Renewable Scotland

Can renewable energy lead Scotland out of recession? Can Scotland reap significant benefit from the move to a low carbon economy? These are questions posed on a daily basis by those working within, or interacting with, the renewable energy industry. Those firmly in the renewables camp support the view and point to the job creation, infrastructure and environmental dividend. Others caution against over-optimistic forecasts and throw in caveats about investment, planning system change, grid access, the need for nuclear, clean coal and carbon capture and storage and the importance of energy efficiency, heat supply and demand.

Running through this debate, there is the mantra in Scotland that ‘we missed the boat on wind, but we cannot afford to miss the boat on marine energy’.

In relation to Scotland, the following observations may be useful:

Glass half empty syndrome can obscure the great progress made in the last few years and the fact that the global economy is inevitably moving in favour of clean energy. Let us cheer for the fact that Scotland is home to leading utilities with significant renewable energy portfolios; Scotland has seen massive growth in the number of onshore wind projects; a Scottish company created the world’s first commercial wave power device; Scotland is home to the European Marine Energy Centre and bags of emerging technologies; Scotland may also play host to an equivalent research focus for offshore wind-power; Scotland is home to a vibrant collection of micro-generation and energy efficiency companies and technologists; Scotland thus far has demonstrated a political will to counter climate change and encourage renewables; the revised planning framework is relatively benign; the Saltire Prize has created a bit of a stir internationally and Scotland does have a track record of squeezing out entrepreneurs and innovators.

Some within the investment and media communities are not fully accepting that they are dealing with a ‘sector’. While massive strides have been made in recent years, there remains a feeling that ‘renewables’ is still never going to be as big as oil and gas, therefore cannot be viewed as the main and most crucial solution to increased energy demand along with reduced environmental impact. The sector therefore needs to work hard to convince others that it is crucial, viable and a significant economic force.

The renewables ‘sector’ is not unique because of its environmental positives. As a business sector, like others, there are big players, medium players and small players. Those at the big end will try and buy growth and those starting out will try and become bigger, killing off their competitors and eventually growing through acquisition before, probably, being eaten by one of the very big companies. It is the natural way of things. Renewables companies do not have a divine right to exist because they nominally reduce carbon in the atmosphere. Renewables operations only exist within the big utilities because the ROI stacks up.

While government investment is important, as is a fit for purpose grid network, renewable energy companies in Scotland need to fight for investment, attention and influence like everyone else, in every other sector. They need to be out there, actively assessing the market conditions, shaping their offering, constantly innovating, changing the business models (in line with a changing investment environment), taking more responsibility for their own communication and supporting their trade bodies. Thinking beyond the home market should also be part of any such company’s strategy discussions.

Part of any market assessment, must include a view on the framework that will emerge from the intergovernmental meetings in Copenhagen in December. A framework for truly international carbon pricing and exchange will fundamentally impact upon the economics of renewable and environmental technologies.

The role for small-scale renewable energy generation, allied to local use/efficiency systems is not given the attention it deserves. If civic society applied itself to this approach, it could potentially be the main solution to the problem - meeting higher energy demand while reducing carbon output. This perhaps jars with the ‘big’ centralised renewable energy producers and technologies, but they shouldn’t shy away from energy efficiency and localised generation – the economics will move in its favour.

Lets also not forget a related sector, that of ‘environmental’ technologies and services, in other words those companies that reduce and recycle waste, conserve and clean water, monitor and reduce air pollution and clean up contaminated land, to name but a few. Lump these together with renewables and you have a sizeable, growing and yes, important, economic machine.

Ultimately, Scotland does have an economic opportunity with larger scale renewables [be they on or offshore], smart grid technology, energy efficiency innovation, smaller scale, de-centralised energy creation, environmental technologies and services. The opportunity will be realised despite government decisions and/or powerlessness, despite investment challenges and despite competing interests. Yes of course, significant government funding, streamlining of the planning system and greater grid availability and flexibility can and will make a significant difference. However such action will not hide poor business models, poor technologies and loose control and it remains incumbent upon management teams to rise above, slide under, plot their way round and talk their way through the obstacles. There will be others that do not manage to reach stable commercial growth and will be swallowed early or die off. In a market economy, albeit one more restrained, it will be the native cunning of renewable energy and environmental entrepreneurs and corporate beasts that will dictate if the carbon dividend is realised in Scotland.