Scotland strive for green energy attracts billions of investment

(ADPnews) – Oct 8, 2010 – Scotland is steadily advancing to the top of the world’s renewable energy league propped up by a green-minded government committed to unleash bustling investment activity.

By Julia Komitova

In 2007, Scotland set an ambitious target for 50% of its electricity consumption to come from renewables by 2020, a goal that many dismissed as unachievable and unworkable at the time. However, last month Scotland upped the target to 80% by 2020, and only days later First Minister Alex Salmond said the country will produce enough renewable energy to meet "at least" 100% of its electricity needs by 2025. This was a crystal-clear indication of Scotland’s rich green energy potential as well as of the government’s commitment to help it unfold, things that are kindling vast investment interest in the country of some five million.

Speaking at the Scottish Low Carbon Investment conference held at the end of September, Salmond said that the country has the capacity to become a net exporter of clean, green energy by 2025.

“Edinburgh can be the Davos of green finance -- with a better castle,” Salmond said in his closing speech at the event.

"I'm confident that by 2025 we will produce at least 100 percent of our electricity needs from renewables alone, and together with other sources it will enable us to become a net exporter of clean, green energy,” he added, highlighting wind, wave and tidal generation as the key drivers of growth.

Scottish Renewables, the nation’s clean energy trade body with over 300 members, went even further, arguing that renewables could produce the equivalent of 123% of the country’s annual demand for electricity by 2020.

Figures suggest that Scotland is making good progress in unlocking its clean energy potential. The latest data by Scottish Renewables shows that as of October 1, 2010 there was 3.9 GW of operational green energy capacity humming in the country plus a further 3.3 GW under development.

Since 2007, industry and government have announced agreements for 10.6 GW of offshore wind development, commitments to 1.2 GW of wave and tidal power in the Penthland Firth and Orkney Waters, 1.2 GW of additional potential hydro capacity and proposals for more than 500 MW of biomass and heat power, according to Scottish Renewables

In a recent report dubbed “Driving the Low Carbon Economy: Renewing Our Ambitions”, the industry body argues that clean energy is the key to three major challenges world policy makers are grappling with at the moment including reviving economic growth, reducing carbon emissions and securing energy supplies. It calculated that the growth in renewables delivers an annual reduction of between 11.7 million and 15.3 million tonnes of carbon dioxide (CO2) emissions.

Furthermore, the sector could provide a big shot in the arm to the Scottish economy by creating an estimated 60,000 green-collar jobs, Salmond said. According to a separate study called "Scottish Offshore Wind: Creating an Industry" and commissioned by Scottish Renewables and investment agency Scottish Enterprise, the offshore wind industry alone could contribute GBP 7.1 billion (USD 11.3bn/EUR 8.1bn) to Scotland’s economy and create 28,000 jobs by 2020.

The Scottish government in end-September unwrapped an industry-led offshore wind route map, setting out an action plan designed to attract an estimated GBP 200 billion for the offshore renewables sector, which can potentially deliver 68 GW of installed capacity by 2050, according to a study by the Offshore Valuation Group published in May. A quarter of Europe's wind and tidal energy potential is concentrated in Scotland and so is 10% of the continent's wave resource. According to Scottish Renewables, the country boasts the strongest wind, wave and tidal resources in Europe.

This view is obviously shared by some of the major players in the global renewable energy industry, which are flocking to Scotland to take a piece of the tasty pie. The latest evidence of this came only yesterday when Jorge Calvet, chief executive of Spanish wind energy heavyweight Gamesa (MCE:GAM), told Reuters the company is sounding out sites in Scotland and England to host a new UK offshore wind turbine factory. Concrete plans are expected to be announced before the end of the year.

The announcement comes less than a month after compatriot power utility Iberdrola (MCE:IBE) floated out intentions to sink some EUR 4.8 billion (USD 6.7bn) into the UK over 2010-2012, of which two-thirds earmarked for Scotland, the bulk of it in wind farms, smart grids and carbon capture and storage (CCS).

Iberdrola set foot on the Scottish energy market in 2007 through an amicable merger with ScottishPower, the country’s wind power leader with upwards of 6.5 GW of installed capacity under its belt in the first half of 2010 thanks to the start-up of new renewable energy projects.

Scotland’s appeal with the global renewable energy industry was reinforced earlier this year when Scottish and Southern Energy (SSE) and Japanese giant Mitsubishi (TYO:8058) sealed a strategic agreement to co-operate in offshore wind farm development.

But in order for this clean energy investment bonanza to steam ahead, Scotland needs to offer concerted support from all levels of government, according to Scottish Renewables. As the top priorities the industry group outlines effective and efficient consenting regimes that balance the need for renewable energy development with other interests; delivery of new grid connections and upgrades to carry power from where it is generated to where it is consumed; introduction of a modern grid charging framework that recognises Scotland’s increasing inter-dependence and the need to incentivise generation where its strongest renewable resources are located; investment in infrastructure necessary to support the development of a supply chain capable of large scale deployment of offshore wind and wave and tidal energy; and certainty for investors through the maintenance of stable market support mechanisms.

Cost is shaping up as another daunting challenge for the Scottish clean energy sector. Industry experts sounded the alarm last week that the shift to renewables will dig deeper in consumers’ pockets, who will have to pay an extra up to GBP 100 a year in fuel bills. The average customer's annual dual fuel bill is currently GBP 1,030, with GBP 19 of that going towards renewables.

Accountancy firm PricewaterhouseCoopers said in a recent report that the Scottish Government would have to shell out up to GBP 4 billion over the next decade if the burgeoning renewables sector was to be a success.

The overall bill to pay for the renewables and low-carbon economy has been estimated at more than GBP 200 billion, including some GBP 100 billion on upgrading the grid alone. The vast majority of costs for renewable energy projects such as off-shore wind farms are financed through consumers' energy bills.

(GBP 1.0 = USD 1.588/EUR 1.139)
(EUR 1.0 = USD 1.394)

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