Real Solutions: The Scottish Renewable Industry

Written by Laura Marion

A Bright Future

The future of renewable energies in Scotland looks bright: increasing opportunities in wind, solar and especially tidal energies come along with high cutbacks in production costs. If some investors keep betting on fossil fuels, it became evident that this choice is increasingly risky: fossil fuels’ production costs are rising and the carbon bubble threatens to burst at any time. Today renewable energies offer a viable alternative: the main Scottish investors such as for instance the Strathclyde Pension Fund, the 2^nd largest Local Government Pension Scheme in the UK, would gain in long-term financial stability from dropping its fossil fuels assets and opting for green investments.

Renewables: A thriving sector in Scotland

Scotland is one of the worldwide leaders in the development of renewable energies and offers increasing opportunities for investors. With its vast stocks of wind, wave, tidal, hydro and biomass sources, it has sometimes been called the “Saudi Arabia of renewables” (Johnatan Porritt, 2012). With 25% of Europe’s offshore wind and tidal resources, as well as £200 million of public funds available, Scotland offers a favourable environment to renewable investments (Scottish Development International).

These past years, the country has been hosting some of the most ambitious projects and the Scottish government is targeting to generate 100 percent of the electricity used from renewables by 2020. If the objective seems ambitious, the latest trend is encouraging: according to the Department of Energy and Climate Change, renewables achieved 39.9% of gross electricity consumption in 2012, 46.4% in 2013 and 49% in 2014 (BBC News, 2014). However, if the generation of electricity from renewables seems promising, progresses have yet to be made for heat generation: today 3% of heat comes from clean energies, still far from the official goal of 11% by 2020.

The wind power is the fastest growing renewable energy source, with 5328 MW of installed capacity in 2015 (both from onshore and offshore facilities). Whitelee Wind Farm, the largest onshore wind farm in the United Kingdom, in located in Eaglesham (10 miles south of Glasgow). In terms of offshore production, the first turbines were built in 2006 in the North Sea, off the east coast in the Moray Firth: at that time it was the world largest turbine with a generation power of 5 MW.

scotland_electric_capacity2

Source: Energy Matters, 2015

The future of renewable energy in Scotland: the tidal and waves power

One of the main stakes of renewables expansion in Scotland is the development of marine technologies (waves and tidal) in which the country can achieve a real goal of leadership: the narrow sea channels are perfectly suited to take advantage of the heavy Atlantic swell and some of the world’s strongest tides. In addition, unlike wind and wave, tidal power is a predictable source: however the technology is still in its infancy and consequent investments are required. Currently the Scottish Government is funding a £4bn project to build tidal power sites around the Orkney Islands and the Pentland Firth, expected to generate 1.2 GW of green energy (enough to power 750,000 homes). Some estimates have suggested that a combination of tidal and wave power from the area could produce up to 60GW of power. This would represent 10 times Scotland’s annual electricity usage. Other studies suggest one-third of the UK’s total electricity needs could be met by tidal power alone.

At the moment the key investor is Atlantis, the main owner of the MeyGen project that could power nearly 175,000 homes through network of turbines on seabed at Ness of Quoys off Caithness. Its recent partnership with Equitix, the infrastructure investor which plans to put more than £100 millions into Scottish tidal power over the next two years, helps paving the way for other investors to get involved in the nascent UK tidal sector.

The social and economic advantages of renewable energy

Investing in renewable energies is increasingly profitable: these past years costs have dramatically dropped especially for solar photovoltaics and onshore wind. These technologies are becoming more cost-competitive than both fossil fuels and nuclear energy. For instance in Australia, producing onshore wind was 14 percent cheaper than new coal and 18 percent cheaper than new gas in 2013. Solar module prices have dropped 75 percent since 2009 and will continue to fall due to economies of scale and technology improvements. International companies such as Apple, IKEA, Amazon, Wal-Mart or Lego have understood that investing renewables became a safer option than investing in fossil fuels. For instance, General Motors says its clean energy programme has saved the company more than USD 80 million (Huffington Post, 2015). Not only are renewables economically viable, but also are socially beneficial. The renewable energy sector currently supports over 11,000 jobs in Scotland (Scottish Renewables, January 2014). Most studies which attempted to determine the potential job creation in the renewable energy industry found positive employment effects, with estimations up to 20 million new jobs worldwide by 2030 when direct and indirect jobs are considered (UNEP et al., 2008).

chart2_wind

Source: daryanenergyblog, 2013

From fossil fuels to renewable energy

Despite the multiple benefits of renewable energies detailed above, the fossil fuel industry keeps being heavily subsidized at the expense of the development of renewables. In recent years, the UK has been the only G7 country to significantly increase subsidies to fossil fuels. In the 2015 Budget, Chancellor George Osborne awarded a further £1.3 billion in subsidies to the oil industry (Oil Change International Platform, 2016). Subsidizing a mature sector with increasing costs over an infant one, with high economic and social potential, is an economic non-sense that can only be explained by strong lobbying power and vested interests. The UK oil and gas industry is also lobbying hard for “permanent tax breaks” (Oil Change International Platform, 2016). For instance, in 2015 Shell received $123 million from taxpayers (CarbonBrief, 2016). These tax advantages not only are very costly for the Scottish citizens, but also are inefficient to protect jobs in the oil industry. According to the Scottish unions workers keep facing increasing lay-offs.

Fossil fuels expansion is no longer a solution to economic development and job creation. On the other hand the falling costs of renewable energies leaves no more excuses for advantaging fossil fuels: it is now time for governments to redirect subsidies and to create a favourable environment for renewables investments. It is also in the interest of pension funds, such as the Strathclyde Pension Fund, to divest from fossil fuels and switch to more sustainable assets. In anticipation of future environmental policies required to meet the 2°C limit agreed in Paris, as well as a buffer against the market volatility and the expected devaluation of fossil fuels assets, the SPF would ensure the long-term viability of its investments by opting for renewable energies.

Bibliography

IRENA Report, Renewable Energy Jobs, 2011.

http://www.bbc.co.uk/news/uk-scotland-scotland-business-29360934

http://www.carbonbrief.org/uk-taxpayers-handed-shell-usd123m-in-2015

https://daryanenergyblog.wordpress.com/2013/10/08/what-is-so-bad-about-wind-farms/

http://euanmearns.com/scotland-gagging-on-wind-power/

http://www.ft.com/cms/s/0/957eff00-f8fc-11e5-b3f6-11d5706b613b.html#axzz48v7a3yyi

http://www.gov.scot/Topics/Business-Industry/Energy/Facts

http://www.huffingtonpost.com/adnan-z-amin/post_10557_b_8600240.html

http://www.jonathonporritt.com/blog/renewable-energy-scotland

http://platformlondon.org/wp-content/uploads/2016/03/NorthSea_Oil_Tax_Facts.pdf

http://www.sdi.co.uk/invest/sectors/renewables