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Both Scotland and the UK will be stronger if they remain together, argues Ed Davey, UK energy secretary.
In September, people in Scotland will make one of the most important decisions in their history – whether to stay in the UK, or leave it and become an independent state. My department has already published its energy analysis of Scotland’s place in the UK and how that would be affected by independence. This shows conclusively that right across the energy mix, Scottish businesses, industry and households stand to benefit from being part of a United Kingdom.
Scotland is one of the world’s energy hubs, with oil and gas in the North Sea and a thriving renewable energy sector; but being part of the UK is fundamental to the success of Scotland’s energy industry. The size of the UK economy, the integrated market, our shared regulatory regimes and the scale of financial support create the right conditions for business from across the whole world to invest in our domestic energy industries. Scotland is better off as part of the UK, and the UK is stronger with Scotland as part of it.
As part of the UK, costs of energy for Scottish consumers and businesses are kept down with costs shared across the UK for network investment, low carbon incentives and protection for remote communities. This includes up to £6 billion (for 2013/21) for electricity transmission projects in Scotland (almost 30 per cent of total upgrades across the UK); some £560 million of support for the renewables sector (28 per cent of the UK total) in 2012/13; and support to 690,000 North of Scotland domestic electricity consumers to protect them from the high costs of distributing electricity over remote and sparsely populated areas. Given the UK’s fully integrated energy market is ten times larger than Scotland’s alone, these costs can be spread across 30 million households and businesses rather than paid for solely by those in Scotland. For instance, staying in the UK would keep future energy bills for Scottish households up to £189 a year lower and £608,000 a year lower for a medium-sized manufacturer.
In the current system, I work closely with the Scottish government on energy issues; we have proved that can happen effectively and that the system works. Independence means “doubling up” in various areas: two separate states means having two separate regulatory systems, and so on. What’s so effective about the current integrated system is that we’ve been able to keep prices lower across the UK and attract more investment at a cheaper rate.
Although Scotland is a net exporter of electricity to other parts of the UK – with net exports ranging from 11 to 23 per cent of total Scottish generation between 2004 and 2012 – this represents only a small proportion of demand in England and Wales. This demand was met mainly by domestic generation, with the rest from imports – with net imports from continental Europe exceeding those from Scotland in 2012. Across a sample period from 1 April 2011 to 8 January 2014, imports from Netherlands (1.98 per cent) and France (3.05 per cent) contributed a higher proportion than imports from Scotland (4.59 per cent). That means in the event of independence, there would be no need for the continuing UK to support an independent Scottish state’s energy costs to ensure its own security of supply. Even in a hypothetical scenario where there were no flows of electricity between an independent Scottish state and the rest of the continuing UK, there would only be minimal impacts on security of supply.
The UK is one of the most attractive destinations in the world for renewable energy investment, particularly offshore wind. Businesses have announced more than £34 billion of investment in the renewables industry between January 2010 and February 2014 – more than £14 billion of which is in Scotland – with the potential to support about 12,000 Scottish jobs. However, it is only the broad shoulders of the UK that can support Scotland’s growing renewables sector.
The scale of the UK economy provides an attractive environment for investment, which makes it easier and cheaper to achieve our shared energy goals: protecting our energy security while building a low-carbon energy mix and keeping bills low. An independent Scotland would have to attract investment to a smaller market at a higher cost, with a new regulatory regime with no track record. There are also the likely higher costs that will be incurred in balancing demand and supply across the electricity transmission system.
Our long history of working together across the UK is creating the right conditions for future investment in our infrastructure, helping to build a stronger economy and a fairer society across the country.
Ed Davey is secretary of state for energy and climate changeOUT
An independent Scotland can reach its potential, says Fergus Ewing, Scottish energy minister.
For decades, successive Westminster governments have, sadly, failed to take a coherent approach to energy. There has been much uncertainty in the industry, with 14 energy ministers in the past 17 years.
With a country of Scotland’s energy wealth, it is surely unacceptable that so many consumers face rising prices and continuing fuel poverty.
Westminster energy policy has been ineffective. This has led to the unprecedented challenge to secure supplies, with Ofgem analysis showing capacity margins across the GB grid could fall as low as 2 per cent in just two years’ time. This contrasts sharply with the situation in Scotland, where margins are in the region of 20 per cent. Scotland’s renewable and thermal generation therefore play a vital part in UK energy security, as a range of respected industry experts and academics have said. And our energy exports play an even bigger role. Put simply, England needs Scotland’s electricity supply to keep lights on and industry powered. The GB capacity margin of between 2 and 5 per cent also means prices are higher because of simple laws of supply and demand.
It is a scandal that there should be any fuel poverty in an energy-rich nation such as Scotland. With the powers of independence, we will tackle that anomaly, including measures to make a permanent and ongoing cut in household energy bills of £70 a year, by removing the costs of the Warm Homes Discount and the Energy Company Obligation from bills.
We are also leading the development of an exciting new renewables industry.
Scotland’s clean energy underpins the UK’s renewable energy and climate change targets, with Scotland providing 32 per cent of UK renewable electricity in return for 28 per cent of the total UK subsidies. By 2020, we could provide more than 50 per cent of the 29GW necessary to meet UK’s legally binding EU renewables targets.
We all know Scotland is rich in energy with about 25 per cent of Europe’s offshore wind and tidal energy potential, but we are keen to expand our manufacturing base and maximise the manufacturing opportunities of our offshore energy potential.
I recently announced consent for two new adjacent offshore windfarms in the Moray Firth, which together will be the world’s third-largest offshore windfarm. Orkney’s European Marine Energy Centre has the world’s first grid-connected, accredited test facility for wave and tidal technology.
In an independent Scotland we will continue to be a part of the GB-wide market for electricity and gas. But as a substantial supplier to the rest of the UK, an independent Scotland will have a far greater degree of oversight of the market arrangements for energy and firmer safeguards over Scottish energy security. We plan to establish an energy partnership with Westminster, which will ensure Scotland’s long-term interests are better served and that we jointly steer the approach to the energy market.
After independence we would introduce a leasing system for offshore renewables designed to increase investment and production while replacing the Crown Estate Commissioners. We will continue to support research and development in renewables and low-carbon technologies.
In an independent Scotland we will simplify the regulatory landscape to one that is more appropriate for a country of our size. We’ll bring together economic regulatory functions in the vital sectors of communications, energy, transport and water into one combined economic regulator.
This means consumers can benefit from having a more powerful regulator acting on their behalf and the industry will benefit from dealing with fewer regulatory bodies and from greater stability and consistency.
To me, it is clear the UK government’s management of energy policy has added to energy uncertainty at the very time when certainty is needed to continue to attract investment in new plant as capacity constraints bite.
The value of renewable energy to Scotland’s economy is clear and our commitment to harnessing Scotland’s energy wealth – both onshore and offshore, and in the right locations – will ensure that renewables continue to provide low-carbon energy supplies as well as jobs, investment and opportunities for Scotland’s communities long into the future. Only with the full powers of independence will we be able to harness Scotland’s full energy potential.
Fergus Ewing is an SNP MSP and minister for energy, enterprise and tourismScotland special part 1: The last days of the union?
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