Uncertainty in Scotland


November 4, 2011

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An interesting report from Citigroup this week – apparently the bank is advising its clients to exercise caution when considering investing in Scottish renewables because of uncertainty over Scotland’s constitutional future.

The report suggests that Scotland does not have the ‘consumer base’ to be able to support the estimated annual subsidy of £4billlion for its renewable energy targets, and therefore, this will have to be additionally contributed to by customers in England and Wales. With the ceding of Scotland to full independence, the argument goes, this additional funding would come under threat, thereby reducing or removing the return to investors in Scottish energy projects.

Alex Salmond gives a sensible counter argument to the BBC, here, but the reality is, it’s an issue that needs putting to bed as the renewables community, and wind energy in particular, needs the support of the City – not just in Scotland, but across the board.

And whatever the constitutional state of Scotland in the future, the eventual hope is surely that we’ll all be moving towards pan-European schemes, such as a super grid, which will start to negate domestic energy wrangling.

Additionally, given the interest from Asian sovereign wealth funds in German offshore wind and Japanese corporate investments, such as Marubeni, it seems that the international investment community doesn’t, as yet, share the same risk aversion.

If this is to continue however, it’ll probably take more than a firm rebuttal from Mr Salmond to shore up investor confidence easily spooked by the musings of an analyst.

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