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We were fortunate enough to have some time with Scotland’s First Minister Alex Salmond where we discussed a broad range of topics from Scotland’s ambitious renewable energy targets and North Sea oil & gas to Scottish independence and Donald Trump.
In the interview with Oilprice.com, Alex discusses:
• How Scotland will achieve its ambitious renewable energy targets.
• The impact North Sea oil and gas revenues would have on an independent Scotland.
• How Scotland can become the green energy capital of Europe.
• Donald Trumps recent tantrum over offshore wind energy.
• The impact Independence would have on the Scottish economy.
• Why companies are continuing to invest in Scotland’s renewable energy sector.
• Why Scotland would establish an oil fund and how it would be used.
• Why the shale revolution will not affect investment in Scottish renewables.
• The recent partnership between Scotland and Abu Dhabi.
• How Scotland will achieve its ambitious renewable energy targets.
Alex Salmond is the First Minister of Scotland and head of the Scottish National Party. He is a champion of green energy and has a vision to transform Scotland into a renewable energy powerhouse whilst aggressively reducing the country’s carbon emissions.
Interview conduted by James Stafford of Oilprice.com
James Stafford: If Scotland manages to gain its independence it would receive a 90% geographical share of North Sea oil and gas fields based on a division under international maritime law, roughly 81% of current oil and gas receipts, worth between $9.67 - $19.34 billion annually. Is this income crucial to the SNP’s future economic policies?
Alex Salmond: Even without our offshore oil and gas reserves, Scotland currently has the third highest output per head in the UK, after London and the South-East. And when oil and gas output is included, Scotland’s output per head is 15% above the UK average.
Energy is important to Scotland’s economy. We have world class companies operating in the global oil and gas supply chain while we will benefit from Scotland’s second energy windfall in renewable energy where we have around a quarter of Europe’s potential offshore wind and tidal energy and some 10% of its wave energy resource.
James Stafford: What plans do you have for investing this revenue back into Scotland?
Alex Salmond: In contrast to other oil rich nations, successive UK Governments have failed to take the action necessary to ensure that future generations benefit from the economic windfall from Scottish oil and gas. An independent Scotland would use its oil and gas reserves far more responsibly. Specifically, the Scottish Government would establish an oil fund, once fiscal conditions allow. The development of an oil fund for Scotland would promote economic responsibility and stability. Revenues could be invested, rather than spent on current expenditure, during good financial times, and could counteract the effects of economic downturns.
James Stafford: You have stated that there is no chance of any new nuclear power plants being built in Scotland. Does this anti-nuclear stance go as far as shutting down current nuclear power plants? I saw that nuclear power currently provides up to 33% of Scotland’s electricity generation needs - how soon would you hope to close the plants down, and where would you find the extra power?
Alex Salmond: We have always been clear that as long as the safety case can be made we are supportive of the possible life extension of existing nuclear power stations but that we are opposed to the development of new nuclear build in Scotland. New build nuclear power is vastly expensive and prone to delay - and shut downs in recent times have meant they have not been meeting 40 per cent of Scotland's energy needs. We do not support subsidies for new nuclear.
Nuclear power will also leave a legacy of waste and vast decommissioning costs for the next generation of Scots - we will not add to the issues of decommissioning by building new nuclear plants in Scotland. The legacy we must leave future generations is a world where invention and innovation is used to harness the earth’s natural resources sustainably. And it is in wind, wave and tidal energy, and in carbon capture and storage, where Scotland has strong competitive advantages, both in terms of capacity and expertise. This is where it makes economic sense to concentrate our efforts, and that is what we are doing.
James Stafford: Scotland is famously doing very well in achieving its renewable energy goals with provisional generation statistics confirming that 2011 was a record year for renewable generation in Scotland, up 28.1 % from the previous record in 2009. Your well publicized target is 100% renewable electricity by 2020. How are you coming along with that? Is this figure really achievable?
Alex Salmond: Our Electricity Generation Policy Statement confirms that our 100% renewable electricity is technically feasible although we are not complacent and accept that it will be challenging. Delivery of the target will require around 16GW of capacity. We currently have almost 5GW operational. With a further 3.3 GW consented or operational and over 20GW in planning or scoping we are confident that the target can be delivered.
James Stafford: If Scotland manages to achieve 100% renewable electricity by 2020, will it continue to invest in renewable energy technology and look to become an energy exporter?
Alex Salmond: Scotland is fortunate in having a massive green energy potential. We have the best capacity for CCS in the European Union as well as a buoyant oil and gas regime, with record levels of capital investment. Our wind and seas hold some of the most concentrated potential not only across the UK and Europe, but in the world – our practical offshore renewables resource has been estimated at 206 GW. By harnessing around a third of this resource, installed offshore renewables capacity could reach 68 GW by 2050 – enough to meet Scotland’s own domestic electricity needs seven times. Around 20 per cent of the electricity generated in Scotland is already exported to the rest of the UK and Scotland can go far beyond this to become the green energy capital of Europe.
James Stafford: Offshore wind farms are an important part of Scotland’s renewable energy future, but what do you say about the concerns of small fishing villages, such as those of East Neuk, who fear that their livelihoods will be threatened?
Alex Salmond: “Communities across the country stand to benefit from the development of Scotland’s huge offshore clean energy resources and clearly the fishing industry is right at the heart of many coastal communities, so we aim to strike the right balance between our renewables ambitions and other competing uses for the seas. That’s why Marine Scotland is actively engaged with the industry, for example, through a trilateral policy group, bringing together government, renewables and fisheries, and by ensuring fishermen are represented on two other renewable energy steering groups and where possible engaging them in an operational capacity such as undertaking fisheries liaison duties.. It is also undertaking mapping and research into areas used by the fishing industry, including sensitive fisheries. At an individual project level, Marine Scotland is required by statute to fully consult relevant stakeholders, including the fishing industry, and the public, before any offshore renewable project can be consented or rejected.”
James Stafford: Donald Trump has made a public complaint and set up a campaign to prevent offshore wind farms along the coast of Scotland. I imagine he is more worried about the view from his luxury golf resort than the plight of the local communities, but the local communities do still back him. Do you believe his campaign could receive enough support to prove troublesome, or will you always be able to laugh it off as the tantrum of man who is used to getting his own way?
Alex Salmond: In terms of the local community, I’d simply point out that so far there have been some 460 representations from members of the public supporting the Offshore Wind Demonstrator project, compared to 137 against. Of course, as we have made clear throughout, each project is determined on it merits taking into account views of stakeholders, consultees and members of the public. In general terms, however, several recent surveys have shown strong public support for clean energy, including wind power.
Some 71 per cent of people in Scotland backed wind power as part of our energy mix in a Scottish Renewables/YouGov poll published around the time Mr Trump gave his evidence to the Scottish Parliament Committee. The development of the low carbon economy, driven by a renewables revolution that reindustrialises communities across Scotland, was a clear commitment in the last election which we won convincingly. So, I’m confident that our support for Scotland’s world-leading renewables industry is well welcomed across Scotland. Communities are already benefiting from thousands of jobs and tens of millions of pounds of investment. Over last year, around £750 million of new renewable electricity projects began generating in Scotland, while there is a potential future pipeline of renewable electricity projects with a capital value of around £46 billion.
James Stafford: Angus Armstrong, director of macroeconomic research at NIESR, said that “even with a favourable settlement on future oil revenues, its (Scotland’s) fiscal balances are likely to be volatile with large deficits in some years as a result of its dependence on oil revenues.” He suggested that an independent Scotland's debt would be about 70% of the country's gross domestic product. Does this fear have any founding? How do you intend to protect Scotland from an over reliance on oil revenues?
Alex Salmond: As a result of the financial crisis and the management of the public finances by successive UK Governments, the UK has a considerable national debt. Debt that Scotland will have to repay independent or not. If UK debt was allocated on a per capita basis, then for 2010-11 - the last year in which figures are fully available - Scotland’s net debt would be 51% of GDP compared to 60% of GDP for the UK.
Scotland has a broad tax base and is not overly reliant on North Sea revenues. For example even when North Sea revenues fell by 50% in 2009-10, during the global financial crises, Scotland’s fiscal position remained stronger than the UK’s.
James Stafford: The partnership deal with Masdar, the Abu Dhabi clean energy company, could be hugely lucrative and beneficial for Scotland. We know that the agreement covers; offshore and onshore wind, carbon capture and storage, investment in the low carbon economy, and renewable energy research and development, but could you give us a more detailed account as to what Scotland will benefit from, and what Abu Dhabi will benefit from?
Alex Salmond: Globally, we need to make the transition from an economy which largely generates energy from fossil fuels to one based on renewable energy. The issues that Scotland and Abu Dhabi will work on together are among the key challenges that confront the world as it moves to a low carbon future: how to develop commercial onshore and offshore wind projects of scale; how to reduce the cost of offshore wind; the implementation of projects for carbon capture and storage; smart grids; power electronics; bio-energy; building technologies and solar power. Both Abu Dhabi and Scotland know that countries which develop the low carbon technologies to power the planet in the future will gain significant economic benefits, whether it is from the sale of technology, the manufacture of turbines and machinery, or the export of clean electricity itself. The Framework for Action between Scottish Enterprise, Masdar, the 12 Scottish universities of the Energy Technology Partnership and the Masdar Institute for Science and Technology brings together a huge amount of accumulated expertise. Masdar is a very attractive partner because its basic premise is to invest in and develop low carbon technologies and Scotland has massive investment opportunities, for example in offshore wind. Masdar is making significant investments in markets outside the UAE and is ambitious to invest further in the UK. Masdar, which has a number of investment funds which take shares in hi-tech companies, will consider potential investment opportunities in the Clean Technology sector in Scotland. Both Abu Dhabi and Scotland are committed to using our existing expertise in the oil and gas industry to help us in the transition to a low-carbon economy, for example Scotland’s North Sea experience can help cut the costs of offshore wind. Our partnership is also a wider statement of intent that it makes about the role that Scotland and Abu Dhabi intend to play in helping the world to meet its future energy needs.
James Stafford: If Scotland achieves its independence, in what areas are you looking to exert that independence? I have read that you will still keep the pound sterling as your currency, but that means that monetary policies will be set/heavily influenced by the Bank of England.
Alex Salmond: Scottish Ministers have outlined our intention to stay in a sterling zone with the rest of the UK, which would be in the best interests of the Scottish and UK economies.
"The Bank of England has had operational independence from the UK Government since 1997 – a position we would support post independence.
The aim of monetary policy is to provide the overall stable macroeconomic framework that is conducive to growth. What independence would provide is access to the key levers – particularly fiscal policy – which would give the Scottish Government the ability to tailor a full range of policies to meet the specific needs of the Scottish economy. These levers could include the use of taxation and regulation to boost innovation, skills and attract investment.
James Stafford: Do you think that Scottish Independence will be contested in Europe? It could prove a troublesome issue for countries, for example, the regions of Catalonia or the Basque Country could decide to separate themselves and declare their independence from Spain.
Alex Salmond: An independent Scotland would inherit membership of the EU as a successor state, in the same way as the rest of the UK, and Scotland brings a great deal to the EU table. We are a leader in the field of climate change, we are natural-resource rich, we have 10% of Europe’s coastline and 20% of Europe’s seas and we enjoy vast renewables potential, including around a quarter of Europe's offshore wind and tidal energy resource, and as much as a tenth of Europe's wave power potential, and in the North Sea Western Europe's largest oil and natural gas reserves – crucial to the Commission’s objectives for energy security of supply.
Scotland’s constitutional position within the UK is very different from the Spanish context, but in any event Spain have already confirmed that they would have no objections to Scottish independence and membership of the EU. Spanish Foreign Minister José Manuel García-Margallo, is quoted in the Spanish newspaper Diario Vasco on 24th February 2012 saying that "If in the UK both parties agree that this is consistent with their constitutional order, written or unwritten, Spain would have nothing to say, just that this does not affect us. No one would object to a consented independence of Scotland.
James Stafford: Is Scottish independence crucial to your renewable energy plans for the future?
Alex Salmond: The Scottish Government has a very strong vision of the opportunities that independence would bring to Scotland in the energy sector. We are aiming for a transformation – a re-industrialisation along the lines of a green economy. The Scottish Government strongly believes that the increasingly integrated EU energy market means it is in the shared interests of Scotland and the rest of the UK to continue with the GB-wide energy and electricity markets after Scottish independence. This would be similar in principle to the many international sharing arrangements which already exist, for example the All-Islands Approach agreed by UK, Scottish and Irish governments. Scotland can continue to play a key role in ensuring security of supply for the UK. The costs of low carbon electricity generation, be it in Scotland, England, Wales or Northern Ireland, to allow us collectively to meet international obligations to reduce polluting emissions, would continue to be spread equally across the consumer base.
James Stafford: Subsidies for renewable energy programs are losing popularity in many countries as expensive startup costs and the shale gas revolution make these technologies economically unfeasible. How are you attracting investors to your various programs?
Alex Salmond: Scotland has a natural competitive advantage in the transition to the low carbon economy given our vast renewable energy resources and our history of technological innovation. We believe that our competitive advantage lies in being at the forefront of technological innovation: this is achievable for a small nation. We want to make Scotland the destination for international investment in low carbon, and for the development of the financial architecture for a global low carbon economy, by operating at the forefront of development of clean energy. You also have to provide investment certainty. In 2009 the Scottish Parliament unanimously passed The Climate Change (Scotland) Act 2009. This groundbreaking piece of legislation sets a world-leading target of at least a 42% cut in national greenhouse gas emissions by 2020 compared to 1990. As well as having all-party support, the Scottish legislation received support from across Scottish civil society such as business organisations, trade unions and environmental groups. The aim of the Act was to provide certainty for businesses and the public about Scotland’s low carbon future. We have backed up the legislation with a comprehensive delivery framework. So business, and investors know that Scotland is serious about leading the low carbon transition and International energy companies are making Scotland their base for research and development in offshore wind and marine energy.
Climate change campaigner and Nobel Laureate Al Gore praised Scotland’s commitment to renewables when he said: "Scotland has not only provided inspiring leadership, you are exploiting one of the greatest resources anywhere on the planet, with wind onshore and particularly offshore, all sorts of variety of windmills - and the new renewable technologies are especially important". So clearly, major international figures think we have the framework right in Scotland.
James Stafford: Given the SNP commitment to renewable energy independence would you be able to discuss the importance of wave & tidal power in the overall renewable matrix?
Alex Salmond: The Scottish Government sees wave and tidal as playing a central role in the energy mix given their ability to complement and balance other forms of renewable energy generation. In the short term our priority is to develop the industry through small arrays to meet as much as possible of the ambitious plans for over 1GW of wave and tidal in the Pentland Firth and Orkney waters by 2020.
We have also consented a 10 megawatt tidal power array in the Sound of Islay; this is the world’s largest consented wave or tidal stream project. We have launched the Saltire Prize, Scotland’s £10 million energy challenge to the world to push back the boundaries of marine energy innovation will accelerate the commercial development of wave and tidal technology.
James Stafford: Would Edinburgh join the EU? If so, what does that mean for its renewable energy targets?
Alex Salmond: Scotland is and will remain a member of the EU. We already have ambitious targets, above the EU target, so we will take those ambitions to the top table in Europe. Scotland has a target of delivering the equivalent of 100% of domestic electricity demand from renewables – far above the EU target of about 30% for the UK – we exceeded that last year.
James Stafford: Should you gain independence from the United Kingdom, do you believe North Sea oil will give Edinburgh enough cash to shield it from similar debt burdens plaguing the eurozone?
Alex Salmond: Scotland has had a lower fiscal deficit than the UK over the past five years as a whole. Scottish Ministers believe that with the additional economic levers that independence would provide, and the £1.5 trillion asset based provided by Scotland’s remaining oil and gas reserves, an independent Scotland would stand on a strong financial footing.
An independent Scotland would establish a credible fiscal framework to ensure Scotland’s public finances were put on a sustainable footing. In order to facilitate this process, the Scottish Government has recently established a Fiscal Commission Working Group (comprising of Professors Joseph Stiglitz; Andrew Hughes Hallett; Sir Jim Mirrlees; and Frances Ruane) to oversee the crucial work to assist in the design of a fiscal and macroeconomic framework for Scotland which entrenches financial responsibility.
James Stafford: A recent Citigroup research report estimated that to achieve your renewable energy goals you would need to invest between £6 billion to £7 billion a year. Where do you see this investment coming from? As green energy has not delivered good returns for investors in the past.
Alex Salmond: The Citigroup report was widely criticised by industry in Scotland and the proof is that investors are continuing to invest in Scotland. The UK Government estimates announcements more of renewables investment and jobs in 2011-12 in Scotland were £1.7 billion with 4411 jobs, with a potential £8bn and 3313 jobs in the pipeline – that’s more investment in the pipeline than the rest of the UK put together – significantly more. There have been a string of announcements by major domestic and international companies making significant investments in Scotland encouraged by our commitment to the low carbon revolution: Scottish and Southern Energy, Iberdrola Scottish Power, Gamesa, Mitsubishi, Samsung, Gaia Wind, Global Energy Group, Aquamarine Power. And we have seen substantial £7bn of investment in grid connections in Scotland being fasttracked by Ofgem in particular to strengthen the capacity to export green electricity to England – Scotland already exports around a fifth of our electricity generation. And of course we heard recent welcome news that the Green Investment Bank, with capital of £3bn, will have its HQ in Edinburgh.
James Stafford: Alex, thank you for taking the time to go through our questions.
Interview by. James Stafford of Oilprice.com
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James Stafford is the Editor of Oilprice.com