An energy policy that reduces carbon emissions while ensuring security of supply is proving one of the biggest challenges for governments at national and global levels.
Increasing generation from renewable sources within the next few years is vital if the move to the low-carbon economy essential to meet climate change targets is to be affordable.
In the past financial year, Scotland has attracted £1.7 billion of the UK's £6.9bn of new investments in renewable energy. This would be significant at any time but, with economic recovery all but stalled, the renewables industry is an important new source of employment, supporting more than 11,000 jobs across Scotland, with 3313 more in the pipeline from a further £8bn of planned investments.
The financial viability of much of this investment, however, is dependent on Government energy policy. The finding by the Institute for Public Policy Research (IPPR) that ministers were sending mixed signals about their aims to reduce carbon emissions should be seen as a timely warning of the need for a coherent strategy on renewable energy to attract long-term investment from business.
When the UK Government published its Draft Energy Bill last month, it was with the claim by Energy Minister Ed Davey that it will ensure we can keep the lights on, the bills down and the air clean. The test will be how these three aims can be balanced. The key will be the level of subsidy. The Department of Energy and Climate Change plans a 10% cut in subsidies for onshore wind farms from April next year. However, intense lobbying from a large number of backbench Tory MPs with constituents hostile to further wind farm development is prompting the Treasury to consider cutting the subsidies by up to 25%.
The original reduction in subsidy was designed to reflect the falling cost of onshore wind generation and provide more support for less developed technologies including biomass and wave power. This would be particularly welcome in Scotland where projected offshore wind projects could bring in £30bn of investment by 2020 and employ up to 28,000 people and where tidal energy systems are already being piloted.
However, the viability of both onshore and offshore wind power and other developments depends on sufficient support to enable development to go ahead while keeping the cost to the consumer at an affordable level. While there is widespread support for renewable energy in theory, wind power is increasingly controversial because, in scenic areas in particular, large arrays of turbines are regarded as a blot on the landscape and a significant disincentive to tourism. Offshore wind farms overcome those difficulties but have the disadvantage of being more expensive to instal and, with the need for a costly new connection to the National Grid, require double the subsidy of onshore generation. Those in the industry say reducing the subsidy by 25% would make offshore wind unviable.
If the UK is to meet its legally binding target of achieving 15% of energy from renewable sources by 2020, and the Scottish Government its more ambitious target of 20%, further investment in renewable energy will be needed.
Provision for communities close to wind farms to benefit directly would be a positive step. In a changing energy market, that requires clarity from the Government on a consistent long-term policy not confined to renewable energy but to help innovation in other industries and transport to reduce carbon emissions.
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