Tackling challenges of boosting green energy

Despite recent cuts in subsidies for renewables, Scotland is forging ahead with ambitious plans for the future, writes Clare Foster

Scotland has established itself as a global market leader in the clean energy sector.

Many advancements in offshore wind, floating wind and tidal energy markets – from concept to commercial viability – were made in this country, and Scotland is now the envy of the world, given its knowledge base, academic prowess and abundance of opportunities to harness the elements, both on land and around our shores.

For investors, Scotland was seen as an attractive location to back renewable energy projects and developments, backed by a fiscal regime designed not only to encourage inward investment but also to provide long-term security on those investments.

However, in recent times the renewable energy sector has faced a number of challenges. The UK government’s drive to reduce renewable energy subsidies has had a significant negative impact, and the recent statistics are alarming: last year, investment in ‘clean energy’ was down 56 per cent, driven essentially by government policy changes for the sector.

The fact that investors are reacting this way is not a great surprise, although continued investment is vital if Scotland is to have any hope of meeting the ambitious short, medium and long-term carbon reduction targets set by Scottish Government, and the new, more ambitious targets now being considered by the UK government.

In onshore wind, project costs have reduced significantly in the last few years, and there is a great deal of work being put in by developers in moving towards a subsidy-free environment: a corporate Purchase Power Agreements market is now beginning to emerge.

However in the meantime, onshore wind’s out-and-out exclusion from subsidies has slowed development in that market, making it a much tougher environment in which to raise finance, and inevitably deal flow has contracted for new projects; albeit the secondary mergers and acquisitions market appears to be holding up.

The story is similar for offshore wind. Growth in this sub-sector has been remarkable over the last decade, and there is a correlation with project costs having reduced exponentially, but it remains critical that Scotland and its stakeholders maintain a viable project pipeline to exploit the remaining opportunities, which, in turn, will boost developer and supply chain confidence and investment.

From an urban and city perspective, the imperative to decarbonise is immediate, though we are yet to see the seismic shift needed to undertake the large-scale projects that will provide cleaner, warmer and more energy-efficient cities for growing populations.

Where Scotland goes from here is the key question. From a policy perspective, there is plenty for those in the sector to aim for: the Scottish Energy Strategy and the Energy Efficient Scotland: route map, both set out ambitious targets for production and a warmer, greener, more energy-efficient country.

Both articulate the Scottish Government’s various clean energy aspirations, though both are policy documents and, as ever, the question remains: how does this policy evolve and translate into a development pipeline?

Scotland is a country rich in natural resources and renowned for innovation, with many of our universities and industry-focused research and incubator centres considered ‘centres of excellence’ in clean energy technology development. We have the talent and the resource and we have two key challenges:

1. To make Scotland as attractive a destination as possible for clean energy inward investment; and 2. To position our country as a global leader in clean energy, increase export of our expertise and technology and develop projects from ideas to create vibrant new markets.

The challenges are formidable and our aspirations for the clean energy sector could be criticised for being overly ambitious, but, as a nation, Scotland is known for rising to the challenge.

More importantly, we owe it to future generations to try.

Clare Foster is head of clean energy, Shepherd and Wedderburn. To join the conversation on the future of the Scottish economy and contribute to the Fraser of Allander Institute study, Scotland in 2050: Realising Our Global Potential, visit https://250.shepwedd.com/scotland-2050.