Realising the ambition INTRODUCTION
The renewable energy industry’s priorities for government in Scotland 2011-2016
Scotland has long been an energy economy. The legacy of our proud engineering past is still evident in our advanced manufacturing sector and the world-leading research and development activity in our academic institutions. In the last thirty years, Scotland has built a genuinely global oil and gas industry on expertise gained in the North Sea which is now applied all over the world. With a new Scottish Government, we now have new ambitions for our energy sector that could potentially eclipse anything we have done in the past – meeting the equivalent of 100 per cent electricity demand from renewable sources by 2020. We should take confidence from the progress made in the twelve years of devolution, with renewables delivering around a third of Scotland’s electricity demand and accounting for 42 per cent of the UK’s total renewable electricity capacity. Progress in heat and transport has yet to accelerate, but Scotland is home to some of the leading installations and technology providers in both these areas, with potential to grow significantly over the next decade. 100 per cent of electricity demand is ambitious, but it will require around half of the existing plans for offshore wind agreed with The Crown Estate, around a quarter of the wave and tidal agreements, steady growth in onshore wind, and modest increases in hydro and biomass to hit this target. The next five years will be crucial in meeting these aspirations, and in the writing of this next chapter in Scotland’s energy story. However, with political commitment and support, the renewable energy sector can continue to power economic growth, stimulate investment, create jobs and cut carbon emissions. This document sets out the priorities for our industry to deliver that ambition, and to kick-start progress in heat and transport to create a truly renewable Scotland.
Image © Scottish Parliamentary Corporate Body - 2011
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commitment All Energy The Scottish Government has placed renewable energy not just at the heart of economic and environmental policy, but at the very heart of its vision for a competitive and sustainable Scotland. To achieve Ministers’ aspirations, that commitment must be reflected by every part of government and its agencies, and in the policies and decisions they make. By doing so, we can give investors certainty that this is a growth market that is here to stay, and that Scotland is the ‘go-to’ destination for renewable energy in the UK and Europe. Huge progress has been made in electricity, but we now need to bring the same focus to our heat and transport sectors. Analysis published by Scottish Renewables has shown that Scotland is well on track to hit its existing target for 11 per cent renewable heat early and we have called for government to increase this to 16 per cent by 2020. We now want to see government assess the potential impact of renewed ambitions for heat and electricity and raise Scotland’s 2020 ‘all renewable energy’ target.
capital Electricity Market Billions of pounds of investment are required to achieve this new ambition, yet we are in a period of constrained credit markets and extreme regulatory uncertainty, with the electricity market going through its biggest shake up since privatisation. It is no exaggeration to say that Electricity Market Reform will make or break the investment case in renewables and, therefore, progress towards renewable electricity targets. Though market mechanisms are reserved, the Scottish Government has significant powers over the Renewables Obligation (RO) bandings in Scotland, which have been used to stimulate investment in our world-leading wave and tidal sector. To maintain investor confidence in Scotland, we want to see the Scottish Government commit to use its current powers over ROC bandings to maintain Scotland’s place as the most attractive place in the UK to invest in renewables, and to consult with industry on a possible extension to the Renewables Obligation to 2020, rather than 2017 as presently proposed by the Department for Energy and Climate Change (DECC).
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We also believe that DECC should commit to continued Scottish Government control over banding levels if the RO is replaced with a ‘Contracts for Difference’ framework.
Marine Scotland’s wave and tidal sector is a genuine world leader. Though still in the early stages of precommercial demonstration, the industry has major goals for 2020, with our plans for deployment in the Pentland Firth and Orkney Waters on a different scale to any other country’s ambitions. The major challenge for the marine energy industry is to secure finance to move from deploying single, full-scale marine energy devices to installing the first small arrays. Technologies are not yet sufficiently mature to make the first arrays commercially justifiable investments without government support. To capitalise on its global lead, Scotland must put in place a mechanism which will supplement the Renewables Obligation Scotland (ROS) and enable technology and/ or project developers to bridge this technological and financial gap. Due to the range of levels of maturity of marine technologies, there must be diversity in financial mechanisms to support those leading technology developments, while not blocking new entrants.
National Renewables Infrastructure Fund The National Renewables Infrastructure Fund has already resulted in at least one wind turbine manufacturer committing to locate in Scotland, with several others assessing sites around the country. We want to see government do all it can to extend the level of support available, and to establish a similar scheme for wave and tidal fabrication and deployment facilities to ensure the development of this growing sector’s emerging supply chain.
Scottish Fossil Fuel Levy Release of the Scottish Fossil Fuel Levy (SFFL) could result in a potentially ‘game changing’ increase in public sector support for renewable energy technologies, particularly in areas of major opportunity like offshore wind technology development, marine device deployment and capital intensive heat technologies. We urge the new Scottish Government to continue to press for early release of the SFFL to create additional spending and activity in this sector.
Renewable Heat Incentive The Renewable Heat Incentive is the first financial support scheme for renewable heat of its kind in the world, and will provide financial support for large scale heat users and then small businesses and households
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to move away from fossil-fuelled heating systems. The Scottish Government has a key role to play in raising awareness of this new incentive which could drive down fuel costs, reduce fuel imports, and tackle fuel poverty as oil and gas prices continue to rise.
communities
There are lessons learned from onshore planning. Effective national guidance reflecting national policy priorities, effective and timely consenting processes, and political leadership need to be applied to the emerging offshore planning regime if we are to progress even a proportion of the proposed 10GW of offshore wind developments and 1.6GW of wave and tidal projects.
Engaging Communities
General Permitted Development Rights
Achieving our renewed ambitions will depend on continuing public as well as government support. We will work with government on its objectives to continue community engagement in the planning process, to expand community ownership and to make public sector assets work harder to generate revenues for the public purse.
The Scottish Government has embarked upon various policy reforms aimed at removing the red tape faced by consumers and businesses wishing to install microrenewables. However, this has not covered micro-wind turbines and air-source heat pumps, and we now want to see the introduction of permitted development rights for these technologies, based upon MCS certification standards and in line with World Health Organisation noise criteria recommendations.
Local Financial Benefits One clear way of achieving greater local benefit from renewables developments is for a proportion of business rates from new projects to be retained for distribution in the local area, as proposed by the UK Government. We urge the Scottish Government to explore ways of ensuring the existing financial payments of renewables projects, such as business rates, result in direct benefits to the local area.
consenting Onshore Wind Onshore wind will make the largest contribution to Scotland’s stretching renewables targets. The technology is mature, attractive to investors and cheaper than alternatives that can be deployed at scale. Onshore wind will finance investment in grid upgrades, R&D activity in the emerging technologies of offshore wind, wave and tidal power, and provide an accessible point of entry to Scotland’s renewable energy supply chain. Government must continue to support a strong, competitive onshore wind sector, or place in jeopardy its world lead in offshore renewables and the strong service industry that will supply those sectors.
Getting the Balance Right Changes to the planning system through legislation, better regulation, guidance, resources and more effective decision-making are paying dividends for the renewables sector. Significantly, the cultural shift in the planning regime has seen more of a ‘can-do’ approach to development, with more inclusive and faster decision-making.
Storage Additional grid connections and expanded storage are required to smooth out peaks and troughs in renewables output, and government must prioritise new pumped storage facilities through the National Planning Framework process.
Collaboration Supply Chain The Scottish Government’s commitment to put Scotland at the forefront of renewable energy development has already borne fruit, with the siting of internationally significant engineering, R&D and manufacturing facilities in Scotland. We will seek to expand on our work to build relationships between suppliers and developers and with the oil and gas community, working alongside the enterprise agencies to identify gaps, bottlenecks, and contracting issues, with the ultimate aims of: 1. ensuring a safe and healthy working environment offshore 2. increasing productivity 3. building an internationally-recognised centre of expertise in offshore wind technology, design, installation, servicing and de-commissioning
Industry Engagement The Energy Advisory Board and Forum for Renewable Energy Development in Scotland (FREDS) have both played a key role in developing and delivering industry
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consensus and a practical way forward for government. There is a clear and pressing need for continued engagement and dialogue on how the renewables sector can drive forward progress to meet the renewed ambitions of both industry and government.
Skills With up to 28,000 direct jobs in offshore wind alone, renewables has been identified as the biggest economic and employment opportunity for Scotland in a generation. Skills Development Scotland, along with the Scottish Funding Council, has taken a pragmatic approach to identifying the sector’s likely skills needs. The priority now is continued industry engagement and coordination of delivery to ensure the right facilities are available to support this growing sector.
Connections Grid Significant new connections and a new charging framework are required for the nation’s grid to support the nation’s renewable energy ambitions. Without upgrades and new power lines to export clean power generated by businesses here in Scotland to consumers in the rest of the UK, and ultimately Europe, we will never meet our new aspirations. Likewise, we need new connections to resource-rich parts of the country, as Shetland and the Western Isles, which have huge potential for both onshore and offshore, wind and wave and tidal, but which simply lack the necessary connections to the national grid. Such connections must be a priority for the next round of the National Planning Framework. However, planning is not the only barrier. The costs of underwriting grid connections and potential use of system charges is already holding up onshore wind development, with consequences such as the postponing of the Western Isles inter-connection, which in turn is holding up wave and tidal developments in this tremendously resource-rich area. Without reform, the same fate inevitably awaits connections to other islands. We therefore seek the continuing support of Scottish Ministers to press for reform of the outdated and outmoded transmission charging framework, which continues to discourage investment here in Scotland, home to Europe’s most outstanding wind, wave and tidal resources.
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Transport A whole new infrastructure will be required to underpin the development of the renewable transport sector, particularly the increased use of electric vehicles. With the clock running down to 2020, government should make an early assessment of the likely architecture required to support the shift in technology and consumer behaviour.
District Heating One of the critical barriers to the growth of renewable heat is the absence of district heating networks, and Scottish Renewables will seek to harness the expertise in its membership to assist the Scottish Government in its Expert Commission on the Delivery of District Heating and with the Scottish Futures Trust to develop funding models to promote district heating schemes.
Conclusion Scotland’s commitment to renewable energy is paying dividends: the sector is now a major part of our energy mix and a significant part of our economy. However, there are still fundamental and complex challenges to be overcome to create the right climate for investment, not least on grid, markets and marine planning. The next five years will be crucial in determining progress to 2020 and beyond, and we must take nothing for granted. Scottish Renewables is committed to working with industry and government at all levels to overcome these barriers to progress and meet our shared aspirations for the future. With the right leadership, support and reforms, we know we can meet our ambitions for a renewable Scotland.
This final policy paper is the culmination of policy review across all technologies and sectors with detailed actions for public policy decision-makers at all levels of government and regulation. For more information on the policy development programme of Scottish Renewables, please contact: Jenny Hogan | Director of Policy | T: 0141 353 4004 E:
[email protected]
