Sep 17, 2014

Apprehension Looms over Renewable Energy Sector in Scotland Ahead of Independence Vote

Energy Policy
5 min
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...

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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Jul 29, 2021

Carbon dioxide removal revenues worth £2bn a year by 2030

Dominic Ellis
4 min
Engineered greenhouse gas removals will become "a major new infrastructure sector" in the coming decades says the UK's National Infrastructure Commission

Carbon dioxide removal revenues could reach £2bn a year by 2030 in the UK with costs per megatonne totalling up to £400 million, according to the National Infrastructure Commission

Engineered greenhouse gas removals will become "a major new infrastructure sector" in the coming decades - although costs are uncertain given removal technologies are in their infancy - and revenues could match that of the UK’s water sector by 2050. The Commission’s analysis suggests engineered removals technologies need to have capacity to remove five to ten megatonnes of carbon dioxide no later than 2030, and between 40 and 100 megatonnes by 2050.

The Commission states technologies fit into two categories: extracting carbon dioxide directly out of the air; and bioenergy with carbon capture technology – processing biomass to recapture carbon dioxide absorbed as the fuel grew. In both cases, the captured CO2 is then stored permanently out of the atmosphere, typically under the seabed.

The report sets out how the engineered removal and storage of carbon dioxide offers the most realistic way to mitigate the final slice of emissions expected to remain by the 2040s from sources that don’t currently have a decarbonisation solution, like aviation and agriculture. 

It stresses that the potential of these technologies is “not an excuse to delay necessary action elsewhere” and cannot replace efforts to reduce emissions from sectors like road transport or power, where removals would be a more expensive alternative.  

The critical role these technologies will play in meeting climate targets means government must rapidly kick start the sector so that it becomes viable by the 2030s, according to the report, which was commissioned by government in November 2020. 

Early movement by the UK to develop the expertise and capacity in greenhouse gas removal technologies could create a comparative advantage, with the prospect of other countries needing to procure the knowledge and skills the UK develops.

The Commission recommends that government should support the development of this new sector in the short term with policies that drive delivery of these technologies and create demand through obligations on polluting industries, which will over time enable a competitive market to develop. Robust independent regulation must also be put in place from the start to help build public and investor confidence.

While the burden of these costs could be shared by different parts of industries required to pay for removals or in part shared with government, the report acknowledges that, over the longer term, the aim should be to have polluting sectors pay for removals they need to reach carbon targets.

Polluting industries are likely to pass a proportion of the costs onto consumers. While those with bigger household expenditures will pay more than those on lower incomes, the report underlines that government will need to identify ways of protecting vulnerable consumers and to decide where in relevant industry supply chains the costs should fall.

Chair of the National Infrastructure Commission, Sir John Armitt, said taking steps to clean our air is something we’re going to have to get used to, just as we already manage our wastewater and household refuse. 

"While engineered removals will not be everyone’s favourite device in the toolkit, they are there for the hardest jobs. And in the overall project of mitigating our impact on the planet for the sake of generations to come, we need every tool we can find," he said.

“But to get close to having the sector operating where and when we need it to, the government needs to get ahead of the game now. The adaptive approach to market building we recommend will create the best environment for emerging technologies to develop quickly and show their worth, avoiding the need for government to pick winners. We know from the dramatic fall in the cost of renewables that this approach works and we must apply the lessons learned to this novel, but necessary, technology.” 

The Intergovernmental Panel on Climate Change and International Energy Agency estimate a global capacity for engineered removals of 2,000 to 16,000 megatonnes of carbon dioxide each year by 2050 will be needed in order to meet global reduction targets. 

Yesterday Summit Carbon Solutions received "a strategic investment" from John Deere to advance a major CCUS project (click here). The project will accelerate decarbonisation efforts across the agriculture industry by enabling the production of low carbon ethanol, resulting in the production of more sustainable food, feed, and fuel. Summit Carbon Solutions has partnered with 31 biorefineries across the Midwest United States to capture and permanently sequester their CO2 emissions.  

Cory Reed, President, Agriculture & Turf Division of John Deere, said: "Carbon neutral ethanol would have a positive impact on the environment and bolster the long-term sustainability of the agriculture industry. The work Summit Carbon Solutions is doing will be critical in delivering on these goals."

McKinsey highlights a number of CCUS methods which can drive CO2 to net zero:

  • Today’s leader: Enhanced oil recovery Among CO2 uses by industry, enhanced oil recovery leads the field. It accounts for around 90 percent of all CO2 usage today
  • Cementing in CO2 for the ages New processes could lock up CO2 permanently in concrete, “storing” CO2 in buildings, sidewalks, or anywhere else concrete is used
  • Carbon neutral fuel for jets Technically, CO2 could be used to create virtually any type of fuel. Through a chemical reaction, CO2 captured from industry can be combined with hydrogen to create synthetic gasoline, jet fuel, and diesel
  • Capturing CO2 from ambient air - anywhere Direct air capture (DAC) could push CO2 emissions into negative territory in a big way
  • The biomass-energy cycle: CO2 neutral or even negative Bioenergy with carbon capture and storage relies on nature to remove CO2 from the atmosphere for use elsewhere

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