Energy row deepens amid warning of £900 bill hikes 

David Cameron and Alex Salmond have clashed over a warning to energy giants about investing in Scotland as it was claimed Scots could face a hike in their electricity bills of almost £900 a year to pay for the SNP Government’s ambitious renewables policy.

A report by leading financial services firm Citigroup urged power companies to rethink investing in Scotland because of the uncertainty surrounding an independence referendum.

It said that if Scots bore the full burden of meeting the SNP Government’s commitment to provide all of Scotland’s electricity from renewables by 2020, the cost would be at least £4 billion a year, noting that “bills for residential consumers could rise by £875 per annum”.

In the Commons, the Prime Minister seized on the report, telling MPs it was “very important we keep our United Kingdom together and we support vital industries like green technology”.

He added: “The combination of a green investment bank sponsored by the United Kingdom Government and the many natural advantages there are in Scotland means it can be a great industry for people in Scotland, but we will only do that if we keep our country together.”

In contrast, the First Minister was quick to rubbish Citigroup’s analysis as a “brainstorm” which had missed the crucial point – that the energy from renewables would not only be used in Scotland but would also be exported to other countries, including England.

“Believe me, in the modern world the ability to produce power is a great asset, not a liability,” declared Mr Salmond.

He pointed to how in the last year alone, £750 million had been invested in Scottish renewables, and claimed that in 10 years’ time power from Scotland’s offshore wind farms would be needed to light homes and businesses south of the Border.

“To get anywhere near the renewable energy obligations that London is going to have, England is going to have to have Scottish renewables from the sea,” explained Mr Salmond.

“Perhaps the reason why all these international companies are committing funds to Scotland is because in 10 years’ time, without Scottish offshore wind power, then there would be a severe danger of the lights going off in England. I don’t think anybody is going to want or allow that to happen,” he added.

However, Tom Greatrex, the Shadow Energy Minister, said the First Minister was wrong to assume that, if Scotland seceded from the Union, England would look northwards for its electricity. He argued it would have a choice and could import power from the Continent. “Given the proximity to population centres in the south, that could well be the case. Alex Salmond should not pass off his presumptions as fact,” he added.

In its analysis, Citigroup said an independence referendum would “create huge uncertainty at precisely the time when major investment decisions are due to be made”.

It went on: “This political battle will, of course, be taking place just when major investment decisions will need to be taken, particularly in regard to offshore wind developments, if the 2020 target for Scotland is to be met.

“Against this background of intense political uncertainty, it is difficult to see how multi-billion pound projects can be approved by companies and/or financed.”

If Scotland became independent, subsidies for renewables projects could be at “grave risk”.

Citigroup warned utility companies and other investors to “exercise extreme caution in committing further capital to Scotland”.

The warning plays into the pro-Union parties’ key argument that the Scottish Government’s timescale for a referendum – 2014 at the earliest – could put off investors, who notoriously dislike uncertainty.