Written evidence submitted by RWE (NRG0018)
10th January
RWE submission to Scottish Affairs Committee inquiry into GB Energy and the net zero transition
RWE is the UK’s leading power generator, and a leading renewable energy company, generating enough electricity for around 12 million homes via a diverse portfolio of onshore and offshore wind, hydro, biomass and gas. We intend to maintain the pace of our investment in the UK, having invested €3 billion net between 2021 and 2023, with an ambition to invest around €8 billion net in the years 2024 to 2030 in developing clean energy projects in the UK. We are investing today, with 2.2GW of new renewable projects currently in construction, including three new onshore wind farms totalling 169MW in Scotland.
Within this, RWE is a committed, long-term partner for Scotland and is a key market for our future development plans. We currently employ around 100 people in Scotland and operate approximately 480MW of installed renewable capacity across 26 sites, including 15 hydropower, 10 onshore wind and one offshore wind projects. This is complemented by our 55MW biomass combined heat and power district heating plant at Markinch, Fife.
We plan to continue expanding our renewables portfolio in Scotland, representing an important element of our wider ambitions across the UK. Our Scottish onshore wind pipeline, in addition to the three projects under construction, includes 13 projects in development totalling over 1GW. In 2024, we also announced the development of a 200MWe green hydrogen production project at Grangemouth, underlining our ongoing commitment to investing in Scotland’s decarbonisation.
Beyond the clean energy that they produce, our Scottish assets contribute real benefits to the communities that host them. Since first generation, wind farms operated by RWE have invested more than £7 million into Scottish communities neighbouring our sites through their community benefit funds. RWE’s contributions to Scottish communities continue to grow by nearly £850,000 per year. This will be enhanced further by the three onshore wind sites currently in construction. These projects alone are set to channel £25 million into Scottish communities, nearly doubling our annual community fund contribution.
We welcome the opportunity to provide written evidence to this inquiry. It is essential that the wider benefits of the transition are felt by Scottish communities, and there are key actions that the Scottish and UK Governments can take, including through GB Energy, to realise this. We see a particular role for the Local Power Plan aspect of GB Energy in enabling communities t invest in the infrastructure that they host. Central, however, is providing the clarity and certainty needed by developers, and the supply chain, to invest. Underpinning this is:
We are grateful for the chance to respond to this inquiry and would be happy to engage further with the Committee on this, and can respond to any specific questions or queries.
UK Public Affairs Manager
2. What UK Government interventions will be necessary to maximise the ability of oil and gas workers to find jobs in clean energy?
RWE has broadly welcomed early steps taken by the UK Government focused on skills, including plans for Skills England, the establishment of the Office for Clean Energy Jobs (OCEJ), and actions included within the Clean Power 2030 Action Plan. This focus on skills policy can aid the transition of workers from the oil and gas sector to clean energy. There are already significant skills shortages evident within the clean energy sector and so a clear need for workers to transition to help fill occupations that are otherwise difficult to fill.
The first step is for the UK Government to understand and address these shortages, particularly where it affects the supply chain. Government should look to industry to get the data to inform this understanding. There is also a shortage of data around the skills of oil and gas workers, who could contribute to the future clean energy workforce. This sort of data is crucial for facilitating the transition between sectors. 80% of the labour market in 2030 is already in employment today[1], meaning that attracting workers from other sectors is essential to meeting the clean energy sector’s future needs. Key to the transition is access for current oil and gas workers to personalised and localised careers information to ensure they understand how they best fit into the clean energy industry.
We commend the successful Energy Skills Partnership as a focal point for employers to be able to source information in Scotland, particularly accessing support on training and the development of suitable training to meet changing needs of the industry. It is important that they are supported to be able to continue. RWE fully supports the concept of similar hub and spoke training centres throughout the UK.
Specific interventions that could enable the transition for oil and gas workers to clean energy sectors could include incentives within the supply chain for job creation, apprenticeships and other appropriate skills investments, in shortage occupations or so that existing workers can retrain and upskill to enable them to transition between sectors.
Skills policy is devolved. While this could be positive in addressing local skills needs, it has fragmented systems for national and UK-wide employers like RWE. The landscape is complex and, therefore, we would encourage the newly established Office for Clean Energy Jobs to work closely with the Scottish Government in helping employers to navigate these systems. There is also a role for the OECJ in helping to identify, promote and incentivise good practice and share learnings across the oil and gas sector. This can then be applied across borders to help form part of a more holistic view to workforce planning, one that recognises the links between the oil and gas and clean power sectors.
4. What actions should the UK and Scottish Governments take to ensure the necessary generation and transmission infrastructure to support the development of Scotland’s renewables sector?
RWE has welcomed early signs of greater collaboration between the UK and Scottish Governments on energy policy. This includes the recent consultation on Electricity Infrastructure Consenting Scotland, to which we responded, emphasising the importance of additional resource across the consenting regime. However, planning is just one of three hurdles, alongside securing a grid connection and a route-to-market, that renewable projects have to clear to come to fruition. Developers need certainty and clarity in order to be able to invest. Reform in these three areas can help deliver that, thus supporting the development of Scotland’s renewables sector.
Planning
RWE warmly welcomed many of the actions included with the Clean Power 2030 Action Plan across these three areas. Beginning with planning, delays in the planning system are proving challenging to new clean energy projects in every part of the country. Resource constraints within planning authorities and statutory consultees is a consistent barrier to timely decision-making. We therefore welcomed the UK Government’s commitment to review resource within the planning system, something that RWE has long called for. Given planning is devolved, we would urge the Scottish Government to follow suit.
There are further issues specific to Scotland. All projects over 50MW go to the Energy Consents Unit within the Scottish Government. However, this often lacks the teeth to push local authorities and statutory consultees to make decisions in line with the timeframes. Clearer direction is needed from Scottish Government to local authorities and key statutory consultees regarding consideration timeframes. Alternatively, Scottish Government could propose procedural amendments that provide more clarity and certainty. This constraint extends post-consent: RWE is currently facing particular issues with the Highland Council, failing to discharge planning conditions and holding up construction start. This is delaying investment and the deployment of clean, cheap energy.
Grid
Access to the grid has also proven to be a constraint. The grid connection queue currently stands at over 700GW, compared with required generation capacity in 2030 in the region of 200-225GW. RWE projects are currently facing delays of 3-5 years in connecting to the grid. We have, therefore, welcomed the steps taken by the National Energy System Operator (NESO) to unblock the grid connection queue by fast-tracking the most advanced projects that can contribute to the 2030 clean power target to the front of the queue. We await further information on this from NESO, with the expectation that it will report back on plans for connections reform in Spring.
There is a particular need for greater interconnection between Scotland and England to reduce constraints during periods of high wind, and give greater opportunity for flexible generators to support Scottish demand during periods of low wind. We welcome NESO’s identification of this priority in its assessment of necessary grid upgrades between now and 2030.
Route-to-market
Finally, in relation to the Clean Power Action Plan, we strongly welcomed the UK Government’s “minded to” position to establish an auction schedule for the Contracts for Difference (CfD), the support mechanism for new renewable generation, including capacity ambitions for upcoming allocation rounds to improve transparency and predictability. Other welcome proposals included on updating auction parameters to be more market reflective, and looking at the length of contracts.
It is clear that prioritising the delivery of projects that are most advanced in their development will be critical to meeting the 2030 target. RWE does not, therefore, support the option put forward in the Action Plan to allow projects without planning consent to be eligible to enter the CfD. Given the UK pipeline of projects with consent is already sufficient to comfortably meet even the more stretching Clean Power 2030 scenario, adding riskier, earlier stage projects to the auction approach will do nothing to improve delivery of targets. Furthermore, more advanced, consented projects with supply chain orders could lose out to less developed projects that have not made similar commitments or even started the procurement process.
Other issues
There are other issues specific to Scottish projects in need of being addressed in order to maximise support for Scotland’s renewables sector.
Wind farms are increasingly becoming part of the built environment and, as such, cannot be expected to continually pay for costly radar mitigation in perpetuity and be “on hold” for endless periods of time awaiting consideration by the relevant consultee. Whilst it is encouraging that radar mitigation is able to be deployed, it is the financial cost and delayed timeframes of mitigation agreements that is a financial and delay barrier for projects.
The ongoing uncertainty surrounding Eskdalemuir is a barrier for 5-7GW future onshore development. Doubts around how to appoint exclusion zones encourages uncertainty and prevents investment decisions and identification of future sites. Up to 7GW of otherwise consentable projects are “on hold” until the Ministry of Defence agree a methodology for this issue, enabling decision making to move forward.
Finally, it is also proving challenging to get taller turbines to site while ensuring adequate Police Scotland support. Legislation ought to be changed to allow private companies to provide this support, as is the case in England, although we understand that Police Scotland are looking at providing additional resource to this issue. In addition, addressing the complex issue of compulsory purchase rights to allow maximum deployment at lowest cost to the consumer is a controversial but important point to unpicking access constraints for project and timely delivery of renewable energy. Taller turbines generate more energy and increase the likelihood of project viability.
5. 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?
RWE sees a role for GB Energy, alongside other state interventions like the National Wealth Fund, in unlocking critical investment that cannot be taken forward by the private sector alone. As currently set out, the GB Energy proposal is broad in its ambitions and objectives, some of which may not be achievable simultaneously. This requires a prioritisation or rationalisation of objectives, to help focus the proposition on a set of achievable and impactful priorities, including for Scotland.
RWE’s own assessment of GB Energy’s stated objectives, looking at where it could most effectively target its efforts to maximise its impact in driving clean energy deployment working in partnership with the private sector, is that it should primarily seek to:
We support the stated principle of seeking to “crowd-in” private sector investment and agree the principle that GB Energy should not seek to simply displace investment or distort the market where the private sector is capable of delivering investment in an efficient and cost-competitive manner. This should guide all state interventions in the market, whether that be through GB Energy, the National Wealth Fund, or the wider Industrial Strategy. Ensuring state interventions are truly additive to what the private sector would otherwise deliver is essential to maximising the potential of these new institutions.
State intervention is most effective in leveraging private investment where there is market failure. A good example in relation to renewables and wider clean energy industries is port infrastructure. The private sector lacks the necessary resources to fund long-term investment, with individual orders from offshore wind farms insufficient to justify investment decisions. There is therefore a role for these new investment vehicles to undertake strategic port investment, enabling Scotland, and the rest of the UK, to reap the full socio-economic benefits of offshore wind.
Likewise, there is a role for the state in catalysing investment in emerging technologies. The hydrogen economy has particular potential in Scotland. While the Hydrogen Production Business Model (HPBM) offers a valuable framework for investment, the absence of transport and storage (T&S) infrastructure hinders the market’s development. Hydrogen faces a “chicken and egg” problem, with supply and demand required to grow simultaneously. By stimulating investment in hydrogen T&S infrastructure, state intervention can catalyse the hydrogen economy, reducing costs and driving innovation.
Finally, on retaining value for the British people, RWE sees a role for the Local Power Plan aspect of GB Energy in providing the capital necessary for communities to invest in renewable energy projects. We have already offered the opportunity to Scottish communities to invest in some of our onshore wind projects. However, they lack the capital, resource and know-how to do this. Therefore, we see a role for GB Energy to step in and provide what is currently missing for local communities to be able to invest in the clean energy infrastructure that they host.
There remain many unanswered questions, however, over the role of GB Energy. Given the extent of the Government’s ambitions, there are questions over where the organisation can add the most value and make interventions that bring additionality in support of the Government’s public policy objectives. Further questions exist over how the organisation will invest, own and operate projects, the nature of public ownership stakes, how the organisation will support more local energy deployment, and managing potential conflict of interest issues when interacting with existing regulatory and financial support frameworks.
6. How should GB Energy work with the Scottish Government and other Scottish bodies to identify appropriate funding and other mechanisms?
RWE welcomed confirmation of a collaborative agreement between the Department for Energy Security and Net Zero and the Scottish Government to explore partnerships for GB Energy with Crown Estate Scotland, the Scottish Enterprise Agencies, the Scottish National Investment Bank and the Scottish Government’s Community and Renewable Energy Scheme. Working in collaboration with interested stakeholders, including the industry itself, will be key in ensuring that GB Energy drives real value for Scotland, additional to what the private sector already provides.
We noted with interest the announcement of GB Energy’s partnership with The Crown Estate in England and Wales, with a view to bringing forward 20-30GW of new seabed leases by 2030 and facilitating greater state-led activity in the “pre-development” stage of future offshore wind sites. This has the potential to help overcome some of the barriers that currently hold back the delivery of offshore wind projects through a more co-ordinated and efficient approach. However, the shape of this partnership will be critical: it needs to retain the significant expertise that has been built up over 20 years by global developers such as RWE, crowding in, rather than out, our knowledge and expertise. This principle applies across the board to GB Energy’s activity, including partnerships with the Scottish Government and other Scottish bodies.
As set out in response to Question 5, there is significant potential in the Local Power Plan aspect of GB Energy in providing the capital necessary for local communities to invest in the renewable energy assets that they host. It should be a priority action for the Scottish Government and other Scottish bodies – including Forestry and Land Scotland, with whom we have already explored opportunities for community investment – to work with GB Energy, local authorities and communities to identify where there is the potential for Scottish renewable projects to benefit from this.
7. What does a just transition look like for workers and communities across Scotland’s highland and island communities, and what role might community energy and community benefits play in this?
RWE is proud of our track-record of delivering community benefits, including in highland and island communities. Our community funds are all about empowering local people to get involved and have real agency and control over what is supported in their own community, a model which we firmly believe is industry leading. We know these local funds have the biggest impact when decisions on how they are spent are made by local people, helping to foster a just transition. Panels of local people who live, work or volunteer in the local area are appointed by to decide on the allocation of funds and to make strategic decisions about the long-term direction of funding and how it can best be used to support their local plans and ambitions.
In our challenging economic climate, community funding from renewable energy projects is a unique opportunity for people that live and work in an area to be in control of how funding is delivered in their own community and has the potential to support the long-term sustainable development of those communities hosting energy assets. Extremely flexible, long-term funding with minimal bureaucracy can support communities to deliver against their local action plans, can support capital and revenue activities and even be delivered in different ways such as loans or through commissioning of projects. Whilst the value of small projects should not be overlooked, these funds also have the potential to address some of the much bigger, legacy challenges. Communities across Scotland are already using these funds to address challenging issues such as provision of affordable housing, fuel poverty and securing vital community assets.
Watten Shop in Caithness, also known as Woodside Stores, is a remarkable story of community success. When the shop was at risk of closing or being repurposed, a group of dedicated locals united to save it. By securing funding from the Camster Wind Farm Community Fund and establishing as a community benefit society, the Watten Shop Group has successfully purchased the shop. This type of initiative fully supports a just transition by not only preserving a vital community asset but also though strengthened local bonds and ensuring the shop's continued service to the community.
The scale of future funding in Scotland will not doubt support some opportunities to deliver funding on a more regional scale, however we firmly believe that rather than imposing this on communities it should be driven by local grassroots decision-making.
The community benefit funds associated with our Bad a Cheo and Camster onshore wind farms in Caithness have chosen to deliver some of their funding through education and training grants to people living in the communities closest to the wind farm. Subsequently the Camster Wind Farm Fund local panel took the decision to spread this benefit by investing some of their funding into the wider Caithness area, to deliver education and training grants to people who would not otherwise benefit from the opportunity, with the aim of improving their employability prospects or developing a new career. The Caithness Wind Farm Education and Training Fund was set up with an initial £30,000 in 2022, a further £30,000 was donated to the fund in 2023, and £15,000 has been put into the fund for current distribution, all from the RWE Camster Wind Farm Community Fund. This is just one example of how community benefit funds can be used to support a just transition across the wider region of highland and island communities.
In terms of ways that community benefits can be enhanced, while we acknowledge a desire from some to compensate communities for hosting wind farms through local electricity discount (LEDs) schemes, we believe that a mandated level of flexible community benefit (£/MW/annum) is preferable, enabling all those in a community to benefit from the presence of a wind farm, irrespective of their choice of supplier, enhancing the just transition for the communities that host clean energy infrastructure. While we can understand the theoretical attractiveness of LEDs as a ‘political’ quid pro quo for supporting the development of onshore wind, on a practical level we do not view them as being effective or workable. This does not preclude community benefit funds being used in other ways to helps alleviate fuel poverty where this is identified by local people as a priority. This could include initiatives that target reducing fuel bills of the most vulnerable households, such as support for net zero measure which can help to reduce bills whilst also reducing emissions, again in line with delivering a just transition.
January 2025
[1] The Prince’s Responsible Business Network (2022) Rebooting Lifelong Learning for a Skilled Workforce