotland’s natural resources to help us to produce the most competitive electricity in these islands? Instead of parroting Ofgem’s nonsense, is it not time that this Parliament had control of that organisation?
It is a new pleasure to be able to entirely agree with the former First Minister from the front benches.
To be serious, if anyone is entitled to advance these arguments, it is Alex Salmond, because he has campaigned for a fair deal for Scotland on this issue not only over the past year but since the charges were introduced by the Labour Government. He is entirely right that we have a system of transmission charge apartheid in the UK, where Scotland is on the receiving end of extra charges. Although Murdo Fraser is grinning, smirking and laughing now, on the radio he admitted, along with his colleague Alex Johnstone, that that is exactly the problem.
I will quote independent experts who are outwith the political terrain. Professor Stuart Haszeldine of the University of Edinburgh said:
“At the moment, the transmission charging regime militates against the rebuilding of thermal power plant in Scotland.”—[Official Report, Economy, Energy and Tourism Committee, 27 May 2015; c 44.]
That is very simple. It is not complicated.
Mr Fraser might remember that quote, because it comes from evidence that was given to him in the Economy, Energy and Tourism Committee. Perhaps he has forgotten. I remind him that, in that same meeting, Professor Karen Turner said:
“The main obstacle is the network pricing, whereby generators are charged based on their distance from the population centres that they serve. There could be an argument that, based on that policy, no power stations will be built above the Watford gap.”—[Official Report, Economy, Energy and Tourism Committee, 27 May 2015; c 5.]
I thank the minister for advance sight of his statement.
As the former MP for Longannet, I worked long and hard to try to get new investment into the plant, in order to extend its life and make it greener. I am, therefore, disappointed by the decision to close the plant, and by the decision on carbon capture and storage, which effectively ended its life.
I am sure that the minister will agree with me that the UK Government’s onshore wind policy is damaging. Has he considered the paper called “Powering Up” that was published last week by the Policy Exchange, which sets out a considerable opportunity for onshore wind in Scotland? Considering that organisation’s association with the Conservative Party, I hope that the minister might consider that area of policy, because I think that we have to put inordinate pressure on the UK Government in order to get it to change its views.
We are putting inordinate pressure on the UK Government to change its views and we will continue to do so. I look forward to meeting Amber Rudd on 21 September. I have not seen the particular article to which Mr Rennie refers, but I believe that it is correct to have high ambitions for renewable energy in Scotland, not least because we are the best place in the UK and, arguably, in Europe, to generate electricity from the power of the elements. That is the case for Scotland being the green powerhouse of the UK. That is the role that we have been playing—we have been exporting electricity to England 98 per cent of the time between the years 2012 and 2015. That is because of the power of the wind. Of course, last year, 49.8 per cent of our electricity came from renewable sources.
We believe that, in the light of changed circumstances and the abrupt withdrawal of support for onshore wind by the UK Government, we have to review matters to reflect the changing facts. It is a matter of total fiscal perversity to say that the UK Government should pull the rug from the least expensive method of generating renewable electricity, given that the contract for difference subsidy is £80 for onshore wind, which is cheaper than the £114 for offshore wind. That means, according to my maths, that the cost will be 34 over 80 more than it should be—or, to put it more clearly, as Keith Anderson did, consumers will pay £2,000 million to £3,000 million extra on their electricity bills because of the muddle-headed, perverse and irrational policies that are pursued by Mr Fraser’s London bosses.
Nine members still wish to ask a question, so I ask that questions and answers be brief.
As the constituency member for Longannet, I can say that the closure announcement is a devastating blow for the communities that I represent and for the workers and their families.
I, too, was pleased to be asked to be a member of the task force. However, given that the Scottish Government has long anticipated the closure of Longannet by 2020, regardless of transmission charging—for example, that outcome is included in the Scottish Government’s climate action plan and in its report on proposals and policies—why has there been no clear strategy to secure inward investment to Kincardine and Fife in order to manage the inevitable transition for the communities and workers?
We are now looking at 1,000 job losses in Fife and across central Scotland as a result of the closure, which will sit beside the job losses at Tullis Russell and Havelock Europa. Given the significant investment that was made available when Hall’s of Broxburn closed, what money will the Scottish Government make available to the Longannet task force for regeneration activities?
I was pleased that we pursued a bipartisan approach in the task force. That was right. Members will appreciate that we always seek to conduct such meetings—as we did in the case of the Longannet task force, which met on 21 August—in a way that eschews partisan politics and gets on with the job in hand. I welcome the fact that both Cara Hilton and Douglas Chapman MP attended the meeting. The Conservatives sent their apologies, so we hope to see them at some future date.
It is entirely wrong to suggest that there has been no strategy. In general terms, Scottish Enterprise’s inward investment strategy is being implemented all the time, and the member will be aware that, according to an independent EY report, Scotland is more successful at attracting inward investment than any other part of the UK except London. I have played a modest part in that by, for example, meeting the chief executives of companies such as FMC Technologies and Oceaneering, which are both based in Fife, while visiting Houston on several occasions over the years. I am pleased that, in Scottish Enterprise, Highlands and Islands Enterprise and Scottish Development International, we have a team that is working around the clock on these issues. It is entirely unfair to them to suggest that they have not been working away behind the scenes, as they continue to do. Nevertheless, we are acutely aware of the impact on businesses and we are redoubling our efforts to ensure that every potential opportunity to provide alternative business and employment is pursued.
Will the minister outline what recent steps the UK Government has taken to work with the Scottish Government to create an environment that incentivises the huge potential of clean thermal technologies such as carbon capture and storage?
I am working with the UK Government with particular regard to progressing the Summit Power captain clean energy scheme. Both the Scottish and UK Governments have made financial contributions to that scheme, which is a 500MW scheme that would generate clean energy from coal with precombustion CCS. I hope that it will receive the support of everybody, including the Greens, because that is the only effective way to tackle climate change. The scheme would also deliver enormous economic benefits. We are working on that scheme and I will discuss it with Amber Rudd on 21 September. I am grateful to have the opportunity to make that point today.
The closure of Longannet is worrying for the Fife economy. As the minister knows, it comes on the back of other recent closures and redundancies. His statement referred to discussions with the UK Government on the carbon price support mechanism proposal. If those discussions are not successful, will the Scottish Government consider supporting and funding a similar measure for the Scottish coal industry? Will the minister say more about the plans for the long-term future of the Longannet site? Who is responsible for the future restoration of that site?
We worked hard with the opencast task force, which has met 13 times, to persuade the UK Government to work with us to produce a scheme based on the coal industry restoration plan. That would involve an exemption from the carbon price support mechanism. Those matters are entirely reserved and within the UK Government’s gift. They enjoy the in-principle support of David Mundell, the Secretary of State for Scotland, who has a constituency interest and has been supportive of the proposal. I hope that he will continue to be supportive and use all the influence that he can command as the secretary of state to persuade the UK Treasury to say yes, rather than no. We will take the matter forward optimistically, and as a matter of urgency.
The operator—Peel Ports Group—of Hunterston coal terminal, which is in my constituency, has announced that a consultation will be held with the site’s 95 staff members following the decision to close Longannet, in expectation of significant redundancies. Will the Scottish Government and its agencies work with Peel Ports Group to explore alternative uses for the terminal, which is suitable for the import and export of a wide range of bulk solids and liquid products as well as offshore decommissioning? While he is exploring all the available options to minimise the number of redundancies, will he ensure that partnership action for continuing employment is available to assist any Hunterston employee who is threatened with redundancy?
Yes, we will. We have, of course, offered PACE support to Peel Ports Group in respect of the impact that the closure next year of Longannet power station is expected to have on it. I can also say that its representative attended the task force meeting and the round-table supply-chain meeting, so we are already working closely with Peel Ports. During the course of that round-table event, which I chaired on Monday this week, I referred to Mr Gibson’s sterling efforts in campaigning on the issue. We are meeting and engaging closely with the company to see what can conceivably be done to assist it in addressing the very serious impacts of the Longannet closure, which will be faced by many businesses in Scotland. This is not just about one power station, hugely significant thought it is; it is about hundreds of companies that are impacted by the results of a decision that could have been avoided if the UK Government had been prepared to lift a finger.
Looking to the future, will the Scottish Government prevent the same transitional issues from arising again with thermal plant closures and other changes by ensuring that there is a robust strategy to manage, with the unions, the inevitable shift to a low carbon economy through a just transition for workers and communities across Scotland, including those that are impacted by knock-on and supply-chain effects such as at Clydeport?
I have already outlined the problem of higher charges for Scotland than England for exactly the same power stations, which means that we can devise any strategy that we want, but the strategy in itself will not alter the basic realities of the arithmetic that means that no company will invest in a part of a country where the charges are three times higher than those in another part of the country. I have, sadly, to repeat that it was a Labour Government that introduced that discriminatory system in 2005. Our strategy—as the former First Minister has advocated for about a decade—is to have for Scotland a fair system that would allow us to manage the transition to a low carbon energy policy.
It is not just Scotland but the whole world that is finally coming to recognise that we cannot keep burning coal to produce our electricity. As the decision this week on early closure of a coal-fired power station in Yorkshire demonstrates, it is not just a Scottish issue. Are we not facing a situation in which long-term planning for the transition is what is lacking? Is it not clear that the requirement for an immediate decision to set up a PACE working group only when plants and businesses close and redundancies are announced is inadequate? We need a much longer-term planning arrangement so that we invest the profits of outgoing industries in the development of the new.
First, it would be a bit strange if we were to set up PACE activity before people faced redundancy. That would be absurd because the task force exists to help people who are made redundant—that is the point of PACE. Secondly, to take Patrick Harvie’s major point, of course we have a strategy: it is set out in our electricity generation policy statement. If he has not read it, I can easily provide him with a copy of it. However, I suspect that he is aware of it.
A major part of the EGPS, which was introduced just a couple of years ago, is that we need to have continuing back up on baseload. The EGPS recommended a continuing requirement of about 2.5GW of thermal generating capacity, progressively fitted with carbon capture and storage. Therefore, we do have a strategy—carbon capture and storage, clean energy from fossil fuel and removing carbon emissions—that is supported by the International Energy Agency and green groups in the USA, but which is apparently, although it is a sine qua non of achieving climate change targets, not supported by the party that advocates that case most fervently on most other occasions. I think that, not for the first time, Mr Harvie and I will have to agree to disagree.
There will clearly be knock-on effects from the closure of Longannet for supply-chain companies. For example, more than 30 train drivers transport coal into Longannet, and there are also shunter drivers, signalmen and fitters, many of whom live in my constituency. I have been approached by train drivers at Longannet who would wish to retrain to allow them to transfer from freight to passenger transport. Will PACE assist with retraining of the drivers, if requested?
I am grateful for a sensible question. We confirm that PACE has been in contact with D B Schenker Rail UK to offer support. I was very pleased that D B Schenker attended the round-table meeting and I was grateful that the Associated Society of Locomotive Engineers and Firemen and other unions made the exact point that Angus MacDonald has rightly made on behalf of his constituents.
We are absolutely determined to make sure that all practical steps to tackle the immediate and direct consequences of next year’s Longannet closure are taken. Therefore, I am happy to undertake to continue to work closely with the company and its workforce representatives, as well as with Angus MacDonald, who has robustly pursued the matter.
That ends the minister’s statement. I pass on my sincere apologies to the two members whom I could not call, but I have let the item run on for five minutes longer than was scheduled.
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