Scotland has bold ambitions for renewable energy, while the water sector has a seven-year march on competition. Utility Week takes a look at what is going on in the Scottish energy and water sectors.

ENERGY

Scotland is a renewable force to be reckoned with. Renewables were the single largest contributor to electricity generation in Scotland in 2015 – higher than nuclear generation (33 per cent) or fossil fuels (28 per cent). The government wants to go further, generating the equivalent of 100 per cent of its electricity consumption and 11 per cent of heat consumption from renewable sources by 2020.

Onshore wind has seen huge success, exceeding the country’s energy demand on two days in September. The country also boasts 25 per cent of Europe’s offshore wind resources and is home to 100 per cent of hydroelectric plants with planning permission in the UK.

Despite the prosperity of the country’s renewable resources, Scotland’s energy system is not without its challenges. Energy Action Scotland (EAS) is calling on the Scottish government to negotiate a better deal for rural consumers through regulation. In the north of Scotland customers face higher prices because the area’s rural and remote nature means they pay higher distribution costs. The EAS claims the difference between here and elsewhere is 2p/kWh.

EAS director Norman Kerr tells Utility Week: “This is not a new problem. It’s one we’ve had for the past 50 years, so it may be that we need a new and innovative solution to it.”

Fuel poverty is a major issue and in June 2016 the Scottish government admitted it would not meet its target of ending fuel poverty in Scotland. The Scottish government has a statutory duty under the Housing (Scotland) Act 2001 to “ensure, so far as reasonably practicable, that people are not living in fuel poverty in Scotland by November 2016”. But the most recent official figures, for the year 2014, show that around 35 per cent of Scottish households are in fuel poverty.

For huge parts of Scotland, particularly along the west coast and the highlands, there is no gas infrastructure. Many homes have electric heating, and therein lies another issue. The calculations of energy efficiency schemes assume that electric heating is 100 per cent efficient, so no improvements can be made and the consumer is unable to switch over to gas to get the carbon saving.
So what’s next for Scotland’s energy system?

The EAS is urging government to shape regulation for the private rented sector and place an energy efficiency standard on it. A similar standard is in place in England, which requires a property to be above a certain level of energy efficiency before it can
be let.

The organisation “applauds” the government for committing funding to the national infrastructure priority and strategic fuel poverty policy, but says it must now “draw a route map” about what it can reasonably suggest to the Scottish public for the next fuel poverty targets – and commit the funding to achieve that.

A WWF Scotland report concluded that Scotland could be free of gas, coal or nuclear power stations by 2030 and “maintain and even build on its position as a net power exporter”. The government will need to push through new policy to resolve the energy dilemma in rural Scotland, but the future for renewables looks bright and with government support, renewable sources in Scotland can continue to be harnessed.

WATER

The water sectors in Scotland and England face many of the same challenges, such as climate change, population growth and ageing assets. However, there are also some stark differences.

One of the biggest is that while England is served by 21 commercial companies, in Scotland there is only publicly-owned Scottish Water. Unmetered domestic customers pay for their water via their council tax bill.

Competition exists in the non-domestic retail market, and has done since 2008. Scottish Water is the incumbent wholesaler, while retailers compete for customers. The largest supplier is Business Stream, Scottish Water’s business retail arm.

There are a number of other retailers in the Scottish market, including Castle Water and Clear Business Water, as well as some of the English incumbents.

The Central Market Agency is Scotland’s version of MOSL, and facilitates the transfer of customer information between suppliers. It also calculates the money owned by each supplier to Scottish Water for wholesale services.

There are more than 130,000 business customers in Scotland eligible to choose their supplier, while the soon-to-open English market will have more than 1.2 million eligible customers. Many believe that switching in England will happen at a much higher rate than it currently does in Scotland.

The economic regulator for the Scottish market – Wics – has much the same task as Ofwat in England and Wales. Wics chief executive Alan Sutherland says he does not necessarily agree with introducing lots of markets into the sector in the same way as Ofwat wants to in England and Wales.

Scotland as a whole has an ambitious target to reduce emissions of all greenhouse gases by 42 per cent by 2020. In July, Scottish environment secretary Roseanna Cunningham announced that the country’s emissions had fallen by nearly 46 per cent between 1990 and 2014, surpassing its target earlier than expected.

Scottish Water requires around 440GWh of electricity annually to operate its 2,000 treatment works and 60,000 miles of pipes. In the past two years, the company has doubled the amount of renewable energy that can be generated at its treatment works and in its water mains. Several of its treatment works can be considered self-sufficient.

Another big challenge facing many water companies is population growth. The UK’s population is expected to rise by ten million by the 2030s and another ten million by around 2050.  

Boosting the resilience of the network and of Scottish Water’s ability to meet demand, leakage has been reduced by more than half since 2006, meaning Scottish Water has been able to connect more customers without having to build new treatment facilities.

Coupled with this, water quality is at an all-time high. Speaking at WWT’s Water Scotland conference in Glasgow, Cunningham said drinking water quality is at its highest level ever in Scotland, with 99.92 per cent of samples meeting strict standards.

“Environmental compliance has also improved – in 2006 there were more than 1,000 pollution incidents, and now there are 260,” she said. “Customer service scores are excellent too. In 2006, Scottish Water’s customer satisfaction score was poor compared with the rest of the UK, now it is leading.”

Q&A: Peter Farrer, Chief operating officer, Scottish Water

We ask about Scottish Water’s stance on competition, renewables and Brexit.

Q: What do you see as the main difference between the Scottish and the rest of the UK water markets?

A: Scottish Water is a unique, publicly-owned utility. Our surplus is reinvested to support delivery of services to customers. We’re accountable to the Scottish parliament, and have one-to-one economic regulation, whereas in England there are multiple water companies. But generally speaking we work in similar ways and, like our colleagues elsewhere in the UK, are very customer-focused.

On the retail side, the market for non-household customers has been in place in Scotland since 2008 – and is becoming increasingly competitive – while the market in England opens fully next year.

Q: How does customer charging work in Scotland?

A: Household customer bills are collected by local councils on our behalf using the council tax payment system. For the vast majority of households, their bill is based on their council tax band.

Our household customers continue to benefit from an average household charge which is among the lowest in Great Britain – and it’s helping to pay for £3.5 billion of investment between 2015 and 2021 to further improve services and support jobs in Scotland’s economy.

For business customers, their key billing relationship is with the retailer/licensed provider, which in turn pays Scottish Water as the wholesaler.

Q: Do you think environmental policy in Scotland will be impacted by Brexit?

A: Like many other companies in a range of sectors, we are observing developments with interest. Clearly there is a significant amount of environmental legislation which applies to the water industry. But the Scottish government has made it clear that it will not change environmental protection standards as a result of Brexit, and Scottish Water has a clear plan to deliver for our customers and protect the environment, with plans and priorities set to 2021.

Q: Does Scottish Water have plans for further renewable energy and onsite generation?

A: In the past three years, we have doubled our renewable capacity and diversified our technology to include hydro, wind, photovoltaic solar and combined heat and power. Our commercial arm, Horizons, also operates a successful food recycling plant.
Our aim, by 2018, is to facilitate more than double the amount of energy we consume through renewables.