Let’s not blow our big chance

Scot­land is well placed to build a world-class re­new­able en­ergy in­dus­try but in­flex­i­ble plan­ners and the tax­man could scup­per it, says Don­ald Forsyth

The Herald Business - - Renewables -

AS THE North Sea’s oil re­serves be­gin to dwin­dle, the in­evitable de­bate has de­vel­oped about whether Scot­land missed out on the full ben­e­fits of the oil boom of the past 30 years. It is all rather ster­ile and aca­demic and, in­stead, we should be fo­cus­ing on the fu­ture and the tremen­dous po­ten­tial that re­new­able en­ergy pro­vides for Scot­land and make sure that we don’t blow it.

Even the ca­sual day-trip­per to Scot­land can­not fail to no­tice the tide, wind, and waves. We have more than our fair share of weather, so let’s use the el­e­ments for our na­tion’s benef it. Af­ter all, it is not as if we are a de­vel­op­ing coun­try: Aberdeen has huge ex­pe­ri­ence of the en­ergy in­dus­try; Ed­in­burgh has ac­cess to the world’s cap­i­tal mar­kets and Glas­gow could make the tur­bines and all the other so­phis­ti­cated en­gi­neer­ing equip­ment re­quired. Add the fact that we have world­class univer­si­ties to de­velop new ways of har­ness­ing th­ese global forces and it seems to me that we re­ally have it all.

The gen­eral eco­nomic ben­e­fits are also huge. Strip out RBS and a few other big play­ers and our busi­ness sec­tor looks a bit thread­bare. With re­new­able en­ergy we have the op­por­tu­nity to build our econ­omy in a sec­tor that will never go out of fash­ion and will en­sure the se­cu­rity of en­ergy sup­ply.

Who wouldn’t rather have our en­ergy gen­er­ated from our own hills, coast and sea rather than piped or shipped from an­other coun­try?

So re­new­ables make eco­nomic sense and Scot­land is beau­ti­fully built to ex­ploit them. How­ever, be­ing Scot­land, there is a catch. Sev­eral ac­tu­ally, but let’s start with plan­ning and look at one ex­am­ple that demon­strates the lack of joined up think­ing that is frus­trat­ing.

The West­ern Isles Coun­cil has rec­om­mended that coun­cil­lors ap­prove pro­pos­als for a 181-tur­bine wind farm in Lewis. I un­der­stand that Scot­tish Nat­u­ral Her­itage and the Scot­tish En­vi­ron­ment Pro­tec­tion Agency have both made rep­re­sen­ta­tions to the Scot­tish Ex­ec­u­tive, which will make the fi­nal de­ci­sion. In ad­di­tion, the Royal So­ci­ety for the Pro­tec­tion of Birds is not too keen on it.

The press tends to pre-fix this de­vel­op­ment with the word “con­tro­ver­sial” be­cause, if it goes ahead, it will be one of the big­gest de­vel­op­ments of its kind in the world and it

will cre­ate sus­tain­able jobs in a part of the coun­try where jobs aren’t al­ways thick on the ground.

Plan­ning and ap­provals are a key area where the Scot­tish Ex­ec­u­tive could help be­cause we des­per­ately need to achieve some fo­cus so we can all pull in the same di­rec­tion. The pro­posed site for this wind farm is bleak moor­land and, as a Lewis­man my­self, I think it is a place of beauty. But as a re­al­ist, I think,we have lots of other moors and I would rather see the Scots flour­ish­ing in a sus­tain­able econ­omy than be un­em­ployed in a na­tional park.

Hav­ing said that, it is very im­por­tant to en­gage with the lo­cal com­mu­nity – so what about rais­ing the game here and mov­ing away from low level ‘plan­ning gain’ ex­er­cises such as promis­ing to build a new com­mu­nity hall for lo­cals if they ap­prove the de­vel­op­ment to more far-sighted ap­proaches?

What about de­vel­op­ers gift­ing th­ese com­mu­ni­ties some of the own­er­ship in the shape of shares placed in a com­mu­nity trust? In ad­di­tion to the jobs, that would cre­ate an on­go­ing ben­e­fit for gen­er­a­tions.

I’m not sure if that’s left-wing “pub­lic own­er­ship of the means of pro­duc­tion” or right-wing “wider share own­er­ship” and I don’t care which one it turns out to be – I think it makes sense. As well as the Scot­tish Ex­ec­u­tive look­ing to it­self, the Chan­cel­lor in West­min­ster must also think again about the tax regime cov­er­ing this sec­tor. For ex­am­ple, ‘plan­ning gains sup­ple­ment’ may not be a phrase that is on ev­ery­one’s lips, but it is a nasty new tax which the UK gov­ern­ment is propos­ing to in­tro­duce around 2008

De­tails of this tax are still vague but, broadly, the gov­ern­ment in­tends to im­pose a levy on in­creases in land val­ues that arise from re­ceiv­ing plan­ning per­mis­sion. As wind farms tend to be lo­cated on land which is un­likely to have any other valu­able use, when plan­ning per­mis­sion to erect a wind farm is granted there could be a sub­stan­tial in­crease in the value of the land and a sub­stan­tial tax charge.

The tax will only be­come payable once the de­vel­op­ment is about to start, and only once the pay­ment has been made can de­vel­op­ment law­fully go ahead. I don’t think I’ll be fil­ing this one un­der “in­cen­tives”.

Should Gor­don Brown sim­ply not just drop this nasty tax, if not for ev­ery­one then for re­new­able en­ergy projects?

In terms of mak­ing the wider tax regime more favourable to re­new­able en­ergy com­pa­nies we should be look­ing at ways of giv­ing wind en­ergy com­pa­nies a break when it comes to pay­ing rates and also in­ves­ti­gate en­hanced cap­i­tal al­lowances on their plant?

The peo­ple who run re­new­able en­ergy com­pa­nies are not eco-war­riors. They are sci­en­tists, fi­nanciers and direc­tors, the same as in any other busi­ness. They are also, by def­i­ni­tion, en­tre­pre­neur­ial – and try­ing to get a re­new­able en­ergy off the ground is loaded with risk.

Th­ese busi­nesses, again by def­i­ni­tion, are early stage com­pa­nies. The direc­tors range from those who are run­ning their first busi­ness to those who are very se­nior, with sub­stan­tial in­ter­na­tional ex­pe­ri­ence.

And as with other en­trepreneurs, they want to make money. We need to help them, for their suc­cess is in all our in­ter­ests.

Don­ald Forsyth is a part­ner with Scot­tMon­crieff and a lead­ing ad­viser to Bri­tish and Euro­pean re­new­able com­pa­nies.

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