Tide power projects offer Scots a green energy dream

FOR those despairing over longer-term prospects for Scotland's economy, the Scottish Government's go-ahead yesterday for wave and tidal energy projects will come as a desperately-needed tonic.

Wind and tidal energy companies have been granted leasing rights to install equipment in the seas off the north of Scotland with the potential to power 750,000 homes. As important is the broader macro-economic benefit of what could prove a new energy Klondike. It could give Scotland a pivotal role in the development of the multi billion pound renewables industry.

The green energy installations would have four times the output of Dounreay nuclear station at its peak and could power about a third of homes in Scotland by 2020. And for the First Minister all this offers the prospect of a non-nuclear, energy-independent Scotland and a colossal ongoing economic boost free of the vagaries of the oil price.

At least four of the ten schemes envisaged will be built using devices designed and built by Scottish companies Pelamis Wave Power and Aquamarine Power, both based in Edinburgh. Others are likely to use devices built in Scotland so they can easily be transported to the rough seas between Caithness and Orkney.

So much for the positives. But how easy will it prove to bring these prospects to fruition, and what will be the likely cost?

Huge challenges lie in store. Installing up to 1,000 machines in the fierce waters off the north of Scotland, and then transporting the electricity to towns and cities will require complex developments in infrastructure and billions of pounds of investment.

Even if 1.2 gigawatts of electricity was generated from the seas between Orkney and Caithness, there is currently no grid to transport it to the mainland. And once it got to the mainland the existing electricity grid is so full that energy generators currently have to wait in a queue for up to a decade to get permission to connect. This in turn will involve putting in place the necessary grid infrastructure and developing the expertise needed for the fledgling industry to be a success.

The investment needed for the ten projects is reckoned at 4 billion. This will have to be funded almost entirely by the lease-winning companies. They include utility giants such as Scottish & Southern Energy and E.on.

However, money is not exactly pouring out from a stricken banking system, while equity investors will demand assurance on returns.

And there will certainly be a cost to the consumer. The government's Renewables Obligation scheme, which provides incentives for renewables development over new conventional power, currently adds about 12 a year to consumer electricity bills.

The additional cost will be massive and will need to be offset by government subvention. But the government's finances are in an appalling state. The vision unveiled yesterday is to be applauded. But the stepping stones to its realisation are far from being in place.