Draft Energy Strategy and Just Transition Plan

Executive Summary

To realise our climate change ambitions, we need to transform the way Scotland generates, transports and uses energy. We must seize the huge opportunity this presents and deliver maximum benefits to Scotland's people, workers, communities and economy from our vast renewable energy resource. This draft Energy Strategy and Just Transition Plan sets out the scale of that opportunity and provides clarity on how Scotland will prepare for a Just Energy Transition.

Our vision is that by 2045 Scotland will have a flourishing, climate friendly energy system that delivers affordable, resilient and clean energy supplies for Scotland's households, communities and business. This will deliver maximum benefit for Scotland, enabling us to achieve our wider climate and environmental ambitions, drive the development of a wellbeing economy and deliver a just transition for our workers, businesses, communities and regions.

In order to deliver that vision, this strategy sets out clear policy positions and a route map of actions with a focus out to 2030 that the Scottish Government will take and the changes that the UK Government must deliver.

The research underpinning that vision shows that if successful we can deliver a net zero energy system for Scotland that also delivers a net gain in employment in Scotland's energy production sector.

Preparing for a Just Transition: Scotland's first draft Just Transition Plan

To secure a just transition that benefits all of Scotland's communities, we must take steps to ensure that our national, regional and local energy economies are thriving, and that the Strategy and Plan delivers for all parts of Scotland.

We are committed to increasing access to affordable energy. We will continue to do all we can to support households and businesses, and to prioritise those in or at risk of fuel poverty. We urge the UK Government to reform the energy market to permanently break the link between the price of electricity and the cost of gas to help realise the benefits of the low costs of renewable electricity.

We are committed to maximising community benefits from, and ownership of, energy projects, and providing regional and local opportunities to participate in our net zero energy future. We are encouraging developers to offer community benefits and shared ownership opportunities to communities as standard on all new renewable energy projects, including repowering and extensions to existing projects.

For areas of Scotland with traditionally higher dependence on fossil fuel related economic activity, such as the North East, Grangemouth and Shetland, the transition will involve shifting investment and employment to renewable sectors such as wind and marine energy.

Maximising opportunities for growing net zero energy sectors and businesses, driving investment and increasing trade opportunities will be critical to delivering a just transition. Through government investment in the net zero energy economy and by providing a stable policy environment and clear market signals, our aim is to attract increased levels of private and inward investment into Scotland's energy sector. Boosting our skills base and domestic supply chain will support the creation of vital jobs across the economy.

We are already investing almost £5 billion in the net zero energy economy in Scotland over this parliamentary term, prioritising those projects that align with our vision as set out in this draft Strategy and Plan. Our capital investment is primarily focussed on the demand sectors of heat, transport and industry. Under the current constitutional settlement, the Scottish Government is unable to invest in many parts of the UK's liberalised energy markets. We will continue to use our capital funds to support those least able to pay, to maximise economic opportunities for communities across Scotland and to promote environmental protection.

Expanding our energy generation sector

We are taking action to transform and expand Scotland's energy generation sector. Scotland's rich renewables endowment means we can not only generate enough cheap green electricity to power Scotland's economy, but also export electricity to our neighbours, supporting jobs here in Scotland and the decarbonisation ambitions of our partners.

We are setting an ambition for more than 20 GW of additional low-cost renewable electricity generation capacity by 2030, including 12 GW of onshore wind, and we are consulting on setting a further offshore deployment ambition, and a new ambition for solar, wave and tidal deployment. Scotland already has 13.4 GW of renewable electricity generation capacity. An additional 20 GW of renewable generation will more than double our existing renewable generation capacity by 2030 generating enough power each year to power the equivalent of every home Scotland for over 7 years.^[1] That is the equivalent of 48% of Scotlands current total energy demand.^[2]

There are tremendous opportunities ready to be seized over the coming years as our renewables capabilities and wider supply chains grow. As one of the cheapest forms of electricity, offshore wind has a vital role to play in decarbonising our energy demand and securing a just transition to net zero. Subject to planning and consenting decisions and finding a route to market, we have a current reported potential pipeline (subject to change) of over 38 GW of offshore wind projects. When projects which are awaiting construction, under construction or already operational are added to this, the total potential capacity reaches over 40 GW – the equivalent to produce enough electricity annually to power every home in Scotland for 17 years or every home in the UK for over a year and a half.

We have set a renewable and low-carbon hydrogen production ambition of 5 GW by 2030 - equivalent to a sixth of Scotland's energy needs by 2030 - and an ambition for 25 GW by 2045. Hydrogen is an emerging sector perfectly placed to support a just transition for existing oil and gas workforces and we have set out plans to rapidly grow Scotland's hydrogen economy.

Hydro power has the potential to play a significantly greater role in the energy transition and we are urging the UK Government to act now to ensure the clean energy and storage capability of Scotland's hydro resource can be realised by instituting appropriate market mechanisms. We are also clear that the UK Government plays a critical role in delivering carbon capture, utilisation and storage (CCUS) in Scotland, as we do not hold the necessary legislative and regulatory levers. UK Government certainty and support, including access to BEIS business models, is essential to accelerate the Scottish Cluster project. The development of CCUS infrastructure in Scotland's industrial clusters in Grangemouth and the North East could ensure a just transition for important domestic industries, protecting jobs and utilising existing skills.

We are taking action across all sectors of the economy to reduce our reliance on fossil fuels. The Scottish Government is clear that unlimited extraction of fossil fuels is not consistent with our climate obligations. Neither is it a solution to the energy price crisis people across Scotland are facing. We want to see the fastest possible just transition for the oil and gas sector.

We have finalised our position of no support for unconventional oil and gas in Scotland. We are finalising our policy positions on onshore conventional oil and gas, and coal extraction, as part of this Strategy and Plan. We have also updated our position on offshore oil and gas and are consulting on it.

The Scottish Government has devolved powers over onshore oil and gas (both conventional and unconventional), but powers over offshore oil and gas are reserved to the UK Government. These positions can be found in Chapter 3.

We do not support the building of new nuclear power plants, which due to the high costs of nuclear^[3], as well as taking decades to build, will do nothing to address the urgent imperative of driving down energy prices.

Changing the way we use energy

We must change the way we use energy – reducing demand across our heat and transport sectors and replacing fossil fuel demand with zero carbon technologies. Low cost, renewable electricity will be critical for decarbonising our energy use, along with significant volumes of renewable and low-carbon hydrogen in harder-to-decarbonise sectors.

We are taking action so that by 2030 the vast majority of the 170,000 off-gas homes that currently use high emissions oil, LPG and solid fuels, as well as at

least 1 million homes currently using mains gas, convert to zero emissions heating. We are also reducing emissions from our non-domestic buildings.

We are bringing forward a Heat in Buildings Bill which will outline proposals for regulating for energy efficiency and zero direct emissions heat in Scotland's homes and buildings.

Recognising the pace at which we must act to decarbonise heat in our homes and buildings Heat and Energy Efficiency Scotland - our National Public Energy Agency - will play an important role in co-ordinating this huge transition and help to ensure it is a just and fair one.

We have committed to reduce car kilometres by 20% by 2030 and to help people on lower incomes and in remote rural and island communities to switch to zero emissions vehicles through our consumer focussed incentive schemes. We are developing a Just Transition Plan for transport that delivers for people, places and communities across Scotland.

While we expect oil and gas to remain a component of Scotland's energy system while it transitions to a zero carbon system, particularly in industrial energy usage, we are clear that overall use of fossil fuels across heating and transport sectors must decline and that alternative technology and energy solutions are available.

We will continue to support industry to work towards 43%^[4] decarbonisation by 2032, through match funding for industrial energy efficiency and decarbonisation, including through the Scottish Industrial Energy Transformation Fund and the Low Carbon Manufacturing Challenge Fund.

To drive essential CCUS deployment, we will continue to work with the North East CCUS industry led alliance to support the delivery of the CCUS industry in Scotland; support the Scottish Cluster through the UK Government's cluster sequencing process; continue to build the evidence base to underpin this; and explore the international opportunities afforded by Scotland's vast CO₂ storage assets, alongside a prioritisation of domestic hard to abate emissions. We will also continue to work with the UK Government, Welsh Government and Northern Ireland Executive to align the UK Emissions Trading Scheme with our net zero targets; ensuring a strong carbon price to incentivise business investment in decarbonisation.

We are providing a suite of support and advice services, such as the Farm Advisory Service, to help farmers and crofters reduce their energy demand and decarbonise energy use, as well as highlighting the range of ways farmers and land managers can participate in the net zero energy economy.

Creating the conditions for a net zero energy system

By 2030, our energy system will be in the midst of a major transformation, integrating new ways of producing, transporting and using energy. Our energy supplies need to be secure, reliable and affordable for people and businesses across Scotland. This draft Strategy and Plan sets out how we are working with the UK Government on key areas of energy security, network investment and market regulation to ensure we have the infrastructure and market design that will enable the transformation of Scotland's energy system in line with our vision. Our energy infrastructure must also be resilient to the impacts of climate change in Scotland.

Working with the UK Government

Many of the key decision-making powers in energy sit with the UK Government, with responsibility for making or changing legislation and regulations reserved under the Scotland Act. Critical areas where the UK Government must take action to secure the full benefits of the energy transition for Scotland's people and businesses include:

• electricity market reform;
• support for carbon capture and storage;
• action on energy affordability;
• reforms to consenting of offshore wind and regulation of the offshore marine environment; and
• the development of new market mechanisms to support clean energy technology deployment.

We have set out in Chapter 7 the key issues where actions by the UK Government and UK regulatory bodies are required to meet the ambition outlined in this strategy. We will invite the UK Government and those relevant bodies to join us as part of an Energy Transition delivery group to drive this strategy forward, identify and remove barriers, harness the opportunities and track progress in delivering a net zero energy system for Scotland.

Summary of policies set out in this draft Strategy and Plan: A Just Transition

We are setting out actions in this Strategy and Plan to ensure that:

• People have access to affordable clean energy.
• Communities and places can participate and benefit in the net zero energy transition.
• We have a supportive policy environment, maximising the impact of government expenditure and attracting private investment.
• Scotland is home to a multi-skilled energy workforce, boosting our domestic supply chain and manufacturing capabilities.
• Scotland's net zero energy system is continuously innovative and competitive in domestic and international markets.

Community benefits and shared ownership

We have set an ambition for 2 GW of community owned energy by 2030. We will encourage developers to offer community benefit and shared ownership opportunities as standard on all new renewable energy projects – including repowering and extensions to existing projects. We are currently updating our Good Practice Principles for Community Benefit from Offshore Renewable Energy Developments, and will consult on new draft guidance in 2023. We will engage with the UK Government to consider mechanisms for maximising opportunities for community benefit and shared ownership for renewable energy developments.

Energy supplies – Scaling up renewable energy

Offshore Wind

The Offshore Wind Policy Statement, published in 2020, set out our ambition to achieve 8-11 GW of offshore wind in Scottish waters by 2030. This consultation seeks views on whether the Scottish Government should set an increased ambition for offshore wind deployment, and what the level of ambition should be, by 2030 and 2045. The draft Strategy and Plan also acknowledges that the major expansion of offshore wind will impact marine biodiversity and other users of the sea, and describes the action we are taking to balance those impacts.

Onshore Wind

In the Onshore Wind Policy Statement, published in December 2022, we set an ambition for a further 12 GW of onshore wind by 2030, increasing from 8.78 GW as of June 2022 to 20 GW by 2030, more than double our existing capacity. Our draft Strategy and Plan restates our ambition and provides clear positions on community benefit and shared ownership, including how communities can benefit from repowering of existing sites. The Onshore Wind Policy Statement sets out how we will work with industry to deliver an Onshore Wind Sector Deal in 2023, to ensure we maximise deployment and the economic opportunities that flow from it.

Marine

The draft marine vision consults on a new ambition for marine deployment and presents the opportunities for the sector, and potential actions to enable the continued growth of both wave and tidal energy. This will support the delivery of a secure and low carbon energy system and a new industrial opportunity for Scotland.

Solar

We will support the sector to minimise barriers to deployment, aiming to maximise the contribution solar can make to a just, inclusive transition to net zero. We are keen to see the number of solar installations offering community benefits increase and continue to encourage the sector to consider what packages of community benefit it can offer communities local to developments, in line with our Good Practice Principles.^[5]

Hydro power

Hydro power has the potential to play a significantly greater role in the energy transition – both at small-scale in co-operation with local communities as part of a diverse resilient energy supply in remote parts of Scotland, and at larger scale, providing flexibility services to the grid and helping to ensure a continued resilient and secure electricity supply. We urge the UK Government to provide appropriate market mechanisms for hydro power to ensure the full potential of this sector is realised.

Hydrogen

The Hydrogen Action Plan and this draft both reaffirm policy support for hydrogen, and our strong ambitions for Scotland's hydrogen economy. They highlight our intention to capture the supply chain and infrastructure benefits to the Scottish economy from taking a leading role in hydrogen production. Previous ambitions on hydrogen production have not changed:

• 5 GW installed renewable and low-carbon hydrogen production capacity in Scotland by 2030
• 25 GW installed renewable and low-carbon hydrogen production capacity in Scotland by 2045

Energy supplies - Reducing our reliance on fossil fuels

Fossil fuel electricity generation

We are opposed to the continued use of unabated fossil fuels to generate electricity. The deployment of CCUS for the Scottish Cluster must demonstrate decarbonisation at pace and cannot be used to justify unsustainable levels of fossil fuel extraction or impede Scotland's just transition to net zero.

Oil and Gas – Offshore

This draft sets out our support for the fastest possible just transition for the sector and consults on the principles on which decisions for future extraction would be based. The UK Government has introduced a checkpoint to ensure any future licensing is compatible with the UK's climate objectives before a licensing round is offered. In line with advice from the Climate Change Committee (CCC)^[6] Scottish Government policy is that climate compatibility checkpoints for oil and gas licensing should extend beyond new licensing rounds to cover fields that are consented but not yet in production. Further, we consider that any checkpoint should also include an assessment of the proposed production's contribution to international climate commitments. Whilst licensing is reserved to the UK Government, the Scottish Government is consulting on whether, in order to support the fastest possible and most effective just transition, there should be a presumption against new exploration for oil and gas.

Oil and Gas - Onshore

The draft reaffirms our preferred policy position of no support for the exploration or development of onshore conventional oil and gas in Scotland and position of no support for unconventional oil and gas.

Coal

The draft reaffirms our preferred policy position of no support for coal extraction in Scotland.

Nuclear

The draft reiterates our firm position on traditional nuclear energy, that we do not support the building of new nuclear power plants under current technologies.

Energy demand for heat, transport, industry and agriculture

Heat in Buildings

This draft reaffirms our ambitions to decarbonise 1 million homes by 2030, and to reduce emissions from our non-domestic buildings and invest over £1.8 billion in decarbonising homes and buildings, through Heat and Energy Efficiency Scotland - our national energy agency.

Transport

This draft reaffirms our ambitions to reduce car kilometres by 20% and sets out the significant investment in sector decarbonisation.

Industry

The draft sets out how we will continue to support industrial energy efficiency and decarbonisation including low carbon manufacturing over the course of this parliament and sets out our work to deliver a Just Transition Plan for Grangemouth.

CCUS

The Scottish Government remains supportive of CCUS as part of the energy transition. In particular it remains committed to supporting the delivery of the Scottish Cluster. However, we agree that any strategy for deployment of these technologies must enable decarbonisation at pace and cannot be used to justify unsustainable levels of fossil fuel extraction or impede Scotland's just transition to net zero.

Agriculture

This draft sets out how we are building our evidence base through research on opportunities for the sector to decarbonise their energy usage and our continued support through a suite of advice programmes.

This consultation document

This draft Strategy and Plan presents the vision for Scotland's future decarbonised energy system and the actions we and others need to take to deliver it.

It sets a vision to 2045, and a route map of ambitions and actions that, coupled with detailed sectoral plans and the forthcoming Climate Change Plan, will guide decision-making and policy support over the course of this decade to 2030. The Strategy and Plan provides policy certainty for consumers, businesses and investors and sets a clear direction for the future of Scotland's oil and gas sector.

Chapter 1 describes our vision for this energy system transition, with a focus on the interim milestones we must achieve by 2030.

Chapters 2-5 set out how we will prepare for a just transition and the action we will take to achieve the vision. This includes proposals for how we can secure maximum social and economic benefit from the transition for Scotland, working with business and investors to attract additional capital and inward investment to support our net zero ambitions and export potential.

Chapter 6 sets out a consolidated route map of actions, and Chapter 7 describes the changes needed at UK level to realise the vision.

Throughout the document, you will find boxes that set out the positive impacts that the energy transition will deliver for Climate and the Environment (green boxes), for our Economy (orange boxes), and for Scotland's Communities and Regions (blue boxes). This draft Strategy and Plan describes the actions we and partners - including industry, the wider public sector and the UK Government - must take to achieve those positive outcomes.

This consultation provides an opportunity for communities, workers, citizens and businesses to engage in the process of co-designing Scotland's energy transition. In consulting on this draft vision and route map, our purpose is to:

1. seek views on our vision and the actions we are taking to transition to an affordable, resilient and clean energy system; and

2. understand how we secure the maximum social and economic benefits from the energy transition for Scotland.

You will find consultation questions in Annex B, along with information on how to respond to this consultation. We invite you to respond to these questions by 9 May 2023. We will use the consultation responses received, and the continuing engagement we will be carrying out, to further develop the Strategy and Plan, before a final version is published in late 2023.

Engagement

We have conducted a series of intensive stakeholder engagement workshops throughout the production of this draft Strategy and Plan to gather ideas and evidence on the actions that we can take to ensure this is a just transition – see Annex C.

You will also find references to the Just Transition Commission's interim report recommendations^[7].

And the feedback from engagement through the initial stages of the co-design process that informed this draft.