Scrapping of massive wind farm is warning about over-reliance on renewables

Common sense points towards pursuing a balanced energy policy which includes nuclear, gas, hydro and other forms of storage

At Holyrood the other day, Fergus Ewing – who else, on the SNP benches? – threw John Swinney an awkward question. Did he accept that, to provide stability for the National Grid as dependence on renewables grows, “the only option remaining on the table is gas”?

Mr Ewing referenced Spain and Portugal where the rapid transition to renewables is, rightly or wrongly, being held accountable for nation-wide blackouts which will cost billions to put right and avoid a recurrence.

It was clearly not an issue which had exercised Mr Swinney’s intellect and he mumbled a mysterious reply: “There is a wider solution to the important issue which Mr Ewing puts to me, which has to be addressed to deliver security and safety for the population of Scotland”.

This retreat into a meaningless platitude might have appeared even less satisfactory a couple of days later. By then, the Danish multinational, Ørsted, had abandoned plans for a windfarm in the North Sea which was designated to supply energy to a million homes, when the wind is blowing.

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Lisa Nandy, now UK Culture Secretary, viewed models of wind turbines at the Orsted Visitor Centre in Grimsby in 2022 (Picture: Christopher Furlong) | Getty Images

Wake-up calls

Ørsted had taken its decision, as tends to be the way with multinationals, on hard-headed financial grounds. The Hornsea4 project no longer made economic sense because of soaring costs in the international supply chain and “increased execution risks”.

This is not the last project to be ditched and neither is it the first. Last month, the Australian multinational, Macquarie, pulled the plug on the only offshore windfarm licensed off the west coast of Ireland. Seventy million euros in community benefit which had been negotiated in Connemara disappeared with it.

These and other project cancellations can be dismissed as straws in the wind, albeit rather large ones. Or they can be taken as wake-up calls which confirm that issuing licences does not equate to delivery of projects, and that this is one more reason not to pursue a one-dimensional energy strategy.

There are plenty warning signs in the way the Scottish offshore wind industry is proceeding. Most major developers, including Scottish Power and SSE, have signed a letter which comes close to threatening an investment strike if they don’t get their own way on zonal pricing which, they say, would force them to sell power generated in Scotland more cheaply, thereby frightening off investors.

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Ruthless decisions

Since cheaper power is a trade-off on which Scottish support for renewables largely depends, this is a tricky one for the Scottish Government which has conspicuously failed to support zonal pricing. Whatever the outcome, which we should know soon, the mere threat demonstrates the fragility of an assumption that all these ScotWind projects will actually happen.

Just as with Hornsea4 and Connemara, these decisions will be taken ruthlessly by multinational operators with lots of options to choose from. There will be no sentiment involved and issues like zonal pricing and transmission charging will influence not only their decision-making but also the cost to government and consumers of incentivising them to stick with their UK projects.

The more dependent energy policy is on offshore wind and other renewables, the more vulnerable it will become to ransom demands. Once again, every element of common sense points towards keeping options open by pursuing a balanced energy policy which also includes key elements of baseload – nuclear and gas – as well as pushing forward on hydro and other forms of storage.

Back to front

Unfortunately, it is not possible to put Humpty back together again and approach our energy transition in a more rational fashion. Everything has been done back to front. Licenses were sold cheap before the barriers to project delivery were addressed. Targets were set with too little regard for practicalities. Battle lines were drawn between renewables and baseload generation when the two must be complementary. Now the risks are emerging of tripping over these contradictions.

Democracy is one of the casualties. I noticed that resistance is growing to a massive converter station at Fanellan, near Beauly. But what is the point? Much of the ScotWind programme is predicated on power converging on the site from north, west and east. It is inconceivable that it will not be pushed through because so much else depends on it.

Yet there was at least a decade to plan all this and get it right by giving a limited number of projects certainty and matching them to grid investment. Instead, we have vastly expensive infrastructure being embarked on without even the certainty of projects materialising. That’s before you get to the Dutch auction for subsidy called Contract for Difference which will involve ScotWind projects competing against one another. What a way to run an energy transition!

Swinney right about one thing

The main players have been a regulator, Ofgem, which has far too much power; two governments which, while all this was evolving, behaved as bitter competitors rather than essential partners in a shared venture; and the multinational companies which hold the fate of projects in their hands.

That is a mess which the incoming Labour government inherited and now has to work its way through. I have always thought they made additional rods for their own backs by setting targets which are not within their power to deliver on, as Ørsted just reminded them, as well as irrational negativity towards domestic oil and gas. There are now myriad reasons, globally and nationally, to reassess.

Reverting to Fergus Ewing’s question, one very straightforward line of reasoning needs to be admitted to by both Scottish and UK governments. We will need gas for a long time to come so it makes sense to produce in the North Sea rather than increase reliance on imports. Norway understands that. Why can’t we?

Meanwhile, when John Swinney finds out what “the wider solution to the important issue” is, he will doubtless let us know. At least he’s right about one thing. It is important.