Thursday 5 December 2013

Is Scotland better off going it alone on energy?

Is Scotland better off going it alone on energy?

Scotland could be better off going it alone when it comes to electricity, a new report has found.

The study was written by a group of five academics from universities across the UK as part of the Delivering Renewable Energy Under Devolution (DREUD) project.

A previous report released by the group earlier this year said Scotland would have cheaper power with a shared UK electricity system.

But following DECC’s announcement of both the strike price for Hinkley Point C in October and the strike prices for renewables in June, the group has now revised its conclusions.

The study said the nuclear strike price would lead to large hikes in energy bills that could be avoided by Scottish consumers buying power in a separate electricity system.

It added that the strike price for renewables had been set too low – providing less of a financial incentive than the Renewables Obligation - and would undermine Scotland’s attempt to generate 100% of its electricity demand by 2020.

The report claimed offering 20-year contracts – instead of 15-year ones - and giving the same loan guarantees as those awarded to Hinkley Point, could bring down the cost of renewables significantly.

It gave the example of onshore wind for which the UK government has agreed a strike price of £95/MWh. With longer contracts and loan guarantees this could be brought down to £76/MWh, the study said.

The report claimed such changes would allow Scotland to hit its 2020 target with a bill increase of 7.2% lasting 20 years.

It said by comparison, meeting the target whilst keeping a shared system would lead to bill increases of 5.6% for Scottish consumers if just Hinkley Point C was built and 8% if Sizewell C went ahead as well.

While it may not seem like much of a difference, these increased prices would last for 35 years – the length of the nuclear strike price deal – rather than just 20, the study pointed out.

The report’s lead author, Dr David Toke of Aberdeen University said: “The notion of Scotland having its own renewable energy support mechanism is no longer necessarily detrimental to the prospect of renewable energy in the long term.”

When asked by ELN how Scotland would deal with the ‘capacity crunch’ in 2015/16 whilst going it alone he said: “It would face any of the same problems as the whole the UK.

“It would be able to have its own capacity market and contract either side of the border.”

Dr Toke said EU rules would mean Scotland could import electricity to fill any gaps with relatively low transmission costs. He added however that a shared capacity market probably would be better for Scotland.

Written by

Bruna Pinhoni

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