IT is essential that the implications for Scotland of the proposed £7 billion investment in electrical distribution are fully discussed in public prior to the scheme going ahead ("£7 billion power plan to create around 3000 jobs", The Herald, January 24).
As currently described, the creation of 3000 jobs would not represent any kind of economic growth since it has all the hallmarks of the French economist Bastiat's Broken Window Fallacy whereby employment for glaziers is created if we go around breaking each other's windows. Bastiat explained that prosperity would not result from this since the additional spending power of glaziers and glass manufacturers would be cancelled by the reduced spending power of window owners. Destruction does not produce wealth.
In the case of the electricity distribution upgrade, the benefit of the 3000 extra jobs would be cancelled by the levy on the increased bills of electricity customers.
The arithmetic of the £7 billion cost being paid for by a 35p levy does not make sense given the disparity in the sums involved. The eight-year programme would involve a spend of nearly £900 million a year to be paid for by the six million Scottish Power and SSE customers, which works out at £150 a year or £37.50 per quarterly bill, not 35p. Further elaboration is clearly needed on this point.
The outcome of the development would seem to be that Scotland would be covered in mega-pylon lines from north to south and it would be worth considering the economic effect that this destruction of Scotland's landscape would have on tourism vis-a-vis M Bastiat's Fallacy.
In the final analysis the plan is only viable if there is a market in the UK and Europe for all this hugely expensive renewable electricity and takes no account of the possibility of much cheaper electricity being generated from abundant supplies of shale gas, plans for which are already well advanced in many countries.
If we are not careful we could be encumbered with a huge electrical white elephant.
Dr W Flood,
68 Rowanbank Road,
Dumfries.
OFGEM has made clear the costs of National Grid's business plans for the upgrade of other parts of the transmission network at the time of its announcement. National Grid has submitted business plans for around £30 billion and I said as much at our announcement.
Until National Grid reaches the same stage of the price control process as Scottish Power (SP) and Scottish Hydro Electric Transmission Ltd (SSE) it would be wrong to speculate as to the impact of their price control on energy bills. The £30 billion figure may change when the company resubmits its business plans in March. Once we have reached the same level of certainty for National Grid's price control as we have with SP and SSE we will, as usual, provide an estimate of the total impact on consumers' bills for the transmission upgrade for the whole of Britain.
It is important that figures given for the impact on consumers' bills are as accurate as possible.
In the meantime we stand by our estimates, based on the information published by SP and SSE, of the cost of their proposals for a £7 billion network upgrade on consumers' bills of around 35p a year, a total increase of around £2.80 over the eight years of the price control. We believe this investment delivers value for money for consumers.
Hannah Nixon,
Ofgem Senior Partner,
9 Millbank,
London.
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