Energy - Fraser of Allander Institute Blog

An initial exploration of the economy, energy and emissions impact of successful, sectoral-specific export strategies

Grant Allan, Peter McGregor and Andrew Ross

Fraser of Allander Institute, Department of Economics, University of Strathclyde

Policymakers have been understandably active in identifying economic opportunities for the UK through new and expanded trading opportunities. The recent Industrial Strategy and Export Strategy lay out the UK Government’s ambitions for increasing exports, as well as seeking out specific sectors where the UK has comparative economic advantage. The Export Strategy talks of an aspiration to raise exports to the equivalent of 35% of Gross Domestic Product.

A successful export strategy, one which does lead to increases in the scale of exports, will bring economic benefits – this is unambiguous. What is unclear however is how such outcomes might interact with government objectives in other areas, such as the Clean Growth Strategy (2018), with its focus on moving to “cleaner economic growth”, though, for example the development of new technologies.

With colleagues we have explored this trade-off at the economy-wide level for the UK. Through our work, supported by the UK Energy Research Centre, we have focused on simulating a successful policy which raises the level of all exports. Our results from this – reported last month – found that, overall, an across-the-board export stimulus raises economic activity while simultaneously increasing energy use and emissions.

In our results, increases in energy use and emissions are greater than the economic boost (in percentage terms), so that energy- and emissions-intensity of GDP rises as a result. Employment increases in all sectors, but again by less than sectors’ energy use. This important finding also confirms that, absent any offsetting policy, there exist tradeoffs between a successful export strategy’s impact on economic activity, with effects on environmental and energy indicators.

Variation in electricity transmission tariffs…

Jamie Cox is an undergraduate economics student at the University of Strathclyde, about to start his fourth year, and has a summer internship in the Fraser of Allander Institute supported by the Research Interns@Strathclyde scheme. This blog summarises some of Jamie’s research into how electricity charges vary geographically. Following on from his earlier blog last week on transmission charges in the UK (TNUoS), in this blog he explores variation between tariffs for different generator types, with a focus on intermittent generators.

Transmission Tariff Model

To analyse transmission charges, we built a model that approximates the charges levied by National Grid: both on methodology, and in monetary amounts. Using sub-national electricity consumption statistics and generation statistics (from the Department for Business, Energy & Industrial Strategy) we approximate electricity flows, and thereby estimate TNUoS tariffs. An example of the output of our model and how it matches up with actual charges levied by National Grid can be seen in the second figure of previous blog.

In this blog, we discuss how tariffs depend on generator type, in particular: whether the generator is conventional or intermittent.

Electricity generation and transmission charges

Jamie Cox is an undergraduate economics student at the University of Strathclyde, about to start his fourth year, and has a summer internship in the Fraser of Allander Institute supported by the Research Interns@Strathclyde scheme. This blog summarises some of Jamie’s research into how electricity charges vary geographically, and in particular, how the closure of the Longannet coal fired power station in Fife in 2016 may affect the economics of renewable energy in Scotland.

In late March 2016, Longannet power station closed after providing energy for nearly half a century. The station’s closure brought about the loss of 236 jobs, with an estimated 800 indirect supply jobs also affected (figures from the Longannet Task Force Report, March 2017).

So while the closure of a coal-fired power station may be viewed as positive environmental news, on the face of it, this was negative economic news. This blog describes some research conducted at the Fraser of Allander Institute, which investigates whether there is an economic as well as environmental upside to Longannet’s closure.

The mechanism by which Longannet’s closure could have positive economic effects, is via its impact upon transmission charges.Continue reading

What might high temperatures and low rainfall mean for the Scottish economy?

Scott J. McGrane, Grant Allan and Graeme Roy

The prolonged period of warm and dry weather during June and early July is at odds with what many of us would call a “traditional Scottish summer”. These conditions however, are representative of a number of quite extraordinary global weather events that have occurred in the past few months. From the ongoing drought conditions, wildfires and subsequent flooding and landslide events that ravaged California last year, the near-miss of “day zero” in Cape Town, where dry conditions and poor water management almost resulted in no water supply being available, and the global heatwave currently impacting many countries across the globe, climatic extremes have had significant impacts on livelihoods, infrastructure and economies alike.

In this note we set out whether this is genuinely atypical weather, what the consequences have been for water in Scotland (both in terms of supply and demand), before discussing what is currently known about the links between Scotland’s economy and water. We conclude with a discussion of what this recent period might mean for the Scottish economy in a future climate in which water characteristics seen over the last few weeks may be more regular occurrences.

This is part of a new project we’re working on with colleagues at Stanford University in the US looking at the role of technology in improving environmental measurement and the potential implications for our economy.

The impact of economic downturns upon the energy transition

This blog discusses research in progress by David Comerford & Alessandro Spiganti, entitled “The Energy Trap”, which was presented at the Royal Economic Society conference at the University of Sussex on 27^th March 2018. The presentation slides can be found here. The purpose of this blog is to describe this early stage research, which is at the stage of being presented to an academic conference, to a non-technical audience.