A climate of uncertainty

Friday 20 April 2012

DOES the Scottish Government's energy policy have more to do with politics than economics?

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Even if the aesthetics of wind turbines remain a divisive issue, there is no doubt that the idea of a prosperous independent Scotland powered by energy harvested from wind and water is an appealing one. Whether it can be made to work in business terms, without far larger subsidies than are currently on offer, is quite another matter.

A year ago, announcing the plan by Doosan Power to create hundreds of jobs in Scotland's offshore wind sector, Alex Salmond was ecstatic. The First Minister described the Korean firm's initiative as "another great stride forward for the renewables industry in Scotland, which is now the chosen destination for three energy engineering giants to design their next generation of turbines to service the global offshore wind industry". He was less forthcoming when the company intimated to his administration in December that it had decided to abandon the venture, citing deteriorating confidence in offshore wind. In fact, the news only leaked out last week at an industry conference. Yesterday the government and the renewables lobby were at pains to portray Doosan's withdrawal as an individual business decision that goes against a largely positive trend. Samsung and Gamesa are still intending to develop and manufacture the next generation of wind turbines in Scotland, said the government spokesman.Yet the fact that the Scottish Government has kept this news quiet for four months suggests that it too fears a domino effect. Since the beginning of the year there has been a definite loss of momentum behind renewables in general and windpower in particular, while the opposition has become more vocal and more organised. This week the oil services company Petrofac warned that only 30% of wind projects planned for the North Sea may get built because of financing problems. Recently General Electric Energy has put its £100m UK wind turbine manufacturing investment "on hold". Economic jitters in the Eurozone, the discovery of potentially cheap shale gas and unhelpful comments from Chancellor George Osborne have all deepened the mood of uncertainty. Meanwhile billionaire Donald Trump is preparing to deliver one of his broadsides against wind power to the Scottish Government's economy energy and tourism committee next week and at Westminster and yesterday Liberal Democrat peer Lord Carlile launched a new national body opposing wind turbines.Ultimately, the reality of climate change and the exhaustion of fossil fuels will force the move to low-carbon energy. So Mr Salmond is right to talk up the potential of renewables, provided it is based on a properly worked-out energy policy that will keep the lights on once the nuclear power stations have been decommissioned. Once system costs have been included, offshore wind is around four times more expensive than coal, oil and gas, which are hardly cheap. In a country where one household in three struggles to pay its energy bills already, how is that huge gap to be filled? Much faith lies in carbon capture and storage (CCS) and the £1bn low carbon coal-fired power station that the National Grid and Petrofac hope to build at Grangemouth. But, as a report from Sussex University warned yesterday, this technology is still years away from being proven on a commercial scale and will require many billions more to develop.If global warming is to be tackled, there needs to be more honesty about both the scale and the complexity of the challenge or Doosan's withdrawal will be repeated elsewhere.

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A climate of uncertainty

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