:00:02. > :00:12.last year. These moments in time will happen when we had the best in
:00:12. > :00:13.
:00:13. > :00:18.Tonight on Newsnight... Is the whole renewable energy
:00:18. > :00:21.industry in jeopardy from changes in British government policy? A new
:00:21. > :00:24.marine energy park is opened in the north of Scotland. But is its
:00:24. > :00:27.future, and the future of wind farms, solar and even nuclear power,
:00:27. > :00:35.threatened by rows over electricity pricing and whether the UK should
:00:35. > :00:38.stick to strict carbon targets? Today saw the UK government's
:00:38. > :00:41.energy minister launch the Pentland Firth and Orkney Waters marine
:00:41. > :00:45.energy park - in effect, a vote of confidence in the cutting edge
:00:45. > :00:48.research already happening there. And that other old favourite,
:00:48. > :00:52.offshore wind, had a boost with plans for a large new wind farm off
:00:52. > :00:55.the Firth of Forth. But a series of rows over renewables, one of which
:00:55. > :01:05.seems to have caused serious divisions in the Cabinet, could
:01:05. > :01:11.
:01:11. > :01:16.threaten the whole future of The sheer power of nature around
:01:16. > :01:23.Scotland's coast. This seems proof enough of Scotland's potential as a
:01:23. > :01:26.world leader in renewable energy. These waters - the Pentland Firth
:01:26. > :01:30.and Orkney Waters - are now home to Scotland's first renewable energy
:01:30. > :01:33.park. The idea is to help bring researchers and commercial
:01:33. > :01:38.developers together and give them the facilities they need to help
:01:38. > :01:42.take their ideas forward. It is really important that we get that
:01:42. > :01:45.geographic focus, so you bring together not just the manufacturers
:01:45. > :01:51.and developers and the entrepreneurs, but also the
:01:51. > :01:55.research and academic institutions and also be Government as well and
:01:55. > :02:01.bringing a real sense of dynamism to this very important part of the
:02:01. > :02:03.local economy. The park status will help us Corporate better across the
:02:03. > :02:08.whole Highlands and Islands region. When this industry reaches
:02:08. > :02:10.commercial stage, we will need all the people, the experience and all
:02:11. > :02:14.the different parts of the community to come together to make
:02:15. > :02:18.this work. I think the opportunity that we get
:02:18. > :02:22.with the energy park is to make sure that everybody he needs to
:02:22. > :02:31.play apart place their part at the right time. It is a co-ordinating
:02:31. > :02:36.Both the UK and Scottish governments believe they can play a
:02:36. > :02:42.part in helping Scotland make the most of our wind, waves and water.
:02:42. > :02:45.Although the energy market itself is Westminster's responsibility.
:02:46. > :02:50.Boosting renewable energy is about more than helping the environment.
:02:50. > :02:54.This is the huge wind farm near Glasgow. It is still being extended
:02:54. > :02:58.and when it is by no be completed, it should be able to generate
:02:58. > :03:02.enough electricity for 300,000 homes every year. The Scottish
:03:02. > :03:08.Government said before that Scotland could be the Saudi Arabia
:03:08. > :03:11.of the renewable energy, selling green energy generated here beyond
:03:11. > :03:15.our borders and generating jobs and manufacturing and research and
:03:16. > :03:23.development. But before Scotland can achieve its potential, there
:03:23. > :03:27.are challenges to overcome. The main export market for power
:03:28. > :03:32.generated in Scotland will almost certainly almost be the rest of the
:03:32. > :03:39.UK. The UK Government plans legislation to reform the energy
:03:39. > :03:43.market. It has three big games - keeping the lights on as our
:03:43. > :03:46.stations come to the end of the working lives, keeping bills down
:03:46. > :03:52.and creating cleaner, greener electricity to tackle climate
:03:52. > :03:58.change. But there are tensions in the coalition are over how Biscuits
:03:58. > :04:01.put into practice. When the row is over, the level of support given to
:04:01. > :04:05.companies providing wind energy to the grids. Chancellor George
:04:05. > :04:13.Osborne wanted to cut the subsidies by one quarter. The Liberal
:04:13. > :04:18.Democrats said this was too much. And don't assume de carbonised in
:04:18. > :04:22.power generation automatically means more from wind farms and
:04:22. > :04:30.waves. The gas industry has been lobbying hard to have gas 3
:04:30. > :04:35.labelled as the green fuel as it produces far less common than coal.
:04:35. > :04:39.-- carbon. As for Nuclear Power, the Scottish Government proposes
:04:39. > :04:43.new stations here that the UK Government has no principal
:04:43. > :04:47.objections to building and south of the border. Even General Electric,
:04:47. > :04:51.which has long supplied equipment for some nuclear power stations,
:04:52. > :04:58.now appears to be arguing the markets increasingly for gas and
:04:58. > :05:00.wind as nuclear energy is getting I'm joined now by Professor Stewart
:05:00. > :05:03.Cameron of the Institute of Mechanical Engineers, by Neil
:05:03. > :05:09.Stuart of Scottish Renewables, the industry group, and from London by
:05:09. > :05:14.James Murray, editor of the website BusinessGreen.
:05:14. > :05:18.We will talk about some of these reforms and a moment. But this farm
:05:18. > :05:23.that was set up today in the Pentland Firth and Orkney Waters,
:05:23. > :05:27.or what are the expectations for that? Will it produced commercially
:05:27. > :05:30.viable technology? The main energy park is the
:05:30. > :05:35.designation for the parks of the UK that have significant wave and
:05:35. > :05:37.tidal potential. It is a hub to bring together technology
:05:37. > :05:44.developers and the utilities and their suppliers and researchers and
:05:44. > :05:48.academics. It is about converting the plans for 1.6 gigawatt of wave
:05:48. > :05:52.and tidal power, which is the equivalent to a large part station.
:05:52. > :05:56.It is about converting his plans into a commercial reality by a
:05:56. > :06:00.Twenty20. That means what? That this would be
:06:00. > :06:10.up and running and selling Power from the Pentland Firth and Orkney
:06:10. > :06:11.
:06:11. > :06:15.Waters into the national numerous developers by saying that SVRs...
:06:15. > :06:22.There is a commission to build those out by Twenty20. Construction
:06:22. > :06:29.will be well under way about Twenty20. We will have to wait and
:06:29. > :06:34.see if we have the full 1.6 gigawatt.
:06:34. > :06:38.Dare his disquiet there amongst some of the renewals producers at
:06:38. > :06:43.the moment about the political shenanigans. I know this is very
:06:43. > :06:46.complicated, so why will just take this stage by stage. But you are
:06:46. > :06:51.concerned at the attitude of the Chancellor of the Exchequer seems
:06:51. > :06:54.to be adopting. Just explain what you were Reza.
:06:54. > :06:59.The broad concern is that we have gone from a situation where there
:07:00. > :07:05.was real clarity on the UK's energy and renewable energy policy and
:07:05. > :07:08.everyone was pushing in the same direction. Go was the triple aim of
:07:08. > :07:12.keeping the lights on, keeping the costs low and cutting down the
:07:12. > :07:15.carbon emissions. Those are still the aims, but the level of balance
:07:15. > :07:20.and the next that we are planning seems to be up for debate again. It
:07:20. > :07:24.is very clear the Chancellor is pushing for a mix that is more
:07:24. > :07:27.reliant on gas than maybe was originally the plans. We have seen
:07:27. > :07:37.from leaked letters in the last fortnight that he wants the UK to
:07:37. > :07:38.
:07:38. > :07:42.be, a gas hob. -- become. There is debate over that. But it is all
:07:42. > :07:45.being done behind closed doors. The message from a loss of renewable
:07:45. > :07:48.energy firms and proper energy firms is they want to see a bit
:07:48. > :07:53.more certainty over what the Government is thinking in the
:07:53. > :08:00.longer term. The Chancellor has won one battle
:08:00. > :08:06.already, because there was a suggestion that there should be a
:08:06. > :08:10.target of the car organising electricity by 2030, except for car
:08:10. > :08:15.stations that would come on and be shot off for periods when
:08:15. > :08:17.renewables could not provide the energy. But was abandoned Ind the
:08:18. > :08:23.Department of Energy's statement last Friday, wasn't it?
:08:23. > :08:28.No don't think it was technically abandoned. The Secretary made it
:08:28. > :08:32.clear that he felt that issue was still up for debate. The Department
:08:32. > :08:34.of Energy and climate change Hasted report back on reports from the
:08:34. > :08:38.climate change Committee which recommended that target. Their view
:08:38. > :08:41.is that they have not officially decided one way or the other as yet.
:08:41. > :08:45.If what you're saying is perfectly true, the Chancellor is pushing
:08:45. > :08:54.very hard for that target to be dropped, but it is my understanding
:08:55. > :09:04.that the Liberal Democrats have not Where you stand on this, Stewart
:09:04. > :09:09.Cameron? It also looks as if that we may be in position to build a
:09:09. > :09:17.whole new generation of gas fired power stations, which would be much
:09:17. > :09:21.cheaper. We have always said about you need a balance here. Not
:09:21. > :09:25.necessarily a one third, one third, one third, between renewables
:09:25. > :09:32.thermal plant and we always believed nuclear should be part of
:09:32. > :09:37.that next. How that is aimed at, how that is achieved, a lot of
:09:37. > :09:43.debate, but you still need their will plants in Scotland, the
:09:43. > :09:53.Government itself is saying... that you mean coal and gas? Coal
:09:53. > :09:56.
:09:56. > :10:01.and gas. Just now, the only stations in Scotland will be shut
:10:01. > :10:04.down in the near future. Can you see what some of the renewable
:10:04. > :10:10.companies are worried about? The more you have a Government started
:10:10. > :10:17.to talk up the possibility of any rut of cheap gas, the more they are
:10:17. > :10:21.worried about their investments. can understand that, but as I said
:10:21. > :10:26.earlier we always believed there should be a mix there. Gas may
:10:26. > :10:32.become cheaper, it may be driven by the US market, which may or may not
:10:32. > :10:42.affect us, so there is a lot of uncertainty there. If you are going
:10:42. > :10:43.
:10:43. > :10:48.for new gas-fired plants, there is carbon capture required, and so
:10:48. > :10:51.there is a lot of work to be done. Even in the last few days, there
:10:51. > :10:56.have been developments which are presumably of some concern to your
:10:56. > :11:01.members. For example, this idea that there will now be another
:11:01. > :11:05.round, that they will set prices and subsidies for renewable power,
:11:05. > :11:13.but that there is to be another round of reviews. I think there is
:11:13. > :11:18.a lot of nervousness about this and how what is going to work. We also
:11:18. > :11:27.have a situation where Government delayed and delayed and delayed
:11:27. > :11:30.again at the announcement of the bindings. -- abandons. As you say,
:11:30. > :11:34.no sooner have forgot that certainty than we have to go
:11:34. > :11:38.through it all again with another review, possibly to decide whether
:11:38. > :11:45.there will be another review wants a review concludes. So people are
:11:45. > :11:48.finding it very hard to get any decisions. Going back to your point
:11:48. > :11:53.about gas, there is a broad agreement that gas is only going in
:11:53. > :11:56.one direction and that is that it is likely to become more expensive
:11:56. > :11:59.and renewables are only going in one direction and that is that they
:11:59. > :12:04.will become more affordable. I am not sure that there is that
:12:04. > :12:09.agreement. But let us think about what James Murray was saying, that
:12:09. > :12:14.the whole process of de carbonised in the UK economy has been the
:12:14. > :12:19.subject of cross-party agreement and he is worried that agreement is
:12:19. > :12:23.starting to break down. There are obviously different views within
:12:23. > :12:26.the coalition on renewables and the part that renewables will play in
:12:26. > :12:32.our energy mix in the future. I think everyone is agreed that they
:12:32. > :12:36.will play a significant part, but Tory MPs are wrote a letter to the
:12:36. > :12:40.Prime Minister saying that they wanted to less support for onshore
:12:40. > :12:43.wind, so there are at different expectations. I believe that
:12:43. > :12:49.renewables will win out because they're bringing investment at a
:12:49. > :12:53.difficult time in the economy and they are creating jobs, and we have
:12:53. > :12:58.to decry organise our economy. James Murray, these worries are
:12:58. > :13:01.there. You think in the short term there could be a huge raft of new
:13:01. > :13:05.renewables projects coming on- stream, given all the worries about
:13:05. > :13:09.this electricity reform, why is it that in that short term there will
:13:09. > :13:14.be a lot of new stuff? Because the bulk of these reforms do not come
:13:14. > :13:18.into effect until 2017, so there is now a window where there is a
:13:18. > :13:24.relatively high degree of certainty or for what the subsidy policy
:13:24. > :13:28.should be between now and 2017. One of the big advantages of these
:13:28. > :13:38.projects, particularly over nuclear and carbon catchers storage, is
:13:38. > :13:38.
:13:39. > :13:47.that you can build them relatively quickly. -- carbon catcher. Just to
:13:47. > :13:52.be clear, there was a proposal Road today to build a huge 125 tower
:13:52. > :13:56.buying off the coast of Fife. If that is done in the next three or
:13:56. > :14:00.five years, will that be able to take advantage of the current
:14:00. > :14:04.regime and stay part of the current regime and in no way be separated
:14:04. > :14:10.out from this debate that is going on about market reform? Absolutely.
:14:10. > :14:13.The problem is that it is devilishly complex stuff, but these
:14:13. > :14:19.renewables Certificates that the banding for announced for last week,
:14:19. > :14:23.the supply from next year through to 2017. So there is a five-year
:14:23. > :14:27.period where everyone knows what the level will be. After that we
:14:28. > :14:31.moved to the new system and then it gets a little bit more uncertain,
:14:31. > :14:35.but the Government has promised to try and get the energy bill through
:14:35. > :14:39.this autumn. So we are moving in the right direction towards a more
:14:39. > :14:43.stable policy environment. The concern is that there will be an
:14:43. > :14:47.almighty political row in the autumn to work out what that is.
:14:47. > :14:52.I know you are members are worried about the implications of these
:14:52. > :15:00.longer term reforms. We have established that for several years
:15:00. > :15:07.the very phrase contract... Let us try to and pick some of the
:15:07. > :15:17.problems. This idea that the pricing mechanism, that long-term
:15:17. > :15:18.
:15:18. > :15:21.prop jets, -- projects which have, and my understanding was that the
:15:21. > :15:27.Government would understand this construction and the pricing
:15:27. > :15:31.arrangements for them and that has been abandoned. He I will not try
:15:31. > :15:36.and explain to you what a synthetic counter party is, but essentially
:15:36. > :15:39.what the Government have said is that they will not sign a contract
:15:39. > :15:43.but rather we signed a contract with suppliers of relativity and
:15:43. > :15:46.they will take on obligations according to their market share to
:15:46. > :15:51.underwrite those contracts, and that is one of the big concerns
:15:51. > :15:55.that our contracts. They might to a contract but is it actually worth
:15:55. > :15:59.anything? And the other worry is that when you take that contract to
:15:59. > :16:04.the back, the banks say, if you were underwritten by the Government,
:16:04. > :16:11.we would give you interest rates at five %, but now we're going to try
:16:11. > :16:14.out -- charge-sheet ten %. something happened to the person
:16:14. > :16:19.that the contract, we would see them were have some assets that we
:16:19. > :16:28.could go after, so -- that your contract is not with anyone. So
:16:28. > :16:32.that is something we have tried to work out just now. This idea of
:16:32. > :16:42.developing nuclear power, this would be an issue for nuclear power
:16:42. > :16:43.
:16:43. > :16:50.as well. Yes. We recognise that. As Neil said, the pricing is ready
:16:50. > :16:56.unbearable, is probably the best term to use. -- the ball. But it is
:16:56. > :17:03.this issue of being underwritten by the UK Government in some sense.
:17:03. > :17:09.Yes. There is an argument in my mind that says we should go back to
:17:09. > :17:16.the days of the old Government department, but now it is all
:17:17. > :17:20.privatised. What was the other thing you were saying? The other
:17:20. > :17:25.thing is that you could spend up to nine years developing plans for an
:17:25. > :17:28.offshore wind farm and it may be that when you come to Government to
:17:28. > :17:32.say that you want to sign a contract, the Government says that
:17:32. > :17:35.the budget has been spent for this year and next year, so come back in
:17:35. > :17:39.three years' time and ruled what you about your contract.
:17:39. > :17:43.Departments have to work within budgets and there are no guarantees
:17:43. > :17:48.for our members that if they deliver contracts the Government
:17:48. > :17:54.will underwrite the contracts. is a big issue. The idea that the
:17:54. > :17:59.amount of money you will be capped, so let us say there is a big new
:17:59. > :18:06.nuclear power station, that could be one year's allocations gone in a
:18:06. > :18:10.flash and other projects would find that they could not operate. That
:18:10. > :18:14.is a concern and those concerns have all been raised by the Select
:18:14. > :18:18.Committee. It has been put to the Department of Energy and climate
:18:18. > :18:21.change and they are being looked at now. This is a very much a live
:18:21. > :18:26.issue and the hope is that come the autumn they will be resolved in
:18:26. > :18:30.favour of Lucca in generation. The key point to remember is that we
:18:30. > :18:38.are talking about a massive success story. The rest of the economy is
:18:38. > :18:40.flat and the sector is growing at five or ten % a year. We have
:18:40. > :18:47.almost a third increase in renewable capacity across the UK
:18:47. > :18:54.last year. Jobs are being created. Is it you're cute that if these
:18:55. > :18:58.plans went ahead as currently proposed -- is in your view, that
:18:58. > :19:02.flow of investment into green energy could be under threat?
:19:02. > :19:07.think the feeling at the moment within the industry is that they
:19:07. > :19:12.need clarity. It is under threat at the moment because we do not have
:19:12. > :19:21.that clarity. Some of the technical issues of the Bell are a cause for
:19:21. > :19:25.concern. People will have -- of the bill. We're talking about over �100
:19:25. > :19:30.billion over the next eight years. It is a huge sum of money. There
:19:30. > :19:33.are concerns that some of these issues, particularly the issue of
:19:33. > :19:42.the guarantee, could make it much harder to deliver the pace of
:19:42. > :19:47.investment that we need. Stewart Cameron, the select committee
:19:47. > :19:52.produced a report the other week that was enormously hostile and
:19:52. > :19:56.that is almost understating it to what is being proposed. It is
:19:56. > :20:02.hostile and that sense, but regarding the Scottish Government,
:20:02. > :20:06.since we put out our report last November we have been very act and
:20:06. > :20:09.with that of -- active with the Government and they have been very
:20:10. > :20:16.active with us and they have been giving us constructive comments on
:20:16. > :20:22.the way forward. I am also interested in what happens to small
:20:22. > :20:26.companies involved in this. As I understand it, up under the
:20:26. > :20:31.renewables obligations, if you are a small company you get less than
:20:31. > :20:35.the best price for renewable power but you get a long-term contract.
:20:35. > :20:39.Under the new system, I cannot claim I understand it, as I
:20:39. > :20:44.understand that is almost like a physical thing, that you have to
:20:44. > :20:50.physically by this renewable power and those occasions are removed. Is
:20:50. > :20:55.that right? Everyone who retail villages city has an obligation to
:20:55. > :21:03.source a percentage of that elegist you from renewables under the
:21:03. > :21:10.current system. -- a percentage of that electricity. Under the new
:21:10. > :21:15.system, what the Government intends and what is not yet clear, is that
:21:15. > :21:19.small companies, or any independent generator of relativity, will trade
:21:19. > :21:23.on the open market and trade to retailers. Is it your view that
:21:23. > :21:27.would make it not viable for lots of them. That would make a very
:21:27. > :21:33.viable, or what is not clear is whether there is a competitive
:21:33. > :21:38.market enough to allow them to sell their power 24 hours ahead. So you
:21:38. > :21:42.are worried that smaller companies will not go ahead?. We are wide the
:21:42. > :21:51.suppliers will find elegist to from other sources and put a discount on
:21:51. > :21:55.the electricity from our sources. - - electricity. George Osborne is
:21:55. > :22:01.saying that he is trying to keep prices down, otherwise it looks
:22:01. > :22:05.like prizes will go up for ever. That is the concern and that is the
:22:05. > :22:10.argument that people say we should invest more in gas in the short
:22:10. > :22:13.term. There are many flaws with that, the most fundamental one is
:22:13. > :22:18.that climate change is real and is happening and if we keep investing
:22:18. > :22:21.in fossil fuels we will have a major problem. We will have to get