The online news site Tortoise asked me for some numbers about the importance of renewable electricity to Scotland, particularly in comparison to the revenues it derives from offshore oil. Will active development of wind and solar on the way to net zero bring as much money into the economy as today’s fossil fuel activities?

Some rough answers to this question follow. In summary, the maximum development of offshore wind is likely to result in about as much financial contribution as offshore oil does today. Much of the electricity from wind will need to converted into hydrogen because Scotland’s own energy needs will be easily met. This hydrogen excess will be exported, probably principally by pipeline to the Netherlands and beyond. At the right price, Germany will be a ready market for Scottish hydrogen.

Exploited to their fullest extent, renewables can wholly replace the role of fossil fuels in the Scottish economy but the challenge is a tough one. As well as pushing offshore development to close to its likely maximum size, Scotland will need to increase onshore wind substantially and invest in solar. If it becomes cost competitive, tidal power, which Scotland has in abundance, will add to the portfolio.

Scotland’s current energy needs

1, The total energy demand for Scotland is about 160 terawatt hours (TWh) per year.[1]

2, Out of this total, electricity demand is approximately 34 TWh. The rest is largely oil and gas used for heating and transport.

3, Renewable electricity generation is about 32 TWh. In other words, Scotland is already close to meeting its total electricity needs from locally generated renewables.[2]

4, In addition, low-carbon (but not electricity) sources of heat provide about 5 TWh of energy. This is about 6.5% of total heat demand.[3] Overall, low carbon sources therefore provide just under a quarter of Scotland’s energy, not just electricity needs.

Scotland’s current energy production

5, The value of oil and gas production in Scottish waters was approximately £22 billion in 2019.[4] (This value is of course affected by variations in the price of fossil fuels).

6, Scottish GDP is about £167bn.[5] This means that the sales of oil and gas is equivalent to about 13% of the national economy. The actual value added in Scotland by the industry is less, of course, at around £9bn or just over 5% of GDP.[6]

7, The oil and gas industry in Scotland produced total taxation of about £700m in 2019. (This figure will change substantially from year to year in line with fuel prices).[7]

The scale of the potential for renewable electricity

8, Less than 1 GW of the UK’s 11 GW offshore wind capacity is in Scottish waters. Most of Scotland’s renewable electricity comes from onshore turbines.

9, Scotland plans to increase its offshore wind capacity to 11 GW by 2030.[8] Assuming a capacity factor of 50%, which is probably slightly conservative, this will add about 44 Terawatt hours (TWh) to Scottish energy provision, or slightly more than a quarter of its current total energy consumption of around 160 TWh. Scotland will then be in a position of having large electricity surpluses while covering almost one half of its entire energy need. This power will be largely transmitted to England.

10, At today’s approximate value of £45 (UK pounds) for a megawatt hour of wind electricity, 11 GW of offshore capacity will be worth about £2bn, or around a tenth of today’s Scottish oil and gas industry size. So the 2030 plans do not remotely cover the loss of the oil and gas industry.

11, But Scotland indicates that it will not stop at that point. A recent investigation of the possibility to use excess renewable electricity to make green hydrogen set an ‘ambitious’ target of 60 GW by 2045, which is the country’s target for its net zero date.[9] This would produce about 262 TWh of electric power, or over 100 TWh greater than Scotland’s total energy need. At a value of £45 per MWh, the extra wind electricity would have a gross value of £11.8bn, or somewhat over half the size of the current oil and gas industry.

12, But, once operational, wind farms require relatively little expenditure. It may be that the net benefit to Scotland is actually great as the £9bn produced in value added by the fossil fuel industry.

13, Perhaps as importantly, Scotland is not restricted to 60 GW of offshore wind. A 2010 research project backed by the Scottish government and others assessed the potential as 169 GW, including large amounts of floating wind.[10] If exploited, much of the electricity produced would have to be exported in the form of hydrogen. (169 GW would provide at least 3 times as much power as is currently used in the entire UK, meaning most would be wasted if it could not be converted into a storage medium).

14, Hydrogen may have a lower price than electricity, expressed in terms of cost per MWh. Additionally, there will be losses in the conversion process from electricity. The value of the hydrogen produced may be as low as $45 (US dollars) per megawatt hour, which is equivalent to $1.50 per kilogramme.[11] At an electrolysis conversion efficiency of 75%, 169 GW of new offshore wind would be worth about $25bn, or about £18bn. Adding in today’s existing renewables and the total rises to just under £20bn, or roughly equivalent to the value of Scottish oil and gas today. This would leave Scotland with an energy economy equivalent to 12% of its GDP, a higher figure by world standards.

15, This shows the scale of the challenge. Scotland can replace fossil fuels with offshore wind but it may also aim also to exploit onshore wind resources, with which it is also well-endowed, as well as other renewable sources. Shortages of electricity transmission capacity into Europe means that it will almost inevitably have to use hydrogen as the energy carrier.

[1] https://scotland.shinyapps.io/Energy/?Section=WholeSystem&Chart=EnConsumption

[2] https://scotland.shinyapps.io/Energy/?Section=RenLowCarbon&Subsection=RenElec&Chart=RenElecTarget

[3] https://scotland.shinyapps.io/Energy/?Section=RenLowCarbon&Subsection=RenHeat&Chart=RenHeat

[4] https://www.gov.scot/news/oil-and-gas-production-statistics-for-2019-1/

[5] https://www.scottish-enterprise.com/learning-zone/research-and-publications/components-folder/research-and-publications-listings/scottish-economic-statistics

[6] https://www.energyvoice.com/renewables-energy-transition/286963/scottish-government-energy-statement/

[7] https://www.energyvoice.com/oilandgas/north-sea/260923/north-sea-gers-figures-scotland/

[8] https://www.gov.scot/news/increased-offshore-wind-ambition-by-2030/

[9] https://www.gov.scot/publications/scottish-offshore-wind-green-hydrogen-opportunity-assessment/

[10] https://publicinterest.org.uk/offshore/

[11] This value is normally assumed as the global price at which green hydrogen will be as cheap as the grey version. In actual fact, the prevailing price in Europe is likely to be higher.