What Does Scotland's Rising Energy Costs Mean For Your Casks?
Updated: Mar 3
The Whisky Industry
Scotland’s whisky industry has long been a cornerstone of the country’s economy, with over 140 active distilleries producing some of the world’s most sought-after and valuable spirits. However, in recent years, the industry has faced challenges related to rising energy costs, which threaten to potentially erode profitability and competitiveness.
Let’s take a closer look at the whisky industry; Scotland has been producing whisky for centuries, and the process has remained largely unchanged over the years.
Whisky is a significant contributor to Scotland’s economy, with the industry estimated to be worth over £6 billion annually. In addition to providing jobs and income for local communities, tourists from around the world, distillery tours, and tastings are popular attractions. The industry is also a source of national pride, with Scotch whisky recognized as a uniquely Scottish product with a long history and heritage.
However, as with any industry, there are challenges. One of the most pressing issues is rising energy costs. Distilling whisky is an energy-intensive process, requiring large amounts of heat and electricity. As energy costs have risen, many distilleries have been forced to cut back on production or seek out more efficient methods of operation to maintain profitability.
This increase is the global shift toward renewable energy sources, which has led to reduced investment in traditional fossil fuel-based power plants. In addition to the war in Ukraine, the global shift towards renewables had led to higher prices for traditional energy sources such as natural gas and oil, which are still the primary fuels used by many distilleries. There have also been regulatory changes in recent years aimed at reducing carbon emissions, which has led to additional costs for businesses in the form of carbon taxes and other fees.
To address these challenges, most distilleries are turning to renewable energy sources such as wind and solar power. In fact, some are already generating a significant portion of their energy needs through on-site renewable energy production. For example, the Balmenach distillery in Speyside installed a biomass boiler that uses wood chips to generate heat and steam, reducing the distillery’s reliance on fossil fuels. Other distilleries are exploring similar options, such as installing solar panels or wind turbines on their properties.
Another solution is to increase energy efficiency within the distilling process itself. This can be done through upgrades to equipment or changes to operating procedures that reduce energy consumption. For example, some distilleries are exploring ways to recover waste heat generated during the distilling process and use it to heat water or other parts of the production process.
Despite the challenges posed by rising energy costs, Scotland’s whisky industry remains a vital part of the country’s economy and cultural heritage. By embracing new technologies and sustainable practices, the industry can continue to thrive while reducing its environmental impact and dependence on traditional energy sources. As Scotland looks toward a future powered by renewable energy, its whisky industry is sure to play an important role in shaping that future.
How will this affect your cask?
As a cask owner, rising energy costs may actually be a good thing for your investment. As you are aware, the key reason for prices of whisky continuing to increase is a complete disconnect between supply and demand, and this will remain the same for the foreseeable future.
Should distilleries start to produce less due to energy price hikes, the abovementioned disconnect between supply and demand will only be exacerbated, so prices may go up even faster in future.
Meanwhile, annual storage costs may increase over time, but this will more likely be driven by general inflation, as, unlike wine, whisky does not have to be stored in either a heated or cooled environment (depending on the temperature outside), so this will not generally be affected by a rise in energy costs.
So, in conclusion, this may in fact be an opportune time to consider adding an additional cask or casks to your whisky investment portfolio, in particular since Pound Sterling is still relatively cheap.