Written evidence submitted by SSE plc (NRG0043)

House of Commons Scottish Affairs Committee Inquiry - GB Energy and the net zero transition

Written evidence from SSE plc

SSE is UK-listed energy infrastructure company headquartered in Perth, Scotland - and has a growing presence in international markets. We develop, build, operate and invest in world-class electricity infrastructure that is vital to the clean energy transition, including onshore and offshore wind, hydro power, electricity transmission and distribution networks, power stations, carbon capture and hydrogen storage, solar and batteries, as well as providing energy products and services for businesses and customers.

SSE could invest more than £40bn in the next decade, assuming a supportive policy environment, with half of that in Scotland, and particularly northern Scotland.

Our key points can be summarised as follows:

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

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

The state of readiness is likely to vary across different organisations, regions and sub-sections of the energy sector. While many larger industry players, including SSE, are making significant progress in preparing their workforces for the net zero transition, challenges remain that must be addressed to ensure a just and fair transition. Protecting and retaining Scotland’s rich industrial skills base will require investment in low carbon technologies to happen at pace.

Carbon Capture and Storage (CCS) and the production of hydrogen are crucial technologies for decarbonising gas-fired power generation and heavy industry, including oil and gas refining and the chemicals sector. Scotland has unique natural geological potential for CCS deployment, with substantial offshore storage capacity in the central and northern North Sea. The UK Government needs to urgently progress deployment of CCS in Scotland, by committing to launch Track-2 of the CCS cluster process, with funding identified through the upcoming Comprehensive Spending Review due in June. This must include further low carbon dispatchable generation which will anchor the new CCS cluster, support delivery of Clean Power 2030 and protecting jobs and industry in a key industrial heartland – with the Scottish Cluster being critical for the success of Project Willow on the future of the Grangemouth site.

In terms of skills, several challenges relate to policy creation and the level of coordination between governments and public sector agencies. A University of Edinburgh report[1] commissioned in 2024 by SSE to map out future skills need across six different sectors, including energy, found that current energy policy uncertainty exacerbates workforce planning issues. A supportive policy environment is essential for ensuring project pipeline certainty for developers and their supply chains. This, in turn, enables investment in workforce planning, development, and training.

• 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?

Anticipated skills shortages must also be considered in the context of increased global demand for energy, an ageing population and policy uncertainty. The UK and Scottish Government’s should work jointly to ensure that there are clear pathways for those in the workforce that can transition from high carbon roles to the low carbon sector. It is, however, important to recognise that a just transition cannot always be achieved by the straightforward transfer of workers and skills from the oil and gas sector into clean energy sector jobs. The regions of Scotland and the rest of the UK where those skills are currently located may differ from where they will be needed in future. We believe it is therefore necessary to look beyond energy sectors at other pathways for former oil and gas workers and to consider other means of acquiring the required skills in the clean energy sector.

As part of UK-wide planning, it will be important to also consider future needs in the context of AI and how that may change the type of skills required, as well as changes in migration caused by, for example, immigration regulations, as these can directly impact our ability to fill key roles. For example, a tightening of UK Government immigration criteria has created challenges for both our graduate pipeline and our plans to recruit craft workers from overseas training academies.

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

SSE suggests the UK Government:

• Urgently progresses Track-2 of the CCS cluster process covering the Scottish Cluster, with funding identified through the upcoming spending review. The Scottish Cluster has the potential to create an average of 10,800 jobs in the UK economy during the development and construction period (of which 4,700 will be in Scotland). This includes an additional 4,700 operational jobs, with 2,300 expected in Scotland, and safeguards 18,800 jobs that would otherwise be lost across the UK – 12,100 of which are in Scotland, many involving oil and gas workers. SSE’s Peterhead Power Station, the new carbon capture project as part of the Scottish Cluster would create 1000 jobs during construction and around 240 supported during each year of operation, many of which will be existing jobs protected;
• Carries out an analysis of demand levels, skills availability and regional pull to provide an accurate account of the workforce requirements for the clean energy sector. This will allow an assessment of the potential of transferring oil and gas workers into key roles in the sector;
• Offers incentives and facilitates transitions for oil and gas workers, as well as workers from other sectors, to address workforce challenges and accelerate the shift to clean energy;
• Increases training provision for skilled workers and those entering the sector from related industries;
• Reviews the timelines of planned UK infrastructure projects and identifies ways to prevent skills bottlenecks;
• Establishes clear communication pathways to ensure workers are aware of transition opportunities into clean energy roles.

Moreover, SSE is pleased to note the introduction of the Energy Skills Passport[2] in Scotland which facilitates the transition of oil and gas workers into the offshore wind industry and would welcome the expansion of this scheme to other parts of the clean energy sector. When further developing the scheme, SSE would encourage the UK government to adopt a place-based approach, i.e. one which takes into consideration the availability of clean energy jobs in regions which have a high number of oil and gas workers, and the needs of the local community. For instance, in Aberdeen, there may not be enough jobs in renewable energy generation for all oil and gas workers but there will be a range of opportunities in other roles and sectors - which would benefit both workers and the community. The Government can help by working with training providers and other public agencies to provide tools and funding to establish those career transition pathways. 

The SSE-commissioned report by University of Edinburgh provides detailed insights into regional disparities in training provision (pp16-17) and examines the potential impact of the transition to a net zero economy on employment across various regions of the UK (Figure 3).
 

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

Scotland’s offshore leadership and the need to scale-up

Scottish industry has been a leader in the clean energy transition, leveraging significant experience and world-class expertise in offshore wind and other renewable energy technologies and its recent ScotWind auction. Scotland is at the forefront of commercial-scale floating offshore wind development, with Scottish companies, including SSE, playing pivotal roles. Additionally, numerous significant supply chain companies maintain Scottish bases or manufacturing centres.

Industry has committed significant funding and resources to support supply chain growth and innovation projects. Most notably through the development of the Scottish Strategic Investment Model (SIM), UK Offshore Wind Growth Partnership (OWGP) and now the Offshore Wind Industrial Growth Plan (IGP)[3], which is set to invest c.£300m of industry funding in priority areas to support UK growth.

Delivering the UK’s Clean Power Mission will require a transformative acceleration in offshore wind deployment. Faster project development and deployment are critical, particularly in addressing key challenges such as consenting timelines, unlocking commercial-scale floating wind projects at competitive prices, and ensuring stable and sufficient government revenue support to sustain a thriving sector capable of investing and growing. Industry, in collaboration with the Scottish Government and wider public sector bodies across the UK, has made considerable progress in identifying barriers to deployment and ensuring economic benefits for Scotland. Organisations such as the Scottish Offshore Wind Energy Council and the UK’s Offshore Wind Industry Council have played instrumental roles in these efforts. However, it is clear that more decisive action is required to streamline consenting processes, support workforce and supply chain development, and drive innovation.

Having taken an early lead, Scotland is now in a highly competitive global race for low-carbon investment. Supply chains will cluster around the projects and markets which offer the most certainty and that is why timely planning and consenting processes are crucial. By leveraging the powers at its disposal, Scottish and UK Governments have the opportunity to build and maintain a competitive advantage for projects on our shores. Making Scotland amongst the fastest places in Europe to develop sustainable low-carbon projects would lure investors to Scotland, bolster supply chains, create jobs and ignite growth in the economy.

At present, consenting timescales for large scale projects in Scotland are having the opposite effect on investment. To address this, the Scottish Government has in recent months taken welcome practical steps to bolster resource and streamline process within the planning and consenting system. This has included doubling the resource of the Energy Consents Unit (ECU) and the establishment of Scotland’s first Planning Hub, based in Aberdeen. These steps have been widely welcomed by industry, who are optimistic this will translate into shorter timescales for determining projects of national significance, in future.

Case Study: Berwick Bank offshore wind farm

The scale and certainty of a sustainable pipeline of consented offshore wind projects will be crucial in building the supply chain’s confidence to invest in Scotland. After limited success for new Scottish offshore wind at the most recent CfD Allocation Rounds 5 and 6, where only 400MW of new capacity in Scotland was secured, the supply chain is potentially facing a significant gap in pipeline at the time it should be scaling up for ScotWind. The current lack of consented projects of scale in Scotland is placing the national economic opportunity of offshore wind at risk. With its immense size, the 4.1GW Berwick Bank project off the Lothian coast has the potential to anchor supply chain jobs and investment in Scotland in advance of ScotWind. An economic impact study, commissioned by SSE Renewables and performed by consultants BVG Associates, said that Berwick Bank could represent a £4.1 billion economic boost for Scotland and create around 4,650 direct, indirect and induced jobs in the process[4].

The project, however, remains without a consent and is unable to progress, despite being submitted to the Scottish Government in December 2022. If built, it would become the largest offshore wind farm in the world, surpassing SSE and Equinor’s 3.6GW Dogger Bank, which is currently in construction off the north east coast of England.

Case Study: Securing subsea cable manufacturing in the Scottish Highlands

In May 2024, the Sumitomo Electric company broke ground on a £350m subsea transmission cable factory at the Port of Nigg in the Scottish Highlands. The investment had its origins in the UK’s Offshore Transmission Network Review (OTNR) which was launched in 2020. The outcomes of the OTNR led to the development of a strategic plan for the electricity transmission network from the National Energy System Operator (NESO) in 2022 in order to deliver on the UK’s offshore wind target for 2030 – this strategic grid plan was the first transitional Centralised Strategic Network Plan (CSNP).

Grid upgrades within this strategic grid plan were then approved by the energy regulator, Ofgem, under a new forward-looking Accelerated Strategic Transmission Investment (ASTI) framework. ASTI moved beyond individual project-by-project approvals which had fragmented procurement processes, and allowed the Electricity Transmission Owners (TOs) to have early and at scale engagement with the supply chain, in what was a tight market with European counterparts looking to make grid upgrades of similar scale.

Where procurement in a tight market may have led to inflated costs or delayed projects, the shift in mindset delivered under the more strategic approach, coupled with targeted public funding helped trigger the Sumitomo investment, securing wider economic benefits from the UK’s upcoming grid development.

Under the Clean Power Mission, there will be a range of similar opportunities to use the GB energy policy and regulatory framework alongside wider industrial policy to secure economic opportunities from the upcoming investment. However, to date the Sumitomo example is an isolated case study given the overfocus on piece-by-piece competition across the GB energy policy and regulatory framework which has overfocussed on near term costs, over long-term value.

Strategic deployment of energy infrastructure and the threat of zonal pricing

Critical to delivery of Scottish clean energy projects will be the strategic deployment of energy infrastructure, and SSE is a strong supporter of moves to the strategic deployment for renewables, grid and flexibility under the Clean Power Mission, as well as the upcoming Strategic Spatial Energy Plan (SSEP). The network constraints seen in Scotland today have got much attention, but it is important to note they are a result of a lack of strategic planning taken around the mid-2010s, when the UK Government overly focused on seeking to step away from the market and dismantled strategic planning infrastructure that was put in place between 2007-9 to deliver on the UK’s 2020 renewables target.

The constraints caused by the lack of grid build, are now being addressed, but is leading to calls to split the electricity market in Great Britain into regional price zones under the UK’s Review of Electricity Market Arrangements (REMA), which has been ongoing since July 2022. However, zonal pricing presents a major risk for low carbon investment across GB, and for Scotland in particular. A decision to split the GB electricity market, would add costs to the delivery of the Clean Power Mission, and effectively stymy renewables investment in Scotland.

A refresh of the analysis done for DESNZ on zonal commissioned by SSE outlined that when taking into account the latest grid plans and delivery of ScotWind, alongside incremental reforms, there is no system benefit from a move to zonal pricing between 2030-50, with a 1 percentage point impact on the cost of capital for upcoming investment would mean zonal pricing instead becoming £8-19bn cost[5]. Proponents of zonal pricing claim Scotland will have lower wholesale prices to garner support, but this ignores the latest grid plans and costs that would appear elsewhere on the bill (eg higher CfD costs and transitional arrangements).

The focus for REMA should be on delivery and investment, with incremental reforms to transmission charging and constraint management to support investment in flexible demand. Incremental reforms to the GB market can be delivered more quickly than zonal, and without the disruption to renewables investment.

A particular issue is the potential impact of a decision to implement zonal pricing being taken ahead of AR7 and AR8 CfD auctions this year and next year respectively. Whilst DESNZ have addressed potential ‘price risks’ by noting CfD reference prices will be set per zone in the event of a move to zonal pricing, they have left wind developers exposed to ‘volume risk’[6]. Volume risk is the risk that wind farms will be curtailed, which due to the lack of current grid capacity is a greater risk in Scotland. DESNZ are aware of this, as they considering CfD reforms for AR9 in 2027 to address this volume risk (under a ‘Deemed CfD’). However, this means for the next two CfD auctions wind farm developers will have to price this volume risk into CfD bids, recovering their costs over fewer hours, inflating the clearing price of the upcoming auctions, and as this risk is currently greater in Scotland, it will effectively mean Scottish projects are disadvantaged (similarly to how they are under the current Transmission Network Use of System (TNUoS) regime).

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?

Accelerating the consenting of renewable energy projects will be vital to delivering the net zero transition and meeting the UK’s Clean Power Mission. The delivery of National Planning Framework 4 (NPF4) in Scotland has been a positive move forward.

However, the pace of consenting for offshore wind must urgently increase. This is critical not only to meet 2030 targets but also to instill confidence in the supply chain by ensuring a reliable pipeline of projects. Offshore wind requires immediate action to address current delays. A key focus should be on overcoming the limitations of habitat regulations, not only to streamline offshore windfarm approvals but also to protect and enhance the marine environment. It’s vital that the UK Government fully leverages the powers of the Energy Act to deliver the strategic compensation necessary to meet offshore wind targets while simultaneously advancing marine environmental benefits.

Equally important is the need for market support mechanisms to deliver the scale of projects required for the UK Government’s Clean Power 2030 plan. We welcome the recent Clean Power 2030 Action Plan and in particular the clear indication it gives on securing the volume required in upcoming Contract for Difference auctions to meet 2030 targets. We also welcome some of the proposed changes to the parameters to the auction, such as reviewing reference prices and increasing contract length which will help deliver the projects required while maintaining value for the consumer. It’s also important that upcoming auctions recognise the vital role that Scottish renewable energy projects have in delivering CP2030 and that upcoming CfD auctions recognise this. We are also concerned about the proposed relaxation of eligibility criteria, specifically removing the requirement for projects to have secured consents, as this change could introduce significant risks and distort developer behavior during the auction process.

Moreover, delivering the flexibility and storage capacity needed to support a renewable-led electricity system is another critical priority.  We welcome the UK Government’s recent decision to move forward with putting in place a Cap and Floor mechanism to support Long Duration Energy Storage (LDES), the detailed design and delivery of which will now be taken forward by Ofgem. We also welcome the intent to now deliver the scheme on an ambitious timetable.  Pumped Hydro Storage (PSH) is the most mature and proven of the LDES technologies with a long history and will likely deliver the initial projects under the scheme. This is particularly significant from a Scottish perspective, as most of these projects will be located in Scotland.  This includes SSE’s Coire Glas project, which is the most advanced of the new PSH projects under development and with 30GWh of storage will double the UK’s energy storage capacity.  Early delivery of the Cap and Floor won’t just deliver vital storage capacity but will also unlock billions of pounds of investment in the Scottish economy.

While these measures will accelerate renewable deployment, they must be complemented by decisive action on low-carbon dispatchable generation, including urgent progress on Track-2 of the CCS cluster process, with funding identified through the upcoming Spending Review in June, which would support a Final Investment Decision (FID) on Peterhead Carbon Capture to be taken before the end of 2026.

Onshore electricity transmission infrastructure

Significant upgrades to the transmission network are essential to connect vast Scottish renewable resources to households, communities and businesses, and support tens of thousands of jobs. SSEN Transmission’s RIIO T3 business plan for 2026-2031[7] sets out £22bn+ of investment, supporting 37,000 jobs, with 17,500 of these in Scotland and 8,400 in the North of Scotland.

• Consenting             

The existing consenting process in Scotland for overhead lines presents the biggest risk to the efficient delivery of transmission infrastructure required for enabling Clean Power by 2030. We welcome the recent recognition of this issue by both the UK and Scottish Governments and their collaborative efforts, as demonstrated in the recent joint consultation[8] on reviewing Scotland’s consenting arrangements for electricity transmission infrastructure. To ensure success, it is critical that this collaborative approach continues and that both Governments get the details right:

1. We need positive consent determinations to be made no later than 12 months after an application has been submitted to the Scottish Government, in line with the Scottish Government’s commitment in its Green Industrial Strategy;
2. This 12-month time frame for determining consents should be put on a statutory footing;
3. The automatic trigger for a Public Local Inquiry (PLI) must be replaced by a more proportionate approach, such as exists in England and Wales, ie for the relevant Scottish Government Minister to determine whether there are grounds for a PLI.

The Scottish planning system must also be adequately resourced and fit for purpose to successfully deliver the process. Stakeholder engagement conducted jointly with SP Energy Networks and the Scottish Government highlighted that resource is very stretched across Scottish Local Planning Authorities and without Government support on skills, training and funding, consenting authorities will struggle to deliver the scale of the task.

• Land rights

While we welcome ongoing work to review the consenting system in Scotland, we urge the UK Government to commit as strongly to reforming the framework for securing land rights in Scotland under the Electricity Act 1989. Without progress to ensure swift determination of statutory applications, we risk undermining progress being made on consenting to expedite overall delivery timelines.

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?

In regards to skills and workforce planning, please refer to answers 1 and 2 above.

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

GB Energy’s collaboration is particularly crucial for technologies like CCS and hydrogen, where routes to market depend heavily on clear and robust policy support. For example, funding could be allocated to enable pre-FID works, ensuring that critical projects maintain momentum while awaiting business model allocation.

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?

Companies like SSE have a responsibility to shape the transition so that opportunities to create shared value and economic prosperity are realised, and potentially negative impacts are minimised.

SSE’s latest Just Transition Strategy[9] was published in 2024, updating its Just Transition Strategy published in 2020.

To support a just transition, SSE has:

• A framework of 20 principles to guide our decision-making covering the creation of good, green jobs, how we support those moving from high-carbon to low-carbon roles, and how we partner with communities.
• A set of 10 KPIs that will help us track and evidence progress across job creation, human rights, community investment, and more
• A commitment to move to a place-based approach, ensuring our work in impacted areas is rooted in local context and communities

In regard to the workforce, a well-managed transition will help prevent any form of ‘brain drain’, will create good jobs with attractive and fair terms and conditions, and will provide opportunities to tackle labour market exclusion and lack of diversity. Ongoing engagement with impacted stakeholders is important. Trade unions have a critical role, and with younger and older people facing distinct challenges in the labour market, engagement must be across different generations.

Skills and training will be critical in supporting workers to secure roles in emerging sectors. We would draw the Committee’s attention to the SSE-funded report from the University of Edinburgh referenced above that sets out by sector how different regions in Scotland may be impacted (Figure 3) and potential redirect pathways into the energy sector (Table 3).

SSEN Transmission’s Housing Strategy

In an industry first, announced in October 2024, SSEN Transmission pledged to support the delivery of more than 1,000 new homes across the north of Scotland as it aims to play a role in alleviating the region’s housing challenges.

Developed in collaboration with contractors, local authorities, registered social landlords and other housing organisations, the strategy details several delivery models that will be used to achieve its ambitions. It offers a blueprint that could be used as a template by other infrastructure developers, driving housing development in the communities where projects are based.

The new homes will be delivered to complement the Pathway to 2030 programme – a £20bn investment to upgrade the transmission network in the north of Scotland in support of energy security and national net zero ambitions. Workers’ accommodation will be required to deliver the proposed projects, and SSEN Transmission’s strategy seeks to create a lasting legacy in the communities that will host its workforce by delivering housing that will support local need when the projects are completed.

The scale of this delivery of new housing in local authority areas in the north of Scotland includes around 400 homes in the Highlands and a similar number in Aberdeenshire. Other significant housing activity is planned elsewhere across SSEN’s network area, including the islands.

Community Benefit for renewables

To date SSE has invested over £67.5 million in Scotland through community benefits which support 21% of Scotland’s population spanning 133 communities. Our community benefits have funded 4,400 local projects including enhancing 366 community owned assets, creating 631 local jobs and building 61 community owned houses. Our evaluation shows the funding creates a Social Return of Investment of up to £10.95 for every £1 of community benefits provided.

SSE’s experience of community benefits shows the following requirements for a just transition:

•                   Sharing value – to achieve a just transition local areas require tangible and lasting socio-economic growth from the energy transition. This value must be fair to the communities while also ensuring the energy transition can accelerate at pace;
•                   Local control – it is pivotal that local stakeholders and communities have control of community benefit, shared ownership and community energy. The local community are the experts in their area and to achieve lasting impact, they must drive decisions. An example is Shetland Community Benefit Fund[10], a co-operative with representation from all 18 community council areas in Shetland. They manage the community funds from renewable assets to deliver local, strategic priorities as identified in their business plan - A Legacy for Shetland. GB Energy has a role to promote local control as a principle for the just transition;
•                   Capacity Building – communities require capacity building support to increase their skills to lead on a just transition. GB Energy could have a role in accelerating the access to capacity building support across the Highlands and Islands;
•                   Financing – through our research and consultation with Development Trust Association Scotland we know that communities need access to low-cost financing models to achieve their shared ownership and community energy projects. Communities cannot absorb the commercial financing models used by the energy sector. GB Energy could play a role in facilitating access to affordable financing models.

Community benefit for transmission infrastructure

• SSEN Transmission recently launched its own £10m community benefit fund, which is designed to support local and regional initiatives across the north of Scotland. We have just closed applications for the first £2m regional funding round, and have opened applications for our first Local Fund, the East Coast 400kV Overhead Line Upgrade Local Fund.
• Following a UK Government announcement in November 2023 regarding community benefits from transmission infrastructure, SSEN Transmission anticipates the value of future community funds from our current investment plans to be in excess of £100m. This initiative is subject to the finalised UK Government guidance and approval from Ofgem and will apply to all new transmission infrastructure projects in Great Britain.

January 2025

12