As the new UK Government prepares to impose tax increases experts say could cost thousands of oil and gas jobs in Scotland, prime minister Keir Starmer’s plans could also put a spoke in the wheels of the country’s renewable energy revolution.
The speech in which King Charles will tomorrow set out the Government’s legislative plans is expected to confirm Labour’s manifesto promise to increase the North Sea windfall tax rate and curb allowances that were introduced alongside the levy.
While industry leaders warn the changes could lead to firms slashing spending in the North Sea, Labour will claim that other measures should help to stimulate a boom in renewable energy investment that will boost the economy while helping to curb emissions.
Before launching Labour’s manifesto, Mr Starmer unveiled plans to create a new organisation to lead the transition to a low carbon economy in the form of GB Energy, which he said would be based in Scotland. Labour held out the prospect that this could help create 50,000 clean energy jobs in Scotland.
But in advance of the King’s speech new Chancellor Rachel Reeves made a move to unlock green investment in England that may cause complications in Scotland.
Ms Reeves said she was scrapping planning restrictions that were imposed in England in 2015, which had resulted in a de facto ban on onshore windfarm developments in the country.
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Official said the move, which took immediate effect, should help the new Government to meet its target of doubling onshore wind energy by 2030.
The measures that were repealed were imposed by the administration led by David Cameron amid opposition to windfarm developments from people who were concerned about their impact on the areas they lived in.
Then housing minister Greg Clark said the measures would ensure local residents would have the final say over whether onshore windfarm applications got the go-ahead.
“While onshore wind now makes a meaningful contribution to our energy mix, they are often imposed upon communities without consultation or public support,” he said.
The restrictions did not impact on investment in Scotland, in which control of planning policy is reserved to the Scottish Government.
The easing of the restrictions will result in a change in the competitive environment for onshore windfarm operators that could cause big problems in Scotland.
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While the SNP Government likes to claim that the country has been a leader in the development of onshore wind energy it keeps quiet about the fact that the ban on English developments has provided a huge boon for Scotland.
Private sector investors have backed a large number of developments in Scotland that have been spared from competition from proposals for schemes in England.
Energy giant SSE and a range of foreign-owned big guns have invested heavily in Scottish schemes. These include Spanish-owned ScottishPower, France’s EDF and Vattenfall of Sweden. Specialised investment firms, such as The Renewables Infrastructure Group have also amassed portfolios of Scottish windfarms.
Investors that may have focused on Scotland because England was not an option could now shift their gaze south of the border. The likes of EDF are already reported to be eyeing sites in England.
The enthusiasm of such investors reflects the fact that developers can sell the energy that windfarms generate under long-term contracts with prices linked to the inflation rate.
READ MORE: £100m windfarms deal highlights investor interest in Scotland
To make things even better, revenues are under-pinned by subsidy deals agreed with the UK Government. Firms are guaranteed a minimum price for their output by the Government under the Contracts for Difference (CFD) programme.
In the absence of competition from English developments, Scottish windfarms have been able to hog the benefits of the CFD scheme. Since the programme was introduced in 2015 some 49 windfarms in the UK have won support in the onshore wind category.
Of these 43, or around 90%, are in Scotland.
Two English schemes sneaked into the first round of awards in 2015 but none have won backing since.
Four Welsh windfarms have been supported.
With the effective ban on English developments lifted, the competition for CFD funding is likely to intensify in a way that could result in a sharp fall in the number of Scottish schemes that win backing.
READ MORE: Scottish windfarm plan fuels energy transition controversy
Renewables champions in Scotland have suggested that the Government should increase the amount of support made available under the contracts for difference programme.
Following Labour’s election victory, Scottish Renewables chief executive Claire Mack said: “Uplifting the budget for the Contracts for Difference Allocation Round 6 this summer will be essential for delivering the scale of deployment needed across all technologies to achieve our net-zero and energy security ambitions.”
But ministers should remember that while the Government decides how much support should be provided under the CFD programme the costs are paid by households. They are added to the standing charges paid by households and businesses irrespective of the amount of energy they use.
In theory firms may have to pay money to the Government under the CFD programme, if wholesale prices rise above the agreed strike price.
However, industry body Energy UK notes the Conservative Government set a record budget of £1.025 billion for the forthcoming sixth allocation round (AR6) based on its view of the outlook for energy prices.
Energy UK predicts that onshore wind will absorb much of the budget for established technologies in AR6. The Labour Government also hopes to use the round to encourage investment in a new generation of floating windfarms offshore. Schemes are in development off England and Scotland.
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The prospect of increased competition for windfarm investment is an uncomfortable one for the Scottish Government as it aims to breathe fresh life into the faltering drive to encourage a “Just Transition” from a fossil-fuel based economy.
Repeating assertions that Scotland is a green energy powerhouse, the SNP general election manifesto underlined the importance of windfarms in the net zero drive.
The Scottish Government reckons onshore windfarms could play a key role in cutting emissions in Scotland while supporting economic activity. This will include fuelling the development of green hydrogen, which the Scottish Government said in 2022 “represents a pivotal opportunity for both decarbonisation and the economy and is a key driver in our just transition”.
The grandiose claims are undermined by the fact that the economic impact of the developments completed to date has been much lower than expected. A fall in the number of onshore windfarm developments would leave the Scottish Government with more ground to make up even if it would be welcomed by people who think turbines are a blight on rural areas.
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