Scottish offshore wind: Government Dispute threatens revenues

A dispute between the Scottish and UK parliaments may be hindering the development of Scottish offshore wind, as well as other forms of off-shore renewable energy. The dispute between the SNP majority government at Holyrood and the Conservative and Liberal Democrat coalition at Westminster is threatening investment in the sector. The SNP (Scottish National Party) had made the devolution of Scottish Crown Estate Property (in this case the seabed itself) one of it’s key economic policies. The Crown Estate has become a divisive issue between the two parliaments as the development of Scotland’s offshore renewable energy generation potential is considered to be key to achieving the SNP target of 100% renewable energy generation  by 2020. According to some SNP figures Scotland is to become “Saudi Arabia of renewables”. Currently the revenues generated from Scottish Waters are controlled by the Crown Estate and therefore bi-pass the Scottish Parliament completely and go to the Treasury at Westminster.

Danny Alexander, the Lib Dem Chief Treasury Secretary  has recently unveiled a new scheme to ‘support economic development in coastal communities’. This scheme will see 50% of the Crown Estate offshore revenues made available to such coastal communities for investment. The scheme will have a pot of cash of £23.7 million in total with £1.85 million ear-marked for the Highlands and Isles and £2.05 million for the rest of Scotland. With large-scale investment expected in Scottish offshore wind, marine and tidal generation it is expected that the amount available will increase dramatically; some estimates have put Scottish revenues from the seabed to rise to £40 million by the year 2021.

However the scheme has been criticised for a number of reasons. Firstly the Secretary has been accused of political opportunism, with some interpreting the scheme as an attempt to de-fang the SNP on the issue. Secondly, there has been criticism of a less political nature, the scheme will be placed under the control of the Big Lottery Fund meaning that coastal communities will be required to bid for access to the money. Thirdly, an upcoming  Scottish Affairs Select Committee report is expected to strongly recommend “much greater” devolution to local communities so that they can directly benefit from investing in their sea beds.

Scottish Finance Secretary John Swinney reacted to the announcement of the scheme: “We welcome the fact that Scotland’s coastal communities will now benefit from their own resources, but it is only because of pressure from the Scottish Government that Westminster is taking any action on this issue, and this paltry announcement does not go nearly far enough.

“The Treasury has hit Scotland’s offshore oil and gas industry with a £2 billion tax grab and is also withholding around £200 million of Scotland’s money in the form of the Fossil Fuel Levy – now they appear to be trying to buy off Scotland’s coastal communities by offering them only 50% of their own resources.

“Those communities need to benefit from all of the money raised from Crown Estate revenues in Scottish waters.

“This is Scotland’s money and devolving  full responsibility is vital if Scotland is to make the most of our vast offshore renewable energy potential.”

Angus Campbell, leader of the Western Isles Council welcomed the announcement as the beginning to reform but went on to say: “However I do not believe that a challenge fund controlled by the lottery is the way these funds should be administered. Local communities should have control and disburse income which is generated in their waters, not have to go through a bidding process to get what should be rightfully theirs.”

The dispute comes at a time when Scottish offshore wind developments are encountering some other problems. Whilst there are a number of developments underway there is a time delay between turbines being successfully constructed and being connected to the electricity grid. In the first six months of 2011 only around two thirds of the number of offshore turbines built in the UK were actually connected to the grid.  This has meant that there has been less progress than there should have been in adding new generating capacity to the grid.

There has been good news for the wind sector as whole however as it has recently been uncovered that wind energy is now key to the European construction sector. Wind energy was one of the few industry’s which maintained demand over the course of the recession; most of the rest of the construction sector suffered badly.

The dispute over Scottish offshore revenues has led to some uncertainty about investment however Scottish renewables as a whole are continuing to develop at a good pace.
Scottish onshore wind particularly as Scottish offshore wind is considered to be around 40% more expensive to estasblish.

 

 

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