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ABERDEEN – Salmond’s Scottish National Party has put the issue of independence to a referendum vote in 2014. Energy policy in Scotland is dictated by the UK and regulated by OFGEM. The annual peak demand for electricity in Scotland is nearly 5,600 mw’s with 30 percent coming from the nuclear plants Hunterston B and Torness; 26 percent from gas plant Peterhead; 24 percent from a coal plant at Longannet; and 20 percent from renewables and pumped storage. This culminates in just under 8,000 megawatts with the excess being exported to the UK via a 2,200 mw capacity interconnection with plans to increase the interconnection capacity to 7,000 mw’s by 2021.

Scotland has a renewable energy resource unparalleled in Europe. The seas surrounding Scotland have an abundance of natural energy estimated to have a quarter of Europe’s potential wind energy capacity and a quarter of its tidal energy capacity. Salmond established a target of producing 100 percent of net electricity demand for renewables by 2020. renewables infrastructure.

He recently reset a new interim target of 50 percent by 2015. This translates into 10,000 mw’s from onshore wind and 7,500 mw’s from offshore wind. Salmond sees Scotland reaching a “tipping point” for offshore wind. Five gw’s of offshore capacity is under consideration. “Agreements for Lease” are now in place for ten offshore wind projects in Scottish waters. The offshore industry is estimated to create over 28,000 full time jobs and add more than £7 billion gross value added to the Scottish economy.

Scottish Enterprise is Scotland’s main economic development agency. They work with partners from the public and private sectors to attract new investment to Scotland. They fund “POWERS,” Prototype Offshore Wind Energy Renewables Support to form a key component of the integrated suite of support available to investors looking to establish their manufacturing base in Scotland. POWERS awarded Samsung Heavy Industries a contract to support development of its 7 mw offshore wind turbine prototype. SHI is expected to invest £100 million in Scotland.

Areva will site an industrial facility in Scotland for its wind turbines and blades creating 750 jobs. Mitsubishi is building a $128 million R&D facility in Edinburgh. Gamesa is investing $360 million for an offshore technology center in Glasgow and a new manufacturing plant in Leith. Statoil is designing a new floating turbine wind park. The European Offshore Wind Deployment Center (EOWDC) is a joint venture between AREG and Vattenfall, plus consortium partner Technip Offshore Wind Ltd. The project is expected to deliver £230 million worth of investment in Scottish

OFFSHORE WIND OPPORTUNITY
The Crown Estate is the independent landlord for the UK’s seabed and is responsible for awarding offshore wind development sites through a series of licensing rounds. Five separate offshore wind licensing rounds have been undertaken: Round 1, Round 2, Round 1 & 2 Extensions, Scottish Territorial Waters (STW), and Round 3, and a number of wave and tidal leasing rounds.

STW
In February 2009, the Crown Estate announced 10 offshore wind development zones in Scottish Territorial Waters (STW). In March 2010, six sites were given approval subject to securing detailed consent. Five of these sites were awarded agreements for lease and the sixth site was relinquished by its developer. The five STW sites are in development and have a targeted generating capacity of 4,755 mw.

ROUND 3
In January 2010, the Crown Estate awarded exclusivity agreements for the nine Round 3 offshore wind development zones. The Round 3 zones are of a much larger scale than the Round 1, 2 and STW sites, and most are farther out to sea and in deeper waters. Two of the nine development zones are sited off the Scottish coast, in the Moray Firth and Firth of Forth.

These two Scottish zones will have a combined generating capacity of 4.8GW. The largest round 3 zone is Dogger Bank, which has a planned generating capacity of 9GW. The nine round 3 zones are in development and have a targeted generating capacity of 32GW.

ROUND 1 & 2 EXTENSIONS
In May 2010, the Crown Estate announced that 2GW of potential additional capacity would be made available from the Round 1 and 2 projects. Two sites were offered permission to increase capacity by 340MW within existing boundaries. Five sites offered permission to extend their boundaries, allowing for an additional 1.7GW of capacity. One of the planned extensions has since been abandoned. The remaining four projects, with a targeted capacity of 1.5GW, are in development.

Before Round 3, individual offshore wind farm sites were identified by offshore wind developers, and these sites were then awarded to them for development. For Round 3, a different approach was adopted. The Crown Estate selected nine areas (called ’zones’) which are suitable for wind farms. These zones were then offered to offshore wind developers to investigate in more detail. The developers search for potential offshore wind farm locations within the zones and design those projects. Some of the Round 3 zones are large enough to have several wind farms within them, while others will contain just one wind farm.

The developers’ role is to identify where offshore wind farms can be built within their zones, taking into account technical and environmental issues present at the site. The developer has to submit a consent application to include details on project design and an environmental statement. The environmental statement describes the environmental surveys that were undertaken, makes an assessment of the impacts that will result from the wind farm, and states how the impacts will be reduced to acceptable levels. In Scotland, the application is submitted to Marine Scotland.

Marine Scotland’s purpose is to manage Scotland’s seas for prosperity and environmental sustainability, work toward achieving good environmental status, and promote sustainable economic growth from marine renewables through integrated planning.

COST OF OFFSHORE WIND
The Pathways Study has produced and validated assessment of the potential for offshore wind power cost reduction. It is based on unprecedented engagement with 120 companies, organizations and individuals from the offshore wind industry, insurance, academic and finance communities over six months. Recent wind farm projects have indicated that costs have stabilized at around £140 per MWh.

The DECC has put forward a challenge that offshore wind should reach a Levelized Cost of Energy (LCOE) of £100 MWh by 2020. LCOE can be seen as the lifetime cost of the project per unit of energy generated. It is defined as the sum of discounted lifetime generation costs (£) divided by the sum of discounted lifetime electricity output (MWh). Generation costs include all capital, operating, and decommissioning costs incurred by the generator/ developer over the lifetime of the project, including transmission costs. It does not necessarily correspond to the level of revenue (or ‘strike price’) that would be required to support the project. It is an expression of cost rather than revenue. The discount rate is the Weighted Average Cost of Capital (WACC) over the lifetime of the project, as determined by the capital structure and financing costs. LCOE is calculated on a post-tax basis and expressed in real 2011 prices for all years.

Until now offshore wind farms have largely used products adapted from application in other fields. The supply chain that serves offshore wind farms operates on a project-by-project basis.

Moving to products specifically designed for offshore wind and industrializing the supply chain provides a large number of opportunities to reduce capital and operating costs and increase power generation. Compared with a wind far project whose FID is in 2011, FID 2020 projects could reduce the LCOE of offshore wind power by 39%.

The cost structures of onshore and offshore wind turbines are different. Onshore wind capital costs are dominated by turbine costs up to 75% of the totals. For offshore wind farms the turbine (including tower for comparative purposes) represents between 40-50% of total capital costs. The greatest cost reductions result from the increases in turbine size and changes in blades and drive trains.

EMEC - ORKNEY
The European Marine Energy Center (EMEC) in Orkney is the world’s first gridconnected, accredited test facility for wave and tidal devices and technologies. Scottish tidal power is estimated to reach 7.5 GWs and wave power 14 GWs. The Crown Estate has leased over 20 seabed sites for wave and tidal projects and is considering investing £20 million in two stream projects. The Saltire Prize of £10 million, issued by the Scottish government, is the world’s largest innovation prize for technological advances in wave and tidal energy.

US tidal power company ResHydro has announced plans to establish operations in Glasgow. Res Hydro uses cutting-edge industrial science to harness the power of water currents to produce electricity. Establishing a base in Scotland will allow the company to work in partnership with the University of Strathclyde to advance its hydrokinetic energy generation.

The Energy Technology Partnership (ETP) is an alliance of twelve Scottish universities, with over 250 academics and more than 700 researchers engaged in world class energy related research and development. ETP is the largest research partnership of its kind in Europe, with unparalleled energy R&D capability and core research strengths across a spectrum of energy technologies.

ITREZ
Glasgow is where the potential of offshore wind and other renewables is being turned into world-leading reality. ITREZ is creating a community of developers, suppliers, academics and researchers. Key partners are the University of Strathclyde and Scottish Enterprise. The core of this dynamic new zone will be an £89 million Technology and Innovation Center on the Scottish Enterprise-owned City Science site.

ITREZ is one of the key elements outlined in the National Renewables Infrastructure Plan, the blueprint for channeling £223 million into renewable energy infrastructure projects across Scotland with a view to creating more than 5,000 manufacturing jobs and generating £300 million a year for Scotland’s economy.

The Technology Innovation Centre at the University of Strathclyde is the cornerstone of ITREZ. Up to 850 academics will be working with 500 engineers, researchers and project managers from industry. The Centre has already attracted major partners and has attracted financial backing from Scottish Enterprise and the Scottish Funding Council.

CLIMATE CHANGE
The main energy issue has been the UK’s international climate change obligation. The electricity industry has been chosen to deliver the major part of the carbon savings. The electricity subsidy regime (Renewable Obligation Certificates and Feed-in-Tariff) is to encourage investment into new renewable sources. These subsidies cover the wide range of generation technologies, from 0.5 ROCs/MWh for new large hydro, 0.9 ROCs/ MWh for onshore wind and twice that for offshore wind. Under the FiT scheme about 15p/kW is now paid for solar PV guaranteed for 25 years.

An independent Scotland will have to take on a carbon reduction target to meet its international obligations under climate change legislation to reduce carbon emissions. The figure of 40% would probably be the 2020 target that an independent Scotland will have to adopt under the EU legislation aimed at combating climate change.