Investor Panel: Mobilising international capital to finance the transition to Net Zero

Sectors the Panel focused on

Most of our recommendations apply to all investments, however some are specific to priority sectors identified in discussion between the Scottish Government and the Investor Panel – ScotWind, Hydrogen and Heat in Buildings.

ScotWind is a globally-significant offshore wind opportunity offering development rights for 20 projects with an associated £70 billion of expenditure^[1]. It faces challenges. There is strong global competition for resources and investment. Changed market conditions resulted in no bids being submitted for offshore wind in the most recent UK Contract for Difference (CfD) auction, however the UK Government recently announced they have raised the maximum price offshore wind and other renewables projects can receive in the next CfD auction. However, the scale of lease option awards exceeds the currently anticipated grid capacity.

Unlike oil and gas activity, which has an extensive services sector and generates significant tax revenue, the main direct economic benefits to Scotland from offshore wind are most evidently the rental payments to Crown Estate Scotland, developing a supply chain, and providing Operation and Maintenance (O&M) services. The Scottish Government should therefore focus on these areas.

Continued uncertainty on grid connection and CFD, both reserved issues, impose commercial risks which act as an impediment to projects investing in the supply chain and supporting infrastructure.

Scotland has a potential comparative advantage in securing a meaningful part of the supply chain for floating wind. However, this is a new technology, and the commercial rollout of floating offshore wind will take time to scale and significant preliminary infrastructure costs will be incurred.

Green Hydrogen has captured considerable attention, but it is still a developing industry and it is clear that more work is needed to consider the extent to which it will be economic to produce for export, at scale in Scotland.

The capital cost of converting the Scottish building stock to zero emissions by 2045 is in the region of £33 billion^[2]. The Green Heat Finance Taskforce has recently published its Part 1 report with recommendations on how to address this gap.