(For official use only) PUBLIC PETITION NO. PE1188 Should you wish to submit a public petition for consideration by the Public Petitions Committee please refer to the guidance leaflet How to submit a public petition and the Guidance Notes at the back of this form. 1. NAME OF PRINCIPAL PETITIONER Nick Dekker 2. TEXT OF PETITION Nick Dekker calling on the Scottish Parliament to urge the Scottish Government to investigate the circumstances whereby it agreed that 60 hydro-power stations could be accredited for subsidy under the Renewables Obligation scheme and that generation capacity could be cut to below the 20megawatt qualification threshold at others to enable accreditation and whether, in the interests of electricity consumers, it will rescind these accreditations. 3. ACTION TAKEN TO RESOLVE ISSUES OF CONCERN BEFORE SUBMITTING THE PETITION I have contacted and have been in correspondence with AuditScotland, OFGEM, Scottish & Southern Energy PLC and ScottishPower PLC. Alex Neil MSP also corresponded with Scottish & Southern Energy. 4. ADDITIONAL INFORMATION See— “The war on climate change – A licence to print money?” “Subsidies and Subterfuge – Hydro-power and the Renewables Obligation” (also on www.swap.org.uk) “ROCs earned by Alcan, SSE and ScottishPower from 'old build' hydro, April 2002 to December 2007” (a report by the petitioners); “Renewable Energy Data for Scotland (Hydro), May 2008” Correspondence generally pertinent to the petition but esp to Question 3 OFGEM’s “Annual Reports on the Renewables Obligation” 2004 to 2008; Press releases and other material referred to in “The war on climate change – a licence to print money?” and elsewhere 5. DO YOU WISH YOUR PETITION TO BE HOSTED ON THE PARLIAMENT’S WEBSITE AS AN E-PETITION? 1 YES NO If “Yes” please enter a closing date for gathering signatures on your petition (we usually recommend a period of around six weeks). Please also provide at least one comment to set the scene for an on-line discussion on the petition, not exceeding ten lines of text. CLOSING DATE 30 August 2008 COMMENTS TO STIMULATE ON-LINE DISCUSSION If public money is given to a private company to encourage it to invest in projects deemed to be to the public benefit, there should be clear evidence that (a) the investment is for something the company would not have done on its own accord and (b) there is a clear and transparent equivalence between what is given to the company and what it invests. Neither test was met when the Scottish Executive agreed that already existing hydro-electric power stations could be accredited under the Renewables Obligation scheme. In practice, it meant (a) a reduction in hydro generating capacity and (b) the generators being paid 20 times over for their investment at a time of widespread fuel poverty. We are calling on the Scottish Parliament to investigate the decision and its financial consequences and to consider whether the subsidies should be withdrawn. 2 The war on climate change – A licence to print money? A petition calling on the Scottish Parliament to investigate the circumstances whereby the Scottish Executive agreed that extant hydro-power stations could be accredited for subsidy under the Renewables Obligation scheme, that generation capacity could be cut at others to enable accreditation and if it is in the interests of electricity consumers that the Scottish Government take steps to rescind the accreditations. EVERYONE IS aware that the mechanism for driving the development of renewable electricity generation in Scotland is the Renewables Obligation (Scotland) (ROS) and that it is one of several parallel schemes across the UK. Fewer grasp how these complex ‘carrot-and-stick’ regimes work.1 In essence, they offer an incentive to invest in approved types of generating plant by, on the one hand, making it compulsory to supply a proportion of electricity from renewable sources while, on the other, offering high levels of subsidy for doing so. Consultation on the schemes, which ran from March 1999 to March 2001, addressed the issue of a portfolio of small hydro installations, mostly in private hands and sometimes dating back to Edwardian times, which had fallen into disrepair or disuse and of how its owners might be enticed to bring it back into production. The key notion was that they could be accredited to the RO/ROS and treated as new plant if they were refurbished to an agreed standard or had been refurbished within the previous 12 years. In the run-up to the launch of the schemes in April 2002, the electricity supply sector was, for a variety of reasons, cash-starved. In spite of this, government and stakeholders agreed that existing ‘large’ hydro-power stations should, as a mature and profitable technology, be excluded from the subsidies regime: Large-scale schemes will be taken here as having an installed generating capacity of greater than 5 MW. The assumption is that large-scale schemes would be developed and operated by major electricity utilities. (May 1999) 2 While relatively well-established technologies such as large scale hydro and energy from waste will count towards achievement of the 10% target, they will be excluded from the Obligation. (October 2000) 3 The majority view on hydro power was that the Government is right to exclude large-scale hydro power from the Renewables Obligation. (March 2001) 4 Whitehall initially saw no reason why this situation should change and the (then) Scottish Executive presumably concurred. This was proper. Building a new hydro station does incur high up-front costs but most of these are in the dams, tunnels and infrastructure – the turbines are comparatively cheap. The capital cost of Scotland’s hydro stations was written off decades ago and, though they may have been expensive to build, they are cheap to maintain and particularly long-lasting. In operational terms, hydro is superior to other renewable sources such as wind because, being storable, it is available pretty well on demand and, because it can come on- and go off-line at short notice, it attracts above average prices. 1 Strictly speaking, the Renewables Obligation schemes are levies on electricity consumers, not fiscally-funded subsidies, but subsidy is the term generally used. The ROS is administered by OFGEM, not the Scottish Government. 2 DTI, New and Renewable Energy – Prospects for the 21st Century; Supporting Analysis, May 1999, pps 87 & 91. 3 DTI, ibid – Preliminary Consultation, October 2000, p 3, emphasis added. 4 DTI, ibid – Analysis of the Responses to the Consultation Paper, March 2001, p 6. Contrary to popular perception, neither the construction nor the upkeep of any station in the Scottish hydro portfolio was ever state-funded or subsidised when in public ownership. Historically, Scotland’s hydro power had hitherto been self-sufficient. However, by 2001, generators were pressing the government to subsidise the technology for the first time ever and continued their lobbying after public consultation closed. Blaming ageing plant and poor trading conditions, Scottish and Southern Energy even threatened to ‘de-commission’ stations unless a subsidy mechanism could be found for all but the very largest of its stations. 5 In the event, one was – two significant changes were included in the Renewables Obligation regulations that came into force on 1 April 2002. Neither had been the subject of public consultation. The first change – lowering the bar The public was at least told about this change, albeit post hoc. It raised the limit below which the existing hydro power schemes qualified for subsidy, at first from 5 MW to 10 then, later, from 10 MW to 20. In March 2001, the DTI had reported that: Eligible supplies ...may exclude hydro-electric schemes . exceeding 10 MW since large scale hydro has long been established in the market and is in a position to compete in the open market with fossil-sourced energy. 6 By June, the limit had again been increased: We, therefore, propose to exclude existing stations with a declared net capacity (DNC) of over 20 MW from the Obligation, but to include any stations first commissioned after the date of the Order is made, regardless of capacity. 7 Although no rationale for these changes has been offered, refurbishing a station to secure accreditation was certainly an enticing investment. The owners had only to replace, or have recently replaced, the moving parts in a turbine, something which is (self-evidently) done from time to time in any event. The move costs little but adds at least thirty years to the life of the plant – roughly the same as the life of a thermal power station and probably twice that of a wind turbine. It was justified on the grounds that refurbishment would restore electricity output to original levels and, in some cases at least, increase it due to design improvements. Power companies, politicians and others claimed efficiency gains of up to ten per cent.8 Even if this figure is accepted (it can readily be shown to be exaggerated), it means that the subsidy per MWh of additional generation capacity created by refurbishing hydro is, by definition, ten times higher than that paid to those who develop new capacity from scratch. Audit Scotland reported that the issue was outwith its remit and it fell to the petitioners and to politicians to approach the major hydro generators for details of what they spent on refurbishment to secure accreditation and on how this compared to the financial benefit they received. Although they declined to provide this ‘equivalence information’, a reasonable estimate of both can be derived from data in the public domain, from general industry knowledge and from press reports on the refurbishment programme. The petitioners calculate that: 5 See, e.g., House of Commons Science and Technology Committee, Proceedings, 21 March 2001.