The Scottish Government

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5. Infrastructure

Overview:

The substantial existing network of renewables-related infrastructure in Scotland is experiencing rapid growth and investment, from the European Marine Energy Centre ( EMEC) at Orkney, to recent investments in the fabrication yard at Arnish Point in Stornoway, and the on-shore wind tower production facility at Machrihanish. Building on this strong existing base, the scale of Scotland's renewables resource means that more will be required to maintain current momentum across a range of categories.

Objectives:

• to continue to improve the infrastructure in Scotland, to enable the continued expansion of the Renewables sector, and deliver maximum benefit to the domestic economy;
• to stimulate investment in the infrastructure that will serve emerging industries.

Principal categories of infrastructure needs include:

Non-grid Infrastructure

The Scottish Government is taking a strategic and targeted approach to the task, which will be addressed though a phased process of review, recommendation, and delivery. In line with recommendations from the newly established Energy Advisory Board, we have selected the off-shore wind and marine energy sectors as the focus for the first phase of scoping work.

• Clarity on where we see this industry developing will assist us in planning infrastructure investment both in sites and local access, as well as developing the logistics chain that will support new industry in these locations.
• The table below details the timetable for a focussed project to assess off-shore infrastructure needs and opportunities.

Renewables infrastructure - 3 major steps in 18 months:

Scottish Enterprise ( SEn)/Highlands and Islands Enterprise ( HIE) will:

• work with infrastructure owners to identify further need;
• identify any market failures requiring public sector investment;
• develop appropriate funding and delivery solutions.

Step 1 - Open for Business

• Objective: to make Scotland a first choice location for companies and individuals with the scope and ambition to help us realise our renewable energy potential.

Actions (already completed or currently underway):

• Establishment of a new Renewable Energy Division within the Scottish Government (effectively doubling our staff resource in energy in 12 months);
• integration of the Energy Intermediary Technology Institute ( ITI) within Scottish Enterprise, to ensure coordinated drive of progress in the renewables sector;
• re-organisation of Scottish Development International ( SDI) (our overseas sales and inward investment agency) enables increased focus on renewables, through a coordinated network of 120 overseas offices;
• development of a Renewables Action Plan, which will be subject to progress updates on 6 monthly basis, and annual refresh of route map actions;
• Ministers charge development bodies ( SEn/ HIE) to ensure necessary infrastructure is in place;
• Establish single point of contact through our economic development agencies for all those interested in investing in Scotland and making this country their home base for taking the global new energy opportunity.

Step 2 - Identification of Key Strategic Sites

• Scottish Enterprise and HIE have been tasked with developing a clear spatial framework for port and port-side land and landward infrastructure that can support the manufacturing, construction, and operation and maintenance of offshore wind devices and commercial wave and tidal machines. (June - Oct 09)
• Alongside this core infrastructure review and forward plan, work is also progressing to identify infrastructure dependencies such as transportation of raw materials and finished components; power and other basic service infrastructure, locations for training facilities and the role and linkage between key testing centres such as EMEC, the Advanced Forming Research Centre ( AFRC) at Strathclyde University, the New and Renewable Energy Centre ( NAREC) in Blyth and developing a Power Networks Demonstration Centre ( PNDC) at Cumbernauld.
• Discussions are currently underway with industry partners to achieve a common understanding of the needs and opportunities.
• The Minister for Enterprise, Energy and Tourism will be leading a study visit to a model site in Europe in the autumn, followed by an Off-shore Renewables Infrastructure consultation event. (Sept/Oct 09)
• This will feed in to the scoping project, which will report in October 2009 with recommendations for the identification of an initial clutch of key Scottish Renewables Infrastructure Projects. (Oct 09)
• The focus will immediately switch to delivery, whilst FREDS and the EAB will be tasked with advising on the next category of infrastructure to be developed, thereby establishing a rolling programme of review, forward planning, and delivery across the full range of infrastructure needs.

Step 3 - Making Investment

• SEn and HIE are simultaneously reviewing the investment requirements that are needed to take advantage of the Crown Estate offshore wind and marine renewables licensing processes.
• By early autumn they have been tasked with producing an investment plan that will make Scottish Renewables Infrastructure Projects ready for action and private sector investment; particularly around the key projects needed to create the platform for growth.
• Given the scale of the economic growth opportunity and the potential for private sector profit, it is envisaged that investment needs for infrastructure can be addressed.
• SEn/ HIE are discussing the scale of need with infrastructure owners and investors, how investment might be structured, and how in partnership both shareholders and taxpayers can reap the rewards of early investment.
• The projects identified are envisaged as sound investments, which will be positioned to ensure that the assets developed are flexible in their use, and connected to local communities and companies who will benefit from employment and other spin off expenditure.

Grid Infrastructure

Grid capacity is a key issue for the future of renewable energy deployment in Scotland. The purpose of the proposed Beauly-Denny 400kV overhead transmission line is to increase the transmission capacity between the Highlands and central Scotland, so as to accommodate the level of contracted renewable generation in the north of Scotland. The overhead line would be 220km long, running between Beauly, west of Inverness, and Denny, near Falkirk. The objections of the 5 local authorities through whose land the line would pass necessitated a Public Local Inquiry, the Report from which is with Ministers for consideration. Ministers will make a decision on the proposal in the course of 2009.

Grid access is another key issue, and the Scottish Government is keen that renewable and small generators should not face significant connection delays, unnecessarily high costs or administrative burdens in applying for or obtaining connection to distribution networks.

We are also keen that the thresholds determining whether or not applicants in particular areas face higher costs or delays relating to transmission access or upgrades are set sensibly and with our policy of support for Scottish and small generators firmly in mind. We are conscious that delays in connection time and a lack of strategic prioritisation of consented capacity is preventing renewable projects from coming on stream to meet Scottish, UK and EU renewable energy targets. We have become increasingly aware that many small developers are facing significant delays in connection dates.

We welcome the findings of Ofgem's Transmission Access Review ( TAR) and its recognition of the need for a holistic model for the allocation and pricing of transmission access rights, finding ways to maximise access to existing capacity, and prioritising projects with consents and financing in place. Overall we recognise that Ofgem and National Grid are aware of the scale of the issues, and are coming forward with activity to try to address them. While there has been some improvement recently, with Ofgem announcing a derogation from GB quality and security of supply rules to advance the connection of up to 450 MW from renewable energy projects in Scotland, there is still significant progress to be made. We are urging UK Government, Ofgem and National Grid to move quickly on the Transmission Access Review proposals and deliver an enduring access regime that is fit for purpose and connects, transports and exports Scotland's renewable energy resources.

Locational Charging and Balancing

In addition to working to develop the grid network, the Scottish Government has made clear its view that the current distance based transmission access and charging regime applied by Ofgem presents a bias in the UK transmission regulatory system against remote generation. The current system focuses on the existing generation mix, and works against developing a more mixed energy supply, with a significant renewable energy element (as the best sources of renewable energy are found in parts of the UK distant from main demand centres).

Further potential changes to the system of managing constraints, currently under consideration by Ofgem and National Grid, have the potential to increase costs to Scottish electricity generators, and renewable generators in particular.

Next Steps

Government, Ofgem and National Grid are key players in working to deliver a low carbon economy and a thriving and sustainable renewable energy sector. While there inevitably are areas where we will seek discussion, we remain committed to engaging productively with Ofgem, National Grid and DECC on the longer term vision that we all share:

• to deliver Scottish and UK renewable energy potential;
• to address grid access and constraints issues;
• to deliver a suitable and sustainable long term grid network that is fit for purpose to deliver a low carbon economy;
• to reinforce and upgrade Scotland's interconnectors to the rest of the UK and the EU for mutual and lasting benefit.

The Scottish Energy Advisory Board provides a forum to discuss appropriate and proportionate energy regulatory frameworks for Scotland, in an integrated UK and Worldwide energy market.

In addition, 4 key actions, which call for a partnership approach between industry and Government on Grid issues are currently are in hand:

• The Scottish Government is working with the energy sector to respond to the National Grid's consultation (launched 19th May 2009), seeking evidence that the existing locational charging arrangements are stifling competition or discouraging investment in renewables, and is keen for the renewables sector to engage with National Grid on this debate. The Scottish Government's alternative approach to transmission charging, proposed in conjunction with Scottish Power, Scottish and Southern Energy and the Scottish Renewables, can be accessed via the link below ¹.
• Ofgem have asked National Grid to undertake further analysis ² and consideration of the impacts of the proposed new system of locational balancing. The Scottish Government is keen for the renewables sector to engage fully in this assessment.
• We will also work to identify and help resolve individual and collective grid access issues for the renewables sector and on transmission charging and the constraints balancing regime in particular. Liaison on these issues will also continue with Energy company representatives and the wider Scottish business and industry community, including the Scotland's renewable and conventional energy industry interests, trade unions, business representative organisations, local authorities and others.
• The European Commission Directive on Renewable Energy ³ which came into force on 25th June 2009 provides a new regulatory framework at a European level for developing and connecting renewable energy sources. This wide ranging Directive clearly states that the charging of transmission and distribution tariffs by Member States should not discriminate against electricity from renewable energy sources, particularly those sited in peripheral regions. The Scottish Government will undertake further work to establish how this Directive can help develop Scotland's renewables sector.

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