A wholesale electricity market reform proposal is being considered by National Grid and Ofgem, which aims to access the low cost of renewable energy for the places where it is produced. Right now, the price of electricity is set by the most expensive fuel – gas – and most locations pay more or less the same price, regardless of how much power is produced in that area.
As Scotland has the most renewable capacity in the whole of the UK, it might seem that this system would benefit bill payers and companies based in the country.
But Alan Brown, the SNP’s transport, infrastructure and energy spokesman, said the move could backfire.
He explained to Express.co.uk: “At present it is unclear what the overall impact of a localized marginal pricing system would be.
“We all welcome any avenues that reduce costs, but this model could actually jeopardize renewable energy investment in Scotland.”
His comments come in response to an analysis of the model by expert Dr Simon Cran-McGreehin, head of analysis at the Energy and Climate Intelligence Unit.
He explained to Express.co.uk: “[Under] Localized marginal pricing, on occasion when there is a real imbalance between too much production and not enough demand, you provide signals so that customers are incentivized to use more.
“It could be mainly industrial customers… but also households. Smart meters and smart appliances increasingly have the ability to use more electricity when it is cheaper and more available.
“It could be overnight when demand is lower or when there is more wind.
“Taken to the extreme, if you had such strong signals and lots of cheap wind in Scotland and not enough capacity to get into England. You might see some industries moving or settling from Scotland rather than to England.
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But Mr Brown warned that locational marginal pricing could actually have the opposite effect.
He explained: “If the generators are known to create too much power and get paid much less, then it might not be economically viable to continue with the projects. It is clearly counterproductive. »
He later added: ‘Scotland is currently being hurt by the highest grid loads in Europe placed on generators. It seems unfair to potentially switch to a system which means generators get much lower tariffs for their energy production than elsewhere in the UK. Obviously, this will further divert investment away from Scottish projects.
“These aspects alone show how an independent Scotland can make better decisions about how energy infrastructure can be better managed to have a system that is truly designed to achieve net zero and encourage renewable energy generation where it is. is best placed for maximum efficiency.”
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If there are fewer incentives to invest in Scottish projects, this could therefore imply that instead of English companies setting up shop in the region, Scottish-based companies might seek to set up in places where investment is encouraged.
Mr Brown’s comments come after Scottish First Minister Nicola Sturgeon unveiled her blueprint for a second Scottish independence referendum this week.
Ms Sturgeon identified October 19, 2023 as the date of the vote, but the legality of pushing that through has been questioned.
Asked by journalists about this, the Prime Minister replied: “I want a legal and constitutional referendum. That’s what I’m focusing on right now.
“Scotland cannot and will not be in a position where its democracy is a prisoner of Westminster intransigence, so people will have that opportunity to make their views on independence known and that is what we will put in an election, which is clearly a legal process.”