Energy is not just electricity. This may seem like a trite, somewhat geeky comment, but it is key to thinking about net zero targets and how energy is talked about by politicians, in the press and online. Almost every day, statements are made about the percentage of electricity from renewable sources, or energy generated by wind, and comparing different countries (generally Scotland and England), electricity costs, green levies etc etc.
The most important figure to remember is that electricity provided only 21.7% of Scotland’s total energy consumption in 2020. So, whenever commentators quote the very high proportion of electricity produced from renewable sources, 21.7% is the key figure to remember. Energy is clearly not just electricity.
The balance of total energy consumed is in heat (41% of the total with only 6.2% from renewable sources as the vast majority of households use either gas or oil for heating) and transport (21% of the total with only 5.9% from biofuels). Taking all energy uses, only 20.7% was from renewable sources.
Of course, for electricity the renewable impact is much, much greater but even here commentators obfuscate the numbers depending on their argument. Scotland generated 51.9TWh (terra watt hours) of electricity in 2020. Of this, 61.8% (32TWhr) was from renewables (wind accounting for 44.5% of total electricity generation with the balance from hydro, solar and waste) and a further 25.7% was from low carbon generation (nuclear). 88.1% of total electricity generated was from low carbon sources but this does include nuclear where Torness, the remaining power station, is due to close in 2028. It is also worth noting, this figure represents a huge change in the last decade increasing substantially from 19.0% in 2010.
To add another layer of complexity, Scotland generates significantly more electricity than it requires. From total generation of 51.9TWh in 2021, Scotland exported 17.7TWh of electricity through transmission links to England and the Moyle interconnector to Northern Ireland. We did import 1TWh of electricity resulting in net exports of 16.7TWh with an estimated wholesale value of £2.4 billion (which would of course be substantially higher this year).
And to add yet another layer of complexity, not all generated electricity actually ends up at a plug socket due to consumption by generators and losses. Last year Scotland actually used 28TWh of electricity.
So taking all this into account, Scotland generated somewhere between 13% of total energy consumption from renewable sources and 114% of its electricity consumption from renewable sources (being total electricity demand divided by total renewable electricity generated). So, which answer did you want?
Oh, and of course we can add in the further complication of when the electricity is actually generated. One might expect given the overcapacity in electricity generation that we would always generate sufficient electricity. However, as we all know, the sun doesn’t always shine and the wind doesn’t always blow. Indeed, we sometime have extended periods under high pressure systems where the whole country and surrounding seasons have little wind. This situation arose in Spring and Summer 2021 with estimated wind generation reduced by about 30%. Over the whole year, Scotland met its own demand from low carbon (renewables and nuclear) 67.2% of the time in 2021 compared with 83.6% of the time in 2020. This issue is of course well advertised particularly by those opposed to renewables and remaining vocal ‘climate sceptic’ lobby. However, it is remarkable that Scotland did meet its own demand 83.6% of the time in 2020 as, firstly, this was an increase from 9.1% a decade earlier, and secondly shows that with minimal improvements to long term storage, demand management and replacement of the nuclear power (a sizeable elephant in the room), the country could easily satisfy its own demand 100% of the time from low carbon.
What are the key conclusions of all these numbers to consider the next time someone throws out some numbers?
Firstly, low carbon generation is now very significant in terms of electricity usage and, with additional capacity and storage, could generate all the electricity we need for current demands. However, the next step towards Net Zero is to electrify as much as possible of the other energy usages, principally heat and transport. This sounds like a tall order. However, with heat pumps a proven technology (more of that in separate blog), electric cars and light vehicles, green hydrogen for heavier transport and a combination of electrification, batteries and green hydrogen for trains, it should, in principle be able to completely decarbonise heat and transport through electrification. In addition, we can add in the use of carbon capture and storage (CCS) for gas fired power stations and nuclear power to provide base load capacity and, at a smaller scale, local generation, be that solar panels on roofs or hydro schemes. Making some very big assumptions, the complete electrification of heat and transport would require additional installed capacity of 100GW (compared with 13GW already installed). The recent Scotwind award of licences for 25GW of offshore wind generation shows the scale of the challenge and the level of investment required but that this should be achievable if very challenging by 2045. This will also require huge investments in improving uptime on generation, balancing the grid, improved infrastructure as well as the softer issues every household will need to handle- how will a heat pump work compared to my existing gas boiler, how do I charge my car overnight, the costs of making the changes etc etc.
Another key issue, particularly with the current focus on cost of living, is the cost of generating renewable electricity. The last six months have shown how expensive electricity can be and, notwithstanding the price caps, how quickly prices can rise. However, despite the anti-Net Zero lobby’s claims, the price increases are almost entirely due to increases in the cost of gas. Wholesale prices make up about 35% of the cost of domestic electricity and the various environmental and social levies between 9-13%. As an aside, the levies cover a wide range of schemes including feed in tariffs and emissions trading but also the Warm Home discount and funding for insulation. Day ahead gas prices have increased from 20p/therm in June 2020, to 90p/therm in June 2021 and 150p/therm in June 2022. Over the same period, monthly average wholesale electricity prices have increased from £55/MWhr to £171/MWhr with £93/MWhr (of £112/MWhr) of this increase due to the increase in gas price. And although Scotland requires a relatively small proportion of electricity generated from gas (about 17%), it is the cost of the marginal therm of electricity (that is the last therm sold) that sets the price. And despite what some people may argue, as shown above, Scotland currently still requires the marginal therm to be generated from gas.
The cheapest forms of electricity generation globally are solar (probably likely to remain a relatively small component of Scottish generation) and onshore wind even when the gas price was at the level of two years ago. With the huge growth in offshore wind developments, the cost of electricity from these sources has also dramatically decreased with recent awards having contracts for difference at as low as £37.35/MWhr which is similar to gas fired generation at ‘standard’ gas prices and substantially less than at the current high prices. North Sea and West of Shetland gas can play a part in improving our security of supply and to some extent mitigating the effects of international gas prices and the carbon footprint of imported gas. However, as the North Sea is a very mature oil and gas province, with recent discoveries such as Jackdaw complex and challenging, this impact is marginal. There are of course costs associated with intermittency of generation and new infrastructure directly related to renewable electricity. However, the huge uncertainty in future gas prices and the carbon emissions associated with the use of gas, means that the case for increased renewable and low carbon electricity generation is absolutely compelling.
In summary, Scotland has done extremely well in almost entirely moving to low carbon electricity generation. However, the next stage of decarbonising heat and transport will require a mammoth investment in new generation capacity, new base load capacity to underpin renewable sources, storage, infrastructure and grid balancing amongst a range of other issues. The answer to the trilemma of cost, security of supply and zero carbon cannot be more hydrocarbons for electricity generation but low carbon generation.
Delivery of this decarbonisation also requires a huge change in the mindset of everyone in the country as to how we heat our homes, drive our cars and go about our daily lives. And to deliver this change requires leadership from government being clear on the costs and the prize.
Stuart Paton is an associate of Reform Scotland and the former CEO of Dana Petroleum plc