How Will Scottish Independence Affect Its Energy Future? – Interview With Alex Salmond

By: OilPrice.com   Date: 15 August 2012

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By 2014, Scottish voters may have the chance to end the country’s 307-year intermarriage with England and the United Kingdom at a referendum for independence. The growing belief right is now that Scotland has the economic capacity to go it alone, particularly as they have an abundance of oil and natural gas reserves. Yet even so, the Scottish government is still keen to become the green energy capital of Europe, with more investments placed in renewable energy.

How Will Scottish Independence Affect Its Energy Future? – Interview With Alex S

Will Scotland Become The Green Energy Capital of Europe?
Photo Credit: jula julz - Flickr

We were fortunate enough to have some time with Scotland's First Minister Alex Salmond where we discussed a broad range of topics from Scotland's ambitious renewable energy targets and North Sea oil & gas to Scottish independence and Donald Trump.

In the interview, Alex discusses (Interview conducted by James Stafford of OilPrice.com):

·      How Scotland will achieve its ambitious renewable energy targets. 

·      The impact North Sea oil and gas revenues would have on an independent Scotland. 

·      How Scotland can become the green energy capital of Europe. 

·      Donald Trump’s recent tantrum over offshore wind energy. 

·      The impact independence would have on the Scottish economy. 

·      Why companies are continuing to invest in Scotland's renewable energy sector. 

·      Why Scotland would establish an oil fund and how it would be used. 

·      Why the shale revolution will not affect investment in Scottish renewables. 

·      The recent partnership between Scotland and Abu Dhabi. 

·      How Scotland will achieve its ambitious renewable energy targets.

Alex Salmond is the First Minister of Scotland and head of the Scottish National Party. He is a champion of green energy and has a vision to transform Scotland into a renewable energy powerhouse whilst aggressively reducing the country's carbon emissions.

Related: A United Kingdom Divided: Scottish Independence & Its Repercussions

Related: UK Coalition a 'New Kind of Politics' - But Not For Scotland

OP: If Scotland manages to gain its independence it would receive a 90 percent geographical share of North Sea oil and gas fields based on a division under international maritime law, roughly 81 percent of current oil and gas receipts, worth between $9.67 - $19.34 billion annually. Is this income crucial to the SNP's future economic policies?

AS: Even without our offshore oil and gas reserves, Scotland currently has the third highest output per head in the U.K., after London and the South-East. And when oil and gas output is included, Scotland's output per head is 15 percent above the U.K. average.

Energy is important to Scotland's economy. We have world-class companies operating in the global oil and gas supply chain while we will benefit from Scotland's second energy windfall in renewable energy where we have around a quarter of Europe's potential offshore wind and tidal energy and some 10 percent of its wave energy resource.

OP: What plans do you have for investing this revenue back into Scotland?

AS: In contrast to other oil rich nations, successive U.K. Governments have failed to take the action necessary to ensure that future generations benefit from the economic windfall from Scottish oil and gas.

An independent Scotland would use its oil and gas reserves far more responsibly. Specifically, the Scottish Government would establish an oil fund, once fiscal conditions allow. The development of an oil fund for Scotland would promote economic responsibility and stability. Revenues could be invested, rather than spent on current expenditure, during good financial times, and could counteract the effects of economic downturns.

OP: You have stated that there is no chance of any new nuclear power plants being built in Scotland. Does this anti-nuclear stance go as far as shutting down current nuclear power plants? I saw that nuclear power currently provides up to 33 percent of Scotland's electricity generation needs - how soon would you hope to close the plants down, and where would you find the extra power?

AS: We have always been clear that as long as the safety case can be made we are supportive of the possible life extension of existing nuclear power stations but that we are opposed to the development of new nuclear build in Scotland. New build nuclear power is vastly expensive and prone to delay - and shut downs in recent times have meant they have not been meeting 40 percent of Scotland's energy needs. We do not support subsidies for new nuclear.

Nuclear power will also leave a legacy of waste and vast decommissioning costs for the next generation of Scots - we will not add to the issues of decommissioning by building new nuclear plants in Scotland.

The legacy we must leave future generations is a world where invention and innovation is used to harness the earth's natural resources sustainably. And it is in wind, wave and tidal energy, and in carbon capture and storage, where Scotland has strong competitive advantages, both in terms of capacity and expertise. This is where it makes economic sense to concentrate our efforts, and that is what we are doing.

OP: Scotland is famously doing very well in achieving its renewable energy goals with provisional generation statistics confirming that 2011 was a record year for renewable generation in Scotland, up 28.1 percent from the previous record in 2009. Your well-publicized target is 100 percent renewable electricity by 2020. How are you coming along with that? Is this figure really achievable?

AS: Our Electricity Generation Policy Statement confirms that our 100 percent renewable electricity is technically feasible although we are not complacent and accept that it will be challenging. Delivery of the target will require around 16GW of capacity. We currently have almost 5GW operational. With a further 3.3 GW consented or operational and over 20GW in planning or scoping we are confident that the target can be delivered.

OP: If Scotland manages to achieve 100 percent renewable electricity by 2020, will it continue to invest in renewable energy technology and look to become an energy exporter?

AS: Scotland is fortunate in having a massive green energy potential. We have the best capacity for CCS in the European Union as well as a buoyant oil and gas regime, with record levels of capital investment. Our wind and seas hold some of the most concentrated potential not only across the U.K. and Europe, but in the world - our practical offshore renewables resource has been estimated at 206 GW.

By harnessing around a third of this resource, installed offshore renewables capacity could reach 68 GW by 2050 - enough to meet Scotland's own domestic electricity needs seven times. Around 20 percent of the electricity generated in Scotland is already exported to the rest of the U.K. and Scotland can go far beyond this to become the green energy capital of Europe.

OP: Offshore wind farms are an important part of Scotland's renewable energy future, but what do you say about the concerns of small fishing villages, such as those of East Neuk, who fear that their livelihoods will be threatened?

AS: Communities across the country stand to benefit from the development of Scotland's huge offshore clean energy resources and clearly the fishing industry is right at the heart of many coastal communities, so we aim to strike the right balance between our renewables ambitions and other competing uses for the seas. That's why Marine Scotland is actively engaged with the industry, for example, through a trilateral policy group, bringing together

government, renewables and fisheries, and by ensuring fishermen are represented on two other renewable energy steering groups and where possible engaging them in an operational capacity such as undertaking fisheries liaison duties.. It is also undertaking mapping and research into areas used by the fishing industry, including sensitive fisheries. At an individual project level, Marine Scotland is required by statute to fully consult relevant stakeholders, including the fishing industry, and the public, before any offshore renewable project can be consented or rejected.

OP: Donald Trump has made a public complaint and set up a campaign to prevent offshore wind farms along the coast of Scotland. I imagine he is more worried about the view from his luxury golf resort than the plight of the local communities, but the local communities do still back him. Do you believe his campaign could receive enough support to prove troublesome, or will you always be able to laugh it off as the tantrum of man who is used to getting his own way?

AS: In terms of the local community, I'd simply point out that so far there have been some 460 representations from members of the public supporting the Offshore Wind Demonstrator project, compared to 137 against. Of course, as we have made clear throughout, each project is determined on it merits taking into account views of stakeholders, consultees and members of the public. In general terms, however, several recent surveys have shown strong public support for clean energy, including wind power.

Some 71 percent of people in Scotland backed wind power as part of our energy mix in a Scottish Renewables/YouGov poll published around the time Mr Trump gave his evidence to the Scottish Parliament Committee. The development of the low carbon economy, driven by a renewables revolution that reindustrialises communities across Scotland, was a clear commitment in the last election, which we won convincingly. So, I'm confident that our support for Scotland's world-leading renewables industry is well welcomed across Scotland.

Communities are already benefiting from thousands of jobs and tens of millions of pounds of investment. Over last year, around £750 million of new renewable electricity projects began generating in Scotland, while there is a potential future pipeline of renewable electricity projects with a capital value of around £46 billion.

OP: Angus Armstrong, director of macroeconomic research at NIESR, said that "even with a favourable settlement on future oil revenues, its (Scotland's) fiscal balances are likely to be volatile with large deficits in some years as a result of its dependence on oil revenues." He suggested that an independent Scotland's debt would be about 70 percent of the country's gross domestic product. Does this fear have any founding? How do you intend to protect Scotland from an over reliance on oil revenues?

AS: As a result of the financial crisis and the management of the public finances by successive U.K. Governments, the U.K. has a considerable national debt. Debt that Scotland will have to repay independent or not. If U.K. debt was allocated on a per capita basis, then for 2010-11 - the last year in which figures are fully available - Scotland's net debt would be 51 percent of GDP compared to 60 percent of GDP for the U.K..

Scotland has a broad tax base and is not overly reliant on North Sea revenues. For example even when North Sea revenues fell by 50 percent in 2009-10, during the global financial crises, Scotland's fiscal position remained stronger than the U.K.'s.

OP: The partnership deal with Masdar, the Abu Dhabi clean energy company, could be hugely lucrative and beneficial for Scotland. We know that the agreement covers; offshore and onshore wind, carbon capture and storage, investment in the low carbon economy, and renewable energy research and development, but could you give us a more detailed account as to what Scotland will benefit from, and what Abu Dhabi will benefit from?

AS: Globally, we need to make the transition from an economy, which largely generates energy from fossil fuels to one based on renewable energy. The issues that Scotland and Abu Dhabi will work on together are among the key challenges that confront the world as it moves to a low carbon future: how to develop commercial onshore and offshore wind projects of scale; how to reduce the cost of offshore wind; the implementation of projects for carbon capture and storage; smart grids; power electronics; bio-energy; building technologies and solar power.

Both Abu Dhabi and Scotland know that countries which develop the low carbon technologies to power the planet in the future will gain significant economic benefits, whether it is from the sale of technology, the manufacture of turbines and machinery, or the export of clean electricity itself.

The Framework for Action between Scottish Enterprise, Masdar, the 12 Scottish universities of the Energy Technology Partnership and the Masdar Institute for Science and Technology brings together a huge amount of accumulated expertise. Masdar is a very attractive partner because its basic premise is to invest in and develop low carbon technologies and Scotland has massive investment opportunities, for example in offshore wind. Masdar is making significant investments in markets outside the UAE and is ambitious to invest further in the U.K.. Masdar, which has a number of investment funds which take shares in hi-tech companies, will consider potential investment opportunities in the Clean Technology sector in Scotland.

Both Abu Dhabi and Scotland are committed to using our existing expertise in the oil and gas industry to help us in the transition to a low-carbon economy, for example Scotland's North Sea experience can help cut the costs of offshore wind. Our partnership is also a wider statement of intent that it makes about the role that Scotland and Abu Dhabi intend to play in helping the world to meet its future energy needs.

Interview continues on next page...

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