Speech to Scottish Energy Association, March 10th 2016

Ladies and Gentlemen.  Thank you for inviting me to speak today. 

My name is Martin Veart.  I am standing on behalf of the Scottish Liberal Democrats in the Constituency of Edinburgh Northern and Leith.  Currently I am working with ICOE Research on their upcoming publication Offshore Oil & Gas Operations: Environment, Health and Safety.  Prior to this, I have more than 20 years experience in offshore oil and gas.

Scotland needs a government which will invest in 21^st Century infrastructure.  Infrastructure that helps us beat our climate change targets, creates warmer homes, reduces air pollution and strengthens our economy.

For Liberal Democrats, this literally begins at home.  At our recent conference we addressed the issue of fuel poverty.  Both in rural areas of Scotland and in much of the existing housing stock in our cities, there is too much of the nation’s homes that is still poorly insulated, resulting in fuel poverty for many.  We will reduce this through better planning for district heating and renewable energy technology in new social housing, as well as improving the energy efficiency of existing homes, as part of a national infrastructure project.

Renewables are the key to Scotland’s energy future and reducing global greenhouse emissions are a key part of the planet’s future.  

While in government, Liberal Democrats have so often set the pace on renewables and low-carbon technologies. 

In the early years of the Scottish Parliament, we established the first ever renewable electricity targets, setting the groundwork for green investment and jobs.

It was Liberal Democrats in the UK Government who established the Green Investment Bank, based in Edinburgh, paving the way for Carbon Capture and Storage and established the Green Deal.

After the breakthrough climate change talks in Paris, the renewables sector should be thriving.  It should be set for unprecedented levels of support from government.  We should be seeing new action from both the Westminster and  Scotland’s governments. 

Instead, the UK Government has cut off the renewable sector at the knees; driven by ideological attachment to the free market and in pursuit of short-sighted, short-term savings.

Since last summer, the Tories have cut the DECC budget by 22%.

They scrapped the £1 billion groundbreaking Carbon Capture project planned for Peterhead and gone are the associated scientific and innovation benefits. 

Scrapped too is the Green Deal.

The Tories have cut £130 million from the solar and wind budget, with the result of thousands of job losses.  Even worse, there has been a massive blow to investor confidence, job creation, energy security and our nation’s low-carbon ambitions.

And we have a Scottish Government that, days after Paris, cut the climate change budget by £50 million, including £40 million from the green energy budget.  That is 10% and once again we see the SNP talk about investment while following Conservative cuts.

So what would we do?

Liberal Democrats are committed to having 100% of Scotland’s electrical energy generated from renewable sources.   While part of the UK government, we ensured an average investment in the sector of £7 billion per year: nearly as much as the oil companies were annually investing in the North Sea during the same period.  No other party can match that record.

Liberal Democrats also understands that reliance upon renewables makes difficulties for major energy suppliers to plan and invest during the transition period to renewable energy.  That is why we appreciate the need for ceiling and floor tariffs, governed by Offgem, so that energy operators have secure boundaries within which to plan and invest.

Another avenue Liberal Democrats are keen to explore is renewable heating.  Currently only 2% of UK heating demand are met by low-carbon sources.  In Scotland the figure for renewable heating is slightly higher: 3%.  Our nation's target by 2030 is 40% so have a long way to go on this. 

This morning, I looked at the UK electric generation and the percentage breakdowns are this:

Coal: 16.5     Nuclear: 17.6             CCGT       46.6

Wind 6.0       Hydro  0.4                 Biomass 5.0               Via Interconnect: 8.0

This shows that while politicians talk about renewables, what we have to cope with at this time is a very different mix.

I’ll take nuclear first.  It does not look what is happening at Hinkley-C will act as any form of model to encourage further investment from the private sector.   The original Conservative government pledge was to have 16 such power stations operational by 2030.  That is not going to happen, but I believe there is the political will to go ahead with Hinkley-C, regardless of cost.  One just hopes EDF, having being awarded the contract, can survive its good fortune.

Willie Rennie, leader of the Liberal Democrats, supports the recent announcement to keep Torness open, purely upon a pragmatic basis.  He goes on to point out that with the SNP firmly opposed to nuclear and the Conservatives wrecking the renewables budget, an impasse has been reached.   The two governments need a joint plan but they are showing no signs of developing one.

 Offshore oil and gas is currently in a terrible state owing to the oil price crash.  Job losses are probably over 100,000 if one takes total UK jobs into account.  The price of Brent crude has just managed to bounce up the $40 per barrel this week but still, this is not high enough to support the industry in the long term.  Investment in the offshore sector has plunged from an average of £8 billion per annum to less than £1 billion for 2016. 

 

This was the picture just two years ago, prior to the Scottish referendum. 

I put this up as a warning against politicians, like me, who may stand in front of you and claim to have a crystal ball in which the future is golden.  Sometimes it isn’t.

But of the two competing claims up there, which one would you have considered the more reasonable?  I know, hindsight is a wonderful thing.  Few people saw this particular oil-price crash coming. 

But out of the two claims, I went with the OBR and here’s why:

As you can see, this is the annual UK oil and gas production for the past twenty years.   The trend is only in one direction.  Even when the oil price peaked at over $140 a barrel during 2010, the fall in production figures could not be reversed.  In 2015 there is a welcome rise in production of 9.7%: this is what some in the SNP call “an oil boom” but this graph puts things into their proper perspective.

The reality is that production levels, when compared to their peak in late 1990s, both gas and oil have fallen by over 70%. 

The futures oil price for December 2018 is still not expected to break $50 dollars a barrel.   Despite the drastic cost cutting which is still underway by the North Sea operators, the industry has a very uncertain future. 

Liberal Democrats support the current round of tax equalisation measures to bring the offshore oil and gas taxation regimes more in line with other business sectors.  We also support companies’ access to data sources, as laid out in the OGA Corporate Plan published yesterday. 

That leaves us in Scotland and the rest of the UK with hard choices to make.  We are still far from having an infrastructure that can do without oil and gas.  Even with best efforts, it will take more than twenty years wean the Scottish economy off fossil fuels. 

 So, what is to be done?  Import or frack?

As you may have heard, we in the Scottish Liberal Democrats have been recently discussing this matter.  I was talking to Willie Rennie over the weekend and we can agree that as Liberal Democrats we respect each other’s position and both sides share the desire to see CO2 emissions drop as quickly as possible.  The debate is ongoing and I am sure you will have questions after.

This is an energy comparison between fossil fuel types and taking into account their sources.  

As one can instantly see, in terms of CO2 release, coal has to go and it is right that it is being phased out.

Shale gas actually compares quite favourably with gas either imported by pipeline from outside the EU, or by tanker in the form of LNG.  This is one of the factors why I am personally in favour of fracking.

Ultimately the decision should be with the public and local government during the planning stage.  I believe companies should have the right to put the case for fracking, within a tight regulatory framework and with independent assessment of the evidence.

In summary: the Liberal Democrats have an excellent track record of being a practical and progressive partner, whether in providing people with warmer homes, seeking new opportunities for industry, or with coalition partners in striving towards a better Scotland.  When Liberal Democrats are in government, people know they will receive a fair and considered hearing.

Ladies and gentlemen, thank you for your time.