The UK Government plans to hold 'capacity auctions' in December 2014 to ensure that there is sufficient electricity generating capacity in place to ensure that the UK electricity system can buttress its currently marginal surplus available generating capacity margins by 2018. The British electricity industry will, in the event of a 'YES' vote in the Scottish Referendum taking place in September, expect a pretty rapid reassurance from the UK Government that the incentives will continue to be paid in respect of existing renewable energy schemes. They will want, what is known in the trade as, 'grandfathering' of Renewable Obligation Certificates (ROCs) for existing Scottish investments, at least, and probably, all schemes installed prior to independence.
Failure to provide such assurances would, in pretty short time, plunge the British electricity system into crisis, if not disaster. If the UK Government did cut off the incentives through the Renewables Obligation (RO) paid to owners of existing Scottish renewable projects (mainly windfarms) the people who would suffer directly would the owners of those installations. These are particularly Scottish Power (owned by Iberdrola, a Spanish based multinational) and SSE, but also others whose business is mainly south of the border. Both Scottish Power and SSE, of course, have extensive holdings and planned power station investments in England and Wales.
These companies, who would thus face major financial issues, would no doubt be consulting their lawyers about suing the British Government about retrospective action to deprive them of their assets. They (and, no doubt, other major potential power plant developers) would also be distinctly under-impressed about investing in the new power stations that the British Government expects the electricity industry to deliver very quickly. The Scottish Government could well retaliate by insisting that Scottish power stations would have to pledge their capacity for Scotland rather than enter any binding capacity agreements with the South.
The result could be that the UK Government would have to postpone the capacity auctions. Alternatively the prices the (r)UK system would have to pay bids for the extra capacities would increase dramatically as the amount of generation offered would be significantly reduced, both by the cancellation of plans to build new power stations and reductions in offers from existing power plant. Some companies would fear they could no longer afford the investments and the Scottish power plant would be withdrawn from the British electricity mix. Scotland actually has a much more healthy generation capacity margin compared to England, something that is grudgingly recognised by even the UK Government in their anti-independence reports.
Postponing the capacity auctions would only make the situation worse, as the National Grid would become increasingly unable to balance generation and supply, leading to them having to pay out larger and larger sums to industry and business to stop consuming electricity during peak periods. That would also increase electricity prices and make real blackouts more likely.
Probably the Scottish Government would not actually have to formally warn the electricity industry against engaging in the UK Government's capacity auctions. This is because the British Electricity Trading and Transmission Arrangement (BETTA) would have to be cancelled by the UK Government to stop Scottish consumers simply switching their suppliers away from Scottish Power and SSE to other suppliers operating mainly in England and so having the same market choices, and the same prices, as English electricity consumers. The British electricity system would thus be split into two as part of the UK Government's efforts to cut off its Scottish (power station) nose to spite its face.
I am sure the public would become rather angry with the politicians as this situation became more apparent. Pressure on the UK and Scottish Governments to reach an accommodation would intensify. Since the Scottish electorate would not countenance an outcome that involved significant increases in their power bills, the plausible outcome would be an agreement that ensured 'grandfathering' of ROCs by the UK Government, one assumes, at least for schemes already installed and most likely installed up until independence itself. The issue of meeting the EU Renewables target would be a card that would be played by the Scottish Government, regardless of how quickly it would join the EU. On top of this the British electricity industry would be bearing down with their lawyers and public opinion on the Westminster Government to act to ensure as near as possible to a 'business as expected' situation - this includes the UK Government not changing laws with retrospective consequences for existing renewable energy investments.
For these reasons, the UK Government's efforts to sow uncertainty over electricity prices seem implausible. Uncertainty would multiply on both sides of the border. If the UK Government did decide to carry out its implied threat the consequences would be both expensive and potentially disastrous for electricity consumers in England and Wales.
You can see myself and others discussing these and related issues at a recent meeting of the Economy Energy and Tourism Select Committee of the Scottish Parliament at http://m.youtube.com/watch?v=
