As we look forward to hosting COP26, the transition in our energy market is gathering pace with onshore and offshore wind becoming an increasingly attractive investment for large corporate players.
As the Scottish Greens approved their Bute House Agreement with the governing SNP it was not surprising to see sides being taken along increasingly hard drawn political lines, but one of the sidelines of that story, where the First Minister wrote to the prime minister to urge a reassessment on the development of the new Cambo oil field west of Shetland, illustrates the remarkable transition in the energy market in Scotland.
“Scotland’s oil,” – the bedrock of the economic case for independence in the 2014 referendum now appears to have a limited shelf life with onshore, and increasingly, offshore wind, supported by pioneering technologies such as battery storage solutions and green hydrogen, representing the future.
The renewables industry, which was rocked by the early closure of Renewable Obligation Certificates (ROCs) and exclusion from CfD auctions, is well and truly back.
Andy McFarlane, Head of Renewables at the Scottish legal firm Wright, Johnston & Mackenzie (WJM) believes the COP 26 conference taking place in Scotland later this year should give the industry some pause for reflection.
The immediate drivers on the market are apparent he says “The onshore projects we are seeing now have larger capacity, with taller turbines than we have had before. As the proven technology, it is seen as very reliable and a good investment.”
It now finds itself in competition with offshore wind. “While onshore was excluded from CfD auctions, offshore was driving prices down to a level which people would scarcely have believed even five years ago. As such onshore developers continue to look for every opportunity to make they projects leaner and maximise their assets”
The renewables team at WJM headed up by McFarlane, are considered to be one of the leading outfits in Scotland and their current workload reflects developers’ desires.
Their planning team, along with the rest of the industry, await publication of National Planning Framework 4 (NPF4) by the Scottish Government.
“It’s going to give developers an idea of what sort of challenges will exist in the future when it comes to the consent process – whether there will be any presumption in favour of development and if development will be allowed on and around Scotland’s designated wild land areas. The indications so far are that the national parks are going to continue to be protected”.
Many developers await its impact as they make plans for the repowering of existing wind farms. Many of them commenced operation in the 1990s and are ripe for re-planting shortly.
“It’s going to be interesting to see how that will be dealt with in the planning phase,” says McFarlane. “We assume we are going to see more sympathy towards taller turbines. That makes sense as there will be fewer of them but they will be generating more power. They will also be better laid out and more sympathetic to the landscape.”
His own team are now seeing co-location of battery storage factored into every proposed new project as well as a separate market for battery storage plants (they are now involved in their second corporate sale of such a scheme).
“Maximising use of the energy generated continues to be a hot topic with developments in hydrogen being closely monitored at both the development and retail ends of the market”
He believes that there has been a sea change in attitude towards the climate emergency among those corporates not traditionally in the renewables sector.
“I think that COP26 has been something of a wake-up call to them too. There is a clear change in mood and we are seeing that in the things they are doing.” Such corporates have for a while now been happy to own expertly managed renewables projects but we are now seeing large corporate clients who want to install renewable energy generation on their own premises.
“Obviously that has always been a good look for them, but more time is now being spent on doing something that will endure and stacks up financially,” says McFarlane.
“We are going to see big companies taking action that contributes to the battle against climate change but also helps their profile.”
The real question, according to McFarlane, is just what moves these enterprises will actually make to address the problems and how much focus they will put on this work.
He believes that we may see particular activity around carbon units with an international market developing in these.
“It’s something that the former Governor of the Bank of England, Mark Carney, is taking a lead on and it would be a surprise if he and others involved don’t see COP26 as the perfect platform for launching their future proposal in respect of same,” he concludes.