The Power of Scotland

Last year a report The Power of Scotland Renewed (you can read it here) showed the amazing potential Scotland has for conversion to renewable energy.

The Power of Scotland Renewed report, based on research by independent energy analysts Garrad Hassan, and commissioned by Friends of the Earth Scotland, the World Development Movement, WWF Scotland and RSPB Scotland, shows that there is enormous potential to increase generation of electricity from renewable sources during the next two decades, so much so that by 2030 renewable energy can meet between 60% and 143% of Scotland’s projected annual electricity demand.

If Scotland also meets official targets for energy saving, the research concludes it is feasible for all fossil fuel fired generation to be closed by 2030, delivering almost complete decarbonisation for Scotland’s electricity supply. It’s in this context that the scandalous withholding of the fossil fuel levy by the Tory-Liberal London government takes place. Duncan Mclaren, Chief Executive at Friends of the Earth Scotland writes:

Cunning wheeze, or Faustian pact? For over a decade electricity Scottish consumers – like others across the UK – have paid a ‘fossil fuel levy’ on their bills, to help fund renewable energy development. But the Scottish share of those funds has sat in an Ofgem account while Holyrood and Westminster wrangled over whether they could be released without an equivalent reduction in Scotland’s Departmental Expenditure Limit (DEL).

Both the SNP and the previous Labour / Lib-Dem administrations have put a case for the cash to be made available as additional investment, in the same way as European grants are paid. But the Treasury has refused to release the money on such terms.

Enter George Osborne and Danny Alexander. Following a Liberal Democrat election pledge to immediately release the funds for additional expenditure, encouraging noises started to emerge from Whitehall. The Liberal Democrats seemed to have a clear win to chalk up to their role in the coalition, and the air was full of talk of a ‘respect agenda’.

But nothing could be signed off before the Comprehensive Spending Review in October. And one can only guess at what frenzied negotiations led to the proposal that finally emerged. On the face of it, it was still a win for the Liberals: an extra £250m dedicated to Scotland in the funding supplied to the Green Investment Bank (GIB) on start-up in 2013/14, on condition that Scotland ‘agreed to the release of the FFL money’. It looked like an unnecessary delay – but still better than leaving the cash where no-one could use it.

But the devil was in the usual place, and the details make much less positive reading.

First, the condition is that the Scottish Government draws down the FFL funds within DEL – in other words spending the money on green energy, but at the cost of making equal extra cuts elsewhere. While that would be good for the environment if the cuts came in environmentally damaging expenditure, it wouldn’t be any gain if the cuts came from the hard fought budgets for energy conservation or public transport. And public support for renewables could take a bashing if the sector got funds at the expense of health or education.

In a crude effort to make this option seem attractive, the UK Government appears to have deliberately upped the ante by excluding Scotland and the other devolved nations from access to the £60m fund established to upgrade ports to service the offshore renewables industry. This raises the unpalatable prospect that investment and jobs servicing the Scottish offshore sector of wind, wave and tidal power could go to Teeside or Merseyside, rather than to ports on the Forth or Clyde, unless the Scottish Government finds money to support Scottish ports too.

Second, the money committed via the GIB looks less substantial the more one tries to pin it down. It’s completely unclear whether the commitment is to make total investments of at least £250m in Scotland, or to invest £250m of public money, alongside all the other cash that sum could be used to lever in. Whether in the GIB or in the hands of the Scottish Government, or the proposed Scottish Investment Bank, that £250m could easily lever in as much again, for example, from the European Investment Bank. Controlled by a Scottish institution that would mean at least £500m invested in Scotland – but in the GIB, without further safeguards and commitments, it could still mean no more than £250m spent in Scotland, and then only “if viable opportunities exist”.

That caveat might seem like another weasel clause, but in practice the problem is the opposite. It is almost inevitable that there will be so many opportunities in Scotland’s renewables sector – with our 20% plus share of the whole of Europe’s offshore renewables resource – that the GIB will invest far more than £250m in Scotland without needing any ring-fencing mechanism. In other words the deal may not lead to a single penny more being invested in Scotland than would have happened anyway.

George Osborne might have seen his plan as a cunning wheeze, but from the Scottish Government’s perspective it must look more like a Faustian pact: find ways to cut existing expenditure even more severely, so as to spend dedicated money on renewables, in return for which, three or four years hence, the Green Investment Bank will ring-fence for Scotland some money that it would have invested in Scotland in any event.

Even if it were just a delay in delivering additional investment, that would still be unforgiveable. Carbon emissions need to be cut today, not in a few years time. The economy needs a green stimulus now, not in 2014. And somewhat ironically, it will be the UK’s renewable energy targets that may be missed as a result, not just Scotland’s, if investment in Scotland remains at current rates, rather than accelerating.

Of course, whatever your view of the macro-economics of it all, it’s good politics for the Coalition to try to generate infighting in Scotland over where cuts should fall, rather than resistance to the ultimate source of those cuts. But for the same reasons it would also be good politics for Labour and the SNP in particular to show a united progressive front on this issue – as indeed they did in today’s Holyrood debate.

Rather than allowing Westminster to put pressure on the Scottish Government to cut vital expenditure on education, health or energy efficiency, Scotland’s progressive parties should keep pushing Westminster to free up the FFL funding for urgent additional investment in renewables; and to establish a genuine Green Investment Bank as soon as possible. The Bank should get a clear mandate to deliver critical capital investment in clean energy, energy saving and resource efficiency across the whole of the UK.

In the interim, nonetheless, Scotland would be well served if the Scottish Government cut, or at least delayed, capital spend on major road building projects that will increase carbon emissions for little if any economic benefit, Projects such as the Forth Crossing or Aberdeen Bypass are set to take over £2bn of capital investment in the coming years. Freezing those projects would free up scarce cash to redirect to urgent green energy investments that will both cut carbon and create jobs.

Comments (2)

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  1. Tocasaid says:

    Interesting article – though there’s no surprise that Westminster is playing petty partisan politics again. I’m not sure though about cancelling all proposed road projects. The A9 is in dire need of upgrading and I see no reason why the Highlands should not have access to at least some of the infrastructure available to the central belt. Sure, public transport should be improved, but both solutions would benefit many of our rural communities. Diverting cash to renewables will not cut carbon emissions – people will still use their cars.

    Am not so sure about the new Forth crossing or the Aberdeen bypass – but is the status quo of long traffic queues any more beneficial to the environment?

    Unfortunately though, we’re not in the same position as some of our Euro neighbours…

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