Ministers, businesses and the public have been warned that up to £30bn worth of scheduled onshore investment in Scottish renewable projects could be put at risk if zonal energy pricing proposals are backed by the government later this month.
Recent analysis as part of the onshore wind sector deal found that more than 10GW of projects are in the Scottish onshore wind development pipeline.
Analysis from the independent consultancy firm, Biggar Economics, for the Fairer Energy Future campaign looked at the economic impact that the delivery of the pipeline would bring to Scotland.
On average, every 1GW of onshore wind to be built between 2030 and 2035 will support around 800 new jobs in Scotland during its construction and a further 200 jobs once each GW site becomes fully operational. There are currently over 12,000 jobs supported by the onshore wind sector today in Scotland, many of which are reliant on the current pipeline being delivered.
On average, a commitment of £1.5 billion of initial capital investment has been made per GW of onshore wind, with a total of £3.0 billion of lifetime investment (assuming a 30-year lifespan) – investing a combined total of £30bn and 8,000 new jobs to the Scottish economy.
However, these investment plans are now at risk due to the uncertainty that the zonal energy pricing proposal would introduce. The analysis comes as the UK government is currently exploring options for major reform of the Great Britain electricity market as part of a consultation process led by the Department for Energy Security and Net Zero.
Infrastructure and energy providers from around the UK and in Scotland – including UK Steel, Ceramics UK, OnPath Energy and Scottish Renewables – have said there will be delays in investment due to the uncertainty around policy implementation at a time where we need businesses to go further and faster to achieve the energy transition.
Instead of adopting a local or regionalised system where consumers and businesses in the different parts of the country could have substantially different energy prices from other areas in Great Britain, Fairer Energy Future is calling for an ‘Enhanced National Pricing’ regime.
Here are some of Fairer Energy Future’s commitments:
- Ensuring price competition in short-term markets: a review of competition within the retail, wholesale, and balancing markets, looking at occurrences of adverse market power and ‘price gouging’ during periods of gas dependency and system imbalance.
- A comprehensive and rapid reform of the planning, funding and operation of interconnectors: these are set to become a key element of the GB clean power system. This is a post-Brexit opportunity that needs urgency and leadership to improve energy trading efficiency and security. Areas to consider include integration and collaboration with neighbouring markets, incorporation of interconnectors into the SSEP and CSNP to ensure optimal location and reduce constraints, cross-border trading efficiency and the management of interconnector flows.
- A reform of consumer bill cost allocation, including the issue of fixed charges and the allocation of environmental levies and whether these should be shifted from electricity to be based on carbon or more progressive general taxation. This could also include a review of the Renewable Obligation Certificate Scheme, which adds c. £100 to consumer bills and whether it would be better for the government to either buy out outstanding ROCs or create an auction to convert these to CfDs.
This series of simple, practical measures will ensure the energy system works best and is fairer, greener and cheaper for businesses and consumers, who are already facing some of the highest energy costs in Europe.
The campaign is backed by manufacturers and energy producers, including UK Steel, Ceramics UK and OnPath Energy.
A spokesperson for Fairer Energy Future said: “Proponents of a zonal energy pricing system argue that it will help the UK reach net zero. On the contrary, the latest research shows that billions of pounds worth of renewable investment and thousands of jobs would be at risk if these proposals are greenlit by the government.
“Following the uncertainty of Brexit and the pandemic, including wars on the continent which have driven up energy prices, it’s clear that now is not the time for more risk for business.
“Our ‘Enhanced National Pricing’ proposal provides a more suitable and sensible alternative to Zonal Pricing. It’s fairer, cheaper and greener, getting us to clean power by 2030 without the uncertainty and unknowns zonal pricing brings with it.
“And at a time when the country is seeking to boost economic growth, jobs and productivity, we strongly believe Enhanced National Pricing is the right way forward.”
