APPENDIX 7
Memorandum submitted to the Committee
by Energywatch
EXECUTIVE SUMMARY
Projections of Scotland's future energy needs
point to an increase in consumption and changing sources of generation.
We believe it is unlikely nuclear power stations will be replaced
with other nuclear plants. Renewable generation is likely to grow
substantially over the next 20 years. We do not believe Scotland
will actually experience a shortfall in electricity supplies as
a British-wide market is imminent which will be underpinned by
a regulatory framework ensuring security of supply. The changing
generation mix requires substantial changes to transmission and
distribution systems. Where these costs fall could potentially
impact on generation development and consumers currently experiencing
difficulties paying for their energy because of their personal
circumstances or location. The upgrading of existing and development
of new interconnectors with other European countries will further
reduce the possibility of any shortfall of electricity in Scotland.
When considering future energy needs a range
of factors must be considered. Addressing energy demand by energy
efficiency, technology innovation and education programmes will
facilitate better understanding of energy consumption and assist
environmental, social and economic goals. To facilitate the decision
making process energywatch recommends that sustainable development
principles and the eight consumer rights we assert are employed
when considering future generation options. Referring to these
principles will ensure that consumers can take confidence that
choices made will be in their and future consumers best interests;
deliver social progress for all whilst effectively and prudently
protecting the environment and maintaining high and stable levels
of economic growth. However this assumes an effective market which
is transparent and competitive. energywatch is campaigning to
improve the effectiveness of the market.
WHO WE
ARE
The Utilities Act 2000 placed on energywatch
a statutory duty to protect and promote the interests of existing
and future gas and electricity consumers in Scotland, England
and Wales. We also have a specific duty to "have regard"
to the interests of individuals:
who are disabled or chronically sick;
with low incomes and on benefits;
residing in rural areas.
The evidence submitted here will underpin our
position in relation to the third strand of this inquiry: "How
can the shortfall in energy output be met once nuclear power no
longer provides Scotland's energy needs?". The committee
may be interested to know that energywatch has also submitted
written evidence to the Trade and Industry Select Committee investigating
the wholesale gas market. Energywatch believes only an effective,
competitive market can deliver benefits for consumers, secure
supplies and a sustainable market.
THE CURRENT
SITUATION
There is an abundance of information available
in the public domain which attempts to project future energy demands,
likely generation mix and levels of import/export in Scotland.
This all points to a future where electricity consumption steadily
increases and a generation mix with renewable generation increasing
at a rate close, but slightly below, Scottish Executive aspirations;
gas fired plants replacing redundant plants and power from nuclear
plants reducing to nil by 2023.
Scotland currently exports about one sixth of
electricity generated to England and Northern Ireland[9]
and has spare generation capacity of approximately 70%well
above that of England and Wales. However, as with the rest of
Britain, nuclear power plants at the end of their operating life
and are not being replaced with other nuclear power plants.
The Energy White Paper[10]
made it clear that the Government has no plans to propose new
nuclear power stations. The paper also states: "Before any
decision to proceed with the building of new nuclear power stations,
there would be the fullest public consultation and the publication
of a White Paper setting out the Government's proposals. In common
with all generation options, the initiative for bringing forward
proposals to construct new nuclear plant lies with the market
and the generating companies."
THE FUTURE?
We believe it is highly unlikely that any new
nuclear power plants will be commissioned in time to replace any
of the remaining operational Scottish nuclear power plants. We
assume this as it is improbable that the market will propose to
build such a plant without public subsidy. On top of this the
economics are unfavourable when compared to new gas or coal power
stations.
We also conclude that large-scale renewable
generation will grow at a rate close to that envisaged by the
Scottish Executive. [11]This
assumption is based on the current and developing regulatory regime,
effective operation of the Renewables Obligation (throughout Britain);
the will to place Scotland "in the vanguard of a new sustainable
energy industry that could bring with it considerable economic
benefit"[12]
and the fact that Scotland has about one third of Europe's wind
power potential. Although planning issues have been recently addressed
to make it easier for renewable generation proposal to come to
fruition public opinion is not always in favour of construction
of sites in their vicinity.
CHALLENGING THE
ASSUMPTION OF
A SHORTFALL
The market in England and Wales has shown that
when generation plant needs replacing it can do so whilst maintaining
a healthy capacity margin. This is not a guarantee that the market
will always react in this manner but it does call into question
the assumption that there will actually be a real shortfall at
any given moment in time.
The Electricity Act (1989) obliges the Secretary
of State and Ofgem to be responsible for "the need to secure
that all reasonable demands for electricity are met".[13]
The Act also places duties on the Secretary of State and Ofgem
to "secure a diverse and viable long-term energy supply".
In order to understand what these needs are the Joint Energy Security
of Supply (JESS) [14]working
group was established in 2001. This group originally considered
only England and Wales, but in the future will consider all of
Britain. The twice yearly reports of this group consider security
of supply issues over a timescale of at least seven years ahead.
The licensed transmission system operators and owners have duties
to ensure security of supply too.
Once the British Electricity Trading and Transmission
Arrangements (BETTA) are in place Britain will in effect be a
single market. In this context any shortfall in generation in
Scotland, England or Wales could impact on other areas of Britain.
The interconnector (once BETTA is implemented
the interconnector will become part of the British transmission
system) between England and Scotland is being reinforced to cope
with increased power flows between Scotland and England. [15]The
UK transmission system is also linked to the England-France Interconnectora
2,000MW high voltage direct current link. Current plans for further
interconnectors include an interconnector between Britain and
the Netherlands[16]
(due for completion in 2007) and developing an interconnector
between the Britain and Norway. [17]Therefore
once completed Scotland will be connected to transmission systems
in England, Northern Ireland, France, Holland and Norway resulting
in a European wide network, further reducing the likelihood that
a shortfall will occur. Gas interconnectors are also being strengthened
and constructed to connect Britain to the European gas network,
implying that gas fired generation will become increasingly popular.
These projected changes in the generation mix
(including embedded generation) will require sweeping changes
to the way transmission and distribution networks are designed
and maintained. The need to move away from a heavily centralised
generation system to a more dispersed system potentially involves
significant cost. Differences in transmission charges between
Scotland and England and Wales have to be resolved prior to BETTA
being implemented. Energywatch has been part of this process to
ensure that consumers, particularly those living in rural areas,
are not unfairly penalised. The removal of the hydro-benefit for
consumers in northern Scotland and its proposed replacement is
a good example of how consumers living in remote areas need protection
from policies which could result in them paying exorbitant distribution
costs for electricity simply because they live far from the source
of generation.
MANAGING FUTURE
ENERGY NEEDS
Energywatch urges the Committee to consider
that the closure of nuclear power plants (and equally the closure
of the coal fired stations at Cockenzie and Longannet which have
a combined output exceeding the combined output of nuclear power
plants in Scotland) need not be met solely by replacing old generation
capacity. There is great scope to reduce energy demand by: ensuring
the market operates as effectively as possible; improving the
energy efficiency of all buildings; educating people about their
consumption; improving electrical appliance efficiencies and providing
people with information on different generation options. Suppliers
are now obliged to provide information, at least once a year,
to all consumers detailing the percentage of generation sources
making up their electricity consumption. Measures such as these
will help engage and educate consumers about their energy consumption.
The Scottish Executive is already ploughing
substantial resources (far exceeding spend in England and Wales
on a pro-rata basis) into improving heating systems for
pensioners and should be applauded for this action. The energy
and money saved by these consumers cannot be underplayed. This
action helps tackle energy demand and complements the Scottish
Executives' stance "to ensure, so far as reasonably practicable,
that people are not living in fuel poverty in Scotland by November
2016".[18]
Measures to improve Scottish building standards, coupled with
initiatives such as the Community Energy Programme, the Energy
Efficiency Commitment, the Central Heating Programme, the Warm
Deal Programme and Scottish Community and Housing Renewables Initiative,
will help deliver better efficiencies in homes, tackle fuel poverty
and energy demand. They have also been designed to bring to the
market innovative products and services, such as micro-CHP, micro-renewables
and energy services packages.
FACTORS TO
CONSIDER
Energywatch believes that an effective market
could deliver the necessary generation capacity for Scotland.
We are not convinced though that the market is currently operating
as effectively as it should. We will be campaigning for coordinated
GB regulation to cover the offshore and onshore markets; changes
to the gas network code to bring increased market transparency
for energy suppliers and large consumers; a substantial programme
of measures from government and companies to protect low income
and other priority consumers; a clearer understanding of why wholesale
price spikes have occurred and what market remedies are available.
Poor billing is a market-wide problem that causes
not only extreme inconvenience, but, according to energywatch
research, [19]puts
up to 10% of consumers into debt. We will: campaign for accurate,
timely and clear bills; encourage consumers to read their meters
and for companies to use those readings to provide accurate bills;
establish a recognised standard for energy bills.
Energywatch research has revealed serious impediments
to consumers receiving the benefits of effective competition.
We will: press for solutions for consumers locked into teleswitching
meter suppliers; explore the impact of BETTA as it goes live in
2005; highlight the detriment to consumers of two-tier regional
pricing for electricity
Energywatch would like to see all policy development
explicitly embrace sustainable development principles and the
eight consumer rights we assert. [20]We
believe that if these principles are considered during the development
of Scottish generation assets then consumers can be confident
that the choices made will be in their and future consumers best
interest; deliver social progress for all whilst effectively and
prudently protecting the environment and maintaining high and
stable levels of economic growth.
17 January 2005
9 http://www.dti.gov.uk/energy/inform/energy_trends/dec_04.pdf.
"Energy Trends 2004". DTI. Pg 34. Back
10
http://www.dti.gov.uk/energy/whitepaper/ourenergyfuture.pdf. "Our
energy future-creating a low carbon economy". Pg 61. Back
11
http://www.scotland.gov.uk/library3/finance/ser5-09.asp. "Energy
and Carbon Dioxide Emissions Projections for Scotland, 1990-2020:
Summary and Discussion of AEA Technology Research". Back
12
http://www.scotland.gov.uk/library5/environment/srfe.pdf. "Securing
a Renewable Future: Scotland's Renewable Energy". Pg
18. Back
13
http://www.legislation.hmso.gov.uk/acts/acts1989/Ukpga_19890029_en_1.htm. Back
14
http://www.dti.gov.uk/energy/jess/index.shtml. Back
15
http://www.nationalgrid.com/uk/activities/other/mn_interconnectors_scotland.html. Back
16
http://www.nationalgrid.com/uk/activities/other/mn_interconnectors_netherlands.html. Back
17
http://www.nationalgrid.com/uk/activities/other/mn_interconnectors_norway.html. Back
18
http://www.scotland.gov.uk/library5/environment/sfps.pdf. "The
Scottish Fuel Poverty Statement August 2002". Back
19
NOP (commissioned by energywatch) 2002. Back
20
http://www.energywatch.org.uk/public_consultations/work_plan_05/index.asp.
"energywatch Work Plan 2005: Consultation document".
Pg 5. Back
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