Meeting of the Parliament 06 December 2016
Scotland has made tremendous progress in green energy infrastructure and capacity over recent years, and we now generate more than half our electricity requirements from renewables. In addition, Scotland’s contribution to the UK’s renewable energy supply targets is substantial, at 26 per cent of the UK total. However, Scotland has ambitious targets for the future: to meet 100 per cent of our electricity needs from renewables by 2020 and to focus on making significant inroads into converting heat and transport energy supply to renewables over the coming years.
It is worth taking a step back and remembering why we are focused on the shift towards renewables. The impact of climate change on our planet is clear, but our response is not about saving the planet—it will do just fine, as it has for the past 4 billion years. It is about keeping the planet habitable for Homo sapiens—it is pure self-interest. Scotland’s work to build our renewables capacity means that we not only meet but exceed our climate change targets, and Scotland’s progress in that area is internationally recognised.
Renewables provide clean energy, mitigate the effects of climate change and provide the opportunity to leverage new technologies to build the industries of the future. However, as with all energy technologies, renewables require market stability in order to support new investment in capacity and development. That is the context in which we must view the UK Government’s contracts for difference pricing mechanism and its commitment—or lack of it—to Scotland’s renewables technologies.
The UK Government’s recent announcement of the CFD structure, which had been delayed since the summer because of Brexit, was very disappointing in the way that it limits the growth of Scotland’s renewables potential and stifles Scotland’s renewables ambitions. There is no ring-fenced funding for marine or onshore wind in the CFD structure, which makes it unlikely that projects for those technologies will win funding. However, nuclear power will receive funding: the Hinkley Point C deal will provide support pricing set at £92.50 per MWh, which is almost double the current wholesale price of electricity. In contrast, onshore wind costs have continued to fall, with the last round of support at around £80 per MWh and the industry working towards much lower prices as technologies mature.
Island wind offers a route to establishing high-efficiency wind generation as a significant contribution to our energy mix and an economic contribution to our island communities. Despite repeated assurances following the 2013 consultation that it would do the contrary, the UK Government has, in effect, excluded island wind projects such as the Viking project in Shetland from the CFD allocation. Instead, the UK Government has kicked the can down the road by initiating a further consultation, which will delay implementation and create even more uncertainty.
Many parts of the renewables sector, such as tidal and wave, are in their infancy. Those technologies will become mainstream in the future, and the countries that invest in them now will reap the economic reward for decades to come. The UK Government has failed to recognise the potential of those technologies and to invest in them. At the same time, it is making a £35 billion bet on unproven European pressurised reactor nuclear technology at Hinkley C. That is not good for consumers, for industry in this country or for Scotland.
The recent CFD announcement was disappointing news for wave and tidal as no minima was set aside for those technologies. Without minima, wave and tidal projects will be included in a cost-competitive auction process alongside offshore wind projects, which are significantly cheaper due to the technology’s maturity and scale. Given the comparably high cost of wave and tidal projects, it is unlikely that they will secure a contract in a competitive auction. That is especially problematic for Scottish firms, which are in a dominant position in the marine sector.
It is a truism that the wind does not blow all the time, although sometimes in Scotland it feels like it does. The need to balance intermittency can be—and is being—tackled in a number of ways, such as through smart demand management, battery storage technologies and the use of local solutions to feed into the grid. The use of pumped hydro has a large role to play in balancing energy supply, allowing excess generation from wind to be stored as hydro energy for future use.
Major hydro projects at Cruachan and Coire Glas, with totaI additional capacity of 1GW, are costed, funded and ready to proceed, prevented only by the lack of CFD support from the UK Government. Despite UK Government ministers applauding Scotland’s renewable energy success, their decisions continue to create serious uncertainty across the sector and undermine Scotland’s renewables potential.
Renewables is an industry Scotland was made for. Blessed with the fabulous resource of our oil and gas sector in earlier decades, Scotland has hit the jackpot not once, but twice, with our renewables potential. We need to support and to develop the sector not just to meet our own energy needs and provide for export or build manufacturing industries on the back of the sector, but to build up levels of expertise in the sector, similar to what has been achieved in the oil and gas sector, providing us with a revenue stream and high-value employment far into the future.
Low-carbon industries in Scotland generated £10.7 billion in turnover and support 43,000 jobs, and they have the potential to do far more to support our economy of the future. However, we need the UK Government, which holds the economic levers in the sector—as it does in many others—not to stand in the way of Scotland’s interests.
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