The SNP Government has received a boost from Westminster as First Minister John Swinney tries to maintain hopes that Scotland will some day get the green jobs his party has promised.
The UK Infrastructure Bank has agreed to provide up to £87 million towards the cost of a subsea high voltage cable plant in Ayrshire.
The firm leading the project, XLCC, says the Hunterston plant will create 900 high quality production jobs. More than 1,000 people would be expected to work in the construction phase, which is due to start next year.
The development could potentially provide a big fillip for an area which has been hit hard by the deindustrialisation process. The plant will be developed on the site of a former coal terminal.
News of UK Infrastructure Bank’s support was greeted enthusiastically by champions of North Ayrshire and of Scotland’s renewables industry.
READ MORE: Is Ayrshire key to Scotland becoming a green industrial powerhouse?
The cables produced in Ayrshire could help to maximise the potential of windfarms off Scotland by taking the output they generate to urban areas far away.
A development on the scale proposed would provide a big helping hand for the SNP Government, which unveiled a green industrial strategy in September.
The strategy was launched more than 15 years after former FM Alex Salmond boasted that Scotland would become the Saudi Arabia of renewables. Claims about the green jobs boom the country is set for have been trotted out repeatedly. However, the numbers of jobs actually created have fallen well short of expectations.
The reaction of the Scottish Government to the Hunterston news was muted. It probably didn’t want to help the UK Government led by Keir Starmer after Labour won loads of seats from the SNP at the general election.
Mr Swinney and colleagues don’t like to accept that there are significant advantages to being part of the UK when it comes to developing renewables.
READ MORE: SNP Government bid to revive faded green jobs dream is feeble
The UK has provided huge subsidies for windfarm developments through the Contracts for Difference scheme, which is paid for by households.
Carbon Capture Utilisation and Storage and large-scale hydrogen production – which feature in the SNP Government’s Green Industrial Strategy – won’t happen without massive subsidies.
But it may be unwise to get too excited yet about XLCC as the developers have plenty of hurdles to overcome. The project has faced big challenges during a period of rampant cost inflation.
The plant was originally meant to be fully operational in 2024. It is now expected to be 2030 before significant lengths of cables are produced.
When the plans were announced in 2021 the budget was £370 million plus £200 for a specialised cable transportation vessel. The total cost is now expected to be £1 billion plus.
That means XLCC will need to raise huge amounts of money.
READ MORE: Scottish energy giant highlights renewables challenge
UK Infrastructure Bank said XLCC had previously secured around £40m. This includes £9m provided by Scottish Enterprise.
The bank hopes the commitment it has made will help ‘crowd in’ private sector funding.
That looks like an optimistic assessment given the huge upfront investment that will be required.
XLCC will need to convince funders that it will be able to generate the revenues required to service potentially hefty debts and provide a return for shareholders.
It will face huge uncertainty about if and when windfarm developers will place orders. There are tensions in the supply chain about who should shoulder the risks associated with projects in what remains a nascent industry.
The Hunterston yard will face competition from others in the UK and overseas. Port of Tyne is courting Korean investors about a potential HVDC plant.
Ironically, Hunterston’s rivals could include a yard on the Cromarty Firth. Japanese giant Sumitomo was awarded £24m Scottish Government support for a £350m cable plant development at Nigg earlier this year amid fanfare.
We should remember though that other renewables manufacturing projects which generated huge excitement don’t seem to have delivered.
In December 2021 former FM Nicola Sturgeon hailed news that Global Energy Group planned to develop a turbine tower factory at Nigg. It was claimed that this would create more than 400 manufacturing jobs on site and support 1,100 in the Scottish supply chain. SSE said at the time that it expected to announce a contract with the plant in the “near future”.
However, GEG’s partner in the project, Haizea, withdrew leaving the scheme in apparent limbo.
READ MORE: 35,000 jobs at risk amid fears of 'hard stop' to North Sea investment
GEG has not responded to a request for an update.
Scotland has failed to develop the turbine manufacturing capacity required to support windfarm development despite having plenty of time to do so. SSE has been left to rely on firms outside Scotland to produce turbines for developments such as Seagreen off the Angus coast.
After the BiFab turbine engineering business went under in 2020 the Scottish Government said EU rules on state aid stopped it doing more to help.
The UK Government can be happy, however, that firms have developed significant turbine operations south of the border.
The plant developed by Siemens Gamesa at Hull has enjoyed huge success.
Last week German energy giant RWE highlighted the role the factory will play in the development of its huge Sofia windfarm off Teesside.
READ MORE: Cost inflation hits hopes for hydrogen boom in Scotland
Siemens Gamesa will manufacture, install and commission all 100 of the massive blades that will be used on Sofia at the Hull plant. This is helping to power the economy on Humberside.
Tom Glover, RWE UK Country Chair: “To see these impressive turbine blades being produced, ready to be installed at our flagship Sofia offshore wind farm, is a fantastic demonstration of the true value that offshore wind brings to coastal communities, such as Hull.”
Darren Davidson, Vice President Siemens Energy UK & Ireland proclaimed: “We now employ over 1,300 people at the site, after recruiting more than 600 new employees over the last 12 months.”
RWE noted that operations and maintenance activities for Sofia will be managed from its new offshore wind operations base at Grimsby, which has lost many fishing jobs in recent decades. The Grimsby hub will service RWE’s Triton Knoll Offshore Wind Farm as well.
RWE is also working on two Dogger Bank south windfarms. These will have twice the capacity of Sofia in total.
Meanwhile the wait for publication of the SNP Government’s energy strategy and updated Just Transition Plan goes on.
A draft energy strategy was published late in January last year. It recommended a presumption against new oil and gas exploration in the North Sea. The SNP Government subsequently opposed plans for the Cambo and Rosebank developments off Scotland, which would support thousands of jobs.
Crude prices rose at the fastest pace in around two years last week amid fears about the prospect of all-out war in the Middle East.
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