Investing in Scotland Energy Independence

In 2002, I got a reality check on how Hollywood distorts history.

While sitting in a pub in Glasgow for a few hours, full of deep-fried Haddock and very heavy, malty ale, I had a fascinating conversation with the bartender. Sadly, I don’t remember his name, but I do recall his demeanor.

A tall, lanky guy with a chip on his shoulder and an arrogant sway in his walk, this bartender kept telling me about how badly he wanted to visit the United States. He was saving up so he could take a road trip from D.C. to Los Angeles. Said he wanted to party in New Orleans, meet a “real” Texan, and burn Hollywood to the ground.

Yes, he definitely had a violent streak in him. I could tell. But his hang-up with Hollywood was based on little more than its interpretation of William Wallace in the movie Braveheart.

The whole thing was rubbish, he told me.

Lies, all lies.

I remember him being particularly upset about the face painting, saying that William Wallace never painted his face that way and that such a tradition was from an earlier era — before Wallace was even born.

Now, I don’t know much about Scottish history, but here’s what I do know…

Scotland is one of the most beautiful places I’ve ever visited in my life. Even with the steady rains and gray skies, you’ll find fewer places with such breathtaking views. The Isle of Skye, Rannoch Moor, the tiny village of Crovie.

Hell, even the views from the rest stops will blow you away. I’m not kidding.

But I’m not writing about Scotland today to tell you about the views.

Independence

There are few folks in the Western world who don’t know that tomorrow, the good people of Scotland will vote to separate from the UK.

We’ll find out shortly how this vote will go down. But in the meantime, I do know there are plenty of folks who are opposed to independence. As my colleague Geoffrey Pike noted on Monday…

Most politicians and other defenders of the establishment are completely against this idea, using fear tactics and bribes in order to get the Scottish people to remain in the U.K.

It is no surprise that most of the establishment is against independence for Scotland. They always prefer centralization. And they don’t know the ramifications of this, particularly as it pertains to the European Union. This could potentially cause an eventual breakup of the European Union.

Now Scotland’s two biggest banks are joining the opposition to Scottish independence. Lloyds Banking Group and Royal Bank of Scotland Group both indicated that they would likely move their headquarters to London, or somewhere else in England, if there is a majority “yes” vote for independence. Both banks are partially state-owned.

Then there’s the energy issue.

If I Were Scottish…

Those who fear an independent Scotland have been quick to warn that if Scotland breaks free, it could affect the country’s ability to maintain its energy economy as it does today. But if I were a Scot, I wouldn’t hesitate to call this bluff.

First of all, if Scotland frees itself from the UK, it has been suggested by insiders that Scotland would be entitled to about 90% of Britain’s oil wealth based on the division of the water rights of the two countries.

Bloomberg also noted that Scottish renewable energy projects (mostly wind) are supported through a nationwide program called the “Renewables Obligation.” Some warn that in the event of an independent Scotland, the mandate would no longer have any validity in Scotland.

Never mind the fact that Scotland exports about 25% of its electricity and delivers nearly 50% of the UK’s wind power capacity.

The entire UK is starved for energy, and Britain doesn’t have the luxury of turning down a steady supply of power from Scotland. Especially “clean” power. The way I see it, this gives Scotland an advantage.

The only suggested downside is that in the absence of the big banks, many of the new renewable energy projects in development will either lose funding or never get it to begin with. But I’d call that bluff, too.

Scotland has one of the best wind resources in the world — particularly offshore. If any of the big UK banks decide to halt funding, I can guarantee you there are plenty of other banks, private financiers, or public funding companies — like Hannon Armstrong (NYSE: HASI), for instance — that would be more than happy to finance some of those assets.

Sure, there will be regulatory hurdles at first, and yes, there will be some issues with the potential absence of subsidies. But the need for subsidies is not as great as it was 10 years ago. In another few years, they won’t be needed at all, particularly in Scotland.

My point is that I think worries over a disrupted renewable energy market in Scotland are the result of little more than veiled threats and fearmongering.

Rest assured, Scotland is an energy powerhouse. The country’s wind and oil resources are not to be underestimated. And neither are its people!

To a new way of life and a new generation of wealth…

Jeff Siegel

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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.

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