HM Insights

Scotland's renewable energy: what way will the wind blow next?

2013 has been a turbulent year for renewable energy developments in Scotland. On the face of it, substantial progress was made – according to figures from Scottish Renewables Forum, there are now around 6500 mega watts (MW) of renewable electricity generation capacity installed in Scotland, a figure that has doubled since 2007. Leading the way are on-shore wind, with almost 4000 MW installed, and hydro with around 1500 mega watts. When you take into account the more than 4000 MW of further onshore wind already consented and the over 5000 MW of off-shore wind in the planning system, together with growing figures for solar/pv, biomass plants being developed and wave and tidal projects at early stages, there seems to be a very busy future for practitioners in this field.

The activity we’ve seen within our Energy team at Harper Macleod (where our team members have been involved in transactions accounting for well over one-third of the renewable electricity now installed in Scotland) paints a picture of the work currently open to legal practitioners operating in the renewables sector. It’s been an extremely busy year, and in 2013 alone we have: completed large-scale wind farm developments at Rothes 2, Rosehall and Clyde extension; been involved in numerous small-scale wind projects under the Feed-in Tariff regime; completed roof-mounted solar projects on social housing properties to alleviate fuel poverty; worked on proposed ground mounted solar farms; assisted Scotland`s largest landowner on the roll-out of large parts of the national forest estate for wind and hydro development; and helped various companies become involved in the supply chain for energy developments.

When you take into account the drivers of the need to tackle climate change, the economic benefits of taking advantage of our natural resources in wind, wave and tidal and the challenge of providing us with energy security, the case for advancing in renewables seems self-evident.

And yet all this has been achieved against an uncertain and changing political and regulatory set up. The Scottish Government, whatever the colour of the party in power, has been a strong supporter of renewable energy since devolution. Notwithstanding that energy is not a devolved matter it has used its devolved planning powers to consent far more projects than in the rest of the UK and its control of the Scottish arm of the Renewables Obligation has permitted it to give greater subsidy than to some equivalent technologies in England – for instance, in hydro. But the independence debate has been used by the No campaign to question how support would be provided if Independence was granted and to question who would buy the surplus electricity which Scotland produces, the implication being that England would be under no obligation to purchase the power.

Westminster has also taken control of the regulatory function, with an Energy Bill currently going through Parliament which will introduce Electricity Market Reform (EMR) - trumpeted as putting in place the most robust and stable long-term framework for low-carbon energy the UK has ever had but introduced to try and support new nuclear power south of the Border and to increase competition by ensuring supply exceeds demand. Under the current Renewables Obligation the utilities are required to take an increasing amount of their electricity from renewable sources but under EMR they will be under no such obligation. No-one argues with the idea that bringing down costs is a good thing but if you want to take advantage of natural resources for your long-term benefit then sometimes you have to take long-term decisions which might involve short-term pain.

The political stability in support for renewables which we have seen in Holyrood has also been absent in Westminster. The current coalition government set out claiming it would be the greenest government ever but in three short years we have seen it losing three court cases over trying to retrospectively cut support for solar pv, suddenly start praising gas extraction by fracking despite obvious opposition from local communities, reducing the subsidy for on-shore wind and hydro and saying that green taxes would have to be reviewed – all this amongst in-fighting within the Conservative party and between it and the Liberals.

These matters all affect investor confidence. We live in a world where there is a constant contest for capital and large companies are very capable of diverting funds which might have been used for renewable development to what are perceived as less-risky ventures just because they see countries with governments who seem incapable of agreeing on a consistent, stable, long-term energy strategy as less attractive places to invest.

All this is in addition to the traditional challenges renewable developments face – a slow, under-resourced planning system, delays caused by issues of radar interference which should be capable of being solved and a grid network that is trying belatedly to catch up after years of neglect.

Scotland has coped with adversity before and every government target set for renewable development has been achieved up to now. Whatever the political and economic conditions, clever organisations will adapt to changing conditions. We anticipate being as busy as ever this year. But we live in interesting times and it will be fascinating to see where we are a year from now with the Independence result through, EMR progressing and elections approaching in both Westminster and Holyrood.