Onshore Wind Energy

– in the Scottish Parliament on 23rd June 2015.

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Photo of Tricia Marwick Tricia Marwick None

The next item of business is a statement by Fergus Ewing on the future of onshore wind as part of Scotland’s balanced energy mix. The minister will take questions at the end of his statement; therefore, there should be no interventions or interruptions. I will allow a few moments for the minister to get settled. In the meantime, members who wish to ask questions of the minister should press their request-to-speak buttons now. Mr Ewing—you have about 10 minutes.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Thank you, Presiding Officer. I am grateful for your assistance and that of your office in scheduling this statement at short notice.

My statement concerns the proposal of the United Kingdom Conservative Government to halt new subsidies for onshore wind developments under the renewables obligation. Although the abrupt and early curtailment of the renewables obligation will have serious implications for people right across the United Kingdom, the economic and supply-chain impacts are concentrated heavily in Scotland. Around 70 per cent of all onshore wind projects that are in planning in the United Kingdom—the projects that are at risk—are located in Scotland.

Last Thursday, Amber Rudd, the Secretary of State for Energy and Climate Change, lodged a written parliamentary statement in the House of Commons proposing to end new subsidies for onshore wind, specifically in relation to the renewables obligation. Ms Rudd confirmed that in her oral statement at Westminster yesterday.

Primary legislation will be introduced to close the RO from 1 April next year—a year earlier than the industry and community developers had been led to expect. The future of other support schemes for onshore wind including contracts for difference and feed-in tariffs—the latter apply to smaller schemes—is unclear. However, the energy secretary has asserted that the UK has enough onshore wind to meet the Government’s renewable energy commitments.

I appreciate that the Conservatives made a manifesto pledge to end new subsidies for onshore wind farms, but that gave no notice to investors and developers that existing subsidies would be cut short. Developers have invested very substantial sums on the understanding that the RO is an existing scheme and not a new subsidy, and on the basis of a clearly stated UK Government policy to ensure a smooth transition from the RO to contracts for difference.

The Scottish Government’s view is that the planned transition policy should be maintained, consistent with the aim of moving onshore wind to a position of grid parity—thereby ending the requirement for subsidy—by around the end of the current decade. Any other course will give rise to harmful uncertainty, undermine the UK’s reputation with investors and risk wider consequences for investment far beyond the renewables sector.

Given that argument, coupled with the fact that onshore wind is already the lowest-cost large-scale option—and hence should, based on any rational analysis, be the last to be scrapped—what is proposed must surely expose the Scottish and UK taxpayer to serious risk of judicial review at the instance of companies or, indeed, communities that are impacted.

There can be no doubt that the move to close the RO prematurely will harm investment and jobs, damage severely the prospects of community energy schemes and, ultimately, risk increasing the consumer cost of meeting renewable energy targets. A large number of projects face being guillotined and losing sunk investment, as a consequence.

With the Office of Gas and Electricity Markets predicting derated capacity margins falling to as low as 2 per cent this winter, to scupper any planned generation capacity is surely short-sighted. The key impacts will fall into four categories: consumers, communities, companies and our renewable energy goals. Consumers will pay the price in their energy bills. Onshore wind is the cheapest large-scale source of renewable electricity—a fact that was admitted by Amber Rudd in her Radio 4 interview last week. Replacing onshore wind technology with more expensive technologies could cost consumers £2 billion to £3 billion more. That is the clear warning from Keith Anderson of Scottish Power.

In addition to the impact on individuals and households, many communities will suffer. Communities that are planning to develop their own local schemes and those that are in line to gain from community benefit payments will lose from the early closure of the RO. In the past 12 months, communities across Scotland have received nearly £9 million in community benefit payments.

Further community income streams could be lost. For example, Renewable Energy Systems estimates that up to £46 million of community benefit could be lost, in addition to the revenue from local construction and business rates, and Falck Renewables Wind Ltd has three projects that are at risk from early closure of the RO. Those are only two of the many commercial companies that have made clear the commercial damage that the decision will cause. If those projects are not completed, £10.4 million will be lost to local communities and 11 communities will lose out on the opportunity to invest in co-operative investment schemes.

The third impact will hit companies that are investing in Scotland. According to Scottish Renewables, up to £3 billion-worth of onshore wind projects in Scotland and more than 5,000 jobs are at risk. Let me repeat that: up to £3 billion-worth of onshore wind projects in Scotland and more than 5,000 jobs are at risk. [Interruption.]

Photo of Fergus Ewing Fergus Ewing Scottish National Party

This is not a matter for jocularity, despite the Conservatives’ laughter.

Photo of Tricia Marwick Tricia Marwick None

Just continue with the statement, minister.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

The impacts reverberate across the wider supply chain, including to ports and harbours, transmission and distribution, consultancy, universities and the civil engineering sector, to name but a few areas. The Confederation of British Industry has warned that the proposal

“sends a worrying signal about the stability of the UK’s energy policy framework ... and could damage our reputation as a good place to invest in energy infrastructure.”

Above all else, investors value certainty, but sudden changes undermine trust and deter investment.

RO closure raises serious questions about the deliverability of the UK’s 2020 renewable energy target. The target is to meet 15 per cent of total energy needs from renewable sources by 2020, which is well below the European Union’s overall aim of 20 per cent. The latest outturn figures for 2013-14 show that the UK achieved just 5.4 per cent, which is barely a third of the target to be met. Last week, the European Commission published a progress report that identified the UK among a group of countries that need to reflect on whether their

“policies and tools are sufficient and effective in meeting their renewable energy objectives”.

As Secretary of State for Energy and Climate Change and the person who will represent the UK in the crucial United Nations climate change talks in Paris in December, Amber Rudd must not ignore the major contribution that onshore wind can make to compensate for slow progress in other areas, such as heat and transport. However, her first act in the new Government was to cut green energy provisions and to set a terrible example to the rest of the world.

The UK Government is minded to offer grace periods to projects that possess planning consent, a grid connection agreement and evidence of land rights as of the date of Ms Rudd’s statement to Parliament—namely, 18 June. I have put it to Amber Rudd that affording reasonable protection to developers would suggest that grace periods should offer as much flexibility as possible and apply to projects in all stages of planning. That is not my preferred course, but it would at least limit the damage that will be caused.

Speaking on the BBC’s “Sunday Politics” show, the Secretary of State for Scotland, David Mundell MP, indicated that the grace period will apply when

“there is any prospect of a grid connection being delivered.”

We welcome that change in the UK Government’s position and will look for that to be extended further.

After several years of uncertainty for the industry while electricity market reform was being devised, there was a fleeting period of relative stability, but once again uncertainty shrouds the entire sector. Our concern is not limited to early closure of the RO; the industry has been clear that longer-term targets and commitments are fundamental in order to maintain investment. Therefore, it is crucial that the UK Government provide early information on the future of contracts for difference, including the date of the next allocation round and the level of budget that is to be assigned.

In conclusion, I call on the UK Government to provide the required clarity on the long-term policy for renewables and so to limit the damage to investment in Scotland. Onshore wind is the least expensive source of renewable electricity; to ignore the massive resource that is available from Scotland and to squander the huge economic benefits for consumers, communities and companies is utter folly.

Photo of Tricia Marwick Tricia Marwick None

The minister will now take questions on the issues raised in his statement. We must finish at 2.50—I would appreciate members’ co-operation in that regard.

Photo of Lewis Macdonald Lewis Macdonald Labour

I thank the minister for the advance copy of his statement.

Last week’s announcement by the Conservative Government at Westminster is clearly bad for jobs, investment and the environment and will end up costing consumers more. We deplore the bad decision that the UK Government has made. We want to hear what the Scottish Government intends to do to address the impacts of the early ending of support for onshore wind across the UK.

Given the number of jobs at risk that Scottish Renewables has identified, can the minister tell us what steps the Scottish Government will take to strengthen the skills base in the sector to ensure that as many jobs and skills as possible are protected for the future?

The Conservative Government appears to be totally confused about its own policy on a grace period for planned projects. Will the minister tell us what discussions his officials have had so far with the Department for Energy and Climate Change on the implementation of a grace period, and what illumination he has had from those discussions?

Bad policy from another Government should not affect progress towards the renewable energy targets that have been set in Scotland, with broad cross-party support. What steps will the Scottish Government take to bring forward the deployment of solar photovoltaic and other forms of low-carbon electricity generation to fill the gap left by the UK Government’s misguided approach to onshore wind?

Finally, will the minister examine the impact of the proposals, and the available alternatives, on consumers? Will he report to Parliament on that as soon as possible in the autumn?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Yes, I will certainly update Parliament in the autumn.

Lewis Macdonald is right to say that the jobs and skills are essential. Having been given this ministerial portfolio, my very first engagement was in the kingdom of Fife to open a course for young people on renewable energy skills. Such courses have been replicated in Dumfries, Ayr, Inverness and elsewhere throughout the country because we expected a continued and consistent policy of support for the industry from the UK. In 2013, when the UK Government reviewed the ROCs, it said that the system would continue until 2017—then it abruptly lifted the commercial carpet from under investors’ feet.

As I have stated, I have had discussions with Amber Rudd on the terms of the grace period, which I argued we should interpret broadly. I was pleased that David Mundell, on television, clearly said that projects with a prospect of a grid connection should qualify. That is important because in parts of the Highlands and in many other parts of Scotland, grid connections are not currently available. That needs to be recognised.

As far as other forms of energy are concerned, we continue to support solar, biomass, hydro—in which we have substantial capacity—anaerobic digestion, the tidal sector and, of course, wave energy Scotland. It is reasonable to say that we have been fairly consistent in supporting renewable energy across the board. That will continue.

Lewis Macdonald asks what we will do to fill the gap and address the damage caused by the UK Government’s decision, but I would far prefer to try to persuade the UK Government to ameliorate the announcement that it made so that there is at least damage mitigation. I will be meeting Amber Rudd tomorrow, when I will argue that point very strongly. I believe that the UK Government simply does not understand the consequences of what it has done.

Photo of Murdo Fraser Murdo Fraser Conservative

I thank the minister for advance sight of his statement.

Communities across Scotland have been delighted by a UK Conservative Government standing up for their interests, in contrast to a central belt Scottish National Party Administration in Edinburgh, which has done nothing to assist them over the past eight years.

The minister makes extravagant claims about the damage to the economy and job losses as a result of the UK Government’s move. Is that not exactly the scaremongering that we heard from the minister and his back-bench colleagues when the previous Government reduced the subsidies for solar PV installations? At the time, we heard dire warnings of job losses and business closures, but the solar industry is stronger today than it ever has been. The minister has been caught crying wolf once before. Why should we believe him this time?

Will the minister confirm whether the Fergus Ewing who is delivering the statement to us is the same Fergus Ewing who, in 2007, railed against the then Scottish Executive and its energy minister for the overdevelopment of onshore wind, saying in the Strathspey and Badenoch Herald:

The SNP believes that many other forms of renewable energy are the future—not unconstrained wind farms”?

Photo of Murdo Fraser Murdo Fraser Conservative

Will communities across Scotland not be right to draw a contrast between the Conservative Party, which, in opposition promises to act on the overdevelopment of onshore wind and in government delivers on its promises, and an SNP, which in opposition promises to do one thing but in government does exactly the opposite?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I have never argued in favour of the unconstrained development of onshore wind. [Interruption.]

Photo of Fergus Ewing Fergus Ewing Scottish National Party

We did not get many facts from Mr Fraser, so perhaps I should introduce one or two. There have been 68 section 36 onshore wind applications, of which 65 per cent have been consented, 22 per cent have been rejected and 13 per cent have been withdrawn.

We have considered each application, as we are required to do as ministers in the Scottish Government, strictly on their merits. In addition, we have addressed the previous policy’s shortcomings, to which I have alluded previously, by increasing community benefit.

When Allan Wilson was the minister for energy, I suggested to him that we should increase the community benefit, so that communities would gain. Do members know what he said? He said that if we did that, we would risk all the development going to Wales. We have increased the community benefit to £5,000 a megawatt a year, and £10,000 a megawatt for community schemes. Above all, communities should have an ownership stake. We have also tightened up designations in relation to issues in the cumulative impact guidance and the designation of wild land.

As I say, I was never in favour of unconstrained development, so I am grateful for the opportunity to clarify that—[Interruption.]

Photo of Fergus Ewing Fergus Ewing Scottish National Party

—to the satisfaction of every reasonable person in the chamber.

The rest of Mr Fraser’s remarks were of a somewhat political nature. I say gently to the Conservatives that the stance of total opposition to wind power that their front-bench members appear to take does not, with all respect, appear to be one that is followed in practice by some Conservative members. Indeed, there are at least three camps in the Scottish Tories: there are those who support onshore wind; there are those who are against it; and then there are some who have a wind farm of their own.

Photo of Tricia Marwick Tricia Marwick None

I remind members that I need brief questions and answers.

Photo of Rob Gibson Rob Gibson Scottish National Party

I represent areas in the north where the human communities are the most endangered species. They fully support onshore wind. They know that Scotland’s renewable electricity displaced 11.9 megatonnes of CO2 equivalent in 2013. Will the minister offer any further information on the impact of the decision to end onshore wind farm subsidies on Scotland’s ability to meet its climate change targets, which are underpinned by our renewables targets?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

As I have said, the decision will make it challenging, for obvious reasons, to meet the target of delivering 100 per cent green energy by 2020. That is particularly disappointing as we effectively met our interim target of 50 per cent in 2014, a year ahead of schedule. I emphasise our support for a broad range of renewable energy generation sources, including hydro, which was at a record high level of up to 26 per cent of the energy mix.

The mystery is how the UK Government can square its perverse and foolish decision, which has extremely damaging consequences, with its manifesto commitment to achieve climate change targets. How on earth can it square that circle? We do not believe that to be possible.

Photo of Sarah Boyack Sarah Boyack Labour

Renewables are very important in meeting our climate change targets, and they are a key driver of green jobs in Scotland. Given that, and given the importance of the disinvestment to the whole country and the fact that companies that have been investing in good faith now face huge uncertainty regarding future investment, what assistance can the Scottish Government offer the industry? What practical steps can the minister take to secure those green jobs and green electricity?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Members on the Scottish National Party benches are happy to work with the Labour Party on this issue, both here and at Westminster, to see what can be done to ameliorate an appallingly bad decision. Indeed, it is an irrational decision, and the one thing that ministers should not do is make irrational decisions, because the Wednesbury test says that if they do so, they may well face judicial review.

Photo of Jackson Carlaw Jackson Carlaw Conservative

Why is the decision irrational?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

The decision is irrational because the UK Government has cut the subsidies for the least expensive method of generating renewable electricity. That is irrational.

What can we do to help companies? In the short term I will repeat the call to improve the grace-period provision. The second point—which perhaps is the more important—is this: unless companies in this area of business know whether there will be any provision in the contracts for difference for onshore wind, there is simply no route to market. Companies will have spent millions of pounds on the scheme and there is no route to market. The UK Government has not said when it will end the confusion that its announcement has created by explaining what its CFD plans will be. However, in direct response to Sarah Boyack’s question, I say that the best thing that all of us can do is demand that the UK climate change and energy secretary end that confusion by announcing what provision she will make in contracts for difference for onshore wind. Otherwise, a great many companies—many of which I addressed this morning at the conference of onshore wind developers—may simply shut up shop and take their investments to other countries in Europe.

Photo of Tricia Marwick Tricia Marwick None

Eight members wish to ask questions and there is less than eight minutes left of the statement period.

Photo of Liam McArthur Liam McArthur Liberal Democrat

I thank the minister for early sight of his statement and agree whole-heartedly that the decision is bad for consumers, communities and companies, including many in my constituency. Does he agree that the lack of prior consultation and, even now, the lack of clarity on the detail of what the decision will mean in terms of grace periods and so on, has damaged and is damaging confidence not only in offshore wind, but in the wider sector, including marine renewables and the wider supply chain? From his experience, will he care to contrast the progressive approach and commitment that was shown by my colleague, the former energy secretary Ed Davey, with the rather reckless and short-sighted attitude of the current Conservative Government?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I have always said that Ed Davey and I worked together, for example on delivering connections to the islands. Liam McArthur is absolutely right: the decision that the UK Government announced will make it more difficult to raise the investment that is required in all areas for renewables, because of the simple fact that when bankers and commercial companies see a Government—the UK Government in this case—acting irrationally and curtailing incentives a year earlier than it promised to, those investors will wonder what is coming next.

Although the previous UK Government, with Ed Davey as minister, did commit to a remote islands CFD, obtained state-aid clearance and announced the CFD in July—a timetable to which Alan Sykes and others are committed at the Viking wind farm, for example, and which is also important in Orkney and the Western Isles—it now looks as though delivery of connections to the islands will, by virtue of this decision’s impacts, be made much more difficult.

The smiles are going off the Conservatives’ faces now: perhaps the penny is beginning to drop about what they have done.

Photo of Dave Thompson Dave Thompson Scottish National Party

Can the minister give an update on how the recent changes to onshore wind farm subsidies will affect the consented Glen Ullinish wind farm development in Skye, in my constituency—a development that has massive public support in the whole community and which will bring great benefits to Skye? Does he have any concerns about support for pumped storage?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I have concerns about the progress of pumped storage, because the last UK Government failed to engage with us in advancing it. We have two existing facilities, but we also have one with consent in the Great Glen and another at Cruachan that have between them about 1.2GW. We believe that pumped storage should play a part—and, of course, it counteracts the stochastic nature of wind energy.

Regarding the first question that Dave Thompson asked, I have been contacted by the director of Kilmac, which is progressing the Glen Ullinish scheme. My information is that a number of local crofters were due to benefit from the lease. For the sake of transparency, I should also say that the Scottish Government might also benefit because of our interest in the land. That is one of many schemes that Mr Thompson will be aware of in the west Highlands, Argyll, Dumfries, Aberdeenshire and elsewhere.

There are many schemes in which communities have an interest but on which the guillotine has been brought down by what appears to me to be a perverse and irrational decision by the UK Government, which has been taken—if this is not an over-polite way of framing it—in the interest of placating its gentlemen from the shires. [Interruption.]

Photo of Fergus Ewing Fergus Ewing Scottish National Party

It was taken, in other words, for political reasons rather than reasons of good governance.

Photo of Tricia Marwick Tricia Marwick None

I ask members to ask one brief question.

Photo of Claudia Beamish Claudia Beamish Labour

Does the minister agree with me that many of the communities that will now be struggling are in rural isolation? Some of them have already been subject to open-cast-mining restoration challenges and are doing their best to develop sustainably. Can he outline what action the Scottish Government can take to support communities that find themselves left high and dry by an ill-thought-out Tory decision?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

We will continue to support communities that wish to gain from the resources in their parts of Scotland by helping them with investment from the renewable energy investment fund and from the local energy investment fund, which is designed to stimulate investment and to address the difficulty of finalising projects in time by investing the money and then offering communities a stake. We will also continue with the community and renewable energy scheme—CARES—which provides advice. We will continue with local energy Scotland, which has excellent people who spend their time visiting communities, listening to them and helping them to navigate issues including grid connections and planning permission, of which communities may have had zero experience. We will help communities in all those ways.

However, at the end of the day, I anticipate that if there is no policy support from the UK Government, a great many communities around Scotland will face the Tory guillotine that was announced this week.

Photo of Mike MacKenzie Mike MacKenzie Scottish National Party

The minister has suggested that early withdrawal of the renewables obligation for onshore wind will have knock-on effects on other sectors. Does he agree that the uncertainty is having serious negative consequences for other renewables technologies, including wave power and tidal power?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Yes I do. Not least is the obvious fact—at least to those of us who have spent hundreds of hours meeting the companies—that many of the companies that have onshore schemes that are being guillotined are also offshore wind developers. They have been planning to do the onshore projects prior to taking part in and delivering offshore projects. Now they may find themselves with little or nothing to do in the UK. Perhaps, like one company that I spoke to on Friday in Inverness at a meeting that was chaired by Inverness Chamber of Commerce, they may already be contemplating switching their investment to countries such as Sweden.

It is essential that the UK Government end the uncertainty by giving clarity on contracts for difference for wind projects. I fear the worst, if it fails to do that by the end of this Westminster parliamentary session. The virus of lack of confidence among investors is contagious, and it will move to other sectors, including offshore wind and other areas of renewable energy. How can companies rely on the UK Government’s promises that there will be incentives that will last for a certain period, when the UK Government comes along without notice or consultation and abruptly brings that programme to a halt? They cannot. That is how both investors and banks behave, as I thought the Conservatives understood.

Photo of Patrick Harvie Patrick Harvie Green

Is not it clear that if this decision—which the minister rightly describes as “irrational”—is successful in its goal of undermining the onshore wind industry, other sectors of the Scottish economy are going to have to work much harder if we are ever going to reach our climate change targets? Will the minister initiate a discussion with colleagues to discuss how much more can be done by the heat and transport sectors, for example, in order to restore our trajectory towards the climate change targets?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

We have ambitious targets on heat, including our goal of taking 40,000 houses into district heating. As Mr Harvie knows, we have a heat map and a plan in that regard, and my colleague, Derek Mackay, is taking forward issues with regard to work and transport. However, Mr Harvie is right to say that if we cannot achieve our targets as we expected we would, it will become more difficult to do so and we will need to focus more on other areas.

Photo of Alex Johnstone Alex Johnstone Conservative

Will the minister concede that, more than a year before the election, Michael Fallon made it clear that subsidies would be withdrawn in the event of a Conservative win?

Will he also concede—

Photo of Tricia Marwick Tricia Marwick None

One question, please. I call the minister.

Photo of Alex Johnstone Alex Johnstone Conservative

—that this party has campaigned repeatedly for a diverse energy mix—

Photo of Tricia Marwick Tricia Marwick None

Order. One question. I call the minister.

Photo of Alex Johnstone Alex Johnstone Conservative

Does the minister really put all his eggs in one basket—

Photo of Alex Johnstone Alex Johnstone Conservative

—and not expect us to say, “I told you so”?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I am glad that Alex Johnstone mentioned Michael Fallon, because Michael Fallon was responsible for the daddy of them all, in terms of subsidy. It was he who took forward the Hinkley Point project—

Members: Hear, hear.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

—which gets a subsidy not for 15 years, like onshore wind, but for 35 years. The total cost of that subsidy is £35 billion, plus £10 billion in loan guarantees, which makes it, according to Peter Atherton of Liberum Capital,

“The most expensive power station in the world”.

The total cumulo subsidy for one nuclear power station is equivalent to four times the amount of the aggregate subsidy for all renewables in the first decade of the RO’s operation.

Photo of Tricia Marwick Tricia Marwick None

That ends the minister’s statement. My apologies to Stewart Stevenson and Christian Allard, whom I was unable to call.