Energy Policy and Scotland’s
Constitutional Future
Setting the Scene
John Paterson
University of Aberdeen
The legislative background
• Scotland Act 1998
– Created Scottish Parliament and Scottish
Executive (now Government)
– Reserved certain powers to the UK Parliament
– Anything else is deemed to be devolved
– Devolution of reserved powers possible by
secondary legislation
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Reserved matters
• Specific reservations in Schedule 5 include the
following:
– Generation, transmission, distribution and supply
of electricity
– the ownership of, exploration for and exploitation
of deposits of oil and natural gas
– Coal, including its ownership and exploitation
– Nuclear energy and nuclear installations
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Devolved powers
• Despite the general reservation, some energy
matters have been devolved by secondary
legislation to Scottish Ministers, including:
– the Renewables Obligation in Scotland
– consent for power stations >50 MW onshore and
>1 MW offshore
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Other relevant powers
• Other legislative powers impact upon energy
projects, including:
– Fiscal
– Environmental regulation
– Planning
• Of these, fiscal powers are reserved, whereas
environmental and planning are devolved
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The current position
• Thus, even though energy is a reserved
matter, the net effect in Scotland of the
deemed and executively devolved powers is:
– Significant development of renewable generating
capacity
– Effective block on new nuclear development
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Other relevant factors
• Energy developments are also influenced by GHG
emission reduction and renewable targets, in
relation to which the Scottish Government has
been more ambitious:
– Reduce GHG emissions by 42% by 2020 (UK target
34%)
– 20% of all energy from renewables by 2020 (UK target
15%)
– Aim to decarbonise electricity generation by 2030 (no
UK target)
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Comparative advantage - renewables
• Scotland possesses natural advantages to
make such targets more achievable:
– 1% of EU population
– 25% of wind resource
– 10% of wave resource
– 25% of tidal resource
– CO2 storage capacity > Germany, Netherlands and
Denmark together
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Obstacles?
• The Scottish Government has identified
potential challenges, including:
– The transmission charging system militates
against electricity generation in the north of
Scotland while effectively offering a subsidy in the
south-west of England
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The oil and gas advantage
• In addition to a comparative advantage in
relation to renewables, Scotland would also
have significant hydrocarbon reserves:
– Estimates vary, but the fact that 90% of UKCS
production to date has been in Scottish waters
indicates possible future scenarios
– NB delimitation of an international maritime
boundary need not follow the median line
approach on which this figure is based
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The future of oil and gas?
• The Scottish Government suggests that
devolution of fiscal powers in relation to oil
and gas would allow for
– a regime better adapted to the needs of the
maturing province
– the establishment of an oil fund
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Calman Commission on Devolution
• Recommended energy remain a reserved matter
• Saw merit in a UK-wide approach...
• ...but interestingly did not address transmission
charging, as believed it was beyond their remit
• Preference for UK approach to energy premised
on perceived benefits in terms of
– security of supply,
– meeting international targets
– service to consumers
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Scottish Government’s riposte
• Scottish Government felt Calman’s analysis
missed the point that existing arrangements
did not allow Scotland’s full energy potential
to be realised
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A complex picture - renewables
• Transmission charges v support for renewables
under Renewables Obligation
– Transmission charges are higher in Scotland, but
– One-third of renewables support goes to Scotland,
while Scotland only has 10% of households
• Energy Bill: how will matters look under the new
Feed-in Tariffs with Contracts for Difference?
• Would an independent Scotland with expensive
renewables find itself in a buyer’s or a seller’s
market in the EU?
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A complex picture - hydrocarbons
• What are the regulatory resource realities of
devo max or independence?
• How will current licences be affected?
• What are the tax implications for companies
operating north and south of the border?
• Will uncertainty affect investment decisions?
Any delay would exacerbate the problems
caused by ageing infrastructure
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Conclusions
• Scotland has significant hydrocarbon and
renewable resources
• In the best-case scenario, an independent
Scotland or one with devo max could reap
significant rewards
• In other scenarios, things could be much
tougher
• The referendum is a very high-stakes game for
the whole UK...
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