A company owned by the Chinese government lobbied a Scottish minister to reduce the rent it will pay at a future wind farm in the North Sea, The Ferret can reveal.
In an August 2021 letter, Red Rock Power told energy minister, Michael Matheson, that rental terms at the proposed Inch Cape offshore wind farm would have a “negative impact” on the project’s chances of being built.
These terms were set by the Crown Estate in 2011 when developers were initially granted a 10-year lease agreement for the project. Red Rock claims that rents at Inch Cape – which will be paid to the Scottish Government via Crown Estate Scotland (CES) – are now much higher than at other offshore wind farms in the North Sea.
In its letter to Matheson, the firm said that rental costs at Inch Cape would now make it “unlikely” that the project will receive financial support from the UK Government. Failure to land this support would deal “a blow to the Scottish supply chain and net zero targets”, the company argued.
In response, Matheson said he would raise the issue with CES officials. According to CES, there have been “no changes” to the rental terms at Inch Cape, though.
Critics said the lobbying was a “sad indictment of the mess being made of the ownership of Scotland’s renewables industry”. They argued that Red Rock’s attempts to reduce the amount they pay into the Scottish public finances “add insult to injury”.
Red Rock – which is owned by China’s State Development and Investment Corporation (SDIC) – told The Ferret that the rents were a “major barrier” to the project securing the long-term financing it needs to go ahead. It pointed out that the project would “deliver green jobs and carbon savings for Scotland”.
Red Rock now owns fifty per cent of Inch Cape, alongside its partner, Ireland’s state-owned energy company, ESB. If it goes ahead, the project will see 72 turbines installed off the Angus Coast with the potential to power one million homes.
The letters were released to The Ferret by the Scottish Government under freedom of information legislation.
The August 2021 letter was sent to Michael Matheson ahead of a meeting between the minister and Red Rock on 14 September 2021. It includes a presentation outlining the company’s case for the rental terms to be reviewed.
In it, the firm argued that the rental terms at Inch Cape “no longer reflect market value for offshore wind projects”.
If they are not decreased to current market rates – the firm claimed – then rents at the wind farm would be “inconsistent” with efforts to “promote the economic and environmental wellbeing of Scotland”.
The company calculated that Inch Cape would be spending four times as much of its revenue on rent as Beatrice and Neart Na Gaoithe offshore wind farms, which are also located off Scotland’s east coast.
These high rents were “likely to be the difference between success and failure” in the project’s attempts to land a Contract for Difference (CfD), Red Rock said.
CfD is the UK Government’s main means of providing financial support to new renewable energy projects. Wind farms which secure a CfD are paid a fixed amount for the energy they produce over a 15-year period.
Red Rock raised the same points about rent at Inch Cape at the September meeting with the minister. Michael Matheson replied to them in writing on 7 October 2021.
In his response, Matheson said he had asked Crown Estate Scotland (CES) to “revisit” the issue and “provide assurances that they have duly considered all options available”. Matheson’s response noted that changes to rental terms at one project “may have to be considered for all”, however.
In a subsequent letter on 23 December 2021, Matheson stated that CES was “maintaining the position” it had already set out on the rental terms. According to Red Rock, CES had previously refused to decrease the rent because it had concerns that doing so would breach competition law.
A CES spokesperson said it was “aware of Inch Cape’s representations to the Scottish Government” but there had been “no changes to the rental terms” of its lease since December 2021.
Scottish Labour MSP, Paul Sweeney, told The Ferret that Red Rock’s lobbying was illustrative of the “doomed economic model of foreign dependency” which Scotland had embarked on with its renewables industry.
He said: “This is another sad indictment of the mess being made of the ownership of Scotland’s renewables industry.
“To add insult to injury, these state backed companies are not only content with making a profit from Scotland’s natural resources, they are actively trying to minimise the amount of money they pay into the Scottish public finances.
“Scotland’s renewable resources should remain in Scotland’s hands. That economic control would allow us to invest in the industries of the future, create high skilled jobs, and breathe life back into Scottish industrial communities.”
Robin McAlpine, head of strategic development at the think tank, Common Weal, said the lobbying was “further evidence” that “big business has easy access to the Scottish Government”.
McAlpine said: “The Gupta aluminium affair, the Tata Steel mess, the relationship with Heathrow, the close relationship with the Big Four accounting corporations and much more, show that this access pays off. But not for Scotland, obviously, which keeps getting short-changed.”
A spokesperson for Red Rock Power said: “Our Edinburgh team is committed to delivering a successful, efficient wind farm project. Inch Cape’s rental terms are higher than other offshore wind developments in Scotland and the UK.
“This is a major barrier to the project bidding successfully for the long-term contract it needs in order to go ahead, and deliver green jobs and carbon savings for Scotland.”
A Scottish Government spokesperson said that any decision on rent for an offshore wind farm development is for Crown Estate Scotland.
They added: “The Scottish Government is committed to ongoing, cross-government engagement, working with every corner of society on our continuing journey to net zero. We welcome constructive discussion with business, energy, environmental and other groups in our collective effort to ensure a just transition to net zero.
“The Net Zero and Energy Secretary regularly meets with companies and representatives of the energy sector. The energy sector is an important part of Scotland’s economy, employing thousands of people across the country and will play a vital role in our transition to net zero by 2045.”
Photo Credit: iStock/Richard Johnson
This story was co-published with the Herald
Not sure what the issue is here – looking at the documents listed as sources it appears the Scottish projects are being charged more than the English equivalents by the Scottish arm of the Crown Estate. When this is added to Scottish generation assets having to subsidise nearly the entirety of the UK grid through substantially higher access costs (those in the South East are unbelievably PAID to access the grid) then it seems fair for this company to ask for the playing field to be levelled. Economic opportunity must be the same across the nation to ensure we do not continue to reinforce the rich/poor divide currently centered somewhere around the Watford Gap.