Swinney has blown our chances of a payoff for all those turbines

Times

6 hours ago

Lesley Riddoch is fed up. Granted, this is not an unusual condition for the independence-supporting columnist and promoter of all things Nordic. But it is not hard to understand why she's upset that there was scarcely a murmur of discontent from the Scottish government last week after Ed Miliband scrapped zonal energy pricing.
'Where's the outcry from the SNP or Greens?' she asked, plaintively. What was so wrong about Scots getting cheaper bills? How could John Swinney have missed this opportunity to demand that Scots get direct benefit from Scotland's wind? Surely this was a slam dunk for a nationalist party which always claims that Scots were robbed of the last energy bonanza in the North Sea.
Zonal pricing is the idea, promoted by Greg Jackson of Octopus Energy and backed by Jonathan Brearley of the regulator Ofgem, that electricity prices in Scotland should reflect its contribution to addressing climate change. All those wind farms in the North Sea and the towering turbines now gracing Scotland's hills are supposed to deliver cheap-as-chips energy. But Scottish bills have continued to rise, plunging around a million Scots into fuel poverty.
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Yet Scotland could enjoy 'the cheapest energy costs in Europe', according to Jackson, if the UK government introduced zonal pricing. The cost of electricity, he says, should reflect the cost of producing and transporting it. In the past, location didn't matter much because power for the electricity grid was generated by coal, gas and nuclear plants which were dispersed across the country. But with renewable energy generated in the North Sea, location very much does matter.
It is expensive to transport the electricity produced by Scottish wind farms to the south of England, where most of it is used. Huge infrastructure projects are necessary to drag the reluctant electrons five hundred miles through cables and interconnections. A lot of energy is lost on the way through heat and leakage. Allowing energy costs to fall in areas where it is generated should be more energy-efficient. More importantly, it might encourage energy-intensive industries to come to Scotland.
Those footloose data centres and artificial intelligence companies, with their insatiable demand for energy, could locate in Scotland to take advantage of lower energy costs. Given the chronic overconcentration of economic activity in the south of England, this is not such a daft idea. At any rate, you'd think that this is something that would appeal to Swinney, the first minister, who keeps saying he wants economic growth brought back to Scotland.
Scotland was one of the centres of the Industrial Revolution largely because of an abundance of coal and other raw materials. That's why the Clyde could build a fifth of world shipping before the First World War and mills such as Ravenscraig could later turn out miles of sheet metal for the motor industry. The days of coal are over, of course, and Westminster has passed a death sentence on the Scottish oil and gas industry. So surely Scotland would have a case for demanding that the new industries of the digital age should be located where energy is abundant.
Of course, zonal pricing might have had awkward trade-offs. If Scots paid less for their energy, English consumers would presumably have to pay more. Yet it would not be a massive imposition for the 65 million consumers who don't live in Scotland to finance a couple of hundred quid off the bills of the five million who do.
The main reason Swinney has been reluctant to campaign for zonal pricing is that the big energy companies, most notably SSE and Scottish Power, are firmly against it. These largely foreign-owned behemoths have a material interest in the status quo. They are compensated generously by a panoply of schemes such as contracts for difference, which effectively guarantee that the profits from renewable energy are never less than the profits they make from gas. At least a quarter of domestic energy bills go toward subsidies for renewables. They claim that they would not be able to finance new wind farms if differential pricing undermined profitability.
However, the energy companies also benefit directly from the mismatch between where energy is generated and where it is used. Last year they earned nearly £2.7 billion in constraint payments, largely for turning their windmills off when they generated too much energy for the grid to accommodate. A quarter of Scotland's potential was switched off last year. Well, there seems an obvious solution to that. Even more obvious is surely the propaganda benefit to a nationalist government of a situation where Scottish wind energy was actually being wasted.
Moreover, communities are already being compensated for proximity to wind farms, albeit in a very limited way. RES, a renewables development company, has been setting up local energy discount schemes (LEDs) across the country since 2012. Properties near Glenchamber Wind Farm in Dumfries and Galloway can apply for a £200 discount on electricity bills. So zonal pricing is actually happening — just not at scale. And even as Miliband killed the idea of zonal pricing, he promised zonal compensation for communities facing wind farm development. There will have to be, he said, 'direct community benefits'.
Perhaps it is not feasible to disaggregate the National Grid to create zonal pricing. There is a democratic argument that energy costs should be the same across the UK. But given that so much of the cost of renewables is covered by subsidies, surely this could be re-engineered to allow Scottish homes and businesses to benefit from all that wind.
UK energy policy is anyway riddled with anomalies, waste and unfairness. Miliband is using punitive taxation to accelerate the collapse of Scotland's oil and gas industry. The promise of a bonanza of green jobs has been as false as Labour's promise to cut energy bills by £300. If zonal pricing isn't feasible, then what would be a sensible way of compensating Scots for the disruption to their environment and their selfless contribution to saving the planet? And why isn't the Scottish government arguing for it?
For once, there is good reason here to play the Scottish card. Instead of meekly acquiescing in the diktat of the renewable energy cartel, the Scottish government should be holding Miliband's feet to the fire and making sure the dash for renewables doesn't leave Scotland on the sidelines. As Riddoch says: 'Why the heck not?'