Making and wielding power

The Hydro Image copyright PA
Image caption SSE has attached its Hydro brand to Glasgow's newest music venue

Energy companies generate power, and also wield it.

That's particularly in the Scottish economy, where hydrocarbons and renewable power are at the heart of the existing economy and, it is hoped, the future one.

So here are three stories of power being made and wielded in the complex relationship between producers and politics.

Hydro power chord

One of Scotland's largest companies, SSE, is tonight celebrating a marketing coup. It's successfully attached its brand, the Hydro, to a rather splendid new music venue in Glasgow, which looks set to be something of a national institution.

From my desk at the BBC, I can see the stragglers arriving for Rod Stewart's opening concert at the venue, and a vast fleet of trucks that the venerable rocker-cum-crooner takes on the road when he tours.

Earlier in the day, SSE had something very interesting to say. It's made a loss, in the six months to September, on its retail business - the bit that sells gas and electricity to homes and businesses.

It's still profitable in generating power and in distributing it across northern Scotland. But it's blaming disappointing figures on gas wholesale prices, and also on the fixed costs of supplying energy, even in the summer months when demand drops.

And when it mentions wholesale gas prices being ahead of expectations, you can probably guess what might be coming next.

Price freeze

Centrica has already hinted heavily that a price rise is on the way. Can SSE be far behind?

Those who watch the Big Six most carefully reckon we can expect all of them to have some unwelcome announcements on prices in the next few weeks.

This is partly because they didn't want to fuel political rhetoric during the party conference season.

But few of them reckoned on Ed Miliband's surprise at the Labour gathering, when he said a government led by him would implement a temporary freeze on household bills.

Having been Secretary of State at the Department of Energy and Climate Change, they reckoned the Labour leader would understand the link between profitability and the source of the £200bn investment bill to upgrade and re-orient Britain's energy infrastructure. They got that wrong. So cue last week's apoplexy about Mr Miliband's initiative.

SSE went on to say more, amid the guidance that precedes its six-month numbers. Despite the political pressure, it intends to deliver a dividend increase ahead of inflation this year.

That's not a message for Mr Miliband, but to reassure investors after the share price fell 8% last week. They were duly relieved, and despite the news of a loss on retail sales, the share price rose on Monday.

Over an oil barrel?

The oil and gas industry looks to government for tax breaks more than regulation. And it's so big that it tends to get a lot of what it wants.

Image copyright Getty Images
Image caption Ineos said Grangemouth may close by the end of 2017 if it doesn't get grants and loan guarantees

Ineos, the huge, international and private company which owns the petro-chemical works at Grangemouth, says it'll shut up shop by the end of 2017 if it doesn't get costs down (industrial relations are already poor) plus £150m in grants and loan guarantees.

To step back, for some explanation, Grangemouth is Scotland's biggest industrial site by far. Part of it is a refinery, jointly owned by Ineos and the vast PetroChina corporation. It takes oil piped from the North Sea and produces petrol, diesel, aviation fuel, etc.

The gaseous by-products from that cracking process are piped next door to the petro-chemical plant, where they're converted by clever people into plastics and lots more besides.

There are 1,400 direct employees across the whole site, and 2,000 contractors, with turnover of £4bn and big export numbers. Ineos claims this supports 7,000 indirect jobs in Scotland.

It goes on to claim it's making losses of more than £10m per month, or around £600m over the past four years.

The petro-chemical bit of Grangemouth is at 50 to 60% of capacity. It's not that less oil is coming into Grangemouth, but the black stuff that's now being pumped has different properties to the old days, including fewer by-products when it's cracked.

The contract to use the refinery's by-product runs out in 2017. Hence the deadline. And the plan is to spend more than £300m to equip Grangemouth to import ethane from the USA's cheap shale gas boom.

While it's not threatening the refinery yet, the big downside of closing the petro-chemical plant would be that the financial case for refining looks a lot less attractive if you can't sell your gas by-product to your neighbour.

And with refining capacity something of a bottleneck for energy supplies, that's not an outcome any government - Scottish, British or, indeed, European, is going to want to explain to its electorate. So cue the pressure on government to come up with a deal to keep Grangemouth going.

Waving or drowning

That complex relationship between energy companies and government goes into the renewable field too.

Image caption The Pentland Firth is the world's busiest site for testing wave and tidal energy

While subsidies are required, particularly for commercially unproven technology in wave and tidal power, big companies such as SSE, Scottish Power, RWE and E.ON are key to supporting the smaller developers of new devices.

That's seen as a big prospect for the Scottish economy, with the powerful currents and waves of the Pentland Firth the world's busiest site for testing.

But some of the big players are pulling back, and it's reported that SSE may join them in reducing its exposure to the development risk. That, in turn, could lose Britain the lead it's built up in several aspects of the new energy technology.

Of course, a bit more government support would surely make the financial case a bit more attractive to the finance directors. And that support does not include a freeze on fuel bills.

*On the utilities' response to Ed Miliband's bill freezing proposal, there's more from Scottish Power.

Tuesday brings a thinly-veiled threat to pull back on investment and a reminder that its Spanish parent company, Iberdrola, can take its funds elsewhere if Britain doesn't retain its political consensus around bills having to rise to pay for new equipment.