Energy policy: a growing schism between Scotland and the UK

Scottish Public Finance Minister Kate Forbes announced the Scottish Budget 2020-21 in a statement on 6 February. This revealed a significant package of funding to accelerate Scotland’s transition to a net zero economy.

With the UK Budget due to be announced on 11 March, the Scottish government has presented tax and spending plans without certainty about its fiscal position, having to make assumptions about the Barnett formula. Nonetheless, the Scottish government has passed its spending plans into law, containing the best estimate, minimum level of funding that will be available in 2020-21.

This uncertainty, as Forbes said, “creates unnecessary challenges for public bodies, to businesses and to taxpayers right across Scotland.”

Against this backdrop, the Scottish Budget included £1.8bn of investment in low carbon infrastructure – an increase in low carbon capital investment of over £500mn compared to the previous year. It also set aside:

  • £220mn of seed funding for the Scottish National Investment Bank to support the transition to a net zero economy.
  • £120mn for a new Heat Transition Deal, which includes a £50mn Heat Networks Early Adopter Challenge Fund for local authorities and a £10mn fund to support hydrogen heat demonstrator projects.
  • A total investment of £151mn in energy efficiency.
  • A £83mn Future Transport Fund for low carbon initiatives including low emission and electric buses and electric vehicle (EV) charge points.
  • £5mn to help the shift to electric vehicles in the Justice sector.

The budget underscores the SNP’s intent in delivering the low carbon energy transition – one that must deliver net zero emissions by 2045 – five years ahead of the rest of the UK.

The timing of the announcement is also indicative of the increasing political misalignment between the Scottish and UK governments, with the SNP apparently eager to pursue an entirely separate energy and climate change mitigation agenda.

The SNP set out proposals for a Green Energy Deal during the 2019 General Election campaign, which aims to harness the power of the Scottish National Investment Bank and create a £3bn package of investments to attract green finance to Scotland. The plans also include:

  • Allowing onshore wind to compete in Contracts for Difference auctions.
  • Reforming punitive transmission charging that can discourage investment in Scotland.
  • Setting a clear timescale for the delivery of the interconnectors to Scotland’s islands.
  • Pressing the UK government to scrap plans to quadruple VAT on residential solar panels.
  • Supporting a diesel scrappage scheme if trading for ultra-low emission vehicles.

SNP Business, Energy and Industrial Strategy spokesperson Drew Hendry MP said in July 2019 that “if the UK government won’t act and continues to impede Scotland reaching its climate change targets, then full powers should be devolved to Holyrood so the SNP government can get on with boosting our onshore wind potential.”

The Scottish government is already pursuing its own programmes for improving energy efficiency of its building stock and reducing fuel poverty.

The Energy Efficient Scotland programme is providing a route map for transforming Scotland’s buildings to 2040. The Scottish government is also proposing long-term domestic standards and piloting Local Heat and Energy Efficiency Strategies.

The Fuel Poverty (Scotland) Bill, mandating the production of a new long-term fuel poverty strategy, and a draft Fuel Poverty Strategy, setting out how the delivery of the fuel poverty target will be achieved, were published in June 2018. This strategy continues to be developed.

First Minister of Scotland Nicola Sturgeon has expressed her desire for her government to work closely and constructively with the UK government in preparation for COP26. This is scheduled to be held in Glasgow from 9 to 19 November under the presidency of the UK government.

Sturgeon has challenged the UK government to set out significant climate change mitigation steps of its own in its forthcoming Budget, but a potentially transformative new energy policy framework may be outlined sooner in the UK government’s long-anticipated energy White Paper. Only time will tell if this will be a catalyst for closer working or another example of political misalignment.

We will continue to closely monitor and assess policy developments in Scotland, as well as Scottish energy sector news, in our weekly newsletter.

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