Energy sector relief as Scots vote ‘No’ to independence

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Victory for the ‘No’ vote in yesterday’s referendum on Scottish independence has removed major questions marks over the future path of the UK energy industry.

This morning it was revealed that Scots voted by 55.3 per cent to 44.7 per cent to remain part of the UK.

Tony Ward, head of power and utilities at EY, said: “A ‘No’ vote is important for the whole of the UK in that it allows the established dynamic in the energy markets to continue its current course.  

“The UK markets have developed ever-closer and more integrated systems and ways of operating that serve to reduce, then smooth, the cost burden across all users. This also enables investment choices to be made on system-wide merit and help achieve a degree of energy security that can often be taken for granted.”

Ward said that “a major uncertainty has been removed by the vote, particularly for those who were evaluating significant capital investments in Scotland”.

“The Electricity Market Reforms and further developments of the UK's competitive retail market can now progress while taking the UK market into account as a whole.

“The un-picking of this fully integrated market would have likely led to the creation of a significant degree of asymmetry in the separated markets, particularly in respect of the allocation of costs and assets. This is now smoothed by the ability to adopt a nationwide approach."

There had been great concerns that victory for the pro-independence campaign would significantly impact Scotland’s thriving renewables industry.

On the impact on renewables of the No vote, Ben Warren, environmental finance leader at EY, said: “The cost of subsidising renewable energy has traditionally been spread across the UK. Today’s result is positive in that Scotland now won’t be left to pay the lion’s share of subsidies given that this is where most of renewable energy is generated.”

He added that independence would have added further concerns to a market already facing significant challenges. “The renewables sector still has to face the difficult choices that the new contract for difference feed-in tariff regime, the threat of budgetary constraints and further solar subsidy revisions bring, as well as fatigue from constant policy tinkering. And with the current levels of energy market reform underway, the UK’s energy sector was not looking forward to having to digest the impact of an independent Scotland."

“We know how prolonged policy uncertainty can impact the attractiveness and viability of renewables investment and cause project delays.”

Meanwhile, Mark Kember, chief executive of The Climate Group, said: "As a member of The Climate Group States & Regions Alliance, Scotland has been an inspiration for its significant climate achievements and a world leader for renewable power. Last year alone, Scotland received 46 per cent of its electricity from renewable energy.

"The leadership Scotland shows is exactly what we need from regional governments in tackling climate change, and now that it will remain part of the union we hope that Scotland will continue to set a clear example on the benefit low carbon technologies can provide, both in terms of sustainable resources and economic growth."

UK Energy Minister Matthew Hancock this morning tweeted: “Delighted by the resounding vote for the union & a proper settlement for England to come. Thank you Scotland”, while Shadow Energy Secretary Caroline Flint tweeted “Delighted Scotland has voted to stay part of the UK”.

John Cridland, director-general of the CBI (Confederation of British Industry), said the No vote was “a momentous day for our United Kingdom”.

“This result will be greeted by a collective sigh of relief across the business community. Business has always believed that the Union is best for creating jobs, raising growth and improving living standards, and welcomes that the people of Scotland want to play an integral role in this internationally successful partnership.”

Keith Parker, chief executive of the Nuclear Industry Association, said: “After today’s historic ‘no’ vote and commitment to further devolution, Scotland and the rest of the UK must look to the future.

“Nuclear power plays a vital role in Scotland, supplying 46 per cent of its electricity demands. The country is also home to several major nuclear supply chain companies generating nearly 5000 jobs. There are still questions which need to be answered more fully on the future of nuclear power for Scottish homes, business and hospitals. With more powers to be devolved to the Scottish Parliament, the nuclear sector will work with policymakers to address any changes which may arise.”

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