Written evidence submitted by Scottish Government (NRG0045)
Scottish Affairs Committee Inquiry on GB Energy and net zero transition – Response from Scottish Government officials
1. What impact will the UK Government’s approach to net zero have on Scotland’s oil and gas industry?
The Scottish Government has long recognised offshore oil and gas as an integral part of Scotland’s economy, which continues to play an important part in our energy transition to net zero. We value and welcome this ongoing contribution from the industry and its highly skilled workforces. We also recognise that the North Sea basin is geologically mature and now in a state of natural decline.
Many of the key levers for the North Sea energy transition, including offshore oil and gas licensing and consenting as well as the associated fiscal regime, are currently reserved. The UK Government’s approach to these matters will have a very significant impact on Scotland’s oil and gas industry and energy transition as a whole.
The offshore oil and gas sector is currently going through a period of fiscal and regulatory change at the UK level, in part following the change in UK Government and in part in response to the implications of the “Finch” Supreme Court ruling for the environmental assessment of consenting for new development.
The UK Autumn Budget also saw confirmation of further changes to the oil and gas fiscal regime including the rise in the Energy Profits Levy, from 35 to 38%, with the extension of the sunset clause to March 2030. Whilst the Scottish Government welcomes the retention of the Decarbonisation Allowance and First Year Capital Allowances in full and continue to support the Energy Profits Levy at its original rate and duration, we do not support the latest extension or increase. There is a risk that these changes could impact jobs and investment in the transition.
The UK Government has recently concluded, or is expected to soon launch, three consultations in relation to future offshore oil and gas policy:
On strengthened environmental guidance for assessing the climate impacts of the “scope 3” emissions arising from new oil and gas developments.
On implementation of the UK Government’s manifesto position not to issue new oil and gas licences to explore new fields.
On HMT’s commitment, which Scottish Government has welcomed, to work with industry and other stakeholders to design a long-term fiscal regime for the post-Energy Profit’s Levy period from 2030 onwards (or earlier if Energy Security Investment Mechanism were to be triggered).
The outcomes of all three of these UK Government consultations are expected in 2025. Scottish Ministers recognise that this is a rapidly changing landscape at the UK level and will take time to reflect on developments before drawing any conclusions.
The Scottish Government’s own focus will remain on reducing emissions in line with climate change goals, meeting our energy security needs and ensuring a just transition for workforces as North Sea oil and gas resources decline. We see partnership working between government and industry as an essential part of achieving these objectives and engage regularly with bodies such as OEUK to understand the views of industry on the transition.
In terms of scaling up clean energy sectors as traditional oil and gas activity declines, the Scottish Government’s Green Industrial Strategy[1] (published in September 2024) identifies offshore wind energy, hydrogen energy and CCUS as three of the five key opportunity areas for Scotland in the energy transition.
We are already seeing growth in clean energy jobs, and green jobs more widely, across Scotland. The recent PwC Green Jobs Barometer[2] shows that 5.6% of all job adverts in Scotland in 2024 were for jobs that have a positive impact on the environment, up from 4.0% in 2023. This helped Scotland once again retain first place among 12 nations and regions of the UK in the overall Green Jobs Barometer.
There is also strong optimism about Scotland’s renewable energy potential. A Scottish Renewables’ survey of supply chain companies found 100% have confidence in securing work within the industry for the next five years and 90% have expanded their workforce because of renewable opportunities[3].
There is a range of evidence available around the estimated numbers of jobs in Scotland’s energy sectors as the transition progresses. For example, the Scottish Government commissioned an independent programme of work to better understand Scotland’s energy requirements as we transition to net zero[4]. This was published in 2023 and included detailed economic analysis and projections of jobs for Scotland’s offshore energy transition. The analysis estimates that, with the correct support and investment and as part of a wider policy of a just transition for offshore oil and gas workers, the number of low carbon jobs in Scotland is projected to rise from 19,000 in 2019 to 77,000 by 2050. The analysis also estimated that a cumulative £33.3 billion investment is needed in offshore wind, CCUS and hydrogen to offset the loss of oil and gas jobs by 2050.
In summary, the available evidence and feedback from stakeholders points to a range of opportunities for Scotland’s existing offshore oil and gas workforces in the energy transition. There are, however, also challenges – including in terms of uncertainty around the future pipeline of clean energy projects in Scotland. The UK Government should work with Scottish Government to address these uncertainties as far as is possible, with both reserved and devolved policy levers used to ensure there is no gap between the decline of the oil and gas sector and the scaling up of the clean energy sector.
The UK Government should also move quickly, once the current suite of consultation processes has concluded, to update and apply its reserved levers around offshore oil and gas licensing, consenting and fiscal regime to ensure a managed and just transition for the North Sea. Early clarity on these matters is of vital importance for business and industry.
2. What UK Government interventions will be necessary to maximise the ability of oil and gas workers to find jobs in clean energy?
The Scottish Government is committed to supporting a just transition for Scotland’s valued and highly skilled offshore oil and gas workforces. The factors affecting the transferability of oil and gas workers to clean energy jobs are a mix of reserved and devolved policies, as well as labour market forces. We are committed to working constructively with the UK Government, wherever possible, to help workers find clean energy jobs and ensure a skilled workforce for the energy transition.
This transition represents a very substantial opportunity. Robert Gordon University analysis[5] found that 90% of the UK’s oil and gas workforce have medium to high skills transferability and readiness for the energy transition and to work in adjacent energy sectors (offshore wind, CCUS, hydrogen and oil and gas decommissioning).
As already noted in our response to question 1, increasing the certainty of the clean energy project pipeline and applying reserved levers around offshore oil and gas (licensing, consenting and fiscal regime) in a way that supports a managed and just transition are key sets of levers for UK Government to maximise the ability of oil and gas workers to find jobs in clean energy. The future of partnership working between government and industry through the North Sea Transition Deal (or any successor to this) will also be important.
While we acknowledge that action on skills is a devolved matter, it should be noted that skills, training and qualifications for emerging energy sectors such as hydrogen and CCUS do not exist in a vacuum. Widely recognised, accredited trainings for such sectors are still being established and this is likely to occur more rapidly and effectively if there is greater certainty on the pipeline of projects that will provide jobs in these areas.
An example of the importance of the project pipeline in this regard would be the Acorn Transport and Storage Project and the Scottish Cluster where CO2 will be transported offshore to be stored permanently under the North Sea. The Scottish Cluster is absolutely crucial for a just transition to net zero – not just in Scotland where the target of reaching net zero is 2045, but also for the UK’s 2050 target. An Economic Impact Assessment[6], published by the Scottish Cluster in May 2024, predicts that the cluster will have a significant economic benefit, contributing an estimated £17.7 billion in Gross Value Added, or GVA, to the UK economy between now and 2050, along with 4,700 long term operational jobs, and a peak of 10,800 jobs during the development and construction phase. Whilst the UK Government’s announcement in October 2024 to support the Track 1 clusters with £21.7bn over 25 years is a positive step for the development of the CCUS sector in the UK, we urgently require the UK Government to provide further information and a firm commitment on the Track 2 process, so that the momentum is maintained and to provide investors with clarity. A final investment decision from the UK Government on the Scottish Cluster is needed to unlock the long-term economic benefits and the associated low carbon energy jobs available for oil and gas workers to utilise their transferable skills. The recent announcement of cessation of refining at the Grangemouth refinery owned and run by the joint venture Petroineos has increased the importance and urgency of a Track status commitment being made by the UK government. This commitment would vastly increase the attractiveness of investment in the site’s future, as the site is a key part of the Scottish Cluster and gives access to critical infrastructure and skilled workers. A decision on track status would greatly increase the chances of interest in taking forward the sustainable options for the site included in Project Willow.
The Scottish Government is itself already taking action in devolved areas of the energy skills transition landscape. For example, we have provided funding to the industry-led Offshore Energy Skills Passport, which aims to make the transferability of training and qualifications easier between energy sectors (e.g. between offshore oil and gas and offshore wind). The Scottish Government is pleased that UK Government has also now come on board as a partner in this project and we look forward to working together and with industry to see the launch of the initial version of the passport in January 2025 and further development in the future.
3. Are Scotland’s energy industry and associated supply chains well-placed to transition to clean energy generation, or is more support needed?
Scotland has an internationally significant energy supply chain. Whilst it is currently focused on supplying the offshore oil and gas industry, much of the supply chain has great transferability and potential to cater to the wider renewable energy sector in Scotland, the rest of the UK and internationally.
The Scottish Government published its Green Industrial Strategy in September 2024. Its goal is to help Scotland realise economic growth opportunities from the global transition to net zero, in energy particularly focusing on the key opportunity areas of wind power, carbon capture and storage (CCUS) and hydrogen.
The Green Industrial Strategy sets out a package of measures to support businesses across the energy supply chain and in related emerging growth areas. These focus on four key themes of business awareness and information, business support, investment, and supporting a circular economy for energy materials. Examples of actions include Scottish Enterprise’s supplier excellence programme, launched in Autumn 2024, to support SMEs across the energy supply chain to realise the opportunities in offshore wind and hydrogen, broadening out to wider energy transition opportunities thereafter.
Our Enterprise and Skills Agencies will also support the reskilling and upskilling of the workforce, building from Scottish Enterprise’s Leadership and Workplace Innovation Service. The Agencies will support Scottish businesses by raising awareness of specific energy supply chain opportunities, as well as providing detailed analysis, including information on when and where goods and services will be procured, timings of projects, components/services required and volumes.
The Scottish Government is taking action to anchor our offshore wind supply chain by almost tripling our capital funding in offshore wind in 2025-26 to £150 million. This is year two of our strategic investment of up to £500 million over five years, which is expected to leverage additional private investment of £1.5 billion in the infrastructure and manufacturing facilities critical to growing the sector. We are taking a commercial-first approach (where priority is attached to commercial investment by the Scottish National Investment Bank), which will stimulate private investment and maximise the economic value to Scotland.
In addition to a strong business support offer, having a clear pipeline of clean energy projects is important, including overcoming practical barriers to delivery for businesses, such as issues relating to consenting and grid connection.
The responses to Q1 and Q2 have already set out some of the challenges for the energy sector to transition, and the further support required – including from UK Government in areas of reserved competence. This includes the need for greater certainty around the future pipeline of clean energy projects at a national level to give businesses the confidence to invest, and ensuring full recognition of applicable training, certifications and accreditations across the energy sectors to support skills transferability.
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?
Scotland’s significant renewables potential, strong pipeline of projects, and growing supply chain will be vital to achieving a secure, affordable and clean power system. Critical to the success of developments will be timely access to grid connection, and clear communication to projects when they can expect grid connection for the purposes of certainty for developers and the supply chain. In addition the importance acceptance of developments and transmission infrastructure by the communities that will host them cannot be overstated. Communities must see tangible and long lasting legacy benefits of hosting transmission and generation infrastructure.
As set out in the current Programme for Government, and other key Scottish Government publications, we are taking forward a number of commitments to ensure the necessary generation and transmission infrastructure is in place to support the development of the renewables sector.
These include:
Offshore Wind and Marine Planning
We have committed to publishing an updated Offshore Wind Policy Statement in 2025-26 and an updated Sectoral Marine Plan for Offshore Wind Energy in 2025, which will deliver the planning framework for ScotWind and INTOG, supporting deployment in Scottish waters while protecting marine users and our environment. In addition, we are currently developing a new National Marine Plan which will provide an updated planning framework for the shared use of the Scottish marine zone, including renewables development, to be adopted in 2027.
Onshore Wind
We published our Onshore Wind Policy Statement in 2022, which set an ambition to have a minimum installed capacity of 20GW of onshore wind in Scotland by 2030. This was followed by the Onshore Wind Sector Deal, signed jointly with industry in September 2023, which demonstrated the Scottish Government’s commitment to tackling the barriers to deployment of onshore wind and increasing generation.
We continue to work with industry to implement the commitments set out in that deal and are also working closely with the UK Government to ensure alignment with the UK Government’s Onshore Wind Industry Taskforce. This will help unlock development potential currently limited by reserved matters, including issues related to aviation and defence.
Terrestrial Planning
Our Fourth National Planning Framework (NPF4), approved by the Scottish Parliament in 2023, places climate and nature at the centre of our planning system and makes clear our support for all forms of renewable, low-carbon and zero emission technologies, including transmission and distribution infrastructure. Potential impacts on communities, nature and cultural heritage, including the cumulative effects of developments, are important considerations in the decision-making process. All applications are subject to site-specific assessments.
The Scottish Government launched the Planning Hub on 11 September 2024 to provide direct support to planning authorities strengthening capacity and accelerating decision making and development delivery. The Planning Hub will initially focus on hydrogen this financial year and will provide urgent action in response to the rapid increase of proposals expected and to test its proof of concept.
Terrestrial Consenting
Robust, timely and proportionate planning and consenting systems are a key enabler of Scotland’s net-zero transition. In the Programme for Government, we committed to several actions to improve the system in Scotland.
We want to improve the consistency and pace of the consenting process for proposals over 50 MW, ensuring we are resourced to meet demand, and reducing timescales for section 36 and 37 determinations. To that end, we recently undertook a significant recruitment exercise to increase the size of our Energy Consents Unit, taking it from 30 members of staff to 80.
We will shortly introduce pre-application community and stakeholder engagement guidance for transmission developments, improving public engagement and confidence in consenting processes. This work is on track to be published shortly after the new year.
We have been collaborating with the UK Government on their review of Scottish terrestrial consenting to reform the Electricity Act, which is the underlying legislation that enables our decision making. The associated consultation has closed, and we understand that UK Government colleagues are currently analysing the responses and deciding on next steps. As has been the case during the development of the consultation proposals, we expect UK Government to continue to work closely with us as this work develops.
These actions all build on the work of, and previous commitments made, in the Onshore Wind Sector Deal and Transmission Network Short Life Working Group to enable a robust, timely and proportionate planning and consenting system as a key enabler of Scotland’s net-zero transition.
Marine Licensing and Consenting
It is important the marine licensing and consenting processes are robust to ensure the right projects are built in the right place at the right time to support renewables industry, protect our marine environment and other sea users and maximise the economic opportunities a secure pipeline of development will bring. We aim to process offshore wind farm applications within 9 to 12 months, depending on requirements to undertake Habitats Regulations Appraisals. However, it should always be noted that the time to reach determinations is highly contingent on the quality of applications submitted by the developers. With that in mind, we continue to work with applicants and stakeholders, including statutory bodies, to improve guidance to ensure we receive high quality applications which already balance both the environmental and development aspects as well as the impacts on other marine users.
We have considerably increased the resource available within the Marine Directorate Licensing Operations Team (MD-LOT) in the last 3 years, with the team now comprising around 65 staff members working across marine licensing, grid connection/interconnectors, ports and harbour developments and wind, wave and tide applications. We recognise the importance of an efficient and effective consenting process for offshore energy projects and as part of a continuous improvement approach MD-LOT has a streamlining team focused on increasing process efficiency, reducing duplication and improving external guidance.
We are also engaging closely with the UK Government on implementation of offshore wind consenting reforms in the UK Government’s Energy Act 2023 to maximise benefits for Scotland and improve devolved decision making. We want to ensure developers and decision makers can meet their environmental obligations by having a clear and transparent way to secure appropriate compensation for environmental impacts. To deliver on those ambitions, we are working closely with the UK Government on the secondary legislation needed to enable practical delivery of the Act’s provisions, to deliver benefits for our environment so that offshore wind development can be enabled at scale in a ‘nature positive’ way. We are also giving active consideration to ways to deliver strategic compensation in Scotland, and assessing how a Scottish Marine Recovery Fund (MRF) could deliver measures in streamlined way.
We have a strong record in delivering robust marine consents and have – to date – consented all of the offshore wind applications that have completed the consenting process. We also recognise that the scale of future development is at a level not previously experienced and that this consenting history does not necessarily mean every application in future will be successful. It does however demonstrate that consents are granted where it is possible to balance the environmental and development aspects and the impacts on other marine users.
GB-wide system planning
In relation to GB wide system planning including transmission and generation infrastructure and electricity markets, we are committed to working closely with the UK Government, Ofgem, NESO, the UK and Welsh Governments and industry to accelerate progress towards Scotland’s economic and net zero targets.
It is vital that a truly collaborative approach to the future energy system across GB is taken with full partnership roles for the devolved governments.
In support of our ambitions, we are engaging closely with the UK Government, Ofgem and NESO ongoing reforms across the electricity networks sector plan forward, increase capacity and facilitate quicker connections to the transmission network that are critical to enabling our just transition to net zero by 2045.
Specifically in relation to future system planning we have worked with the UK Government, the Scottish Government, the Welsh Government and the energy regulator Ofgem to co-commission NESO to create a Strategic Spatial Energy Plan (SSEP).
This plan will help to provide a clear vision of how Scotland’s renewables potential can contribute towards a just transition to clean energy in support of the UK’s net zero goals. We believe the SSEP can help accelerate and optimise the transition to clean, affordable and secure energy in Great Britain by providing greater clarity to industry, investors, consumers and the public on the shape of our future reformed energy system.
In the near term, we have been working, and will continue to work closely with, the UK Government to ensure Scotland’s interests are fully considered with regards to the Clean Power Action Plan.
Throughout all our engagement on these reforms, we have made clear that GB-wide energy planning must respect devolved powers, ambitions and policies and ensure tangible benefits for consumers and communities, alongside boosting industry confidence.
Collaboration will be vital to the development of Scotland's renewable sector. The Scottish Government is committed to working closely with the UK Government on shared ambitions to decarbonise the energy system and drive progress towards net zero.
We recognise that much of energy policy and regulation is reserved to Westminster. It is therefore vital that the UK government continue to take a collaborative approach to designing and delivering future legislation and policy development, for example in relation to future electricity market reforms.
The approach must take into account the views and interests of Scotland and clearly commit and define roles for devolved governments within governance structures where GB wide energy system changes are being considered.
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 October 2024, the Scottish Government and the UK Government’s Department for Energy Security and Net Zero signed a joint collaborative agreement paving the way for joint working between GB Energy, the Scottish Government and Scottish public bodies (namely Crown Estate Scotland, the Scottish National Investment Bank, Scottish Enterprise, Highlands and Islands Enterprise, South of Scotland Enterprise and our Community and Renewable Energy Scheme (CARES)). It is envisaged that cooperation will cover:
GB energy priorities should also include supporting technologies which need assistance to reach commercial viability, supporting innovation, and growth.
The Scottish Government is keen to work with the UK Government to maximise GB Energy investment in Scotland with the consequent benefits for employment, clean energy supply chains and ultimately economic growth. But realising that will require close collaborative working between GB Energy and Scotland’s public bodies who have detailed local knowledge of current funding gaps in respect of clean energy projects.
6. How should GB Energy work with the Scottish Government and other Scottish bodies to identify appropriate funding and other mechanisms?
There are increasing levels of engagement between GB Energy, the Scottish Government and our public bodies with the aim of maximising GBE investment in Scotland to ensure it delivers real benefits for the people of Scotland and directly supports a just energy transition.
Scotland already has a strong pipeline of clean energy and supply chain opportunities, is at the forefront of floating offshore wind development, and has a depth of knowledge and experience on community and local energy, as well as organisations that are already delivering. GB energy funding could augment existing funding and increase capacity to meet demand.
It is important that there is an understanding in UK Government of the public bodies landscape in Scotland and that GB Energy works collaboratively with Crown Estate Scotland, the Scottish National Investment Bank, the Enterprise Agencies and our Community and Renewable Energy Scheme (CARES) (who all have detailed knowledge of the clean energy landscape and funding gaps) to ensure funding is directed correctly, avoids duplication and does not crowd out previously agreed investment.
Following the signing of this collaborative agreement, we have established joint working practices to coordinate activity. The Scottish Government is regularly engaging with all the public bodies to share information and ensure a shared understanding of respective roles and responsibilities around engagement with GB Energy.
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?
The Scottish Government vision for a just transition in Scotland, including in the Highlands and Islands, is set out in our National Just Transition Planning Framework. We believe communities and workers must be supported in adapting to net zero, in a way that mitigates the risks of the transition and maximises the opportunities that it presents.
For people in the Highlands and Islands, these opportunities and challenges are similar to those faced by workers and communities across Scotland - albeit in a very specific social, economic and geographic context.
For example, while the Scottish Government is taking important action to address issues around connectivity in the region, this is a challenge that also needs to be factored into collective planning for a just transition. Similarly, the role of the oil and gas sector in the Highlands and Islands – particularly in Shetland – means that the region faces specific economic challenges for the move to net zero. We are therefore continuing our work to understand the specific transition impacts facing island and rural communities – for example, by considering the Just Transition Commission's recent report on Shetland.
There should be substantial legacy benefits of our energy transition for communities, such as investment in local infrastructure like affordable housing and community amenities. A country that is major producer of energy should not be experiencing the high levels of fuel poverty that many households do. Fuel poverty is particularly high in the rural areas of Scotland that are set to produce the most green electricity.
However, the transition also offers significant opportunities for the Highlands and Islands. This includes economic opportunities, from the region’s potential in relation to offshore wind and green hydrogen; the circular economy; land use and natural capital; and the decarbonisation of heat. Sumitomo’s £350m subsea cable manufacturing plant under construction at the Port of Nigg is a significant step in growing Scotland’s supply chain and will create hundreds of green jobs in the Highlands.
The Scottish Government is determined to ensure that all of these challenges and opportunities are addressed in a way that brings benefits to communities. In part, this involves taking a place-based approach to a just transition. For example, the Carbon Neutral Islands Project is helping six islands in Scotland (Hoy, Barra, Raasay, Islay, Yell and Great Cumbrae) to become carbon neutral by 2040. The project, which supports carbon emission reduction activity, ensures that islanders have a say in how they wish to decarbonise.
In addition, we are working with partners across Scotland to further grow the community energy sector, and ensure the delivery of renewable energy that benefits people – including in the Highlands and Islands. To that end, we continue to invest in our Community and Renewable Energy Scheme (CARES), which provides advice and funding to communities who are looking to develop renewable energy, heat decarbonisation and energy efficiency projects. Since its inception CARES has provided over £67 million in funding to communities throughout Scotland, supporting over 960 projects and the installation of 63 MW of renewable energy.
The Scottish Government places great importance on wider community benefits. Despite the powers to mandate community benefits being reserved to the UK Government, over £30 million worth of benefits has been offered to communities in Scotland in the last 12 months. Supported by the Scottish Government’s Good Practice Principles for Community Benefits, over £3.2 million has been committed by renewable energy developers to communities and projects across the highlands and islands.
Building on this success, as well as the progress made through Scotland’s Onshore Wind Sector Deal, we are undertaking a joint review and consultation on our Good Practice Principles. The information and views gathered from this work will inform a refresh of our onshore and offshore Good Practice Principles by the end of 2025. We welcome ongoing work by the UK Government to review its approach to community benefit and continue to call on them to consult on mandating benefits from onshore net zero energy projects.
8. Can the UK learn lessons from international examples about how to effectively manage Scotland’s energy sector transition?
Global challenges, such as climate change and the energy transition away from reliance on fossil fuels, require global solutions.
Scotland is taking action to realise the economic benefits of the global transition to net zero and ensure that this equates to our workforce shapes and shares in the benefits of this green growth as well as to support our communities to adapt to net zero. Engagement and comparison with international examples informs our policy making. We would particularly point to the value in engaging with governments with similar conditions, including but not limited to historic fossil fuel production and federalised governance structures. Examples of governments also already taking a just transition approach include Brazil, Spain and France.
The UK can also follow the example of Denmark which has rolled out heat networks and community energy schemes at pace which give communities access to affordable electricity and low carbon affordable heating.
January 2025
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[1] Green industrial strategy - gov.scot
[2] Green Jobs Barometer - PwC UK
[3] Scottish Renewables' Supply Chain Impact Statement 2023/24 by Carol - Flipsnack
[4] Energy system and Just Transition: independent analysis - gov.scot