The Scottish Government

A vision for the future of energy in Scotland

Energy Minister Jim Mather

All Energy Conference

Aberdeen

May 23, 2007

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I am very pleased to be here today to have an early opportunity to address an audience in a sector that is so key to Scotland's economic future.

The focus of this new Scottish government is on sustainable growth - two words, which must go side by side in relation to energy.

The energy sector has been a vital driver of Scotland's economy and I want it to remain as a driver.

For our energy policies and energy strengths are key to achieving sustainable economic growth - to reducing carbon emissions - and to helping secure the future of our planet.

So we are clear that energy must contribute to both economic development and our environmental objectives.

In talking to you today, I am not going to set out developed policy right across the energy field.

That policy needs to develop through discussion with you.

Not just with you, the industry, but also with others, who have real and legitimate interest in the future of our economy and our environment…. With local Government, with Economic Development Agencies, with communities, with environmental groups, with house builders and so on.

Together, we have to manage the objectives of increasing sustainable growth and addressing Climate Change.

I am determined though to look at energy in the round - not to pick off specific issues in isolation from the whole. I want to look at the energy sector as a 'System' that can be optimised in Scotland to make Scotland a better, more competitive, wealthier and environmentally attractive place.

I want to take stock, to clarify and agree those objectives and then use a systematic approach to help us achieve objectives.

Together with the industry and other stakeholders I want to identify barriers in our way- and work with you to remove them.

I have asked officials to set up an initial seminar to help map out the way forward. But I promise you that this will not be the only opportunity for dialogue. I am committed to ensuring that the dialogue like your industry - is open-ended.

For I know that we will only achieve our objectives through on-going constructive dialogue and partnership.

Our resulting strategy will acknowledge that the Scottish government does not have all the levers at its hand - we will therefore develop a strategy which will set out the actions the Scottish government can currently take itself. But it will be a strategy, which will also set out how we will seek to influence the actions of others.

The liberalised energy market in the UK has brought many benefits but we believe the regulatory framework could be much more effective in supporting a low carbon future.

It makes no sense for OFGEM to focus so much on reducing cost or short term investment needs that it discourages investment in Scotland in clean coal or discourages exploitation of Scotland's renewables resources.

Indeed, the First Minister's visit to Longannet last week demonstrated the contribution that we believe can be made through clean coal technologies and carbon capture.

Eventually that Clean Coal Potential can include both Longannet and Cockenzie and has the ability to:

• Reduce CO2 emissions
• Extend the life of the Scottish coal field
• Increase and develop our Carbon Capture expertise
• Protect Scottish jobs in energy production and at Babcock
• Retain Wealth In Scotland

Those who forecast, the retiral of Scottish Coal and under-estimated the potential of renewables - will need to redo their calculations - especially about Scotland's ability to meet base load.

The commitment is total - for Alex Salmond told Scottish Power last week that he wants to work with energy companies here in Scotland to ensure that we have a framework that supports sustainable and secure energy.

And please note that Scotland starts from a position of strength given that current generation capacity in Scotland exceeds peak demand by over 20%....and about 20% of electricity generated in Scotland is exported.

We believe that forecasts of an "energy gap" rely on existing power stations closing and no new commercial investment in new power stations in Scotland.

That appears not just unlikely…..but ridiculous.

Consequently, as I have said, I am here today to start a dialogue with you to ensure that Scotland's future energy potential is fully realised.

Already there is strong commercial interest in investing in significant new generation capacity in Scotland……..and this Government is committed to making that happen.

And there is significant ongoing investment in renewable generation in Scotland.

Scottish and Southern electricity, BP, GE and RTZ have applied for consent for their proposed hydrogen based generation plant at Peterhead - perhaps an initial foothold into the Hyrdogen Economy.

And Scottish Power announced last week a feasibility study into investment in new clean-coal technology

Later, today, the UK Government will publish its White Paper on Energy. No doubt there will be measures in it which will help promote clean energy and we will welcome those.

But I fear that many of its proposals are rather later than they should have been- on grid access for example- and may not go as far as necessary.

In our thinking, I am determined that we take a twin track approach of promoting reduced energy consumption and promoting low carbon technologies.

And in relation to low carbon technologies we need a twin track approach again: We need more renewables in our energy mix but we also need hydro carbon, clean coal and carbon capture.

And we will recognise that an energy strategy must focus on both power and heat. Electricity makes up some 20% of our energy use. We need to look too at heat - including combined heat and power and stop wasting heat resulting from power generation.

As far as electricity is concerned, we will press on with urgency in giving new technologies the support they need.

Much of that support must, I believe, come from the UK government - but we will be ready to supplement that support where it makes sense to do so.

In marine energy for example I want to talk to companies about timescales for commercial production and we will seek to objectively understand what will make the difference between success and failure.

There has been much talk in the press in recent days about electricity supply and possible gaps in supply.

The plain facts of life are that it would be for energy companies and the Nuclear Installations Inspectorate to decide whether to extend the life of current nuclear generating stations. The simple fact is that this is not a decision for Ministers. Our role relates to considering any proposals for new build.

We are therefore committed to promote the technologies which will allow us a different way forward once existing stations have reached the limit of their safe life.

The UK government has of course been forced to step back - to consult properly on nuclear power. I hope they do so…….or more accurately the High Court will insist.

Here in Scotland I believe we can do much better in working with stakeholders and the people of Scotland to develop an energy strategy which has support and which directly benefits everyone.

We want to see more community led projects of the type supported by HICEC, the Highlands and Islands Community Energy Company. And we want to see more developers taking active steps to ensure local communities directly benefit from developments.

Not just through a donation for a community facility - although that may be welcome - but through a continuing stake in the fruits of the project.

And Ministers can take that- and economic benefit- into account in considering proposals for generating capacity and we will do so.

There are good existing examples: we can learn from, where communities have taken a lead in contracting with energy suppliers - building in energy efficiency measures to supply contracts.

So communities will be very much part of our energy strategy.

The dialogue I want to see will - as I have said- will include embracing energy efficiency and microgeneration. I want an evidence led approach which harnesses expertise alongside enthusiasm.

I also want an approach which recognises Scotland as part of Europe. Energy networks of the future will not be Scotland or UK wide- they will be European. We want Scotland to be at the forefront in this. For that reason the First Minister has made discussions with Norway a priority.

In conclusion I want to acknowledge again the huge expertise we have here in Scotland, particularly here in Aberdeen, which we see as the logical centre for new energy technologies.

Our industrial and academic expertise has been reflected in the proposal put together for the proposed Energy Technology Institute, in which Scotland set out how people would work together in a consortium.

In doing so, you set the agenda for proposals from different regions of England. Scotland is now on the short list and I am sure that this city will make an excellent case for hosting such a centre for research and development.

Especially as, the oil and gas industry, with its base in Aberdeen, has been and will continue to be vital to Scotland's economy.

We now have the opportunity to build a broader energy sector - again integrated into the global economy through export, investment and skills.

An energy sector embracing renewable technologies, embracing fossil fuels, alongside carbon capture and technologies which assist reduced consumption.

On that positive note, I look forward to working with you to achieve that broader energy sector. …….Thank you for listening.