SCOTLAND'S renewable energy production share is one of the highest in Europe, but Scots have some of the most expensive power bills. Why?
Renewable energy made up 45.3% of the European Union (EU) members' electricity use in 2023, a new record.
Sweden, Finland and Denmark had the highest renewable energy sources share among member states in the EU in 2023, according to data from the European Environment Agency.
This is largely due to strong hydro industries in both Sweden and Finland, along with wind power and the wide use of solid biofuels for district heating amongst the three nations.
Sweden is among the leading EU nations with its renewable energy sources share sitting at around two-thirds while both Norway and Iceland sit above 75%.
The majority of nations that have invested in renewable energy like Sweden, Finland and Denmark saw a decrease in household power bills, averaging around 10% in the first half of last year, according to figures published by Eurostat.
Comparably when you look at Britain's electricity energy sources, renewables only equate to around 40%.
If you were to look at Scotland individually, the country’s renewable technologies generated the equivalent of 113% of its overall electricity consumption in 2022, according to statistics from the Scottish Government.
Britain followed a similar trend to most of the other EU nations where it saw a slight decrease in energy bills, but they rose again in the second half of the year with them expected to increase again in 2025.
It raises the question as to why Scots are having to pay for increasingly high energy bills when Scotland is generating vast amounts of renewable energy.
According to Rhys Stanwix (below), who has spent over 30 years in the energy industry with 25 of them in Perth with SSE and is now working with Energy Scotland, the key issue is that electricity in Britain – not the UK as Northern Ireland is part of the all-Ireland market – is a single market.
He added that because energy is a reserved matter, Scotland cannot create its own market.
So, if Scotland cannot create its own market why is electricity so expensive?
Compared with countries in the EU, British domestic electricity prices ranked fourth highest in the first half of 2024, according to the most recent UK Government data.
This is for consumers with medium usage, including taxes and subsidies.
For industrial electricity, Britain had the highest prices, for medium users, over the same period.
According to Stanwix, there are several features of the British market that put pressure on energy prices.
He explained that one of the reasons is because British electricity is a “pay as clear” market.
“This means that the most expensive generator that the system requires sets the price for all generators,” Stanwix said.
“In Britain, this is now invariably gas and as gas prices are very high, electricity prices are very high. The fact that all generators receive this price means that cheaper generators, like early renewables and especially nuclear, receive inflated profits that the consumer is paying for.”
Another reason according to Stanwix is that UK gas is expensive, and the price is volatile.
He said that the UK used to be largely self-sufficient in gas, but as the North Sea has declined, Britain's reliance on imported gas has risen, increasing costs due to transportation costs from European pipelines or LNG tankers.
The UK also has far less gas storage capacity than Europe, which means that as international prices rise, UK prices rise almost immediately in response, as there are little reserves to fall back on, Stanwix explained.
“This is potentially a good example of the impact of not managing the ‘just transition’ from gas effectively,” he said.
“The UK has forfeited valuable gas and oil reserves and declined to increase gas storage before it has an alternative in place.
“The Ukraine war completed the ‘perfect storm’ of events going against us.”
Another reason why energy bills are so expensive is that consumer prices are directly coupled to wholesale prices.
In the UK, consumer prices are not regulated separately from wholesale prices.
Stanwix explained that this means as wholesale prices go up, consumer prices follow almost immediately.
“This worked well for the UK when we were well endowed with plentiful cheap gas and coal, but is now coming to bite us,” he said.
“Ofgem intervened a little to put on price caps, although these are still linked to wholesale prices, and the Government offered a winter discount at one point, but a key point of difference with the UK has been the light touch regulation and little input from Government to lower or even stabilise prices.”
Stanwix added that another contributing factor to increasing energy prices is that the UK is undergoing a huge grid investment.
An example of this is the £2.5 billion subsea electricity superhighway between Scotland and England which construction began last week.
Ofgem green-lit the Eastern Green Link 1, a joint venture between SP Energy Networks and National Grid Electricity Transmission, last year. It will transport green electricity for two million homes along 190km of undersea cable linking the south-east of Scotland with the north-east of England.
Stanwix said: “The UK is transitioning from coal and gas generation largely in England to renewables largely in Scotland, a long way from the demand centres.
“To transport the electricity south a huge investment in interconnection and new grid is underway, which all adds cost to the UK electricity price.”
