The UK government is sabotaging Scotwind

When the Scottish Government auctioned the right to develop offshore wind in Scotland’s waters last year there was huge excitement about the potential to create a headline 25GW of power. But the UK Government’s latest interventions means it is increasingly likely that less than a third will be onstream by 2030 – and it could be even less.

There were no bids at all for offshore wind in the UK’s funding round this year - and that means energy bills are calculated to cost a massive £2 billion more than they would have done if the round had produced the expected number of projects. 

“Worrying and embarrassing” UK decision over funding for offshore wind

In a devastating blow for Scotland, the UK Government offered to pay only as much for new offshore power as they already pay for onshore wind in its latest energy round. But onshore wind is much cheaper to create for obvious reasons – siting fixed bottom wind turbines out at sea is more difficult and dangerous and requires a whole different supply chain from onshore wind. 

Because of the UK’s pricing regime, energy companies can’t confidently commit to development in the Scotwind areas. There are virtually no final financial decisions in place for building Scotwind turbines. 

In an editorial the Financial Times concluded: “The UK is…second only to China for its offshore wind energy capacity globally. Britain’s gale-force winds will be vital to meet its 2050 net zero target. This makes its failure last week to attract any bids from offshore wind developers in its annual renewable energy auction both worrying and embarrassing.”

A bitter blow for Scottish industry and energy consumers

This is a bitter disappointment for the Scottish economy. The country has some of the windiest offshores areas in Europe and huge potential to create green energy. But the UK Government regulates the energy market for the whole UK, so there is not much the Scottish Government can do. 

But it is a disaster for Scottish consumers - both households and businesses - as with the price of gas skyrocketing, the main hope to reduce energy bills is to make the most of renewable resources. 

Zero bids for offshore wind in this year’s round

Renewable energy projects in the UK are supported by the “contracts for difference” system, under which the government guarantees developers a fixed price for the electricity they generate over 15 years.

No energy company bid for the right to build more offshore wind anywhere in the UK in this year’s energy bidding round in response to the CfD on offer – there was an industry-wide boycott. There were bids for onshore and solar projects but these added up to just 3.7GW of generating capacity, the lowest level since 2017 and just over one-third of the capacity awarded last year.

Keith Anderson, chief executive of renewable energy giant ScottishPower, said: “We had two projects eligible for the auction. We ended up not bidding either.” He also told the Herald: “This is a multi-billion-pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for Government.”

Offshore wind is supposed to be the major plank of the UK’s strategy to reach net zero, increase energy security and reduce energy bills. RenewableUK said the offshore wind projects eligible for this year’s round could have “saved consumers £2bn a year compared to the cost of electricity from gas”.

An independent Scotland can prioritise a just transition

When Scotland is independent, it will be able to set market conditions in line with the priorities of the Scottish people – which are to use Scotland’s extraordinary energy potential to fuel a just transition. But the unnecessary delays imposed by the UK mean Scotland is falling behind other countries in this emerging sector and it could be hard to catch up. Supply chains are tight and it will be difficult to get the right parts and machinery in place to meet Scotland’s challenging net zero targets.

The UK’s failure to provide the right market signals in this crucial investment round will add to the perception that Scotland could do better as an independent country – and the sooner the better. 

“A terrible look on the international stage”

Scottish Renewables chief executive Claire Mack said the result of AR5 had been “a major blow” to Scotland and the UK’s renewable energy ambitions.

“As a whole, these results are a terrible look for the UK on the international stage. It is incredibly hard to say we are a world leader in decarbonisation when the central function of the system which delivers that decarbonisation has failed in such a spectacular fashion.”

“With the huge pipeline of ScotWind offshore wind projects in Scotland offering £28 billion of investment it is critical that these issues are resolved as soon as possible.”

Scotland falling behind

RenewableUK executive director for policy and engagement, Ana Musat said the delay meant that even if the UK Government flip-flops on this, Scottish projects will be left struggling to source what they need to build:

 “Something else I’m concerned about is the impact on the supply chain. We already know that supply chains are really stretched, we know order books are full for the next four years or so and whatever slots don’t get taken up by UK projects get taken up by projects elsewhere in Europe.”

“I think for Scotwind projects that’s going to be a real problem. Because we need to build the supply chain and have time to ensure that we can deliver those by 2030 – and I’m just not seeing that the investment environment is quite right yet.”

Warnings over the exposure of Scotwind projects to the CfD process are not new. A 2021 advisory paper from the University of Strathclyde noted that “the route to market (the CfD) remains unstable and out of the Scottish Government’s jurisdiction.”

“This is a particular concern for Scottish projects where sites may be less desirable than in the rest of GB (e.g. due to distance from demand, water depth, transmission and connection charges),” the paper adds.

Scotland needs to control energy regulation

Scotland’s energy providers are calling for an urgent change of heart and policy by the UK government. But there is little evidence that a just transition is top of their priority lists. 

The UK’s bizarre and incompetent behaviour means bigger bills for Scots consumers and businesses. It also kicks at the kneecaps of Scotland’s renewable energy sector - which is potentially a power house that could lift the Scottish economy. 

The sooner Scotland is independent and can take charge of regulating the energy market and setting energy policy in line with Scotland’s priorities, the better.