D&Gs Future Business Development: does it need this upgrade?

Last week Deborah Galbraith posed an interesting question after receiving a reply to her concerns about SPENs proposal from one of the area’s politicians.

In essence the response from the politician stated that while they have similar concerns to Deborah about the routeing and the apparent lack of consideration of the alternatives they believe the upgrade is in the interests of Dumfries and Galloway in terms of allowing the Region to keep pace with the rest of the UK’s energy infrastructure and that future business development in the region is likely to depend on this upgrade taking place.

Deborah asked for a comment.

Like many things in life there is no right or wrong response to this sort of question, but let’s begin by examining the background to see how this might help us reach a considered and rational response and ultimately lead to a conclusion.

1 The existing system is old

Yes, it’s clearly old, but it’s no older than many similar rural transmission systems in England and Wales to the extent that the National Grid (2014, p.169) have issued a statement saying “Transmission assets tend to have very long operational lifetimes, many in excess of 50 years.  Although much of the equipment is obsolete, it is in good condition with many years of service left.”

2 The system doesn’t have enough capacity

Yes, this is true also.  The rating of the existing system is 105MW (summer rating) while the amount of connected on-shore wind generation is reported to be in the region of 355MW (D&G Council, 2014) and could rise to around 1000MW when all the consented wind farms are operational in the next 5-10 years or so.

3 Future business development will depend on the upgrade

This depends on the type of business development.  A business that consumes electrical energy located close to a source of renewable generation would be welcome as it will help alleviate the capacity restrictions on the network.  In other words it would consume some of the renewable energy local to the source leaving less needing to be transmitted through the Region to load centres in England and Wales.

On the other hand, if the business development mentioned is additional renewable generation then this will further exacerbate the current constraint.

4 The load on the system is increasing

It is interesting to note that the demand for electricity in Dumfries & Galloway, both domestic as well as industrial and commercial, is reducing as the graph below shows.  This graph uses HM Government (2015) figures and is up to date to 2013.

It shows that there has been an almost 15% fall in domestic consumption since 2005 against a 3% increase in the number of homes built in the region.  Scotland as a whole reported a similar fall.  For the industrial and commercial sector the fall is lower at 7%; worse than Scotland which reports an 11% fall overall in the same time period but it is expected that the rate of fall for the non-domestic sector for both Dumfries & Galloway as well as Scotland will further accelerate over the coming years as public sector organisations and large private sector firms take steps to reduce energy consumption.

In some ways this reduction in demand is part of the problem.  What this Region requires is more demand so as to consume more of the renewable energy generated in the Region.  Without demand more excess will require to be transmitted on an already constrained network.

Elect Consumption

5 Renewable generation is increasing

Very true.  The actual figures seem to vary.  Dumfries & Galloway Council (2014) cite a figure of 355MW for large scale on-shore wind together with 106MW for hydro and 44MW for biomass together with many smaller hydro, wind and solar PV systems.  RenewableUK (2015) on the other hand cite a figure of 328MW for all on-shore wind.  However, in this exercise using the Dumfries & Galloway Council figures and load factors for wind, hydro and biomass at 0.27, 0.5 and 1.0 gives an annual energy generation of around 1700GWh (840GWh from large-scale on-shore wind, 464GWh from large-scale hydro and 385GWh from biomass) and that ignores all the smaller generation sources.

This level of generation demonstrates that Dumfries & Galloway is a Region where demand is falling but where generation is rising.  The area is already self-sufficient by a factor of two.  When all the consented on-shore wind farms are connected and generating, and as consumption continues to fall the self-sufficiency factor will increase to at least a figure of four or more.

So what the Region requires are more businesses that require large amounts of electrical energy so as to use up all the excess energy – but is that a likelihood?

 

6 Types of business in Dumfries & Galloway

Let’s first remind ourselves that Dumfries & Galloway, like a number of other local authority areas in Scotland, is predominantly rural and in our particular Region approximately 50% of the population either live in accessible rural or remote rural areas (ONS, 2014) as shown below.

Rural Pop

Typical of such regions is the domination by small firms (0 – 49 employees) which for Dumfries & Galloway comprise of 93.4% of all enterprises.  In this case the top five small enterprise sectors expressed as a percentage of all enterprises are shown below.  Taken together these five sectors represent around 70% of all businesses.

Top Ent

These sectors comprise of agriculture, fishing and forestry, construction, wholesale/retail, accommodation and food services, and professional, scientific and technical.  All told these five sectors account for almost 58% of the employment and 56% of the turnover.  So what does this mean to us?  Well, it suggests the businesses in these sectors are not large consumers of electrical energy and it gives confidence to the conclusion that, unless something drastically changes, electricity consumption by industry and commerce, and also by the domestic market within Dumfries & Galloway will continue to fall over the coming years.

Conclusions

Having reviewed the facts where does this take us with our conclusions?

1 The types of small business that dominate and characterise the rural economy of Dumfries & Galloway are not, in the main, large consumers of electrical energy.

2 It is unlikely that the demand for electrical energy will rise over the next few years or even decades; instead the indication is that with energy efficiency measures in place within the public and large firm private sector electricity consumption will continue to fall and a similar trajectory is expected in the domestic sector as housing stock continues to improve.

3 Against this background electricity generation from renewable sources is expected to increase.

4 The balance between demand for electrical energy and electricity generation within Dumfries & Galloway will continue to widen leading to larger flows of excess electrical energy dependent on an already constrained network.

5 It therefore makes strategic sense to upgrade the network to transmit the excess electrical energy to load centres in England and Wales.

6 New entrants to Dumfries & Galloway will benefit from an upgraded network if they operate within the renewable energy sector by being able to export their excess electrical energy out of the Region.

7 The renewable energy sector within Dumfries & Galloway generates 334 jobs and £20m per annum in gross value added (GVA) (Dumfries & Galloway Council, 2014) and while this wealth creation is an important addition to the Region it is important to ensure the chosen method for upgrading the network (ie. overhead line vs. undergrounding) does not jeopardise the areas already growing £300m per annum tourism and recreation industry that already employs 6000 full time equivalent direct jobs and a further 1360 jobs from indirect revenue streams (Dumfries & Galloway Council, 2011).

References

Dumfries & Galloway Council (2011) Dumfries & Galloway Tourism Strategy

Dumfries & Galloway Council (2014) Dumfries & Galloway Renewable Energy Action Plan

HM Government (2015) Sub National Electricity Consumption Statistics 2005-2013

National Grid (2014) Electricity Ten Year Statement

ONS (2014) Enterprises in Scotland

RenewableUK (2015) Wind Energy Database

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