Amid all the debate surrounding the Smith commission there has been surprisingly little focus on energy policy and where there has its focused almost exclusively on oil. Clearly there are issues of great importance to discuss such as tax and welfare but energy will play a vital part in Scotland’s future. Successive Westminster governments have failed to invest adequately in the infrastructure and refuse to take heed of the unique problems (and advantages) that Scotland’s geography present.
Of course the age-old arguments about oil revenues are even more pertinent considering the discovery of more oil fields in the North Sea, but simply redirecting oil revenues from Westminster doesn’t tackle the underlying problems (although it would be a good start). The reason I argue for Scotland to have control of energy policy is so that the people of Scotland benefit from its natural resources by having a modern grid, reasonable energy prices and a structure that gives profits back to the people instead of solely to large corporations. The UK is the only country in Europe that doesn’t own its electricity grid, it also has the fourth highest electricity bills and the highest customer dissatisfaction with the private companies supplying the electricity so clearly the current model is not working.
The two areas of the electricity system that matter most are transmission and generation. Transmission of electricity through high-voltage lines is operated by the National Grid (it also owns the network in England and Wales) the network in Scotland is owned by Scottish Power and SSE. They earn money from the grid by charging companies to use it who then sell electricity to consumers. In 2013 the Scottish Power companies SP Transmission Ltd made £154.3 million before tax profit and SP Distribution Ltd made £179.4 million before tax profit. SSE made a massive £955.4 million profit in 2014 from the network side of its business of which £136.7 million came from transmission (high-voltage lines) and £507 million came from distribution (carrying power to houses and businesses).
Clearly electricity is a necessity so why is it that this vital commodity is controlled by two corporations that are beholden only to their shareholders ? These companies are making massive profits from what is essentially a captive market and although it would be unfair to say they aren’t making any investments in updating the grid they aren’t doing it quickly enough to take full advantage of Scotland’s renewable energy potential. An example of this reluctance to fully commit to investing in infrastructure that plagues risk averse private companies is the much delayed grid connections from the islands of Orkney, Shetland and Western Isles. Between them they have excellent marine and wind energy resources but this bounty of clean energy remains untapped as the unique challenges provided by their location keeps the development in limbo.
If the grid was publicly owned and maintenance work was contracted out to private companies such as SSE this would allow the expertise and experience of the current owners to be utilised whilst allowing the Government and thus the people to steer the direction of our energy policy in a way that suits our needs and aspirations. This has all been outlined by The Common Weal in their Making Energy Work For Us proposal along with a more in-depth analysis in Repossessing the Future.
It’s probably worth mentioning at this point before I carry on that the Chairman of SSE is none other than Lord Smith of Kelvin, the very man who is in charge of the discussions over the powers that be devolved (including energy policy) is chairman of the company that dominates Scotland’s electricity market. But of course that’s not important he couldn’t possibly have a conflict of interest.
The energy sector is undergoing transformational changes as Scotland moves towards a fully renewable supply. This will require a mixture of wind, wave and tidal energy as well as innovative ways of storing the energy. That Scotland has enough wind and wave resources is not in doubt nor does it require new technolgy to be created to store it, pumped hydro has been around for decades. The main barrier for the development is that it requires the Government to persuade the companies in question that they can make enough profit out any scheme (thus profit from the consumer). Private companies look for low risk high return ventures but in a publicly owned industry the Government could accept lower returns as the investment is for the good of society. In March SSE reconsidered plans to create four offshore wind farms “as limited subsidies and high costs threatened the viability of the industry and returns on a series of projects were not attractive enough to invest.”
By taking energy generation into public ownership the profits could be reinvested into our society instead of simply lining the pockets of enormous corporations. The Norwegian people reaped the benefit of oil due to the fact that its largest oil supplier StatOil is owned by the Government, of course we all know this didn’t happen in the UK. It’s imperative that this doesn’t happen again with the renewable industry and this can only happen if Scotland is given power over energy policy and then uses those powers to create an energy industry that puts the people first and not the corporations that currently have a complete monopoly over generation, transmission and distribution of our electricity.