Local energy policy statement

Chapter 5: Opportunity - delivering sustainable, inclusive economic growth across Scotland and capitalising on the wider-benefits that local energy projects will bring.

Principles

• Local energy projects should seek to support the creation of jobs, including the development of the Scottish supply chain.

• Any changes to the energy system should ensure a just transition for Scotland's workforce.

This chapter highlights the potential economic opportunities - locally, nationally and globally - that a shift towards localised energy systems can deliver (as well as a reduction in carbon emissions).

5.1 Inclusive growth is key to success

Inclusive growth^[16] is a strategic priority for the Scottish Government.  Put simply, this means:  growth that combines increased prosperity with greater equality, creates opportunities for all, and distributes the benefits of increased prosperity fairly.

It is essential to create the right environment for more inclusive employment opportunities to flourish. Through supporting investment, innovation, internationalisation and fairer work, the Scottish Government is encouraging competitiveness and more responsible business behaviour.  

Empowered people, acting within a system of fair competition, support inclusive and sustainable growth in our economy - enabling businesses to innovate and grow in response to consumer need.  This approach is as the centre of the Scottish Government's economic green recovery plan post COVID-19.

Outlined below are some of the key areas where Scotland can potentially benefit from and, in some cases, lead the way.  

5.2 Cementing Scotland's place globally

Scotland is recognised as a world-leader in decarbonisation and for our efforts in tackling climate change – therefore, Scotland is ideally placed to be a global frontrunner in the development of low carbon local energy projects. 

A recent study, commissioned by Scottish Enterprise and carried out by Ricardo Energy & Environment (Smart Local Energy Systems International Research^[17]), estimated that the local energy systems market in Scotland would be worth circa £637 million by 2030 – and almost £350 billion globally. 

The COVID-19 pandemic has seen many countries focusing on a "green recovery" and there may be opportunities for Scottish businesses to benefit from exporting their expertise and knowledge globally.

Conversely, with these other countries now giving serious consideration to local energy systems, it is important that Scotland acts now to consolidate our efforts at home – before then pushing internationally– to prevent our leading-edge being lost. 

Within the same study mentioned above, it was suggested that the main types of services that could, potentially, be exported from Scotland broadly fit into three categories:

• Smart grid solutions
• Renewable power to hydrogen
• Renewable power to heat

And internationalisation does not solely mean the commercial export of goods, services and knowledge: there are potential opportunities for Scottish communities to benefit. 

For example, knowledge-sharing between countries could be a key driver in the reduction of costs in the development and operation of local energy systems across Scotland.  This is already happening, particularly in our island communities through projects such as,  

• Smart Islands Energy System (SMILE)^[18]
• Building Innovative Green Hydrogen Systems in Isolated Territories (BIG HIT)^[19] projects.
• Concepts, Planning, Demonstration and Reputational of Local User-friendly Energy Communities project (CLUE)^[20]

Our Enterprise Agencies (Highlands and Island Enterprise, Scottish Enterprise, and South of Scotland Enterprise) are leading the charge to ensure Scotland is front and centre, supporting internationalisation and creating opportunities to attract new investment, through initiatives such as Trade Envoys and Innovation and Investment Hubs. 

5.3 Scotland's Enterprise Agencies

Our Enterprise Agencies, are key partners in supporting the roll out of local energy systems. A key priority is to ensure that the deployment of local energy systems in Scotland, and globally, not only benefits the energy systems themselves which helps to achieve climate change targets, but also has a significant positive impact on Scotland's businesses and economy. 

A Local Energy Systems Programme Board with representatives of Scottish Government and the Enterprise Agencies was set-up in 2018.  The aim of the board is to oversee the development of a programme of support for the emerging Scottish local energy systems sector.

One of the main activities within this programme is the establishment of a Local Energy System Scottish Industry Network (LESSIN) launched in December 2020. The LESSIN is the starting point for local energy systems industry engagement and a mechanism for the sector to collaborate, share knowledge and lessons learned via in-person meetings and online platforms. 

It will provide initial support for companies to target and convert key market opportunities and connect companies to the wider local energy systems stakeholder community including public and third sector organisations seeking project partners. 

It will also signpost to our Enterprise Agencies and partner products, funding opportunities and the Scottish innovation network as well as connecting companies to the local energy systems investor community. The coordinator of the LESSIN will report on progress to the Local Energy Systems Programme Board.

Beyond the establishment of the LESSIN, the Enterprise Agencies will seek to help facilitate key flagship local energy systems projects in Scotland, and also to enable export of Scottish products, services and expertise to target local energy systems markets around the world.

Case Study: Clean Energy for EU Islands – Supporting a Collaborative Transition to Net Zero

The Islands of Rum, Eigg, Muck, Canna, Foula and Fair Isle are all 'off-grid', not connected to the national electricity network. Highlands and Islands Enterprise supported these communities to successfully apply to become part of the EU Clean Islands Network. All islands participating have pledged to develop a Clean Energy Transition Agenda. 

This support programme provides a platform for collaboration on an international scale, enabling strong linkages to be built across international islands in a similar situation. The communities will share knowledge, expertise and resource to develop one overarching off-grid Transition Agenda with specific recommendations for each island within this. 

Although not a true island, the Off-Grid community of Knoydart will join them on this journey. The communities are also closely collaborating with the University of the Highlands and Islands, Shetland Islands Council, Highland Council and Highlands and Islands Enterprise on their journeys towards decarbonisation.  

5.4 Scottish supply chains

Scottish businesses, including community-led organisations, have developed real strengths across the whole energy supply chain. To emphasise this diversity, the Smart Local Energy Systems International Research study identified over 250 companies in the local energy systems field, which can be categorised as follows:

• 51% consultancy/desk-based design
• 32% project developers
• 69% technology/software developers
• 42% installers/providers to end customer
• 37% O&M

Chapter 4 refers to the impact which the digitalisation of the energy market will have on the way energy is generated and consumed. This also opens up huge potential for Scottish companies to offer a wide range of digital applications from software to data science to informatics – especially as many companies have never considered energy as a potential marketplace historically. 

There is also growing interest (and opportunity) in adopting the circular economy approach in relation to energy – i.e. where the aim is to reduce unnecessary waste in the system, and across the wider Scottish economy. The circular economy approach is already having an effect in the manufacturing sector, with more thought given to the use and re-use of materials in manufacturing processes.

Case Study: Outer Hebrides Local Energy Hub (OHLEH)

The OHLEH project delivers renewable power, heat, and transport to the local community by integrating a variety of innovative technologies to improve the efficiency and output of the Anaerobic Digester site at Creed, and the salmon hatchery in Barvas - both on the Isle of Lewis. The project is focused on encouraging a circular economy, where fish waste from the hatchery is used to increase the biogas output of the anaerobic digester. The added value of this being:

• Increased heat and electricity output from the CHP, which allows for the production of hydrogen. 
• The use of new and existing hydrogen-generation infrastructure to release additional renewable energy generation capacity.
• The use of hydrogen as transport fuel for the Council's refuse collection vehicle.
• The development of the local supply chains and skills required to generate, transport and use hydrogen and oxygen locally, with both gases supplied to the salmon hatchery to power their Hydrogen fuel cell.  

Overall, there is potential to develop local supply chains across a range of emerging and growing markets for local energy projects and systems across all regions of Scotland – thereby, providing an opportunity for more balanced regional development within Scotland.

5.5 Community-led activity has a role

Scotland has a legacy of strong community engagement in local renewables generation, primarily through supporting community ownership. There continues to be a role for community-led activity in the future local energy landscape, such as: 

• By developing, owning and operating local energy projects that create local solutions. 
• By being meaningful partners in commercial renewable energy projects through shared ownership (and this opportunity is expected to continue for larger infrastructure projects). 
• Whole system projects will need to engage, encourage participation, and inspire collective action within the project area - and communities can be key partners with unrivalled local reach.  
• Energy innovation and market disruption could see new opportunities for more localised systems and trading, with local communities having the opportunity to deliver these models. 

Overall, local energy projects have the potential to help local communities reduce carbon emissions, create local jobs, upskill local people, reduce energy costs, and allow greater investment in the local economy – while innovative business models, such as those involving peer-to-peer trading, may help to retain wealth within local communities. 

The Scottish Government will ensure that our Enterprise Agencies and Local Energy Scotland will continue to work with businesses and communities to build the necessary capacity for all to capitalise on the benefits arising from the transition. 

5.6 Equipping Scotland's workforce for the future

Scotland's Energy Strategy highlights the need to ensure there is a pipeline of suitably-skilled people to grasp the opportunities that our transition to a net zero economy (and decentralised energy market) will bring: from the manufacturing jobs which will produce the plant and equipment required to power Scottish communities and businesses, to the engineering roles required to install and maintain such equipment. However, this has to be the right kind of job creation: jobs which are sustainable and secure.

Scottish colleges and universities are world-renowned for producing talented graduates across a host of fields – including engineering, science, and digital technology. Indeed, many further educational institutions across Scotland have already recognised the need to tailor courses they offer to ensure graduates are prepared for a future net zero economy by incorporating renewables/ renewable energy into, for example, environmental engineering courses.

The Scottish Government recognises that there are concerns over what impact our transition to a net zero economy will have on existing jobs – whether this be through increased automation or the move towards renewable energy away from fossil fuels. 

This statement highlights our desire for a just transition: it is essential to ensure that this encompasses Scotland's workforce – particularly those who may be impacted by these changes – by providing opportunities for re-training or upskilling that are accessible by those experiencing socio-economic disadvantages.

The Scottish Government will continue to work collaboratively with organisations such as Skills Development Scotland, Energy Skills Partnership, Scottish businesses, and academic institutions to create modern apprenticeships that are fit-for-purpose and future-proof to enable Scotland to meet its ambition on climate change.

We Will

• In partnership with our Enterprise Agencies, seek to maximise the opportunities for developing Scottish supply chains and creating jobs in the transition to net zero, part of which included the establishment of a Local Energy Systems Scottish Industry Network.

• Continue to build on our links with academia to ensure Scotland continues to show leadership in supporting research and innovation opportunities.

• Ensure there is a role for community-led activity in the future local energy landscape.