Written evidence submitted by Uplift (NRG0011)

Introduction

Uplift is a research and campaign organisation that supports efforts to create a rapid and fair transition away from oil and gas production in the UK. Our team undertakes research into how the UK's transition away from oil and gas production can be achieved in a way that is both compatible with climate targets and protects workers and communities currently dependent on the sector.  Given the significant role that Scotland will play in the UK’s mission to become a clean superpower, due to its abundant natural resources, Uplift has been undertaking research and analysis that particularly focuses on how the transition can be delivered in a way that benefits workers and communities in Scotland.

Uplift welcomes this public inquiry and the opportunity to present our views on the transition to net zero in Scotland’s energy sector, and how the UK Government can support a transition that maximises opportunities for jobs and economic growth. Our response draws in particular from the findings of two recent research projects: A New Deal for the North Sea and Clean Energy Made in the UK.

Q1. What impact will the UK Government’s approach to net zero have on Scotland’s oil and gas industry?

The transition to net zero, and the roll-out of offshore wind in particular, provides the solutions to managing Scotland’s declining oil and gas industry. To unlock this opportunity, the UK Government must work with the Scottish Government to take a proactive approach. 

The age of the North Sea basin means that Scotland’s oil and gas industry is already in steep decline. After nearly 50 years of drilling, the geological reality is that the transition away from oil and gas production in the North Sea is unavoidable and already underway, with reserves declining and becoming harder to reach. New licensing or other attempts to bolster the oil and gas industry cannot reverse this decline, as is evident from the ongoing decline in oil and gas jobs over the past decade, the same period as hundreds of new oil and gas licences being issued.

The transition to net zero, and in particular the planned roll-out of offshore wind energy, provides an opportunity to transform the North Sea into a hub for clean energy, delivering prosperity for the Scottish economy, for workers in high carbon industries, and for communities in industrial heartlands, particularly in the North East of Scotland. However, to achieve this, the UK Government must step in and work with the Scottish Government to take a proactive approach to managing the transition. To date, much of the responsibility for driving the North Sea’s transition has been left to oil and gas companies, who have neither the capacity for, nor are their interests served by, coming up with a broad and coherent transition plan that prioritises the needs of workers, the supply chain, communities, and the country as a whole. In the absence of a plan, workers and communities in Scotland are enduring the social and economic consequences of a disorderly transition.

The UK Government must urgently bring forward a credible plan for the future of the North Sea to ensure that Scotland reaps the multiple wider benefits from the North Sea’s transition to clean energy - from increased energy security, supply chain and manufacturing opportunities, job creation and community wealth-building - and to ensure those benefits reach workers and communities currently dependent on the declining North Sea. This plan should be developed in partnership with the Scottish Government, trade unions, workers and affected communities. The closure of the Grangemouth oil refinery provides a warning: government intervention needs to come early, the Scottish Government and unions need to be involved from the outset, and decisions cannot be left solely in the hands of industry.

- What state of readiness is the oil and gas sector in for the net zero transition?

The majority of oil and gas producers are not investing in the net zero transition. Just 13% of North Sea oil and gas producers intend to invest in renewables, hydrogen or CCUS by 2030.

The oil and gas sector has long positioned itself as a major partner in the UK’s energy transition, and the industry has been handed much of the responsibility for determining the transition’s shape and pace. However, recent research from Uplift reveals that the vast majority of offshore oil and gas companies operating in the UK are not shifting investment away from fossil fuels, undermining the industry’s claim to be a driving force behind the transition. Of the 87 offshore oil and gas companies operating in the UK, 11 companies (13%) intend to invest in either renewables, hydrogen or CCS by 2030, with just seven investing anything in renewable energy in that time. Only two of these will transition their investment portfolios to ‘majority’ (more than 50%) renewable energy projects by this date. Three-quarters of oil and gas companies in the UK plan to invest solely in oil and gas production between now and 2030, seeking to make the greatest returns possible while time allows, instead of investing in the UK’s transition to clean energy[1]. For some oil and gas firms, such as Shell and BP, this is part of a broader pivot away from investing in renewables.[2]

Both the financial investment and strategic vision of the oil and gas industry demonstrate a clear disinterest in driving the energy transition, and the lack of low-carbon investment plans by oil and gas companies reduces them to minor players in the UK’s future energy system. The Government must step in and take responsibility for managing the transition in the public interest.

- Is the scaling up of the clean energy sector keeping pace with the decline of jobs and investment in the oil and gas sector, or does the UK Government need to do more to close this gap?

The UK Government needs to work with the Scottish Government to bring forward a clear plan with concrete steps to ensure growth of the clean energy sector leads to job creation for workers in the declining oil and gas sector.

Jobs supported by the oil and gas sector have more than halved in the past decade.[3] Data from industry body OEUK shows that in Scotland specifically, the number of jobs directly and indirectly employed in oil and gas has fallen by nearly 40% over a decade, with 43,800 jobs lost in the period 2013 to 2022.[4]

Much of what is said about oil and gas job predictions is misleading. For example, UK-wide figures for oil and gas job losses were wrongly attributed as being Scotland specific in political debate last year.[5] These figures also often include induced jobs, meaning those in the wider economy supported by oil and gas workers’ spending, such as a job in a pub or cafe in Aberdeen frequented by oil and gas workers. It’s important to interpret many of these induced jobs as “at risk” rather than guaranteed losses with the decline of the oil and gas sector. The number of induced jobs could be maintained by the creation of an expanded manufacturing base and supply chain industry, as the wider economy would benefit from the spending of those directly and indirectly employed in these industries.

However, what is clear is that the transition is already underway due to the declining nature of the North Sea basin, with a corresponding decline in oil and gas jobs. This decline has happened despite the UK Government issuing hundreds of oil and gas licences over the same period. What is evident from this is that a strategy of doubling down on new oil and gas will not protect jobs in this maturing basin. A range of sources, including the North Sea Transition Deal[6] (NSTD), backed by Government and industry, and the UK Committee on Climate Change[7], all project declining employment in oil and gas regardless of the predicted levels of production from the basin. With the right policies, the solution to declining oil and gas jobs are in the clean energy rollout, but this requires strong government support.

As the clean energy sector scales up, there is a huge opportunity to create jobs for the oil and gas workforce. These long-promised ‘green jobs’ have so far failed to materialise in the numbers required. Whilst the UK, in particular in Scotland, has been world-leading in the rollout of offshore wind energy, this has not corresponded with equivalent success in job creation or local economic prosperity. This is largely because the manufacturing work - where the majority of job opportunities are in offshore wind - is being done abroad. To close this gap, the UK and Scottish governments must incentivise investment in domestic renewable energy manufacturing (see Q2 and Q3). More broadly, the UK Government needs to bring forward a long-term, properly-funded transition plan for the UK’s energy workers and communities. The need for workforce transition planning is now urgent for the well-being of workers and communities already experiencing the transition's sharp edge.

Q2. What UK Government interventions will be necessary to maximise the ability of oil and gas workers to find jobs in clean energy?

The Government should establish a thriving domestic wind manufacturing industry to create job opportunities for oil and gas workers to transition into.

The major rollout of offshore wind energy in the UK and Scotland provides an opportunity to create thousands of good quality clean energy jobs for oil and gas workers to transition into. Most job opportunities in offshore wind are in manufacturing, rather than operations or maintenance (unlike in the oil and gas industry, where there are more jobs available in the operations). However, successive governments have failed to grasp the opportunity to establish a thriving domestic wind manufacturing industry. Less than a quarter of the material content in a typical North Sea turbine comes from domestic manufacturers, with the majority coming from abroad.

Public investment in domestic manufacturing and assembly for renewables is critical if the energy transition is to create good jobs in Scotland. Uplift’s analysis suggests that Government intervention could help establish 30 new or upgraded manufacturing facilities in the offshore wind supply chain, providing 50% of the targeted components and critical materials needed for the offshore wind pipeline, supporting over 10,000 good quality, permanent direct manufacturing jobs and 13,300 indirect jobs in industrial heartlands and coastal communities, like Scotland’s oil and gas communities.[8] STUC analysis shows that there are currently no significant fabrication sites for offshore wind components in Scotland, and only two in development with approved sites and funding. If ScotWind developers source from Scotland at the scale committed to in the 2022 ScotWind Leasing round, this could potentially deliver peak direct employment of 25,000 jobs. To deliver on these commitments there needs to be an enormous ramp-up in the Scottish supply chain for offshore wind. Scotland will need 19 significant fabrication sites for offshore wind components (e.g. blades, nacelles, towers, foundations, floating substructures, cables).[9]

The Government should ensure renewables jobs are of good quality.

Improving the quality of jobs in the UK’s offshore wind industry is also necessary to support workers to transition. This means addressing concerns around wages, job insecurity, skills support and health and safety. The simplest, most efficient mechanism to drive up job quality across the UK renewables industry is to make entry into CfD auctions conditional on companies adopting good standards and practices, such as raising wages and trade union representation. Making public spending conditional on job quality provision is a tool of governments worldwide, including in Scotland and Wales, where public procurement has fair work conditions attached through the Scottish Fair Work First Policy and Wales’ Ethical Employment in Supply Chains Code of Practice.

We propose that entry into a CfD auction should be made conditional on two things: (1) developers and their significant contractors paying quality wages in line with national negotiated agreements or prevailing wages, as determined by the Secretary of State, and (2) developers and significant contractors adopting a Fair Work Charter (like those in Scotland and Wales), including the following criteria: trade union recognition and access, investment in training, skills and apprenticeships, and high standards across health and safety, transparency and whistleblowing, and equalities. Other targeted measures to improve basic job quality in the renewables sector include extending National Minimum Wage and other rights to all people working on the UK Continental Shelf and standardising the right to paid time off for essential training and skills development.

The Government should ensure jobs are located in the areas that need them most.

The UK Government’s clean energy mission must benefit the locations that need it the most, in particular communities that are at risk due to the transition and places with significant high-carbon employment and high levels of deprivation. The government will therefore need to deliver a significant programme of work in Scotland, in partnership with the Scottish Government, to ensure that Scotland’s oil and gas communities and workers are involved in transition planning, and benefit from an expanded renewables sector in Scotland. Building a thriving supply chain industry for offshore wind, with well-directed and targeted local investments, provides an opportunity to ensure new jobs and investment go to Scotland’s oil and gas communities. The UK Government should incentivise companies to locate their manufacturing facilities in these key target locations. The Clean Industry Bonus is one key mechanism for this, however it needs to be strengthened and built upon if it is to effectively support employment and the development of clean energy supply chains in Scotland (see Q5). In addition, the National Wealth Fund (‘NWF’) should be required to prioritise projects in deprived areas and energy communities, and strong public procurement provisions for local development should be applied to projects where a public body (e.g. GB Energy or the NWF) has an equity stake.

The Government should support the creation of accessible transition pathways for oil and gas workers.

Over 90% of oil and gas workers possess skills that are transferable to the offshore renewables sector.[10] The vast majority of these workers want a clear, accessible pathway out of high-carbon jobs, both because the industry is in decline and the work has become increasingly precarious.[11] However, to date, there has been no coherent strategy to transition the oil and gas workforce into clean energy jobs. The 2021 North Sea Transition Deal provides little support for workers and no workforce planning for areas where fossil fuel jobs are concentrated. The Deal’s people and skills plan lacks provisions for retraining, leaving offshore oil and gas workers facing costly duplication of qualifications, running to thousands of pounds, if they wish to work in offshore wind.

To address this gap, the Government should: 

●        Create a ‘Transition Scheme for Oil and Gas Workers’ which identifies and delivers recruitment and retention pathways to move the oil and gas workforce into clean industries with a long-term future. The Scheme should be overseen by the Office for Clean Energy Jobs (‘OCEJ’). This would involve conducting detailed skills mapping of the workforce involved in offshore oil and gas and its supply chain and subsequent skills-matching and jobs-matching exercises. OCEJ should deliver this skills and jobs matching process with engagement from unions and the oil and gas, renewables, and supply chain industries to ensure that it leads to easy access for workers to move into new quality jobs. The Scheme should include a training role, running the required skills upgrade courses for targeted sections of the oil and gas workforce, to enable a straightforward transition.

●        Use regulation to ensure the oil and gas industry does not abandon its workforce, and invests into upskilling workers to transition into low carbon roles. Where existing regulatory powers are not sufficient, additional levers can be created using primary legislation. This should require employers in the oil and gas sector to provide accredited training and time off to conduct the training, with accreditation that allows their workforce to work in low carbon industries / is consistent with the Offshore Skills Passport.

●        Establish a specific Job Guarantee & Welfare Support programme targeted at those whose livelihoods currently rely heavily on oil and gas. Strong social security systems in Germany and Denmark smoothed transition pathways for workers to low-carbon industries.[12] By contrast, the UK’s comparatively meagre unemployment support and punitive approach to welfare falls far short. The Government must address these shortcomings, including with a Job Guarantee and Welfare Support programme to support those who have worked long term in the oil and gas sector.

●        Provide support with skills development.  The UK Government should publish a strategic, long-term timeline of planned investments to allow local government, employers, and skills providers to coordinate job creation with skills planning. Skills Development Scotland should explicitly support workers and communities affected by decarbonisation, deliver regional green skills gap analysis, deliver coordinated training programmes to collectively prepare the oil and gas workforce to transition into clean energy, and proactively fund courses to fill shortages and to support energy workers looking for clean energy job opportunities.

●        Speed up the delivery of the Offshore Skills Passport as part of a broader plan to transition the oil and gas workforce. Industry efforts to deliver an Offshore Skills Passport – to allow workers to move from oil and gas to renewable energy projects without costly additional certification – have been long delayed. The UK Government should build upon its recent announcement to join the passport initiative as an official partner and establish a public body to administer it, with employers compelled to accept accredited qualifications.

The Government should ensure effective collaboration between the UK and Scottish Governments.

Meeting UK and Scottish net zero targets and maximising the opportunities created by the transition will require enduring and effective collaboration between the UK and Scottish Governments. Whilst energy is an issue reserved to the UK Government and Parliament, delivering a just transition for Scotland’s oil and gas workers requires close collaboration and coordination with the Scottish Government and Parliament. At present, the policy landscape for delivering a just transition is fragmented and incoherent - this must be urgently addressed by both governments. It is heartening to see that this collaboration has begun with a recent partnership around GB Energy to “maximise the benefits of its activities in Scotland”. This should be seen as a starting point for building out collaboration on the policies suggested in this evidence, such as developing an effective plan for the North Sea Transition and expanding Scotland’s domestic offshore wind manufacturing sector.

Q3. Are Scotland’s energy industry and associated supply chains well-placed to transition to clean energy generation, or is more support needed?

Greater public investment is needed to scale up clean energy supply chains in Scotland.

Currently, most clean energy supply chain needs in the UK are being addressed by overseas inputs. For example, the vast majority of the UK’s offshore wind capacity is owned by foreign companies and the typical North Sea turbine, of which there are over 2,600, contains more than three times as much material content from abroad as it does from domestic manufacturers[13]. As the UK accelerates the clean energy transition, and we are about to ramp up the rollout of offshore wind significantly, now is the time to firmly establish offshore wind manufacturing capacity in Scotland. Greater public investment is needed to scale up domestic supply chains in Scotland. The STUC estimates that a total of £2.5 - 4.5bn of investment is required in Scotland and that funding sources, across both Scottish and UK Governments, leave a gap of at least £900mn - £3bn to be filled.[14]

●        Building out wind manufacturing: Research by Transition Economics shows that to create the jobs that ScotWind developers have promised by committing to invest 38% of their overall supply chain spend in Scotland, there needs to be an enormous ramp-up in the Scottish supply chain for offshore wind. Scotland will need 19 significant fabrication sites for offshore wind components (e.g. blades, nacelles, towers, foundations, floating substructures, cables). Currently, Scotland has no significant fabrication sites, with only two in development[15].

●        Upgrading ports: UK ports are crucial for the delivery of offshore wind, but chronic underinvestment means that the current port infrastructure is not set up to deliver the energy transition. Many don’t have yards large enough for the fabrication and assembly required, which has undermined local content, domestic manufacturing and job creation. For example, all five of Hywind Scotland’s offshore wind platforms were towed from Aberdeenshire to Norway for repairs, because of the lack of port infrastructure - dubbed a “national disgrace” by former UK offshore wind champion.[16] There is a need to rapidly invest in upgrading port infrastructure, making ports ready for the rollout of renewable energy in Scotland.

Q5. How can GB Energy, and other ways of backing industry (including funding), most effectively support employment, economic growth and the development of clean energy supply chains in Scotland?

GB Energy

GB Energy should proactively support the expansion of domestic supply chains for clean power industries, ensuring that money spent delivering the clean power mission also delivers good jobs for workers in regions that need them, including Scotland's oil and gas communities. Where manufacturers and suppliers hesitate to invest in growing UK supply chains, GB Energy can play a strategic role.

GB Energy should also proactively support delivery of just transition pathways for the North Sea oil and gas workforce. It has the potential to create quality jobs, both directly (on its projects and on its sites in Aberdeen, Edinburgh and Glasgow) and through its supply chains, and to support oil and gas workers with transition pathways. For example, adopting recruitment strategies and using its investment and procurement powers to target former oil and gas workers proactively. GB Energy can play a role in agreeing and delivering a coordinated and funded transition plan, for example, by coordinating workforce transfer and upskilling programmes working with private sector partners.

Like its counterpart state-owned energy companies in Denmark, France and other countries, GB Energy should set high standards on job quality in the energy sector including trade union recognition, good industrial relations and strong pay and conditions.

Strong public procurement provisions should be applied for local development to projects where GB Energy has an ownership / equity stake,  and projects located in deprived areas and energy communities should be prioritised.

Clean Industry Bonus (CIB)

The CIB is a welcome start to support the growth of domestic clean energy supply chains and is an improvement on the previous Government’s Sustainable Industry Rewards scheme. However, the CIB is currently too limited in its scope, funding and ambition, and must be strengthened and built upon if it is to effectively support employment and the development of clean energy supply chains in Scotland.

In particular, the CIB should be strengthened to prioritise job quality, create jobs in key target locations, and provide transition pathways for oil and gas workers. A core element of the CIB should be reviving industrial heartlands and delivering jobs in key locations - and many of these will be in Scotland. A manufacturing investment bonus would encourage investment in new manufacturing facilities for renewable supply chains in key locations and could grant higher payments for projects that upgrade facilities currently within the oil and gas supply chain. The CIB must also incentivise and reward clean energy developers who drive up job quality standards and who support workers to transition, for example by incentivising employer participation in a ‘Transition Scheme for Oil and Gas Workers’.  The CIB package should also go beyond this type of bonus incentive payments to include conditions for accessing CfD auctions and enhancing regulations.

A full proposal of how the Clean Industry Bonus should be designed is laid out by Uplift in the Clean Energy Made in the UK report.

National Wealth Fund (NWF)

The NWF should invest in clean energy supply chains, as well as in upgrading ports and docksides to ensure they are ready for the rollout of renewable energy and to create hubs for clean energy jobs.

£1.8 billion of the NWF has been earmarked to upgrade ports and build supply chains, which presents an opportunity to develop strategic, long-term port and manufacturing infrastructure. This planned public investment must be expanded, and the NWF must prioritise taking equity stakes in ports as critical national infrastructure. Any rollback will directly undercut the UK’s ability to become a clean energy superpower.

There must be strong public procurement provisions for local development in projects where NWF has an ownership / equity stake. The NWF should be required to prioritise projects in deprived areas and energy communities.

Supportive policy

All three of these policies need to include:

●        credible plans that get into the specifics of where and how opportunities will be created and that transparently explain how these policies will result in new jobs;

●        balanced governance, so that private interests do not dominate them and instead centre workers, communities and the public interest;

●        need to be coherently integrated into a wider transition plan for the North Sea.

January 2025