Energy companies deliver independent Scotland power bill warning
Scottish households could be left with higher power bills after independence to fund subsidies for wind and wave farms, the country’s major energy companies and the Government have indicated.
The Association of Energy Producers, which includes five of the so-called ‘Big Six’ power firms, questioned whether Scottish consumers alone could afford to continue supporting renewable power schemes north of the Border.
Meanwhile, the UK Government announced it will review the current regime of subsidies if Scotland votes for separation and challenged Alex Salmond to spell out how he would meet this cost following independence.
The First Minister’s plan for a massive expansion of green power projects relies on households in the remainder of the UK continuing to subsidise the schemes after separation as part of a single energy market.
But the power companies raised doubts over whether the English and Welsh “would be prepared to meet the additional costs of such policies”, potentially leaving Scottish consumers to meet the entire cost.
According to calculations by one of the world’s largest energy consultants, the annual subsidy for Scottish projects will increase to £2 billion by the end of the decade, adding £194 to the average power bill.
The association also confirmed the independence referendum is causing economic uncertainty for investors, a situation it said will continue until the ballot is staged and details of Scotland’s energy market finalised.
In separate submissions to the Commons Energy and Climate Change Committee, E. ON voiced fears over a separate Scotland joining the euro and the National Grid warned separation could create a “hiatus” in green energy projects.
The subsidy is currently added to all UK household power bills and the energy producers said a “key consideration” for investors is how this cost will be met following separation.
“While over a third of the financial support paid to renewables in the UK goes to projects in Scotland, only a tenth of the households in the UK are located in Scotland,” they said.
“This raises concerns about how the costs of support for renewables in Scotland would be recovered and met if Scotland was no longer part of the UK.”
The organisation suggested adopting a regime whereby households on both sides of the Border continue to share the “costs and benefits” of supporting green energy.
However, it said “difficulties” could arise over “the extent to which consumers would be prepared to meet the additional costs of such policies in the other country.” It questioned whether this arrangement was “desirable or practical”.
The Department of Energy and Climate Change confirmed Scottish separation would prompt a review of the current green energy subsidy regime and “energy prices and bills could be affected” north of the Border.
“There are concerns about how Scotland separated from the rest of the UK could afford the investment needed to support the level of deployment required to meet its very ambitious renewable targets, particularly if paid through a Scottish consumer base, but these are questions that the Scottish government needs to respond to,” its submission said.
SSE, formerly Scottish and Southern Energy, has already said the referendum is affecting its investment plans by creating “additional” risk. This placed pressure on Mr Salmond to bring forward his autumn 2014 timescale.
The producers’ association, which has just been rebranded Energy UK, also includes British Gas, EDF, Scottish Power and E. ON, delivered a similar warning.
“This uncertainty will last until the independence referendum and, in case of a vote in favour of change, until the details of the electricity market following independence have been finalised,” the energy producers said.
But a Scottish Executive spokesman dismissed the warnings. He said: “Scotland produces the cheapest renewable energy in these islands, and the reality is that the rest of the UK not only needs Scotland’s electricity to meet its own renewables targets but also to help keep the lights on south of the Border.”
By Simon Johnson, Scottish Political Editor The Telegraph
12 Apr 2012