Electricity Market (Scotland)

Part of the debate – in Westminster Hall at 2:57 pm on 8th September 2004.

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Photo of Mr Peter Duncan Mr Peter Duncan Shadow Secretary of State for Scotland, Local and Devolved Government Affairs 2:57 pm, 8th September 2004

I share in the common congratulations to Mr. Salmond on his timeous selection of this debate in our first week back after the summer recess. I suppose that a lot has changed over the last couple of months. For him to have shown such foresight over that period is truly remarkable.

Obviously this is an important and pertinent debate, but I greatly enjoyed—I thought it was one of the most important debates—the discussion about which party John Maynard Keynes would belong to. I thought that that was an instructive indication of the way in which Scottish politics is likely to head in the coming months and years. We look forward to that juncture. If there is any doubt remaining in the minds of hon. Members, I reassure them that he would not have best found himself in my party.

The market for electricity in Scotland is clearly different. It has been historically different—hon. Members have referred to the foresight of the hydro engineers in the past, but there is a different commercial field in Scotland. Research by the Scottish Energy Environment Foundation shows its importance: three out of the top 10 companies by turnover in Scotland are electricity utilities. That is clearly a different emphasis to the rest of England and Wales. The Scottish market is much more integrated and much less fragmented than that south of the border.

I reiterate the welcome made by my hon. Friends in the passage of the Energy Act; we look forward to the better provision of new opportunities for Scottish energy generators after the passage of the Act. I hope to provide considerable support for the substance of what the hon. Member for Banff and Buchan said. We will probably diverge in emphasis a bit later on, but it is always useful to start on common ground.

The hon. Gentleman has made an important and succinct summary of the case against discrimination in energy transmission. His opening remarks have shown how clearly existing Scottish generators will suffer if the proposal—option B, as it has been described—is allowed to go through. Locational pricing was originally an Ofgem concept. The National Grid Company has brought forward proposals to comply with that concept. Ofgem has to look long and hard at the way that it has taken this debate. It is not going to move forward an important sector of Scotland's economy and, on that basis, Ofgem will need to look long and hard at it before moving forward.

I want to provide the hon. Gentleman with support for his suggestion, which was reiterated by Mr. Carmichael, that wind projects should be located where they are most efficient and effective. There is clearly little point in creating a market that will encourage the creation of renewable projects in areas where they are least effective. That would be crazy, and it would not add anything to the wider debate on energy needs in Scotland or the GB market. I found little to quibble with in what the hon. Gentleman said on those two points.

I hope that Scottish consumers will see some improvement in the cost of electricity. Consumer prices have been attractively low in recent years, but that has provided a huge challenge for policy makers and companies in the energy sector. As Mr. Weir pointed out, the Scots have missed out relative to those in other parts of Britain on the benefits since deregulation. I read this morning that Energywatch has found that Scottish prices have increased by 10 per cent. since privatisation, whereas they have decreased by 5 per cent. in England and Wales. Clearly, that will not help in the wider selling of an effective market in Scotland. It has even been advocated that we switch to English or Welsh companies, a truly extraordinary remark for a Scot to make. Prices may have fallen in real terms, but we clearly have not shared in the benefits of privatisation. I was interested to hear that the National Audit Office has recommended that Ofgem should review the differences in consumer prices. I look forward to its response.

Much of the debate has focused on wind and renewable energy. That is inevitable, given that they tend to be the most peripherally located forms of generation. The Scottish Executive's target—it wants 40 per cent. of generation to be renewable by 2020—figures significantly in that debate. I understand that we are currently approaching the 12 per cent. mark. Scotland is rich in wind and wave resources, but I counsel hon. Members that my party does not necessarily share the common dash for wind. We see a place for it, but we see a place also for renewable energy and a balanced energy mix. We are hugely concerned at the unrestrained dash for wind energy in Scotland.

I sympathise entirely with the comments of the hon. Member for Orkney and Shetland that we tend to focus on wind to the exclusion of other forms of renewable energy. I will share a personal anecdote. When researching the purchase of a solar panel for my house recently, I was interested to note that the technology had not moved on significantly since my father undertook a similar purchase in 1975. The photovoltaic sector has not made an incremental jump in those 25 or 30 years. However, although renewable energy has huge potential, I would not support those who wanted to focus exclusively on wind energy.