The current energy crisis reveals how UK Government misled people over renewables support during the debate over Scotttish independence in 2014.
During the Scottish independence debate in 2014 the impression was given by the UK Government that support for renewables under the renewables obligation would all but disappear, but the current debate in the energy crisis suggests that this was total nonsense.
The Government published a document in the name of the then Secretary of State for Energy and Climate Change, Ed Davey on the impacts of Scottish independence on consumer bills. The document, ‘Scotland Analysis: Energy‘ implied that Scottish consumers could expect a large increase in consumer bills to replace incentives for renewables that had been paid under the renewables obligation.
On page 53 of the Davey document it says:
‘2.26 Independence would result in the UK-wide approach for incentives in low carbon generation being revisited. Scottish low carbon projects are unlikely to be able to rely on the current levels of financial support provided by all UK energy bill payers that it currently enjoys as part of the UK.
2.27 In the absence of a UK-wide approach, the Scottish Government may decide to replicate UK schemes or set up a whole new approach. However, if the cost of providing support for renewable electricity generation was passed on to Scottish electricity consumers, this could have a considerable impact on Scottish consumer bills……’
But now it transpires that the impression that the Government was giving, ie that upon independence Westminster could just end the renewables obligation support system for Scottish renewable projects, was just plain bunkum.
Why? Well, at the moment the UK Government is struggling to negotiate with the renewables companies a deal whereby the renewable energy projects agree to be paid less than the sky-high prices paid for generation from gas fired power stations (all electricity generation gets the same marginal price under the current set-up). Instead the Government are, apparently, offering renewables companies a sweet deal whereby the renewables companies would get a very good fixed price for their generation for a rather longer period than was guaranteed under the renewables obligation. That’s because, as one commentator, Richard Hall says on twitter , ‘The fundamental difficulty that government faces is that it is in an incredibly weak negotiating position. Wholesale prices are so sky high that generators would have to be offered very attractive future terms to compensate them for the loss of revenue now’
The reason that the UK Government is an ‘incredibly weak negotiating position’ is twofold. First (and mainly), legally, if the UK Government tries simply to end the Renewables Obligation (for anyone) they would be open to lawsuits (based on both national retrospective action rules and international law) that it is unlikely to win. The renewable company operators would get awarded more or less full compensation by the courts.
So, of course, if it is illegal now it will have been illegal in 2014 to end the Renewables Obligation for Scottish renewable energy projects. The Government was talking rubbish at the time!
I tried to argue myself that the UK Government couldn’t simply end the Renewables Obligation support for Scottish Renewables projects. I even appeared before a Scottish Parliamentary Enquiry to say this, but was roundly rubbished. I was treated as if I was going along with nationalist wishful thinking whereas I was merely trying to put forward a balanced analytical judgement.
The second reason why the Government are in a very weak negotiating position with the renewables developers is that they have already eschewed he possibility of mandating ‘windfall taxes’ on excess profits by the electricity companies for renewable energy. In practice this could be complicated to levy, but it could be done relatively easily on the schemes owned by the big companies that own most of the renewable energy projects in the UK. Of course the UK Government really wants to protect the oil and gas companies from further windfall taxes!
It is a pity everyone has forgotten the nonsense that the UK Government came out with on renewables’ incentives at the time of the independence referendum. But I do not mind reminding people!
by David Toke
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