Written evidence submitted by Scottish Renewables (NRG0037)
January 14, 2025
Dear Committee
GB ENERGY AND THE NET-ZERO TRANSITION INQUIRY
Scottish Renewables (SR) is the leading voice of Scotland’s renewable energy industry. Our vision is for Scotland to lead the world in renewable energy. We work to grow Scotland’s renewable energy sector and sustain its position at the forefront of the global clean energy industry. We represent over 350 organisations that deliver investment, jobs, social benefit, and reduce the carbon emissions which cause climate change.
Our members work across all renewable technologies in Scotland, the UK, Europe and around the world. They range from energy suppliers, operators and manufacturers to small developers, installers and community groups, as well as companies throughout the supply chain. We aim to lead and inform the debate on how the growth of renewable energy can provide solutions to help sustainably heat and power Scotland’s homes and businesses.
SR was recently appointed as the Cluster Management Organisation (CMO) by the Scottish Offshore Wind Energy Council (SOWEC) to take forward the establishment of a national Clean Energy Cluster for Scotland. There are currently eight clusters around the UK with Deepwind and Forth & Tay having been in Scotland. The unified national cluster will enable SR to consolidate and streamline support for all Scottish suppliers to build a world-class network.
We welcome the Committee’s timely inquiry into GB Energy and the net-zero transition. Scotland’s renewable energy industry and supply chain has grown significantly in recent years with the latest estimates by the Fraser of Allander Institute revealing we supported more than 42,000 jobs and an economic output of over £10.1 billion in 2021. However, with electricity demand set to rise significantly over the next decade as we decarbonise our entire economy, we must accelerate the deployment of Scotland’s renewable energy pipeline. This in return will create a cleaner, more secure and affordable energy system that generates high-value jobs and economic growth.
We hope that this submission is helpful and would be pleased to provide any further evidence to the Committee.
a) What state of readiness is the oil and gas sector in for the net zero transition?
b) 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 ‘Powering up the Workforce’ report by Robert Gordon University (RGU) in September 2023 demonstrated that a managed and just transition from oil and gas to renewable energy will see the oil and gas workforce decline from 120,000 today to around 87,000 by 2030 (in line with production decline and decommissioning activities). Over the same timeframe, and depending on the level of ambition realised, the UK offshore renewable energy workforce is expected to increase from around 34,000 in 2023 up to 138,000 in 2030. Overall, a successful transition will see the UK offshore energy workforce increase by approximately 50% to 225,000 people by 2030. However, failure to realise its full potential will see the workforce decline by around 15% to 130,000 over the same period.
The analysis shows that there is a workforce ‘goldilocks zone’ between 2024 and 2028 when the UK supply chain capacity and capability can be sustained, developed and invested in to ensure the transferability of the offshore energy workforce is optimised. We agree with RGU that rapid investment in UK capabilities to deliver a fast-growing programme of green capital projects is essential during this ‘goldilocks zone’, which in turn will help to realise ambitious goals for domestic execution of these projects. Scotland has the strategic advantage of an unprecedented line of sight through our renewable energy pipeline, including the ScotWind and Innovation Targeted Oil and Gas (INTOG) Leasing Rounds for offshore wind. These provide the programme of green capital projects which must be successfully enabled in order to achieve a successful just transition. A key enabler will be investment to grow the capacity, capabilities and competitiveness of our own supply chains to support offshore wind deployment.
The Offshore Wind Industrial Growth Plan (IGP), published by industry in April 2024, aims to grow the offshore wind supply chain to accelerate and de-risk delivery, as well as grow market share and technology leadership for the UK. The IGP identifies five key technology areas in which the UK should prioritise investment to secure value:
The measures set out in the IGP would create an additional 10,000 jobs a year and boost the UK’s economy by a further £25 billion between now and 2035, if we accelerate offshore wind deployment in line with our net-zero targets to 5-6GW a year. The plan envisages mobilising nearly £3 billion of funding nationwide, with private finance doing the heavy lifting, which would offer a return to our economy of just under £9 for every £1 invested. RGU have also outlined that for each additional 1% of UK content in the offshore energy industry could equate to around £275 million spend and to around 3,800 additional direct/indirect jobs in 2030. Altogether, this clearly demonstrates the importance of strategic investments into out supply chains in delivering a successful just transition.
To successfully deliver the IGP, alongside the Strategic Investment Model (SIM) in Scotland, industry requires clearer alignment of funding objectives with other initiatives and objectives. Specifically, industry requires greater clarity around which financial products will be available from the National Wealth Fund and GB Energy so that they can be effectively aligned with the broader funding landscape in Scotland and across the UK. This will help to avoid unnecessary duplication and ensure valuable public funds are strategically targeted at delivering maximum value for industry and consumers through the attraction of private investment.
More broadly, it is vital that the UK continues to deliver a clear route to market for the green capital projects which RGU highlight are needed between now and the end of the decade to deliver a successful just transition. The Contracts for Difference (CfD) scheme has been pivotal in scaling up the UK’s clean energy generation for more than a decade and will be central to the achievement of Clean Power 2030. SR welcomes the enhanced budget secured for Allocation Round 6 (AR6) in September 2024 which delivered a record-breaking result for Scotland with a total of 37 projects worth almost 2GW. Whilst AR6 marked a recovery from the previous allocation round (AR5) which failed to secure any new offshore wind projects due to unrealistic pricing assumptions, Allocation Round 7 (AR7) this year must continue to increase capacity and maintain investor confidence if we are to secure the Scottish projects which underpin Clean Power 2030.
SR, alongside our industry partners, are engaging closely with the UK Government on progressive reforms to CfD as outlined in the recent Clean Power 2030 Action Plan. We believe CfD allocation rounds should be more consistent volumes to clear at each auction by setting target capacity (in GW) per auction pot. Initially these targets should be set in advance for the next five future auctions and adjusted on a rolling annual basis, in line with targets. The ongoing Connections Reform process is also vital in this context alongside the need to deliver a package of evolutionary, not revolutionary, electricity market reforms to maintain investor confidence. Urgent clarity is also required around the future of disproportionate Transmission Network Use of System (TNUoS) charges and other connection costs within the context of a strategically mapped future of energy infrastructure and investment to assuage the concerns of existing investors and promote further private investment into the market.
SR believes that the adoption of a 2031 to 2035 pathway through Clean Power 2030 is imperative for securing the Scottish projects which are vital to not just the 2030 target but also net-zero by 2045 in Scotland and by 2050 in the UK. By answering the UK Government’s decision to align Clean Power ambitions with Connections Reform, NESO has already identified that this pathway scenario optimises project delivery for the 2030 target while minimising consumer risk. By retaining firm offers for projects within this ten-year horizon, in addition to any wider assurances to maintain confidence, we can incentivise projects to continue development and avoid the risk of an investment hiatus for the critical period prior to the publication of the Strategic Spatial Energy Plan (SSEP). An extended pathway would also aid the management of any attrition and delay to projects that may occur before 2030.
In the years ahead, enabling consistent project deployment will be crucial to matching the increasing decarbonisation of demand and ensuring that annual Contracts for Difference (CfD) auctions remain competitive. This is important not only for the development of UK supply chains but also to maximise the benefits for consumers and the country from expanding the generation of home-grown renewable energy sources. Ultimately, given their nationally strategic importance, as much certainty as possible should be provided to all Scottish wind projects. Projects that hold existing contracts with government and/or public bodies, such as Crown Estate Scotland, should retain a firm connection. Certainty for these projects will enable the continued investment that is key to the welcome ambitions behind Clean Power and Connections Reform.
Completing an effective route to market must also come an efficient planning and consenting system which is an acute responsibility for the Scottish Government. SR welcomes the bold ambitions from the Scottish Government on creating an efficient planning and consenting system, such as through the National Planning Framework 4 (NPF4) and the Scottish Onshore Wind Sector Deal (SOWSD) which commits to determining Section 36 applications for new onshore wind sites, and for the repowering of existing operational sites, within 12 months where there is no public inquiry, or 24 months if there is a public inquiry. The Scottish Government has also committed to shorten the timeframes for both pre-application and post-consent processes for offshore wind.
Delayed decisions in planning and consenting are a key barrier for both the buildout of clean energy technologies and the upgrades required for nationally significant infrastructure in Scotland. It currently takes on average 15 months to reach a planning decision for offshore wind in Scotland and four years to complete the consenting process of key infrastructure, in particular vital transmission infrastructure. The next six to 24 months are critical for our pipeline of projects to clear planning and move into construction. We echo the recommendations recently published by IPPR Scotland who called on the Scottish Government to make sure the planning and consenting systems are fit for purpose, including ensuring they are adequately resourced – both financially and with a strategy to ensure the pool of trained planners working in the public sector is large enough to manage the demands arising from renewable energy acceleration.
SR welcomes the ‘Energy Skills Passport’ initiative under development between the government and industry with a pilot scheme set to be introduced early 2025. The skills passport will show how offshore workers’ skills and qualifications can be recognised by employers across various sectors, facilitating their smooth transition into the renewable energy sector. It will also identify where oil and gas health and safety standards will be recognised in the offshore wind sector and map out different career pathways into the wind energy industry.
According to the ‘Powering up the Workforce’ report by Robert Gordon University (RGU), a new workforce model will emerge if a successfully managed just transition can be achieved. Future jobs are expected to be concentrated around key energy clusters across the UK with a more transient workforce increasingly focused on capex and vocational work from project to project across the country. However, with over 100,000 people expected to move across or enter the UK offshore energy industry during the 2020s in the most successful scenario, there will be a key requirement to introduce readily accessible induction training to support the various energy sectors. Moreover, with at least 80% of the 2030 workforce already in employment and over 90% of the UK’s oil and gas workforce possessing the skills needed to have medium to high transferability to the offshore wind sector, there is an acute need to significantly improve the upskilling and reskilling provision currently available.
RGU’s ‘UK Offshore Energy Workforce Transferability Review’ demonstrated that approximately 100,000 of the 130,000 people required to underpin development of the offshore wind, hydrogen, carbon capture and energy storage sectors will need to be filled by people transferring from existing oil and gas jobs to offshore renewables roles, new graduates and new recruitment from outside the existing UK offshore energy sector. At present a key barrier to the transition is the lack of cross-sector training recognition. This means many offshore oil and gas workers are expected to duplicate existing training to access roles in wind and they often also have to pay out of their own pocket. This is a significant obstacle for workers moving between industries.
SR supply chain members have also advised of labour shortages and difficulties in accessing skilled resources. Welders and those skilled in construction practices in particular, are also in short supply. Whilst the UK offers City and Guilds certificates and BTEC courses in fabrication and welding, they are not yet successfully attracting enough young welders. There is an acute need for more people to join the sector and for individuals from other sectors to be reskilled and upskilled. Without this, the sector faces challenges in delivering new projects on time, maintaining existing wind farms and maximising economic and environmental benefits. In that context, it should be recognised that various sectors within renewable energy and infrastructure have very similar skills demands. The UK Government’s approach to industrial strategy, employment and welfare reform, educational and apprenticeship levy reform must all work in tandem to successfully meet the skills needs of wider industry.
Delivering the projects and enabling infrastructure needed to support our clean energy transition all depends on developing a skilled and diverse workforce. Scotland’s renewable energy industry and supply chain already supports more than 42,000 jobs and an economic output of over £10.1 billion. Renewable energy presents an unprecedented opportunity for the UK workforce, with clean energy jobs better paid by almost £10,000 compared to the UK average annual salary and nearly two times more productive than the average UK job. Despite these figures, there are pronounced skill shortages and workforce challenges across the sector.
For the Scottish Onshore Wind Sector Deal (SOWSD), analysis was carried out by ClimateXChange to identify the range of skills needed by the onshore wind industry to deliver 20GW by 2030. It revealed:
Skills shortages, skills development and the financial stability of higher and further education are an increasing concern for Scotland's renewable energy industry. SR believes the current post-school education and skills system in Scotland does not adequately reflect the needs of the renewable energy industry. Despite having an unprecedented line of sight to 2030 and beyond with our renewable energy pipeline, it is not clear how industry can effectively input its needs at a strategic level. SR encourages the Scottish and UK Governments to work closely with the higher and further education sector to agree sustainable funding models and partnerships which take the needs of the renewable energy industry on skills provision fully into account, helping to deliver a skilled workforce and green industrial growth on Scotland's transition to net-zero.
The UK energy supply chain has decades of experience in the capabilities which floating offshore wind requires such as deep-water experience, offshore operations expertise, a strong health and safety track record and the knowledge to deliver major capital infrastructure projects. This sits alongside world-class skills in subsea systems, subsea engineering and subsea electrical systems and cables. To prepare our workforce to capitalise on the enormous opportunities presented by the clean energy transition, SR recommends both governments to consider:
Immigration also has an important role to play in the immediate term for labour shortages. We would welcome further exploration by the Migration Advisory Committee of where this might most be necessary, in addition to the work on how we grow the domestic labour market. Currently, migration issues include problems securing visas for supply chain vessel operators, as well as bringing international graduates into UK as part of their career development rotation. Survey, construction, installation, and operations and maintenance of offshore strategic energy infrastructure projects is typically performed by specialist crew aboard specialist vessels. The UK is reliant on internationally flagged vessels and their highly skilled international crews to perform this work.
These vessels move from project-to-project spending anything from days to months fulfilling contracts in waters around the world, and may enter UK waters from European ports, via UK ports or be stationed at wind farms before moving onto the next job. International offshore workers are not entering the UK to reside, only its waters and ports to perform work for offshore assets. There is already an international shortage of vessels and crew, with increasing demand for their services, both globally and within the UK.
Amendments to the Immigration Act 1971 and the concurrent cessation of the Offshore Wind Workers Visa Immigration Rules Concession 2017 (April 2023) is exacerbating this issue, as it requires all non-UK or non-Irish offshore workers to obtain a visa to work within UK territorial waters. These visa requirements will further increase the cost of, and delays to, projects (and in turn costs to consumers) – and threaten the ability to deliver a successful just transition through the creation of high-value, long-term jobs from the deployment of projects
Moving to a clean energy system will not only help to secure home-grown energy supply but provide an enormous opportunity to secure the supply chains which will underpin that clean energy system. Delivering the UK’s energy ambitions will depend not only on a commitment from developers to drive projects but on a whole raft of skilled, experienced, innovative suppliers too. From offshore inspection, port services and steel fabrication to civil engineering, electrical products and even accommodation services, there is a wide variety of work to be tendered for, won and delivered. But these businesses will need to have confidence in the timelines of these projects. While they can see the pipeline, they need greater assurances that they will go ahead.
Businesses, particularly small to medium enterprises (SMEs), looking to expand their facilities and grow their capabilities while hiring and upskilling staff need to be able to justify the investment. According to the Federation for Small Businesses, SMEs represent 99.4% of all private sector businesses. However, many SMEs are struggling to invest in the capabilities and capacity needed to expand and innovate in renewable energy and we would encourage more tailored support for SMEs to grasp near-term renewable energy opportunities. Launching targeted financial grant support for SMEs and supply chain firms seeking to scale-up their capabilities, facilities and skills in renewable energy will enable these grass roots businesses to invest in equipment spaces and training to scale-up operations as well as to invest in people creating jobs and developing the workforce of the future.
According to IPPR, the UK has a current competitive edge in making a third of the 143 products needed in technologies to deliver net zero. These include products for monitoring, measuring and analysing, all crucial for the electricity grid, renewable energy generation and decarbonising industry. The UK is also strong at making electric trains and their parts, heat pump components, and turbines for geothermal or hydro electricity generation.
To keep investors interested these barriers to deployment must be urgently addressed. Key enablers that will unlock the opportunity clean energy projects include:
Underpinning the ability to achieve green industrial growth is the need for major electricity network expansion. The National Energy System Operator (NESO) have advised that achieving Clean Power by 2030 will require building more than twice as much transmission network in the coming five years than the previous ten, along with accompanying enabling works, connections and distribution network strengthening. NESO advise that current plans for network expansion are sufficient but must overcome many barriers to deliver on time with the need to accelerate delivery of some vital projects by 2030.
The Accelerating Strategic Transmission Infrastructure (ASTI) framework has provided an effective model for rolling investment into faster, more agile and comprehensive delivery of vital infrastructure which the Industrial Strategy should seek to build on as it establishes foundational sectors and value chains. ASTI complements the strategic planning of our energy system underway since the publication of the British Energy Security Strategy in 2022 which raised the target for offshore wind generation to 50GW by 2030, unlocking billions of pounds worth of investment.
Namely, the Holistic Network Design (HND) and the Holistic Network Design Follow Up Exercise (HNDFUE) have fed into the Transitional Centralised Strategic Network Plan 2 which is to be followed by a final Centralised Strategic Network Plan (CSNP) and Strategic Spatial Energy Plan (SSEP). The independent review by the UK Electricity Networks Commissioner, Nick Winser, on accelerating electricity transmission network deployment, similar to the independent review by the UK’s Offshore Wind Champion, Tim Pick, on accelerating deployment of offshore wind, has also provided a clear and effective model for concentrating action by government and industry to accelerate deployment which continue to need attention. Alongside the delivery of the Transmission Acceleration Action Plan (TAAP) and reforms by Ofgem, the UK and Scottish Governments must work together to build cross-party and local consensus on the need for more transmission capacity.
Grid infrastructure is at the core of our net-zero and energy security ambitions with significant industrial opportunities through some of the largest construction projects in the UK. Reforming the electricity network across the UK will strengthen energy security, restore investor confidence, generate local employment and support economic growth across the country. The forecasted reforms for planning and grid are estimated to accelerate around £90 billion of additional business investment over the next ten years alone. Seizing this economic opportunity relies on efficient and effective process and regulatory reform while simultaneously supporting investors through change.
As the UK’s clean energy powerhouse, Scotland is at the heart of modernising our grid. This presents significant opportunities for Scotland’s energy supply chain, with SSEN Transmission investing over £20 billion to upgrade the network infrastructure across the North of Scotland which is expected to create 9,000 high-value jobs. SP Energy Networks have also announced £5.4 billion worth of contracts to upgrade its networks with a commitment from ScottishPower to create 1,000 new jobs and deliver tens of thousands more in the supply chain.
With electricity demand set to more than double over the next ten years, demand for high voltage direct current (HVDC) cables will increase 8-fold over the next 10 years and 35-fold by 2050. The UK is expected to be one of the largest markets for power cables, with the high voltage direct current transmission systems market in UK was valued at $827.6 million in 2023 and is estimated to grow to $1,221.0 million in 2028. This will create an incremental growth opportunity worth $393.4 million between 2023 and 2028, which translates to around 48% of the market size in 2023. The global market for HV switchgear, which includes HVDC systems, was valued at approximately $25.02 billion in 2022 and is projected to grow to $30.34 billion by 2027. In 2023, at least 46 new HVDC projects were set to be installed over the next decade, equating to a 94.3GW addition of HVDC transmission capacity and at least 18,000 km of HVDC cables.
Scotland has taken steps to secure these industrial opportunities with £24.5 million worth of public sector support to secure Sumitomo Electric’s £350 million purpose-built subsea cable manufacturing plant at the Port of Nigg which is expected to create around 330 jobs over the next ten years for the Highlands. The UK Infrastructure Bank has also provided £20 million investment for XLCC’s planned subsea HVDC cable manufacturing facility at Hunterston.
SR supports efforts to speed up consenting timelines from project development to consent as has been outlined in proposals to reform the consenting processes in Scotland under the Electricity Act 1989 announced by the Scottish and UK Governments in October 2024. The proposals put forward in this consultation may help to drive greater consistency in the quality of stakeholder engagement and help to frontload the identification and resolution of issues where possible. However, it should be recognised that, whilst pre-application consultation (PAC) is not presently mandatory for applications made under the Electricity Act 1989, it is already standard practice across onshore and offshore energy projects with existing Scottish Government guidance and circulars under the Town and Country Planning regime readily applied to electricity infrastructure proposals. As such, the proposal to mandate pre application community consultation and associated reporting is unlikely to represent any meaningful change from current practice. More broadly, we have some wider considerations:
Overall timelines
We are concerned that the proposals do not set clear timelines for each stage of the pre-application process – including consultation periods and when consultees will return feedback. Without clear timelines, we are concerned that the proposals won’t reduce the time it takes for developments to be consented. The UK Government should ensure Section 37 decisions are made within a 12-month window, whether a Public Local Inquiry (PLI) occurs or not. Any delays to the delivery of projects in the Accelerated Strategic Transmission Investment (ASTI) framework would further delay grid connection dates for the first 11GW tranche of ScotWind, jeopardising vital projects in the multi-billion-pound offshore wind and networks investment.
An overly bureaucratic process
We are concerned that the proposals would result in an administratively burdensome exercise that creates additional barriers to renewable energy proposals. Much of this pre-application proposal is currently standard practice for onshore and offshore wind and is unlikely to represent any meaningful change from current practice. The development process for wind projects is well established. This proposal also frontloads work currently done later in the development process and adds checkpoints that will slow down the application process.
Resources
Appropriate resourcing for all relevant government departments, local authorities, and statutory consultees, which includes upskilling of staff and ensuring retention of personnel, will be critical to meet the demand in casework to deliver electricity infrastructure at pace and to prevent unnecessary consenting delays. However, the forementioned consultation does not address how both governments plan to overcome this challenge and meet the demand for technically skilled staff needed to ensure that applications are processed in a timely manner. We are concerned that by formalising the pre-application process, more pressure will be put on already stretched resources, including the ability to provide meaningful feedback to developers.
We would encourage both governments to provide more detail on how the proposals will guarantee adequate, ring-fenced funding resources for statutory consultees. This will be particularly pertinent due to the increased diversity of generation and grid stability projects entering the Scottish consenting system. These now span long duration pumped storage hydro, short-duration grid forming batteries and grid stability synchronous compensators to green hydrogen, in addition to Scotland’s existing wind, solar and grid infrastructure projects.
In addition to strategic transmission infrastructure, we wish to highlight challenges facing ports shore power and overall energy usage. We believe ports are national infrastructure assets that act as the UK’s gateway for energy products and as hubs for green energy project construction. As anchors of the energy transition, these essential facilities are working to reduce their own emissions and to provide solutions to decarbonising marine vessel operations. A 2022 feasibility study by Aberdeen Harbour found that green shore power could reduce emissions in ports by more than 90% as well as minimize noise and air pollution levels. When shore power facility is completely supplied by green electricity, the GHG emissions reduction could be around 100%.
SR port members are already investing in electrification activity with the Montrose Port Authority the first in Scotland to offer shore power to offshore energy supply vessels. This international collaboration, powered by 100% renewable energy reduces vessel carbon emissions and the port’s own scope three emissions. Investment is growing across the world too. The Port of Barcelona invested €110 million in an onshore power supply (OPS) system to electrifying all cruise berths and ferry terminals by 2030 and Rotterdam has expanded its stake in Rotterdam Shore Power, a joint venture between Eneco and the Port Authority, from 20% to 50% in April 2023 to boost the availability and supply of shore power.
However, the installation of shore power requires significant capital investment in infrastructure, including electrical substations, cabling, and connection points. The high cost of this infrastructure means these projects are not commercially viable and the investment is a barrier for our ports which have limited financial resources. Examples of international best practice incentivising shore power include, the European Commission approved €570 million Italian scheme to incentivize ships to use shore-side electricity when at berth in maritime ports and Norway’s $13.6 million investment in a total of seventeen shore power projects. President Biden’s Administration announced in May 2023 an additional $4 billion in funding for programmes to support electrification of US ports and reduce emissions.
To support port investment in shore power projects the UK Government should establish a port shore power co-fund to provide ports with the infrastructure they require to reduce vessel emissions, attract vessels to their facilities and reduce UK carbon emissions. The UK Government should support this fund by introducing regulation for vessels to incentivise shore power utilisation.
In addition to vessel shore power many ports are working to modernise and improve their power supply and decarbonise their activities with many of our port members investing in electric vehicles and solar panels. The use of micro-grids and batteries is also emerging. Research from the British Ports Association (BPA) suggests 70% of UK ports are already at or near to their ceiling in terms of available power from the grid with other ports around the world exporting similar issues. Ensuring these facilities have access to the clean power they require to enable the build-out of on and offshore wind farms as well as to import vital electricity products such as heat pumps and components for grid enhancements is crucial.
Countries around the world are prioritising port electrification. In 2024 the United States Department of Energy’s Office of Electricity created the Port Electrification Handbook to aid maritime ports in their clean energy transition. The handbook is a practical tool which emphasizes the critical evaluation and planning phase of port electrification projects, as well as benefits and challenges to consider during these phases, including economic feasibility, resilience impacts, and environmental impact.
To provide ports with the power they need to operate, electrify and expand to deliver critical renewable energy activities and attract key manufacturing inward investors the UK Government should prepare guidance for ports on how to prepare for and access additional grid resource as well as establish their own clean power generation and explore solutions such as microgrids. The guidance should take a regional approach to power and be future proofed taking into account the increasing demand arising from the use of electrification products such as electric vehicles and heat-pumps. To support this the UK Government should establish a port electrification fund to support investment in grid infrastructure for the ports around the UK.
We support the priority areas outlined by the UK Government for GB Energy through the Founding Statement published on July 25, 2024. It outlines that GB Energy will own, manage and operate clean power projects and reinvest revenue into future energy projects. In doing so, GB Energy will work with:
We believe GB Energy can play a positive role in supporting innovative new technologies and community ownership projects. Local and smaller energy schemes have suffered greatly from a lack of policy and investment support for some time. GB Energy should enable resilience and economic development in diverse areas of our country. A report by Public First, prepared for RenewableUK, also recognised access to financing as a recurring barrier for community energy projects and reiterated the importance of wider investment timing and location.
Further opportunities for GB Energy which should be considered include partnerships with the private sector, distribution network operators (DNOs) and local authorities to deliver system-wide benefits, such as building city-wide district heating scheme, developing emerging technologies and identifying procurement opportunities, such as for the expansion of electricity networks. In that context, it will be essential that GB Energy works closely with the development of the Strategic Spatial Energy Plan (SSEP) and Regional Energy Strategic Plans (RESPs).
However, we urgently need to understand the next steps of GB Energy’s development which must be formed in close partnership with industry, alongside key stakeholders including the Scottish Government and Crown Estate Scotland. Consideration should be made to give appropriate industry and regional representation in GB Energy’s governance. Moreover, GB Energy’s partnership with Crown Estate to enable up to 20-30GW of new offshore wind developments reaching seabed lease stage by 2030 must not create disparities within the UK market. The ScotWind and INTOG Leasing Rounds and the Scottish Onshore Wind Sector Deal must be optimised for 2030.
SR welcomes the agreement signed between the UK and Scottish Governments on October 17, 2024, to ensure GB Energy works in partnership with Scottish public bodies, including Crown Estate Scotland, the Enterprise Agencies and the Scottish National Investment Bank. We agree with the objective of the agreement “to secure investment in domestic priority supply chains and infrastructure to increase the pace of delivery of clean energy technologies, and maximise the economic benefits arising from this, including through creating jobs.”
GB Energy should work in partnership with industry to complement, rather than duplicate, the investment, expertise and experience of the private sector which has already enabled the Scotland and the UK to have a strong track record on renewable energy deployment. We believe GB Energy should address genuine market frustrations, such as supply chain procurement, by offering a greater appetite for risk and more flexible investment models to secure faster capital allocations, particularly for emerging technologies. It is also important to ensure that GB Energy has a sharp focus through clear policy and strong governance, including how it will interact within the existing institutional policy and funding landscape to provide political longevity and enable the “swift funding decisions” recommended by the National System Operator (NESO) in its independent advice on achieving Clean Power 2030.
The Scottish Government’s Green Industrial Strategy and forthcoming UK Industrial Strategy should effectively align with each other to provide absolute confidence to industry on the long-term, strategic investments which will be prioritised to capture the growth opportunities of Scotland’s renewable energy industry and supply chain. In doing so, it would be beneficial for both governments to carry out a mapping exercise of the financial products and services which will be delivered by relevant bodies to provide certainty to both individual organisations seeking funding and for organisations seeking to invest into the UK. Within this space includes the Scottish Government’s commitment to invest up to £500 million over the next five years for Scotland’s offshore wind supply chain. GB Energy should enable strategic, long-term investments, underpinned by the Industrial Strategy, into a diversified portfolio which maximises growth opportunities to generate a strong return for the public.
SR recognises the importance of a just transition for the Highlands and Islands where some of our best renewable energy resources are located. We also recognise that communities in the Highlands and Islands suffer from some of the highest levels of extreme fuel poverty which further underlines the importance of delivering a positive legacy.
The Highlands and Islands have pioneered the development of clean energy in Scotland, including the UK’s first grid-connected onshore wind turbine and the world’s most powerful tidal stream turbine in Orkney. The world’s first and leading test centre for marine energy is also located in Orkney where wave and tidal stream energy has been developed since 2003. An economic impact assessment found that the creation of the European Marine Energy Centre (EMEC), and subsequent activities that have burgeoned since, has amounted to £370 million GVA to the UK economy, of which £263 million was accrued in Scotland and £130 million in Orkney alone. The economic impact of marine energy is also clearly demonstrated by Orbital Marine Power who achieved an 80% supply chain spend in the UK with their 2MW Orbital O2 project.
Presently, the Highlands and Islands has enormous potential to boost the UK’s renewable energy capabilities. SSE are investing £100 million to develop the Coire Glas pumped storage hydro facility. Once operational, Coire Glas would be able to generate enough power for three million homes in just five minutes and double the UK’s existing electricity storage capacity. Pumped storage hydro projects like these will be essential for ensuring the UK can effectively manage high demand or periods of low variable generation in a renewables-based energy system. Industry continues to appeal for the UK Government to accelerate the delivery of the proposed ‘cap and floor’ investment mechanism for Long Duration Electricity Storage (LDES).
SSEN Transmission are also set to make an unprecedented investment to upgrade the network infrastructure across the North of Scotland as part of its ‘Pathway to 2030’ projects. As announced on January 9, 2025, SSEN Transmission’s Business Plan for the RIIO-T3 period (April 2026 to March 2031) will involve a baseline total expenditure of around £6 billion with an additional £16 billion of committed strategic investments that have already received approval of need from Ofgem through its Accelerated Strategic Transmission Investment (ASTI) framework and Large Onshore Transmission Investments (LOTI) Uncertainty Mechanisms. SSEN Transmission has also set out the potential for an additional £9.4 billion of future Uncertainty Mechanism expenditure, which could bring the total expenditure over the RIIO-T3 period to around £31.7 billion.
Economic analysis by BiGGAR Economics forecast that, if delivered in full, the potential £31.7 billion total investment could support up to 37,000 jobs across the UK and 17,500 across Scotland, including 8,400 in the North of Scotland. It would also add £15 billion in value to the UK economy, of which £3 billion would be in the North of Scotland. These unrivalled investments will provide significant opportunities to local communities and are set to be further complemented by proposals for community benefit from transmission infrastructure by the UK Government. Based on draft guidance, more than £100 million in community benefit funding is expected to be generated by the projects being taken forward across the RIIO-T3 period by SSEN Transmission. Moreover, SSEN Transmission have also outlined proposals to support the development of at least 1,000 new homes across the North of Scotland which will create a long-term positive legacy in host communities.
Offshore wind also presents enormous opportunities for the Highlands and Islands, particularly through the growth of local supply chains. Projects in the ScotWind Leasing Round, worth up to 30GW, are set to invest £1.4 billion per project built and £1 billion per gigawatt of capacity built into the Scottish economy. Both the ScotWind and Innovation Targeted Oil and Gas (INTOG) Leasing Rounds have cemented Scotland’s floating offshore wind pipeline as a world leader which the Highlands and Islands is well placed to capture its economic benefits.
The UK’s existing industrial capability means that, by 2030, 58% of the capital spend on UK wind farms could happen in the UK. With this level of local supply, the gross value added (GVA) contribution to UK GDP from the direct impacts of building UK floating offshore wind projects and the indirect impacts from activity in the supply chain would reach £25 billion by 2050. The number of full-time jobs associated with this domestic capital spend could rise to 36,000 in 2030 and 97,000 in 2050. To maximise UK activity and reduce the cost of floating offshore wind construction, the UK will need at least three to five ports with capacity to enable industrialised construction activity for GW scale projects. This will require investment of between £3-4 billion of public and private investment by 2040.
Ports will be the lynchpin to realising Scotland’s offshore wind ambitions and growing our supply chains. The Floating Offshore Wind Taskforce has found that every £1 invested in Scottish ports can generate around £4 of added value to our economy, with development of as little as six hectares of port estate assembly holding the potential to create up to 55 FTE direct jobs every year. Ports across the Highlands and Islands are making strategic ahead of time investments to upgrade their infrastructure to support the range of services required for offshore wind, such as marshalling, assembly, fabrication, storage, operations and maintenance. Key investments include:
As part of the Scottish Onshore Wind Sector Deal (2023) agreed between industry and the Scottish Government, analysis is produced every six months of the expected pipeline of new onshore wind projects, extensions to existing projects, life extensions and re-powering projects expected between 2023 and 2030.
The latest data for December 2024 shows that there are 196 projects for the Energy Consents Unit (ECU) and 61 projects for the Local Planning Authority (LPA) in Highland between 2024-2033. Over the same period, there are 0 projects for the ECU and 17 projects for the LPA in Orkney, 0 for the ECU and 9 for the LPA in Shetland, 12 for the ECU and 4 for the LPA in Na h-Eileanan an Iar, 94 for the ECU and 6 for the LPA in Argyll and Bute. The total community benefit estimated to be generated from the successful deployment of these projects, based on scenario two of the analysis by BVG Associates, is approximately £273.8 million.
SR believes that the clean energy transition should bring social and economic benefits to the areas where projects are located. This was reiterated last year in the National Planning Framework 4 which commits to maximising economic net-gain and in the Scottish Onshore Wind Sector Deal which re-committed to the Good Practice Principles for Community Benefits from onshore wind developments which promote £5,000 per year for every installed megawatt (MW) of generating capacity, index linked to inflation, for the lifetime of a project. Since 1990 renewable energy developers have invested over £200 million of community benefit funding in Scotland.
The Scottish Government launched a consultation on December 19, 2024, seeking views on updating the Scottish Government's Good Practice Principles for Community Benefit from Onshore Renewable Energy Developments and on developing guidance for Offshore Renewable Energy Developments. SR believes that any future schemes for community benefit from renewable energy developments must be sustainable for developers and the economic realities of individual technologies whilst delivering a strategic and long-term legacy to local communities.
The main route to market for renewable energy projects since 2014 has been the UK Government’s Contracts for Difference (CfD) mechanism. Through CfDs, the UK Government sets the maximum price it is willing to pay for renewable energy and projects must bid below this price to secure a contract with the agreed price then fixed for 15 years. In 2014, a CfD onshore wind project received £79.99 (or £82.50 for wind farms on remote islands) per MWh whereas in 2023 a CfD onshore wind project received £52.29 per MWh.
The minimum level that a project needs to reach before the developer decides to proceed with its construction is called the hurdle rate. This rate will vary between developers, depending on their attitude towards risk, their approach to financing projects and the types of investors who are likely to support the project. Typically, the hurdle rate for onshore wind developers in Scotland is between 6% and 8%. Approximately 40% of consented onshore wind projects in Scotland will not proceed because they do not meet the developer's hurdle rate. Some of these projects will be redesigned and resubmitted to the planning system, while others will be abandoned. There are more onshore turbines in Highland which are potentially in this position than anywhere else in the UK in that they have planning permission but have not been constructed due to significantly higher financial challenges, particularly due to disproportionate Transmission Network Use of System (TNUoS) charges.
According to BiGGAR Economics, an onshore wind project will earn between £15-£20 of operating surplus on every £100 of income it receives. The operating surplus of a company is the income it receives less what it spends on supplies and staff costs. This will include the profits that it makes and the taxes it has to pay. Whilst this will depend on various factors for onshore wind, TNUoS charges as well as the wind resource at a site and the approach of a developer to financing the project, the operating surplus for onshore wind is less than the average for the UK economy (£24 of every £100 of income). Sectors such as oil and gas, telecommunications and forestry will earn considerably more than this. The largest share of the operating surplus for onshore wind projects is taxes. This will include corporation tax, business rates and the electricity generator levy. The developer will receive around a third of the surplus as profits and approximately 10% will be allocated to the Community Benefit Fund.
Approximately 25% of Scotland’s onshore wind pipeline is in Highland it is estimated that around 2.6GW will be constructed in Highland between 2024 and 2030 if Scotland were to achieve its targets. In the next fiveyears, developers must invest around £13.5 billion to build the onshore wind projects required to meet Scotland’s onshore wind target of 20GW by 2030. However, the returns a renewable energy developer can make on an onshore wind farm in the UK are currently lower than in other European countries. Analysis by WindEurope in 2022 shows that the UK ranks tenth in Europe for the level of investment into onshore it was able to attract at whilst Germany ranked first. Scotland will have to outperform Germany for each of the next five years in order to meet our 2030 target.
Further analysis by BiGGAR Economics also revealed that the proposed ‘Social Values Charter for Renewables Investment’ by Highland Council in June 2024 could cost the Highland economy £2 billion over the next 30 years as four out of five viable onshore wind projects would not go ahead. This would also mean that the equivalent to almost £200 million less funding available to local communities in Highland. The charter includes a voluntary provision of £12,500 per MW in Community Benefit Funding (including £7,500 to a core Strategic Fund facilitated by the Highland Council) from renewable energy developments.
Considering domestic and export supply there is an estimated £3,000 billion serviceable market opportunity for UK offshore wind suppliers between 2024 and 2050, with £440 billion to be spent in the UK. With appropriate action to develop domestic capability and capacity, there is an opportunity for the UK to secure a significant share of the market spend. Expansion of the UK’s expertise in floating and deep-water technologies will be a key contributor to future market growth. The three main export markets are the EU, Asia Pacific, North America, with EU being the biggest opportunity. It is also essential that there are positive trade relations between these markets to ensure that components that are sourced internationally are able to be accessed at a reasonable price by OEMs and developers to prevent shortages and unnecessary increase in CAPEX.
Scotland’s renewable energy expertise is already being put to work in 72 countries. As more countries around the world are embarking on their net-zero journeys, there is huge opportunity for exporting Scottish supply chain expertise. Scottish suppliers are well placed to support international markets and many companies are already thriving in key offshore wind markets such as Europe, South-East Asia and the USA. There is also huge potential for growth. A survey of 300 suppliers carried out by Xodus in 2021 stated that more than a third of respondents are exporting to offshore wind clients overseas. With Europe offering the most opportunity followed by the USA, Southeast Asia, Asia-Pasific, South America and China.
International markets at an early stage of maturity are perceived as good export markets as there is likely to be greater appetite for Scottish expertise and insight from lessons learned. High potential export markets for offshore wind activity were outlined by SOWEC’s 2021 Offshore Wind International Export Markets exporters they include: Germany, The Netherlands, Denmark, France, Belgium, Poland, Ireland, Taiwan, Japan and South Korea. France in particular has been recognised for their government-backed green bonds to fund renewable energy projects and offer low interest loans to businesses.
The Scottish and UK Government can help suppliers to overcome challenges by enhancing export opportunities for UK suppliers by promoting and supporting companies moving into international markets. Achieving this will ensure that the UK’s renewable energy supply chain becomes truly international, helping countries around the globe to transition to clean energy systems and reach net-zero. As importantly, it would help drive growth across all levels of the UK’s supply chain, building fresh economic opportunities. To support the entrepreneurial spirit of the small and medium-sized businesses working in Scotland’s renewable energy industry, it is vital that the Scottish and UK Governments work together to unlock the full potential of public and private investment in clean energy. We would recommend the forthcoming UK Industrial Strategy introduce dedicated green financing options, such as low interest loans, grants, or subsidies tailored to renewable energy and sustainable industries.
January 2025
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