Annual energy statement 2019

5. Strategic Priorities: Achievements and Plans

Consumer Engagement and Protection

We will work hard to protect consumers from excessive or avoidable costs, and promote the benefits of smarter domestic energy applications and systems.

Achievements

• We have published our Energy Consumer Action Plan alongside this Annual Energy Statement - putting consumers' interests and needs at the heart of Scotland's low carbon transition.
• The Action Plan builds on the outcomes of Energy Summits held in 2016 and 2018, as well as setting out new steps that must be taken to enable consumers to shape and benefit from the evolving energy system.
• We established an expert consumer advisory group to help inform the development of the Action Plan - and commissioned research to assess the impacts of emerging policy, regulatory and technological change in the energy sector on Scottish consumers.
• We have continued to champion the needs and interests of Scottish consumers in UK Government and Ofgem-led interventions such as the smart meter roll out, price caps and support for vulnerable consumers.
• We supported Home Energy Scotland to pilot a face to face advice and support service, Switch in the City - providing guidance to over 1,000 vulnerable and disengaged people in Glasgow on how to switch energy supplier or tariff. This was in addition to existing advice and support services.
• In February 2019, Ministers wrote to the Chief Executives of the big six energy companies, asking them to do more for vulnerable consumers and calling on them to engage with our work to deliver an inclusive transition to a carbon neutral economy.
• We continue to make progress towards establishing a Public Energy Company - a Strategic Outline Case was published in April 2018. We have commissioned an independent Outline Business Case, and work is now underway to develop a substantive proposal that could offer energy at a fair price and tackle issues such as fuel poverty, as well as potentially contributing to economic development.
• The Minister for Energy, Connectivity and the Islands wrote to COSLA to offer to work in partnership to deliver this ambition, supporting locally led solutions and building on local authorities' existing experience. COSLA and SOLACE agreed to join the steering group for the Outline Business Case. This reflects the principle of co-design, and ensures that the public energy company delivers for communities across Scotland.

Plans

• Consumers remain at the heart of our future plans for the energy system, and the Action Plan sets out a collaborative approach to ensuring consumers are informed, engaged and empowered as the energy system evolves. Over the next two years, we will:
  • establish an independent Energy Consumer Commission for Scotland to give Scottish consumers a more powerful voice in Scottish and British energy policy;
  • tackle long-standing and detrimental consumer issues in the energy market in Scotland through our Improving Consumer Outcomes Fund and providing more holistic and interventionist support to vulnerable energy consumers, particularly those in debt;
  • encourage lively debate, and allow people to shape Scotland's energy future;
  • bring together energy supply and network companies, the energy regulator and consumer groups to collaboratively tackle the issues that matter to consumers through the development of the Energy Consumer Charter for Scotland;
  • develop an interactive data hub to provide the most comprehensive picture possible of the experience of Scottish energy Consumer; and
  • ensure that Energy Efficient Scotland keeps consumer interests at its heart as it builds confidence and understanding around the development of heat networks.
• We will consult on plans for delivering the ambition of a Public Energy Company this year.

Energy Efficiency - Buildings

We will continue to take direct and supporting actions to improve the use and management of energy in Scotland's Homes, Buildings, Industrial processes and manufacturing.

Achievements

• We are on track to deliver our 2016 Programme for Government commitment to make £0.5 billion available over the 4 years to 2021 to tackle fuel poverty and improve energy efficiency.
• Our 2019-20 budget, published in December 2018, makes £145 million available through Energy Efficient Scotland to reduce energy costs and tackle fuel poverty. Since 2013/14, our remote and rural areas have received almost £64 million in investment through our Home Energy Efficiency Programmes (HEEPS) - to tackle fuel poverty.
• We launched the Energy Efficient Scotland Route Map in May 2018 with an aim of all Scottish homes having an EPC C^[5] by 2040, and to secure parallel improvements in Scotland's non-domestic premises - with a consultation taking place on these proposals. It is estimated that the value to the whole economy will be in the region of £10 billion - £12 billion.
• Following a parliamentary debate in 2018 which favoured a faster timetable, we published a second consultation on 26 March 2019 on whether Energy Efficient Scotland can be accelerated, and how any risks associated with this can be overcome.
• We also published a call for evidence on the future of low carbon heat for off gas buildings to inform future policy, and a report from the Energy Efficient Scotland Skills and Supply Chain short life working group outlining recommendations on consumer protection, supply chain and quality assurance.
• We have consulted twice on introducing a statutory duty on local authorities to develop Local Heat and Energy Efficiency Strategies (LHEES), and funded pilot projects in 23 local authorities to date, with pilots in the remaining 9 local authorities planned for the Transition Phase of the Programme. We have confirmed that support will be made available to all local authorities ahead of any statutory requirement.

Plans

• We will introduce regulations for minimum energy efficiency standards in the Private Rented Sector to come into force from April 2020, and introduce further standards for energy efficiency in the Social Housing Sector.
• We will bring forward proposals and consult later in 2019 on how to improve energy efficiency and meet EPC targets in owner occupied housing.
• We will prepare legislation in 2019 to introduce regulation to the district heating sector.
• We are also seeking views during the Call for Evidence on Low Carbon Heat on how the Scottish Government can help grow district heating. 

Energy Efficiency - Industrial

We will continue to take direct and supporting actions to improve the use and management of energy in Scotland's Homes, Buildings, Industrial processes and manufacturing.

Achievements

• We have established an Energy Intensive Industries (EII) Roundtable and facilitate regular stakeholder engagement and communication across all EII sectors, including trade association representatives and leaders of large industrial sites.
• We have improved our evidence base of data on EII and used this to a) analyse the scale and location of the Scottish industrial sector (and subsectors within), b) look at trends in energy productivity and emissions intensity, and c) monitor high-level targets.
• We used this evidence to develop a discussion paper on decarbonisation and energy efficiency in the industrial sector, published in April 2019. The paper presents the barriers and opportunities to investment in industrial energy efficiency and decarbonisation in Scotland and analyses the main issues that we propose to address.
• We presented this paper during a workshop with stakeholders at the end of April to develop a shared understanding of which activities to prioritise that will incentivise decarbonisation and/or energy efficiency measures across industry.
• We have also created an Industrial Decarbonisation Agency group to co-ordinate existing agency-led activity and to inform options in the design of adapted or new programmes of support.
• We have connected leaders from EII, as high-carbon emitting industries, with the emerging Carbon Capture Utilisation and Storage (CCUS) Industry Group to identify and join up investment opportunities in this new area.

Plans

• We will co-design our approach with Scottish industry - holding further EII stakeholder engagement during 2019 to prioritise and develop our next steps.
• We will highlight the potential of industrial decarbonisation as an economic investment opportunity to grow our existing energy intensive sectors, and to attract new, advanced manufacturing industries of the future.
• We will demonstrate the knock-on socio-economic benefits across Scotland and emphasise the impact this kind of investment could have on wider emissions targets.
• We will also work with Scottish projects, sites, locations, and clusters to help them consider support at a UK and international level, in order to encourage investment.

Renewables and Low Carbon Solutions

We will continue to champion and explore the potential of Scotland's huge renewable energy resource, and its ability to meet our local and national heat, transport and electricity needs - helping to achieve our ambitious emissions reduction targets.

Achievements

• We launched our Low Carbon Innovation Fund invitation in January 2018 - with £13.4 million development and capital funding awards announced in March 2019. This will further develop Scotland's low carbon capabilities as we continue to attract, retain and advance low carbon innovations, and place Scotland at the forefront of this important sector.
• We are monitoring and responding to major network investment proposals and charging reviews, which will have a profound influence on the viability of renewables projects in Scotland.
• We have launched a £10 million Saltire Tidal Energy Challenge Fund to drive innovation and incentivise investment in the Scottish tidal energy sector, supporting a pathway to cost reduction and commercialisation.
• Our Wave Energy Scotland programme has awarded £7.7 million to two new Scottish wave energy devices which will take to the sea in 2020. We have allocated £10 million in 2019/20 for Wave Energy Scotland, building on £30 million in funding to date.
• We have been working with stakeholders to find solutions to onshore wind deployment barriers, and to help support commercially viable projects across Scotland. These efforts include steps to address civil and military aviation radar issues, and our Eskdalemuir Working Group.
• We have reviewed our Good Practice Principles for Community Benefits and Shared Ownership (for onshore renewables), and consulted upon the revised documents (November 2018 - January 2019), before launching at the CARES conference in May 2019.
• We have created the new Scottish Offshore Wind Energy Council, to specifically consider the part Scotland has to play in delivering the Offshore Wind Sector Deal.
• On 2 May 2019, Cabinet Secretary for Finance, Economy and Fair Work, alongside the Minister for Energy, Connectivity and the Islands, held an offshore wind supply chain summit looking at how our indigenous supply chain can secure larger contracts during procurement rounds. Ministers used the summit to set out their expectations for the industry, making clear that collective action is necessary if the industry is to achieve the 60% UK content target as set out in the Sector Deal.
• We have established a Hydro Task and Finish Group (HTFG) which brings together the Scottish Government, our agencies and industry to tackle current issues facing the sector.
• We have met with trade groups such as the Solar Trade Association (STA) on a regular basis to provide policy updates, and to gain an understanding of the issues facing small-scale solar projects in Scotland - such as grid constraints, permitted developments, and business rates.
• We are continuing to make financial incentives available to accelerate the growth of low carbon heat, through the Renewable Heat Incentive (RHI), District Heating Loan Fund, Home Renewables Loans and SME Loans. We are monitoring and streamlining these incentive schemes in line with the Energy Efficient Scotland programme route map to ensure maximum uptake and availability of assistance for Scottish based consumers and businesses.
• We also launched a Call for Evidence on the future of low carbon heat for off gas buildings in March 2019 in order to inform future policy.
• Scotland now has one of Europe's most comprehensive charge point networks and 2018 saw 39% growth in registrations of ultra-low emission vehicles in Scotland, compared to UK growth of 20%. Our Scottish Green Bus Fund has helped purchase 475 low emission buses.
• We have increased funding for low carbon vehicles in 2018/19 to develop the charging network, as well as an increased budget (£8 million to £20 million) for our Low Carbon Transport Loan scheme.
• We have also established a new 'Switched on Towns and Cities Challenge Fund', and we are strengthening ChargePlace Scotland through new investment and collaboration with the network operators and other stakeholders, to ensure it can meet future demands.

Plans

• We will consider the need for further targeted low carbon capital funding invitations through the Low Carbon Infrastructure Transition Programme.
• The Energy Investment Fund will continue to provide commercial investment for renewables and low carbon energy solutions, encouraging co-investment from the private sector. Up to £20 million is available this year (2019/20) to support the delivery of energy projects in Scotland that will facilitate, catalyse and accelerate Scotland's transition to a carbon neutral economy.
• We will continue to make the case for securing a route to market for renewable and low carbon technologies in Scotland, and for network investments/regulatory outcomes which support our strategic priorities.
• We will work closely with the marine energy sector, and the Scottish Marine Energy Industry Working Group, to develop a coordinated approach to future support requirements and further cost reduction.
• We will continue to support arguments for a market stabilisation mechanism for onshore wind, and to promote appropriate repowering of onshore wind farms as they approach the end of their operational lives.
• We are committed to ensuring that Scotland benefits from the support provided by the Offshore Wind Sector Deal to maximise offshore wind deployment, and the related economic benefits - building on the outcomes of our Offshore Wind Summit on May 2nd. We will continue to work with the industry to help ensure that Scottish developments can be as competitive and viable as possible.
• We expect to consult on our draft Sectoral Marine Plan for Offshore Wind this autumn. These options within the draft Plan will set the spatial framework for the ScotWind seabed leasing round, which Crown Estate Scotland expects to launch in October.
• We will continue to encourage and promote hydro in Scotland, creating a supportive environment for the sector. The Hydro Task and Finish Group will continue to meet on a regular basis. We will also continue to support the case for pumped storage hydro, and a policy approach from the UK Government which recognises its value to the system.
• We will continue to work constructively on the challenges facing the small-scale solar projects in Scotland, arising from the cancellation of the Feed in Tariff Scheme by the UK Government, and explore ways in which Scotland can maximise its solar potential through capitalising on the forthcoming Smart Export Guarantee scheme.
• We will consult on a draft Bioenergy Action Plan later this year, building on research we have commissioned to establish the potential role for bioenergy in Scotland.
• We will create a new stakeholder group to monitor (and prepare our networks for) the expected acceleration in Ultra Low Emission Vehicles and charging infrastructure.
• The Energy Efficient Scotland programme will include a focus on low carbon heat solutions - LHEES pilots are testing authority-wide heat decarbonisation and energy efficiency strategies, identifying priority zones for area-based delivery programmes from 2020.
• We are preparing legislation to introduce regulation for district and communal heating in Scotland, subject to Parliamentary time. Regulation will provide certainty to investors and stakeholders helping to make Scotland a more attractive place to invest in heat networks, supporting efforts to eradicate fuel poverty and reduce greenhouse gas emissions. We aim to transform the way that heat networks are developed in Scotland, taking a more strategic approach to identifying deployment opportunities and setting clear standards for all market participants.
• We will continue to collaborate with the UK Government, and to accelerate decisions on the future of the gas network (a reserved area).
• We will analyse the responses received to the call for evidence on low carbon heat in off-gas areas and continue to strengthen our approach to decarbonising the heat supply to Scotland's buildings with a view to publishing a Heat Decarbonisation Policy Statement in summer 2020.
• The recently established independent Infrastructure Commission, set up to advise the Scottish Government on managing the transition to a carbon neutral economy as part of its remit, will help inform the development of the Scottish Government's next Infrastructure Investment Plan.

Innovative Local Energy Systems

We will empower our communities by supporting the development of innovative and integrated local energy systems and networks.

Achievements

• We have consulted on introducing a statutory duty on local authorities to develop Local Heat and Energy Efficiency Strategies (LHEES), and funded pilot projects in 23 local authorities to date, with pilots in the remaining 9 local authorities planned for the Transition Phase of the Programme.
• The Community and Renewable Energy Scheme (CARES) has supported 267 community and locally owned projects which have a capacity of 59 MW - including a total of 41 individual solar and hydro projects since publication of the Strategy.
• By June 2018, an estimated 0.7 GW of community and locally owned renewable energy capacity was operational in Scotland.
• We established an accelerated support package through CARES to support community hydro projects (ahead of the closure of the UK Government Feed-in Tariffs Scheme (FITS) on 31 March 2019). This included the formation of a hydro sub-team at Local Energy Scotland, who were able to secure FITS for 7 out of 9 projects before its closure.

Plans

• We will publish a Local Energy Systems policy statement in 2019, establishing a series of principles for local energy systems' development. We will formally consult on the statement in the second half of 2019.

System Security and Flexibility

Scotland should have the capacity, the connections, the flexibility and the resilience necessary to maintain secure and reliable supplies of energy to all of our homes and businesses as our energy transition continues.

Achievements

• We have published a Networks Vision Statement^[6] (March 2019), describing the priorities needed to guide the evolution of Scotland's electricity and gas networks in the context of Scotland's Energy Strategy.
• We are monitoring and responding to major network investment proposals and charging reviews, identifying and raising key Scottish issues and priorities.
• We continue to work and engage with key stakeholders to support the delivery of transmission links to Scotland's island groups, unlocking the islands' vast renewable potential and associated economic benefits.

Plans

• We will build on our Networks Vision Statement - hosting a Networks Summit during 2019, engaging with Ofgem, and liaising with the UK Government on a number of key issues.
• We are proposing to establish a new Networks Leadership Group to monitor the Networks Vision, agree actions as necessary and report progress and issues to SEAB.
• We will continue to engage closely with Ofgem, Scotland's network owners, consumer groups and other key stakeholders across a series of important reviews, including the network price controls and reviews of network access and charging.
• We will build on our role as a leader in UK decarbonisation by leading the way in sustainably delivering technical system services, ensuring that we maintain a resilient and secure electricity supply.
• We will set out clearly our understanding and position on security of electricity supply and how we expect this to be delivered in a carbon neutral energy system - working with key stakeholders such as National Grid and Scotland's network owners, and developing metrics to help us benchmark and understand Scotland's electricity security of supply trends over time.

Oil and Gas Industry Strengths

We will support investment, innovation and diversification across our oil and gas sector, working with industry to advance key priorities such as maximising the recovery of remaining resources, subsea engineering, decommissioning and carbon capture and storage - collaboratively addressing the challenges of today and preparing the sector and its workforce for a positive role in Scotland's future energy system.

Achievements

• Our Decommissioning Challenge Fund awarded grants of £5.4 million in 2018/19. We have also undertaken feasibility work looking at establishing an ultra deep water port in Scotland, compatible with the largest decommissioning vessels and highest value projects. A business case for the location is due to get underway in May 2019.
• We are participating in the UK Government Ministerial-led Carbon Capture Utilisation Storage (CCUS) Council, promoting Scottish CCUS opportunities. We have actively engaged in working groups and workshops set up to meet the commitments in the UK Government CCUS Deployment Action Plan, published November 2018.
• We have also established a Scottish CCUS Interest Group to help to coordinate efforts to raise awareness of CCUS and to help realise the deployment of CCUS systems in Scotland.
• We have supported the Acorn CCS Project at St Fergus with direct funding of £100,000 and an additional £175,000 alongside the UK Government and Total, match funded by EU funding, to drive the project forward.
• We are supporting a number of world-leading hydrogen demonstration projects - providing £6.3 million to date for the Aberdeen Hydrogen Bus Project, and £1.3 million for Orkney's Surf N Turf Project, the only project in the world producing hydrogen from tidal power.
• We have established the Scottish Hydrogen Interest Group to share information and help coordinate action on the development of hydrogen projects and activity in Scotland.
• The Oil & Gas Industry Leadership Group (ILG) membership and remit has been refreshed to increase its focus on supporting and developing the supply chain, and on skills.
• The Transition Training Fund has supported over 4000 people, playing an important role in retaining core skills for the supply chain in the years to come.
• The Oil and Gas Technology Centre (OGTC), funded through the Aberdeen City Region Deal, has made substantial headway - co-investing over £100 million in 188 industry led projects.
• We have supported the Oil and Gas Innovation Centre (OGIC) as part of £120 million committed by the Scottish Funding Council
• We are entering the final stages of the policy making process in relation to onshore unconventional oil and gas development in Scotland. Our consultation on the SEA, partial BRIA, and preferred policy position on unconventional oil and gas ran from 23 October - 18 December 2018, with an eight-week consultation on an addendum to these consultation documents launched on 30th April - providing clarification on a number of points raised in response to the 2018 consultation. We will consider responses to the addendum in detail prior to any policy position being adopted.

Plans

• We will remain closely engaged with the UK Government on its CCUS Deployment Action Plan, and continue to work with Scottish stakeholders and our newly formed CCUS Interest Group to promote and work towards establishing CCUS systems in Scotland.
• We will work closely with stakeholders over the coming year on the potential economic, social and strategic value of hydrogen to Scotland - carrying out a detailed assessment which examines the achievements of hydrogen projects in Scotland to date, and the lessons to be learned from broader UK and international experience.
• We will also explore the opportunities and challenges of further deployment of hydrogen, and build a strong evidence base on the potential roles for hydrogen in the energy transition. Hydrogen has huge potential across the whole energy system - as a means of decarbonising heat and transport, and providing storage solutions to help balance Scotland's growing renewable electricity generation.
• Following its success to date, the Scottish Government will remain involved with the Hyseas hydrogen ferry project, which is developing the world's first sea-going ro-ro vehicle ferry powered by hydrogen produced using locally generated renewable electricity.
• We will review the successes of the Decommissioning Challenge Fund and plan for its reopening.
• We will complete the ultra deep water port business case and continue to develop the evidence base to support a facility at Dales Voe, Shetland. We will support Highlands and Islands Enterprise to secure the necessary investment, including any public sector funding.
• We will continue to press the UK Government to support the oil and gas industry's ambitions to increase the total economic value of the North Sea, including a positive and stable framework consistent with the oil and gas sector's Vision 2035.
• We will work with the Oil and Gas ILG Supply Chain Sub-Group to develop or support projects or initiatives which will anchor the supply chain in Scotland and generate long term value for the Scottish economy.
• We will confirm and adopt our final policy on unconventional oil and gas as soon as possible after the consultation process is complete. We remain committed to transparency and public engagement on this important issue.