The early closure of Longannet power station in Fife is a shocking blow to the workforce and the Fife economy. The causes are a toxic cocktail of company indifference, absurd regulations and an energy policy that's not fit for purpose.
Scottish Power has announced that it is to to close its coal-fired power station at Longannet early next year, rather than the original 2020 date. This comes after they failed to win a contract from National Grid to help maintain voltage capacity on the grid. The company didn't even bid for the earlier capacity auction from 2018. 270 jobs will go, plus those in the supply chain, including freight train operations and Scotland's struggling coal industry will suffer even more.
So why is it closing early?
Firstly, because of discriminatory transmission charges. The cost of sending electricity down the long distance transmission wires is heavily biased towards encouraging electricity generation near where it's consumed - mainly in the big English cities and London in particular. This is important because Scotland has always been an exporter of electricity, providing quality jobs and contributing revenues to the Scottish economy. This means that if you generate power near London you get a subsidy from the grid. If you generate it in Scotland or the North of England, you pay an additional charge. Ofgem's Project TransmiT has been reviewing those charges for years, but the changes will be too small and too late for Longannet. At best, its transmission costs next year will fall from £40m to £34m.
Secondly, we have company indifference. ScottishPower is owned by the Spanish energy giant Iberdrola, who have significant pressures on their limited investment funding. They have failed to invest in Longannet, either to make it IED compliant (reducing emissions) or put in a serious bid for Carbon Capture and Storage (CCS). It suits Iberdrola's purpose to highlight transmission charges because it diverts attention from their own failures. Former energy minister Brian Wilson described the relationship between the company and the Scottish Government in a recent column in the Scotsman. Lots of grand announcements, but precious little delivery.
Thirdly, we have UK and Scottish Government energy policy. A UK government implementing its hugely complex energy market reform that attempts to patch up market failure, badly. As for the Scottish Government's hopelessly unbalanced energy policy? Brian Wilson sums it up well:
"Now reality is closing in. The Scottish Government’s policy is based on crossing its fingers and hoping that hated nuclear power stations keep going till 2030. Cockenzie is closed. Longannet is on the way out. "Renewables" has turned out to be synonymous with onshore wind – with virtually none of the hardware which adorns our hillsides manufactured in Scotland."
We now have the previously unthinkable situation where Scotland relies on England to keep the lights on when the wind isn't blowing. As Tom Greatrex MP highlighted recently, in the three years from 2012 to 2015, Scotland relied on English power for part of 231 out of 1036 days, or one in five. For seven days in each year, Scotland imported electricity from England for a full 24 hour period.
Even with English electricity there will be a concern that we have enough generation capacity in Scotland. On Boxing Day, when wind generated less than 1% of the power from Scotland going into the grid, Longannet met 40% of our electricity demand through coal. When our two nuclear stations go as well, the position will be even worse.
The early closure of Longannet is the result of an energy market that isn't working for Scotland. Multi-national companies don't care where the power is generated, but we should because of the impact on jobs and the economy. Equally, governments need to recognise the value of a balanced energy policy that ensures a mix of generation capacity. That is the best guarantee that the industry in Scotland has of a long term future and importantly, our lights remain on.