The next item of business is a statement by Fergus Ewing on Scotland’s energy future: achieving security of supply and a balanced energy mix. The minister will take questions at the end of his statement, so there should be no interventions or interruptions.
Before I call the minister, I say to members that we are extremely tight for time all afternoon.
14:40
I would like to update the chamber on recent developments relating to Longannet and their implications for the future of Scotland’s electricity system.
On Monday, National Grid announced its decision to award a contract for additional voltage support services in 2016-17 to SSE’s Peterhead power station. I welcome the support for Peterhead. I understand that SSE is now progressing investment that will allow the station to operate more efficiently and flexibly. Peterhead is key to efforts to prove the viability of carbon capture and storage, which is a technology that has the potential to unlock future low-carbon thermal generation in Scotland.
For Longannet, however, National Grid’s decision is negative. Scottish Power has stated that “in all likelihood” it will be forced to close Longannet prematurely in 2016. The consequences of that would be profound for direct and indirect employment, for Scottish coal production, for hopes of restoring former opencast sites and, ultimately, for the balance and resilience of Scotland’s electricity supply.
Let me be clear. Although the decision is one for the company to make, we in the Scottish Government are determined to continue to explore any options that may avert the premature closure of Longannet. We believe that the decision that has been taken by National Grid and endorsed by the outgoing United Kingdom Government is flawed and fails to take account of serious flaws in the UK electricity supply system.
My foremost thoughts are for the 270 direct employees at Longannet and those affected in the related supply chain. This is a deeply worrying time for all those whose livelihoods depend most heavily on Longannet. I met the leader and deputy leader of Fife Council on 4 March, and I spoke again with Councillor David Ross earlier this week. We have agreed to work on a joint response. We will co-chair a meeting to co-ordinate our efforts and will invite input from Scottish Power, workforce representatives and other key stakeholders.
The Scottish Government-led partnership action for continuing employment—PACE—has contacted Scottish Power to outline the support that is on offer to affected employees. In addition, I will meet representatives of the Scottish Trades Union Congress and the Longannet unions on Thursday. The Government and all our partners will strain every sinew to secure the best possible outcomes for all those affected and to mitigate the local and national economic impact if closure cannot be averted.
The expected closure of Longannet will be felt throughout the supply chain, particularly in the coal sector. The Scottish coal industry has put forward proposals to the UK Government for restoration coal, which would introduce a carbon price support exemption for opencast coal sites. As well as addressing the environmental liabilities that are associated with unrestored opencast, restoration coal has the potential to reduce Longannet’s running costs. The UK and Scottish Governments are committed to further joint work to implement that proposal, and I have written to the Exchequer Secretary to the Treasury, Priti Patel, to urge swift action.
I turn to the consequences of National Grid’s decision for the balance and resilience of Scotland’s energy supply. A balanced mix of clean thermal generation progressively fitted with CCS operating alongside renewables is and always has been this Government’s objective. Scotland’s comparative advantage in the generation of renewable electricity is huge—it has 90 per cent of the UK’s hydro capacity, 25 per cent of the European Union’s offshore wind and tidal power potential and 10 per cent of its wave power potential. Renewables now supply almost half of Scotland’s electricity consumption. To ignore that massive resource and squander the economic opportunity of a lifetime would be utterly reckless.
Some members believe that the development of renewables has harmed the prospects of thermal stations. Those arguments are false. They might have carried some credibility if we were in a situation of healthy oversupply, but spare capacity in the Great Britain system will fall to as low as 2 per cent by next winter. The fact that we are even debating Longannet’s future at exactly the point when the UK authorities have allowed energy security to dwindle so severely is a national scandal.
The Scottish Government has pushed National Grid to explain in detail the consequences of Longannet’s closure for Scotland’s energy security and black-start planning. We have still to receive the full details despite two letters from the First Minister to the Prime Minister.
I welcome National Grid’s recent commitment to publish a dedicated capacity assessment for Scotland, but surely we should have had that assessment many years ago.
We must also reflect on how we got to this point. The UK authorities have created an environment in which it is increasingly difficult to operate thermal plant in Scotland. Scotland exported 28 per cent of the power that we generated in 2013 and we want to continue to deliver large amounts of electricity across these islands, but our ability to do so is undermined by a UK framework that penalises Scottish generators and discourages investment.
The location-based transmission charging methodology that was introduced to Scotland in 2005 under a Labour UK Government is the single biggest and most pressing issue. There are, of course, other factors that affect the profitability of all coal-fired generation across Britain, but no other factor uniquely disadvantages Longannet. With 12 per cent of GB electricity generation, Scottish generators pay 35 per cent of the charges. Longannet alone pays over £40 million annually to connect to the grid, whereas similar stations in England and Wales pay much less or may even be paid to connect.
We are told that locational grid charging is designed to discourage the siting of energy generation away from major population centres, but it penalises Longannet, which is, of course, close to the city of Edinburgh and all of central Scotland. Longannet is charged £17.15 per kilowatt whereas generators in Cornwall are paid £5.80 per kilowatt. In Somerset, where Hinkley C will connect, generators are paid £3.94 per kilowatt.
We are coming to the nub of the problem. Scotland has an established policy towards its electricity generation that recognises the need to maintain a balanced mix of generation, but our efforts are frustrated by the UK Government’s unwillingness to address Scottish issues properly. For example, the UK capacity market takes no account of location or the flexibility that is provided by pumped storage. We no longer have a say over the revenue support for renewables under the contracts for difference scheme, even for Scotland-based projects. Our ability to meet our renewables ambitions is severely restricted by the lack of clear and consistent commitments by the UK Government under the levy control framework, and the UK Government has refused to address industry concerns regarding degression rates under the hydro feed-in tariff.
We have made some progress on securing a commitment for support for renewables on the Scottish islands, but there is no firm resolution yet. Transmission charging is inhibiting the construction of the new high-efficiency gas station at Cockenzie, which I consented in 2011, and is also restricting the output at Peterhead.
It is clear that, on a wide range of issues, we remain at the mercy of decisions that are taken in Westminster over which the Scottish Parliament and the Scottish Government have no control. I am Scotland’s energy minister, but energy policy remains largely a reserved matter. That lack of power over key decisions on energy policy should concern all political parties in Scotland and should prompt some deeper reflection on the future of our energy system.
There will be opportunities to review the energy policy landscape post-May, but our immediate priority—ideally supported by a show of unity across the chamber—must be to avert the premature closure of Longannet.
The minister will now take questions on his statement. I intend to allow approximately 20 minutes for questions, after which we will move to the next item of business.
I thank the minister for the advance copy of his statement.
The minister says he would like cross-party support for his immediate priority, which is
“to avert the premature closure of Longannet.”
Unfortunately, he has not told us how he intends to achieve that end. If plan A was to lobby National Grid to award its voltage control contract for 2016-17 to Longannet rather than to Peterhead, it has clearly failed.
What is the minister’s plan B? Mr Ewing has talked about the impact of locational charging on the transmission system. He will, of course, know that Peterhead is further north than Longannet and that it also faces higher transmission charges. He and Iberdrola, which owns Scottish Power, have known for years about transmission charges. Iberdrola clearly decided some time ago not to make the investment required for Longannet to conform to European regulatory requirements to stay open beyond 2020. That is a commercial decision that Iberdrola is entitled to make, but the minister knew about that too.
Although the minister might want to make wider points in the chamber today, the Longannet workforce wants to hear whether there is a plan B, what it is and when he will share any such strategy with those who are most directly affected by the decision. The minister has had years to work with other stakeholders to prepare for when unabated coal generation at Longannet would no longer be possible, albeit that that time has now been brought forward. Can he tell us today what the plans are so that the Longannet workforce is not left in the dark any longer?
The Scottish Government is determined to explore every opportunity to avert the premature closure of Longannet. We are pleased that, to that end, we will work alongside the union Prospect, which has urged all politicians to support that aim and carry out that work. Garry Graham of Prospect said that Prospect will ask all Scottish politicians and politicians north and south of the border to work together to ensure that there is a future for Longannet.
I have worked with Councillor David Ross, the leader of Fife Council, on many matters. He has said that he still believes that Longannet has a long-term sustainable future. If the workforce representatives and the local authority believe that we should work together across the Parliament to achieve that objective, I hope that the Labour Party will join that campaign.
Mr Macdonald asked a reasonable question about what plan B is. It is to persuade National Grid, which is in charge of systems operations, as those who heard its recent evidence to the Economy, Energy and Tourism Committee well know, to use its extensive powers and enormous budget of something of the order of £1 billion to make the relatively modest commitment to Longannet that would be required to tackle the higher transmission costs with which it is burdened. I hope that we will gain the clear support of the Labour Party for that campaign.
Moreover, after May, with an incoming Administration at Westminster, we will have an opportunity to take a different approach to safeguarding the security of energy supply in these islands. A wide range of experts and commentators have informed our view and given the Scottish Government evidence that they believe that National Grid’s assumptions about security of supply in the UK are extremely optimistic. For example, its winter statement assumes that 90 per cent of some thermal generation stations will continue to operate. Many of those who operate stations do not share that optimism. Moreover, another imminent factor is that tech will be given up by many companies in the coming weeks. That means that it is correct for National Grid to do a reappraisal.
When I met Mike Calviou in London last Thursday, he confirmed that it is perfectly possible for other, alternative arrangements to be made. There is not a shadow of a doubt that it is perfectly possible for Longannet to continue to do an excellent job for Scotland for several years yet. What is in doubt is whether there is a clear cross-party consensus and the political will to set our common weight behind that task.
I thank the minister for advance sight of his statement. As a Fife representative, I am very aware of the impact that Longannet’s early closure would have on the local economy. Our first priority must be to support those whose jobs are at risk, and I welcome the measures that were set out today in the minister’s statement.
However, we know from Scottish Power that transmission charges were not the only issue forcing the closure of Longannet. As Lewis Macdonald said, the Peterhead station pays higher charges than Longannet, but there is no proposal to close it. Despite the minister’s assertions, it is beyond doubt that the overprovision of electricity supply in Scotland today has contributed to higher charges.
The current locational transmission system protects consumers, particularly in the north of Scotland, from higher bills, while consumers in London and the south-east pay more. What exactly is the Scottish Government proposing as an alternative and how much more will Scottish consumers pay as a result?
Does this whole episode not expose once again the utter failure of SNP energy policy? It is anti-fracking, it is anti-nuclear and it is obsessed with wind power, and as a result we face the loss of 55 per cent of our generating capacity in eight years. Energy-rich Scotland will be importing power from England in order to keep the lights on. In the face of all that evidence, surely it is time for a new approach to energy from this Government.
Mr Fraser said that he is based in Fife. Perhaps that is why he seems to be unaware that people who live further north in Scotland pay higher electricity bills, not lower ones, as he suggested. That will come—
You would put them up. Do your homework, Fergus.
Mr Fraser.
That will come as a surprise to those who, like us, are working hard to reduce the burden of extra costs on the north of Scotland. In case Mr Fraser does not know it, I add that that burden exists substantially because the distribution system cost is around £112 per head—far more than the cost of the transmission system. If he checks his facts on that, he might just arrive at better conclusions.
I am disappointed by Mr Fraser. On 17 February, his view, as quoted on BBC Radio Scotland’s “Newsdrive”, with regard to transmission charges and the £40 million penalty for operating in Scotland, was that the system
“does discriminate against Longannet, and that’s a matter of concern for me.”
Moreover, I am disappointed for a second reason. Mr Fraser is never slow to challenge the Scottish Government when he feels that any other costs that face business are higher north of the border than to the south. However, for some strange reason, when it comes to electricity generation—even when the facts clearly demonstrate that Longannet, despite the Conservatives’ shaking heads, faces transmission charges of £40 million whereas coal-fired generating stations down in England are paid to contribute to the grid—the Conservatives say nothing about it. Could that be because their bosses, who are based in London, do not allow them to stand up for Scotland? Is that it?
Perhaps Mr Fraser might want to reflect on public opinion in Scotland. Some 71 per cent support wind, while nearly 10 per cent support the Conservative Party.
We have very little time this afternoon, so I ask that the remaining questions are brief.
Successive UK Governments—the policy makers of the UK electricity market—and National Grid pose a twin threat to energy producers and consumers, including my constituents and others all over Scotland, with a double whammy of dearer grid access charges and dearer electricity for consumers the further north they live in the UK.
Is the minister aware of the continuing concerns in the European Union about discrimination against energy producers by National Grid, which has led to the potential early closure and huge job losses at Longannet, and which also holds back the development of renewables in our part of the United Kingdom?
Yes, I am. The member mentions Europe. When Commissioner Oettinger visited Scotland, he said that, with our success in renewables and with increasing interconnection such as that associated with NorthConnect and the Irish-Scottish links on energy study—ISLES—project, we would have the capacity to be a European reserve for electricity. It appears that we have support from Brussels. What we now need is a little bit of positive support from London.
I say to the minister that we are absolutely happy to work together and do everything in our power to sustain high-quality jobs, but we need to see a plan. However, despite a four-minute answer, I am no clearer about the minister’s proposal. Transmission charges are not the issue, and simply blaming that issue alone is no substitute for having a plan. I therefore ask the minister again: what is his plan?
The issue has of course arisen because of the higher costs. Scottish Power has set that out extremely clearly. Incidentally—this should be a matter of record—Scottish Power has invested £348 million in its plant. There have been attacks on that company from the Labour Party. I think that those attacks are outrageous. It is a matter of record that the company has invested substantially to deal with tackling emissions and in support of its plant, and it continues so to do.
As I have already stated—perhaps Jackie Baillie was not ingesting what I said—when I met National Grid in London last week, it said that it is perfectly possible that other arrangements can be made. That was the view of Mike Calviou of National Grid—just as the contract was issued this week.
Moreover, if the margin of 2 per cent is as parlous as many experts who advise us believe it to be, National Grid will have to put in place other measures in order to protect security of supply. Sir John Armitt, who advises the Labour Party, said:
“We are very close to being in a crisis when it comes to energy.”
I have many more experts to quote, but it appears that the Labour Party does not agree even with its own experts who give it advice.
This is a bad decision. I welcome the minister’s comment about the cost-reduction proposal in relation to restoration coal. If the cost-reduction proposal is rejected, what might be the unemployment impact of the proposed closure of Longannet on its supply chain, particularly with regard to the production of the raw material of coal in Ayrshire, and how can we enhance job opportunities through an accelerated balanced mix of energy supply sources?
I am working with members of the Labour Party and the Conservative Party in order to pursue the opportunities that Chic Brodie rightly describes. The work that we have done on the opencast mining task force—which met most recently on 16 March—is designed to achieve that end. We want restoration coal and we want Longannet to continue to be a market for that coal. We believe that the proposal will allow restoration of the mines in Scotland, which is a terrific objective and one that we share.
To answer Mr Brodie’s question, what we need is full support from Labour and the Conservatives for our aim of averting the premature closure of Longannet, along with the support of the Liberal Democrats, from whom we are perhaps about to hear.
I thank the minister for an advance copy of his statement.
When I represented west Fife in the House of Commons, I repeatedly made the case for the plant to receive extra Government support for CCS and other low-emission measures, so the announcement of the closure of the plant was a sad day for me. However, once the finances for CCS failed to stack up, it was clear that it was not a matter of if but of when.
The priorities must now be to look after the workforce and give them certainty, but also to have constructive discussions with the UK Government and the energy network about the sustainable energy mix in Scotland.
One other issue has not been raised, so I will raise it now. Are there consequences for the Stirling-Alloa-Kincardine railway line, which was built to supply Longannet power station?
I am sure that Keith Brown will respond to the specific point about the railway line. Plainly, a lot of money has been invested in the railway line on the basis of Longannet’s requirements, although, of course, there are also passenger services to Alloa.
I hope that, following my statement and answers, we can all pledge to do what we can to avert Longannet’s premature closure. I thought that that was an objective around which we could unite. It would be extremely sad for Scotland and for the huge number of people who believe that Longannet has done, as it has, a great job for Scotland—a job that will continue to be necessary for several more years—if Longannet did not enjoy cross-party support, at least from the major parties.
We have less than five minutes in which to get through a number of speakers. I ask that members keep their questions brief.
The minister mentioned in his statement those who are affected in the related supply chain. What assessment has he made of the impact of Longannet’s closure on the coal supply chain and, particularly, of the impact on Hunterston terminal, the Clydeport facility that operates coal handling, which is located in my constituency?
The impact would be substantial. For example, the estimated yield of restoration coal would be 5 million tonnes in aggregate. That yield would serve to sustain the supply chain in the member’s constituency and other parts of Scotland.
There is work to be done to consider what the impacts of Longannet’s closure would be. We will work closely with the existing task forces and the council to that end. However, we would far prefer to avert the closure if we possibly can, and our efforts are directed towards that objective.
Longannet is in my constituency, so this week’s announcement has been a bitter blow for my constituents. I, too, want every option to be explored to keep Longannet open. Given that 270 jobs are directly at threat and that up to 1,000 more jobs are at risk throughout the supply chain and independent businesses in the local economy, will the minister back my call and that made by Councillor David Ross, the leader of Fife Council, for a task force to be set up immediately to develop an action plan to protect the local community, to build up its resilience, to promote regeneration and to ensure that Kincardine and west Fife are protected against the worst effects of the site’s potential early closure?
If I may say so, and with respect to the member, the best way to protect her constituents and others throughout the country is to prevent the premature closure of Longannet. Sadly, that objective does not appear to be getting explicit support from Labour, the Conservatives or the Liberal Democrats, and I do not think that we are in any doubt about what Patrick Harvie will say in a minute.
Of course, if it is necessary, we will appoint any force needed to tackle the consequences of closure. Indeed, I have agreed with Councillor Ross to co-chair a meeting bringing together all stakeholders. PACE is already in, and is consulting Scottish Power. However, were Longannet to close, there are still 12 months before that happens. Most task forces are appointed after a closure or redundancies. The task before us is to do everything that we possibly can to prevent that eventuality from occurring. Of course, we are working extremely closely with the council leadership and the executive officers in Fife. We will continue to explore with them everything possible that we can do in the interim.
I would be happy to see the Government pursue any work to explore alternative economic futures for the local area, which should have been the priority for years rather than kidding on people that coal has a long-term future in this country.
Will the minister acknowledge that, even once Longannet is gone, Scotland will be a net exporter of electricity due to the growth of renewables? Should that not be the focus of our energy policy? Should we not ensure that the economic priorities are for alternatives for the community?
We are a net exporter. Last year, we exported 28 per cent of our electricity generated in Scotland.
We are, and have been, pursing with Fife Council other opportunities for economic regeneration in Fife. Patrick Harvie’s premise that we have not been doing that is complete nonsense. For example, just a couple of weeks ago I was honoured to conduct the opening ceremony of the new biomass plant at Markinch. It opened after about a decade of work and £300 million-worth of investment that we contributed to, and it also sustains the future of Tullis Russell. A few weeks ago, I also visited RAF Leuchars and St Andrews as well as tourism businesses in Fife.
Of course we continue to explore all avenues of economic regeneration, including the energy field and the oil and gas field that Mr Harvie disapproves of. I have to say that, in making this statement, I am disappointed that there has been no explicit support for keeping Longannet open for the next several years, which is something that people outwith the chamber strongly believe should happen.
I understand that last month the First Minister wrote to the Prime Minister to ask for a review of electricity supply and security of supply. Have we had a reply yet?
Mr Don is correct. Following a meeting of the energy advisory board at which National Grid was present and was involved in discussions, the First Minister expressed severe concerns to the Prime Minister. However, he rejected those concerns, stating that he backed National Grid, and has therefore refused to intervene. Post May, however, the outgoing Government might be replaced by another one with a stronger Scottish voice in Westminster and an entirely different way of taking forward Scotland’s needs.
Will the minister confirm that the current moratorium on fracking, which excludes underground coal gasification, was in no way connected to a future plan to diversify Longannet and convert it to a UCG plant when the original closure date of 2020 was reached? Will he also confirm that neither he nor Scottish Government officials have had any discussions with Ineos or other parties about the use of Longannet as a potential UCG facility?
I can confirm that I have been in no discussions on those matters.
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