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Publish Date : 16-Mar-2015

Recent weeks have seen much focus on whether Scotland will have the right balance of generation to keep the lights on as some of its older power stations start to close. Rightly there is an intense scrutiny of the system’s capacity to ensure that electricity supplies are secure. Today I appeared before the Scottish Parliament’s Economy, Energy and Tourism Committeeto discuss how SSE plays a part in Scotland’s energy mix.

Firstly, it’s important to stress that we operate within a single GB market with a single system operator and it is in this context that we should be considering security of supply. A power station in Wales or England can provide power to Scotland; just the same as a Scottish station can provide power in the south. That being said, it’s widely recognised that Great Britain’s capacity margins are reducing. As older stations come to the end of their life and inefficient stations start to be replaced by cleaner and more efficient plant, the UK Government, Ofgem and National Grid recognised there would be a pinch point in the short-term up to 2018.

They introduced tools and policies designed to address this and ensure that there is a broad mix of generation which will help keep the lights on, during periods of high demand. In the short-term, the Supplementary Balancing Reserve (SBR) ensures stations can be primed and ready to be called upon if margins become tight. In the medium to longer-term, the first Capacity Market auction held in December 2014 enabled the Government to procure about 85% of the capacity the UK needs for 2018-19. A further auction one year before the delivery period will procure the remaining capacity based on future demand forecasts. The subsequent annual auctions will continue to enable Government to deliver the security needed and the certainty the industry requires to invest in the future.

SSE is just one participant in the market. Only the UK Government and National Grid can see the whole picture of generation capacity and mix, transmission capacity and capability and system demand. SSE’s role is to be a responsible and prudent operator of the plant it owns and it takes this responsibility very seriously. As operators of Peterhead Power Station, the Scottish Parliament Committee was keen to hear from SSE on what part the station plays in Scotland’s energy infrastructure. Peterhead was commissioned in 1980 and has been a big part of the GB system since then. The plant was upgraded in 2000 with modern high efficiency gas turbine plant and should be capable of operating to 2030 and beyond. Its location in the north of Scotland has meant it has historically played an important role in voltage support in the region.

However, like all thermal plant in the UK, it does face economic challenges and uncertain revenues. Market conditions and high transmission charges have made it uneconomical for it to participate in the market currently. Whilst Project TransmiT will provide more cost reflective charging for all generators – including Scottish ones – it has been disappointing how long it’s taken to get to this stage. That being said, we welcome the changes and support a more equitable charging regime, particularly as energy markets across the EU continue to integrate with the majority of them paying no generator charges. Although the station has not been operating in the market since March 2014 it has demonstrated its ability to contribute to system security by fulfilling its obligations under the SBR contract which was in place over the winter months. National Grid also retains an option for a similar service to be provided next winter.

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