Risks for wind in post-‘no’ Scotland


August 26, 2014

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The bagpipes are silent. The campaign leaflets have been binned. For those who longed for Scotland to become an independent nation, the dream is over. For now, at least.

The independence movement attracted 45% of the vote in last Thursday’s referendum on whether to split from the rest of the United Kingdom. It wasn’t enough, though did force promises from UK prime minister David Cameron to shift more powers to Scotland.

And it’s because of this that the next few months will remain critical for those investors and developers with interests in Scottish wind.

As we know, energy policy was central to the devolution debate, and there will be pressure for the UK to give Scotland greater control over its energy policy in the future.

All the same, the UK government must resist. If it hands across more power then it would pile more energy investment uncertainty onto an already ambiguous situation.

On first look this is counterintuitive. Before the referendum, market commentators warned that a ‘yes’ result would have put projects worth a combined £7.5bn at risk. Now that a ‘no’ vote is confirmed then surely it means that all of these projects can go ahead.

That is true, but we simply cannot ignore how the ripples from the ‘no’ vote will affect wind in the longer term.

The departure of Scottish National Party leader and Scottish first minister Alex Salmond is key. He has announced he will leave in November. When he goes, wind will lose one of its big backers. Salmond championed the ambition for Scotland to generate all its energy from renewable sources by 2020, and such a target helps investor confidence.

The current frontrunner to replace him is Nicola Sturgeon, Scotland’s deputy first minister. This may bring policy continuity, but any change at the top will force investors to take stock — and potentially direct their funds elsewhere.

If the UK devolves more energy powers to Scotland then it would only add more uncertainty. It would be political folly.

Let’s be clear. The principle that Scotland should receive greater power to determine Scottish issues is sound. The problem is that energy is not simply a Scottish issue.

The energy system in Scotland is tightly intertwined into the rest of the UK. Currency may be one deeply entrenched union but large-scale renewable energy generation is too.

Set in that light, it’s simply not beneficial for Scotland or the rest of the UK to act independently when it comes to wind. The UK needs Scottish wind resource; and Scotland needs the UK for short-term subsidy support and long-term energy export sales.

And despite its best intentions, a joint energy policy between Westminster and Holyrood would fudge the debate, creating yet another bureaucratic barrier. For that, think more red tape.

That’s bad news for business and that’s bad news for attracting international inward investment too.

Global markets should therefore take heed: devolution may open up new territories and increase international energy trading but to think it will by proxy create an energy resource rich independent nation is a step too far. Even for the enigmatic Salmond.

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