The Scottish Parliament and Scottish Parliament Infor mation C entre l ogos .

SPICe Briefing

Energy 15 March 2017

17/17

Alasdair Reid

This briefing provides an introduction to key themes and global trends in the energy sector. It addresses reducing demand, renewable technologies, energy for electricity, transport and heat.

Whitelee Windfarm. Source: Scottish Power Renewables

Peterhead Power Station. Source:SSE

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CONTENTS

EXECUTIVE SUMMARY .............................................................................................................................................. 3

BACKGROUND............................................................................................................................................................ 5

KEY THEMES............................................................................................................................................................... 7

ENSURING SECURE AFFORDABLE ENERGY SUPPLIES .................................................................................. 7 ENVIRONMENTAL IMPACTS ................................................................................................................................. 9 DECOUPLING AND DEMAND REDUCTION ........................................................................................................ 10

RENEWABLE ENERGY ............................................................................................................................................ 11

ELECTRICITY GENERATION ................................................................................................................................... 15

FOSSIL FUELS ...................................................................................................................................................... 16 Coal .................................................................................................................................................................... 16 Natural Gas ........................................................................................................................................................ 17

NUCLEAR .............................................................................................................................................................. 17 FURTHER RELEVANT ISSUES ............................................................................................................................ 18

Carbon capture and storage .............................................................................................................................. 18 Electricity network .............................................................................................................................................. 19 Cost, efficiency and load factor projections ....................................................................................................... 20

ENERGY FOR TRANSPORT ..................................................................................................................................... 22

ENERGY FOR HEAT ................................................................................................................................................. 23

Unconventional gas ............................................................................................................................................ 24

SOURCES .................................................................................................................................................................. 26

RELATED BRIEFINGS .............................................................................................................................................. 32

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EXECUTIVE SUMMARY

Energy can be thought of as a system, e.g. fuel burned in a car drives the engine and transports goods or people. Electricity is one of a number of different forms of energy; it is not a primary source. The rate of global energy consumption continues to rise, albeit at a reduced rate, and the wellbeing of most societies still relies predominantly on the availability of cheap fossil fuels. These however produce greenhouse gases (GHG), which play a significant role in changing the climate.

In recent years, common approaches to energy management have centred on developing a framework which ensures energy security, affordability, and tackles the environmental impacts of burning fossil fuels, known as the energy trilemma.

A key way to ensure energy security and maintain high standards of living is to reduce energy usage, as well as decarbonising the energy that is used. This is known as decoupling, and there are signs that this has started to happen through increasing output from renewable energy, as well as improvements to energy efficiency.

Many commentators and analysts believe that with consistent policy support, renewable energy sources can contribute substantially to human well-being by sustainably supplying energy and playing a part in stabilising the climate. However, to make this happen, the UK and the rest of the world must address key technical, social, environmental, economic and political issues. The Scottish Government considers the development of renewables to be particularly important; and their promotion, in particular to generate electricity, has increased markedly in the past decade. However, it remains a small part of the overall energy mix, amounting to only approximately 3% of total Scottish energy use in 2013.

Electricity is estimated to account for 22% of overall energy use in Scotland. Within this, in 2015, nuclear accounted for around 35%, coal for 17%, and gas for 4%. At present, the main form of renewable generation in Scotland is electricity from onshore wind, and hydro; however, there is expected to be further deployment of offshore wind and tidal generation in the next few years. The most recent figures show that renewables accounted for 59.4% of the gross annual consumption of electricity in 2015. There are nevertheless limits to the capacity of renewables; including visual intrusion; access to and expense of using electricity networks; expense of development to commercial deployment; and planning constraints.

The transport sector is thought to account for approximately 25% of total energy used. The distances travelled by all modes of motorised transport have risen in the last 40 years, and the vast majority of this growth is based on the use of fossil fuels. For GHG emissions and economic growth to be effectively decoupled, almost complete decarbonisation of road transport by 2050 will be required. Technological improvements alone are not thought to be sufficient to reduce emissions on the necessary scale, therefore behavioural change is vital.

Energy for heat accounts for approximately 53% of Scotland’s total usage, and that is further split between industrial and commercial (57%), and domestic (42%). Gas is the main fuel for heating, used by 79% of Scottish households. In the (mainly rural) areas off the gas grid, the heat market is fragmented with a large number of oil and LPG users. For GHG emissions and economic growth to be effectively decoupled in the UK, a largely de-carbonised heat sector is required by 2050 through a combination of reduced demand and energy efficiency, together

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with a massive increase in the use of renewable or low-carbon heating. One of the challenges of delivering renewable heat energy is the difficulty in transporting it. Typically in the UK, heat is generated on individual premises, though in other European countries local and district heat networks are common, and it will be necessary to replace the gas in the grid with low carbon alternatives.

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BACKGROUND

Energy comes from a number of different sources, and travels many different pathways. For instance organisms in the food chain break down materials which have absorbed and transformed the sun’s heat and light, releasing further chemical energy into the body which allows movement and action; crude oil is extracted from the earth and refined into fuel which is burned in a car to drive the engine allowing goods and people to be transported; or the wind rotates blades and drives turbines which generate electricity allowing for a kettle to be boiled or a train powered.

Energy cannot be created or destroyed; it can only be transferred from one form to another, however when this takes place only part of it can usefully be used. Figure One shows the path of energy through a power station, as it is transformed into electricity and transferred to homes, offices and businesses through the transmission and distribution network. As the energy spreads out it becomes more difficult to use for further transformations, therefore the greater the percentage that can usefully be used by any device the more energy efficient it is. As can be seen, there are often considerable losses as energy is transformed along a pathway (PME 2010).

Figure One: Energy Flows

Terminology can be an off-putting part of energy debate. Common phrases include:

Decentralised energy: small scale, sourced locally, and makes full use of heat (if generated) e.g. solar, or small scale electricity generating plants from renewable sources where the heat is used for homes or community facilities in the vicinity.

Embodied energy: that which goes into, for example, constructing a building, or making a vehicle. Often the energy going into making or producing something can account for a large percentage of the energy use the item will be responsible for throughout its life. It is also sometimes known as the carbon or energy balance.

Primary energy: generally considered to be that which is found in nature, and has not been subjected to any (or minimal) transformation or conversion process. It is energy contained in raw fuels as well as other forms of energy received as input into a system; e.g. oil, gas, coal, nuclear energy, biomass, and hydroelectricity.

Thermal generation: used to describe a power plant which is steam driven. Water is heated, turns into steam and spins a turbine which drives an electrical generator (see Fig. One). A number of different fuel sources can be used e.g. coal, gas, oil, nuclear, wood or waste products. A large percentage of heat energy is often lost in this process.

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Modern economies have, and continue to be, built on their ability to source affordable energy. Figure Two (BP 2016) shows that global consumption of primary energy continues to rise, albeit at a reduced rate – amounting to 1% in 2015; this was the slowest growth rate since 1998 other than the decline in the aftermath of the financial crisis. Cheap energy sources with high carbon content (e.g. coal, oil and gas) have traditionally been most in demand, and while they continue to be the most used they are finite, and increasingly difficult and expensive to source, they also have significant environmental impacts.

The World Energy Outlook (International Energy Agency (IEA) 2016a) notes that non-OECD1 countries account for all of the projected increase in global energy demand to 2040, with demand in OECD states decreasing; the IEA states:

[…] a 30% rise in global energy demand to 2040 means an increase in consumption for all modern fuels, but the global aggregates mask a multitude of diverse trends and significant switching between fuels. Moreover, hundreds of millions of people are still left in 2040 without basic energy services. Globally, renewable energy […] sees by far the fastest growth. Natural gas fares best among the fossil fuels, with consumption rising by 50%. Growth in oil demand slows over the projection period, but tops 103 million barrels per day (mb/d) by 2040. Coal use is hit hard by environmental concerns and, after the rapid expansion of recent years, growth essentially grinds to a halt. The increase in nuclear output is spurred mainly by deployment in China.

As can be seen below (BP 2016), oil accounted for 32.9% of global primary energy consumption in 2015, followed by coal at 29.2%, natural gas at 23.8%, hydroelectricity at 6.8% and nuclear at 4.4%, and other renewables at 2.8%2.

Figure Two: Global Primary Energy Consumption

1 Organisation for Economic Cooperation and Development

2In Scotland, official figures for total energy consumption are classified slightly differently, however for 2014 they

show that petroleum products accounted for 43.5% of energy consumption, natural gas at 32.5%, electricity at

17.9%, coal at 1.2%, bioenergy and wastes at 4.2%, and other manufactured fuels at 0.6% (Scottish Government

2017a).

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KEY THEMES

In recent years, common approaches to energy management have centred on developing a framework which ensures energy security, affordability, and tackles the environmental impacts of burning fossil fuels. Commonly known as the energy trilemma, the World Energy Council (WEC) (2015) provides the following definitions, and Figure Three:

energy security - a country’s ability to meet its current and predicted energy demand

energy equity - the accessibility and affordability of energy across the population

environmental sustainability - achievement of supply of renewable or low carbon forms of energy

Figure Three: Energy Trilemma

This section provides background information on a rapidly changing and increasingly complex energy landscape where the interaction of a number of converging technologies “will affect how we travel, how we live, the way our cities and houses are designed, our fuel supply and attitude to energy efficiency, and even how we interact” (Energy in Demand 2016).

ENSURING SECURE AFFORDABLE ENERGY SUPPLIES

Ready, easy and relatively cheap access to energy sources such as gas and oil have been taken for granted in the developed world for decades; in the UK this is mainly as a result of indigenous fossil fuel reserves. However, the uneven global distribution of energy supplies has also led to significant vulnerabilities (IEA 2012). Energy in Demand (2015) states:

Power transforms lives in many ways. Households can have access to clean water, and communications systems can link the most remote villages to web-based health systems. Most important of all, accessible power can help create productive enterprises and the potential for exchange and trade.

At present, nearly 1.1 billion people worldwide lack access to electricity and more than 2.6 billion rely on dung and woodfuel for cooking. Over 95% of these people are located in Asia and sub-Saharan Africa (Global Diplomatic Forum 2016).

Renewable energy resources and significant opportunities for energy efficiency exist over wide geographical areas, in contrast to fossil fuels, which are concentrated in a limited number of countries. Rapid deployment of renewable energy and energy efficiency, and technological diversification of energy sources, can lead to global energy security and provide broad economic benefits (IEA 2012).

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The global geo-politics of fossil fuel supply and demand is complicated, and has meant that some countries (e.g. Saudi Arabia and Russia) with secure, abundant and accessible resources of oil and gas have become extremely rich and politically powerful. Energy prices have been volatile for the last decade, and recent slight recoveries in oil and gas prices contrast significantly with the historic highs of 2008 and 2011; the price of UK domestic gas and electricity has been relatively stable over the past six years after increasing steadily through 2000-2008. There have been some price cuts, but in general these have been smaller than the price rises (House of Commons Library 2016a). Therefore, the rapid deployment of renewable energy (which benefits from free natural resources, and falling capital costs) and increased investment in energy efficiency is considered to be paramount (WEC 2015, IMF 2015).

As previously noted, on a global scale, fossil fuels are expected to maintain their dominance to 2040, however renewable sources are also fast becoming a viable alternative, and the IEA (2016a) predicts that “nearly 60% of all new power generation capacity to 2040 […] comes from renewables”, furthermore:

[…] by 2040, the majority of renewables-based generation is competitive without any subsidies. Rapid deployment brings lower costs: solar PV is expected to see its average cost cut by a further 40-70% by 2040 and onshore wind by an additional 10-25%. […] Subsidies to renewables are around $150 billion today, some 80% of which are directed to the power sector, 18% to transport and around 1% to heat. With declining costs and an anticipated rise in end-user electricity prices, by the 2030s global subsidies to renewables are on a declining trend from a peak of $240 billion. Renewables also gain ground in providing heat, the largest component of global energy service demand, meeting half of the growth to 2040.

Signs of this transition to renewables are already being seen, for example India is expected to significantly increase its solar power capabilities by 2020, with their Energy Minister announcing that solar electricity would become cheaper than that from coal, in part because of India’s doubling of production taxes on coal (Climate Home 2016). Deutsche Bank (2015) reports that capital costs for solar have fallen by 60% in the past four years and could drop by a further 40%, again predicting that solar investment would overtake coal by 2020.

Closer to home, it has recently been reported that UK solar panels produced more electricity than coal over a 24-hour period for the first time in early April 2016 (Carbon Brief 2016a); 4% of total demand was generated by solar during that period, up on the 3% provided by coal. The pattern was repeated again the following day when solar and coal supplied 6% and 3% of demand respectively. Similarly, the Guardian (2016a, 2016b & 2016c) reports that in May 2016 the amount of electricity generated from coal in the UK fell to zero several times in one week. It is thought to be the first time the UK has been without electricity from coal since the world’s first centralised public coal-fired generator opened in London in 1882. On Sunday 6 August 2016 wind energy is reported to have provided 100% of Scotland’s electricity needs, and on Christmas Day 2016 more than 40% of electricity generated in the UK came from renewable sources, the highest ever, compared with 25% on Christmas Day in 2015, and 12% in 2012.

International oil prices began falling in 2014, due in part to a slowdown in global demand as well as a continued high supply from OPEC3 and other producers. The price of Brent crude fell from over $100 per barrel in summer 2014 to $55 in December 2014. By the end of 2015 the price had fallen below $40 per barrel. Oil prices have fluctuated considerably since the 1970s and there is uncertainty over future oil prices, with the IMF (2015) stating:

3 Organisation of the Petroleum Exporting Countries

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Futures markets imply an increase in Brent oil prices to some $75 a barrel in 2020, but recent experience—including the Brent price rally to about $65 a barrel in April—suggests there may be considerable volatility around this upward trend.

The costs of gas in Europe and therefore electricity have been closely linked to the basic cost of unrefined oil for many years, although with the development of more open trading hubs, particularly in Norway, UK and Netherlands, this is diminishing (Reuters 2013).

ENVIRONMENTAL IMPACTS

The burning of fossil fuels and subsequent release of greenhouse gasses (GHG) into the atmosphere is widely recognised as a key contributing factor to the rise in average global temperatures, known as climate change. In December 2015 the Paris Agreement (UNFCCC 2015) was adopted under the United Nations Framework Convention on Climate Change (UNFCCC). It states that global average temperature rise should be limited to “well below” 2oC and includes a commitment to “pursue efforts” to limit the temperature increase to 1.5oC above pre-industrial levels. The agreement also states that in the second half of this century “net-zero emissions” must be achieved, i.e. the amount of emissions produced must balance with the amount that can be absorbed each year. Many countries have adopted specific greenhouse gas reduction goals and the UK and Scotland have passed legislation that commits them to cut emissions by 80% by 2050.

The IEA (2016a) states:

The Paris Agreement on climate change, which entered into force in November 2016, is at its heart an agreement about energy. Transformative change in the energy sector, the source of at least two-thirds of greenhouse-gas emissions, is essential to reach the objectives of the Agreement. The changes already underway in the energy sector, demonstrating the promise and potential of low-carbon energy, in turn lend credibility to meaningful action on climate change. Growth in energy-related CO2 emissions stalled completely in 2015. This was mainly due to a 1.8% improvement in the energy intensity of the global economy, a trend bolstered by gains in energy efficiency, as well as the expanded use of cleaner energy sources worldwide, mostly renewables.

However, in spite of this positive progress, efforts are not yet considered adequate to move the world onto a pathway consistent with the climate goal outlined above. Countries are generally on track to slow the projected rise in global energy-related CO2 emissions, but not nearly enough to limit warming to less than 2°C.

The IEA (2016a) notes that the “2°C pathway is very tough”, and that the “road to 1.5°C goes through uncharted territory”. The global investment in the energy sector needed to limit temperature rise to below 2oC will require a major reallocation of investment capital going to the energy sector and moving away from fossil fuels towards renewables and other low carbon investments in nuclear and carbon capture and storage (CCS). The IEA (2016b) considers that to achieve many of the targets set in their Paris Agreement pledges an investment of $13.5 trillion is required in energy efficiency and low-carbon technologies – 40% of total energy sector investment to 2030.

The IEA, in a special report on Energy and Climate Change (2015a) highlights five “Bridge Strategy” measures which could help achieve an early peak in total energy-related GHG emissions, at no net economic cost; including: improving energy efficiency in the industry, buildings and transport sectors; phasing out the use of the least-efficient coal-fired power plants; further boosting investment in renewables; gradually phasing out global fossil fuel subsidies; and reducing methane emissions from oil and gas production.

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The energy industry is also considered to be a leading source of air pollution, which is regarded as the world’s largest single environmental health risk, air pollution was estimated to cause 3.7 million premature deaths worldwide in 2012 (WHO 2014). The SPICe Briefing on Air Quality in Scotland provides further details (O’Brien 2016).

DECOUPLING AND DEMAND REDUCTION

Prices have been relatively stable in recent years, nevertheless energy remains a significant expense for many consumers and global demand, whilst fluctuating is still on an upward trend; it is therefore widely recognised that the best way to reduce economic and environmental costs is to reduce the amount of energy used in key sectors4.

For many countries, the modern energy policy panacea is therefore considered to be one where energy use declines sharply, but economies continue to grow and the environment is improved or remains healthy. This concept is known as decoupling the market from energy use. Demand reduction through behavioural change, improving the efficiency of buildings, vehicles, and low carbon electricity production is considered fundamental to effective decoupling (IEA 2015a).

In 2014 and 2015 global GHG emissions decoupled from economic growth, these are attributed largely to reductions in coal use in both China and the USA, alongside an increase in new renewable electricity generation (IEA 2016b). Figure Four gives more detail (IEA 2016b):

Figure Four: Global Energy Related CO2 Emissions

This decoupling has been described as “acute” in OECD countries where CO2 emissions held steady in 2014 despite economic growth. This is the first worldwide decoupling in the 40 years since the IEA started collating this information, and is considered to be an “historic shift” (IEA 2016d).

Whilst this headline announcement has been cautiously welcomed, it does not yet constitute a stable long-term trend; analysis of these figures has highlighted that they relate solely to energy, not overall emissions e.g. from deforestation and international aviation or shipping; nor do they include methane (a significantly more potent GHG than CO2). Also, some of the data may be based on net territorial emissions rather than total consumption emissions and not include for example, consumer goods and components made in China (outwith the OECD) and products

4 In Scotland, industrial and commercial use accounted for 42% of total energy in 2014, the domestic sector

accounted for 31%, and transport for 28% (DECC 2016a).

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such as steel from India (degrowth 2015; Heinrich Böll Foundation 2015; Guardian 2016d). Degrowth (2015) draws the following conclusions:

There is some progress on switching to renewable energy in much of the world’s economy. There are also signs of a reduction in use of the dirtiest fossil fuel, coal (although this may be a short term anomaly)

Whilst renewables have increased their share, and expansion of fossil fuel use has slowed, fossil fuel usage is still increasing, even if the rate of increase is slowing

Focussing on energy generation and use is important; however there are other factors critical to GHG transactions including de-forestation, emissions from agriculture, release of trapped polar methane, reduction of ocean capacity to store carbon dioxide etc.

RENEWABLE ENERGY

Renewable energy can be defined as that which uses a source which renews itself naturally. Renewables can be used for a number of purposes, including generating electricity, heating, and for transport.

The promotion of renewables, in particular for the generation of electricity, has increased markedly in the past decade. However it remains a small part of the overall energy mix. In Scotland, renewables amounted to only approximately 3% of total energy production in 2013 (Scottish Government 2016a), however because of the increasing importance placed on these technologies by governments, they are discussed separately in this section.

The main renewable sources and some relevant Scottish examples are:

Sun Driving force for all life on earth, the sun can be harnessed by simply ensuring buildings are positioned to maximise warmth from the sun and daylight; solar panels can be used to heat water and space; electricity can be generated directly from the sun using ‘photovoltaic cells’. Construction began on a 14 megawatt (MW) installation, said to be Scotland’s largest solar farm, at the Carse of Gowrie in January 2016 (BBC News 2016a).

Wind Extremely efficient in terms of turning energy into electricity, wind power is harnessed using turbines, both on and offshore. Denmark has made extensive use of the technology, with relatively high levels of employment in the sector. Scotland has an excellent wind resource although intermittency of supply and visual intrusion can pose problems. Whilst intermittency of supply is currently considered to be a constraint, the development of smart networks presents significant possibilities. An intelligent distribution network can create considerable efficiency gains, predict usage load levels on the system and (together with smart meters) deliver price signals encouraging consumers to shift demand from peak periods. Smart technology is also likely to be able to manage appliances remotely to help balance the system at peak times (Smart Energy 2016). Wind power is the most widely deployed renewable technology in Scotland, ranging from single turbine installations e.g. in the Orkney Isles to 215 turbines at Whitelee south of Glasgow (Orkney Sustainable Energy 2016, SPRenewables 2016).

Freshwater The oldest commercially harnessed source in Scotland, hydro-electric power involves using water to power turbines. Whilst many of the prime sites in Scotland are already in use, a development at Glendoe near Fort Augustus has been generating up to 100MW of electricity since 2012 (SSE 2016a). Consent for

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a 600MW scheme at Coire Glas in the Great Glen was granted in 2013 however a final investment decision has yet to be made due to commercial and regulatory challenges (SSE 2016b), a number of other smaller scale hydro developments have also been consented in recent years.

Waves Wave energy devices use the motion of water to drive turbines that generate electricity. Some designs capture energy closer to the shoreline, whilst others are designed for deeper waters. Following some difficulties finding development funding, and the subsequent entry into administration of two of Scotland’s key companies, the Scottish Government founded Wave Energy Scotland, designed to accelerate the development of wave energy technology. Relevant devices have been tested at the European Marine Energy Centre (EMEC) in Orkney. EMEC is a Scottish Government supported grid connected test site, where environmental conditions are monitored and devices verified against industrial standards.

Tides Natural sea currents can be harnessed to generate electricity through underwater turbines in tidal streams. Tidal stream generators function in a similar manner to wind turbines, and have been designed to work both in shallow and deeper waters. Scotland has an excellent tidal resource, and Edinburgh based Nova Innovation has recently exported power to the grid for the first time from its Shetland Array Project (Nova 2016).

Biomass This is material derived from living or recently living biological organisms e.g. wood. It is often used in thermal electricity generation, or purely for space heating. A 65MW Combined Heat and Power (CHP) plant started generating in Markinch in 2014, and is fuelled by circa 450,000 tonnes of biomass per annum – approximately 90% is recovered wood waste and the remainder virgin wood sourced from sustainably managed forests (Power Technology 2016). Many other small to medium scale biomass boilers have been installed in domestic and commercial properties (Glendevon Energy 2016).

Geothermal This is the energy contained as heat in the Earth’s crust. It can be harnessed and used for heating purposes. It can also be harnessed for on-site generation through the use of heat pumps. This renewable source has not been significantly developed in Scotland; however a number of feasibility studies have been, or are being carried out (Town Rock Energy 2014).

Other potential renewable sources include:

Hydrogen Hydrogen can be used to store surplus energy generated from a number of sources, which can then be used later. There are two ways to produce hydrogen - one by hydrolysis of water which is very energy intensive, therefore needing lots of renewables to make it low carbon, or by separating flue gases from burning fossil fuels. The energy hydrogen can carry can then be deployed through fuel cells and other means.

Hydrogen demonstration projects currently being supported in Scotland include the Levenmouth Community Energy Project, and Orkney Surf ‘n’ Turf (Local Energy Scotland 2016).

Biofuels Biofuels are derived from biomass composed of recently living organisms or their by-products. The two main types are biodiesel and bioethanol, and the EU is currently trying to increase the volumes of these blended into fossil fuels for transport. Argent Energy has been producing biodiesel near Motherwell since 2005 (Argent Energy 2016).

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Waste Waste products can be burned directly to produce electricity, or organic waste sent to anaerobic digestion (AD) plants which produce gas. In recent years waste regulations have led to improved recycling rates, and significantly less waste going to landfill. Subsequently, the use of AD for food (and other organic) waste has increased. Debate surrounds whether combustible waste should be supported as a renewable energy source. For proponents, it solves two problems at once – reducing residual waste sent to landfill, and reducing emissions from the burning of fossil fuels; however others remain concerned about emissions and whether it discourages recycling or waste prevention. In Lerwick, an energy from waste facility treats about 21,000 tonnes of residual waste per year as well as supplying over 900 domestic, commercial and public buildings with heat (SEPA 2015). In Dunbar, a new energy from waste plant commenced construction in 2014; this 30MW plant will provide electricity to the grid, as well as heat for local use (Viridor 2015).

There is ongoing debate as to whether biomass and energy from waste can be truly defined as renewable. For biomass, the crops used, where they are planted and how they are cultivated are all important factors. Cultivating some soils can result in release of carbon and so the overall carbon balance of the fuel may not be good – this is especially significant in the carbon rich soils to be found in the north and west of Scotland. Replenishment of the resource is another crucial aspect. If land is cleared and not replanted adequately then carbon can be lost from the soil.

A further concern is that ongoing development of markets for biomass and biofuels has led to increased imports of these fuels, with knock-on effects on ecosystems elsewhere in the world, for instance clearing of rainforest to produce palm oil in the tropics. It is important therefore to have robust standards; Oxfam, alongside other international organisations including Birdlife, the Climate Action Network and the European Environmental Bureau have noted that European Governments are increasingly reliant on bioenergy to meet renewable energy targets, but has highlighted climate and other social and environmental impacts, and called for a series of safeguards to avoid “serious negative consequences” (Oxfam 2015); they state:

Bioenergy can play a role in mitigating climate change by replacing fossil fuels, particularly in sectors where electricity produced by renewable sources such as wind and solar is difficult. But at the same time, it must be taken into account that bioenergy is a source of carbon emissions and can cause a number of other undesirable environmental and social impacts, such as biodiversity loss. Moreover, the rapidly increasing demand for biomass for energy production adds to the demand for land and forests, which are already used by other sectors such as food, materials and fibre.

There are also limits to the capacity of renewables. Issues can include:

Visual intrusion – wind and hydro developments need to be situated sympathetically or can run up against considerable local and national opposition

Access to electricity network – the best renewable resource is not always close to the electricity network, and it can be expensive to connect. These issues are discussed further on p19

Expense of development to commercial deployment - Part of the reason wind energy is popular in the UK is that it is a developed technology, and so it is cheaper to invest in this than, for example, marine technologies, though projections for future deployment, and external costs such as climate change impacts should be factored into all such decisions

Planning constraints – the areas of best resource may be in areas valued for other reasons, such as landscape value

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Developments of renewable sources of electricity generation have been rising over the past few years (mostly due to onshore wind). The percentage in Scotland is higher than in the UK (as a whole) partly due to the historic legacy of large scale hydro schemes. In 2014, 38% of all electricity generated in Scotland came from renewable sources, in comparison to 19% in the UK as a whole; by 2015, this had risen to 42% in comparison to 25% for the UK (Scottish Government 2016b & 2017a).

Onshore wind now accounts for the majority of renewable electricity generation in Scotland, in terms of installed capacity the Figure Five shows renewable energy generation capacity in Scotland at the end of 2015 (Scottish Renewables 2016).

Figure Five: 2015 Renewable Electricity Output by Technology – Total 21,760 GWh

Renewables generated 59.4% of Scottish gross electricity consumption in 2015, compared with 12.2% in 2000 (Scottish Government 2017a). The latest climate change statistics show that Scotland’s emissions have fallen by 12.5% year on year to 2014. This is a reduction of 45.8% from the 1990 baseline (2016c). The Scottish Government (2017a) provides the following figure:

Figure Six: Progress to Renewable Energy Targets

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Increasingly, ‘microgeneration’ or ‘microrenewables’ are seen as being an important sector. This can refer to one of the following sources of on-site generation (Microgen Scotland 2016):

Micro-scale combined heat and power

Small scale wind turbines

Solar photovoltaics

Micro hydro systems

Solar water heating systems

Ground source heat pumps

Biomass heating.

ELECTRICITY GENERATION

Although the tems are often used interchangeably, ‘energy’ is not the same as ‘electricity’. Electricity is one of a number of different ways of transferring energy; it is not a primary source. Electricity is estimated to account for only 22% of overall energy use in Scotland (Scottish Government 2017a).

Electricity production relies on large inputs of different forms of energy. To make electricity you have to turn a turbine. Wind, wave and tide can do that directly. For coal, gas and nuclear the fuels are used to heat water and then the steam is used to drive a turbine which makes electricity (called thermal generation). As shown in Figure One, heat is wasted in this transformation process. In addition, transmission losses can occur as the electricity is sent through the grid. Effective use of waste heat from electricity production is therefore central to decoupling.

Electricity generation by source in Scotland is set out below. It is important to note that Scotland exports electricity to Northern Ireland and England through a set of wires often referred to as ‘interconnectors’. In 2015, 29% of Scotland’s electricity was exported (Scottish Government 2017a).

The percentage of electricity generated by different types of source is not the same at Scottish and UK level. As Figure Seven below demonstrates, Scotland relies more on nuclear power, and less on gas, than is the case at UK level. Hydro is much more significant in percentage terms north of the border. Since this table was produced, Longannet the last remaining coal fired power station in Scotland, has closed. Figure Seven compares sources of electricity generated in Scotland and the United Kingdom in 2015 (Scottish Government 2017a). The generation of electricity from renewable sources is considered in detail on pages 11 - 13.

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Figure Seven: Electricity Generation by Fuel Type in Scotland and the UK

Scottish Water is the biggest multi-site user of electricity in Scotland. The water industry generally is the fourth most energy intensive sector in the UK and power companies are massive users of water. Other energy intensive sectors include chemicals, steel, cement and fertiliser production (House of Commons Library 2016b).

FOSSIL FUELS

Fossil fuels are a major source of fuel for the generation of electricity. As previously noted, fossil fuels are finite, and the burning of them produces GHG, which contribute to climate change. Fossil fuel burning power stations are now cleaner and the lives of many stations have been extended through the use of new technology, however they remain large polluters. The relative inefficiency of burning fossil fuels, with additional energy losses through heat, and then transporting electricity significant distances down wires (where there are further losses) has led to significant opposition to the development of new thermal power stations (Greenpeace 2016, Friends of the Earth Scotland 2016).

In 2015, fossil fuels accounted for 22% of Scotland’s electricity generation, down from 27.7% in 2014. Figure Eight (Scottish Government 2017a) shows decreases in fossil fuel usage in Scotland since the turn of the century:

Figure Eight: Decreases in Fossil Fuel Use for Electricity Generation

Coal

In 2015, coal generated approximately 22% of electricity in the UK, and 16% in Scotland. This 16% came from Longannet power station in Fife, which closed in late March 2016 after over 45 years in service. Its owner, Scottish Power, cited the “high cost of connecting to the grid” as the

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reason for closure (BBC News 2016b). Elsewhere in the UK, some coal fired generation is being phased out or running at reduced rates, with demand for coal decreasing by over 20% during 2015 (Carbon Brief 2016b). This decrease is primarily due to the EU’s Industrial Emissions Directive (European Commission 2016), which places stringent emission requirements on power plants. Carbon Brief (2016b) summarises this decrease as follows:

During March 2016, coal supplied an average of 5.6 gigawatts (GW) to the UK grid […], down 56% from the 13.1GW average in March 2015 […]. At some points over the Easter weekend, less than 2% of UK electricity was being generated from coal. The fuel generated less electricity than solar over a full weekend at the start of April.

Natural Gas

For years, burning gas to generate electricity did not take place. In the 1990s and 2000s this changed as gas became cheaper and coal was seen as a dirtier fuel. In 2015 gas accounted for 30% of all electricity generation in the UK and 4% of electricity in Scotland (Scottish Government 2017a). Natural gas produces approximately half the emissions of coal, and the shift from coal to gas at the turn of the century resulted in some reductions of GHG emissions in the UK. This whole process is sometimes known as the ‘dash for gas’ and this together with a move from manufacturing to service industries is one reason for falling UK emissions in recent years.

Peterhead power station, owned by Scottish and Southern Energy, generates electricity using natural gas although it can also run on oil. It was awarded a £15m contract in March 2015 to provide voltage support5 to the grid, and it has been stated that in spite of operations being “economically challenging”, new investment and associated contracts mean that it “has the capability to operate well beyond 2030” (SSE 2015, EETC Official Report 2015).

NUCLEAR

Nuclear power stations use uranium and plutonium, and a process known as fission to produce steam to drive turbines and generate electricity. Nuclear power stations provide the electricity ‘base load’ in Scotland; they take a long time to turn off and on, and work most efficiently at high generation levels. Fluctuations in demand are fed by generation sources which are easier to turn off and on, for instance hydro, or gas fired power stations (EDF Energy 2016).

There are two operational nuclear power stations in Scotland, both owned by EDF Energy:

Hunterston B

Torness

In addition there are three sites undergoing decommissioning:

Dounreay

Hunterston A

Chapelcross

EDF Energy (2016) believes that its nuclear stations provide so much electricity to the UK that like must replace like. However, Friends of the Earth Scotland (2014) and WWF Scotland (2016) are of the opinion that nuclear power is not the answer to tackling climate change or security of supply. The Pathways to Power report (WWF Scotland 2015) sets out in detail how:

5 This is one of the methods that National Grid uses to ensure the electricity system stays balanced.

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Scotland can achieve a secure, decarbonised power sector by 2030 with only renewables and minimal CCS-fitted gas power6. An almost entirely renewables based Scottish system is possible with moderate efforts to reduce demand for electricity and ongoing work to reinforce the grid.

The UK Government’s climate advisers, the Committee on Climate Change7 (CCC) (2015) has noted that there is a role for nuclear generation in a low carbon electricity system; however the appropriate role “will depend on whether new projects can deliver to cost and time, and the cost of alternatives”.

However Professor Keith Barnham (Ecologist 2015) counters the argument that nuclear is a low carbon technology, noting that whilst the electricity generated from nuclear has no direct CO2 emissions, the nuclear fuel cycle still releases significant amounts of CO2 during mining, fuel enrichment and plant construction, as well as producing long-lived toxic wastes.

Scottish Ministers have powers to approve new nuclear power stations, as set out in the SPICe Briefing on Electricity Generating Stations: Planning and Approval (Rehfisch and Reid 2014).

FURTHER RELEVANT ISSUES

Carbon capture and storage

In a report on the “Future of carbon capture and storage in the UK”, the House of Commons Energy and Climate Change Committee (ECCC) (2016) states:

Carbon capture and storage (CCS) is a way of ‘decarbonising’ fossil fuel power generation. It involves capturing carbon dioxide (CO2) emitted from high-producing sources, transporting it and storing it in secure geological formations deep underground. The transported CO2 can also be reused in processes such as enhanced oil recovery or in the chemical industry, a process sometimes known as carbon capture and utilisation (CCU). Carbon capture and storage can be applied to fossil fuel power plants (coal and gas-fired power stations) and to industrial CO2-emitting sources such as oil refineries or cement, chemical and steel plants. Rather than being a single technology, CCS is a suite of technologies and processes. While some of these have been operated successfully for decades, progress in applying large-scale CCS to power generation in the UK and globally has been slow.

The ECCC (2016) further notes that whilst large-scale CCS is still in its infancy, the technology is widely viewed as crucial to meeting global and national climate change targets.

Government support for CCS development has been evident since 2007, and in 2012 a commercialisation competition, with the aim of seeing CCS projects developed before 2020 was launched. Up to £1 billion was ring fenced in capital funding, with additional operational support available through guaranteed price contracts, known as Contracts for Difference (CfDs), to support the initial stages of commercialisation.

Two projects were in the running to build plants demonstrating CCS at commercial scale. A Shell/SSE project at the gas fired plant at Peterhead north of Aberdeen, and the White Rose consortium at Drax in North Yorkshire, the UK’s largest power plant, which burns coal and biomass. In September 2015 Drax halted further investment, leaving Peterhead as the key

6 Carbon Capture and Storage

7 Created to advise Government on carbon budgeting and cost efficiencies relevant to climate change and GHG

emissions.

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project. The North Sea is considered to be of vital importance to the development of this industry, because of the storage capacity of spent oil and gas fields, as well as knowledge and intellectual property within the oil and gas industry. In November 2015’s Spending Review and Autumn Statement, the UK Government unexpectedly announced that the funding was no longer available (Guardian 2015).

In July 2016 the CCC (2016) wrote to the then Secretary of State for Energy and Climate Change urging a new approach that would allow the development of CCS at a lower overall cost to consumers and taxpayers. This would also ensure that domestic industries such as steel, chemicals and cement would be able to take advantage of the technology.

In March 2015 the UK and Scottish Governments provided £4.2 million for industrial research and feasibility work for a proposed 570MW CCS coal-gasification power station located in Grangemouth. In September 2016 interim feasibility findings were presented to both Governments, with the final report expected in mid-2017 (DECC 2015 & Global CCS Institute 2016).

The Scottish Government’s Draft Energy Strategy (2017b) states that “Scotland is currently the best-placed country in Europe to realise CCS on a commercial scale”, supports such an approach and undertakes to “maintain pressure on the UK Government to align its CCS strategy with Scottish energy priorities”; the UK Government’s Draft Industrial Strategy (BEIS 2017) makes no menmtion of CCS.

Electricity network

Sometimes known as the ‘national grid’, the electricity distribution network is the system of sub stations and wires required to deliver electricity from where it is generated to where it is required. It currently transports electricity from large centralised generating stations through a transmission network at high voltages, and a number of lower voltage distribution networks that feed electricity into homes and businesses. Electricity cannot yet easily be stored so electricity generated has to be used very quickly. Demand and supply is monitored minute by minute for technical reasons as there must be balance on the grid at all times.

The network allows for electricity generated in Scotland to be used in England, Wales and Northern Ireland, through a series of high voltage ‘interconnectors’. Scotland has direct links to England and Northern Ireland. In Scotland, the network is owned by ScottishPower in the south, and Scottish and Southern Energy in the north; however these are run by the National Grid. Scottish Ministers have powers to approve new transmission lines (Scottish Government 2017c).

The network in Scotland was initially designed to link thermal generating stations with the main centres of population; however significant investment is now being made to link new renewables projects. There is also a key route to the decommissioned Dounreay nuclear plant on the north coast, and a recently completed line from Beauly near Inverness to Denny near Stirling. Also, two high voltage links from are being developed; Hunterston to North Wales in the west – expected to be operational in 2017, and Peterhead to Tyneside in the east – expected to be operational in 2021. Lines with somewhat less voltage capacity are more widespread and, for example, link hydro-electric power stations to the grid network.

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Cost, efficiency and load factor projections

The CCC (2015) has estimated cost ranges for low carbon technologies in 2020 and 2030, and states:

Low-carbon technologies are, and in the 2020s will continue to be, a more expensive way to generate electricity than burning gas and allowing the emissions to enter the atmosphere for free. However, in a carbon-constrained world this is not an option. Plans are already in place to continue the increase in low-carbon generation to 2020. In the 2020s, several low-carbon generation options should be cost competitive with unabated gas-fired generation provided it faces the full cost of its carbon emissions.

Figures Nine and Ten shows the expected costs of generation by technology in 2020 and 2030

Figure Nine: Cost ranges for Low Carbon Technologies 2020

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Figure Ten: Cost ranges for Low Carbon Technologies 2030

Efficiencies and load factors in electricity production are often confused. These are clarified as follows (Department for Business Energy and Industrial Strategy (BEIS) 2016):

Load Factor is a ratio of average output over theoretical maximum output for a period of time (usually a year). Load factors are useful for predicting quantities of electricity a power station, or a pool of power stations can produce. This has implications for balancing projected supply and demand. Load factors for wind, hydro and solar energy installations rarely deviate more than a few percentage points from the historical annual mean, so it is possible to predict how many units of electricity these technologies will produce every year.

Efficiency measures how well the plant converts energy into units of electricity. It helps calculate how much coal or gas is needed to generate a certain amount of electricity, and has major implications for the cost of electricity. Efficiency in this context can be further extended to examine the total energy costs of a certain technology. For instance, coal needs to be mined using an energy intensive process, it then needs to be transported to the power station, and ash needs to be disposed of after use. All of these processes use energy and decrease the overall efficiency of the technology, on top of the heat lost during generation itself. In the context of wind energy, the driver is readily available at the point of generation and wind as a fuel has no cost. In this sense efficiency is taken to mean how much of the force of movement of air can be converted into units of electricity.

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The following table compares efficiencies and load factors for various generating technologies (BEIS 2016a):

Technology Load Factor (2015) Efficiency

Coal 39.1% 36%

Gas 31.7% 48%

Nuclear 75.1% 39%

Onshore Wind 33.7% 30-35%

Offshore Wind 29.5% 40-45%

Hydro 41.2% Not available

ENERGY FOR TRANSPORT

The most energy intensive modes of transport are road, rail, sea and air; cycling and walking are the least intensive. When considering the amounts of energy used in transport, most headline statistics relate to GHG emissions, rather than primary energy used; i.e. that which comes out, rather than that which goes in. Nevertheless, the transport sector accounts for approximately 25% of total energy used. It also (including international aviation and shipping) makes up 28% of Scotland’s total emissions, and more than two thirds of these emissions come from road transport (Scottish Government 2017a & 2017d).

Scotland is the EU’s largest petroleum producer, and the Ineos plant at Grangemouth is Scotland’s main refinery. Oil and related industries are estimated to account for at least 124,500 jobs, and sales of oil and gas are estimated to have been worth £14.5 billion in 2015, 82% of the UK total. This is a decrease of £5.9 billion (or 29%) over the course of one year and is the fourth consecutive year in which approximate sales income has fallen. (Scottish Government 2017a).

The Scottish Government’s Transport Statistics (2016d) show that 537 million public transport journeys were made by bus (76%), rail (17%), air (5%) and ferry (2%) in 2015-16. Two-thirds of commuters said that they travelled to work by car or van in 2015, 14% walked, 11% went by bus, 4% took a train and 2% cycled.

Over the last five years, there have been increases in car, air and rail passenger numbers and distance cycled, while there has been a fall in bus and ferry passengers. The following table sets this out:

Mode Change over 1 year (2015/16)

Change over 5 years (20010/11 – 2015/16)

Car Traffic on all roads 0.7% 3.2%

Pedal Cycles on all roads -7.3% 14.8%

ScotRail Passengers 0.5% 19%

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Bus Passengers -1.7% -4.9%

Air Passengers 5.9% 22.0%

Ferry Passengers 1.4% -4.4%

In 2014 emissions from cars accounted for 60% of road transport emissions, with goods vehicles accounting for 34%. Average vehicle emissions per kilometre are falling steadily as a consequence of improved engine efficiencies; however, these gains have been offset by increased car travel. For GHG emissions and economic growth to continue to decouple, significant decarbonisation of transport by 2032 will be required. This is only deliverable through low emission cars and vans becoming the norm and low emission HGVs becoming common (Scottish Government 2017d).

A note of caution is required when considering new technology; Sustrans (2015) considers that a “modal shift away from the car to walking, cycling and public transport” should be prioritised over supporting the uptake of low emission fuels and technologies. They “want to see a fundamental shift away from private motor car use (electric or otherwise) in the first instance”. Transform Scotland (2015) states:

The key challenge is a continued failure on the part of Scottish Ministers to match their rhetoric on the need for climate action with spending priorities that will bring about cuts in climate emissions. Between 2011-12 and the 2015-16 budgets, Scottish Government expenditure on roads increased by 34% and expenditure on aviation by 70%. At the same time, expenditure on buses increased by 1%, while investment in active travel (walking and cycling) remains below 2% of the overall budget. The Scottish Government is committed to an £8 billion road-building programme – per capita far in advance of that seen in England […].

The SPICe Briefing on Transport in Scotland (Rehfisch 2016) provides further details.

ENERGY FOR HEAT

Heat can be generated by burning numerous fuels in various ways; for example coal and wood can be burnt raw to heat a room, or burnt in a boiler to heat water which then supplies radiators, as can natural gas or oil. Electricity can also be used to heat radiators, however if this is done with thermally generated electricity, then it is highly inefficient. Gas use in the industrial and domestic sectors has increased over the last two decades, and is now the main fuel for heating. This is a cleaner burning fuel than, for instance, coal, but still produces significant amounts of GHG.

Non-electrical heat demand accounts for approximately 53% of Scotland’s total usage, and that is further split between industrial and commercial (57%), and domestic (42%). Gas fuels the majority (79%) of Scottish households’ primary heating systems, electricity accounts for 12% and oil 7%. Communal heating and solid fuels cover the majority of the remainder (Scottish Government 2017a & 2017c).

The National Gas Transmission System is operated by National Grid. SGN manage the gas distribution network across Scotland delivering gas to almost 2 million Scottish homes and businesses. Approximately 16% of Scottish households are off gas-grid. In these areas, the heat market is especially fragmented with a large number of fuel suppliers delivering mainly oil

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and LPG to individual users, although other fossil fuels (e.g. coal, wood and peat) still play a role (Scottish Government 2017a).

For GHG emissions and economic growth to continue to decouple in the UK, a largely de-carbonised heat sector is required by 2050 with significant progress by 2030 through a combination of reduced demand and energy efficiency, together with a substantial increase in the use of renewable or low-carbon heating. The Scottish Government’s Draft Climate Change Plan 2017 – 2032 (Scottish Government 2017d) sets out a pathway whereby by 2032 80% of domestic buildings’ and 94% of non-domestic buildings’ heat is expected to be supplied using low carbon technologies

In the longer term it is likely that the natural gas in the grid (predominantly methane) will be replaced with low carbon alternatives e.g. hydrogen. In some cases local heat networks may also operate, although one of the challenges of delivering renewable heat energy is the difficulty in transporting it. Typically in the UK heat is generated on individual premises, though in other European countries local and district heat networks are common. While some forms of renewable heat generation are suitable at the individual household level, others work most effectively at community scales. Capturing the benefits of such technologies therefore requires cultural changes within local communities and businesses, and a planning system that facilitates more decentralised patterns of energy generation and supply.

In Scotland, the key challenges (Scottish Government 2015a) are recognised as:

Largely decarbonising the heat system by 2050, to reduce greenhouse gas emissions

Diversifying sources of heat generation and supply to reduce reliance on fossil fuels, and support a resilient heat supply

Reducing the pressure on household and business energy bills through reducing heat demand and providing affordable heat, in particular supporting the fuel poor

Seizing the sizeable economic opportunities that this transformation offers through the development of new heat generation, distribution and demand reduction programmes.

Unconventional gas

Unconventional sources of gas, primarily from shale beds, have made a significant contribution to US gas production in the last decade. UK reserves of unconventional gas, principally shale gas and coalbed methane, could add significantly to the UK’s potentially recoverable gas resources. There is however a notable lack of information about reserves in Scotland and the UK as a whole, and an extensive exploration phase would be needed before a realistic assessment of potentially recoverable assets is possible. Several companies in the UK are looking to exploit them but there is currently no full-scale production.

The Scottish Government (2015b) announced a moratorium on unconventional oil and gas in January 2015, the following October it announced a further moratorium (2015c) on underground coal gasification. Scottish Ministers issued two Directions (Scottish Government 2015d & 2015e) to SEPA "to refer to them for their determination any application under the regulations for an authorisation to carry on any controlled activity in connection with” unconventional oil or gas development and underground coal gasification. Neither moratoria include “the drilling of boreholes solely for the purpose of core sampling”. Alongside these moratoria, an “extremely thorough and wide-ranging examination of the potential impacts of unconventional oil and gas” was announced, supporting “the Scottish Government policy of taking a precautionary, robust and evidence-based approach to this technology”. The potential impacts that have been researched include public health, transport, seismic activity and climate change (Scottish Government 2016e).

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Having completed the research into the potential impacts of unconventional oil and gas, a full public consultation is currently underway, and closes at the end of May 2017 (Scottish Government 2017e). Once that consultation closes and the responses have been independently analysed, Ministers will make a recommendation to Parliament on the future of unconventional oil and gas in Scotland and invite MSP’s to vote on the issue. The SPICe Briefing on Unconventional Gas: Frequently Asked Questions (Reid 2016) provides further details.

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