This article by Graeme Blackett appeared in the Scotsman
The current energy supply mix in Scotland continues to be dominated by fossil fuels. This is financially and environmentally unsustainable in the longer term, because of increasing demand pushing up the prices of raw materials and the global drive to reduce carbon emissions.
But, far from being a problem, this presents a major economic opportunity for Scotland.
Renewable energy – wind, wave and tidal power – and other new energy technologies, like carbon capture and storage, represent the best economic development opportunity for Scotland in a generation. As Reform Scotland’s new Powering Scotland research paper concludes, that opportunity will be realised only if energy policy is fully devolved from Westminster to Holyrood. Energy policy is theoretically the responsibility of the Westminster Government, but the Scottish Government has an effective veto through planning powers. It makes sense to fully devolve energy policy to Holyrood so that the Scottish Government can formulate a policy that meets the country’s needs and is fully integrated with economic development policy.
Scotland’s potential competitive advantage is significant. Scotland accounts for just 1 per cent of the EU’s population but has 25 per cent of its wind and tidal power resources and 10 per cent of its wave power resources. The opportunity is based on more than natural resources; Scotland has an internationally competitive university research and development base, the engineering and construction skills base, offshore expertise from the oil and gas industry, innovative companies developing the next generation of technology (like Pelamis Wave Power and Aquamarine Power) and has already attracted inward investment from leading international energy and engineering companies like Gamesa and Mitsubishi.
Being part of the UK electricity grid also means that Scotland can manage peaks and troughs in demand and supply by importing and exporting electricity from and to the rest of the UK and, as a wider European grid is developed, to other countries.
Scotland has established a high international profile in the renewable energy sector. This can be attributed to the supportive policy environment first established by the Labour-Lib Dem administration when it set ambitious renewable energy targets, which the SNP Scottish Government has since increased. Initiatives such as the Saltire Prize, Scotland’s £10 million award for the commercial development of marine energy, have contributed to establishing Scotland as a centre for new energy technologies.
To see what can happen when energy and economic policies are directed towards realising a country’s competitive advantages, we need to look no further than Denmark which leads the world in wind turbine manufacture, employing 25,000.
The economic benefits of Scotland becoming a world leader in new energy generation technologies are substantial. Benefits include increased exports of electricity, technology and expertise, supporting large numbers of jobs in international markets that will be measured in trillions of pounds
The rapid growth in renewable energy over the last three or four years means that the sector is already having an economic impact, supporting around 7,000 jobs in the wind energy sector alone in Scotland. The Scottish Government’s target of 100 per cent of demand here being met from renewable sources by 2020 implies that half of the electricity generated in Scotland would be exported which, even using conservative assumptions on prices, would increase Scottish exports by £2 billion per annum.
The longer-term potential is even greater as new technologies such as wave and tidal power and carbon capture and storage are deployed and then exported. With the right policies and drive, Scotland could become the biggest exporter of low-carbon electricity and technology in Europe, creating tens of thousands of new jobs.
The energy sector can lead Scotland out of recession and drive the growth of the economy for a generation.
• Graeme Blackett is a Director of BiGGAR Economics and an author of Reform Scotland’s “Powering Scotland” energy policy paper, published yesterday.