Keith Anderson

On Thursday the country goes to the polls.

While the General Election campaign has generated plenty of heat, when it
comes to the future of energy we have yet to see much light.

The new government will have some hard choices ahead. Consumers rightly
want power to be affordable. They also want to know that it will always be
available. And they want carbon to be removed to meet climate change
objectives. Is it possible to square this circle?

Experts from across the energy sector are meeting on Wednesday to tackle
this very question, as for the first time Glasgow is hosting the All Energy
Conference. Many believe that it is possible to invest in resilient energy
supplies that cut carbon and keep bills down.

The advent of large and increasingly efficient wind turbines placed miles
out to sea, complementing those operating onshore, will play a big part, as
will hydroelectric and pumped storage.

Financial penalties for higher emitting power stations – particularly
coal-fired ones – and rewards for renewables will accelerate this change.
And it’s already happening.

ScottishPower was one of the first to secure a “contract for difference” to
build a giant 714 megawatt windfarm offshore from East Anglia. The cost of
generation will be almost one fifth cheaper than for similar offshore
projects awarded contracts just a year ago. This is in addition to our
1,600MW of wind capacity, mainly onshore in Scotland, but including the
389MW west of Duddon Sands off Cumbria; all enough to power more than two
million homes.

Meanwhile, as many in Scotland are aware, we were unfortunately forced to
signal the likely closure from next year of Longannet, our 2,400MW
coal-fired power station that has played a critical role in keeping
Scotland’s lights on for 42 years. This would follow the closure of
Cockenzie, its sister coal plant, in March 2013.

Longannet has felt the burden of penalties for greenhouse gas emissions
very keenly. The UK’s unilateral Carbon Price Floor mechanism has given it
an annual £150 million bill for 2015-16. The £40m annual grid connection
charge levied by National Grid has now tipped the balance so the economics
of Longannet no longer add up after this year. Unless something changes,
closure is likely.

One thing that remains constant in this period of change is security of
supply. To help achieve this, ScottishPower is investing around £8 billion
over the next five years, mainly in renewables and networks. But with
renewables, the wind doesn’t always blow, so having sufficient flexible
back-up generation is vital. We plan to invest in further gas-fired
generation to do exactly that. And 50 years after our Cruachan pumped
storage plant first provided the benefit of instant generation to meet
demand peaks, we intend to double its capacity if it proves economic to do
so with appropriate incentives.

In networks, alongside National Grid we are laying the world’s largest
subsea high voltage transmission cable. Running between Ardnei on the south
coast to the Wirral in north west England, it will play a vital role by
allowing output from Scotland’s renewables to flow to England when the wind
blows, and power from south of the Border to come north when it doesn’t.

To build these projects our UK investment this year alone will be £1.3bn,
more than double the rate prior to ScottishPower becoming part of Iberdrola
in 2007. We want to keep up this investment to secure supplies, cut
emissions and keep bills affordable.

The UK, from a position of relative stability in 2013, has since topped the
European political risk league table for investors in energy. Restoring
that stability will be critical if the new government is to build a
successful energy policy, given the tens of billions of pounds of
investment required.

The winds of change may be blowing in British politics. But whoever is
elected will need to do one thing: work out how they will keep the lights
on for the long term.

Keith Anderson is chief corporate officer at ScottishPower.


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