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Scottish government decarbonization plans amid tie-up find industry favor

10 September 2021 Keiron Greenhalgh

The Scottish government's decarbonization and renewable energy plans for the coming year, forged by a tie-up that gave First Minister Nicola Sturgeon a parliamentary majority, won a favorable reception from industry this week.

The appointment of an energy minister at a cabinet level found a particularly warm welcome, as did a minister with a building decarbonization portfolio.

The appointment of Michael Matheson as Cabinet Secretary for Net Zero, Energy and Transport was a "key win," Energy UK Deputy Director of External Affairs Simon Markall told Net-Zero Business Daily 9 September. "For the first time, we're seeing a joined-up role with decarbonization and energy," he said.

Scottish Renewables CEO Claire Mack said the trade group was pleased by the ambition to achieve net-zero in the plans and the link being made between economic growth, achieving net-zero, and further development of renewables.

"With Glasgow hosting COP26 later this year, the Scottish Government is right to focus on its plans for a net-zero economy," added Tracy Black, director of industry lobby group CBI Scotland.

In the previous parliament, no cabinet-level minister had an energy portfolio. Sturgeon's cabinet for the current parliament will also see Patrick Harvie as minister for zero carbon buildings, active travel, and tenants rights.

Harvie has served as co-leader of the Scottish Greens since 2008. The Scottish Greens and Sturgeon's Scottish National Party (SNP) announced a tie-up, that while short of an official coalition, gave the leader of the devolved government a majority for her third term. The SNP and Sturgeon formed a minority government in 2016.

However, the deal isn't a formal coalition like that entered into on a UK-wide basis by the Conservative Party and Liberal Democrats after the 2010 general election, providing some wiggle room for each side when it comes to parliamentary voting, observers say. It is, though, the first time a green party has been part of a government at a devolved national or on a UK-wide level.

Greener, fairer land

Sturgeon laid out her government's plans for the coming 2021-22 year to the Holyrood parliament on 7 September, calling for greener, fairer, independent Scotland.

In the speech, Sturgeon said some of the government's key plans along these lines included:

  • A £500 million "Just Transition Fund" for Northeast Scotland;
  • At least £1.8 billion to make heating more efficient and decarbonize 1 million homes by 2030;
  • Decarbonize Scotland's railways by 2035;
  • £500 million in support for upskilling and reskilling people for "good, green jobs;"
  • Investing £240 million in an Energy Transition Programme to support the development of new, low carbon technologies.

The Programme for Government as the plans are formally known, followed swiftly on from the ground-breaking deal between the SNP and their new Scottish Greens allies, which was announced 20 August.

Sturgeon promised in a speech announcing the deal that the parties would take "steps to accelerate our transition to net zero—more support for active travel, transformation of home energy, and a 10-year transition fund for the northeast of Scotland," adding there would be "a focus on green jobs and fair work—and a sustainable recovery from COVID."

The two parties promised to provide more support for the marine renewables and offshore wind sectors. The Just Transition Fund would be part of efforts to make Scotland "Europe's renewable energy powerhouse," they said.

A few days later on 31 August, the Scottish Greens promised a doubling of onshore wind capacity, thousands of jobs in the supply chain, and support for an expansion of marine renewables in a tweet.

As she re-opened the Scottish Parliament the same day, Sturgeon said: "Through this agreement we will deliver a stronger package of support for marine renewables and offshore wind, and significantly increase our onshore wind capacity."

Also, she noted: "We must ensure that the recovery is a green and sustainable one, and address with urgency and determination the climate and nature crises which threaten the planet and the security of this and future generations."

Additional offshore wind leasing

A day after that on 1 September, Crown Estate Scotland (CES) launched a leasing process aimed at helping offshore wind farms decarbonize Scotland's oil and natural gas sector. The announcement followed the launch of the Scottish government's consultation on a new planning process for seabed leases.

CES stressed in announcing the leasing process that it was entirely separate from the ScotWind leasing round currently under way for commercial-scale offshore wind projects. The agency, which oversees government lands in Scotland, said the latest leasing process was specifically designed for offshore wind farms that support the decarbonization of the oil and gas sector plus small-scale innovation projects of less than 100 MW.

Crown Estate Scotland plans to open the leasing process to decarbonize the oil and gas sector for applications in early 2022, it said, adding that an announcement will be made outlining additional information on the process in November.

Bidding into the long-awaited 10-GW ScotWind offshore wind tender matched, and perhaps even exceeded, what were already lofty expectations for participation, observers told Net-Zero Business Daily.

CES said 22 July it received 74 applications to secure rights to seabed leases across 15 areas. The ScotWind bidders will start receiving initial offers to move forward with their applications in January 2022, it added.

On 8 September, BW Offshore revealed for the first time that the company, in partnership with US developer Invenergy, had submitted bids to develop up to 5.4 GW of offshore wind as part of ScotWind. It said the partnership would focus on both floating and fixed-bottom projects off the northeast coast of Scotland (there are five designated areas).

Energy UK foresees more support for the maritime energy sector from the Scottish parties in the pact than has been the case so far from the UK government, the trade group's Markall said.

Scottish Renewables' Mack concurred, saying: "The Blue Economy Strategy and action plan will be able to highlight the many opportunities and benefits available to us here in Scotland through continuing to support and grow our incredible wave and tidal sector."

The strategy aims to support coastal communities, many of which are vulnerable to climate change, according to Rural Affairs and Islands Secretary Mairi Gougeon, who announced plans 6 September that at least three of Scotland's islands will become fully carbon neutral by 2040.

Scotland's west and north coasts are dotted with islands large and small and Gougeon said the plans illustrated the low carbon energy potential of Scotland's islands as hubs of innovation in renewable energy and climate change resilience.

Scotland has some unique building challenges in the net-zero era, given the age of its housing stock, particularly those of crofters in the west and north of the country, said Markall. Things won't change overnight, he added, it will be a five-, 10- or 20-year process.

Building decarbonization

Scotland has led the way in the UK on energy efficiency programs, and the SNP/Greens promise of the £1.8 billion fund is "very, very welcome," Markall said.

Boris Johnson's UK government is due to release a hotly-anticipated heating and building strategy in the coming weeks. The strategy was first due to be published in May and then July, but local media suggest it could be out by the end of the month.

The energy industry across the UK is supportive of the initial move away from gas-fired boilers in homes to electrified heating, and then possibly to hydrogen opportunities in the longer term, Markall said.

The Scottish government's "target to decarbonize heating in 1 million homes by 2030 reflects a priority area from an emissions and jobs perspective and this needs to be an ambition that grows," added Mack.

Mack also said that the government's plans recognizing opportunities in renewable energy deployment and the need to address challenges around supply chains.

"Business investment is absolutely vital to Scotland's economic recovery, and the government should do everything in its power to attract—not repel—investment and the very best talent. Ultimately, by working more closely with business to create sustainable economic growth, ministers will be able to achieve their goals of improving people's living standards and public services," added Black.

Amid the promises of funding, however, it must be remembered that Scotland is a devolved government, and isn't in full control of its income.

"Scotland does not have anything like full control of its finances—because large quantities of tax and business income are paid direct to London, and then only some of those funds are re-allocated to Scotland through the "Barnett" funding formula," Stuart Haszeldine, professor of carbon capture and storage at the University of Edinburgh, told Net-Zero Business Daily 3 September.

The Barnett formula is used by the UK Treasury to calculate the annual block grants for the Scottish government, Welsh government and Northern Ireland executive. It calculates devolved budgets by using the previous year's budget as a starting point, and then adjusting it based on changes in comparable spending per person in England.

CCUS divide?

Carbon capture, utilization, and storage (CCUS) is one area where differences could emerge between the two government partners, industry observers say. The SNP has a track record as a supporter of CCS, while the Greens haven't. But CCUS is key to both Scotland and the UK's net-zero ambitions, observers say.

CCUS is "absolutely critical" for those net-zero ambitions, said Markall, while Haszeldine said that "all countries" need CCS to reach net zero.

The SNP have backed CCS research and development, said Haszeldine. "It's clear to me that the Scottish government would have committed to CCS about 10 years ago, if it had full control" of the purse strings, he added.

The Acorn Project—which would be located near the UK oil and gas hub of Aberdeen—is essential to achieving a fully decarbonized Scottish industrial economy, and to achieving net zero where emissions from activities from hydrogen and fertilizer manufacturing, as well as agriculture and air travel, are too large to be balanced by nature-based solutions, said Haszeldine.

Progress to securing funding for that project may be impeded by another pillar of the SNP-Scottish Greens pact though—plans to bring about a second referendum on full independence from the UK. The pact gives the SNP, the driving force behind 2014's referendum, the majority it needs to drive legislation through for another ballot.

According to an opinion piece by Adam Tomkins, a University of Glasgow constitutional law lecturer and a Conservative Party member of the Scottish Parliament until earlier this year, the alliance has almost nothing to do with the "natural environment and everything to do with the hostile environment with the Tories Sturgeon is cultivating in the hopes of advancing the cause of Scottish independence."

"After all, it is of course all about independence (with the SNP, it always is)," he said in the piece.

Posted 10 September 2021 by Keiron Greenhalgh, Editor, Climate & Sustainability Group, IHS Markit

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