Green Industrial Strategy

Executive Summary

The transition to net zero creates demand for new goods and services on a global scale. It provides opportunities to build new supply chains, demands new skills and ways of working, and offers a powerful new inspiration for innovation and entrepreneurship.

This Green Industrial Strategy’s mission is to ensure that Scotland realises the maximum possible economic benefit from the opportunities created by the global transition to net zero.

Offshore oil and gas have for several decades been an integral part of Scotland’s economy. However, North Sea production is by every estimate set to decline due to the geological maturity of the basin. Seizing the opportunity for Scotland to play a leading role in the emerging global net zero energy economy offers a route to creating highly-skilled, well-paid jobs with economic and social value which will offer opportunities across our country.

This strategy shows how, with the right focus, support, investment and partnerships, Scottish businesses and workers can innovate, capture new markets, create new jobs and diversify the workforce, solve problems with new products – and sell their expertise to the world.

Scotland is competing with other nations to secure investment, build infrastructure and grow globally competitive industries in renewable energy technologies related to net zero. Success requires a strategic approach to ensure:

• Prioritisation of resources and investment (we should not seek to do everything);
• Coordinated policy (connecting energy, climate, economy goals);
• Partnership working (aligning public institutions, business, industry, investors and academia).

Prioritising resources and investment: five opportunity areas for Scotland

This strategy focuses our efforts and resources on specific opportunities, based on an assessment of Scotland’s likely sources of comparative advantage in the net zero economy. We have prioritised opportunities where Scotland has existing strengths, where those strengths are most likely to lead to growth, and where those strengths and opportunities include the potential to grow Scotland’s exports.

Based on this analysis, we have identified five key areas in which Scotland is initially well placed to develop internationally competitive economic clusters. These are:

1. Maximising Scotland’s wind economy: making the most of our natural resources and established onshore and offshore wind sectors; building on our first-mover advantage in floating offshore wind to generate clean electricity; participating in global supply chains as well as expanding our domestic supply chain capacity, and seizing opportunities across the offshore wind supply chain, from infrastructure to manufacturing opportunities; positioning Scotland as a leader in material circularity of wind turbines and components;

2. Developing a self-sustaining carbon capture, utilisation and storage sector: building on our geological CO₂ storage potential, expertise in subsea engineering and a highly-trained workforce; enabling low carbon products and aiming to capture a portion of the European market for carbon storage, which is both an economic opportunity as well as assisting our European neighbours to decarbonise;

3. Supporting green economy professional and financial services, with global reach: building on our strengths in high-value tradable services sectors and considering how Scottish Government can support future innovation and growth;

4. Growing our hydrogen sector: building on our comparative advantage of renewable electricity generation to become a leading nation in the production and export of reliable, competitive, sustainable hydrogen, hydrogen products, and related skills and services for domestic decarbonisation, and export to European markets and beyond;

5. Establishing Scotland as a competitive centre for the clean Energy Intensive Industries of the future: Supporting the electrification of our existing energy intensive industries where appropriate, and making Scotland internationally attractive as a location for existing and new clean Energy Intensive Industries which will benefit from our growing capacity in renewable electricity production.

Our approach is a sequential one. It reflects our understanding that our natural resources, existing strengths and strategic assets can support the production of clean electricity from wind and the sequestration of carbon offshore. Those strengths underpin our existing global position in green services and will generate opportunities to grow this part of our economy in coming years. Generating growing amounts of clean electricity will, in time, unlock opportunities in hydrogen for use and export and to power the clean energy intensive industries of the future. Consistent with our view of what a modern industrial strategy means, the five opportunity areas span sectors, sub-sectors, and places and require a systems-led approach to delivery. For example, growing our hydrogen sector will create opportunities across the hydrogen supply chain from manufacturing, production, end use, transportation and storage infrastructure, to regulatory innovation, standard setting, and exports. Similarly, the geography of our energy sector presents distinct economic opportunities for different regions of our country, be that as a result of the distribution of our natural resources where our rural and island areas play a pivotal role, our physical proximity to key demand centres in North West Europe, or our existing industrial assets such as our port infrastructure, new Green Freeports and Grangemouth.

Coordinated policy: creating an environment for growth

Realising the economic potential of these opportunities requires action to create and sustain an environment that supports jobs, trade, investment, and growth. Scottish Government will make maximum use of the various tools and levers we have at our disposal, aligning them in order to remove the most important blockers and support the development of most impactful enablers. This will see coordinated action aimed at:

1) Supporting Investment, ensuring an investment-friendly ecosystem;

2) Investing in strong research and development foundations;

3) Supporting the development of a skilled workforce;

4) Helping supply chain businesses to seize opportunities;

5) Delivering an agile planning and consenting system;

6) Delivering required housing and enabling infrastructure.

Partnership working: delivering in a green industrial ecosystem

To achieve our ambitions for economic growth, we must cultivate a thriving green industrial ecosystem. This is one that is founded on a clear mission and offers certainty for businesses and investors and a commitment to ensuring that the rewards of success are shared with all.

This strategy provides the sense of direction this ecosystem requires. It has been developed with the support of partners from across “Team Scotland” and they will play a central role in bringing it to life. We will work with Highlands and Islands Enterprise, Scottish Enterprise, South of Scotland Enterprise, Scottish National Investment Bank, regional economic partnerships, and others to ensure we are all pulling in the same direction and making the best use of our joint resources. Crown Estate Scotland will continue to have a role working with government and partners to optimise seabed use in a way that balances public interest with commercial opportunity and will continue to support and enable growth of the supply chain and energy ports.

We will also work with the UK Government, GB Energy, Ofgem, and the National Energy System Operator (currently the ESO) to ensure that the interests of Scotland are best represented. And we will continue to pursue bilateral and multilateral opportunities to foster a partnership approach with our European neighbours, including maximising value from the UK’s association to the EU Horizon programme and seeking to represent Scotland’s position in existing fora such as the North Seas Energy Cooperation.

Conclusion

The Green Industrial Strategy forms a key part of our broader National Strategy for Economic Transformation. It also links explicitly to our Just Transition Plans which describe how the transition to net zero in the most emitting sectors will be achieved in a way that delivers economic, social and community benefits, including fair work, environmental preservation and reduced poverty and inequality.

The strategy includes targeted actions throughout, which aim to ensure Scotland is an attractive host country for investment in priority areas and associated value chains. It aims to offer a compelling proposition to all who are considering investing in Scotland - from domestic businesses considering expansion into new net zero markets to global investors considering infrastructure opportunities in Scotland, and overseas firms examining potential locations for net zero investment

We look forward to working with you to make this strategy a reality and a success, and to build a fair, green and growing economy in Scotland.

Summary of Key Actions and Approaches

Five Opportunity Areas

Maximising Scotland’s wind economy is about making the most of our natural resources, established onshore and offshore wind sectors and first-mover advantage in floating offshore wind to generate clean electricity; participating in global supply chains as well as expanding our domestic supply chain capacity and seizing opportunities across the offshore wind supply chain, from infrastructure to manufacturing; positioning Scotland as a leader in material circularity of wind turbines and components.

Actions:

• Support investment to improve essential infrastructure, expand supply chains and secure manufacturing opportunities;
• Develop and maintain a pipeline of investment propositions backed by clear information about the timing and nature of renewable energy opportunities;
• Deliver planning and consenting systems which enable Scotland’s net zero development pipeline;
• Work with UK Government, Ofgem and the National Energy System Operator to ensure that the interests of Scotland are best represented;
• Work with UK Government to maximise benefits to Scotland from key UK-wide funding schemes;
• Engage productively in domestic and international partnerships and pursuing effective public-private industrial policy collaborations;
• Explore the circularity opportunity in Onshore Wind.

Developing a self-sustaining carbon capture, utilisation and storage sector is about building on our geological CO₂ storage potential, expertise in subsea engineering and a highly-trained workforce; enabling low carbon products and aiming to capture a portion of the European market for carbon storage, which is both an economic opportunity as well as assisting our European neighbours to decarbonise.

Actions:

• Focus on the key dependencies for a competitive CCUS sector;
• Support CCUS growth in Scotland and internationally by maximising our comparative advantages around infrastructure, skills and storage;
• Coordinate local and national government and agencies to leverage our fourth National Planning Framework (NPF4) commitment to supporting net zero;
• Building a market framework for CCUS is in development.

Supporting green economy professional and financial services, with global reach is about building on our strengths in high-value tradable services sectors that have developed due to historical involvement in energy markets and traditional strengths in financial services; considering how Scottish Government can support future innovation and growth.

Actions:

• Promote Scotland globally as a leading centre for green financial and professional services;
• Harness innovation through Scotland’s FinTech Community;
• Open up new market opportunities in Natural Capital;
• Create domestic demand for green financial services;
• Work with UK Government’s on the delivery of its Green Finance Strategy;
• Deliver on the Scottish Government’s formal bilateral partnership with the City of London Corporation;
• Support Scotland’s world class education sector to nurture domestic and global talent.

Growing our hydrogen sector is about building on our comparative advantage of renewable electricity generation to become a leading producer of reliable, competitive, sustainable hydrogen, hydrogen products and related skills and services for domestic decarbonisation and export to European markets and beyond.

Actions:

• Identify barriers to hydrogen production development and work with the UKG to prioritise the production of renewable and low carbon hydrogen and hydrogen products;
• Encourage domestic demand for renewable and low carbon hydrogen and hydrogen products;
• Support the sector to develop new place-based hubs of co-located hydrogen production and demand;
• Maximise export opportunities for hydrogen and hydrogen products;
• Support the development of the goods and services sectors across the hydrogen supply chain, in tandem with enterprise agencies & key industry stakeholders;
• Support R&D, innovation and early-stage demonstration across the value chain.

Establishing Scotland as a competitive centre for the clean Energy Intensive Industries of the future is about supporting the electrification of our existing energy intensive industries where appropriate; making Scotland internationally attractive as a location for existing and new clean Energy Intensive Industries which will benefit from growth in renewable electricity production.

Actions:

• Tackle the barriers to decarbonisation faced by Energy Intensive Industries;
• Work with UK Government to explore options for reducing electricity costs for large-scale consumers;
• Develop and resource a delivery plan which will identify, target and enable new clean EIIs to locate in Scotland;
• Work with industry to ensure that Scotland is able to attract investment in green datacentres as this market expands.

Six Enabling Areas

Supporting investment, ensuring an investment- friendly ecosystem to enable:

• Capital investment in the large-scale projects and infrastructure necessary to realise the opportunities of wind, hydrogen, CCUS and energy intensive industries;
• Inward investment to complement and add value to Scotland’s existing business base and fill strategic gaps in Scotland’s industrial capability and capacity;
• Investment that supports the development, growth and scale-up of existing and new businesses seeking to take advantage of the global opportunities of the transition.

Supporting strong research and development foundations to:

• Commercialise more of our university research;
• Build competitive clusters of new and scaling businesses in Energy Transition;
• Invest in regional innovation clusters and supply chains;
• Invest in foundational and applied research.

Supporting the development of a skilled workforce by:

• Ensuring the education and skills system is responsive to our green economic priorities;
• Raising the profile of green job opportunities and support people to re-train to take on those opportunities;
• Enhancing the transferability of skills;
• Encouraging and support employers in our opportunity areas to invest in training;
• Expanding Scotland’s Migration Service to provide more support for users in our green industries

Helping supply chain businesses to seize opportunities by:

• Supporting inward investors to understand the size, shape and strength of the local supply chain;
• Strengthening the breadth and resilience of the local supply chain;
• Supporting investment and innovation in our supply chain to drive productivity;
• Delivering a supplier excellence programme for companies across the energy supply chain;
• Building supply chain resilience through recycling and remanufacturing of components and materials.

Delivering an agile planning and consenting system by:

• Improving the quality, consistency and pace of the planning and consenting process through recruitment and via our recent ‘Investing in planning - resourcing Scotland’s planning system: consultation;
• Supporting training and upskilling across our public sector resources and ensuring a pipeline of future planning and consenting professionals;
• Making technical improvements to standardise processes and working with statutory consultees to improve efficiencies across the system;
• Investing in our evidence base to reduce uncertainty and improve decision making.

Delivering required housing and enabling infrastructure to support the growth of Scotland’s green economy by:

• Delivering our ambition for 110,000 affordable homes by 2032, 10% of which will be in rural and island communities;
• Delivering the demand-led Rural Affordable Homes for Key Workers Fund;
• Supporting community-led affordable housing development;
• Exploring the potential and impact of modern methods of construction in rural and island contexts;
• Reforming and modernising compulsory purchase legislation in Scotland;
• Supporting collaborative and place-based approaches to identify land for affordable housing.