“Scotland has the potential to become the Saudi Arabia of renewables,” has been the oft-repeated message from the Scottish Government.
Ministers have been adamant: Scotland is blessed to have so much wind coursing over its hills, so many waves pounding its shores and such strong tidal currents drawing between its islands.
But the “renewables bonanza”, predicted to bring 50,000 long-term jobs to Scotland and allow us to export electricity to the whole of Europe, never mind the rest of the UK, may not be quite as clear cut as has been forecast up until now.
Verso Economics, an economics consultancy, has conducted what it claims is the first comprehensive, in-depth analysis of the economics of the renewables revolution and the results are cautious, at best, and downright pessimistic at worst.
Researchers examined the amount of money being poured into renewable energy through grants, subsidies, tax breaks and rising bills for consumers as well as the number of people employed in the industry and future job projections.
The final report is published today and it warns that the economic benefits of renewable will fall far below official forecasts.
The report found that:
* For every job created in the renewable sector in Scotland, another 1.1 jobs are lost elsewhere in economy. The situation is even worse for the rest of the UK, where 3.7 jobs are lost for every job created in the renewables sector. This is because, the economists claimed, the money which is being poured into renewables is therefore then not available to stimulate other parts of the economy.
* Electricity consumers elsewhere in the UK subsidise the industry in Scotland by £330 million a year through increased bills. Scotland has by far the largest slice of the renewables industry while the money needed to pay for it is raised throughout the whole of the UK.
* The Renewables Obligation, which raises the price of electricity generated by renewable sources, costs Scottish consumers £100 million a year.
* There are only 1,100 people directly employed by the renewable sector in Scotland and the eventual total of permanent jobs are likely to be of a similar magnitude, significantly lower than Scottish Government predictions of 50,000 long-term jobs.
* The report acknowledges that 48,000 manufacturing and support jobs could be created over time but these will only be temporary and will disappear as soon as the renewables infrastructure is built.
Tom Miers, one of the authors of the report, said: “These findings really should come as no surprise. If you build up an industry on subsidies, almost by definition there will be no economic benefit. When you create something by subsidies, you destroy other investment elsewhere.”
And he added: “What happens in Scotland is that people portray the renewable energy sector as an economic opportunity. We are saying it is not an economic opportunity and it is misleading to say it is.
“It might be justified on other grounds – climate change and so on – but the economics don’t stack up.”
The report’s authors claimed that their findings were similar to investigations into renewable energy in Spain, Germany and elsewhere in the EU.
And their report concluded: “Policy to promote the renewable electricity sector in both Scotland and the UK is economically damaging. Government should not see this as an economic opportunity, therefore, but should focus debate instead on whether these costs, and the damage done to the environment, are worth the candle in terms of climate change mitigation.”
But Jenny Hogan, Scottish Renewables’ director of policy, said it was “meaningless” to look at the renewable sector in isolation. She said: “The report completely overlooks the economic impact of climate change and the fact that wind and nuclear have almost identical costs. There is no doubt Scotland’s renewable energy sector is a significant employer and will be even more so in the future.”
And she added: “However, given the forecasts for oil and gas prices, ultimately there are no low cost options for electricity generation and the best bet for energy security and costs for consumers is a growing proportion of renewables as part of a balanced energy mix.”
The Scottish Government, which has championed Scotland’s place at the head of the “renewables revolution”, yesterday dismissed the report as “misleading”.
A Scottish Government spokesman argued that investment in energy by the private sector had no impact on public sector budgets whatever.
The spokesman said: “Independent studies show that Scotland’s natural resources and low carbon opportunities could create 60,000 new jobs in Scotland by 2020, bringing significant economic and environmental benefits.”
And he added: “The idea that UK consumers subsidise Scotland is also inaccurate. Our abundant renewable resources assist all UK suppliers with their obligation to source a percentage of their sales from renewable generation – without this, the costs to deliver renewable ambitions and obligations across the UK and Europe would be significantly higher.”
The report will be dismissed by many in the environmental lobby simply because it deals only with the economics of renewables.
There is an argument that the cost doesn’t matter as long as we reduce our production of greenhouse gasses and that any money that we spend is justified because the prize is saving the planet.
But, to be fair to the economists who prepared the report, they acknowledge that there is no way the environmental costs can be measured and they were not setting out to do that.
All they were doing was examining the claims made by ministers that renewables represented a massive economic opportunity for Scotland. Not only that but, by leading the way, Scotland would become as prosperous as an oil-rich Middle Eastern state.
What this report does is question the economic assertions behind these claims.
One of the authors of the report, Mr Miers, is not an economist and his presence as part of the report team may be used to help condemn the report because he has been associated with right-leaning think tanks like the Policy Institute before.
But the main author of the report is Richard Marsh. He is an elected fellow of the Royal Statistical Society and a member of a Scottish Government expert group on Input-Output accounting and modelling.
He has worked for governments across Europe and the Middle East, economic development agencies, local authorities, multinational businesses, funding bodies and colleges and universities.
And, when Mr Marsh came to look at ways of predicting employment rates for renewables in the future, he used exactly the same modelling that the Scottish Government had used for its predictions of job losses from the VAT rise.
All of this will help add weight to his findings and head off the criticism which will inevitably come pouring down from the Scottish Government and the renewables industry.
There is one, central, good piece of news for Scotland that shines out from the report, though. It is that Scotland has already captured the lion’s share of the renewables industry in the UK. This means that, as money is poured into renewables and jobs are lost elsewhere to pay for it, Scotland actually dos relatively well – much better than the rest of the UK.
But there is another point here too. As the money raised to pay for renewables comes from the electricity bills of all UK consumers and much of it goes to Scotland, Scotland is being effectively subsidised by the rest of the UK to the tune of about £330 million a year.
So, while we may not be on the way to becoming quite the renewables economic powerhouse that some politicians led us to believe, at least we are doing better than the rest of the UK.
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