Infrastructure investment plan 2015: 2016 progress report

Energy

Over the course of 2016 there has been several announcements that relate to accelerating investment in and delivery of community energy and low carbon infrastructure projects.

The Renewable Energy Investment Fund ( REIF) is managed by the Scottish Investment Bank within Scottish Enterprise and prioritises investment in community renewables and marine energy. To date (December 2012- January 2017), £59.3 million has been invested in:

• 13 community-owned wind and hydro schemes, mainly in the Highlands and Islands;
• 5 community investments in commercial wind farms;
• 11 marine energy projects; and
• 3 'other' projects (innovative offshore wind, innovative onshore wind and heat, and a small-scale wind turbine manufacturer).

Support for community energy has been particularly important with REIF filling a market gap for significant community projects. The original concept for REIF was to maximise funds for the private sector, and to date REIF has levered in £133.9 million from an investment of £59.3 million.

Atlantis Resources, developer of the MeyGen tidal array project, has successfully installed four turbines in the Pentland Firth and Edinburgh firm Nova Innovation has installed three tidal turbines off the coast of Shetland. Scottish Government support was instrumental in helping both projects reach these important milestones.

We established Wave Energy Scotland ( WES) at the end of 2014. WES is funded by the Scottish Government and delivered by Highlands and Islands Enterprise ( HIE). It funds the development of disruptive technologies that will improve the performance and cost effectiveness of wave energy devices. WES has so far provided £15 million of funding to 36 projects and will soon launch its fourth funding call (April 2017).

One of the key themes of our draft Energy Strategy is a more localised approach to energy provision, helping to tackle some of our most pressing issues - from fuel poverty, to security of supply, to increasing costs - and stimulate local economic renewal. We want to ensure that communities will be at the heart of this new approach. Through the Local Energy Challenge Fund ( LECF) £20 million of capital funding was offered 2015-16, to support community-led, collaborative projects demonstrating low carbon technology as part of a local energy system. Collaborations were encouraged from range of bodies, such as local authorities, universities, housing associations, private sector companies, community groups and co-ops with four projects offered capital funding:

• Orkney Surf and Turf;
• EastHeat;
• Levenmouth Community Energy Project; and
• Assisting Communities Connect to Electrical Sustainable Sources.

The successful projects are at the cutting edge of innovation, and fit with our drive to create an energy policy focusing on a holistic, local energy system, which could stimulate economic renewal.

£35 million has been made available through CARES (Community and Renewable Energy Scheme) since 2013 to support community and local energy including £31 million for the Local Energy Challenge Fund. CARES has supported nearly 600 operational community and locally owned projects since 2013, of which 265 were community schemes. The Local Energy Challenge fund currently supports 12 large-scale low carbon demonstrator projects which show a local energy economy approach linking energy generation to energy use.

Scotland's Energy Efficiency Programme ( SEEP) seeks to make Scotland's building warmer and easier to heat, as well as reducing their impact on the environment. SEEP is a key part of Scotland's draft Energy Strategy, and our efforts to tackle Climate Change and Fuel Poverty. SEEP's vision and aim is for Scotland's buildings to be near zero carbon by 2050; reducing energy demand and helping to decarbonise the heating of Scotland's built environment in a way that is socially and economically sustainable. The programme objectives are by 2032:

• 94% of non-domestic and 80% of domestic buildings' heat is supplied using low carbon heat technologies; and
• improvements to the fabric of non-domestic and domestic buildings results in a heat demand reduction of 10% and 6% respectively.

Between now and 2025, SEEP concentrates on energy demand reduction through improved energy efficiency; and pursuit of low regrets options for decarbonisation of heat to prevent creation of stranded assets i.e. focusing on off gas grid properties considering individual and communal renewable technology solutions such as heat pumps, biomass boilers and efficient electric of heating technologies.

Beyond 2025 we will see a rapid decarbonisation of heat to those properties connected to the gas grid. We are working closely with partners, including the UK Government to develop a detailed understanding of the options for repurposing the gas grid (hydrogen or biofuels as replacement to natural gas); and for electrification of heat.

The Scottish Government is now consulting on the design and delivery of the SEEP and on the role of Local Heat and Energy Efficiency Plans as part of its consultation on the draft energy strategy.

The Scottish Government is supporting local authorities to pilot and test innovative approaches to the delivery of energy efficiency and lower carbon heat technologies. The Scottish Government is investing over £9 million in local authority pilots to support the development of SEEP in 2016-17, and recently announced that a further £11 million is being made available to support pilots in 2017-18. This investment will help to demonstrate the most effective ways of delivering an integrated programme in order to roll out SEEP from 2018.

Low Carbon Infrastructure Transition Programme ( LCITP)

In March 2015 the £76 million Low Carbon Infrastructure Transition Programme ( LCITP) supported by European Structural Funds was launched to support Scotland's accelerated transition to a low carbon economy. LCITP is a Scotland wide, cross-sector project development unit, to support the development and acceleration of over 200 low carbon infrastructure projects by the end of 2018, with 49 projects receiving financial support at November 2016.

The programme is supported by an innovative delivery model, a working partnership between Scottish Government, Scottish Enterprise, Highlands & Islands Enterprise, Scottish Futures Trust and Resource Efficient Scotland. This has resulted in a streamlined offer to projects where they benefit from the experience of a number of Government Agencies through one clear defined route and process. The intervention continues to focus on supporting the development investment grade business cases, which will assist projects to secure existing streams of public and private capital finance.

The programme has also supported a number of open funding invitations for the demonstration of innovative system design and technologies. Through the 2016 Transformational Low Carbon Demonstrator Funding Invitation it was recently announced that 13 projects would be offered up to £50 million to support the delivery of low carbon energy projects across Scotland by September 2018.

Carbon Capture Storage ( CCS)

Scottish Government policies view the development of CCS systems as an important part of our decarbonisation infrastructure with the flexibility to adapt over time to play a central role across the decarbonisation strategies of key sectors such as heat, industry and power.

We are not alone is pursing CCS, there are sixteen large CCS demonstration plants operating throughout the world including Norway's Sleipner project which has been operating for twenty years and has stored 17 million tonnes of CO2 deep beneath the Norwegian North Sea.

The UK Government have committed to the development of a new policy framework for CCS and we will work with UK Government to encourage that and look for Scotland to host any future investment including demonstration projects.

Meanwhile, the Scottish Government has provided joint funding of £4.2 million (£2.5 million from Scottish Government and £1.7 million from the UK Government) to allow the Summit Power Group to undertake substantial industrial research and feasibility studies for their proposed CCS Clean Energy Project in Grangemouth. The work is due to conclude in August 2017.

A successful oil and gas sector is a key component in the transition to a more resource efficient, lower carbon economy. Whilst this sector is currently facing a range of challenges, it continues to support employment opportunity across Scotland. At this challenging time, it is essential the correct policy framework is in place to support continued capital investment in the sector.

The Scottish Government has also directed funding towards decommissioning. HIE approved £628,000 to Peterson and a further £1,195,000 to Lerwick Port Authority, including £324,416 through the European Regional Development Fund ( ERDF). Lerwick Port authority has also been awarded £1.2 million from the Scottish Government. Peterson has also been awarded £1.1 million of Regional Selective Assistance ( RSA), from by Scottish Enterprise.