THIS week, I published my latest policy paper for Common Weal, looking at the progress of the ScotWind offshore wind auction and revealing that it has likely been a financial disaster for Scotland – potentially losing us tens of billions of pounds in auction fees and supply chain developments.
The price ceiling imposed by Crown Estate Scotland (which was devolved to the Scottish Government in 2017) meant ScotWind could only raise £755 million in direct fees.
In comparison, had it an open auction and had it raised the same amount per MW of capacity as similar offshore auction in New York, then ScotWind would have raised close to £16.5 billion.
A detailed critique of what went wrong can be read in my paper but I would like to take the time here to offer a plan for what the Scottish Government should do now given where we are.
READ MORE: The story of Common Weal's fight for a Scottish public energy company
The first thing would be to bring back plans to launch a Scottish public energy company. There should be no political resistance to this.
The SNP have been instructed to do this by members twice now, the Scottish Greens promoted the idea as a core policy in this newspaper just before they entered government, and while I’m sure that some in Scottish Labour would prefer the scheme to be run alongside or within UK Labour’s “Great British Energy” scheme, this still means that there is a clear majority in Holyrood for publicly owned energy.
The excuses from the Scottish Government on why we can’t have a public energy company have shifted almost depending on the direction of the wind. We’ve been told that we can’t have one because projects like ScotWind were too large. We’ve also been told that companies like the one the Welsh Government have launched are too small. Well then, what’s “just right” for Scottish publicly owned energy? Why can’t we do that?
While a public energy company is getting set up we need to make sure that the ScotWind developers are not given free rein to break their promised commitments. I talked in the paper about how the paltry fines for breaching minimum commitments practically incentivise offshoring jobs.
This should be addressed as far as possible within the contracts likely being negotiated at the moment. Break clauses should be insisted upon so that if promises are breached, the public energy company can step in and take over – just as was done with ScotRail a couple of years ago.
We should also insist on the lease terms being as short as possible. Developers will try to insist on the opposite. It is not unknown for them to demand 99-year leases on land and sea rights or even to ask for perpetual leases that never expire.
Unlike oil, the wind will never run out so there is certainly the incentive there for developers to try to extract profits from Scotland forever. Leases should be long enough for developers to recoup their investment and make a reasonable profit, but they should not extend to multiple generations of turbines.
Ideally, they should not even extend to the full lifespan of a single generation so that Scotland doesn’t end up in the situation – as with oil and with coal before that – of being responsible for cleaning up the mess after developers extract their profits then move on.
Again, when these leases hit their term or if the developer decides to submit new planning applications to “repower” the sites with larger turbines (as is happening with our onshore wind at the moment) then those leases can and should be transferred to the public energy company (unlike what is going on our onshore wind at the moment).
By doing this, Scotland could eventually be able to completely nationalise ScotWind over the course of a decade or so.
READ MORE: Nicola Sturgeon: Scotland would still be facing energy crisis with nationalised supplier
The major advantage of this plan is that you, the energy consumer, wouldn’t pay any more for Scotland doing it than you will if we don’t do it and just leave the assets in private hands – the costs come out of your energy bill either way. The difference is, you won’t also be paying obscene profits to shareholders too.
The mistakes of ScotWind have been made. We might not be able to fix all of them, though we should try.
The crucial thing is that we learn the lessons and make sure that we take the steps now to make sure that a future “ScotWind II” is done in a way that keeps Scottish energy in Scottish public hands and is run for the public good, and not for private profits.
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