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22 January 2014
A green generation

A green generation

The green power industry sits atop an ever changing landscape. Sometimes, on a daily basis, no sooner has one announcement been made demonstrating a positive outlook for the renewables sector, than another swiftly follows showing further challenges ahead.

In December the strike price – the amount of subsidy received – set by the UK Government for onshore wind power saw a sharper drop than had been expected, falling to £95 per MW/hour for 2014/15 down to £90 by 2018/19.

Then a list published by the UK’s Department of Energy and Climate Change on offshore wind projects which would receive a Final Investment Decision contract featured no Scottish contingent. Two further blows came when Scottish Power Renewables dropped its £5.4bn plans for an offshore wind farm off the coast of Tiree of up to 300 turbines, with enough capacity to power one million homes and the news that a test facility planned off the coast of Aberdeen, which has been the subject of a legal challenge from US billionaire Donald Trump, was to be delayed by two years.

However, at the same time, 2013 ended with confirmation that renewables in Scotland had seen a record-breaking year, with 40.3 per cent of gross electricity consumption coming from renewable sources and the country’s green energy making up 36 per cent of the UK’s total generation.

Now this month, the most comprehensive piece of research into Scotland’s renewables industry demonstrates that the contribution it makes to the economy is also increasing.

The survey from industry body Scottish Renewables suggested 11,695 people were in full-time employment, an increase of 5 per cent on the previous year.

More than half of the 540 companies surveyed said they were looking to take on more staff in the next 12 months, and about one quarter of employees were women.

Chief executive Niall Stuart said: “We’re a major part of Scotland’s energy mix and a significant part of Scotland’s economy. The electricity generation figures demonstrate that, the scale of our events demonstrate that and the results of the employment survey show that as well.”

Subsidies for energy generation should reduce over time as the technology becomes more widespread and cost-effective.

While the strike price for onshore wind dropped, the fall for offshore – still a nascent form of technology – is still less steep, from £155 per MW/hour in the next financial year to £140 in 2018/19.

Support for the Scottish Islands onshore will receive no support until 2017 – which provoked an angry response from Scotland’s Energy Minister Fergus Ewing – and wave and tidal energy still receive a far higher subsidy of £305 per MW/hour in recognition that the sector needs more support to become a reliable source of energy.

Stuart said: “I’ve had mixed views from my members. Some are less concerned, some more concerned about how much of a hurdle that now places on their investment plans.

“I think there was a relief that at last we know what the numbers are. Onshore’s reaction was surprise that there was a step down in all years by £5 per MW/h – I don’t think people expected that but DECC were very insistent it was based on the evidence that it was the right price from their point of view.”
He added: “In offshore there are still a lot of unknowns, the plans around Scottish waters are on a scale and the kinds of projects that just haven’t been done yet. We are talking about deploying turbines that have just been prototyped and tested.”
He said the decision to leave the Scottish-based projects off DECC’s first FID round had created “a new uncertainty” and this would be an issue it would take up with the Government early this year.
The Scottish Government has set a target of providing the equivalent of 100 per cent of its electricity from renewable sources by 2020 – and both the UK and Europe have 2020 targets to meet.

Jim Drysdale, environmental lawyer from Ledingham Chalmers, said: “For the larger scale projects, the question is always funding.

“Last year the Co-op bank was pushing its renewable credentials but of course they have had other troubles, which means their ability to be available to lend has been somewhat curtailed.
“It will be interesting to see how much the Green Investment Bank will assist with finance in projects and what sort of projects it will be involved in.”

He said that if banks were not lending then developers could turn to Enterprise Investment Schemes.

He said that smaller renewable projects should also be considered for their role in boosting the economy, because the more people were able to access energy that requires no feedstock, every pound not spent on heating or powering your home is “a pound in your pocket.”

But for the industry, Stuart also said an increasing priority was now to focus on what happened after then for 2030 and beyond, to give the industry long-term stability. Debate is now taking place at a European level on whether an explicit renewables target should be set for 16 years’ time, or simply an emissions target with individual countries able to control how they get there.

Although wave and tidal technology is further advanced in Scotland than elsewhere in the world, with the world’s leading companies Pelamis and Aquamarine based here and with schemes operating in Orkney, the projections for how much can be deployed by 2020 are lower than initially suggested.
And in terms of the overall output of offshore wind, even a year ago, predictions were for between 20 to 30GW of energy being produced from offshore, now this is more likely to be around 10GW.

This will also depend on whether a number of installations around Scottish waters are given consent by the Scottish Government – expected to be later this year.

But Stuart said: “There is a quiet determination in the industry. I think people also understand this is a very fragile industry and just one or two decisions could have a massive impact on the size of our sector.”
But he insisted any uncertainty was “a long way” from putting off major companies like EDPR, Mainstream, Repsol and SSE from investing.
He added: “I don’t expect this to have a major impact on deployment, I think the industry will find ways of eliminating costs in order to work within those constraints – because it has to.”

Renewable energy has found itself in the political spotlight too, last December a House of Lords amendment saw responsibility for setting its own subsidy levels reserved back to Westminster and while both UK and Scottish administrations support the further development of renewable energy, there have been divergent policies on how to achieve it – particularly on nuclear power.

A team of academics from Robert Gordon University and Aberdeen, Cardiff and Queen’s Belfast universities even took the step of revising a report released at the start of last year that had initially claimed it would be more expensive to reach the Scottish Government’s aim of 100 per cent renewables if it achieves independence.

They went back to their original research after the UK Government announced a deal for a new twin nuclear reactor at Hinkley C with further nuclear plants on the horizon.
One of the authors of the DREUD report, Peter Strachan, said this had been a “huge game changer” along with the new Electricity Market Reform prices and the revised report concluded the ambitions would cost less in an independent Scotland.

Speaking about the state of the industry in general, Strachan added: “In the United Kingdom and specifically Scotland, during the past 12 years we’ve seen significant renewable energy expansion. Much of the development that has taken place has been in the devolved administrations – particularly Scotland.

“There has been strong political leadership on renewable energy and there has been cross-party support for renewable energy and Scotland has been quite clever in seeing renewable energy as being a new market worthy of exploitation.

“Renewable energy has been an economic driver for Scotland that there has been a lot of investment to date. That investment is going to continue into the near future.

“Scotland has got very ambitious renewable energy targets and to their credit, major developers such as SSE and Scottish Power are really committed to delivering on the Scottish Government’s renewables agenda.

“I think this particular industry is going to go from strength to strength in the part of the world where I live, the North East of Scotland, [where] we have some very innovative projects that are currently in the pipeline.

“Take, for example, the Aberdeen Bay wind project – that is going to be a major test centre for wind development in terms of test and demonstration for all of Europe.

“You have also in the North East of Scotland major Norwegian companies such as Statoil investing in offshore renewables in the Buchan Deep project. From those signs this industry has got a very healthy future indeed.”

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