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Longannet demise shows power market is rigged against Scotland’s interest

Alex Salmond on a visit to Longannet in 2007.
Alex Salmond on a visit to Longannet in 2007.

Scotland has one of the most competitive and diverse arrays of electricity production in the world.

That potential has made us a net exporter of electricity for many years.

Now that status is at grave risk because of the blatant rigging of the power market against Scotland.

The natural advantage Scotland enjoys in the production of power flows through all of the main technologies, with nuclear power being the sole exception.

The Longannet power plant in Fife is an efficient, if elderly, coal station whose main capital costs were sunk years ago. It would be an excellent and efficient site for gas turbines as would Cockenzie and as is Peterhead.

These sites on the east coast, adjacent to oil reservoirs are perfectly situated for carbon capture and storage systems.

In renewables Scotland has the best conditions for onshore wind energy in Europe with an array of turbines in Shetland holding the world record for wind productivity.

Our hydro power is the most successful energy production system of all time with great potential to expand pump stage capacity to balance the wind generation.

In offshore wind a resource as yet unexploited in Scotland we have about 25% of Europe’s capacity, in the developing technology of tidal power a similar percentage and in the more challenging wave power around 10%.

Only in nuclear, the most expensive land-based generation, is there no Scottish advantage.

We used to have an edge in advanced gas reactors (AGR), which operate in our two existing stations of Hunterston B and Torness but that system has now been displaced by French technology which is proving totally disastrous in terms of cost.

For example, the new reactors at Hinkley point are likely to cost well over £80 billion in public support over their lifetime almost as much as renewing the Trident missile system and a greater subsidy than all public support to all renewables to date.

Competing with Hinkley point would not be a problem. In terms of fossil fuels, oil prices would have to be around $200 a barrel to make Hinkley point contract competitive with gas reactors, while the feather-bedded nuclear contract is already set at a higher price than that for onshore wind.

However, under the British system Scottish generation is not allowed to compete with Hinkley Point.

Instead we have to subside it while the alternative Scottish generation faces penal transmission costs.

At various times over the last decade Scottish generators with about 15% of the electricity production have been forced to pay all of the transmission charges for the entire British network.

That discrimination is forcing the early closure of our last coal station at Longannet which pays an additional £40 million per year and is stopping its planned replacement with combined cycle gas stations at Cockenzie or Longannet itself or both.

That discrimination has meant our remaining major gas station at Peterhead has been derated down to a few hundred megawatts when it should be capable of producing the best part of 2,000 megawatts.

That discrimination has stopped the building of new pump storage hydro power in the Highlands to balance the development of other renewable energy.

Even worse than forcing the closure of Scottish power stations and costing thousand of jobs, this suicidal policy led by the UK Government and its regulator Ofgem is putting at risk the stability of the electricity supply.

These are not unplanned decisions but the inevitable consequence of a crooked system.

It amounts to the sabotage of a key part of the Scottish economy.

The heart of the unfairness lies in a dogma called locational pricing.

This policy charges people for use of the transmission system based on their geographical location near large centres of population.

Thus, if you could build a power station in Hyde Park, London, you would be subsidised for being there.

If you build one in Scotland you have to pay through the nose.

Apart from the unfairness the problem is obvious.

No level of subsidy persuades people to plan enough new power stations where there are other more lucrative uses for the land.

No amount of conceivable incentive would see a combined cycle gas station built in Hyde Park or a wind turbine beside Big Ben.

As a result the system succeeds in shutting down the areas which are penalised in transmission costs but not building enough stations in the areas which are subsidised.

Add to that the uncertainty created by the new system of pricing support and there has been a collapse in safety margin of available production over peak demand until it now hovers at barely 2%.