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View from the Street: Investors must first understand Scotland to harness its true energy

Tom Gillingham

Partner

South Korea’s Hyundai Heavy was the latest Asia-Pacific company to enter the orbit of Scotland’s renewables sector last week. It joins recent Japanese investors Sumitomo Electric (2023) and Marubeni Europower (2022) who have been welcomed with open arms, and China’s Mingyang – which hasn’t.  

There are several reasons for this green-tinged international interest and the differing reactions to it. Some are obvious – others are less so. But all speak to the challenge these companies face in navigating Scotland’s unique environment and connecting with the people who matter most once the fanfare of an initial agreement subsides. 

We’re a nation of abundant energy resource, yet a new Scottish Government energy strategy has been delayed for two years. One of the first wind turbines used to produce electricity was built in Scotland – way back in 1887 – but today’s assemblies rely almost exclusively on imports. Energy policy is reserved to Westminster, but project consenting sits with Holyrood. Scotland is a hilly nation of over 790 islands and plenty of restless wind-rich ‘wilderness’, but these areas are not empty – they support complex communities with their own multifaceted views on the perceived industrialisation of their own back yards.  

So, if we’re such a basket case, what’s the attraction? The obvious answer is Scotland’s huge natural resource and the quickening of processes to harness it. The Crown Estate claims as much as 28.8GW of new generating capacity will be built around Scotland’s coasts from the ScotWind leasing round alone. And that’s even before considering other assets like more tidal stream capacity than the rest of the world combined.  

Still, the upswing of interest feels particularly concentrated now, which suggests more factors at play. ScotWind, after all, was not a sudden process, albeit its projects are now inching towards critical decision points.   

An interesting additional dynamic for supply chain companies has been added via the UK government’s ‘sustainable industry rewards’ mechanism. Its intention is to incentivise offshore wind generators in particular to invest in more deprived communities and shorten their supply chains as they bid for electricity generation contracts. While some of the commitments have been watered down through consultation, the introduction of these rewards in 2025 could be about to change up the domestic supply chain landscape in Scotland. 

A wholesome attraction can be found in some of the reporting around Mingyang’s interest in Scotland, which despite offering the prospect of 1300 jobs, has been fiercely opposed by Stuart McDonald MP in particular. A base in Scotland, within the wider UK, could give the manufacturer a springboard into Europe that sidesteps current EU resistance to Chinese turbine manufacturers. Norway has already declined an equivalent offer.

Clearly, one or more of these factors is underpinning the latest wave of interest, but nuances around the view of renewables in this country can take a degree of adjustment, particularly for first-time entrants or investors. When Charlotte Street Partners work with companies of this type, or even counterpart advisers based in London, there is always some explaining to do. This is especially true if they are first-time entrants or investors.  

Alongside scrutiny at the highest levels of Scottish media and the government, there is also acute interest in the practicalities of these grand plans. While voters broadly support net zero ambitions, there are lingering concerns about visual impact, access to jobs, infrastructure, community benefit and – ultimately – the cost of their bills. And this extends to any organisation involved in the renewables space.  

For this reason, a Scotland-first communications and engagement strategy is vital, especially as projects move towards practical delivery. Communities, politicians and ministers expect representatives to be accessible, up-to-speed and accountable. Whether a company is headquartered in London or Seoul, there is a fundamental operational and reputational risk in trying to ‘do’ Scotland from afar.  

Against the backdrop of Scotland’s stuttering net zero ambitions, and the collapse of the Bute House Agreement, the now minority Scottish Government will be looking to make the most of any good news around inward investment in the renewables space. As a result, the spotlight on incoming companies, and those already operating here, is about to get even brighter. Under this light, a green tinge alone may not be enough.  

Altogether, there is an evolving opportunity in Scotland for renewables companies and their suppliers, but careful navigation is still required to understand the very specific nuances that are critical to successfully doing business here.