Let’s be honest about this, shall we? Since the last All-Energy, it really has not been the best year for the UK and Scottish renewables sectors, although perhaps, given the state of the economy and the attitude of the banks to small companies, it hasn’t been quite as bad as some – including me – had actually expected.
That said, in the past 12 months, Scotland has lost its only two fuel-cell companies. This was due, I’m told, to a lack of availability of funding rather than problems with achieving interest in the products. However, I’m also told that there is a good chance both companies could well be “resuscitated” at some time in the future.
I really hope that’s true because Scotland needs companies that are making stuff we can export or incorporate into other products, such as the batteries being manufactured in Dundee by Axeon.
So, to succeed, we really need a fairly diverse renewables sector that does lots of different things, most of which is high-value-adding activity.
Or do we? If we can’t raise a few million quid to fund a couple of relatively small, but very technologically advanced, fuel-cell companies – both of which, based on market trends, looked like having a bright future – then perhaps we need to really ask ourselves whether we should be being a lot less ambitious than we currently are.
For example, one of the things that concerns me is what happens if one or two of those baby indigenous wave and tidal-energy companies testing their kit in Orkney are successful in proving that their concepts do actually work.
Will they then actually be able to raise the follow-on funding they need without having to resort to selling off their companies to a richer, probably foreign, company or having to take on overseas investors and risk a move to foreign ownership that way?
It has already happened, of course, to Wavegen which, having developed a successful piece of wave-energy technology, couldn’t raise the capital to take it properly to market and was bought over by a German company.
I can also point to the sale of the former Vestas wind-turbine manufacturing plant near Macrihanish, in Argyll, which was taken over by the Danish company, Skykon, rather than a Scottish or British one – and the fact that the main elements of the biomass generation plant to be built in Aberdeen will be provided by Norwegian and German companies.
The reality is that the situation we find ourselves in is what economists call a “market failure”.
The need to re-balance the economy has finally been recognised by all the main political parties, but given there is no evidence we should have any faith at all in the private-sector financial-services sector to suddenly undergo a cultural transformation and start properly supporting companies in the renewables sector, then I really do doubt if we can achieve this re-balance – and properly fund renewables companies – without tearing up the rule book.
Perhaps the first rule to go should be the one that dictates the level of state aid – public-sector funding – that can be used to invest in a company.
Scottish Enterprise is already doing a sterling job through its various co-investment funds, which invest alongside the private sector. So why not now increase the percentage of public-sector funding that can be used to reduce the amount required from the private sector and to reduce the private sector’s risk? I’m not sure what that percentage might have to be, but I would guess that a figure of 75% might be appropriate.
I would also say, despite some of my reservations, that we need to be trying to bring in overseas funding, particularly from the US, where the “enterprise spirit” still exists and risks are still taken.
On top of this, though, we still need other incentives. Albeit prior to the election, some political parties talked about national insurance and other tax holidays to support small companies, and these ideas need to be followed up.
Small companies, and particularly start-ups and university spin-outs, have to be able get moving quickly and employ the staff they need without having to pay additional burdens.
Indeed, why not take the approach that no company should start paying any tax at all – including NI and business rates – until it turns in a profit? That would be radical enough, but so perhaps might be the idea that public-sector space – factory-type buildings, and so on – could be provided free until the company makes a profit.
Perhaps controversially, though, the other issue we need to consider is whether we are chasing the right markets or, indeed, chasing too many markets.
We perhaps need to take the view, at least in the first phase of the development of a low-carbon economy, that we put more emphasis on things we need and gain benefit from rather than jumping on to any and all bandwagons.
Tidal and wave generation is a so-called “no brainer”, but is wind?
Courtesy of the last Conservative government, we lost any advantage we might have had in wind-turbine technologies and are now left with trying to apply – successfully, as it happens – some of what we’ve learned in the oil&gas sector to fabricating foundations for offshore turbines.
But what about liquid fuels, solar, electric vehicles, more heat/energy-efficient building design, geothermal, fuel cells, of course, hydrogen production, and all the other technologies, including some forms of biomass-based generation?
Of these, perhaps liquid fuels hold the most potential as a sector we could succeed in. By applying our biotechnology skills and knowledge, Scotland could actually become a leader in this sector. And, of course, being a primarily rural country, we need to have access to liquid fuels not just for transport, but also for heat. So, both socially and economically, access to low-carbon liquid fuels is very desirable.
I’d also point out that we already have a company producing oil and protein from carbon-dioxide-eating algae.
We should also be looking at small-scale biomass generation based on anaerobic digestion using agricultural “products” because this uses technology that can be mostly made locally, and it could form part of a distributed generation network.
In my view, these are things that we could excel at and around which we could develop a formidable industry presence. There may, of course, be others we can add now or later.
So there are a few ideas, and I’m sure others could come up with a lot more. But what I’m really trying to get across here is that we need to be more focused and extremely determined if we are going to succeed in the renewables world – and we really need to get on with it.
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