Written evidence submitted by ORE Catapult (NRG0040)

ORE Catapult Evidence Submission to the Scottish Affairs Committee – GB Energy and the net zero transition

About ORE Catapult

The Offshore Renewable Energy Catapult is the UK’s leading technology innovation and research centre for offshore renewable energy. We help deliver the UK’s net zero targets by accelerating the creation and growth of UK companies in the offshore renewable energy sector. We use our unique facilities and research & engineering capabilities to bring together industry and academia to drive innovation in renewable energy.

In addition to our work in support of technology innovation, the Catapult is also increasingly active in the space of regional cluster and supply chain support for offshore renewables. We designed and are delivering the Offshore Wind Growth Partnership (OWGP), a £100m, industry-funded initiative to promote closer collaboration across the supply chain, implement structured productivity improvement programmes and facilitate shared growth opportunities between developers and the supply chain.

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

Clean energy is not keeping pace with the decline of jobs and investment in the oil and gas sector, with North Sea oil and gas production and spending declining faster than offshore renewables are growing. However, the North Sea’s necessary journey to net zero represents a massive opportunity for the UK: between £80bn and £125bn of total economic impact in 2050, depending on the path chosen. Under a scenario with offshore wind at the core of the UK energy mix, ORE Catapult have modelled that total economic output across the UK economy could be boosted from £40bn in 2020 to more than £125bn in 2050, and employment increased from 140,000 to 232,000 jobs. Under this model, employment in offshore wind, for both power and production of hydrogen, could total nearly 160,000, CCS could support up to 28,000 posts, while blue and green hydrogen could potentially employ 35,000. Domestic oil and gas jobs are expected to be around 27,000 in 2050. [1]

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

The recent government announcement of skills passporting[2] is a positive step forward in transitioning workers from oil and gas into the clean energy sector. However, with an estimated 100,000 jobs needed by 2030 for offshore wind[3] (OSW), opportunity exists for the government to develop/support a bespoke retraining programme to ensure that workers are supported in their transition and offshore wind has the available talent pool required to deliver the ambitious deployment targets for 2030 and beyond.

However, it should be noted that reluctance of oil & gas workers to switch to renewables, whether due to wage disparity or lack of interest, may limit transitional workers. Furthermore, the workforce between the two industries is not equally distributed nationally – Scotland is home to 67% of the UK oil & gas workforce, but only 29% of the offshore wind workforce, and many workers may be reluctant to relocate.

Therefore dedicated training and incentives for the next generation of offshore workers in clean energy will be vital to set the UK in good stead to deliver on the ambitious clean energy pathway set out in the recent NESO Clean Power 2030 report[4] and capitalise on the commercialisation of nascent technologies such as floating offshore wind.

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

The current capacity of the OSW supply chain is emerging as a key bottleneck to future deployment. Countries aiming to reach their 2030 OSW targets will be constrained by limitations in the current supply chain leading to possible shortages of key components without necessary investment. The UK relies on European imports for several key components and has current UK content as low as 25%, as stated by Tim Pick in the "Independent Report of the Offshore Wind Champion” [5]. Therefore, through it’s upcoming Industrial Strategy the UK government should set a higher target rates of UK content adoption in the region of 50% as recommended in the Offshore Wind Industrial Growth Plan[6].

Greater funding into supply chain support programmes is required, alongside utilisation of policy levers to recognise the conflicting agendas of continued cost reduction and supply chain growth as well as infrastructure investment; this is an area of significant international competition and the UK must act now to avoid becoming an offshore wind import nation. 

Streamlining and accelerating consenting timelines through use of innovative technologies[7] will allow developers to award contracts to enable supply chain to invest/scale up in preparation for projects. The supply chain also needs much greater clarity and certainty of the pipeline and timing of OSW projects, in particular floating wind, which comes down to the need for a UK-wide long-term plan for leasing and route to market revenue scheme.

In floating wind offshore wind (FOW) there is a critical need for offshore test and demonstration opportunities for key technologies such as moorings and cabling systems, delivered through collaborative full-scale demonstrations or via commercial stepping stone projects.

Ports are critical for the manufacture, staging, and marshalling of components during the construction and installation phase, in addition to operations and maintenance (O&M) purposes during the operational phase. As OSW turbines increase in size, UK ports need to be upgraded to facilitate the development of these larger components to realise the full potential of OSW. The key barrier to attract investment is the lack of a visible long-term deployment pipeline for OSW. Without necessary investment in ports, the UK will miss out on economic growth, supply chain development and job creation, and future OSW projects may experience significant delays. As ports are privately owned, they must find this investment on commercial terms. 

The Tim Pick report highlights these challenges and draws attention to timing issues with project development cycles. The CfD being awarded at a late stage in project development results in developers being hesitant to secure orders with ports until they have received confirmation. This incentivises them to go to non-UK ports with shorter lead times. Other issues around port infrastructure include lease gaps, high pricing, exclusivity issues, and high upfront capital requirements

For floating offshore wind specifically, the report “Floating Offshore Wind Taskforce: Industry Roadmap to 2040”[8] identifies a need, by 2030, for 3-5 integration ports in Scotland and 2 integration ports in the Celtic Sea, in addition to a minimum of 4 ports to service either steel or concrete manufacturing. The total investment to develop these ports is estimated to be around £4bn.

In addition, ORE Catapult’s “Strategic Infrastructure and Supply Chain Development Summary Report”[9] assessed port capabilities to support the following FOW activities. Scotland has the highest potential for facilities, with significant additional capability in the North-East, and a relatively low level of capability in the South-West. For O&M activity, we found that there are several well positioned ports around the UK with potential to support vessel operations for FOW. 

The multi-criteria analysis of UK ports concluded in a suggested review of 10 specific ports around the UK, including 5 in Scotland, 2 in the North East and 2 in the South West. These ports were identified as having the greatest potential for providing suitable fabrication and manufacturing of semi-submersibles and spars, marshalling and assembly and O&M following the required infrastructure development.

Other suggestions include aiming to secure supply chain investment and commitments earlier, breaking down the investment and funding requirement in the development period into phases to reduce the upfront funding requirement, and providing a revenue support mechanism to mitigate potential risks. Examples of such revenue support mechanisms include The Offshore Wind Manufacturing Investment Scheme (OWMIS) which was set up by the previous government administration to overcome market barriers limiting investment in UK ports; Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS) which had a funding grant of £160m to support critical port infrastructure development; Freeports and Green Freeports which have a focus on the OSW industry and trying to attract national and international manufacturers.  

However, the OWMIS and FLOWMIS schemes did not address the key challenge facing port operators which is around long term market revenue certainty from OSW. Support mechanisms to provide this long-term revenue certainty could come in various forms such as a backstop lease or a CfD for ports and an eligible OSW port could be included in the pilot programme for Fast Track Development Consent Orders (DCOs).  

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?

Multiple reports show the existing transmission network in the UK is not currently equipped to support the Government’s OSW deployment ambitions. This is due to the nature of renewable energies’ weather dependency, as well as solar and wind farms being far from demand centres.  

The National Grid’s “Pathway to 2030 Holistic Network Design” (HND report) observed that OSW has typically been connected via radial links to the nearest point on shore without consideration of the overall network required to efficiently transport electricity to its intended destination. Regulatory measures were designed to reduce the risks associated with early OSW projects, allowing developers the choice of constructing the necessary network to bring energy onshore. This incentivised individual connections to shore in an attempt to minimise costs and risks, but, crucially, did not promote coordination among developers.  

As the expected OSW capacity has significantly increased, this original model is no longer suitable. Adhering to this outdated model may result in avoidable adverse impacts on consumers, the environment, local communities, and of course deployment of OSW. To mitigate these impacts, the report highlights that grid reform must take place with a more centralised, coordinated and strategic approach at a pace necessary to avoid delaying projects. National Grid has calculated that achieving the 50GW OSW target by 2030 will require obtaining a minimum of 17 new energy transmission consents within the next four years, with three years allocated for construction. This represents a substantial increase, more than fourfold, compared to historical rates of annual transmission project consents.  

The report conveys several key messages, one of which is on infrastructure and the energy system as a whole. It considers the current state of the UK energy system, and developments which could be made to improve it. It states that integrating substantial quantities of renewables, particularly OSW, necessitates strategic planning and coordination across the whole energy system. This includes anticipatory investment to prevent aggravating existing network constraints. Key elements in this integration include regional coordination between distribution and transmission networks, transparent locational price signals, optimised offshore solutions, and consideration of hydrogen and electricity imports and exports to ensure security, affordability, and fairness for consumers.  

The weather dependency of OSW creates challenges in power transmission across regions and in system operation. Presently, there are large power flows from Scotland to England during high wind generation, and this is expected to increase and become more variable with the addition of OSW capacity. Balancing the energy system is increasingly complex, necessitating higher levels of redispatch and resulting in increased transmission constraint costs. Transmission projects, like the Western and Eastern Links, will alleviate some constraints, but significant reinforcement and local flexibility are essential to avoid high costs. 

The HND report also suggests that an investment of £54bn into the UK network infrastructure will be required to facilitate 50GW of OSW by 2030, made up of £32bn for offshore infrastructure and £22bn onshore.  

The reformed network design consists of a combination of radial and coordinated connections. This design fosters enhanced coordination among OSW farms, optimising the selection of landing points. Furthermore, the report proposes connecting certain OSW farms further south than what would typically be considered using the conventional approach to connections.  

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?

Leveraging the National Wealth Fund, additional Scottish programmes to attract both foreign and domestic investment into local and regional supply chains, and initiatives to local promote skills development and could be administered by DESNZ, DBT and the Scottish Government.

Through taking stakes in projects utilising established technologies, i.e. fixed-bottom offshore wind, GB Energy can free up private sector capital to be redeployed in further projects, boosting employment and economic activity. In doing so GB Energy could make it a condition of investment that a certain percentage of local content must be utilised in the project to stimulate local supply chains and encourage regional foreign direct investment.

GB Energy can also take financial stakes in projects for more nascent, burgeoning technologies such as floating offshore wind and tidal stream technologies, with similar investment conditions, which will help to drive these technologies forward in cost reduction and reach commercial scale deployment more rapidly. In doing so the UK can cement its position as a world-leader in these technologies and capture the economic benefits including supply chain development and manufacturing.

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

ORE Catapult has – including through its FOW CoE programme – a great understanding of the industry technology and infrastructure needs for floating wind, which can be used to inform targeted investment in ports and manufacturing capabilities. Similarly, ORE Catapult can advise on the need and scope of offshore test and demonstration opportunities to drive the technology development and innovation in floating wind. We would be keen to work with GB Energy, Scottish Government and associated delivery bodies in order to identify funding mechanisms and frameworks to facilitate supply chain and OSW project development.

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?

N/A

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

France, Spain, Norway have dedicated or government owned demonstrator sites, which the UK lacks. Without these it is prohibitive to developing a market-led approach to technology development and application

In other markets such as the Netherlands, consenting is managed on a regional basis.  Adopting a similar approach in the UK could not only expedite the process but can also provide significant cost savings, as well as potentially better environmental outcomes. In order to achieve this, there would need to be coordination between UK and Scottish governments, Crown Estate, Crown Estate Scotland and regulators to establish a framework whereby innovative technologies can be deployed and the data produced correctly analysed and interpreted for consents to be granted. This approach is outlined in the ORE Catapult report “Accelerating Offshore Wind Developing A Regional Ecosystem Monitoring Programme For The UK Offshore Wind Industry.”[10]

January 2025