Gordon MacIntyre-Kemp: UK energy policy takes the wind out of our sails

According to Scottish Renewables, about 850 Scottish onshore wind turbines spread across 37 projects (representing 2,129 megawatts of generation capacity) already have planning permission and are now under threat. During the referendum campaign, Ed Davey, then UK Energy Secretary, stated that “Scotland would lose billions of pounds in subsidies for renewable energy projects if it voted for independence, putting its green energy revolution at risk”. The Tories have a majority in England and their manifesto included cuts to renewable subsidies but the SNP have a mandate for future investment and a target to generate 100 per cent of our energy needs via renewables by 2020. Due partly to Scotland’s higher support for environmentalism but largely due to geography and wind patterns, 70 per cent of UK onshore wind projects and the 10,000 jobs now threatened are located in Scotland.

Devolving the decision on environmental subsidies to each nation would be the best scenario but, at the very least, all projects currently in the planning stages (some with millions already invested) should still qualify for support even if they start after the new proposed cut-off date. It’s argued onshore wind is highly subsidised but investing in the alternative, nuclear power, is far more expensive. The cost of nuclear power has not fallen in 50 years and it is actually more expensive than renewables, especially adding in the cost of decommissioning and centuries of waste storage. Green energy costs have been coming down substantially, with wind power reducing by 20 per cent since 2008 and solar power costs reducing by up to 80 per cent over the same period. Solar power is now becoming so widespread in hotter countries that Spain is taxing rather than subsidising households with battery storage units at the behest of the big power companies and in Australia domestic solar power generation and storage is now cheaper than buying from retail companies. The UK solar industry has a plan for solar energy production to be subsidy-free by 2020 and it is worth noting that although countries with bright sunlight have a solar advantage, many have far fewer hours of sunlight every day than Scotland, so it can still be highly efficient here. Offshore, the costs are tumbling. Denmark’s wind power field off the east coast of Jutland will generate electricity at roughly half the cost of the Hinckley Point C nuclear reactor planned by the UK Government.

So expensive is nuclear power that the UK Government is set to subsidise that one power station to the tune of €108 billion (£77bn) and that still doesn’t take into account decommissioning costs met by future generations. The Hinckley C subsidies are so ridiculously large that a consortium of energy providers in Germany and Austria have lodged a complaint with the European Court of Justice over the subsidies, claiming “excessive nuclear power subsidies” amount to an “unlawful operating aid”.

The plant will be built and operated by French state-owned power giant EDF who demanded a guaranteed return on investment so the UK Government has guaranteed £92.50 per megawatt hour (double the current electricity price) over the 35-year life of the station. The subsidy will be added to household bills that currently contain a levy (the Renewables Obligation levy), that pays for the renewables subsidies that are being cut to make way for the cost of nuclear. So its not about cost savings but a policy switch to nuclear. Westminster is spinning its true intentions though; Amber Rudd, Secretary of State for Energy and Climate Change, in a press release this week stated the Government was to focus on only “backing good-value green energy, lowering prices for hard-working families” with a promise to “cut emissions as cost-effectively as possible”. As I have pointed out above, she is guaranteeing higher energy prices and committing the UK to a high-cost, highly subsidised energy policy that is actually the least cost-effective option.

Scotland, more than anywhere else in the EU, has a competitive advantage in the production of renewable energy, wind and wave in particular. Scotland’s North East also has the ability to evolve its expertise from oil and gas to be a global renewables leader. So cuts to grants that disproportionately impact on Scotland will have a long-term negative influence on Scotland’s economy.

DESPITE Scotland’s commitment to renewable energy, as part of the UK we have fallen from 1st place in 2005 to 8th now on the Ernst & Young Renewable Energy Country Attractiveness Index. There is, however, some good news for Scotland’s offshore renewable energy developments. This week the EU stated that plans for a North Sea supergrid linking Scottish and European offshore wind farms was a “top priority” for commissioners. With £230bn of EU investment (requiring Scottish oil sector subsea skills to implement) construction could start within two years (assuming England votes to allow us to stay in the EU) and this should protect offshore developments such as the 140-turbine Beatrice wind farm in the Moray Firth from UK Government cuts.

The North Sea supergrid would mean renewable energy produced in Scotland could be stored in Scandinavian pump storage hydro schemes until needed, create a pan-European low-cost energy market and link the EU directly to Iceland’s overly abundant and ultra-cheap geothermal energy through a cable that will go through Scotland. We won’t fully benefit from that cheap energy though, as we will be contracted to buy nuclear power from Hinckley C at many times the cost. Schadenfreude for the Germans suing the UK Government over nuclear subsidies.

Gordon MacIntyre-Kemp is the founder and CEO of Business for Scotland