In what must come as a welcome boost to the flagging hopes of renewable energy workers and supporters Nicola Sturgeon has announced the Government's intention to establish a publicly owned energy company that will be fuelled specifically from renewable energy.
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Credit, of course, should also go to the Scottish Greens upon whose votes the SNP depend for a majority and who have been very influential in pushing forward the green energy agenda.
Of course a lot of detail remains to be worked out, but if what's in the can matches the label then this should be a big opportunity for an industry that has been laid low by Westminster's refusal to fund any further land based wind or solar projects.
The Scottish Government's emphasis is on keeping costs down, but that is not a problem for onshore renewable energy whose costs have been declining rapidly in recent times. What they lack at the moment is long term guarantees about income to be earned for energy generation. Nicola Sturgeon's proposal seems likely to plug this gap.
The Scottish Government (SG) could carry out its mission by various means, provided it achieves the central necessity of issuing long term agreements on levels of payment per unit generated from renewable energy projects. It would also be popular if priority could be given to schemes that are community based, that is owned whole or in part by ordinary people. This is what myself and others were arguing in The Scotsman this morning:
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Long term power purchase arrangements are needed if renewable energy projects are to get cheap financing deals with banks and investors. Among the options there are two routes to progress in how the Scottish company could buy energy and give long term guaranteed incomes flows to solar, wind, and micro-hydro projects. One is that the company could conduct auctions for the right to be given long term power purchase agreements (PPAs), with companies competing to offer the lowest price per MWh to supply a given tranche of contracts. A second, perhaps more suitable for community renewable schemes, is to, in effect, offer them a standard rate for their power, perhaps linked to the wholesale power price (as argued in the letter to The Scotsman).
Recently a report published by Scottish Renewables suggested that 1 GW of wind power was available for no more than �49 per MWh. Yet renewable energy costs (including the costs of solar pv as well as wind) have continued to fall. See https://www.scottishrenewables.com/news/most-competitive-onshore-wind-projects-baringa/
Solar pv costs have been plunging, and if the Scottish Government can offer long term PPAs (for 15 or preferably even 20 years) then they may be able to entice cutting edge solar pv (and battery?) projects up North as has been developed in the Clayhill project in the South of England.
In recent times the wholesale electricity price has been �45 per MWh. Yet with production of the cheaper gas supplies from the British and Norweigian parts of the North Sea under decline and with our other major supplier (The Netherlands) now restricting future exploitation of gas fields the Scottish Government looks like it will be a winner if it signs up wind and solar projects. They may be competing with electricity from gas power plant fuelled by increasingly expensive supplies from Qatar or other places.
Scotland's proposal for a state owned energy company stands in stark contrast to the nationalisation proposed by Labour which is tinged with support for nuclear power. If Labour's planned nuclear expansion goes ahead it will result in heavy state losses, whilst Scotland's renewable expansion will result in cost savings.
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