Sept. 19 (Bloomberg) — Scotland’s renewable energy
developers breathed a sigh of relief at the decision by voters
to stick with the U.K., which will leave intact subsidies that
support investments in wind and solar power projects.
Scotland has about 43 percent of the U.K.’s wind power
capacity and exports a quarter of its electricity, relying on a
nationwide system obligating utilities to buy clean energy to
support the industry. Leaving the union with the U.K. would have
raised questions about the future of those payments.
By choosing to remain tethered to the U.K., Scotland
removed a major question mark underpinning 14 billion pounds
($23 billion) of investment and 12,000 jobs in renewable energy.
“We are delighted with the result,” said Ian Warwick,
chief executive officer at Deepbridge Capital LLP, an investment
manager in renewables. “It allows us to now progress plans to
invest further in Scotland. Scotland is full of great
entrepreneurship and innovation and is a great area for
renewable energy projects, all of which require investment,
which we can now continue to facilitate.”
Scottish voters turned out in record numbers yesterday to
reject by a 10-point margin a referendum question asking whether
the country should be independent of the U.K. About 13 gigawatts
of renewable power projects are on the drawing board currently
in Scotland, 15 percent of the U.K.’s total capacity.
A ‘yes’ vote “would have caused confusion,” said Stephen Lilley, a partner at Greencoat UK Wind Plc, a fund that raised
260 million pounds through an initial share sale in London last
year to invest in U.K. wind farms.
Wind-Energy Central
With expanses of windy highlands distant from population
centers, Scotland has become a center of the U.K.’s wind energy
industry. The government both north of the border and in London
is encouraging turbine developments there onshore and offshore.
Of the 34 billion pounds of investment planned in large-scale renewable power projects from January 2012 to February
2014, about 14 billion of that was to be in Scotland, according
to U.K. Department of Energy and Climate Change data.
Those projects get funded through subsidies run by the
government in London. Of the 2 billion pounds of support paid
through the Renewables Obligation in the fiscal year ended in
2013, Scotland received 560 million pounds. That represents as
much as 28 percent of the total U.K. funding. Scotland itself
accounts for about 10 percent of electricity sales in the U.K.,
according to government estimates.
Uncertainty Removed
“A major uncertainty has been removed by the vote,
particularly for those who were evaluating significant capital
investments in Scotland,” said Tony Ward, head of power and
utilities in the U.K. and Ireland at the consulting company EY.
“A ‘no’ vote is important. It allows the established dynamic in
the energy markets to continue its current course.”
Questions remain about how the relationship between the
U.K. government and Scotland will evolve after Prime Minister David Cameron promised the local authority more say over
spending and taxes if it stuck with the union.
“The decision to vote ‘no’ does not entirely resolve the
uncertainty over Scotland’s constitutional position,” Kevin Daly, an economist at Goldman Sachs Group Inc., wrote in a note
to clients. “There will now follow a period of negotiations
over the additional powers. However, the nature of these
uncertainties is less relevant to financial markets than the
deeper uncertainties that would have arisen in the event of a
‘yes’ vote.”
Division Concerns
For some, raising the question of a division will remain a
drag on sentiment. While many projects in the works will go
ahead, some still in the planning stages may not until it’s more
clear what new authorities the government in Edinburgh will get
and how those will be used.
“There will be some long-term damage to confidence but
it’s not possible to quantify that at this stage,” said Peter Atherton, an analyst at Liberum Capital Ltd. “Onshore wind
projects that have planning permission are likely to go ahead.
Question marks remain over big-ticket items such as offshore
wind projects.”
Maria McCaffery, chief executive of RenewableUK, an
industry group representing 500 developers, investors and
utilities, was more optimistic about the outlook, saying:
“Changes will be forthcoming. This may impact on our shared
energy future. These are big issues which will take time to
evolve. But it’s clear Scotland will remain a powerhouse for
renewable energy within the U.K.”
Renewable Power
The authority in Edinburgh led by First Minister Alex Salmond has been supportive of renewables, which supply almost
half of Scotland’s electricity. The government is targeting for
that to reach 100 percent by 2020. About 34 percent of the
U.K.’s renewable electricity capacity was in Scotland at the end
of 2013.
“The current balance of powers between Westminster and
Holyrood has served the renewables industry incredibly well to
date,” said Niall Stuart, CEO of Scottish Renewables, an
industry group that represents the biggest utilities, developers
and banks working in the sector.
“Energy policy is key to cutting carbon emissions and to
growing the economy so we expect it to feature prominently in
the debate over devolution of more powers to Scotland,” he
said. “Both governments need to work together to deliver an
energy strategy that allows each nation to play to their
strengths.”
To contact the reporter on this story:
Louise Downing in London at
ldowning4@bloomberg.net
To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Randall Hackley