30/07/2012 Newsnight Scotland


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last year. These moments in time will happen when we had the best in


Tonight on Newsnight... Is the whole renewable energy


industry in jeopardy from changes in British government policy? A new


marine energy park is opened in the north of Scotland. But is its


future, and the future of wind farms, solar and even nuclear power,


threatened by rows over electricity pricing and whether the UK should


stick to strict carbon targets? Today saw the UK government's


energy minister launch the Pentland Firth and Orkney Waters marine


energy park - in effect, a vote of confidence in the cutting edge


research already happening there. And that other old favourite,


offshore wind, had a boost with plans for a large new wind farm off


the Firth of Forth. But a series of rows over renewables, one of which


seems to have caused serious divisions in the Cabinet, could


threaten the whole future of The sheer power of nature around


Scotland's coast. This seems proof enough of Scotland's potential as a


world leader in renewable energy. These waters - the Pentland Firth


and Orkney Waters - are now home to Scotland's first renewable energy


park. The idea is to help bring researchers and commercial


developers together and give them the facilities they need to help


take their ideas forward. It is really important that we get that


geographic focus, so you bring together not just the manufacturers


and developers and the entrepreneurs, but also the


research and academic institutions and also be Government as well and


bringing a real sense of dynamism to this very important part of the


local economy. The park status will help us Corporate better across the


whole Highlands and Islands region. When this industry reaches


commercial stage, we will need all the people, the experience and all


the different parts of the community to come together to make


this work. I think the opportunity that we get


with the energy park is to make sure that everybody he needs to


play apart place their part at the right time. It is a co-ordinating


Both the UK and Scottish governments believe they can play a


part in helping Scotland make the most of our wind, waves and water.


Although the energy market itself is Westminster's responsibility.


Boosting renewable energy is about more than helping the environment.


This is the huge wind farm near Glasgow. It is still being extended


and when it is by no be completed, it should be able to generate


enough electricity for 300,000 homes every year. The Scottish


Government said before that Scotland could be the Saudi Arabia


of the renewable energy, selling green energy generated here beyond


our borders and generating jobs and manufacturing and research and


development. But before Scotland can achieve its potential, there


are challenges to overcome. The main export market for power


generated in Scotland will almost certainly almost be the rest of the


UK. The UK Government plans legislation to reform the energy


market. It has three big games - keeping the lights on as our


stations come to the end of the working lives, keeping bills down


and creating cleaner, greener electricity to tackle climate


change. But there are tensions in the coalition are over how Biscuits


put into practice. When the row is over, the level of support given to


companies providing wind energy to the grids. Chancellor George


Osborne wanted to cut the subsidies by one quarter. The Liberal


Democrats said this was too much. And don't assume de carbonised in


power generation automatically means more from wind farms and


waves. The gas industry has been lobbying hard to have gas 3


labelled as the green fuel as it produces far less common than coal.


-- carbon. As for Nuclear Power, the Scottish Government proposes


new stations here that the UK Government has no principal


objections to building and south of the border. Even General Electric,


which has long supplied equipment for some nuclear power stations,


now appears to be arguing the markets increasingly for gas and


wind as nuclear energy is getting I'm joined now by Professor Stewart


Cameron of the Institute of Mechanical Engineers, by Neil


Stuart of Scottish Renewables, the industry group, and from London by


James Murray, editor of the website BusinessGreen.


We will talk about some of these reforms and a moment. But this farm


that was set up today in the Pentland Firth and Orkney Waters,


or what are the expectations for that? Will it produced commercially


viable technology? The main energy park is the


designation for the parks of the UK that have significant wave and


tidal potential. It is a hub to bring together technology


developers and the utilities and their suppliers and researchers and


academics. It is about converting the plans for 1.6 gigawatt of wave


and tidal power, which is the equivalent to a large part station.


It is about converting his plans into a commercial reality by a


Twenty20. That means what? That this would be


up and running and selling Power from the Pentland Firth and Orkney


Waters into the national numerous developers by saying that SVRs...


There is a commission to build those out by Twenty20. Construction


will be well under way about Twenty20. We will have to wait and


see if we have the full 1.6 gigawatt.


Dare his disquiet there amongst some of the renewals producers at


the moment about the political shenanigans. I know this is very


complicated, so why will just take this stage by stage. But you are


concerned at the attitude of the Chancellor of the Exchequer seems


to be adopting. Just explain what you were Reza.


The broad concern is that we have gone from a situation where there


was real clarity on the UK's energy and renewable energy policy and


everyone was pushing in the same direction. Go was the triple aim of


keeping the lights on, keeping the costs low and cutting down the


carbon emissions. Those are still the aims, but the level of balance


and the next that we are planning seems to be up for debate again. It


is very clear the Chancellor is pushing for a mix that is more


reliant on gas than maybe was originally the plans. We have seen


from leaked letters in the last fortnight that he wants the UK to


be, a gas hob. -- become. There is debate over that. But it is all


being done behind closed doors. The message from a loss of renewable


energy firms and proper energy firms is they want to see a bit


more certainty over what the Government is thinking in the


longer term. The Chancellor has won one battle


already, because there was a suggestion that there should be a


target of the car organising electricity by 2030, except for car


stations that would come on and be shot off for periods when


renewables could not provide the energy. But was abandoned Ind the


Department of Energy's statement last Friday, wasn't it?


No don't think it was technically abandoned. The Secretary made it


clear that he felt that issue was still up for debate. The Department


of Energy and climate change Hasted report back on reports from the


climate change Committee which recommended that target. Their view


is that they have not officially decided one way or the other as yet.


If what you're saying is perfectly true, the Chancellor is pushing


very hard for that target to be dropped, but it is my understanding


that the Liberal Democrats have not Where you stand on this, Stewart


Cameron? It also looks as if that we may be in position to build a


whole new generation of gas fired power stations, which would be much


cheaper. We have always said about you need a balance here. Not


necessarily a one third, one third, one third, between renewables


thermal plant and we always believed nuclear should be part of


that next. How that is aimed at, how that is achieved, a lot of


debate, but you still need their will plants in Scotland, the


Government itself is saying... that you mean coal and gas? Coal


and gas. Just now, the only stations in Scotland will be shut


down in the near future. Can you see what some of the renewable


companies are worried about? The more you have a Government started


to talk up the possibility of any rut of cheap gas, the more they are


worried about their investments. can understand that, but as I said


earlier we always believed there should be a mix there. Gas may


become cheaper, it may be driven by the US market, which may or may not


affect us, so there is a lot of uncertainty there. If you are going


for new gas-fired plants, there is carbon capture required, and so


there is a lot of work to be done. Even in the last few days, there


have been developments which are presumably of some concern to your


members. For example, this idea that there will now be another


round, that they will set prices and subsidies for renewable power,


but that there is to be another round of reviews. I think there is


a lot of nervousness about this and how what is going to work. We also


have a situation where Government delayed and delayed and delayed


again at the announcement of the bindings. -- abandons. As you say,


no sooner have forgot that certainty than we have to go


through it all again with another review, possibly to decide whether


there will be another review wants a review concludes. So people are


finding it very hard to get any decisions. Going back to your point


about gas, there is a broad agreement that gas is only going in


one direction and that is that it is likely to become more expensive


and renewables are only going in one direction and that is that they


will become more affordable. I am not sure that there is that


agreement. But let us think about what James Murray was saying, that


the whole process of de carbonised in the UK economy has been the


subject of cross-party agreement and he is worried that agreement is


starting to break down. There are obviously different views within


the coalition on renewables and the part that renewables will play in


our energy mix in the future. I think everyone is agreed that they


will play a significant part, but Tory MPs are wrote a letter to the


Prime Minister saying that they wanted to less support for onshore


wind, so there are at different expectations. I believe that


renewables will win out because they're bringing investment at a


difficult time in the economy and they are creating jobs, and we have


to decry organise our economy. James Murray, these worries are


there. You think in the short term there could be a huge raft of new


renewables projects coming on- stream, given all the worries about


this electricity reform, why is it that in that short term there will


be a lot of new stuff? Because the bulk of these reforms do not come


into effect until 2017, so there is now a window where there is a


relatively high degree of certainty or for what the subsidy policy


should be between now and 2017. One of the big advantages of these


projects, particularly over nuclear and carbon catchers storage, is


that you can build them relatively quickly. -- carbon catcher. Just to


be clear, there was a proposal Road today to build a huge 125 tower


buying off the coast of Fife. If that is done in the next three or


five years, will that be able to take advantage of the current


regime and stay part of the current regime and in no way be separated


out from this debate that is going on about market reform? Absolutely.


The problem is that it is devilishly complex stuff, but these


renewables Certificates that the banding for announced for last week,


the supply from next year through to 2017. So there is a five-year


period where everyone knows what the level will be. After that we


moved to the new system and then it gets a little bit more uncertain,


but the Government has promised to try and get the energy bill through


this autumn. So we are moving in the right direction towards a more


stable policy environment. The concern is that there will be an


almighty political row in the autumn to work out what that is.


I know you are members are worried about the implications of these


longer term reforms. We have established that for several years


the very phrase contract... Let us try to and pick some of the


problems. This idea that the pricing mechanism, that long-term


prop jets, -- projects which have, and my understanding was that the


Government would understand this construction and the pricing


arrangements for them and that has been abandoned. He I will not try


and explain to you what a synthetic counter party is, but essentially


what the Government have said is that they will not sign a contract


but rather we signed a contract with suppliers of relativity and


they will take on obligations according to their market share to


underwrite those contracts, and that is one of the big concerns


that our contracts. They might to a contract but is it actually worth


anything? And the other worry is that when you take that contract to


the back, the banks say, if you were underwritten by the Government,


we would give you interest rates at five %, but now we're going to try


out -- charge-sheet ten %. something happened to the person


that the contract, we would see them were have some assets that we


could go after, so -- that your contract is not with anyone. So


that is something we have tried to work out just now. This idea of


developing nuclear power, this would be an issue for nuclear power


as well. Yes. We recognise that. As Neil said, the pricing is ready


unbearable, is probably the best term to use. -- the ball. But it is


this issue of being underwritten by the UK Government in some sense.


Yes. There is an argument in my mind that says we should go back to


the days of the old Government department, but now it is all


privatised. What was the other thing you were saying? The other


thing is that you could spend up to nine years developing plans for an


offshore wind farm and it may be that when you come to Government to


say that you want to sign a contract, the Government says that


the budget has been spent for this year and next year, so come back in


three years' time and ruled what you about your contract.


Departments have to work within budgets and there are no guarantees


for our members that if they deliver contracts the Government


will underwrite the contracts. is a big issue. The idea that the


amount of money you will be capped, so let us say there is a big new


nuclear power station, that could be one year's allocations gone in a


flash and other projects would find that they could not operate. That


is a concern and those concerns have all been raised by the Select


Committee. It has been put to the Department of Energy and climate


change and they are being looked at now. This is a very much a live


issue and the hope is that come the autumn they will be resolved in


favour of Lucca in generation. The key point to remember is that we


are talking about a massive success story. The rest of the economy is


flat and the sector is growing at five or ten % a year. We have


almost a third increase in renewable capacity across the UK


last year. Jobs are being created. Is it you're cute that if these


plans went ahead as currently proposed -- is in your view, that


flow of investment into green energy could be under threat?


think the feeling at the moment within the industry is that they


need clarity. It is under threat at the moment because we do not have


that clarity. Some of the technical issues of the Bell are a cause for


concern. People will have -- of the bill. We're talking about over �100


billion over the next eight years. It is a huge sum of money. There


are concerns that some of these issues, particularly the issue of


the guarantee, could make it much harder to deliver the pace of


investment that we need. Stewart Cameron, the select committee


produced a report the other week that was enormously hostile and


that is almost understating it to what is being proposed. It is


hostile and that sense, but regarding the Scottish Government,


since we put out our report last November we have been very act and


with that of -- active with the Government and they have been very


active with us and they have been giving us constructive comments on


the way forward. I am also interested in what happens to small


companies involved in this. As I understand it, up under the


renewables obligations, if you are a small company you get less than


the best price for renewable power but you get a long-term contract.


Under the new system, I cannot claim I understand it, as I


understand that is almost like a physical thing, that you have to


physically by this renewable power and those occasions are removed. Is


that right? Everyone who retail villages city has an obligation to


source a percentage of that elegist you from renewables under the


current system. -- a percentage of that electricity. Under the new


system, what the Government intends and what is not yet clear, is that


small companies, or any independent generator of relativity, will trade


on the open market and trade to retailers. Is it your view that


would make it not viable for lots of them. That would make a very


viable, or what is not clear is whether there is a competitive


market enough to allow them to sell their power 24 hours ahead. So you


are worried that smaller companies will not go ahead?. We are wide the


suppliers will find elegist to from other sources and put a discount on


the electricity from our sources. - - electricity. George Osborne is


saying that he is trying to keep prices down, otherwise it looks


like prizes will go up for ever. That is the concern and that is the


argument that people say we should invest more in gas in the short


term. There are many flaws with that, the most fundamental one is


that climate change is real and is happening and if we keep investing


in fossil fuels we will have a major problem. We will have to get


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