Renewable Energy Foundation

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Energy Policy in an Independent Scotland

In a speech to a Scotsman conference today in Edinburgh, Energy Policy in an Independent Scotland, The Rt Hon Ed Davey, Secretary of State for Energy and Climate Change, has issued a clear warning that in the event of Scottish independence the costs of the current subsidy programs to renewables would be be met by Scottish consumers, without cross-subsidy from England Wales.

Mr Davey said:

The Scottish Government has high ambitions with its target of 100 per cent Scottish electricity consumption coming from renewable sources by 2020.

We welcome the ambition, which helps the whole of the UK meet our renewables targets - but I believe it is only possible because Scotland has the wider UK consumer base to provide the demand, with millions more homes in demand of Scottish generation, to underpin and sustain the full commercial potential of the energy industry here.

Third, the billions of pounds of investment in Scottish infrastructure that I've mentioned must be paid for. Under our current approach we spread this cost across the UK on the grounds that the whole of the UK benefits from the energy produced and the contribution to our renewables targets.
But interdependence, by definition, goes both ways.

In the absence of a united single energy market or agreed socialisation of costs under our renewables schemes, the costs of renewables deployment and transmission infrastructure upgrades would, I believe, be too great a burden for Scottish consumers alone to bear.

This is quite unsurprising; indeed, REF has been warning of this possibility for some time, and published a major statement on the matter in the Energy Supplement to Holyrood Magazine in January this year: "At What Price?" (Holyrood, January 2012).

This warning was repeated, with data of ours, in an article in the Scottish edition of the Sunday Times on the 3rd of November 2012 ("SNP Fad for Wind 'will cost us £400'"). We estimated that the cost of supporting Scottish onshore wind would be about £2.2bn annually in 2020, assuming a 50% approval rate for wind applications currently in the planning system. However, recent figures show that the actual approval rate is around 80%, which would take the cost to about £2.5bn annually. Since about 1/3 of this will be drawn from domestic consumers this would result in a direct bill impact of about £350 per Scottish household. Offshore wind would add a further £1.2bn annually, and an additional £170 per Scottish household, giving a grand total of £3.7bn annually, and £520 per household.

It should be also be recognised that while Scottish industrial and commercial consumers would pay about 2/3 of the cost, this would have an effect on households through reduced wages, reduced rates of employment and an increase in the cost of living because the impact on industrial and commercial consumers would increase the cost of goods and services to households.

It is obvious that this is a major hazard, but some, including the Scottish government, have hitherto argued that the hazard was of low risk, since England has carbon targets and needs Scottish renewable energy. Mr Davey's remarks show such a position is untenable. England and Wales have alternatives, such as the use of biomass in existing coal power stations, and the use of natural gas, both of which are cheaper than Scottish wind power and positively encouraged by Westminster. It is highly likely that in the event of independence Scottish consumers would have to shoulder the full burden of subsidies to renewables and other associated costs.

For the avoidance of doubt, we are, emphatically, not suggesting, as Mr Davey appears to be, that the hazard and risk is in itself an argument against independence. On the contrary, we are saying that if independence is desired by the Scottish people then a new and very different energy policy will have to be found without delay.

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