Written evidence submitted by Prospect (NRG0014)
Scottish Affairs Committee inquiry on GB Energy and the net zero transition – Call for Evidence
Written evidence submitted by Prospect Trade Union, 10th January 2025
The ongoing contraction of the oil and gas sector is common knowledge amongst workers, communities and government. However, neither the Scottish nor UK government have concrete plans to deliver a Just Transition for those affected. To date, both governments have relied on an orthodox market-orientated economic approach and, in particular with the Scottish Government, focussed on courting foreign inward investment. Whilst Prospect accepts that private investment (both foreign and domestic) has a role to play, it will not, of itself, deliver a Just Transition for workers and communities in the oil and gas sector. It has not done so as the sector has declined over the last 20 years and there is no reason to believe that continuing this approach will deliver different results.
The new UK government is promising a more strategic approach. Firstly, by committing to clear objectives (Clean Power 2030, Net Zero 2050). Secondly, by outlining plans as to how those objectives can be met (Clean Power 2030 Action Plan, NESO’s forthcoming Strategic Spatial Energy Plan). Thirdly, by establishing public institutions which are able to finance investment in projects necessary to enact such plans (GB Energy, National Wealth Fund). And, fourthly, by establishing an industrial strategy to ensure that the energy infrastructure we install is, to the greatest extent possible, manufactured in the UK (Invest 2035). Through these things, the UK government is putting in place a framework which will allow investment in the UK’s energy supply and infrastructure to be directed in the public interest, rather than flow according to the whims of global market forces. Re-establishing the capacity of the UK state to direct investment in this way provides an opportunity to help achieve a Just Transition, by ensuring that clean energy investments are made in communities which have historically relied on high-carbon energy infrastructure as a source of jobs and investment. However, for this to happen, the Just Transition principle needs to be baked into this framework at every level. But this has not happened. Admirable work has been done to construct this new strategic framework, but the phrase ‘Just Transition’ is barely mentioned across the key documents establishing it. The UK government must do much more to ensure that the coming wave of clean energy investment is consistent with the Just Transition principle and that the decline of high-carbon jobs is matched with the expansion of low-carbon jobs, in the right areas, at the right time. If it doesn’t do this, the transferrable skills of workers leaving the oil and gas sector will go to waste and historic oil and gas communities will decay, requiring long-term state support (e.g. out of work benefits, regeneration funding) that will outweigh the short-term cost of redirecting investment.
Regarding the transition of workers from high to low-carbon industries, there is evidence that skilled workers such as engineers and scientists are transitioning to jobs with low carbon employers. However, there is little indication that jobs are being created for semi-skilled or skilled manual offshore workers on the production side, and it’s clear that offshore wind will not deliver the same range or number of jobs in operation as oil and gas. Developing domestic manufacturing capability and supply chains for emerging clean energy technologies would provide such jobs and help compensate for this. However, there has been little progress on that front. The previous government focussed on introducing revenue support mechanisms for emerging energy technologies, but even where they have been effective at inducing significant levels of private investment (e.g. the Contracts for Difference scheme and offshore wind), not nearly enough was done to ensure that the de-risking of investment was made conditional on building up domestic manufacturing and supply chains. This needs to change for Scotland’s transition to clean energy to be a Just Transition.
The UK government needs to address the portability of skills between oil and gas and clean energy jobs. Whilst safe methods of working should never be compromised there should not be requirements for workers to hold multiple qualifications from different industry bodies where the skills are common. Work done on the common skills passport is welcome but it still does not go far enough. Moreover, the employment model which has come to dominate the oil and gas production economy is based largely on ‘self-employed’ workers (a practice which largely benefits employers), which means that where retraining is a genuine requirement (rather than due to disagreements between internal industry bodies such as the Oil and Gas Contractors Association and Global Wind) the costs of this retraining is being passed on to workers, who already face a reduction in wages when clean energy jobs are compared with oil and gas jobs. This mitigates against workers transitioning and means that employers in the oil and gas sector are not meeting obligations to their workforce. In comparison, the transition away from coal in the electricity sector saw widespread employer-funded training and resettlement programmes. If employers in the oil and gas sector are not going to voluntarily fund similar kinds of schemes, the UK government should increase taxation on the sector to fund them.
The UK as a whole, not just Scotland, faces a demographic time bomb within its existing energy sector. Research commissioned by the National Grid suggests that the sector will need 400,000 new recruits to help the UK achieve Net Zero by 2050, with over a third of these recruits simply replacing those leaving the existing the workforce. In the short run, the same analysis forecast that 117,000 new jobs would be required by 2030 (65,000 new roles, 52,000 replacement roles) and this was all before the Clean Power 2030 target was instituted.
By making clear policy commitments (Clean Power 2030, Net Zero 2050) and outlining how it plans to achieve such objectives (Clean Power 2030 Action Plan, Strategic Spatial Energy Plan) the new government is providing employers in the sector with a reasonable amount of certainty as to the future demand for their goods and services, which will help them with workforce planning decisions. Nevertheless, more support is also needed from the education system to ensure there are enough workers entering the sector. Education is a devolved matter, but the UK remains a single employment market and there is evidence of migration for jobs both into and out of Scotland. Therefore, the ongoing shortage of technical apprenticeships across the UK should be priority for both UK and Scottish governments. Colleges report that technical apprenticeships are almost always heavily oversubscribed, and there are blockages to expansion in both staffing and physical resources (e.g. accommodation). More needs to be done in under-16 education (and even in pre-secondary education) to elevate the attractiveness of STEM jobs in clean energy and, in particular, the distribution and transmission of electricity. To tie this all together, the UK government should establish a comprehensive cross-sectoral workforce plan to address emerging skills gaps and ensure that all subsectors vital to the transition are making the necessary investments in their workforces. If actions such as these do not happen, the government’s objectives will not be achievable and clean energy subsectors risk descending into a counterproductive struggle over a limited supply of workers with the relevant skills.
The UK Government should also take steps to consider an approach similar to the Fair Work conditionality operating in Scotland as a UK wide feature, ensuring that companies who benefit from public investment deliver high quality jobs delivering good terms and conditions of employment, pay and pensions to workers, as a means of encouraging recruitment and retention.
In his recent speech to the Nuclear Industry Association, the Secretary of State for Energy Security and Net Zero described Small Modular Reactors (SMRs) as a “massive industrial opportunity for Britain” and said we should be open to “the potential of SMRs to power the fourth industrial revolution, just as coal powered the first”. The Secretary of State also recognised the substantial economic benefits of conventional nuclear and its supply chain to act as an “economic engine” and create good jobs. Scotland should not be the only part of the UK which misses out on these benefits. Therefore, the UK Government should continue to encourage the Scottish Government to see SMRs as a new technology, which has a rightful place in the sector alongside renewables, and thus allow nuclear sites such as Hunterston, Torness and Dounreay to benefit from investment in new nuclear.
Transmission infrastructure will need to be expanded to deliver power generated by Scotland’s clean energy assets to where it is demanded, however, it is important that any planning reform designed to facilitate this ensures that robust safeguards remain in place to protect areas of scientific and environmental importance.
As outlined in our answer to question one, GB Energy forms part of a new framework being instituted by the UK government which will allow investment in the energy sector to be directed in the public interest. GB Energy provides an opportunity to make investments which (a) boost the UK’s energy security, (b) provide a financial return to the exchequer, and (c) provide an economic stimulus to local areas in most need of them. A market-oriented approach would not deliver all of these things simultaneously and the government should make the most of GB Energy’s ability to do so.
As well as making such investments, GB Energy can also promote the delivery of high-quality, domestically based jobs through conditionality, by taking an approach similar to the Scottish government’s Fair Work First agenda. Where GB Energy is providing financing only (e.g. lending or taking equity stakes, rather than operating projects itself), that financing should be conditional on good jobs and supporting domestic supply chains. The same principle of conditionality should apply to private businesses in receipt of other forms of public financial support in the energy sector, such as financing from the National Wealth Fund and revenue support through the Contracts for Difference scheme. (Public financial support in the form of loans and minority equity stakes creates both a financial asset as well as a financial liability, therefore, the ramping up of such support would not affect public sector net financial liabilities (PSNFL), the UK government’s key measure of debt for its fiscal rules.)
In order to ensure the National Wealth Fund with Just Transition objectives, it would be beneficial to add trade union representation to its board alongside representatives of industry and finance.
The UK government’s ‘Securonomics’ agenda has recognised that the cheapest is not always the best when it comes to procurement and supply chains, and by moving away from this approach, we have an opportunity improve energy security while creating a virtuous cycle of investment in Scotland’s economy. Direct public investment will create public wealth which can be reinvested and introducing conditionality to private investment will help spur investment in the domestically based supply chains.
Reserving seats on the board of GB Energy for each of the devolved administrations would be one way of promoting cooperation. At a minimum, funding decisions taken which impact any of the devolved nations must be fully transparent and to must involve consultation with devolved governments and their advisory bodies, such as the Just Transition Commissions of Scotland and Northern Ireland. As highlighted previously, a Just Transition will only be achieved if the principle is baked into every level of the framework that governs the clean energy transition.
The Highlands and Islands is a geographically amorphous area which is not easy to define. Nevertheless, it is clear that there are communities within this area which suffer from fuel and income poverty, even though a large portion of Scotland’s renewable energy infrastructure is located in and around the Highlands and Islands. Community energy ownership is a sensible answer to this contradiction. Although there are certain issues which need to be addressed if benefits are to be maximised, such as the lack of electric vehicle infrastructure and the lack of public transport as an alternative to private vehicle ownership.
If such barriers are addressed community ownership could be transformational. However, the UK has a poor track record on this. The Just Transition Commission has publicly called for communities to have a statutory right to community ownership or community stakes in developments and this is one area where GB Energy could play a role. For example, one of the roles of GB Energy (as set out in its founding statement) is to help deliver community energy ownership through the Local Power Plan. This strand of GB Energy’s activities should be ramped up as soon as soon as its ability to deliver benefits to communities has been demonstrated. Where clean energy projects are led by private developers and are too big to be wholly owned by the communities which host them, those communities could be given a stake in the project (this could be a condition for receiving financing from GB Energy or other public institutions).
All of that said, it is worth highlighting that just as not every part of Scotland is appropriate for clean energy projects, not even every part of the Highlands, Na h-Eileanan Siar, or Argyll is. Therefore, there needs to be mechanisms in place to ensure that we don’t simply recreate previous inequalities from geography and investment decisions with new inequalities from geography and investment decisions.
The transition away from coal in the Ruhr, Wallonia and Northern France offer examples of planned transitions, rather than transitions left to markets, which can help inform the Scottish and UK government’s approach to transition away from oil and gas. On the other end of the spectrum, we can point to transitions away from industries in the UK which have overwhelmingly been market-led (e.g. steel, shipbuilding) and provide lessons of how not to effectively manage such transitions.
January 2025
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