Draft Energy Strategy and Just Transition Plan

Chapter 7: Action the UK Government must take

Many areas of energy policy are reserved to the UK Government. This means that we need to work with the UK Government to deliver the ambition outlined in this Strategy. The key areas where the UK Government needs to take action to support delivery of this strategy are listed below.

UK Government action to support delivery of the ESJTP: Preparing for a Just Energy Transition

Affordable energy

• We continue to call on the UK Government to take stronger and more targeted action to support households and businesses:
  • A windfall tax should apply fairly to all companies benefiting from significantly higher profits.
  • We have highlighted repeatedly the need for extra support for vulnerable energy consumers who are already struggling to pay their bills and heat their homes.
  • More needs to be done to support households across Scotland who rely on alternative fuels to heat their homes.
• The UK Government should also accelerate the recently announced review of support for domestic and non-domestic consumers after March 2023 – it is essential that those households and businesses which are not classified as fuel poor or vulnerable, but for whom soaring costs remain a huge concern, continue to receive some support.

Community energy

• We call on the UK Government to consider mechanisms for maximising community benefit from renewable energy developments and offers of shared ownership. These could potentially include powers to make such benefits (and offers of shared ownership) mandatory, subject to full consultation.
• We welcome UK Government proposals to consider how local communities can benefit from electricity infrastructure. We will work closely with the UK Government to ensure this policy reflects the diverse needs of industry and community stakeholders across Scotland.

International Opportunities: Trade and Inward Investment

• We urge the UK Government to create a frictionless trading environment for renewable energy, goods and services by using trade agreements and policies to address tariff and non-tariff barriers to trade.
• The UK Government must take the action necessary at a UK-level to facilitate the smooth international trade of hydrogen, in line with Scottish export ambitions.
• We continue to push the UK Government and European Union, through the Specialised Energy Committee, to deliver more efficient electricity trading.
• The UK Government must enable international trade of CO₂ with bilateral agreements under the London Protocol. They should collaborate with the Scottish Government to ensure such agreements align with project-to-project agreements with the Scottish cluster.
• The UK Government must ensure that barriers within the European Union and UK ETS and the European Union CCS Directive and reciprocal UK legislation are addressed to enable international trade of CO₂ for storage in Scotland.

Energy Supplies

Oil and gas- North Sea extraction and exploration

• We call on the UK Government to assess all new exploration and approved offshore oil and gas licenses where drilling has not yet commenced against our climate commitments. The climate compatibility checkpoint tests announced by the UK Government must be strengthened if they are to act as a credible test.
• We urge the UK Government to provide more support directly to the decommissioning sector to ensure as much of this growing area of work as possible is carried out in Scotland, creating and protecting jobs and economic opportunities.

Wind – offshore

• The scale and potential of Scottish offshore wind projects is such that they are set to make a major contribution to Scotland and the UK reaching net zero. Scottish Ministers firmly believe it is to the benefit of both the Scottish and UK Governments to establish a streamlined and coherent licensing and consenting system that allows projects to be approved at pace in Scottish waters and have asked the UK Government to ensure this can be delivered.
• Scottish Ministers are concerned that the UK Government's proposed approach for reforming existing environmental assessment and habitats regulations assessment (HRA) processes should not add complexity and a lack of clarity for industry, potentially slowing down planning and consenting in Scotland. To ensure these reforms are effective we continue to call upon the UK Government to respect Scottish Ministers' devolved and executively devolved roles and responsibilities in consenting as a minimum, and we believe that a fit for purpose licensing and consenting regime for offshore wind is most simply achieved through full legislative devolution.

Marine Energy

The ringfencing of support for tidal stream in Contracts for Difference Allocation Round 4 represents an overdue but welcome step in the journey towards the commercialisation of tidal stream energy. To fully unlock its potential, the sector needs certainty about the support that will be available in future allocation rounds.

Hydrogen

• We urge the UK Government to expedite progress on amending regulations and legislation to support hydrogen blending, accelerate decisions on the role of 100% hydrogen in the gas grid and to enable our ambition to maximise volumes of renewable hydrogen in our energy system as quickly as possible.
• We urge the UK Government to include the supporting infrastructure development for the offshore transportation of green hydrogen from Scotland's ports and harbours in energy infrastructure considerations.

Energy Demand

Heat in Buildings

We call on the UK Government to:

• implement its proposed new market mechanisms to drive investment in, and uptake, of zero emission heat systems
• accelerate decisions on the role of hydrogen and provide clarity on the future of the gas network
• rebalance energy bills in a way that supports the transition away from fossil fuels and delivers a fairer outcome for consumers
• review energy prices to reduce the difference in unit costs between gas and electricity, helping support the transition away from fossil fuels.

Transport

We continue to press the UK Government to reform motoring taxes to remove barriers to decarbonisation of road transport.

Carbon Capture and Storage

• We continue to call on the UK Government to reverse its CCUS cluster sequencing decision and to accelerate the Scottish Cluster to full Track-1 status without delay.
• We also press the UK Government to provide urgent clarity on the timelines and processes of the next stages (Track-2) of the cluster sequencing process.
• We are working constructively with the UK Government on the development of CCUS in the UK and will continue to input into the Track-2 sequencing process to ensure it does not unfairly disadvantage Scotland and takes into account Scottish statutory emissions reduction targets.
• We urge the UK Government to seek the development of a common international standard on CO₂ storage that focuses on storing emissions from essential industries.
• We also support calls (including by the UK CCUS trade association, the Carbon Capture and Storage Association) on the UK Government to make progress on a number of key areas, including passing legislative proposals in the Energy Bill as soon as possible, providing clarity on the future of, and support for, non-pipeline transport and the future process for more dispersed emitters and taking forward necessary actions (particularly on the EU ETS and the London Protocol) to enable cross-border CO₂ storage.

Industrial decarbonisation

• We ask the UK Government to work with us to incentivise consumers, or other buyers, to choose low carbon products; and ensure these choices influence the long-term investment decisions on energy consumed during production by manufacturing industries.
• We will work with the UK Government to plan and secure the delivery of the substantial infrastructure, as well as new energy generation and conversion assets, that need to be developed before industrial fuel switching (to green hydrogen and/or to electrification) and CCUS can be deployed on a large scale.

Creating the conditions for a net zero energy system

Wholesale Market

• We continue to call for reform of the GB wholesale market to enable consumers, communities and businesses in Scotland to share the benefits of low cost renewable power.
• The UK Government must design and implement recently announced changes to the wholesale market for renewable and nuclear generators in a way that maximises the benefit to consumers and does not disadvantage generators who are not making excessive profits. Longer-term, the GB wholesale market must be reformed to break the link between electricity prices and the cost of gas.

System restoration

Although National Grid Energy System Operator (ESO) have existing markets for black start services, the technical requirements are based on the thermal power plants. We continue to press the UK Government to update these requirements, taking into account lessons learned from the Dersalloch trial.

Energy system flexibility

We call on the UK Government to support the development of pumped hydro storage through a market mechanism for pumped storage.

We urge the UK Government to make ancillary markets more accessible for Battery Energy Storage Systems (BESS) and other low carbon technologies ahead of fossil fuel powered alternatives.

Electricity Networks

• We urge Ofgem to ensure its ongoing review of charging arrangements delivers a fairer solution that considers the type of generation we connect to the system as much as where that generation is situated. We will also continue to work with the UK Government to ensure that costs are fairly distributed.
• We urge the UK Government and Ofgem to ensure that investment in our grid infrastructure happens at the pace and scale required to deliver a just energy transition in line with statutory climate targets, including those set by the Scottish Parliament.
• We urge the UK Government to take steps to facilitate necessary reforms to Scotland's onshore grid consenting regime.