Scottish energy market overview
The direction of Scottish energy policy will be influenced by the Scottish Energy Strategy published in December 2017. This lays out the government’s vision to 2050 and prioritises consumer engagement and protection, energy efficiency, system security and flexibility, innovation, renewable and low-carbon solutions and maximising the oil and gas industry. Policy will also be influenced by the Climate Change Plan and Climate Change (Scotland) Bill, which lay out targets to reduce carbon dioxide emissions at intervals up to 2050. Scotland also has an energy efficiency route map, which is intended to guide the decisions made over the next 20 years to improve energy efficiency, and has recently released £2mn of funds to help improve energy efficiency for households and businesses.
Scotland’s policy framework also must fit within the context of the UK’s energy strategy, set out in the Clean Growth Strategy. This promotes local energy solutions through decentralised and devolved decision-making. Other elements point to the need for a better-functioning retail market, removing barriers to and enabling smart technology, supporting sustainable, resilient and affordable services to meet consumer needs, and continuing to invest in capabilities for innovation in smart energy systems.
The electricity sector in Scotland, like the rest of GB, distinguishes between wholesale energy production, delivery through the transmission and distribution networks, and supply to customers. Energy production and supply are competitive activities, while delivery is a regulated monopoly. Unlike in England and Wales, where National Grid is the sole utility that owns the transmission network, Scotland’s transmission network is owned between two utilities. SP Transmission, a subsidiary of SP Energy Networks, is responsible for the transmission of electricity in central and southern Scotland. The transmission network in northern Scotland is owned by Scottish Hydro Electric Transmission, a company which is part of the Scottish and Southern Electricity group. In Scotland, electricity transmission is defined as the assets at voltages of 132kV and over.
Scotland’s gas transmission network is owned and operated by National Grid Gas, which owns the entire gas transmission network across GB. Scotland’s gas distribution network is owned and operated by Scotia Gas Networks (SGN). SGN distributes natural gas and green gas to 5.9mn households and businesses across Scotland. British Gas, through Scottish Gas, is the incumbent gas supplier in Scotland.
Traditionally, routes to market for low-carbon generators have been through the Feed-in Tariff (FiT) and power purchase agreements (PPAs). Historically, FiT export rates have provided good value and certainty for small-scale installations, whereas PPAs have facilitated better rates for exported energy to be achieved.
There are some emerging opportunities in the market, including demand-side response (DSR), power-to-gas and time-of-use tariffs. DSR is recognised by the government as the most beneficial way for end users to engage with the balancing of the national electricity system by increasing or reducing their demand. A few successful power-to-gas schemes have already been demonstrated in Scotland, and the number of time-of-use tariffs on offer is expected to increase as the roll-out of smart meters progresses.