Swinney’s electricity promise lacks spark – Daily Business Magazine

Wind is a growing contributor to electricity output, but is heavily subsidised

Critics are questioning SNP leader John Swinney’s promise of lower power bills, writes TERRY MURDEN

Sensing Labour’s weakness on energy prices, in particular the party’s failure to deliver the manifesto commitment of a £300 cut in household bills, John Swinney is promising low-priced electricity and a surge of investment by power companies in an independent Scotland. It’s no less than a golden ticket handed to everyone who votes for his party next May.

However, he may be in danger of falling into the same trap as those he accuses of letting the country down.

‘It’s Scotland’s Energy’ is the new campaign that borrows from ‘It’s Scotland’s Oil’, the slogan on which the SNP built its 2014 push for independence. It outlines how Scotland could use its energy wealth to lower electricity bills by over a third for households and businesses. With low cost electricity for Scottish businesses, the SNP has said the result would be as economically transformational for Scotland as low corporation tax proved to be for Ireland.

It promises lower operating costs for domestic firms, enabling faster growth. More international investment. A boost to exports and the revenue from exporting Scottish renewables. Downward pressure on inflation enabling an easing of monetary policy, and lower interest rates. Higher economic activity, boosting turnover, profits and employment, leading to an increase in the tax base and higher government revenues.

This is now cast in stone and is based on a growing belief within the nationalist movement that severing links with the rest of the UK will lead to permanently lower energy prices in Scotland, because Scotland is where it is produced.

Critics have questioned the economic arguments in the SNP’s claims and say the forthcoming election is leading to spurious promises that simply cannot be guaranteed.

Research by the advisory group True North says “the ambition to lower bills might be seen as a vote-winner, however, as we’ve seen in the recent zonal pricing debate, it presents significant practical problems”. They say that contrary to making Scotland more attractive to investors., lower prices risks putting them off.

Zonal pricing, supported by Octopus Energy chief Greg Jackson (check), would see energy prices vary from area to area, rather than being uniform across the UK. Opponents, including ScottishPower chief executive Keith Anderson, say zonal pricing could lead to swings in pricing and deter investors who need greater clarity and stability.

True North concurs with this, saying the SNP plan hinges on creating a standalone Scottish electricity market which “would reintroduce the very market-design uncertainty that renewables developers and transmission owners widely warned about during the REMA/zonal pricing debate over summer. Industry has been clear that radical locational reforms risk deterring investment and making some Scottish projects unviable.

It does on: “Investor appetite – especially for offshore wind – would likely fall due to increased revenue risk and exposure to constraints. Ambitions to reduce bills would become untenable if generation investment slows or relocates, as the renewables industry warned during the zonal debate.”

Furthermore, it highlights a number of “unknowns” in the SNP’s policy, including licensing, grid access rules, charging regime, balancing markets, CFD-equivalents, among others, which it says are material consideratiuons. It states that the plan “assumes a new Scottish regulator, new system operator, new transmission charging regime and new support schemes, none of which are defined.”

The paper concludes that “a vacuum on how the new system would actually be regulated is a
major credibility gap for long-term, capital-intensive assets which need durable rules.”

The think tank These Islands has also taken issue with the Swinney plan. Its chief executive Sam Taylor was scathing about the claims being made.

“There are no calculations explaining the third off energy bills claim,” he says. “It’s just plucked from the air. A whole raft of measures are mentioned which seemingly possess the magical quality of saving loads of money while costing no money at all. Execrable stuff.

“Since the SNP says that Scottish households would no longer pay towards nuclear plants in England after independence, we must assume that English & Welsh bill payers would no longer underwrite the costs of Scottish wind farms. Net result: massively higher bills in Scotland.”

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