Keith Anderson, Scottish Power’s Chief Corporate Officer, has detailed his company’s ‘manifesto’ for the UK’s new prime minister – setting out for ‘key asks’ to secure investment and keep the lights on.
And he also warned that while Scottish Power does not want to close down Longannet – the coal-fired power station which is capable of generating around half of Scotland’s electricity – they company will not flinch from doing so if need be.
Speaking yesterday in Glasgow, he that if the energy industry is to make much-needed investments to deliver the energy security the country needs, whilst taking out the carbon and keeping prices for customers affordable, we need to have a clear line of sight on Government policy.
He added: “Squaring such a circle will never be easy. But allow me set out what Scottish Power would like the new Government to include in its energy policy.
Market regulation and competition
The Competition & Markets Authority inquiry should be allowed to run its course. It is a comprehensive and rigorous study of our market – from generation to supply. It is a real opportunity to clear the air, so that customers and investors alike can have renewed confidence in the sector.
According to Exane BNP Paribas, the UK utility sector has the highest political risk in Europe. That must change.
Iberdrola is investing £1.3bn in the UK this year. And another £1.3bn next year. That’s over 40% of the Group’s global investment. And we want to do more.
The CMA investigation is the right way to determine once and for all the heath of competition in the UK energy market. To reassure investors. And to re-establish trust for customers.
The Electricity Market Reform (EMR) should also be allowed to bed in.
We’ve had the first Contract for Difference Allocation Round. And we’ve had the first Capacity Mechanism auction. Scottish Power was pleased to win the CfD for 714MW offshore capacity at East Anglia One at a price below £120/MWh.
Thanks to engineering, procurement and operational efficiencies, this is lower than anything previously seen in large scale offshore wind. It also enables more investment in technological change with a larger supply chain to help bring down costs further.
The industry is on track to levelise costs below £100/MWh by 2020.
We also welcomed the successful running of the first Capacity Mechanism auction though we regret that the high transmission costs made a bid from Longannet unviable.
We do not want to close Longannet but may need to do so.
However, the overall process of the EMR has started well. To maintain investor confidence, our main ‘ask’ of the new Government is that it provides early visibility on the timing and budgets for future CfD Allocation Rounds and the roll forward of the Levy Control Framework up to the mid-2020s.
As planned, the Renewables Obligation should also run in in parallel until the end of March 2017 to support a smooth transition. This has been a fixed point since the 2011 White Paper and investors have planned accordingly.
It is vital that this pillar of the framework continues to be respected by whoever forms the next Government. Overall we ask for the broad political consensus for the EMR to continue and a renewed drive after the election.
As cost-effectiveness and affordability will remain at the heart of future delivery, the new Government must not close the door to further onshore wind.
Yes, the locations need to be appropriate and the concerns of local people accommodated. There are opportunities for good projects in Scotland with technology that is very cost effective.
Scottish Power Renewables is progressing a pipeline of over 1 GW onshore wind projects – mainly within Scotland. We have almost 500 MW of consented capacity (including the 288 MW Kilgallioch project) and 130 MW awaiting planning decision along with a further development pipeline of some 800 MW.
Energy storage and hydro-electricity
As more intermittent wind comes on to the system, there will be a greater potential role for pumped storage to provide cost-effective balancing services. This view is supported by National Grid. They estimate that an additional 4.5GW of new reserve is required by 2020.
But current market conditions will not support such investment, so the new Government will need to look again at possible incentive mechanisms.
For example, there could be an opportunity to expand our Cruachan pumped storage plant and there may be other storage opportunities elsewhere.
“These are our four ‘asks’ for whichever party – or should I say parties – form the next government. Whoever is elected tomorrow, one thing they will need to do quickly is work out how they will keep the lights on.
“The UK, from a position of considerable stability prior to autumn 2013, has since been at the top of the European political risk league table for energy sector investors.
“Restoring that historic stability will be the cornerstone required for the new government to build a successful energy policy, given the tens of billions of pounds of investment required across the sector.