Local energy policy statement: consultation

Chapter 3: Networks & Infrastructure

Flexible networks can help realise local solutions.

Principles

• All local energy systems activity should provide a high level of security and quality of supply to all. New activity should also consider existing energy infrastructure first.

• The design and operation of our energy networks should consider the whole energy system while supporting local, regional and national solutions.

This chapter outlines the role that networks and the enabling infrastructure - electricity, heat, transport and digital - will play in the energy transition and Scotland's journey to a net zero future, as well as what this means for those developing local energy systems projects.

3.1 More flexible than in the past

Scotland should have the capacity, the connections, the flexibility, and the resilience necessary to maintain secure and reliable supplies of energy to all of our homes, communities, and businesses.

Networks allow us to share energy – local networks allow us to share energy locally, and national networks allow us to share energy nationally. Our networks need to evolve in ways that reflect the balance of local and national energy, and the different sources and uses of energy that are envisaged for Scotland.

Our Vision for Scotland's electricity and gas networks^[19], published in March 2019, states that Scotland's gas and electricity networks delivered around half of all energy used in Scotland in 2017. These networks help to deliver affordable, reliable, and increasingly renewable energy across Scotland - and will be critical in achieving Scotland's net zero emissions target by 2045.

As illustrated overleaf, Scotland's Energy Strategy highlighted two possible future energy scenarios for Scotland.

It is worth re-iterating that the precise make-up of the future energy system is uncertain – therefore, it is difficult to determine exactly what Scotland's future infrastructure needs and requirements will be. For example, the uptake of electric heating and transport on a large scale could place extra pressure on the electricity system, affecting the networks' ability to generate, store and use electricity to meet peak demand.

Scenario 1: An Electric Future

By 2050 electricity generation accounts for around half of all final energy delivered. The sustained growth of renewable generation has helped ensure that we meet our climate change targets.
Scottish electricity demand has increased by over 60% since 2015, and is increasingly supplying transport demand through battery powered electric cars and vans. Space and water heating is largely supplied, where practical, by highly efficient heat pumps, and via a new generation of smart storage heaters.

Peak electricity demand has risen significantly, moderated to an extent by smart meters, responsive demand, new national and local market structures, and the changes in consumer behaviour that these have supported.

Scotland retains its pumped storage stations, with new capacity added during the 2020s, and electrical energy storage is widely integrated across the whole system. For example, the EV fleet operates as a vast distributed energy store, capable of supporting local and national energy balancing.

Scenario 2: A Hydrogen Future

By 2050, much of the demand previously met by natural gas has been converted to low carbon hydrogen. This is produced through strategically deployed electrolysers and from SMR plants paired with CCS. The effective transition from natural gas to hydrogen – assisted by Government support and regulation, and by consumer behaviour – has helped us meet our climate change ambitions.

CCS development during the 2020s has allowed the production of low carbon gas on a scale large enough to transform the energy system. Final energy demand has fallen, but natural gas demand has greatly increased – mainly to produce hydrogen, but also to power flexible electricity generation, with both processes utilising CCS.

The flexibility offered by gas has also enabled the expansion of the gas network into new locations without compromising the sustainability of the energy system.

Scotland has developed electrolysis facilities, meeting a proportion of the overall hydrogen supply. This helps balance renewable generation on the system, and creates demand which ensures that new gas generation with CCS can run in the most efficient way.

New hydrogen transmission pipes link production facilities with the main demand centres, and new and repurposed pipelines take captured CO2 to old North Sea gas fields for storage. The gas distribution network has been converted area by area, starting with the main cities.

However, irrespective of the type of energy system which may emerge, there will need to be significant investment in the management, at all levels, of our networks (including enabling infrastructure).

There must also be scope for a flexible and open approach to decarbonisation: one that allows and enables local, regional and national solutions. The design and operation of our networks should be able to help deliver these solutions.

Our electricity networks today are based on a wholly national energy picture. There are limited opportunities for local communities to benefit from managing their local energy supply and demand in ways that limit the need for unnecessary network investment. However, the Scottish Government wants that relationship to change, and will continue to work with electricity network companies to achieve this.

Electricity policy is largely reserved, which means that persuasion, partnership and collaboration are important parts of our approach. The Scottish Government will continue to work closely with the UK Government, Ofgem, National Grid and Scotland's grid operators to ensure that Scotland's priorities are understood and reflected in any decision making process.

This will include playing as full a part as possible – with Scotland's energy network operators (both gas and electricity), consumer representatives and other stakeholders – in the discussions and debate which will inform the RIIO-2^[20] price control period. The Scottish Government will ensure that network companies reflect the ambitions and opportunities of local energy projects within their business plans.

3.2 Local and National

Local energy will not replace the need to have a flourishing national energy sector – rather, it will enhance it by allowing us to promote and maximise an efficient system and use of the network, as well as value from Scotland's renewable resources. Both are critical to ensuring that Scotland can transition to a net zero future in a way that delivers secure, affordable, clean energy for Scotland.

This balancing and combination of local and national needs and capabilities will need to play a key role in providing both a secure supply and greater resilience across our networks – from the bottom up. This will mean local and distributed energy, and demand-providing-services, will help ensure that the national network can operate securely and safely in an increasingly decarbonised system.

3.3 Must meet the needs of all consumers

Any changes - first and foremost - must be designed to meet the interests of all consumers and businesses. Above all, this means ensuring that decision-making starts from the impact of change to all consumers - in particular, reflecting the needs of vulnerable consumers across Scotland.

Today's energy networks provide a high level of security and quality of energy supply to all. Local energy projects can (and must) help retain and deliver these high levels, and have the potential to reduce the cost of doing so. For example, local generation or local energy balancing can defer the need for expensive reinforcement of the network while maintaining a high quality supply.

3.4 Integration with other Scottish Government policies/ programmes

There are other related policies, providing enabling infrastructure, that are essential in our shift towards decentralised renewable generation.

Two of the key ones are:

• The promotion of ultra-low emission vehicles (ULEVs) and the associated infrastructure that will be necessary to achieve our targets. The Scottish Government has invested almost £30 million since 2011 to establish one of the most comprehensive electric vehicle charging networks in Europe – and this will continue to develop.
• Our commitment to word-class, future-proof infrastructure that will deliver digital connectivity across the whole of Scotland.

ULEVs, Electric Vehicle charge points and energy system integration

Switched on Scotland Phase 2: An Action Plan for Growth^[21], published in 2017, is an action plan to facilitate the growth in purchase and use of plug-in electric vehicles across Scotland. It complements the Scottish Government's commitment, made in September 2017, to phase out the need for new petrol and diesel cars and vans by 2032.

On 29 August 2019, a new Strategic Partnership was announced between Scottish Government, including Transport Scotland, Scottish and Southern Electricity Networks, and Scottish Power Energy Networks. It will deliver and improve coordination between electric vehicle charging infrastructure and electricity networks in Scotland.

The £7.5 million partnership includes Scottish Government funding of £5 million and at least an additional £2.5 million from the network companies to deliver trial projects to take place in 2020/2021, aimed at demonstrating the benefits of coordinated planning in electricity and electric vehicle charging infrastructure.

Realising Scotland's Full Potential in a Digital World: A digital strategy for Scotland

Realising Scotland's full potential in a Digital World^[22] sets out our plans for ensuring that digital front and centre of future plans – in the way in which we deliver inclusive economic growth, reform our public services, and prepare our children for the workplace of the future.

It's a strategy for Scotland, not just the Scottish Government. It recognises the profound challenges that digital poses for the nature of work, for society and for both the world and domestic economies. It also accepts that no single organisation can hope to have the answers to these questions and, therefore, looks to create a culture and environment of partnership where collective action is taken to ensure that nobody is left behind and everyone remains safe, secure and confident about the future.

3.5 Well-placed to lead

The Scottish Government is well-placed to lead further development in this area. For example, through:

• Our role in planning and consenting new energy infrastructure.
• Supporting the deployment of enabling infrastructure to increase the take-up of EVs.
• Our Digital Strategy, which aims to provide high quality connectivity across the whole of Scotland.
• Our Vision for Scotland's electricity and gas networks.
• Our CARES programme, which provides a wide-range of free advice and support, as well as funding to support solutions that both generate and use energy locally, often to overcome infrastructure constraints.

Scotland has been at the forefront of developing a number of local community energy projects - primarily ones that focus on electricity - although there are some centred on heat technologies. The business models for these projects were (in most cases) based on financial incentives, including the Feed-in Tariffs Scheme (FITS) and Renewable Heat Incentive (RHI), which have provided a financially viable business case.

However, as highlighted in Chapter 1, the withdrawal/ reduction in UK Government subsidies means that local communities' ability to participate and/ or develop a renewable energy project is changing: it is not solely about generating an income, but involves more diverse interests such as achieving added value for energy generated locally.

Changes in technology and innovation, particularly around digital applications, is leading to the emergence of new "disruptive" business models. These will be transformational in how power is generated, bought and sold. Chapter 4 considers this further.

3.6 Using our powers

Where the Scottish Government has the devolved powers, we will take an integrated approach across different policy areas to ensure that the necessary enabling infrastructure is in place.

Some of these are not directly energy related – however, taking a joined up approach will allow us to take maximum advantage of the opportunities around technological and digital innovation, and their application to energy.

3.7 Questions

10. What infrastructure challenges are you aware of that present an obstacle to delivering local energy projects? What actions would help solve the issue?

11. What other actions could the Scottish Government take to ensure Scotland will have the necessary infrastructure in place to enable resilient, local energy systems?