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[ 28-09-2011 ]

Addressing the 2011 Scottish Chambers of Commerce (SCC) Annual Dinner, SCC Chairman Mike Salter has issued a warning that over-reliance on renewable energy could cost Scottish businesses dear unless urgent action is taken to broaden our energy generation and to manage demand.  Mr Salter has nearly 40 years of experience in the energy industry.

Mr Salter said:
“I think that everyone knows that petrol and Oil have gone up because the world price of the commodity has increased very significantly. But why has electricity gone up so much?  The answer of course is partly because the cost of fuel, (Coal and Gas), have also gone up.  But there is also an additional element and that is the Government’s Renewables Obligation whereby the consumer subsidises renewable generation, both on and offshore.
“Scotland is almost uniquely placed in Europe as a source of wind and tidal generated electricity, and it is rightly seen as a major opportunity for Scotland and Scottish business, particularly in the area of offshore wind generation capacity.  However the costs of these projects is going through the roof, a recently announced second round project in the Irish Sea speaks to an investment of £1.6bn for a windfarm of 389MW capacity- this is £4.1million/MW which is 25-35% more expensive than the next closest technology and 25% more expensive than the estimates of 18months ago.  According to Mott McDonald…the costs of generation from these windfarms is now approaching 19p/KWh.- Compare the current wholesale spot price of Gas of between 1.75-2p/KWh. 
“Mott McDonald in a report on the DECC website are projecting an electricity price of 25p/KWh as a result of these costs, with the other sources of generation being brought up to this base by the addition of the costs of Carbon Capture and Storage – which is in itself unknown at the moment - and the imposition of so-called Carbon Taxes.  The Scottish Government have committed to have the majority of generation coming from this very expensive source by 2020. All I say at this time is- have a care!  This is indeed a very significant opportunity for Scotland, but only if the cost base is right.  If as a consequence the rest of the economy is disadvantaged then perhaps such a total commitment is misguided. Other lower cost technologies are available!
“We must focus on reducing our consumption as quickly as we can, but also using lower cost options for the energy we use.  It is vitally important. As a fish processer in Peterhead recently told me- he uses about £500,000 of electricity per year, and has invested a lot in reducing his consumption and being efficient, but if his electricity bill doubles – he’s out of business!.”

Click here for a copy of Mike Salter's Speech.