Apprehension Looms over Renewable Energy Sector in Scotland Ahead of Independence Vote
Tomorrow, Scotland will vote on whether or not it wishes to break away from the United Kingdom and become a truly independent country. Currently, the polls are in a dead heat, with both the yes and no camps holding nearly equal footing.
There is a lot at stake with the vote, and while the history between Scotland and England hasn’t always been a pleasant one, it is incredibly intertwined. One of the most immediate sources of anxiety in the country and around the world revolves around a simple, yet massive question: what will become of the Scottish energy market?
There’s been a battle over oil in the North Sea, as proponents of independence claim the resource could help finance an independent Scotland.
However, oil isn’t the only portion of the energy sector that the independence vote could shake up—analysts claim both nuclear and renewable energy would be affected deeply.
Michael Liebreich, chairman of the advisory board at Bloomberg New Energy Finance, did not mince words when it came to his analysis of independence’s effect on renewables.
“The number one priority for Europe’s energy sector is to achieve higher levels of market and technical integration, to balance variable renewable generation. Any change that threatens that, especially if it creates a long period of uncertainty, is a step in the wrong direction,” he said. “A ‘yes’ vote would be likely to slam the brakes on the Scottish renewable energy sector.”
Scotland has a target to become 100% renewable by 2020, and Liebreich believes that independence would derail the process.
“You’d have two, three, four years of negotiations,” he said. “That takes us through to 2017-18 and there’s just not enough time to build it after that, even if there’s a good outcome that gives Scotland a great framework.”
It’s estimated that Scottish energy consumers would see a roughly £189 per year increase to their energy bills to help keep Scottish wind farms spinning. There are far more wind farms in Scotland—5.7 GW currently permitted with another 11.3 GW on the way—than there is demand for, though independence movement leader Alex Salmond claims to have plans for selling off the excess power to England and Wales.
BNEF is wary about that, though, claiming the two countries don’t depend heavily on Scotland for energy.
“Scotland may be more reliant on England and Wales as a customer than they are on Scotland as a generator,” it said.
It’s important to remember that the plans laid out are merely groundwork and not in any way concrete. In fact, the uncertainty, which analysts seem to believe is ironically the only certainty, surrounding and potentially following the vote could be incredibly detrimental to all of Scotland’s energy sectors.
BENF’s Kieron Stopforth echoed this sentiment.
“During this period of negotiation, with oil, power, and renewables support under discussion as well as the currency, defense, and national debt, clean energy investors would feel less than confident about future prospects, and decisions will inevitably be delayed,” he said. “These delays could hit projects in the whole of the UK for a time, but the longer-lasting effect would be on those in Scotland if they are unable to compete for support under the Renewables Obligation or Contract-for-Difference schemes.”
This is already having an effect on the sector, though that may only be in the short term.
“No doubt, in the very long term, many new projects will be developed there, whatever the result on 18 September,” BNEF senior analyst Agnus McCrone said. “But our concern is that in the event of a 'yes' vote, there could be a loss of momentum as investors worry about the likely price and market for electricity their projects could generate. One leading renewable energy developer, Infinis Energy, has already said that it will not make an investment decision on two wind projects in Scotland until the outcome of the referendum and its effects on energy policy are known.”
While analysts aren’t exactly positive, utilities are definitely not thrilled.
EDF Energy Chief Vincent de Rivaz sent a letter out to the French utility’s employees, 1,200 of which are in Scotland, warning that a ‘Yes’ vote for independence would be incredible risky and have a direct affect EDF and its employees.
The utility operates two nuclear plants in Scotland and de Rivaz warns that if Scotland breaks away, their future will be uncertain. Salmond reassured EDF that the plants would continue to operate, despite his plan for a nuclear-free Scotland. de Rivaz, however, isn’t convinced.
“What is clear is that, beyond the primary reassurance about the ongoing operation of nuclear, the answers to these questions remain uncertain, depending on the outcome of the vote and any negotiations that may follow,” he said.
Not all were pessimistic, however.
Abhishek Agarwal, Senior Lecturer of Energy Policy and Strategy at Robert Gordon University in Aberdeen, Scotland, believes that Scottish independence would mean the rest of the U.K. would have to rely on Scotland for energy.
“The short answer is that, in the event of a Yes vote, renewable energy would go from strength to strength,” he writes.
He added that regardless of the outcome, climate targets still exist in the U.K. and Scotland is a big part of how they’re going to meet them.
“As a result, it is highly likely that the rest of the UK would have no choice but to continue importing electricity from Scotland,” he writes. “This would place independent Scotland in a better position to negotiate an arrangement for an integrated energy market, in line with the stated policy goal of forming an effective energy partnership with the rest of the UK.”
Simon Buchler, writing for legal analysis firm Berwin Leighton Paisner, perhaps best sums up the future of renewable energy and the independence vote. He believes that if Scotland breaks away from the rest of the U.K., the sector will be potentially remain in a state of flux for a brief period of time as the immediate details of the split are sorted out.
“In the short term, however, whether these issues are resolved is to some extent irrelevant,” he writes. “For funders and developers considering projects now, independence simply means uncertainty and potential effects on cost of capital. Not an ideal investment landscape.”
The independence referendum is scheduled for Thursday, September 18.
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The £424 million acquisition of the Canadian biomass pellet producer supports Drax' ambition to be carbon negative by 2030, using bioenergy with carbon capture and storage (BECCS) and will make a "significant contribution" in the UK cutting emissions by 78% by 2035 (click here).
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