A Low Carbon Economic Strategy for Scotland: Scotland - A Low Carbon Society

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2.2 Transforming the Energy Sector

Section 2.2 outlines the challenges involved in decarbonising the energy sector in Scotland and the resulting economic opportunities that will arise. It demonstrates the range of benefits for both businesses and communities and sets out the role of Government in supporting the transition. It also outlines the corresponding Strategic Objectives with associated actions as detailed previously in Section 1. Wider issues relating to business and industry, the built environment, transport and natural resource-based industries are dealt with under other sections.

Low Carbon Transformation

Transforming the energy sector in Scotland will play a pivotal role in the development of a low carbon economy. The transition can provide a unique combination of benefits, including reduced greenhouse gas emissions and enhanced energy security and less volatility in the energy sector. Through timely and unprecedented levels of investment in the electricity, heat and energy efficiency sectors, the step change in activity will open up enormous opportunities for businesses across Scotland. Scotland stands on the verge of another energy revolution. Just as the discovery of North Sea oil and gas provided a basis to develop international expertise in the sector, Scotland's abundant renewable resources offer opportunities which could be the source of international competitive advantage in the decades ahead. This will help us to meet our climate change and renewable energy targets and generate substantial new economic activity, jobs and prosperity and give Scotland a leading position in emerging global markets.

Scotland's main sources of competitive advantage in the field of renewable energy and low carbon potential include:

  • as much as 25% of Europe's offshore wind and tidal energy potential;
  • an estimated 10% of Europe's capacity for wave power; and
  • the EU's largest offshore storage capacity for carbon emissions - greater than the Netherlands, Denmark and Germany combined.

Electricity generation currently contributes around 30% of all emissions in Scotland annually. Meeting our Climate Change targets will consequently require very large investments by industry over the next twenty years. By 2030 almost all of our electricity will have to come from low carbon technologies such as renewables and fossil fuelled plants fitted with carbon capture and storage technology, a marked transformation from today's mix which provides half our electricity from unabated, or semi-abated, fossil fuelled plants. To facilitate this the Scottish Government recently increased the target for renewable electricity, by 2020 renewable electricity generation must account for at least 80% of gross electricity consumption. As electrification of the transport and heat sectors gathers pace in the 2020s we will also need to generate significantly more electricity than today. Following a recent change of legislation many Local Authorities are now working with private sector companies to generate renewable energy. To support this, investment will be required in a larger, smarter transmission grid to ensure that electricity can be transported from more remote and offshore locations where the natural resources are most plentiful.

Heat production from renewable sources will need to increase significantly by 2030, placing Scotland on the path to a complete decarbonisation of its heat supply by 2050. This too will require mechanisms to stimulate investment in the sector, both to develop technologies and to support their roll out in the domestic and commercial sectors.

Energy efficiency improvements will be a central step towards a low carbon economy. Whilst primarily reducing demand, enhanced energy efficiency is also considered the fastest and most cost effective way of meeting Climate Change targets and offers a way to resolve the tension between the objectives of economic growth and environmental sustainability. Conserve and Save, the Scottish Government's Energy Efficiency Action Plan describes a wide ranging programme of activity to improve energy efficiency in households, business and the public sector. The business opportunities and policies aimed at driving improvements in this area are set out in detail in other Sections.

Secure, resilient and affordable energy supplies in the future represent a further challenge but also a key benefit from the transition to efficient, diverse and low carbon energy systems.

Barriers

  • Investment
  • Infrastructure
  • Skills
  • Technology
  • Costs
  • Market Intelligence

Drivers

  • Legislation and Policy
  • Energy Security
  • Market Opportunities
  • Climate Change (committed and future)
  • Social and Community Benefits
  • Skills Base

Market Opportunities

Ofgem estimates that £200 billion needs to be invested in the next 10 years to secure sustainable energy supplies at an affordable price for consumers. Clearly this represents an enormous challenge for Government and the private sector, however, the economic opportunities arising from the transformation of the energy sector are enormous. And the costs if implemented retrospectively to 'catch up' with leading nations if traditional energy supply is pursued, could be equally enormous.

In Scotland, the primary economic development opportunities will be aligned to our unique advantages in terms of renewable energy resource, research expertise in key areas and experience in offshore engineering. In addition, Scotland is strategically positioned on carbon capture and storage and on collaboration to develop UK and European energy grid networks.

The renewable energy sector represents a significant part of the Low Carbon Environmental Goods and Services sector, however to maximise both the economic and employment opportunities from the transformation of the energy sector it is essential to raise awareness and develop the skills required to service this potential future demand.

The Energy Advisory Board has developed a Skills Investment Plan for the Energy Sector, which estimates the scale of this future opportunity and the interventions required to maximise the benefit. The main areas of future opportunities in Scotland's energy sector include Oil and Gas, Thermal Generation/Carbon Capture and Storage and Renewables. This investment plan reviews a wide range of literature on the energy sector in Scotland and concludes that between 52,000 to 95,000 job opportunities could be supported by activity in the energy sectors by 2020. A significant proportion of this employment will not be directly related to low carbon activity, but the skills and infrastructure required to support this activity will be important to a range of emerging low carbon sectors.

Low Carbon and Environmental Goods and Services Sector - Energy Sub-sectors

Scotland's revealed comparative advantage ( RCA) 57 for energy sub-sectors is shown in the figure below (an RCA value above 1 indicates that Scotland's exports/imports ratio for a particular item is greater than Scotland's ratio of exports/imports for all goods). It shows that Scotland has an RCA in all energy sub-sectors and that this increased across all from 2007 to 2008 58.

Figure 10: RCA Energy Sub Sectors

Figure 10: RCA Energy Sub Sectors

Source: Scottish Government and Inovas.

Sales in energy sub sectors totalled £2.7bn in 2008/9, and are forecast to increase to £3.8bn in 2014/15 and £5.6bn in 2019/20 59. The breakdown is shown in Figure below, with the majority of sales in manufacture and supply in renewables sub sectors.

Figure 11: Sales projections for Energy Sub Sectors

Figure 11: Sales projections for Energy Sub Sectors

Source: Scottish Government and Innovas

This is also the case for the employment figures for energy sub sectors, shown in Figure 12.
Employment is forecast to increase from the 2008/9 figure of 22,000 to 32,000 in 2014/15 and 48,000 in 2019/20.

Figure 12: Employment in Energy Sub Sectors 2019/2060

Figure 12: Employment in Energy Sub Sectors 2019/20

Source: Source Scottish Government and Inovas

Offshore Wind

The large scale development of offshore wind represents the biggest opportunity for sustainable economic growth in Scotland for a generation. It is critical that Scotland exploits the opportunities being made available by the offshore wind industry. Harnessing just one third of our offshore renewable energy potential could meet Scotland's electricity needs seven times over by 2050. The projections of market share and employment reported above are not the upper bound of what is achievable. With the right support and infrastructure, the successful delivery of the offshore wind industry and development of the full extent of the identified offshore wind leasing zones, this sector alone offers the potential for 28,000 direct jobs and a further 20,000 jobs in related industries and £7.1 billion investment in Scotland by 2020. The opportunities for inward investment associated with our offshore wind resource are enormous and this is a priority for Scottish Development International.

Scotland is already active in the offshore renewable energy market and is home to the world's first deepwater offshore wind turbine deployment at the Beatrice Platform in the Moray Firth. Companies including Burntisland Fabrications (BiFab) are also leading suppliers to existing offshore wind projects.

Renewable Energy is recognised as one the key business sectors within the Fife Economic Strategy - 'Growing Fife's Future 2009/2020'. It is one of the strategy's key objectives to become 'a Centre for Excellence for Renewable Energy' in Fife. Key outcomes are the creation of 2,000 new green jobs and a 500m+ investment in renewable energy.

In partnership with Scottish Enterprise, Fife Council has led the development of the Energy Park Fife which is identified as a key asset in the Scottish Renewables Infrastructure Plan and accommodates Burntisland Fabrications (BiFab); BiFab, an established fabrications company based in Fife, has in recent years expanded to become one of Europe's leading suppliers of support structures for offshore wind turbines. Traditionally involved in the supply of steel to the oil and gas industry, BiFab has successfully diversified into the offshore wind, wave and tidal power industry - a move which has seen its annual turnover grow from £20 million to £90 million in just four years. It is now a market leader in the manufacture of Jacket substructures for offshore wind turbines.

Wave and Tidal Energy

Scotland's extraordinary natural marine energy resources and leading position in the development of wave and tidal energy technologies provide a unique platform to establish a world leading position in this vitally important sector. While it is acknowledged that the timeframe for commercial scale deployment is likely to extend beyond that for offshore wind, the industry is making good progress through initiatives like the European Marine Energy Centre in Orkney and the world's first commercial leasing round for wave and tidal energy in the Pentland Firth and Orkney Waters announced by The Crown Estate in March 2010. The leases awarded highlight potential for 1.6 GW of deployed wave and tidal energy technology by 2020. The Scottish Government through Marine Scotland is working closely with local authorities and key stakeholders to support early, sustainable deployment of these new technologies, taking into account environmental issues and the needs of other marine users.

A centre of excellence for marine renewables: The European Marine Energy Centre ( EMEC) is the world's first grid-connected, independent, UKAS accredited test facility for wave and tidal power generation. Located in Orkney, the Centre is the result of investment from several public sector partners, including the Scottish and UK Governments, the Scottish enterprise networks and Orkney Island Council. EMEC provides grid connected berths and a range of services for device developers, including independent assessment of devices' energy conversion capabilities, structural performance and survivability, as well as monitoring and assistance with consent and regulatory issues. Its role extends beyond the provision of real-life testing conditions, and is leading the development of industry-wide standards for the marine energy sector. EMEC is building up important skills and knowledge as it supports developers deploy and test their devices. This knowledge and skills base will be vital to the sector as developers now look to deploy their devices in the sea on a pre-commercial scale.

Carbon Capture and Storage ( CCS)

The economic opportunities for the development of a CCS based industry are considerable. There is the potential for a whole new industry to emerge in Scotland, which could support up to an estimated 10,000 new jobs in the next 15 - 20 years. In the longer term, CCS is expected to develop into a multi-billion pound market with some 23,000 thermal generation plants globally, potentially requiring replacement or retrofit with CCS.

As stated previously, Scotland has real potential to see the development of CCS as a key economic sector. We have many of the skills and engineering experience gained from the oil and gas and power industries which are transferable to this sector. Given the global potential for CCS development, there is significant export potential for Scotland in areas such as power plant construction and components, engineering consultancy services as well as geological and academic expertise.

While we consider that Scotland has already made significant progress in a number of aspects, the challenge will be to build upon this work as we start to move into the demonstration phase of CCS over the next few years.

Onshore Wind

Onshore Wind has developed rapidly over the last decade and in 2008 contributed around 37% of all renewable electricity generated in Scotland. Since May 2007, Scottish Ministers have given consent to 24 wind farm applications totalling well over 2 GW in capacity. In addition Local Authorities play a significant role in approving smaller applications and setting development planning context through Spatial and Local Development plans.

It is important to recognise that onshore wind is still the technology that can make the most immediate positive impact on our low carbon economy, and therefore the Scottish Government will continue to encourage large, medium and small scale developments that are sited appropriately.

Whitelee Windfarm:Europe's largest wind farm - located on Eaglesham Moor, 20 minutes from central Glasgow. It is owned and operated by ScottishPower Renewables. The wind farm site spans 55 square kilometres and has 140 turbines which can generate 322 MW of electricity, enough to power 180,000 homes.

In addition to a secure, green energy supply, Community groups across East Renfrewshire will also benefit from a new fund set up from the development of Europe's largest onshore wind farm.

The fund, which will last for the lifetime of the windfarm, will deliver £140,000 for community groups, activities and initiatives in its first year. There will be similar sums each year over the next 25 years.

Renewable Heat

The Scottish Government recognises the importance of developing renewable heat and the need for transformational change in this area. We have an ambition to create a completely decarbonised heat sector by 2050, with an interim target of 11% of heat to be derived from renewable sources by 2020.

Given the scale of the challenge we face in reaching our renewable heat target, the Scottish Government and local authorities must work with partners, to put in place the necessary support to help develop the sector. In the short to medium term the biggest impact can be made on an industrial and commercial scale, while the domestic sector is more likely to see major changes towards the end of the decade and beyond.

Aviemore North Biomass District Heating Scheme : Albyn Housing Society last year completed the installation of a woodfuel district heating scheme which will provide heating and hot water for 130 homes in Aviemore:

  • £1 million project
  • 3 boilers with a combined power of 1060 kW will heat 130 homes in the scheme.
  • It is estimated that 700 tonnes of CO 2 will be saved per annum through the use of biomass.
  • The Aviemore area has significant amounts of forest locally as well as large sawmills producing huge quantities of wood co-product. Being able to source the fuel locally can make the plant more sustainable and reduce emissions further.

A Renewable Heat Incentive ( RHI) would be a key driver for development of the renewable heat market. Scottish Ministers acknowledge that DECC's Annual Energy Statement published on 27 July, included a positive statement on heat. The UK Government have confirmed that it will fund a Renewable Heat Incentive to be implemented in 2011. This is welcome but we await further details and reassurance that the scheme will be sufficient to overcome the current hiatus in the market and stimulate growth. The Renewable Heat Action Plan61 sets out a route map for the sector and will adapt to exploit the potential opportunities of alternative sources of heat as they are identified.

Oil and Gas

The Oil and Gas industry is already playing a major role in developing renewable energy in Scotland. By using the engineering experience, skills and knowledge of the sector it is helping to develop the new sources of energy where the challenges are often very similar to those faced by the industry. Offshore expertise in pipelines, drilling and reservoirs and aquifers are also very relevant to the development of CCS, which in itself offers real opportunities to continue exploitation of the resource without creating emissions.

Composite Energy Limited

Significant amounts of unconventional gas are now being found all over the world and untapped energy sources such as coal bed methane offer huge potential, so long as development and use is sustainable and consistent with environmental objectives. There are great opportunities if investment is made and Scotland is well placed to develop these technologies utilising the wealth of skills and experience in drilling techniques gained from oil and gas exploration.

Composite Energy Limited is a Scottish-based company specialising in the extraction of natural gas from coal seams. They have committed to a coal bed methane production site in the Central Belt and are pursuing market opportunities in well drilling for gas storage and shale gas in both the UK and across Europe.

A further, and major, opportunity lies in anticipating the changes that the low carbon transition will bring for the downstream petrochemical industry and related chemical and pharmaceutical sectors and their supply chains. Finding new ways to ensure that value can continue to be captured from remaining oil and gas reserves without creating emissions may seem a major challenge but it can develop into a major economic opportunity. A scenario planning exercise carried out for the 2020 Climate Group in conjunction with Scottish Enterprise identified the following emerging strategic insights:

  • flexibility and adaptability: adaptiveness to change is essential. The industry needs to ensure that it is sufficiently nimble to respond quickly but also to pursue a strategic plan for gradual diversification into 'bio-based' products;
  • market foresighting: we need strong market awareness and knowledge coupled with a global perspective and mindset to ensure our thinking stays as far ahead of the curve as possible. New markets are likely to be niche opportunities; global, highly specific and potentially fast-moving;
  • innovation will be a significant element of any future strategy and is key to capturing higher margins and economic value within the Scottish economy. Not only is this likely to include the firm-level innovation and the commercialisation of academic research but also the building of skills, services and know-how around products to increase value;
  • supply chains: a strong understanding of the linkages across supply chains and with complementary industries is needed to assess the nature and scale of new diversification opportunities;
  • industry 'branding': there is an opportunity to align the industry's positioning with Scotland's 'clean, green' brand and to make products that will improve the reputation of the chemicals industry among the public; and
  • collaboration across the industry is likely to be a hallmark of future success, whether it be with firms, with academia, other stakeholders or a combination across all three.

This work is being taken forward across other sectors and provides real opportunities to help Scottish industry develop a competitive advantage in international markets as the markets for environmental goods and services increase.

Community Energy

Maximising benefits from renewables for the people of Scotland is a key aspiration of this Government. Our vision is that the development of renewables should raise the quality of life for the Scottish people, through increasing economic opportunities for all, on a socially and environmentally sustainable basis. Such benefits can be put towards a number of sources from securing those communities' long-term economic health to off-setting the disruption of existing industries or existing ways of life.

The Scottish Government recognises various models for community renewables and for the past two years has provided financial assistance to over 600 projects, as well as help and advice through the Community and Renewable Energy Scheme ( CARES).

Isle of Gigha: Gigha Renewable Energy Limited, a trading subsidiary of the Isle of Gigha Heritage Trust, established the UK's first grid-connected local community-owned wind farm in December 2004, installing 3 second hand wind turbines. Total capital expenditure was £440K - this included a Scottish Government grant from the SCHRI scheme of £82K, Lottery funding £50K, Commercial loan £148K, Equity £120K.

  • Gross annual income of £150K is anticipated.
  • By generating their own electricity and selling their Renewable Obligation Certificates through their electricity supplier, Gigha residents will generate a new source of revenue for the island, whilst providing funds for the replacement of the turbines at the end of their working life.
  • The residents are using the net profit from the project to fund energy efficiency improvements (opportunities for local businesses and skills development), which should in time allow the community to reduce their energy consumption and achieve an even higher contribution from renewable energy without any expansion in generating capacity.

Building on CARES success, the Scottish Government commissioned an initial business case to consider the need for a loan fund to help de-risk early stage financing development of community renewables projects. The study was published on 28 September 2010 and will help inform future policy development.

Hydrogen and Fuel Cells

Hydrogen and fuel cells can play an important role in the development of Scotland's low carbon economy, with applications in heat and power, energy storage, and sustainable transport. Scotland is home to a number of demonstration projects, as well as companies operating in the commercial market, and a significant level of university-based R&D activity.

The Hydrogen Office Demonstration Centre has been set up to support the accelerated development of the renewable, energy storage (with a focus on Hydrogen), and fuel cell sectors in Scotland. The project is intended to improve awareness of these technologies, and promote the importance of energy storage and fuel cell technologies in enabling the transition towards a low carbon and secure energy future. The Hydrogen Office project will also actively undertake education, skills development, and research and development initiatives to ensure Scotland can fully benefit from the employment opportunities that will arise from this sector.

Strategic objectives for government and the wider public sector

This Section sets out strategic objectives for the energy sector, associated immediate actions are described previously in Section 1.3 .

Objective 5: Securing funding and de-risking investment.Attracting long-term finance and secure investment in the Scottish energy sector through understanding the issues, opportunities and global dynamics of finance, as well as the importance of creating an attractive landscape with adequate funding and support.

The Scottish Government and partner organisations are leading work on the Scottish Low Carbon Investment Project to attract international investment to low carbon projects across Scotland. Scottish Development International is also active in working with potential partners to secure inward investment. The key outcomes of the Low Carbon Investment Conference held in Edinburgh on 28/29 September 2010 identified that:

  • the main barriers to investment in large offshore projects are linked to risk and time. All the risks are not bridgeable by private finance, so Government has to consider getting involved, especially at the early stages. There is money out there if risks can be reduced. Pension funds are 'warm' to the idea of renewables, but need more guidance;
  • there is a possible role for Government to act as a guarantor to underpin early-stage investment in high-risk areas like offshore wind and renewables where the private sector is not prepared to gamble;
  • a modern grid is crucial to provide power that can get to the market. Scotland understands the strategic role of the North Sea in the European grid and will continue to engage in Europe-wide discussions on grid upgrades;
  • Ofgem's review of transmission charges is welcome and Scotland will continue to lobby for a fairer system that reflects where power is generated;
  • Renewable Obligation Certificates ( ROCs) are not perfect but work relatively well and we shouldn't keep tinkering;
  • Scotland will continue lobbying for the release of the Fossil Fuel Levy money. This could make a huge difference to Scotland's port infrastructure by leveraging private cash and stimulating the offshore supply chain. In the short-term, consideration should be given to public-private collaboration to ensure investment is made in ports now;
  • The key players - utilities, port operators and supply chain companies - are ready to start making deals but consideration needs to be given to developing a hub port very soon;
  • The supply chain is crucial to maximising the economic impact of renewables. We must move quickly but cannot follow the normal sequence; we need to invest in projects, supply chain and infrastructure at the same time; and
  • there is a need to start transferring skills from the oil and gas sector to renewables now as well as developing new skills. There is a lack of key posts including project managers, electrical engineers and turbine technicians.

Subsequent to the Low Carbon Investment Conference and in recognition of the pressing need to invest in infrastructure the Scottish Government, Scottish Enterprise and Highland and Islands Enterprise have launched a £70m Renewable Infrastructure Fund.

In the June 2010 Emergency Budget, the Chancellor confirmed the creation of a 'Green Investment Bank', to handle Government funding and leverage private investment in the low carbon economy. In taking steps to support private sector investment in infrastructure, the Chancellor confirmed in the recent Comprehensive Spending Review an investment of £1 billion funding and additional significant proceeds from asset sales for a UK-wide Green Investment Bank.

However, the Scottish Government also recognises that it must also provide support to the sector. The Scottish Government continues to be innovative in a period of stretched finances, and works to ensure that funding provides a legacy for the industry and for the Scottish people. Current examples of this are the £10 million Saltire Prize for technological advances in wave and tidal energy 62 - and the £13 million WATERS (Wave and Tidal Energy: Research, Development and Demonstration Support) fund -63.

There is also an attractive marketplace for renewables developers to come to Scotland. Introduced in 2002, the Renewable Obligation ( RO) is the main mechanism across the UK for supporting renewable electricity generation. Renewable power generally costs more to produce than conventional forms of generation. The RO creates a market for renewable power by placing an obligation on all licensed electricity suppliers to source a specific and annually increasing percentage of their sales from the various eligible technologies. The Renewables Obligation (Scotland), or ROS, is fundamental to increasing renewables capacity across Scotland, achieving our target that 80% of Scottish electricity demand should be met from renewable sources by 2020 and has led to significant increases in renewable output across Scotland since its introduction in 2002.

The Scottish Government has led the way with increased support to emerging technologies through the RO, including wave, tidal and offshore wind. Giving these technologies a kick start can mean that Scotland can attract early investment and build a secure infrastructure.

Objective 6: Develop world leading policy frameworks and create a comprehensive infrastructure.Ensuring delivery of the clean, affordable and secure electricity supply required to meet climate change targets and create a secure and competitive position across low carbon energy sectors whilst delivering economic benefits for Scotland.

Along with renewables projects, developing a comprehensive infrastructure will allow Scotland to create a secure and competitive position in the renewables industry, particularly in offshore wind.

National Renewables Infrastructure Plan ( NRIP) - Strategic action to ensure Scotland gains a competitive position for the growth of offshore renewables industry in the global Low Carbon Economy

The National Renewables Infrastructure Plan (N- RIP) led by Scottish Enterprise ( SE) and Highlands and Islands Enterprise ( HIE) and with the active engagement of councils, has focussed on a particular infrastructure needed to catalyse growth of the offshore renewables industry - manufacturing, installation, operation and management locations that are fit for industry use in key locations. The delivery of investment at these sites will enable Scotland to be a key player in this industry.

Offshore renewables sites identified can support up to 5,180 manufacturing jobs with an annual GVA of £294.5m, if Scotland becomes a home to manufacturing. To achieve this, investment needs to be made by asset owners with public sector investment support.

SE and HIE are continuing to work with asset owners to secure the provision of industry ready sites. There is ongoing and intense dialogue between industry and port asset owners to make sure that there is strong awareness of what is needed and the timescales. In time the job of Government in this sector will be done and business to business relationships will drive progress.

While the NRIP has focussed on offshore renewables, similar processes looking at industry infrastructure needs for renewable heat, CCS industry development and waste are a priority for the enterprise agencies to ensure that a competitive position is secured for Scotland. In supporting the transition to a low carbon economy, SE and HIE will develop a dialogue and an approach to industry around these issues in order to carry out low carbon business infrastructure reviews which will assist in identifying key investment needs.

Also fundamental to successful projects, ideally situated to take full advantage of Scotland's resources, is the development of a comprehensive grid and fair access regime. 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. The Government is also keen that the thresholds determining whether or not applicants in particular areas face higher costs or delays relating to transmission access or upgrades is set sensibly and with a policy of support for Scottish and small generators firmly in mind.

The UK Government have announced a welcome review of transmission charging. The Scottish Government will be pressing for an end to the unfair locational charging system which effectively penalises Scottish generators and does not reflect the need for a greater generational mix (i.e. higher proportion of renewable energy, a great deal of which - wind, wave and tidal - is located in Scotland) in the UK energy supply.

Despite the obvious potential for the development and deployment of renewable and low carbon technologies, there remain significant barriers to be overcome to ensure a clean, affordable and secure electricity supply that is required to meet climate change targets whilst delivering economic benefits for Scotland.

In addition to addressing the root causes of the challenges facing industry, there are other strong arguments for governments intervening in the energy markets, such as maintaining secure energy supplies, reducing exposure to high and volatile fossil fuel prices and creating new jobs and businesses. It is also important that energy decisions made today are environmentally sustainable and resilient to the future changes in climate, and these are considered in partnership with, and through the work of, the Scottish Environment Protection Agency ( SEPA).

The Scottish Government understands that setting out appropriate actions does not always generate tangible results. That is why we have established a comprehensive framework of groups to assist us in reaching our targets, putting us in the position to begin to deliver.

Irish-Scottish Links on Energy Study ( ISLES):ISLES is a collaborative project between the Scottish Government, the Northern Ireland Executive and the Government of Ireland. Funded mainly by the EU's INTERREGIVA Programme and managed by the Special EU Programmes Body ( SEUPB), it is assessing the feasibility of creating an offshore interconnected transmission network and subsea electricity grid based on renewable energy sources off the coast of western Scotland and the Irish Sea. A robust business case for accelerating the development of renewables across jurisdictions will be presented to the partner governments.

The target area has huge potential for capturing wind, wave and tidal energy. However, each region's electricity network has not been developed as an offshore grid to exploit this major marine renewable resource and grid infrastructure is poor. As a result, the capacity to generate electricity is not matched by the ability to collect and transport that energy to market. As well as identifying the challenges in creating, storing and transporting the electricity created from these renewable sources, ISLES can help pave the way for renewable energy and carbon reduction targets to be met and assist in the economic development of the relatively peripheral coastal areas in each of the three partner countries.

The results of the feasibility study, being carried out by RPS Group, will be known by the end of 2011.

Scotland's Energy Advisory Board

The Scottish Energy Advisory Board ( EAB), chaired by the First Minister, creates effective, high-level, open and informed engagement between Ministers, local government, the energy industry and other relevant bodies, addressing the key issues facing the energy sector in Scotland. Four, Ministerial led, energy theme groups have been established in conjunction with the overarching EAB. These focus on:

  • Oil and Gas;
  • Thermal Generation and Carbon Capture and Storage ( TG and CCS);
  • Renewables ( FREDS); and
  • Offshore Renewables (Offshore Energy Programme Board).

Oil and Gas Advisory Group

This group aims to further better integration of Government policy in the oil and gas sector and to influence investment as a contribution to sustainable economic growth. Its focus is to nurture and grow the Scottish oil and gas supply chain capability, to maximise the recovery and value of remaining North Sea reserves and to access current and future business opportunities in oil and gas and the growing alternative energy market domestically and overseas.

Thermal Generation ( TG) and Carbon Capture and Storage ( CCS) Advisory Group

This group looks to articulate the needs of industry in regard to TG and CCS, coal-bed methane and underground coal gasification in line with Scottish Government policies. There is cross membership from the other theme groups which facilitates knowledge exchange and constructive input.

Forum for Renewable Energy Development Scotland ( FREDS)

FREDS builds a partnership between industry, academia and Government which draws on their expertise, networks, and the numerous strands of activity in which they are engaged in order to most effectively develop Scotland's renewable energy industry. FREDS has a commitment to oversee and update the Renewables Action Plan every 6 months. It is informed by and contributes to the work of a number of sub-groups (bringing together over 170 members from the renewables industry) which work for the development of the renewables industry in a specific technological or cross cutting area - they include:

  • Marine Energy;
  • Offshore Wind;
  • Pentland Firth and Orkney Waters;
  • Renewable Heat;
  • Skills;
  • Micro Hydro;
  • Hydrogen and Fuel Cells; and
  • Communities.

Offshore Energy Programme Board

Established in early 2010, the role of the Offshore Energy Programme Board ( OEPB) is to strategically drive and co-ordinate the public sector's collective contribution to the growing offshore energy opportunities, seeking maximum benefit for Scotland. Overseeing the newly emerging offshore energy sectors will allow for strategic linkages and priorities to be drawn out within the existing work of the public sector authorities, influencing the direction of future work. The OEPB's scope will cover the key areas of offshore energy - wind, marine renewables and grid infrastructure.

The Scottish Government actively work to remove barriers to the deployment of renewables, and to improve the quality of energy applications and the process by which Scottish Ministers assess them.

In determining 45 energy applications since 2007, with 40 consented and 5 refused, working closely with local authorities, Scottish Ministers have struck a balance between developing and delivering Scotland's energy future and protecting environmental, cultural heritage, economic and community issues. The Beauly to Denny upgrade, for example, is Scotland's most significant and important electricity infrastructure reinforcement project in a generation, and is the key to unlocking the massive renewable energy potential in the North. Scotland's commitment to further improve its planning processes and establish best practice is demonstrated by its leadership of the European Commission-funded Good Practice Wind project, http://www.scotland.gov.uk/Topics/Business-Industry/Energy/Action/leading/Good-Practice-Wind set up to examine and disseminate best practice across Europe in balancing objectives on renewable energy with wider environmental and community objectives.

The British Wind Energy Association (now Renewable UK) commented: 'In 2007 the incoming Scottish Government promised to improve the system in order to maintain investor confidence in what is effectively the renewable powerhouse of the UK. These promises were kept, with a flurry of decisions coming after Government took office and a further voluntary pledge to make decisions on section 36 projects within 9 months of submission.