He who pays the piper calls the tune: but who is putting their money in the jukebox? Concern grows over who fits the bill for our green energy transition. Scotland is ramping up on multiple fronts to make the most of the opportunities of offshore renewable energy. Yet how many of us fully understand the mountain of money required to meet the commitments made to reach net zero?
The Scottish Fiscal Commission estimates that £1,136m a year — or 18 per cent of the annual budget — will be required in additional capital investment from the Scottish Government to reach its net-zero target over the period 2020 to 2050.
That is a mammoth number for a nation of 5.4 million. Just how much long-term benefit will accrue to the people of Scotland in terms of economic growth, sustainable businesses, and highly-skilled jobs remains to be seen.
There is a concern that it is the energy user – domestic or business – who will face inflation-busting bills for decades to come. Not the most appetising thought, and one which policymakers and politicians of all hues have not properly squared with voters.
Already the ScotWind leasing round is being used to pay for the shortfalls in public funding. John Swinney’s Scottish Government might well have a legitimate beef if Edinburgh does not get the Barnett Formula’s equivalent payout from the rise in employers National Insurance contributions.
The Scottish Government landed £699.2m from the first round of ScotWind leasing, plus a further £54m from the Innovation and Targeted Oil and Gas (INTOG) leasing round. In August 2024, the Scottish Government declared it would be using £200m of ScotWind proceeds to support resource funding levels in 2024-25.
In September 2024, Shona Robison, the Cabinet Secretary for Finance, signalled that ScotWind proceeds may be needed to balance the 2024-25 budget. The Autumn Budget Revision suggested an extra £224m of ScotWind proceeds would be used, bringing the total to £424m. Read more in our Legal Review 2024: Did the Budget give a green light to clean energy action?
Seeing sense, the Scottish Government reduced the planned use of ScotWind proceeds to fill current shortfalls. Over the next 12 months £326m will be used for capital spending with £10m for resources.
This leaves £219m to support capital or resource spending in the future. There is no planned use of ScotWind proceeds in 2026-27. Some of the money has already found its way into green projects that will sustain future jobs.
“In particular, the Scottish Government’s decisions to borrowing the maximum possible amount in 2025-26 combined with plans to use £326m of ScotWind proceeds means there is less scope to use these funding sources to boost capital spending in future years,” says the commission’s report.
However, complex issues over who will pay for the green energy bonanza are emerging, such as the proposal for zonal pricing, which could divide the UK into different pricing zones and see consumers face varying electricity costs.
In a joint letter, Scottish Renewables has urged the UK Government to introduce a Reformed National Market, a combination of measures to improve existing market arrangements.
Claire Mack, Chief Executive of Scottish Renewables, said: “Zonal pricing has become a dangerous distraction which risks derailing these vital new developments for energy security. Any theoretical benefits of zonal pricing have not been convincingly demonstrated and would take at least seven years to deliver.”
She said Scotland has become a key hub for investment in clean energy infrastructure and a future-proof electricity system.
Zonal pricing has become a dangerous distraction which risks derailing these vital new developments for energy security
“To maintain and accelerate this momentum, it is imperative that these critical projects are safeguarded against the increasingly complex challenges we face in the current economic landscape,” she says.
“The renewable energy industry stands ready to support positive reforms which will offer a double win for consumers and industry, such as modernising unfair transmission charges. These are reforms that require considerable focus from government to deliver but will improve rather than impair industry.
“We urge the UK Government to rule out zonal pricing and commit to workable reforms which ensure industry can deliver the high-value jobs, new supply chains and affordable energy, which are crucial for the future prosperity of our country.”
The letter was signed by BlueFloat Energy, Ocean Winds, ESB, Thistle Wind Partners, Red Rock Renewables, ScottishPower, SSE, Orsted, Inch Cape Offshore, Corio, and Vattenfall.
The big players need massive amounts of investment to deliver the green future, but there is a danger that the energy-users of the future will be those stuck with the electricity bills.
Read more about Claire Mack in A position of power: The Business interview with Claire Mack of Scottish Renewables.
