30/07/2012 Newsnight Scotland

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