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
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.