EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.
This information is reported in the narrative of the Economic section.
EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change.
Climate Change Economics
Reports by Professor Lord Nicholas Stern (The Stern Review on the Economics of Climate Change 2006, and A Blueprint for a Safer Planet, 2009) estimate that introducing measures to cut greenhouse gas emissions to avoid the worst impacts of climate change could cost between 1-2% of world Gross Domestic Product (GDP) per year by 2050.
Conversely, taking no action on emissions could cause the costs and risks of climate change to increase to an estimated loss of at least 5% of global GDP each year.
Summer floods in 2007 resulted in insured flooding losses of an estimated £4.9bn.
ScottishPower, like other utilities, is required under the Climate Change Act 2008 to provide the Government with a report on the risks and opportunities facing our business as a result of climate change. These may include addressing risks, such as flooding of low-lying substations.
In addition, tackling climate change will provide new opportunities for our business, such as the development of grid charging points for electric vehicles, carbon capture and storage solutions and an expansion of paid for energy services through Smart Grid technologies.
EC3 Coverage of the organization’s defined benefit plan obligations.
ScottishPower provides employee retirement benefits that are market competitive and in line with best practice standards. Over 75% of all employees contribute to our pension plans.
We have three pension schemes – two final salary schemes, which are closed to new entrants and the ScottishPower Stakeholder Plan.
Our longer serving employees benefit from our two final salary pension schemes, which have the security of building up valuable pension benefits with flexible, innovative options for topping up their Scheme benefits.
Our schemes are well funded and managed by effective, responsible trustee bodies committed to safeguarding these pension schemes for all members.
This information is reported in greater detail in the People section of this review.
EC4 Significant financial assistance received from government
We received funding of £6.2 million from the UK Government in 2010 towards the development of a front end engineering design study for a Carbon Capture and Storage solution at Longannet Power Station.
We also received £52,167 for the last phase of the Energy Demand Research project into the use of Smart Meters and energy monitors, which concluded in March 2010.
EC5 Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation.
In 2010 we paid entry level wages at least equal to 100% of the national minimum wage.
EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation.
The number of registered suppliers with orders in 2010 was 3,655. It is not possible to provide a geographic breakdown between UK and non-UK suppliers, as the SAP system is corporate and a number of suppliers work across parts of the IBERDROLA Group in different countries.
The value of purchases from UK suppliers was £637.62 million and £34.33 million from non-UK suppliers (Conversion factor from Euro 0.858170)
EC7 Procedures for local hiring and proportion of senior management hired from the local community at locations of significant operation.
ScottishPower does not have a specific policy for recruiting local workers and we do not track this information at present. However, it seems reasonable to assume that the majority of our employees live within a reasonable distance of their place of work
We do not track this information with regard to the senior management population for reporting purposes at present.
EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement.
In Energy Networks there is an on-going project to make improvements to a community garden that is associated with work to upgrade Dewar Place substation, which serves the main commercial centre of the city of Edinburgh.
The Visitor Centres at Longannet, Cruachan and Tongland Power Stations have recently been refurbished and rebranded. These play a valuable role in educating the public, particularly school children, about energy.
EC9 Understanding and describing of significant indirect economic impacts, including the extent of impacts.
Some of these have been described in the narrative of this section. In addition, during the development of new projects, the direct and indirect economic impact of a project is considered during the preparation of the environmental and social impact statement.
For example, Damhead Creek 2 Power Station, consent for which was considered by DECC during 2010 (and given in January 2011) represents an investment of some £600 million. During the peak of construction, the workforce would total approximately 1,000 if developed in one phase. In the event of two phase development, the workforce would total approximately 600. It is hoped that much of the workforce will be recruited locally. During operation, approximately 50 personnel would be required.
In addition, operational and maintenance costs will be of the order of £27 million per annum, a significant proportion of which will benefit the local economy.
It is considered that the development of Damhead Creek 2 would have a positive socio-economic impact on the surrounding area, providing additional jobs and investment.
Another example from 2010 is the reinforcement of the electricity infrastructure on Anglesey. Before the project the electricity system on the island was running at almost full capacity, constraining further major business development.
However, increased capacity in the electricity network through the construction of new reinforcement circuits will allow business sites, such as Parc Cybi to expand and potentially create more jobs.
EU6 Management approach to ensure short and long-term electricity availability and reliability.
In the UK there will be significant development and renewal of the electricity generation and networks infrastructure and the Government has put in place policies designed to facilitate this and ensure future demand can be met.
Energy Wholesale has a strategy to become a high reliability organisation and aims to deliver best practice in asset management and process safety in compliance with the findings of the "Baker Report", the Health and Safety Executive’s (HSE) guidance on ageing plant (RR509), process safety indicators (HSG254) and industry best practice asset management (PAS55).
Our principal objective is to protect employees and contractors by mitigating health and safety risks, reducing the likelihood and impact of a catastrophic process safety event. The process safety management system is key to protecting our staff and contractors, safeguarding our ability to efficiently generate electricity and ensuring compliance with health and safety and environmental legislation, as well as the expectations of regulators.
ScottishPower's installed generation capacity is just over 6GW, predominantly from coal with approximately 33% from gas and about 10% hydro.
At present we are developing three new efficient CCGT projects – one in Scotland and two in southern England, with a combined capacity of around 3,000MW. This will more than offset generation capacity that will be lost with the closure of Cockenzie Power Station (1200MW) by the end of 2015.
Projects are being developed to extend the life of Longannet Power Station through the installation of emissions reductions technologies such as NOx reduction technology and Carbon Capture & Storage.
Energy Wholesale monitors the electricity generating potential in the UK as well as actual sales. Predictions are made for future demand in order to inform the decision making process with respect to any new developments. Environmental, social and financial aspects are also key considerations in any new developments.
Energy Networks is delivering strategic infrastructure projects to upgrade high voltage power links with Northern Scotland, via the Beauly-Denny line reinforcement, and a further upgrade of the Anglo-Scottish interconnector from 2800MW to 3300MW.
In addition, we are working in partnership with National Grid Electricity Transmission to develop a high voltage, subsea DC power link on the western side of the UK, which will connect Scotland with England and Wales. This will provide additional capacity on the GB transmission system and support the continued growth of renewable energy as the UK works towards becoming a low carbon economy.
Energy Networks revisits business and investment planning activities annually. The plans are determined using a risk prioritisation approach based on asset condition, load growth and fault performance. During 2010 the UK Regulator (Ofgem) finalised the Distribution Price Control Review (DPCR5), which will cover the next 5 years.
The outcome will form the basis of SP Energy Networks’ business plans for its two Distribution Licensed entities – SPD (Scotland) and SPM (Merseyside, Cheshire and North Wales) for the period 1st April 2010 to 31st March 2015. The proposals establish a series of obligations on SPD and SPM to deliver a set level of activities covering capital investments, maintenance, and customer service.
Output measures are placed on SPD and SPM to ensure these activities and expenditures are completed efficiently. Performance criteria are also associated to certain measures and some of these can incur financial incentives and penalties, if delivered over or under the set performance level.
EU8 Research and development activity and expenditure aimed at providing reliable electricity and promoting sustainable development
ScottishPower's most significant R & D programme is that of Carbon Capture and Storage at Longannet Power Station.
A prototype carbon capture unit has been in operation at the station since May 2009. Over that time, it has provided significant data that will help to improve the complex science involved in capturing CO2 from the flue gases of a coal-fired power station, helping to reduce the energy requirement and hence, the cost of the process.
A ScottishPower consortium, which includes Shell and National Grid, has throughout 2010 worked on detailed plans for a commercial scale carbon capture and storage (CCS) project that would be based at Longannet.
The consortium is the last remaining bidder in a competition for UK Government funding to build a commercial scale CCS project.
A detailed Front End Engineering Design study will be submitted to the UK Government during 2011 and a funding decision will be made once the Government has considered the proposals. It is believed that a commercial scale project would be capable of reducing CO2 emissions to the atmosphere by 90%.
One of the main drivers of Energy Networks' R&D programme is the utilisation of technology to minimise the impact of Customer Interruptions and Customer Minutes Lost on our network. Projects that provide improvements to our system performance, customer restoration and fault location are fundamental to the business and have proved very successful following implementation. It is estimated that around £400k is spent annually on projects related to these areas.
In terms of promoting sustainable development we have an increased focus on R&D in the areas of Smart Grids and the provision of green energy. Currently we are working on several 'Smart Grid' projects, aimed at enhancing the flexibility of the network, enhancing the utilisation of our assets and facilitatting the connection of renewable energy. It is anticipated that further projects will be developed in this area in the coming years.
We are also working with Transport Scotland with the aim of providing a network of charging points for electric vehicles across central Scotland.
EU10 Planned capacity against projected electricity demand over the long term, broken down by energy source and regulatory regime.
ScottishPower has no direct responsibility over long-term electricity planning processes for generation.
The Scottish, UK and Welsh Assembly Governments conduct the necessary studies to anticipate the long-term needs of the electricity system, and ScottishPower acts as a market agent, adopting investment decisions that fit within our business strategy.
Our current plans for generation and network investments are described in the Safety & Reliability section of this Review.
EU11 Average generation efficiency of thermal plants by energy source and regulatory regime.
Average thermal efficiency is calculated by multiplying the gross production of each power station by its value of thermal efficiency and the sum of these partial values is divided between the total thermal generation of the power stations.
Average thermal efficiency across the thermal portfolio during 2010 was 42.81%, with average thermal efficiency for coal stations being 34.71% and 52.52% for gas power stations.
EU12 Transmission and distribution losses as a percentage of total energy.
Losses on our distribution systems for 2009/10, as published by Ofgem were 6.15% for ScottishPower distribution and 6.37% for ScottishPower Manweb. A figure for the transmission system is not available.