Written evidence submitted by the Department for Business, Energy & Industrial Strategy (RES0026)

Scottish Affairs Committee – Renewable Energy in Scotland – written evidence

1)      Scotland’s renewable energy targets

1. How effective has the setting of targets been in achieving ‘net zero’ emissions by 2050 (UK Government) and 2045 (Scottish Government)?

Setting targets has been crucial for demonstrating our ambition. Since declaring our ambition to reach net zero emissions by 2050, the Prime Minister has set out his Ten Point Plan for the UK to lead the world into a Green Industrial Revolution. This innovative programme sets out ambitious policies and £12 billion government investment to support up to 250,000 green jobs. We have also published the Energy White Paper which sets out our plans for the transformation of our energy system, including actions to fully decarbonise electricity generation by 2050.

This April the government laid legislation for the UK’s sixth carbon budget, proposing a world-leading target which would reduce greenhouse gas emissions by 78% by 2035 compared to 1990 levels. This is in line with the latest science as the level recommended by our expert advisers at the Climate Change Committee.

2. What lessons can or have been learned from setting net zero targets?

We can learn the importance of matching our world-leading targets with actions. We have already published the Energy White Paper, Industrial Decarbonisation Strategy and the first phase of our Transport Decarbonisation Plan and will publish the Heat and Building Strategy in due course. We will also publish a comprehensive Net Zero Strategy ahead of COP26, setting out the Government’s vision for transitioning to a net zero economy. This will raise ambition as we outline our path to meet net zero by 2050, our Carbon Budgets and Nationally Determined Contribution.

3. To what extent does the UK Government’s latest white paper – Powering our net-zero future – ensure that renewable energy targets will be met in the UK.

We have committed to 40GW offshore wind by 2030, a fourfold increase on today’s installed capacity, to give the offshore wind sector long-term certainty and will continue to hold regular Contracts for Difference (CfD) auctions. The next auction will be held in December this year, and will be our biggest auction to date, including a pot for established renewable technologies to ensure technologies such as onshore wind and solar can play their full role in meeting net zero. As announced in the White Paper we have also established a Ministerial Delivery Group, providing cross-government coordination and collaboration in achieving our renewable energy ambitions and tackling wider barriers to deployment.

2)      Renewable energy sources

1. What variables have contributed toward wind energy providing more energy to the grid than any other renewable source?

There have been several factors which have contributed towards wind energy’s input to the grid. Onshore wind is the second most widely used renewable electricity generating technology globally (behind hydropower). This has led to an increased learning rate – the rate at which capital costs decrease as more plants are built, resulting from and in greater technological and construction experience – and in turn a fall in costs. Departmental modelling on electricity generation costs has shown that the levelised cost of electricity (LCOE) from onshore wind has fallen 30% since 2016 to £46/MWh.[1]

The UK has good natural resource and Scotland in particular, which hosts around 60% of current onshore wind capacity and 95% of the current pipeline, is one of the windiest countries in Europe. Government policy, including financial schemes such as through the Renewables Obligation and Contracts for Difference have enabled deployment across the UK and Scotland.

The UK also has a particularly rich offshore wind resource. Coupled with the shallow basin of the southern North Sea this has provided a sheltered, area for ease of deployment while the sector has been developing. Since 2008 the UK has had a stable and effective support regime in place for the deployment of renewable technologies – initially with the Renewables Obligation and then with the two-yearly Contract for Difference scheme since 2015. This has allowed investor confidence to develop in the UK as a destination territory for offshore wind while ongoing cost reduction has widened the investor base for offshore wind farm development.

Over the last ten years the offshore wind sector has been developing both in terms of market structure and technology; both have been a factor in the rapid cost reduction which offshore wind has achieved. The steady deployment pipeline in the UK has given the opportunity for learning savings to be recycled back into the cost of wind farm development while the increase in size of offshore wind turbines and increasing blade length has increased the speed of cost reduction achieved.

Figure 1 – comparison of offshore wind turbine sizes since 2002

(Industrial Strategy: Offshore Wind Sector Deal, 2019)

Since the introduction of the CfD the size of offshore wind turbines has almost doubled with the 15MW turbines expected to be used by projects applying for the forthcoming CfD allocation round having a rotor diameter in excess of 230m. This compares with the 150m rotor diameter of turbines used by the successful projects in the first CfD allocation round. Similarly, the successful projects in the first CfD allocation round were 448MW and 714MW respectively while it is expected that the size of projects bidding into this year’s allocation round are likely to be in the range of 1-1.5GW. This has allowed economies of scale to further bring down costs.

In addition to the growth in turbine size, the competitive tension which is provided by the CfD allocation process is also a strong driver for developers and turbine manufacturers to reduce their costs so that they can remain competitive. Offshore wind prices have fallen by two thirds between 2015 and 2019; clearing prices of the winning projects in the first CfD allocation round were £114.39/MWh and £119.89/MWh and in the 2019 CfD allocation round the projects cleared at as low as £39.65/MWh. This, combined with the long-term price certainty the CfD provides, has further made the UK an attractive target market for investors.

2. Why does marine energy account for such a small proportion of the total energy output of renewables in Scotland?

There are no commercial scale marine energy projects in the UK, including in Scotland.

Tidal stream and wave technologies are largely at a pre-commercial stage and have been for a while. There are only a few tidal stream projects in the UK which are operational, all of which are small scale. To date, over 10MW of tidal stream devices have been deployed for testing in the UK compared with 10.4GW of total installed capacity for offshore wind. This includes the world’s first commercial scale tidal stream turbine (MCT SeaGen 1.2MW). The MeyGen 1a array demonstration project, which is the only tidal stream power project operating in Scotland, began deployment in the Pentland Firth in 2016.

Marine energy technologies, specifically wave, tidal stream and tidal range are at a relatively early stage of development in comparison to other renewable technologies, particularly offshore wind and are significantly more expensive to produce.

For context, offshore wind cleared at approximately £150/MWh in the first allocation round of the Contract for Difference auction and has since fallen to ~£40/MWh in the last CfD auction round whereas the Administrative Strike Prices (ASP) for tidal stream in the last CfD auction round was set at £225/MWh for delivery years 2023/24 and £217/MWh for delivery year 2024/25.

3. What is being done to develop and research other forms of renewable energy in Scotland such as wave/tidal energy and carbon capture usage and storage (CCUS) energy or others?

Marine

The Government has a long history of supporting the development and deployment of wave and tidal stream technologies in the UK, including in Scotland. Since 2003 various bodies across Government have provided innovation/R&D funding of £175m to the wave and tidal sectors (almost £80m since 2010).

UK has significant tidal stream resources around Orkney, Shetland, Anglesey and Scotland. The internationally recognised European Marine Energy Centre (‘EMEC’) is in Orkney. EMEC was established in 2003 with UK government support and has since become a global leading tidal energy converter testing centre.

The MeyGen 1A array demonstration project which began deployment in the Pentland Firth in 2016 received a £10m BEIS innovation grant, alongside other public support, and is receiving support under the Renewables Obligation at 5ROCs (Renewable Obligation Certificates)/MWh, the highest level of support for any technology.

The role of marine energy could have a potentially important role in the long-term decarbonisation of the UK. Wave and tidal stream generation as demonstrated at EMEC have significant potential around our coastline and islands but have to reduce their costs sufficiently to compete with other renewable technologies.

As part of the Government’s Industrial Strategy and general innovation funding, there are a number of initiatives, such as the BEIS Energy Entrepreneurs Fund (EEF) scheme, focused on innovation in clean energy, and on supporting the development of technologies, products and processes in energy efficiency, power generation and storage which wave and tidal projects may be able to bid in for.

The Government recently ran a Call for Evidence inviting views on what scope there is for marine technologies across the UK, including examining what additional support could move technologies towards commercialisation. This concluded on 30th September 2020 and we are now considering policy related to Wave and Tidal Stream energy in light of the information received from the Call for Evidence. We will continue to engage with the industry as it seeks to cut its costs and compete with other forms of low-carbon generation.

Floating offshore wind

Although Scottish waters have relatively limited resource suitable for deployment of fixed bottom offshore wind, it is likely to be one of the main target areas for the deployment of floating offshore wind, along with the South West of England/South West Wales. The deeper waters off the Scottish coast and strong wind resource make it an ideal situation for floating offshore wind.

However, the floating wind sector is still at a relatively early stage of development. Currently the world’s two largest floating offshore wind demonstration farms are situated in Scottish waters – the 30MW Hywind project and the 50MW Kinkardine project which is currently under construction. However, the government recognises the valuable role which floating offshore wind could play towards meeting our Carbon Budget 6 and net zero aspirations if its costs can be brought down to be competitive with fixed bottom deployment. Given the focus of floating wind resource in Scottish waters it is likely that growth of the sector will present economic growth opportunities for the Scottish economy.

In recognition of this the Prime Minister announced a target of 1GW of floating wind deployment by 2030 as part of his Ten Point Plan for a Green Industrial Revolution (November 2020). This will form the first steppingstone towards cost reduction and further deployment through the 2030s. Floating offshore wind projects are able to apply to the Contracts for Difference allocations rounds and, in recognition of their earlier stage of development, they will compete separately from fixed bottom offshore wind in the “Emerging Technologies Pot”.

The Crown Estate Scotland’s current “Scotwind” seabed leasing round is anticipated to deliver new floating offshore wind projects into the pipeline later in the year. In addition, BEIS has recently launched an innovation competition focused on accelerating cost reduction in floating wind[2]. The demonstration projects will focus on mid-technology readiness level (TRL) technologies that are ready to be proved. The programme will target four challenge areas: 1) Mooring/Anchoring; 2) Dynamic cables; 3) Floaters/Foundations; 4) Miscellaneous - areas that meet the programme scope and objectives but are not covered by 1-3. This fourth innovation area will be driven by industry. The deadline for applications is 18 June 2021.

Carbon Capture, Usage & Storage (CCUS)

CCUS is essential to meeting our net zero targets of 2045 in Scotland and 2050 across the UK. In November 2020, the government announced its 10 Point Plan for a Green Industrial Revolution. This set out our aim to establish CCUS in two industrial sites by the mid-2020s and a further two by 2030, subject to value for money and affordability considerations. Using consumer subsidies, the government will also support the construction of the UK’s first CCUS power plant by 2030.

Our £1 billion CCUS Infrastructure Fund will support this ambition. This investment will help to create ‘SuperPlaces’ in areas such as Scotland, the North East, the Humber, the North West, South Wales and others.

Government have been supporting CCUS research and projects in Scotland including:

-          £31m from phase 2 of the UKRI Industrial Decarbonisation Challenge, supporting the development and deployment of Scotland’s net zero infrastructure. The project will fund important initiatives linked to the Acorn carbon capture and storage project in Northern Scotland. It will develop both onshore and offshore infrastructure of the Scottish industrial cluster, with the aim of transporting and injecting climate-warming carbon dioxide offshore for long-term secure storage.

-          £6.1m from Call 1 of the Accelerating CCUS Technologies and 2018 BEIS Call for CCUS Innovation[3] to Pale Blue Dot Energy Ltd who are leading the work on Project Acorn. UK funding has been critical in establishing Project Acorn, the funding of the Front End Engineering and Design (FEED) studies will allow the project to move the first phase of their CCUS project towards final investment decision.

-          £3.1m to Project Acorn from BEIS Low Carbon Hydrogen Supply (HYS 1) programme. On 24th May BEIS announced the launch of the Low Carbon Hydrogen Supply 2 (HYS 2) competition which will provide up to £60 million funding for four years.

Officials in BEIS meet with Pale Blue Dot Energy Ltd and the project partners, as well officials in Scottish Government, on a regular basis to discuss progress of the project. The commercial frameworks are being developed by BEIS, and BEIS is ensuring the views of the Scottish Government are considered in the development of policy areas.

Hydrogen

The Prime Minister’s 10 Point Plan was clear on our aim for 5GW of low carbon hydrogen production capacity by 2030 for use across the economy. The forthcoming Hydrogen Strategy will set out what is required to build a hydrogen economy fit for 2030, Carbon Budget 6 and beyond, whilst maximising economic benefits and supporting job and skills.

We welcome the Scottish Government's own 5GW ambition for hydrogen by 2030, which will be important in developing low-carbon hydrogen at scale within the UK. We are committed to working with the Scottish Government and all of the Devolved Administrations to help realise the economic and decarbonisation benefits that a UK hydrogen economy will bring.

3) Employment in renewable energy sector

In 2010 the Scottish Government said there was a potential for 130,000 jobs (Scottish Government, A low carbon economic strategy for Scotland, November 2010, p.10) in the low carbon renewable energy sector.

1. What policy decisions do the UK and Scottish Governments need to make to increase the number of jobs in the renewable energy sector?

The funding package announced in the Chancellor’s budget on 3 March 2021 will support jobs and green growth, particularly in Scotland. This includes £27m for the Aberdeen Energy Transition Zone, a further £5m for the delivery of the Global Underwater Hub in Aberdeen (on top of the £1.3m already secured), and up to £2m for continued development of industry proposals for the North Sea Transition Deal.

Through the North Sea Transition Deal, the offshore oil and gas sector has set its own voluntary target of 50 percent UK content, including capital investment, over the lifecycle of all low-carbon projects, and offshore decommissioning, as well as 30 per cent for locally sourced technology.  

Beyond the North Sea Transition Deal and to ensure that we have the skilled workforce to deliver net zero and our Ten Point Plan, we have launched the Green Jobs Taskforce, working in partnership with business, skills providers, and unions, to help us develop plans for new, long-term and good quality green jobs by 2030 and advise what support is needed for people in transitioning industries.

The Green Jobs Taskforce chaired by BEIS Energy Minister Anne-Marie Trevelyan and DfE Skills Minister Gillian Keegan, forms part of the government’s ambitious Ten Point Plan for a Green Industrial Revolution.

It will assess how the UK jobs market and the skills sector should adapt to support net zero, developing ideas and solutions for how the UK can deliver the green jobs of the future. The taskforce will present its independent recommendations to advise Government and Industry on green skills and support for workers in transitioning industries.

The taskforce will conclude its work in summer 2021, with the actions feeding into our Net Zero Strategy to be published later in the year. We are investing in the UK’s most important asset – our workforce – to ensure that people have the right skills to deliver the low-carbon transition and thrive in the high-value jobs this will create.

The government is also expanding the range of Supply Chain commitments we expect Generators to make when bidding for a Contract for Difference, including and introducing tougher consequences if successful bidders then do not deliver on these commitments as announced on 7 May this year. The new Supply Chain Plan questionnaire will include a section on jobs and skills incentivising greater action on these questions and help the offshore wind sector make progress in delivering their target for 60% UK content by 2030.

2. How effective has the renewable energy sector been in producing careers for Scottish people?

We are determined to seize the once-in-a-generation economic opportunities of the net zero transition by creating new business opportunities and supporting up to 2 million green jobs by 2030 across all regions of the UK.

The UK has a strong base to build upon. Low Carbon and Renewable Energy Economy (LCREE) estimates that full time employment in low carbon sector industries in UK was approximately 202,000 of which approximately 21,400 were in Scotland 2019[4].

3. What UK and Scottish Government support would facilitate the growth of jobs in this sector?

Spanning clean energy, buildings, transport, nature and innovative technologies, the Ten Point Plan for a Green Industrial Revolution will mobilise £12 billion of government investment to unlock three times as much private sector investment by 2030; level up regions across the UK; and support up to 90,000 highly-skilled green jobs across the UK within this Parliament, and up to 250,000 by 2030. 

At the centre of his blueprint are the UK’s industrial heartlands, including in the North East, Yorkshire and the Humber, West Midlands, Scotland and Wales, which will drive forward the green industrial revolution and build green jobs and industries. And many of the initiatives and much of the funding announced today will apply in Scotland, Wales and Northern Ireland.

Beyond the Ten Point Plan, the North Sea Transition Deal, which was announced in March of this year, is a global exemplar of how a government can work with industry in partnership to achieve a managed energy transition, which leaves no-one behind.

As well as stressing the role that the oil and gas sector can play in the development of new low carbon technologies, the Deal had important commitments to skills development, including ensuring the transferability of experience and qualifications from the oil and gas sector to emerging industries and clean technologies.

4. What do the UK and Scottish Governments need to do to achieve a ‘just transition’ for workers in the oil and gas industry to successfully redeploy to the renewable sector or other sectors?

Progress on ensuring a ‘just transition’ is already being demonstrated via the North Sea Transition sector deal between the UK Government and oil and gas industry. The sector deal will support workers, businesses, and the supply chain through this transition by harnessing the industry’s existing capabilities, infrastructure and private investment potential to exploit new and emerging technologies such as hydrogen production, CCUS, offshore wind and decommissioning.

The sector deal could support up to 40,000 high-quality direct and indirect supply chain jobs including in Scotland, generate up to £14-16bn of investment to 2030 and deliver new business and trade opportunities while supporting the transition.

4) Intergovernmental relations

1. How effective have the Scottish and UK Governments been in harnessing Scotland’s renewable energy potential?

It is important to note that Scotland has benefitted and will continue to benefit under future investment and deployment of renewable energy:

• The £2.65bn ‘Beatrice Offshore Windfarm’ project is Scotland’s single largest source of renewable energy. The wind farm became fully functional in May 2019 and is capable of generating enough energy to power 450,000 homes.
• Scotland has benefitted significantly from the Contracts for Difference scheme. 20 of the 58 projects awarded CfDs to date are in Scotland. This represents 34% of all CfD projects and 21% of total CfD capacity (around 3.4GW of nearly 16GW awarded contracts to date).
• Around 60% of the UK’s onshore wind capacity, and almost all hydro, is based in Scotland.

Officials in the UK Government will continue to liaise with Scottish Government to ensure that the UK can harness its renewable energy potential in a way that meets our climate change targets while supporting consumers and the energy system.

2. How effective has consultation between the two Governments been on the development and design of renewable policies?

Officials from BEIS and the UK Government are in regular contact with their counterparts in Scottish Government on their respective renewable technologies and policies. These engagements are valuable in developing and designing policies which showcase the UK’s commitment to a clean energy transition and meeting our net zero target while providing opportunities throughout the nations.

3. What discussions took place between the Scottish and UK Governments in preparing the Energy White Paper?

Officials from BEIS engaged at an official level with Scottish Government officials during the development of the Energy White Paper. These were held periodically through the development of the White Paper with additional sessions arranged prior to publication. Officials from BEIS remain in contact with Scottish Government officials in regards to specific policies contained within the Energy White Paper.

4. How will the Energy White Paper affect the renewable energy sector in Scotland?

Policies within the Energy White Paper will present Scotland with an opportunity to continue to develop and expand its established renewable energy sector. Specific opportunities for Scotland from White Paper policies include but are not limited to industrial clusters, hydrogen production and offshore wind as well as policies such as the North Sea Transition deal which were outlined in the White Paper but finalised in March 2021.

Consumers across Great Britain will accordingly benefit from the new protections and opportunities the White Paper will offer, as well as the savings arising from new ways of running the energy system. In particular, our ambitious plans for low carbon industrial clusters offer a significant opportunity across Great Britain, including Scotland.

Where plans touch on devolved matters they will be progressed in line with devolution settlements. The Scotland Act 2016 transfers certain powers to Scottish Ministers in relation to support schemes applying to gas and electricity suppliers for the purpose of reducing fuel poverty in Scotland. Should Scottish Ministers decide to use their powers, we would work closely with the Scottish Government to ensure that the design of the schemes are consistent with the overall funding envelope and objectives.

5. How can the UK and Scottish Governments work together effectively to achieve their respective targets of net zero by 2050/2045?

The UK Government and devolved administrations are working closely together to achieve our respective climate goals. The Government’s net zero target covers the whole UK, and all four parts of the UK have an integral role to play in delivering the Government’s carbon budgets leading up to 2050.

With devolved administrations counterparts, BEIS has established an Inter-ministerial Group (IMG) that covers Net Zero, Energy and Climate Change. This meets bi-monthly and brings together Ministers from the four administrations to discuss emission reduction efforts across the UK.

The IMG is supported by extensive official-level engagement between BEIS and devolved administration counterparts, at senior-official level through the Net Zero Nations Board and working-level through the Net Zero Working Group, as well as through the wide range of sector-level channels that continue to be developed.

This intergovernmental engagement on net zero will continue to facilitate collaboration and coordination across devolved and reserved competence, ensuring we are delivering effectively for all parts of the UK.

June 2021

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