Opinion: What now for the renewables industry?

North Sea reforms recommended in the Wood Review could become law within weeks
Sir Ian Wood
Opinion by Energy Voice

Well, that’s that – it’s over – and I mean over.

I’ve been living in hope in recent months that we might finally be getting our act together on two important issues. The first being the stewardship of the oil and gas industry and the second the development of an indigenous renewables technology manufacturing industry.

Following the Scottish independence referendum the former will now remain in the hands of the UK Government who say they will follow the recommendations of the Wood Review including the establishment of the new regulator and revising the fiscal regime.

This will be worth watching because the proposed new style regulator will still be subject to the uncertainties and unpredictability of a Treasury that has a huge and growing public sector debt level to deal with!

However, I don’t want to dwell on the regulatory issue until the new set-up has been properly established, the new regulator himself or herself appointed and the promised new fiscal regime agreed. Then and only then will it be possible to judge whether it’s going to work.

That said, I remain seriously concerned about one aspect of the propaganda used to persuade Scotland to vote against independence.

During the run-up to the referendum, Ian Wood asserted very strongly that by 2050 production will have fallen to around 250,000 barrels oil equivalent per day, which will considerably lower the tax take.

Of course, he was assuming that between now and 2050 few if any new fields will be discovered or new technologies developed to get more out of existing fields.

In short, he’s saying the strategy he proposed in his own review will fail and that the figure the industry suggested and he accepted, of a potential 24billion barrels is unreachable or was guff all along. Strong stuff.

However, putting aside for one moment the validity or otherwise of his argument what struck me is that if Wood is right then where’s his Plan B?

Thinking locally, there are around 900 to 1,000 companies and circa 100,000 people reliant (directly and indirectly) on the oil and gas industry in Aberdeen and Aberdeenshire and on the basis of his forecast we could see most of those gradually disappearing over the next 35 years.

In fact, Wood said “. . . the rundown impact will begin to be felt by 2030, which is only 15 years from now”.

So the suggestion is that the Aberdeen economy will all but collapse as people’s jobs go and they inevitably move away. Not all will go of course. Some will have retired here and some will stay as part of a much smaller supply chain which is still operating internationally.

However, without wishing to be too brutal, there is a very good chance that under Wood’s scenario Aberdeen’s economy will shrink dramatically although it may not quite reach the level it was at before the oil industry took off in the early 70s and anyway a lot of what we did then has already gone including shipbuilding and paper production.

Of course, this wasn’t inevitable. In its June 2014 paper on reindustrialisation the Scottish Government said “Manufacturing is also vital to capturing the opportunities from the transition to a low carbon economy. Traditional manufacturing and engineering skills – such as in the offshore industry or shipbuilding – are transferable to areas such as the manufacture of renewables technology or oil decommissioning.”

In short, it understood the potential of creating an indigenous renewables technology manufacturing industry and to help make this happen was proposing to set up a Scottish Innovation Agency and critically, a Scottish Business Development Bank.

But that’s no longer on the table and without a strategy like this, Scotland, let alone Aberdeen, has little chance of doing anything other than providing the opportunity for others to take advantage of those natural resources which were made so much of during the referendum campaign. Don’t treat that statement as scaremongering. It’s already a fact.

There is no indigenous wind turbine manufacturer, we will soon be getting overseas-built tidal turbines in the Pentland Firth and most Scottish and UK companies involved in renewables are dependent on foreign investment with many now even majority owned by overseas companies.

However, Wood’s answer to what he sees as Aberdeen’s looming economic problem was to use the recent annual Northern Star Business Awards as a platform to strongly criticise Aberdeen City Council over the “golden opportunity” missed when plans to transform Union Terrace Gardens were rejected.

He claimed that Aberdeen Council showed “virtually no sign” of recognising the economic challenges facing them – and claimed it was “unbelievable” the ambitious project was scrapped.

Now I can certainly support the former but with the best will in the world I still do not understand how on earth spending £140million or so on revamping Union Terrace Gardens would have any impact at all on Aberdeen’s economy and I never have.

Personally, if I had a spare £50million burning a hole in my pocket as Ian Wood seems to have, I’d be investing some of it in a couple of university spin-outs I’m aware of and I’d start developing some ideas around high value-added clean-tech manufacturing.

I remember clearly Ian Wood saying a couple of years ago that Aberdeen could become the Houston of the East.

As I pointed out at the time this was going to be difficult because Houston’s economy is considerably broader based than Aberdeen’s. It didn’t have any of the electronics, pharmaceutical and the other non oil and gas industries that Houston had when Wood made this claim and, of course, it still doesn’t.

The choice is simple and here finally Wood and I are in broad agreement. We either start putting some real effort into developing a strategy for a post oil Aberdeen or the next generation faces a genuinely grim future.

Wood is right that we can’t expect any help from Westminster although I believe we could have from Holyrood if the referendum had gone the other way.

But there are things that we could do and we could start with supporting AREG (Aberdeen Renewable Energy Group) with its European Offshore Wind Deployment Centre (partner is Vattenfall), which Wood to my knowledge never has encouraged.

And I suppose we could revamp ACSEF which is just another glorified property development programme.

We could also start applying some pressure to all those financial sector outfits that did so well out of oil and gas to make some sensible funds available to entice new industries to Aberdeen to partly replace the Scottish Business Development Bank proposed under independence.

Maybe Ian Wood would like to chuck his £50million into that pot if it ever transpired!