Written evidence submitted by The Department for Energy Security and Net Zero (NRG0031)

Background

The Department for Energy Security and Net Zero (“The Department”) welcomes the Scottish Affairs Committee’s Inquiry on ‘GB Energy and the net zero transition.’ Great British Energy is a key part of UK Government’s mission to make Great Britain a clean energy superpower. This mission encompasses both the delivery of clean power by 2030, and accelerating to net zero across the economy by 2050. Great British Energy will be designed to embrace the excellent opportunities this presents, both for jobs and the wider economy in Scotland. To deliver on this Clean Energy Superpower Mission and the UK Government’s Growth Mission, employment and economic benefits are a central feature in the design, delivery and implementation of our clean power policies. Great British Energy is an excellent example of one of these policies, given its mission to drive clean energy deployment to create jobs, boost energy independence, and ensure UK taxpayers, billpayers, and communities reap the benefits of clean, secure, homegrown energy. With its head office in Aberdeen, smaller sites to come in Glasgow and Edinburgh, and its activities seeking to accelerate clean energy deployment and supply chain development in Scotland and across the UK more broadly, Great British Energy represents the UK government’s commitment to realise these benefits for people across Scotland.

Great British Energy is our new clean energy company at the heart of the UK government’s mission to make Britain a clean energy superpower. The company will be capitalised with £8.3 billion of new money over this Parliament, beginning with £100m capital funding to kickstart Great British Energy’s work in 2025/26. Great British Energy will utilise this funding to drive energy deployment by strategically developing and investing in clean energy projects alongside the private sector, including local and community energy, as well as facilitating the growth of supply chains across the UK. The funding envelope will support Great British Energy’s operations across all UK Nations, and UK Government is working closely with Scottish Government to ensure the benefits of Great British Energy will be realised across Scotland, whilst respecting the devolution settlement.

Great British Energy will be an operationally independent company, meaning its activities will be overseen by an independent fiduciary Board, benefitting from industry-leading expertise and experience across its remit. The company will be accountable to Ministers, and the Secretary of State will set Great British Energy’s strategic priorities to ensure it remains focused on supporting the UK government’s priorities, consistent with its mission to accelerate the delivery of homegrown clean energy power in the UK.

The UK Government is under no illusions about the scale of the challenge to make Britain a clean energy superpower. Successful delivery of the Clean Energy Superpower Mission will be a shared endeavour requiring extensive investment from business and the private sector, engagement with citizens and industry, alongside collaboration between the UK and Devolved Governments. That is why Great British Energy is just one of the UK government’s initiatives to reach its goals. UK Government has set up the Clean Power 2030 Unit to accelerate the delivery of critical, clean energy infrastructure. It has the mandate to lead bold action in collaboration with industry, Ofgem, the Electricity System Operator, and other delivery bodies to remove obstacles and resolve issues as they arise. This will speed up the connection of new power infrastructure to the grid and accelerate Britain’s pathway towards greater energy independence. We have already begun rapid delivery on the Mission. We have ended the ban on new onshore wind in England, signed contracts to launch the UK’s first CCUS projects, and secured a record-breaking number of new clean energy projects in the latest Contracts for Difference (CfD) auction. This followed the UK Government’s action to increase the CfD budget by 50%. The UK Government has also approved four major solar farms, delivering almost 2GW of solar, and capable of powering almost 500,000 homes[1]. We have delivered at home and abroad, as the UK Government has shown international leadership in tackling the climate crisis at COP29, committing to reducing emissions by at least 81% by 2035 on 1990 levels, as well as launching the Global Clean Power Alliance to bring together a coalition of countries to accelerate clean power deployment. UK Government is determined to continue this trajectory to deliver the Clean Energy Superpower Mission, reaching Clean Power by 2030, and accelerating to Net Zero, whilst ensuring its benefits are felt in Scotland and across our United Kingdom.

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

Oil and gas production in the North Sea will be with us for decades to come. The UK Government is committed to managing the energy transition in a way that supports jobs in existing and future industries. We will not issue new licences to explore new fields, however, we will not revoke existing licences either, and we will partner with business and workers to manage our existing fields for their lifespan.

The UK Government will consult shortly on the implementation of its manifesto position not to issue new oil and gas licences to explore new fields and will work with industry to understand the views of the sector.

The £2.3bn raised through changes to the Energy Profits Levy in the Autumn Budget will support the transition to clean energy, enhance energy security and independence, provide sustainable jobs for the future, and help protect electricity bills against future price shocks. Policy decisions on the Energy Profits Levy are a matter for HM Treasury, but the Department can confirm that Great British Energy will be funded, in part, by a tax on the oil and gas sector.

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

The UK Continental Shelf (UKCS) is a super mature basin with declining oil and gas production and the UK is a net importer of oil and gas.  Oil and gas production in the UKCS are declining annually by approximately 7% and 11%[2] respectively and the vast majority of remaining production will come from existing developments.

Through the North Sea Transition Deal, industry is committed to reducing its production emissions by 10% by 2025, 25% by 2027 and 50% by 2030, against a 2018 baseline. The most recent Emissions Monitoring Report from the NSTA shows that good progress has been made and production emissions have decreased by 28% between 2018 and 2023[3].

The OGA Plan was published in March 2024 (following consultation) by the NSTA and provides detailed guidance on how industry should meet decarbonisation obligations set out in the OGA Strategy (how the NSTA ensures it is meeting their principal objective) – for example, via measures for emissions reduction, such as electrifying production and reducing flaring and venting – to support the transition to net zero.

1.ii  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?

We intend to manage the North Sea in a way that ensures a fair, orderly and prosperous transition, which drives towards our clean energy future of energy security, lower bills, and good, long-term jobs.

We are determined to deliver a clean energy revolution which will make Britain a clean energy superpower. We will not create these opportunities without public investment working hand in hand with private investment to make it happen. That is why the UK government has established both the National Wealth Fund in Leeds, and Great British Energy, headquartered in Aberdeen, to help drive the jobs of the future.

DESNZ have also set up the new Office for Clean Energy Jobs (‘the Office’) focuses on coordinating work to develop a skilled workforce in core energy and net zero sectors. The Office is dedicated to ensuring that clean energy jobs are not only abundant, but also of high quality, focussing on fair pay, favourable terms, and good working conditions. The Office actively engages with key stakeholders, including trade unions and industry leaders, to keep job quality at the forefront of our efforts.

There has already been a decline in direct jobs in oil and gas extraction, which have fallen by a third between 2014 and 2023[4] . We are therefore mindful of the need to manage this decline and transition carefully, as we know oil and gas will still be with us in the decades to come. Oil and gas as part of the wider offshore energy sector is a key employer in Scotland, with 1 in 30 of the working population part of the sector (rising to 1 in 5 in North East Scotland[5].) Research has also shown the transferability of oil and gas skills to other energy sectors - Robert Gordon University shows that 90% of oil and gas workers have medium to high transferable skills for offshore renewable jobs[6].

The Government is taking action to deploy clean energy at pace, as evidenced by the Clean Power 2030 Action Plan. Clean energy sectors such as CCUS, offshore wind and hydrogen are scaling up and to support the tangible delivery of these technologies, there are schemes in place. An example of this is the Clean Industry Bonus (CIB), which will enable further investments into the sustainability of the offshore wind supply chain. Delivering on a government commitment, the Clean Industry Bonus will come with an initial £27 million budget per Gigawatt of offshore wind projects. This means if between 7 to 8GW of offshore wind apply, the budget could go up to £200m[7]. The CIB will give proper incentives to companies to invest in UK manufacturing to support offshore wind.

The Scottish Government has invested in a package of skills interventions in the

North East of Scotland, supporting the transferability of the workforce across sectors

to meet the needs of the net zero transition. This includes an Energy Skills Transition Hub and National Energy Skills Accelerator.

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

The oil and gas to green economy jobs transition will involve close working between UK Government, devolved Governments, skills bodies, trade unions and businesses to ensure our offshore workers lead the world in the industries of the future. 

Robert Gordon University’s Energy Transition Institute has published several reports over the last few years setting out a variety of scenarios that will affect job numbers in the offshore energy sector. Those scenarios will depend on the success of energy transition targets and the levels of expenditure in the UK, amongst other things. This means delivering on our renewable electricity ambitions is not only integral to delivering clean power by 2030, but to support high-skilled jobs too. We are committed to working in collaboration with the private sector to radically increase the deployment of onshore wind, solar and offshore wind by 2030. Through Great British Energy, we have a huge opportunity for the UK to become a global leader in the technologies and skills required for the future, working to significantly boost the number of skilled jobs in these essential industries through its partnerships. Government is confident that its interventions will support the creation of new jobs across the clean energy sector.

The UK Government is already working to support that transition. For example, we are accelerating delivery of skills passporting initiatives to make it easier for oil and gas workers to transition into roles in renewable sectors. In October 2024, the Department signed a joint letter with the Scottish Government to David Whitehouse, Chief Executive of Offshore Energies UK (OEUK) and Dan McGrail, Chief Executive of RenewableUK, confirming UK Government would come onboard as a strategic partner alongside Scottish Government to accelerate delivery of a skills passport for workers in the oil and gas industry[8]. In addition, as set out in Question 1.ii, The Office has been established to ensure the availability of good jobs with good wages, and that people have the right skills to be successful in these roles.

The UK Government recongises that what is needed now is a plan. We are very aware of the importance, particularly to North East Scotland, of the workforce transition and that this needs careful consideration. As referenced in Question 1, we will soon be consulting on the implementation of the manifesto position not to issue new licences to explore new fields. This consultation will support the creation of a plan for the future of the North Sea. The UK Government will continue to take action to coordinate our approach to ensure a transition where workers are able to benefit from the economic opportunities from our transition to net zero. Continued investment in training and education, strong industry partnerships, active union involvement, local authorities’ involvement, and targeted government policies are all essential to closing the skills gap.

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

The growth of the UK’s supply chains and jobs throughout the country is a priority for UK government’s Growth and Clean Energy Superpower Missions. The UK government recognises that the development of a competitive and sustainable supply chain, resilient to global economic shocks, is crucial. 

Support for supply chains is a devolved matter. UK Government welcomes the action taken by Scottish Government to support supply chains, including via the Scottish National Investment Bank and Strategic Investment Model (SIM). The SIM will support the growth of offshore wind supply chain growth in Scotland, providing a mechanism for collaboration between offshore wind developers, Scottish Government, enterprise agencies and Crown Estate Scotland. In January 2024, 3 projects, worth a combined total of £500 million progressed to Stage 2 of the SIM. In December 2024, Scottish Government also announced £150 million capital investment to support the growth of the offshore wind sector and support thousands of jobs across Scotland over the next decade. The total investment of up to £500 million over five years is expected to boost private investment in offshore wind by up to £1.5 billion[9], and unlock opportunities for growth across key areas including supply chain opportunities, as well as ports and manufacturing. UK Government is committed to working alongside Scottish Government to support the net zero transition in Scotland, evidenced by both governments' funding support for the Net Zero Technology Centre, the Aberdeen Energy Transition Zone, and the Global Underwater Hub.

Furthermore, The Offshore Wind Industrial Growth Plan (IGP) developed by RenewableUK, the Offshore Wind Growth Partnership, The Crown Estate, Crown Estate Scotland and wider industry, was published in April 2024. The IGP sets out the long-term priorities, objectives, actions and investments needed to grow the offshore wind supply chain to accelerate and de-risk delivery, as well as grow market share and technology leadership in the UK. Industry is now working to establish the independent delivery body to deliver the IGP priorities. The IGP will work closely with HMG and Scottish Government to achieve its objectives.

Work by UK Government to encourage domestic supply chains will also support the transition to clean energy in Scotland. As referenced in Question 1.ii, the CIB will incentivise investment in cleaner supply chains. The CIB will reward fixed and floating offshore wind developers who choose to invest in cleaner manufacturing facilities by covering the difference in cost between more expensive, but more desirable, supply chain investments, and cheaper, but less desirable, investments. Where investments are made in the UK, they will be concentrated in our poorest communities, such as ex-industrial, port and coastal towns.

The UK’s oil and gas supply chain has several transferable elements. According to Rystad[10], there is a high capability correlation between the UK oil and gas supply chain and the renewable energy sector. The supply chain targetable spend overlap is estimated to be 57% for floating offshore wind, 84% for CCS and 80% for hydrogen.

This opportunity was the premise of the 2021 North Sea Transition Deal. The Aberdeen and Grampian Chamber of Commerce’s 39th Energy Transition Survey[11] shows that 64% of respondents are either actively or organically diversifying their operations from oil and gas (similar levels to the last survey). Other energy related areas (including decommissioning, offshore wind, subsea engineering and geothermal) are expected to grow to represent 51% of business activities by 2030[12].

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?

Great Britain’s electricity network must undergo an unprecedented expansion to meet expected rising electricity demand and support the connection of low-carbon generation in Scotland and elsewhere. Analysis by the National Energy System Operator (NESO) indicates around twice as much transmission network must be built by 2030 as has been built in the last decade to connect this new generation and meet this demand.

To deliver this expansion, action must be taken to accelerate the build time of new infrastructure. In parallel, the process for connecting to the grid must be fundamentally reformed to ensure the right projects connect on time.

On 5 November 2024, the National Energy System Operator provided advice to the UK government on the pathways to clean power by 2030. On 13 December 2024, the UK Government published the Clean Power Action Plan, setting out the action the UK government will take, in conjunction with the Scottish Government, industry, Ofgem, NESO and others, to deliver clean power by 2030. The actions in the plan cut across a broad range of policy areas, and include improving planning and consenting processes, regulatory reform, and ensuring communities directly benefit from new infrastructure. The plan also sets out the actions being taken to reform the connections process. NESO submitted proposals for reforms to the connections process at the end of 2024, and Ofgem expects to make a decision on these proposals in early 2025. For the first time we now have a national plan to take us to a new age of clean electricity that will boost our energy security, create good jobs, protect consumers, and tackle climate change.

The government will now plan an energy system based on what the country needs. The plan sets out bold measures to get more homegrown clean power to people. These include: cleaning up a dysfunctional grid system by prioritizing the most important projects and ending the “first-come-first served” system; speeding up decisions on planning permission by empowering planners to prioritize critical energy infrastructure; and expanding the renewable auction process to stop delays and get more projects connected.

On consenting in Scotland specifically, the UK and Scottish Governments are working collaboratively to reform the consenting regime for electricity infrastructure to facilitate the roll-out of low carbon electricity projects (including electricity networks). At present, consenting is typically taking between 2 to 4 years from application to decision. This is too slow and is impacting on investor confidence, increasing costs for developers, and hindering 2030 decarbonisation targets. There has been a programme of work to look at how inefficiencies could be removed from the existing consenting regime, while at the same time ensuring that the voice of local communities continues to be heard. A public consultation ran between October and November 2024 which presented this reform package for views. Although a UK Government consultation, the Scottish Government endorsed the content. A response to the consultation will be published in 2025.

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?

Through its support for clean, home-grown energy production, Great British Energy will help create thousands of jobs and facilitate the growth of supply chains in every nation of the UK. Scotland already has a strong pipeline of opportunities, including through being the forefront of floating offshore wind development, and Great British Energy’s range of activities will help further support and enhance Scotland’s existing offshore wind pipeline, as well as clean energy projects in the other vital sectors the UK needs to meet net zero.

Great British Energy is an integral part of UK Government’s clean energy superpower mission, which poses an incredible opportunity for jobs, including reskilling, and growth across the country. The company will provide opportunities for good jobs, with good wages, including (1) in the projects it will help deliver (2) in clean energy supply chains, and (3) in Great British Energy itself as the company recruits across its Aberdeen Headquarters and future sites in Glasgow and Edinburgh.

Great British Energy will partner and work collaboratively with industry, providing support where doing so will accelerate the pace or scale of the development of the strategically important projects for the UK energy system. By partnering with the private sector, Great British Energy will create a better environment for privately-owned energy companies to continue playing their vital role in delivering an affordable, decarbonised power sector, and will support companies across the energy industry, providing opportunities for high quality, well-paid work across the United Kingdom.

Furthermore, we are building our Great British Energy workforce in Scotland, and the CEO, as well as most of the senior team will be based here. Alongside its Headquarters, additional sites in Edinburgh and Glasgow will allow Great British Energy to recruit from the excellent talent pool across Scotland, benefiting from local skills and expertise.

Locating Great British Energy in Aberdeen has already given confidence to the private sector to invest in developing Scottish skills, as demonstrated by Sarens PSG announcement of its Centre of Excellence in Aberdeen, which the company attributed to Great British Energy’s Headquarters in the city. We are confident that Great British Energy will continue to crowd-in private investment, supporting Aberdeen’s local economy and ensuring the city thrives as Scotland’s clean energy capital. Great British Energy will also support economic growth across the United Kingdom. The company will be owned 100% by and for the british people, with the Secretary of State for Energy Security and Net Zero as the company’s 100% shareholder. Great British Energy will reinvest returns generated through investing, owning, and operating clean energy infrastructure into additional projects that benefit the public, enabling the company to become financially self-sustaining in the long term.

The Department also recognises that we must ensure that people have the right skills to benefit from the high quality work opportunities that these investments can generate. That is why, as noted in Question 1.ii, the Office has been established to focus on developing skills and providing training to the workforce in core energy and net zero sectors. As detailed in Question 2, a joint letter between Scottish and UK Governments confirmed UK Government’s position as a strategic partner of the Skills Passport project, working closely with OEUK, RUK, and the Scottish Government to ensure that this Skills Passport delivers a fair and inclusive transition for all workers. We see this Passport as the first step in our wider approach to ensuring a prosperous transition to net zero. .

6. How should GB Energy work with the Scottish Government and other Scottish bodies to identify appropriate funding and other mechanisms?

UK Government has been clear that meaningful cooperation across the four nations will be key to delivering change across our United Kingdom. Quite simply, that means working with Scottish Government and Scottish stakeholders to identify the appropriate support for clean energy deployment in Scotland. To help support this, in October 2024, the UK and Scottish Governments signed a vision statement[13], committing to explore opportunities for Great British Energy to partner with Scottish public bodies, as well as the Scottish Government’s Community and Renewable Energy Scheme (CARES).

The agreement is an important starting point for discussing potential collaboration between Great British Energy and Scottish Public Bodies across a range of activities, such as:

1. The clean energy supply chain, including ports infrastructure, manufacturing and construction activities.
2. Land to support these activities.
3. Services that support supply chain development, such as digital.
4. Community and local energy projects.

Scottish public bodies, such as Crown Estate Scotland, the Enterprise Agencies, and the Scottish National Investment Bank – each play a unique role in the clean energy sector and the next steps for partnering with each of them is being explored on a case-by-case basis. We are also continuing to work with Scottish government officials in our policy development, to ensure that Great British Energy’s design reflects Scotland’s institutional landscape and can maximise delivery for Scotland.

By developing strong partnerships with existing Scottish public bodies active within the clean energy sector, Great British Energy can deliver quickly and effectively, avoid duplication, and deliver maximum impact and value for money from Scottish projects.

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?

As detailed in Question 2 and 6, UK Government is taking action to support a just transition for workers in the oil and gas industry, including through the Skills Passport. Experimental analysis suggests, for workers, since 2021, more clean energy jobs were advertised in Scotland than any other region of the UK (~15% of all clean energy job adverts were advertised in Scotland[14].) Of these clean energy job adverts in Scotland, most were in the Electricity Networks (33%) and Wind (22%) sectors.

The UK Government is of the view that communities should continue to have a say on any proposals in their area. In the Clean Power Action Plan, we were clear that where communities live near new clean energy infrastructure, we will ensure they benefit from it. As set out in the Clean Power Action Plan the Department is continuing to review how to most effectively deliver community benefits for new energy generation and transmission technology to ensure consistency and quality, and hope to have more to say on this in due course. This will ensure that communities are properly recognised and are brought along on the net zero and clean power journey.

Community benefits refer to agreements designed to enhance local communities, as part of infrastructure projects. These benefits take two forms: monetary contributions and non-monetary support. Examples include grants to local organisations, bill discounts, direct investments in community-focused initiatives such as building schools or community centres, and training opportunities for community members. These schemes help infrastructure projects contribute positively to the local economy, society, and environment of communities living near new infrastructure.

Scotland is widely recognised as a leader in community benefits from renewable energy projects. The Scottish Government strongly encourages developers to provide community benefits under a voluntary cross technology scheme and in 2015 developed clear ‘Good Practice Principles’ to guide how these benefits should be delivered. The principle behind this framework is that communities hosting renewable energy projects should receive a tangible share of the financial and social gains, for example recommending a minimum community benefit of £5,000 per megawatt (MW) per year for onshore wind projects. Under the scheme 292 projects have provided community benefits. Over the last 12 months this has equated to over £30 million paid to communities across Scotland[15]. The Scottish Government is currently consulting on updating their Good Practice Principles for onshore and offshore renewable energy.[16]

Great British Energy’s Local Power Plan will enhance existing support to community energy.  It will do this through partnering with, and providing funding and support to, local and combined authorities – as well as community energy groups – to roll out renewable energy projects and develop up to 8 GW of cleaner power. Scottish Government has established the Community and Renewable Energy Scheme (CARES), through which communities can access funding and advice to invest in or develop their own renewable energy projects. The Department’s Officials have held positive initial talks with their counterparts in the Scottish Government about the design and implementation of Great British Energy and are working to ensure that the company and the Scottish Government’s existing community renewable energy schemes dovetail together and complement one another. As set out in question 6, CARES is within the remit of the collaborative agreement between UK and Scottish Governments, facilitating potential future collaboration between Great British Energy and CARES.

8. Can the UK learn lessons from international examples about how to effectively manage Scotland’s energy sector transition?

Making Britain a Clean Energy Superpower is one of the five missions of this UK Government — delivering clean power by 2030 and accelerating to net zero across the economy by 2050.  At COP 29 in Baku the UK reaffirmed its commitment to international collaboration through the launch of the Global Clean Power Alliance – uniting countries to speed up the clean energy transition globally. UK Government will restore the UK’s position as a global leader on climate action, delivering on our domestic commitments and collaborating with our international partners.

In the negotiating room and beyond, the UK will continue to be a progressive and constructive partner, seeking to drive ambition, resolve issues, and make progress across the wider climate agenda. We understand that working with other countries is vital to achieving this, and we look forward to pushing for climate ambition and engaging with others in 2025.

Scotland is the heart of energy in the United Kingdom, and is already home to a wide range of energy sector expertise and clean energy projects, including both the world’s first and largest grid-connected floating windfarms. Achieving our shared net zero targets, having greater control over our own energy resources, and increasing our energy independence are challenges for the whole of the UK. Through meaningful cooperation, there is an excellent opportunity for UK and Scottish Governments to learn from each other’s expertise and experience to realize a transition that boosts economic growth, as well as the number of clean energy and employment opportunities across our United Kingdom.

January 2025