By Steven Vass
Wednesday, March 05 2014
London has sought to undermine Salmond’s claims about the ease of independence, angrily ruling out his proposed currency union with the rest of the UK, while questioning his assumptions on an independent state’s EU status.
Another battle seems to be taking place at the same time over energy policy, specifically renewables.
Green power has long been central to Salmond’s vision of an independent Scotland — the oil reserves might be slowly dwindling, but harnessing the country’s natural resources will ensure that it remains prosperous, he argues.
For years, Salmond’s nationalists have dreamed of selling the electricity from Scottish winds, tides and waves not only to the English but eventually through a supergrid to every corner of Europe. What tulips are to the Dutch, what cigars are to Cubans, natural power is intended to be to the Scots.
No-one could deny that the country has got off to a rollicking start. Scotland has 4.3GW of installed onshore wind according to the latest figures, almost triple that of England and over 60% of the UK total.
The pipeline figures are equally formidable, with 3.9GW approved in Scotland versus 1.4GW in England; and 4.1GW in planning versus 900MW in England. In offshore wind, strength in natural resources has ironically meant that Scotland has been slower to get moving than the southern UK, yet there is still 5GW of projects in the pipeline.
Yet all this good work is potentially being undermined by the UK government and its Electricity Market Reform (EMR), which has thrown Scotland enough spanners in the works to suggest that London is sneakily using renewables as a weapon against the pro-independence campaign.
First was the revelation late in 2012 that Edinburgh would not enjoy control over Contracts for Difference (CfD) in the way that it had with Renewable Obligation Certificates (ROCs). This has not sparked the row that observers expected, with some suggesting that Salmond has accepted it as a quid pro quo for securing a unified energy market with the rest of the UK.
Yet the unionists in London, led by Energy Secretary Ed Davey, say that English consumers would no longer be prepared to pay the hefty subsidies required to achieve Scotland’s green ambitions.
They say the remainder of the UK would either build more green power within its borders; source more from neighbouring countries such as Ireland; or renegotiate the binding EU renewable-energy targets that necessitate so much green power.
The nationalists retort that England is too anti-renewables to cope with much more of it; is limited in what it can source from elsewhere; and would find it difficult to renegotiate its EU targets.
Yet even the zealots recognise that Scottish green ambitions would be undermined to some extent by reduced UK subsidies. The argument in favour of a unified UK energy market is that it would increase the extent to which the rest of the UK would continue to pay for a Scottish industry.
Last October came a further show of strength from London when it introduced an EMR amendment that removed Scotland’s ability to decide whether to scrap its ROC scheme. This prevented the Scottish National Party from potentially holding the new energy system to ransom ahead of the ROCs’ demise in 2017.
December saw several further pieces of bad news for Scotland. Ofgem announced yet another delay to Project TransmIT, its reform of the transmission charging rules that have undermined the business case for green power, particularly in the north of Scotland. This was seen as another victory for the lobbying of southern-focused power companies that would lose out under the reforms.
Then came the revelation that the shortlist of projects identified as being “provisionally affordable” for the UK government’s Final Investment Decision Enabling (FIDE) scheme did not contain any of the Scottish offshore wind developments. FIDE exists to give a handful of projects early confirmation of CfD contracts.
Not only had Inch Cape, Beatrice and Neart Na Gaoithe all been cut from the long list, four English projects were shortlisted. Three were Round 2 projects that were arguably less prone to risk of cancellation than the Scottish projects; but the other was the first 1GW tranche of Hornsea, a Round 3 project off northeast England that submitted its planning application a year after Beatrice and Neart.
The Scottish authorities cried foul, complaining the UK had broken its promise to consult, while SSE, which is co-developing Beatrice, announced it was consequently reviewing its offshore wind programme.
The Scottish offshore projects now look likely to have to apply for CfD contracts along with everyone else, although there is still the possibility that the shortlist could be changed ahead of FIDE deals being agreed later in March.
While this reality was dawning, Holyrood specialists were digesting the rules about how the rest of the contracts would be allocated. At an uncertain point in proceedings, possibly as soon as the FIDE contracts have gone through, allocation looks likely to be “constrained”. This entails a blind auction between developers, with the lowest bidders getting contracts at the price they bid rather than the CfD published strike price. If the tougher geographical conditions of the Scottish projects make them more expensive per MWh, they will potentially be undercut and lose out.
Norbert Giese, senior vice-president of offshore development at turbine maker Senvion (formerly REpower), which has its UK hub in Edinburgh, says that the lack of offshore progress has put all talk of factories beyond discussion for the time being.
“If you want to have industry, you need orders, order, orders,” he tells Recharge. “We can sign a lot of MoUs here and there, but without orders, nobody will implement a production facility.”
Asked about these issues, the Scottish government would only stress that the FIDE discussions are still ongoing, although no-one else seems to hold out much hope of the shortlist being changed.
Conspiracy theories abound among developers as to why FIDE status went to Hornsea first. Efforts to get answers from the Department of Energy and Climate Change (Decc) about the criteria have produced little clarity.
Craig Milroy of EDP Renewables, which is involved in Moray and Inch Cape, says: “There was absolute shock that not one of the Scottish offshore projects went through. It’s very difficult to find a reason for it. If Decc won’t tell you, it’s inevitable that people will try to find common threads.”
Another developer, who does not want to be named, adds that some wonder if Hornsea was prioritised because project partner Siemens will be supplying the turbines, thereby ensuring that its Humberside factory in northeast England goes ahead. He adds that there is also the whiff of the UK government giving FIDEs to projects involving either Dong or Statoil, backed by the Danish and Norwegian governments, which come with the will and credentials to make them happen.
If the Scottish projects are now to wait for the CfD first round proper, the big question is whether it will involve blind auctions, known in the trade as “constrained allocation”. The industry is expecting some guidance in March but no final word until the summer.
Niall Stuart, chief executive of Scottish Renewables, says: “Our hope is that the first round won’t be a competitive process. That’s a big anxiety for the sector. As well as having to deal with complex projects and a new mechanism, competing for CFDs in an auction would add to the uncertainty.”
It is also not clear who will be allowed to apply in this round. If it is restricted to projects that have planning consents, this could advantage Scotland. Although the Scottish government missed its own targets to sign off at least one offshore project by the end of last year, at the time of going to press, it looked as though the two Moray Firth projects — Moray and Beatrice — would receive planning consents by the end of February. Of the projects further south, Neart Na Gaoithe approval is said to be two months away, while Inch Cape’s is expected in the summer.
Mainstream Renewable Power, which is behind Neart, is now minded to hasten its development programme in order to qualify for ROCs ahead of the March 2017 deadline. This might not be a vote of confidence in UK energy policy, but it is at least a sign that Mainstream is still very committed to Neart.
And although Milroy could not say much about EDP’s project plans, it is understood that the consent announcements over the Moray Firth will be followed by news of supply-chain agreements. The word is that this will finally lead to action on the manufacturing side.
For these reasons, the mood in Scotland’s renewables scene appears to be one of apprehension rather than depression.
Salmond may not have the power to ensure offshore projects are under way by the time Scotland votes on independence, let alone be able to offer them subsidy contracts, but there could certainly be a few projects consented between now and then. Not only would this ensure that his pro-renewables policy gets plenty of attention, but would put pressure on the UK government to grant contracts to the Scottish projects at the agreed strike prices.
Perhaps the delays in the planning process have been part of Salmond’s plan all along.
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