Bloomberg New Energy Finance Summit
First Minister Alex Salmond
Tuesday April 8, 2014
It’s a pleasure to speak here – at one of the most prestigious energy summits in the world.
This event is taking place during Scotland Week – which marks the contribution made by people of Scots ancestry to the USA, and celebrates the ties of trade, culture, family and friendship between our two nations.
As part of Scotland Week, I gave a speech last night at the opening of Glasgow Caledonian University’s New York campus.
I spoke about an independent Scotland’s contribution to the modern world. And I made the point that for generations, much of Scotland’s international reputation has been based on our history of innovation – especially scientific and technological innovation. Our inventions include the condensed steam engine, the telephone, the fax machine, the television, the MRI scanner, penicillin – all the way through to Dolly the sheep, the world’s first cloned mammal!
It was after all an American historian, Arthur Herman, who asserted that Scotland’s record of invention was such, that we actually invented the modern world. Of course we would be far too modest to make that claim ourselves – although that doesn’t stop us repeating it!
So there’s a link between last night’s speech and today’s. I’m going to argue that there are many more Scottish inventions to come – and they will play an important part in developing the new energy technology we need for the future.
I’m going to start with just two examples, involving one Scottish group of islands – Orkney, off Scotland’s northern coast.
On Saturday, I visited the New York office of Smarter Grid Solutions. It’s a Scottish company which began as a joint venture between Strathclyde University and Scottish and Southern Energy. Indeed, Bloomberg named them as a New Energy Pioneer in 2012.
That judgement is being proved correct – the company has just signed a significant contract here, working in conjunction with Con Edison. It’s taking a technology developed to connect renewable energy on Orkney– where the grid was previously considered full – and using it here in New York State.
Innovative grid resilience technology - allowing smart-grids to accommodate renewables - on an island group of 21,000 people, could be influential in providing grid solutions for the world’s greatest city of more than 8 million people.
The second example is also from Orkney – from the island of Eday. Last October, the New York Times carried a report from there. Now, Eday is a stunning place, but it’s maybe not an obvious destination for the world’s media.
Some of you may have seen the 1980s film “Local Hero”, starring the late Burt Lancaster. It’s about a Texas oil company representative who is sent to Scotland by his boss – the boss is Burt Lancaster. The oil company wants to buy a small Highland village in order to demolish it and build a refinery. And so the oil company representative keeps on having to make international calls to Houston while crammed inside a public payphone by the beach. It’s the only method of communication he has from that village. The denouement of the play is that Burt Lancaster - a keen astronomer – decides to build an observatory and ocean research centre instead of a refinery.
Well, Eday’s got a similar sense of distance from the rest of the world. It’s got a population of 160. It’s a flight and then a ferry journey even from Scotland’s biggest cities. And I can confirm it has a payphone by the pier, from which you can still phone anywhere in the world!
But it’s at the centre of something special. The reason the New York Times featured Eday is because more companies are testing wave and tidal devices off Orkney than in any other place on the planet. Orkney is home to the European Marine Energy Centre - the world’s leading location for wave and tidal power research.
If that’s what just one island group can do, think what the whole of Scotland is doing! For example Glasgow is pre-eminent in offshore wind, where it is now the leading research centre in Europe.
That research base is strengthened by the quality of our higher education. In global terms, Scotland has more universities in the top 200, per head of population, than any other country on the planet.
We’ve also got a long history of excellence in engineering, especially marine engineering. A century ago, Scotland built almost a quarter of the world’s shipping tonnage. Now, our oil and gas supply chain is a global leader in subsea technology. It operates in more than 100 countries across the planet. Its exports were worth over $13.5 billion dollars last year.
And Scotland has vast resources – of oil, gas, hydro, offshore wind, wave and tidal power. Per head of population, we are the most energy-rich nation in the European Union.
The question of how we build on those strengths is an important part of Scotland’s constitutional debate. Most of you will know that in five months’ time, Scotland will have the opportunity – through an entirely consensual, peaceful and democratic process- to become an independent country.
Independence would give responsibility for Scotland’s natural resources to the people who are most likely to harness them wisely – the people who live and work in Scotland. It would allow us to adopt policies which meet our priorities and specialisms. That would benefit Scotland, and it would also benefit our energy industry.
If you look at the oil and gas sector, successive UK Governments have imposed 16 tax changes on the sector in the last decade. No government with an understanding of the North Sea industry would do that. It’s no way to encourage investment and maximise extraction rates.
To take another example, in October the UK Government signed a contract for the construction of one nuclear power station, with two reactors, in England.
The contract involves subsidy payments of up to £1 billion per year for the next 35 years.
That’s £35 billion to support a mature technology in one power station – by way of comparison, that is four times the total support, under the Renewable Obligation, for all of the UK’s renewable power in the decade to 2012.
An independent Scottish Government would choose very different priorities. We would co-operate very closely with the rest of the UK – the European energy market is becoming increasingly integrated. But we would take a long term approach to supporting the energy industry.
After all, our oil and gas reserves will last for at least half a century; our offshore wind, wave and tidal power resources will last forever.
It was Benjamin Franklin who said, “in this world nothing can be said to be certain, except death and taxes”. John Maynard Keynes pointed out that in the long run, we are all dead.
However one certainty is that in the long run, Scotland will still be producing vast amounts of energy.
And so we are taking a long-term view.
We have set clear goals. The Scottish Parliament’s statutory greenhouse gas reduction targets are the strongest in the world. We have committed to decarbonise our electricity production by 80% by 2030. And we have set a target that the equivalent of 100% of Scotland’s net electricity demand will be met by renewables by the year 2020 – we’re already up to 46%, well on our way to achieving our 50% interim target by 2015.
We also provide sustained financial support for new technologies - from research and development, to making and testing prototypes, and then on to commercialisation and manufacturing.
Within 100 days of this Government being elected in 2007, we established the largest ocean energy innovation prize in the world – it’s run in partnership with National Geographic, the world’s largest educational charity.
The £10 million Saltire prize now has five entrants working to produce at least 100 gigawatt hours of energy over a continuous 2-year period. It’s a good example of how a relatively low level of public investment has unleashed a high level of private innovation.
These investments will take time to pay off. But they have the potential to pay huge dividends.
Energy Secretary Moniz will speak here later today. Deputy Secretary Poneman made an interesting point about this at last year’s summit.
The US Government first supported fracking technologies in 1978. It provided $137m dollars of support for them over the next 14 years. During that time, fracking hardly reached public consciousness. But in the last 5 years, it has turned assumptions about global energy policy on their head.
Wind power is another example. In 2012 wind power capacity in Europe reached 100 thousand megawatts. It took 27 years to reach 50 thousand megawatts, and then only 6 more years to reach 100 thousand.
Within a generation, these once small-scale technologies have become dominating parts of energy provision. It’s what can happen with new technologies. They can become transformational.
And so we want Scotland to be the home to the new offshore energy technologies of the future.
We also want to manufacture, maintain and service, the turbines, gearboxes, blades and other devices which will be needed as we achieve that aim. And we are welcoming businesses from across the world to help us to realise that ambition.
Commercial viability is still some years away for marine energy, although we expect to have tidal arrays in particular deployed, and producing significant amounts of electricity, in the next few years - with some key projects involving Scottish-USA collaboration – and the New York Times article I quoted earlier suggests that those technologies could potentially meet 15% of the US’s electricity needs in 20 years.
But commercial viability may be coming much closer with offshore wind technology - a couple of weeks ago, Scottish government ministers consented two schemes in the Moray Firth which will become the world’s third largest offshore wind farm. It will generate more than four times the energy of the proposed Cape Wind project off Cape Cod.
What’s interesting and important is not just the scale and commerciality, but how deep offshore wind is being developed.
Deep offshore wind isn’t just onshore wind in a puddle, like many estuary developments. In order to become truly economic it needs new ideas, and much bigger technologies - such as floating platforms and automatic transmission, both of which are being trialled in Scotland at the present time.
What are the other technological challenges? Well, for one we need back-up capacity to allow for renewables’ variability.
And therefore in Scotland, we’re aiming to expand our hydro-electric pump storage schemes. ScottishPower is looking at doubling the capacity of its scheme at Ben Cruachan, which was built in the 1960s. That scheme alone, if it is expanded, would give us more than 1000 mW of spare capacity. And you can switch Cruachan on, from spinning reserve, within 30 seconds.
Other challenges include how we establish the industrial processes that allow new technologies to be produced cost-effectively at scale.
And how do you establish grid networks that span Europe - to transport solar energy from the south and offshore renewables from the north, to meet the continent’s need for secure and sustainable energy?
Instead of addressing these challenges, Europe has been set in energy aspic for at least the last ten years.
Some of the energy security consequences of its reliance on hydrocarbon energy are now coming home to roost. The environmental consequences of the world’s reliance on hydrocarbons are now coming home to roost.
For Scotland, these European and global challenges represent opportunity. We have just over 8% of the UK’s population; and 1% of the EU’s population. But we have 90% of the UK’s hydro capacity, 64% of the EU’s oil reserves, 25% of the EU’s offshore wind and tidal power potential, and 10% of its wave power potential. And we are 100% committed.
Our energy resources can power much of Europe; our energy innovation can power the world.
This is a time for big notions, big ideas, big power and advanced technology. It’s a time for Scotland - working with nations and companies from across the planet – to become the intellectual powerhouse of green energy.
Ladies and gentlemen, Ban Ki-Moon spoke about sustainable energy for all at last year’s summit.
He said that "The climate clock is ticking. The longer we delay, the greater the cost for communities, businesses, economies, and for planet Earth... We are stepping on the tipping point."
Last week’s findings from the Intergovernmental Panel on Climate Change were a reminder of the urgency and scale of the challenge. Climate change is happening across all continents. It is contributing to heatwaves, drought and flooding across the globe. And it is hitting hardest the poorest and the most vulnerable in the least developed nations – those who have done least to create the problem.
At the beginning of my speech I referred to Scotland’s history of innovation. Many of our inventions were fundamental to the industrial revolution.
That’s something we’re hugely proud of – they contributed immeasurably to the wellbeing of people across the planet.
But of course they also contributed to the reliance on carbon emissions which is now causing climate change.
The coming low carbon revolution therefore has a special resonance for Scotland. It’s a huge economic opportunity – and it’s also an overwhelming moral imperative.
And so we seek to harness our unique resources and capabilities to meet this urgent global need. We seek to ensure that Scotland is not just the most energy rich country in the European Union; but the most innovation-rich country in the European Union.
Because by doing so, we will live up to our own rich past - and we will build a better future for ourselves, and for the planet.