Up to 750 new Scottish jobs are in danger of going abroad because of a “Catch 22” stand-off over European regulations which rule out Scottish Enterprise funding for a company making revolutionary noiseless wind turbines.

Neither the Scottish jobs agency nor private investors involved are willing to step in without a written guarantee from each other — but neither will issue one first.

The turbine firm, based just outside Edinburgh in Midlothian, wants to build a Scottish factory but now fears it may have to accept an offer from a major European firm to make them in Germany, despite securing promised backing from one of the world’s biggest financial firms to site the factory in Scotland.

Last night, after being told of the problem by The Times, Scottish Enterprise promised new efforts to find a solution.

“We are caught in a Catch-22 situation,” said Charlie Silverton who, with fellow Edinburgh University graduate Dave Anderson, founded Renewable Devices in 2002. The company already has enough orders to sustain 100 jobs and sees demand for its product eventually leading to 750 jobs.

In three years, the duo has successfully designed and installed over 100 of their turbines on offices, shops and houses, overcoming the problems of other domestic-scale wind generators, such as damaging vibration and noise.

A novel rotor design and sophisticated electronics make their machine twice as effective in harnessing wind energy as rival designs. By encasing the blades in a circular rim, they have also made their turbine virtually noiseless. “It makes about the same noise as a refrigerator and it is quieter than a tree rustling in the wind,” Mr Anderson said.

At moderate wind speeds, the turbine can generate 1.5kW of electricity, about half that used by an average household and much more than that produced by other small turbines.

In the last two years, Renewable Devices, which now employs 40 people, has sold 1,450 turbines. Tesco has put them on supermarket roofs. They have also been installed at the Sky Tower in Auckland, New Zealand’s highest building, and the Corning Tower in Albany, the tallest building in New York State.

“We have orders to ship over 100 a month to the US and 200 a month to Europe,” said Mr Anderson. Now the company urgently has to increase its production facility to meet demand.

Insurance Australia Group (IAG), which is one of the world’s biggest insurance companies and committed to environmental sustainability, has bought a 2.5 per cent shareholding in Renewable Devices at a price valuing the company at £49.6 million. It wants to invest up to £5 million more to fund the expansion Renewable Devices needs. But IAG policy dictates that any investment must be backed by government money. So earlier this year Mr Anderson and Mr Silverton approached Scottish Enterprise.

The agency told them that, partly because of European Union rules on subsidies, it could not deal with them directly, and any approach would have to be made by a private investor who had thoroughly checked their company’s viability.

Although IAG has done these checks, it is not willing to make any written promise to invest until it has a written guarantee of Scottish Enterprise support which, the agency says, it cannot issue without a written application from IAG.

Mr Silverton said a major German firm with car-making interests is keen to build the factory in Germany. “We have been told it could employ up to 750 people,” he said.

The two entrepreneurs met enterprise minister Jim Mather last week to try to break the deadlock. “We got the impression that he fully understood the issues,” Mr Silverton said.

Yesterday Gerald Kelly, Scottish Enterprise director of investment, said: “Our co-investment model means that we can’t invest directly with a company but instead we co-invest alongside private-sector partners, who are responsible for carrying out due diligence on specific deals. IAG is currently not one of [the] approved partners but we have indicated to the company that we would be more than happy to discuss this opportunity with IAG with a view to bringing them on board.”

A Scottish government spokesman said that Mr Mather’s aim is “to work with the company and Scottish Enterprise to try to find a solution”.

COMMENTARY By Peter Jones

Despite being one of Europe’s windiest countries and having plenty of engineering expertise, Scotland somehow managed to lose out in the rise of wind energy caused by the shift from high to low-carbon electricity generation.

Scotland’s hills got the turbines but most of them were designed and manufactured elsewhere — notably in Denmark and Germany.

The progress made by Renewable Devices in producing an effective and virtually silent domestic-scale wind turbine is not only a remarkable achievement by two Edinburgh University graduates, but also offers a chance to recapture some of that lost technological and manufacturing lead.

With resistance to industrial scale wind farms growing, despite the warnings of the threat posed by climate change, small turbines on rooftops look like a different and more publicly acceptable solution.

The fact that this small company has managed to sell 1,450 of its machines world-wide at a price of about £6,000 each is evidence that this is how the rest of the world sees it. It seems extraordinary that a bureaucratic snarl-up is preventing the creation of what could be a major manufacturing operation, especially if Renewable Devices’s designers succeed in their goal of reducing the price of their turbines to about £2,000.

Scottish Enterprise says that it has made big efforts to find the information it needs to make progress; the company’s founders say their efforts to meet Scottish Enterprise have been rebuffed.

But it seems clear that unless these lines are uncrossed, another potential lead for Scotland in wind energy will be lost.

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