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Renew-ability

The First Minister pointed out that the Aberdeen City and Shire region has the ability based on skills and experience - the highest business birth rate in Scotland, the offshore engineering know-how, and the habit of effective business decision-making – to make the region critical to the future success of the country in leveraging economic benefit from the renewables sector.

In referring to the parting shot of Richard Lambert of the CBI that the UK government had no strategy for growth, he described the Scottish Government’s strategy for growth as essentially one of backing winners – those high-growth sectors that offered the best potential for Scotland to prosper in the global economy, which included pharmaceuticals, tourism, finance and, of course, renewable energy. All parties’ plans for the economy will be tested in the May election.

The First Minister is an excellent speaker, and you have to admire the energy and drive that he puts into his zealous promotion of the strategic economic opportunity that the renewables sector undoubtedly represents. Without his personal commitment, leadership and energy, awareness of the opportunities presented by renewable energies would be nowhere near as high as it is. He did take some of the issues head-on – the challenge of transferring know-how from oil and gas to renewables with the different culture of each sector; the lower returns available from renewables in comparison; the speed of deployment needed to catch the wave before it broke; the need for the infrastructure investment in a transmission super-grid; and the need to extract benefit for coastal communities from any bonanza.

In the City and Shire we now all know that  the tremendous returns from oil and gas are likely to continue to deliver for the region, Scotland and the UK for many years to come – certainly a generation or two – and that the renewable energy sector is not an alternative to oil and gas that we can phase neatly into but an additional string to our economic bow.  Expectations of a return to the ‘Klondike’ days of yesteryear are overstated, however, and the renewable energy sector is not expected to generate the same levels of profit as oil and gas.

The Scottish Government and its agencies now need to start to turn their attention to those outstanding issues which, unless dealt with, will slow down the mobilisation of the oil and gas sector expertise to realise the renewables opportunity. These include: the over-reliance on ROCs to make the sector economic; access to finance, especially for SMEs; the opportunity cost of moving out of hydrocarbons and into renewables; the policy uncertainty inherent in a new sector; and finding and training the right people with the right skills to make the opportunity deliverable. Scottish Enterprise and Scottish Renewables have made a good start with the Offshore Wind event, and should be congratulated, but the important work starts here to make the oil and gas supply chain aware and informed. (A quick analysis of the delegate list of over 400, shows that about 150 (40%) are local companies – many of them already engaged.)

There are two other unpredictable issues that could impact on our ability as a region to realise the opportunity. The result of the election in May is far from certain, and if we lose our main cheerleader, will the steam go out of the engine? Secondly, will the oil and gas supply chain in the region warm to the potential and start to commit resources to exploiting renewable energies? Some big players are already getting going – Technip, Wood Group and others – can the rest of the supply chain renew their business models to take advantage? Time will tell.

Your Chamber is figuring out how it might best help this process and will be discussing these issues at the newly formed Energy Network – the sector group for members engaged in the energy sector, chaired by AGCC Board member Deirdre Michie, supported by AGCC Board members  George Yule and Ron Cookson - we’ll keep you posted. One of the key questions is: Where is the niche for SMEs in the oil and gas supply chain to exploit renewable energy other than those already identified for vessel owners and subsea firms? We want to make sure that AGCC members are fully aware of whether this opportunity is for them, what the entry points are (if at all) and how they can exploit the renewable energy sector.

Bob Collier, Chief Executive, AGCC