No fines issued over ScotWind companies breaking promises

Yesterday Common Weal hit the front page of The Herald with a major story about the ongoing problems with the ScotWind offshore renewable project. It has been revealed that despite Scotland losing £7.4 billion worth of promises of supply chain jobs and activity, no company involved has been fined for reneging on its commitments.

In 2023 we published the followup to our first policy paper on ScotWind. In ScotWind: One Year On, we examined the “Supply Chain Development Statements” (SCDS) published by each of the companies that had won an option to develop a section of Scotland’s offshore regions for the purposes of generating renewable energy.

In that paper we found that in the initial statements put forward by companies about how much they were going to invest to develop their plans, just 38% was earmarked for investment within Scotland. This was despite Government claims that the poor running of the initial auction itself – which saw Scotland lose out on potentially tens of billions of pounds of upfront fees – would be more than compensated for by ongoing “supply chain benefits”.

To prevent companies from winning a bid based on outlandish promises that were immediately broken, a system of fines was put in place by Crown Estate Scotland that would be levied if companies failed to deliver on their promised outcomes. In theory, the company could even have its option to develop renewable energy in their sector revoked if the supply chain promises dropped below a certain level.

However, in our 2023 paper we warned that that system of fines was far, far too low to do its job. A company would only lose its option to develop if supply chain investments fell below 25% of its SCDS promise and the maximum fine that could be levied short or revocation – that is, if the company delivered £1 over 25% of its promise – was just £250,000. Given that each SCDS covered investments on the over of hundreds of millions of pounds to several billion pounds we warned that the fines were so low as to actively incentivise broken promises where breaking the promise and paying the fine was cheaper than fulfilling it.

This warning was repeated earlier this year by Audit Scotland who came to essentially the same conclusion, just as it was announced that developers had revised their SCDS plans and had moved or scaled back £7.4 billion worth of commitments in Scotland.

Naturally, upon this last piece of news, Common Weal submitted a Freedom of Information request to find out if any companies had been fined for dropping their commitments. The answer came back saying that no fines had been issued and that companies are able to revise their plans before final lease decisions are made.

The excuse given by the Crown Estate and the Scottish Government is that it is still too early in the process to start issuing fines. This plainly leads us to one of two conclusions.

Either the fines will be issued at a later date – just as the options are converted into formal development leases - and that their issue is now inevitable, but the companies have already pulled back on their commitments which shows that we were right and the fines failed to prevent companies from scaling back their promises.

Or, worse, the fines will not be based on the companies’ initial supply chain statements but on the latest revision of the statement judged right before the lease is issued.

This would allow companies to move the goalposts to where ever they have to be either to avoid losing the lease entirely or merely to balance what they want to avoid in investment costs versus the cost of the fine for breaking their promises.

Either way, the system has already shown itself to be unfit for purpose regardless of whether or not fines have been issued or will or won’t be in the future and that this outcome was obvious from the very start.

Common Weal is a champion of renewable energy and Scotland’s potential to drive forward a Green New Deal. ScotWind is the very opposite of how to do this, with it being almost designed to actively minimise the benefit for Scotland from our own resources, while allowing some of the world’s largest companies to do what they want, when they want and for the benefit of only their own shareholders.