Powering Their Ambitions

Craig Dalzell

A massive new “electricity superhighway” has been approved to allow the transfer of up to 2 gigawatts of electricity between Aberdeenshire and North Yorkshire. This is part of a large scale transition in energy infrastructure in the UK but the precise shape of it reveals some uncomfortable truths about who the UK’s energy sector is set up to help.
To be clear. This isn’t going to be an article about NIMBYism (and that’s largely irrelevant in this case as the cable will run under water though this won’t be the case for many other highway projects), though my thoughts on large scale energy generation in my own back garden are on record.

This also isn’t an article about Ludditism. The sector absolutely must transition if we are to meet climate goals. Great Britain’s energy grid (Northern Ireland is on a separate grid, shared with Ireland) is obsolete. It was designed and built in an era when the cost of transporting electricity was higher than the cost of transporting the fuel for generators (mostly coal, mostly by train, though later gas by pipeline). The extreme disparities in both population and economic activity between the south east of England and basically everywhere else meant that the economically efficient set up for the grid was the idea that one should build large power stations near those centres of population and economy. The pricing (to shorten almost to the point of oversimplification) was designed as if no matter where the customer is located and no matter where the generator is located, it is the distance from London that matters. In effect, if you hooked a generator to the grid to run a house next door to the generator, it’s almost like you pay a cost equivalent to exporting the energy to London but buying it back from there for your house.

Regardless of the moral implications of this setup, it simply doesn’t work in the era of distributed renewables like wind and solar. Wind turbines in particular have to be built where it’s windy and there’s plenty of space for the turbines and the largest areas of opportunity there are in Scotland (our well reported objections to the ScotWind project are about ownership of assets, not the existence of the turbines themselves). Unlike coal power, the “fuel” for wind turbines can’t be delivered to the turbines by rail.

This electricity superhighway project is the result of two of the UK’s economic failures clashing together. One is the failure to bring the public along with climate obligations to break through NIMBYism and to help communities build their own energy assets (rather than objecting to private companies building THEIR assets in the backyards of local communities) so that they can directly benefit from the transition rather than merely hosting the source of profits for someone else. The second is the failure to decentralise the UK’s economy (which is one of the most centralised in the developed world – a point that pro-UK commentators directly attacked Common Weal for making, until the FT, The Economist, Bloomberg and others started saying it too).

So we’re in a situation where the places in the UK that need large amounts of power are now furthest away from the largest sources of power. The solution that suits the UK – given that the highly centralised political structures of the UK Government benefit from a highly centralised economic structure too (see that Bloomberg article above in particular for more on that) – is to build more of these energy superhighways. Given that the UK’s energy sector is so highly privatised that even IF GB Energy meets its goals, almost all of the profits of the energy we generate will flow into the pockets of multinational corporations, foreign public energy companies and foreign sovereign wealth funds. If the grid isn’t reformed politically as this happens then Scotland will be the host of the UK’s generators, but still paying the highest energy prices due to the infrastructure costs. There’s a grim irony that after years of being told we’re paying higher bills because we’re too far away from the power plants, we’ll now be told that we’ll pay higher bills because we’re too far away from our customers.

There is a solution, mooted in our 2018 paper, soon to be expanded upon in an upcoming policy paper but already being talked about in professional energy sector circles. The idea of local pricing.

Under this model it’s not just the distance the customers and generators are away from the main population centres of London that are factored but how far away they are from each other directly. If your local area is a substantial generator of electricity then you should see the benefit of that in terms of your bills. This is particularly the case with renewables where the capital costs of electricity (i.e. the cost of the wind turbine) are fairly fixed and are paid upfront but the marginal cost (the cost to produce an extra unit of energy if it’s a little windier) is basically nothing (contrast that with coal or gas where the cost of the fuel means every additional unit of energy costs money to produce).

Under a local pricing model, areas near power stations or large areas of wind turbines would be incentivised with cheaper prices as a means of avoiding having to transmit the power elsewhere. In the short term, that would meant that a new wind turbine placed in your local area would result in lower bills for you (depending on the definition of “local area” – we could be talking about pricing based on Scotland-wide data, or regions of Scotland or it could well go hyper-local and encourage communities to set up their own community energy companies). In the medium to long term, the persistent lower prices generated by renewables (remember, once built, the cost of energy is free so once the turbine/solar panel is paid off and assuming there’s enough overcapacity and battery storage to cover gaps, then the cost of energy will continue to drop to basically only enough to cover the current maintenance and future replacement costs) will encourage energy intensive companies to move to areas where energy prices are lower (we already see this with extremely energy hungry companies like cryptocurrency miners and AI trainers, though I’m not suggesting we encourage them in particular to Scotland).

This almost reverses the grim irony of the UK. Yes, there are plenty of people who don’t want to see pylons crossing their back gardens (and there are many good reasons for this, not least that unlike hosting a wind turbine near you, pylons don’t generate anything in terms of community benefit payments) but one of the solutions is to minimise the amount of energy we need to transmit from A to B through that garden. Much of that could come from reducing energy demand but much of the rest could come from moving B to A so that there’s no need to transmit the power.

Of course, as much as there is to be gained politically by the UK Government from not subjecting the people of the south east to vast webs of pylons pulling electricity towards them, there’s probably more to be lost by telling them that the reason it doesn’t need to happen any more is because all of the jobs are moving to Scotland. Other reports have highlighted that if Scotland owned its own energy assets rather than giving them away to private interests for almost nothing, we could benefit from the price of exporting that electricity and that is very true also especially as we’re so vastly rich in resources that we simply can’t reasonably use it all.

But this is the reason that we’re not allowed to take control of our own assets. We’re not allowed to use those assets here. We’re not allowed to benefit from exporting those assets. The history of international economics everywhere says that countries that see their resources extracted by someone else rarely benefit from that extraction. Scotland should be powering our own ambitions. With plans like this cable and the reasons why it exists, we’ll only ever be allowed to power someone else’s ambitions instead.