AS the Scottish Government faces fresh accusations that it is failing to support a ‘Just Transition’ to a cleaner energy system investors appear to be capitalising on the focus on renewables in ways that entail heavy costs for consumers.

Friends of the Earth Scotland and the Scottish TUC lambasted ministers after official statistics showed the government missed its climate change target in 2021, during which Nicola Sturgeon added two Green ministers to the SNP administration.

The figures showed emissions of seven key greenhouse gases had only been reduced by 49.9 per cent since 1990, against a target of 51.1%. That meant the target had been missed eight times in 12 years.

In response, STUC Deputy General Secretary Dave Moxham lamented: “As it stands, the Scottish Government’s track record is setting targets and consistently failing to meet them. From broken jobs promises to yet another missed climate target, the reality is that we see too many headlines and not enough credible policy.”

The figures were released as the Scottish Government published discussion papers on Just Transition Plans for the transport, buildings and construction, and agriculture and land use sectors, suggesting it may be some time before we see action in any of the areas concerned.

By contrast, international financiers noted that companies are getting on and creating attractive opportunities to invest in projects in areas such as solar and battery storage.

READ MORE: North Sea job cuts fuel calls for oil industry to be nationalised

In a full-page advert in the FT, Lombard Odier noted: “Electrification is giving rise to a deep, fundamental rewiring of the economy.

“Where profit pools will surface in unexpected places.”

On its website, the Swiss private bank highlights the importance of the rapid rise of decentralised energy, which is being facilitated by the development of small solar facilities and the like. This will allow people to sell energy to the grid rather than just buying it, as they exercise what Lombard Odier terms “prosumer power”.

But an update from a significant player in the emerging solar sector which has connections to Scotland may lead some to question whether the rosy picture painted by Lombard Odier reflects the reality of the new energy economy that is emerging.

The latest annual report from Next Energy Solar Fund shows how much money firms in the sector are making with the support of subsidies that will ultimately be funded by consumers. It also shows how private sector participants effectively secure a share of the fund’s revenues at various points in the business cycle. These look like profit pools.

READ MORE: Edinburgh tree fungus specialists win multi-million pound backing from oveseas investors

The report published in June shows the Guernsey-registered fund made £48m profit on revenues of £66m in the year to March 31. That means it achieved a profit margin of 73%.

The fund operates 99 solar plants, including 91 in the UK and eight overseas. The portfolio includes the Balhearty solar farm in Clackmannanshire. The fund is investing in the Camilla battery storage facility in Fife.

In the annual report, the fund notes the value of the regulatory regime that governs the sector. Firms are able to sell power under long term contracts which are inflation-linked giving them the kind of security that companies in other industries could only dream of. They benefit from subsidies under the Feed In Tariff regime. The relevant costs are added to consumers’ bills.

In the report the fund states: “NESF’s portfolio’s robust performance is backed by inflation-linked subsidies as well as a proactive energy sales strategy, which includes long-term PPAs (power purchase agreements) and rolling short-term hedges over a 36-month period.”

It adds: “This strategy of proactive risk mitigation helps to underpin the Company’s dividend cover, increase the certainty of revenue streams and mitigate the negative impact of short-term fluctuations in the power markets. Of the Company’s revenues during the year, 52% were derived from government subsidies and long-term PPAs and, at the end of the year, the average remaining weighted life of the subsidies was 12 years.”

The beneficiaries of the company’s success include shareholders, who shared in ordinary dividend payments totalling £42m in the latest year. Top 10 shareholders on March 31 included Edinburgh-based fund management firms Artemis and Baillie Gifford.

The report notes: “In May 2023, the Board of NESF approved a target dividend increase of 11% to 8.35 pence per ordinary share for the year ending 31 March 2024 … To date, the Board has increased the target dividend every year since the Company listed in 2014.”

READ MORE: Oil giants eye carbon capture bonanza in Scotland

Other financial institutions shared in the fund’s commercial success.

The fund paid £5.8m management fees during the year, up from £5m in the preceding period. Its investments are managed by London-based Next Energy Capital.

The Channel Islands business of accountancy giant KPMG earned £662,000 audit fees in the latest year, up from £626,000.

The London-listed fund’s City advisers include RBC Capital Markets and Cenkos Securities.

The fund has access to £205m credit facilities provided by NatWest, Santander and AIB.

Directors’ fees increased to £277,000 in total in the latest year, from £222,000.

READ MORE: Scotland's sluggish renewables jobs drive faces post-Brexit headwinds

Scottish corporate finance veteran Kevin Lyon was paid £75,000 for serving as chairman of the fund, up from £70,000. He will stand down in August after nine years on the board and be succeeded by Helen Mahy, who is a director of SSE.

Mr Lyon previously ran private equity giant 3i’s operations in Scotland. He has served on the boards of a range of Scottish firms including Smart Metering Systems and Valiant Petroleum.

With so much benefit apparently flowing to investors and professionals in respect of a firm that benefits from a supportive regulatory regime and subsidies, some may wonder if consumers are getting a fair share of the success of the fund and similar renewables businesses.

Champions of the private sector say that operations such as Next Energy Solar Fund can help deliver goods society needs such as clean energy more cost effectively than the public sector. Hard analyses of the question seem hard to come by.

 In its defence, the fund says it contributes to domestic growth and development wherever its assets are located and is dedicated to ensuring best-practice labour standards are applied by all its contractors.

READ MORE: Blockbuster acquisition of North Sea gas firm set to underline appeal of area

The annual report notes that the fund donated £400,000 donation in the latest year to a foundation run by the Next Energy Group that “participates proactively in the global effort to reduce carbon emissions, provide clean power sources in regions where they are not available, and contribute to alleviate poverty”.

The report also notes: “Under the current system of taxation in Guernsey, the Company is exempt from paying taxes on income, profit or capital gains.”