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ScotWind: One Year On

Overview —

One year on from the announcement of the results of the ScotWind auction in January 2022, we look at how this auction compares to other offshore wind auctions in 2022 and examine published commitments to find that only a minority of investments into this project will take place in Scotland.

Credits—

Craig Dalzell

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In January 2022 Scotland announced the results of the first auction in a decade of Scotland’s offshore territory for the purpose of generating renewable wind energy. This auction was the largest of its kind in Scotland so far and one of the most substantial even by international standards. Coordinated by the Crown Estate Scotland which, since 2017, has been a public corporation owned by and whose board is appointed by the Scottish Government. In Common Weal’s response to the announcement – published as our policy paper ScotWind: Privatising Scotland’s Future Again – we found that the value of Scotland’s renewable resources had been significantly undervalued by the Crown Estate and that Scotland would receive only a tiny fraction of the profits that the private companies who won the auctions can expect to extract from Scotland. The Crown Estate (and therefore the Scottish Treasury) has raised around £755 million from the initial auction and subsequent Clearing round. This report updates that analysis by looking at developments in the year since the initial investment including examining claims around the committed investments in Scotland to support ScotWind’s supply chain as well as comparing the results of the initial auction to international examples to determine if Scotland could have achieved a better return for the largest privatisation of offshore renewable energy yet seen. Finally, the report examines claims by the Scottish Government that it cannot, in the devolved context, keep Scotland’s energy resources in public hands.

KEY POINTS

― The ScotWind auction of January 2022 has massively undervalued Scotland’s offshore energy resources and placed a low and arbitrary maximum ceiling on the amount that competitors could bid for their development.

― In the year since its announcement, at least three more offshore wind auctions have concluded, two in the USA and one in England.

― All three of these auctions have raised many times more revenue for their respective governments than ScotWind did.

― On a comparative basis, these auctions have raised up to 40 times as much as ScotWind did.

― Had ScotWind raised as much on a per MW basis as New York Bight, Scotland would have raised £16.4 billion in a single payment. Had it matched the performance of the recent English auction, it may have raised up to £28 billion in annual payments across up to a decade.

― Beyond the financial disaster that ScotWind has been, the promises of supply chain protections have not been met. Only a little over a third of the minimum investments committed to ScotWind will take place in Scotland.

― Conditions on these minimum commitments all but guarantee that it would be profitable for companies to break the majority of these commitments.

― Even in the best case Ambition scenario, only around half of ScotWind’s investments will take place in Scotland.

― Recent announcements regarding Scotland’s “Green Freeports” raise the severe risk that at least part ScotWind will be constructed within Freeport Zones and may not be subject to normal levels of tax or protections for workers rights or the environment.

― The Scottish Government continues to dismiss out of hand the idea of and benefits of public ownership of renewable energy despite precedents now set by the Welsh Government on how this can be done within the devolved context and clear published blueprints for how involvement can be scaled up over time.

― The Scottish Government should conduct an inquiry into how it got the ScotWind auction so badly wrong and what steps it will take to redress these errors ahead of the next round of renewables development in Scotland.

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