Wednesday, November 2, 2011

Could independence for Scotland hinder the push toward renewable energy? Valuable lessons from the Canadian Province of Québec

The BBC is reporting that a recent report by Citigroup concluded that a proposed referendum on independence in Scotland would "create huge uncertainty" over investment in renewable energy in Scotland at precisely the moment when big investment decisions on renewable energy projects will need to be taken. The report takes the position that an independent Scotland would have too small a consumer base to generate the annual subsidy of 4 billion GBP, which they believe would be needed to support a hugely increased reliance on renewable energy. The Citigroup report goes on to state that "continued subsidy from consumers in England and Wales would be required, but Scotland seceding from the UK would clearly place this subsidy stream at grave risk. Renewable investors risk seeing their assets stranded in a newly independent Scotland." The Citigroup report concluded that "utilities and other investors should exercise extreme caution in committing further capital to Scotland." Scottish First Minister Alex Salmond dismissed concerns in the report and noted that much of the renewable energy produced in Scotland would be for export and would help "keep the lights on" in England.

There are many parallels between the Canadian province of Québec and Scotland: both have had or are considering referendums on independence; both are undertaking or proposing very considerable investments in renewable energy; both lack the domestic consumer base to utilize the generation; and both currently or propose to export most of the generation to a much larger neighbouring jurisdiction (Quebec to the USA and Scotland to England). In 1995, Québec had a referendum on independence which was narrowly defeated and the people of Québec voted to stay in Canada. Following the referendum, Hydro-Québec (the monopoly provincial utility in Québec) embarked on a very ambitious plan to develop renewable energy which has resulted in Hydro-Québec becoming a global leader in renewable energy providing tremendous benefits to both the province and all of Canada. Hydro-Québec is currently in the process of launching hydroelectric projects to create an additional 4,500 MW of generating capacity involving new investment of around $25 billion CAD and the creation of roughly 70,000 jobs over 10 years. Hydro-Québec is also on track to develop 4,000 MW of wind by 2015.

Clearly the decision by the people of Québec to remain an integral and important part of the larger Canadian economic market provided the foundation for the enviable position Hydro-Québec is in now. I am not sure this would have been possible in an independent Québec or if there was uncertainty regarding the political future of the province and its role in Canada.

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