ScotWind Offshore Wind Leasing Round

– in the Scottish Parliament on 18th January 2022.

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Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

Good afternoon. I remind members of the Covid-related measures that are in place. Face coverings should be worn when moving around the chamber and across the Holyrood campus.

The next item of business is a statement by Michael Matheson on the ScotWind offshore wind leasing round. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions.

Photo of Michael Matheson Michael Matheson Scottish National Party

I would like to update the Parliament on the outcome of the ScotWind leasing round, which is a major milestone in our journey to net zero.

ScotWind will provide us with enough power for every home in Scotland, place Scotland at the forefront of the green hydrogen revolution and allow us to become a major exporter of clean energy. There is a huge economic prize on offer: at least £1 billion of investment for every gigawatt that is built, which will help to create thousands of jobs and transform the Scottish economy. It is the first offshore wind leasing round to be held since the devolution of the Scottish Crown estate and it has been administered by Crown Estate Scotland, which announced the winning applicants yesterday.

ScotWind was created with delivery at its core. It was established with the aim of creating a strong pipeline of projects that would drive our just transition and serve as a cornerstone in delivering our commitment to tackle the climate crisis. We put the challenge to the market, which has responded so positively that Crown Estate Scotland has been able to offer awards for 17 major projects. That is a tremendous vote of confidence in Scotland. The level of ambition that has been shown by the market recognises the seriousness of Scotland’s commitment to achieving our net zero targets and sustainable economic growth. ScotWind is by far the world’s largest commercial round for floating offshore wind and breaks new ground in putting large-scale floating wind technology on the map at gigawatt scale.

It is encouraging to see the ambition that has been set out by the provision of floating offshore wind. As members might be aware, our sea bed is considerably deeper than waters in England and Wales. Without technology such as floating wind, it would not be possible to develop renewable energy projects in those areas. It is therefore inspiring to see the tremendous rate of innovation in the technology and to consider what more could be possible 10 to 15 years from now in this fast-moving and growing sector.

Many of the consortia that have been successful in securing lease options also have ambitions for green hydrogen. That presents a range of new energy and export opportunities for Scotland and will help us to achieve our ambition of generating 5GW of renewable and low-carbon hydrogen by 2030 and at least 25GW by 2045. We will further consider those opportunities and what they will mean for our energy system in our energy strategy and just transition plan later this year.

ScotWind will also deliver around £700 million in revenues to the public purse for the initial awards alone. We have already made clear that we will invest from those moneys to help tackle the twin crises in climate and biodiversity. In addition to those revenues, ScotWind promises to deliver billions more in rental revenues once projects become operational. Those will be invested for the benefit of the people of Scotland.

Importantly, ScotWind promises to be transformational in delivering wider economic supply chain benefits to help power Scotland’s green recovery the length and breadth of the country. As part of the bidding process, all applications had to submit a supply chain development statement outlining how they would deliver benefits to Scotland. I welcome the commitment that developers have made to invest at least £1 billion in the Scottish supply chain for every gigawatt generated via ScotWind projects.

The supply chain development statement, a mechanism that was developed through engagement with the Parliament, provides us with an excellent tool to ensure that, by working with the sector, Scottish communities reap the maximum possible economic benefit from ScotWind projects. Those statements are not only an indication of what Scotland can achieve but our expectation of what the winners will deliver for Scotland.

We must now work together to ensure that that happens. As was highlighted in the strategic infrastructure assessment for offshore wind that was commissioned by the Scottish Offshore Wind Energy Council, there must be greater collaboration between developers, the supply chain and the public sector, both to help focus activity and investment in Scottish ports and to help Scottish suppliers to grow and win offshore wind work. We will work closely with SOWEC to implement the five key recommendations in the strategic infrastructure assessment, starting with the creation of a Scottish floating offshore wind port cluster, in which ports will act in partnership to provide the required infrastructure area and capability needed to attract manufacturers to invest in Scotland.

To achieve that, SOWEC is leading on the development of a collaborative framework to encourage the sector to come together and work collectively to support the delivery of offshore wind projects from ScotWind, with a focus on growing capability and expertise, particularly around the growth of floating offshore wind. We fully support the creation of the collaborative framework. We expect the successful ScotWind projects to actively engage in the process from the outset, and to take collective action not only to grow Scotland’s supply chain but to deliver the wider economic transformation that will benefit communities across Scotland.

To that end, the scale of the winning bids augurs well for creating the volume of sustained demand that will mark a step change in developing the capability and capacity of Scotland’s infrastructure and its manufacturing and service sectors.

We are at the start of a journey that will take some years before we see the developments constructed. As well as the supply chain opportunities, the focus now switches to the planning and consenting regimes, ensuring that those work as effectively as possible as we process applications from developers, and to the potential that can be delivered in light of environmental and other impacts.

The stated collective aspirations of the projects that have been awarded options are highly ambitious, and that is to be welcomed. ScotWind will make Scotland a global leader in offshore wind energy, and all the consortia that are holding options are fully aware of the responsibilities that come with the development opportunities that they have won.

However, ScotWind will also be shaped by our continuing commitment to responsible stewardship of our incredibly rich natural marine resources, as well as the need to fully understand the impact on other marine users. We will work with the sector and all affected stakeholders to ensure that the process and its benefits are realised in a manner that recognises the concerns of all interests as we embark on this journey.

It is not possible at this stage to predict what scale of development will be permitted, but through our internationally recognised sectoral marine planning and licensing process, there is an established pathway to facilitate development. By following due process and taking into account all stakeholders and considerations about impact, the Scottish Government can maximise the huge opportunities for energy, the environment and the economy that the large-scale development of offshore wind can bring to Scotland.

The ScotWind awards are a phenomenal mark of confidence in the Scottish offshore wind sector. We are now the biggest offshore wind market in the world and we are demonstrating global leadership in tackling the climate challenge. However, the real work starts now. Tomorrow, the First Minister and I will hold a summit with all the successful parties. We will be clear in stating our expectations to all who are involved. I will meet the successful developers both collectively and individually on an on-going basis to understand how we can work together in a collaborative manner to deliver the best for Scotland. In addition, the Minister for Environment and Land Reform is meeting marine environmental interests and fishers today and tomorrow to ensure that their perspectives and concerns are taken into account.

This is a once-in-a-generation opportunity that has to be realised, to be maximised and to deliver the environmental and economic benefits for all of the people of Scotland.

The Deputy Presiding Officer:

The cabinet secretary will now take questions on the issues that were raised in his statement. I intend to allow about 20 minutes for questions. It would be helpful if those members who wish to ask a question would press their request-to-speak button now.

Photo of Liam Kerr Liam Kerr Conservative

The Scottish Conservatives welcome the announcement on ScotWind as we look to drive the United Kingdom forward with our collective ambitions to achieve net zero.

It is particularly notable that what we might call big oil is at the forefront of the drive towards renewable energy. Indeed, of the £700 million that is expected to be raised, it will pay nearly £240 million. BP has set Aberdeen as the location of its global operations and maintenance centre of excellence for offshore wind, and TotalEnergies reckons that the west of Orkney wind farm could deliver renewable hydrogen power to the Flotta hydrogen hub.

However, the industry has been much maligned by many who failed to see the pivotal role that it would play and took positions that could discourage investment and forward planning.

What diligence has been done on the successful bidders to ensure that they have sufficiently strong balance sheets to deliver the £700 million?

Another issue is the supply chain. It is not lost on me as a north-east representative that 70 per cent of the successful bids came from within 100 miles of Aberdeen. However, given that it is only once agreements have been officially signed that the details of the supply chain commitments in the supply chain development statements will be published, how will the Scottish Government ensure that there is maximum benefit to our local and UK supply chains and that jobs, manufacturing and the like remain in the UK?

I note that Crown Estate Scotland’s website says:

“Capital from sales is reinvested in new opportunities to strengthen the value and revenue earnings of the estate”.

What will happen to the £700 million that has been raised? Whose budget will it augment? For what purposes can it be used?

Photo of Michael Matheson Michael Matheson Scottish National Party

I am grateful to the member for welcoming the outcome from ScotWind and for recognising the huge economic opportunities that it creates.

The member made reference to the oil and gas sector. A number of those that have secured lease options are major oil and gas companies. That is to be welcomed. Those oil and gas companies are making the transition out of hydrocarbons and into renewable energy. That is exactly what the Scottish Government has been encouraging them to do. The engagement that I have been having with them is all about helping to make sure that the transition from a hydrocarbon-based economy in Scotland, particularly in the north-east, offers people in the oil and gas industry an opportunity to move into the renewables sector. The success of some of those oil and gas companies is therefore to be welcomed, on the basis that it allows staff in those organisations to make that transition and to utilise the very considerable skills that our oil and gas sector has—particularly in the subsea sector, which will be very important in supporting the development of some of the projects. That is a positive and welcome step.

The member referred to due diligence on the ability of organisations to secure the lease options. It is worth keeping in mind that, at this stage, they are lease options; organisations still have to get consent and still have to get planning permission for development to take place. I am sure that the member will recognise that, in order to secure that consent, they will have to go through the financial disclosure process. At this stage, it is too early to know what their balance sheets are, but all the companies that have secured lease options through ScotWind operate internationally within the field and are committed to investing in the renewables sector. That includes those that are in the oil and gas sector.

On the member’s final point, which was about the £700 million that has been raised, we have made it very clear that that money will come into the Scottish exchequer; that it is funding that we will use, in part, to support our net zero ambitions; and that we will then consider how to utilise it across the rest of the Scottish block grant.

It is also worth keeping in mind that, although there has been incorrect commentary over the past 24 hours suggesting that the £700 million is all that there is, that is not the case. An on-going annual rental payment will come in from those who go on to start producing electricity from those developments. That in itself will bring in further billions of pounds, over many years, while the projects are operating. Again, that money will help to benefit the whole of Scotland.

The Deputy Presiding Officer:

I do not call Daniel Johnson. I call Colin Smyth, albeit that we were advised that the speaker would be Daniel Johnson.

Photo of Colin Smyth Colin Smyth Labour

I would be happy to hand over to Daniel Johnson, but I will continue.

In the journey to net zero, the need to fulfil Scotland’s huge potential in offshore wind energy is clear, and the award of the licences is an opportunity for the Scottish economy and for Scottish jobs. However, this time, it must not be squandered. History has shown us that, if developers can go elsewhere, they will. Just weeks ago, the Government sank plans for a publicly owned Scottish energy firm, and Scotland’s sea beds are now being franchised entirely to private overseas-owned big multinationals and investment funds—a move that, I hear, is welcomed by the Tories. That will raise around £700 million for the public purse but billions more for firms, none of which are registered or owned in Scotland. It is a case not just of offshoring wind energy but of offshoring the profits from that. It must not also mean offshoring the jobs.

The Government’s record on green jobs is not good. It promised 130,000 of those a year but has delivered less than one fifth of that. Given that the bidders’ supply chain commitments, which remain unpublished, were excluded from the option tender and assessment process, and that the penalties for failing to deliver developer statements are negligible, will the cabinet secretary tell us what binding action will be taken to ensure that the bulk of the work—not the crumbs—remains here in Scotland? Surely the cabinet secretary knows what percentage of the work will be carried out in Scotland for the benefit of Scottish jobs.

Photo of Michael Matheson Michael Matheson Scottish National Party

The member will recognise that the supply chain development statement process was developed in consultation with the Parliament, given the experience of the past. I accept that we have not achieved in our renewables sector the level and scale of inward investment and supply chain development that we would have wanted. That is why it is critical that we maximise the potential benefits from this ScotWind leasing round. It is worth pointing out that this is the first ScotWind leasing round; there is an opportunity for further rounds in the years ahead.

I assure the member that we will do everything that we can to ensure that the level of investment in the Scottish supply chain that was stated in the supply chain development statements will be delivered, which, as I stated, works out at roughly £1 billion for every gigawatt that comes on stream. Our expectation is that that will be delivered.

The process that we have in place with SOWEC through its strategic infrastructure assessment and the collaborative framework that is being developed is about maximising that opportunity and doing so in a way that ensures that we reap the economic and social benefits that can come from such a significant level of financial investment in the Scottish supply chain. We will do everything that we can to ensure that they deliver on the commitments that were set out in those statements.

The Deputy Presiding Officer:

Before I call the next questioner, I ask for more succinct questions and answers. I gave a bit of latitude to front benchers, but I cannot give everybody the same opportunity or we will not get everybody in.

Photo of Gillian Martin Gillian Martin Scottish National Party

The announcement unlocks certainty for developers, operators and the supply chain. It is a huge investment that will create thousands of jobs. Now that we have that certainty, how will we ensure a smooth transition for those working in high-carbon sectors such as oil and gas who want their future to be in renewables?

Photo of Michael Matheson Michael Matheson Scottish National Party

As I mentioned earlier, one of the outcomes from the ScotWind leasing round has been the number of oil and gas companies who have moved into the renewables sector. There is an opportunity for those who are presently employed in high-carbon industries to transition into the renewables sector. It is important that we maximise the skills and knowledge in our oil and gas sector to support that transition and the build-out of the projects that have secured leasing options through ScotWind. I assure the member that we want to make sure that there is a just transition for people who work in our oil and gas sector, and ScotWind provides a pathway to help to achieve that.

Photo of Maurice Golden Maurice Golden Conservative

There is a risk that Scotland loses out here. The projects that will come through ScotWind, which I welcome, are mostly larger than 1GW. That will be a big challenge for the Scottish supply chain unless there is an opportunity to develop and scale up local capabilities, particularly in the north-east.

Scottish innovation projects are currently limited by a 100MW cap, compared with 300MW for English and Welsh projects. Will the cabinet secretary lift the cap on projects in the INTOG—innovation and targeted oil and gas—planning process, which would increase their competitiveness compared with the 300MW projects that will be available in the Celtic Sea? That would provide a vital opportunity for the supply chain to work up its capabilities in advance of ScotWind.

Photo of Michael Matheson Michael Matheson Scottish National Party

The member raises an interesting point, although I think that he misses one of the key risks of what he has just asked for. INTOG is capped at 100MW to support innovation in the sector in order to scale up in support of the decarbonisation of oil and gas, but also to help to prevent it from impacting on the ScotWind development rounds, because of the danger of overdevelopment in some areas.

Raising the cap to 300MW could compromise ScotWind and its developments, which is one of the reasons why INTOG has been capped at 100MW and why it is different from the approach that has been taken in England and Wales. Its key purpose is to drive innovation in the sector and those who are involved in the innovation side of the sector support the level of the cap.

Photo of Alasdair Allan Alasdair Allan Scottish National Party

Yesterday’s welcome announcement will mean that the waters around the Western Isles will contribute substantially to Scotland’s journey to net zero and present vital economic opportunities. What community benefits and supply chain opportunities for the Western Isles can we expect to see from ScotWind, and how will the Government ensure that partners such as the local authority are fully involved?

Photo of Michael Matheson Michael Matheson Scottish National Party

Alasdair Allan raises an important point for his constituency about the potential benefits of the developments off the Western Isles. I assure the member that we are keen to ensure that all parts of Scotland, including his constituency, have the opportunity to benefit from the investment that will be made in the domestic supply chain to support the roll-out of the ScotWind projects.

For example, the deepwater port development that is planned for Stornoway could play an important part in supporting the industry with its build-out.

I assure Alasdair Allan that we will look to work with all stakeholders, to ensure that we maximise the economic and social benefits that can come from the build-out of the projects, including in his constituency.

Photo of Daniel Johnson Daniel Johnson Labour

The sites could generate upwards of £6 billion for international firms, which will pay just £700 million for the rights for 10 years.

What does the Scottish Government assess the payback period and net present value of the projects to those corporations to be? Does that represent good value for money for the Scottish taxpayer, or are the profits simply being blown offshore?

Photo of Michael Matheson Michael Matheson Scottish National Party

We have had an open option process, which has attracted interest from global companies in investing in offshore renewables here in Scotland.

I hope that the member welcomes the commitments that those companies have made to invest, potentially, £25 billion—and potentially a further £10 billion—in the Scottish supply chain. That is good for the Scottish economy and for Scottish communities.

On the wider point, I suspect that the member is making reference to the question whether the projects should all be with Scottish or UK businesses or in public sector control. If only we had powers in that regard, in relation to the energy sector. Mr Johnson’s colleague referred incorrectly to a Scottish energy company; that would have been a retail company, not a production company, because we do not have the capacity or the powers in that regard. I do not know whether the member is saying that we should nationalise energy; his leader in London said that that is not his party’s policy.

We want to make sure that we secure the economic benefits in Scotland. That is exactly what the supply chain development plans are all about. I hope that the member can find it in himself to welcome such significant investment in the Scottish economy.

Photo of Audrey Nicoll Audrey Nicoll Scottish National Party

It is hugely welcome that ScotWind will deliver such substantial revenues to the public purse. For the sake of clarity, can the cabinet secretary provide further assurance to my constituents that the revenues will be invested for the long term, to support our transition to net zero?

Photo of Michael Matheson Michael Matheson Scottish National Party

We are considering how the funding will be deployed. We have committed to making sure that it supports us in achieving our net zero ambitions and tackling the c limate and biodiversity crises. We also want to use the funding in a way that enables it to have a legacy that benefits all communities in Scotland. We want to capitalise on it in a way that has a long-term benefit to every part of Scotland.

Photo of Liam McArthur Liam McArthur Liberal Democrat

ScotWind represents a sea change in realising Scotland’s offshore wind potential. It also underlines the importance of our islands, which have long been at the forefront of renewables innovation and delivering on our net zero ambitions.

Following his response to Alasdair Allan, can the cabinet secretary assure communities that, rather than there being a top-down approach, local communities will have control over decisions about how the funds are invested? What assurances can he give about the involvement of other stakeholders, notably the fishing industry, in shaping how each development is taken forward?

Photo of Michael Matheson Michael Matheson Scottish National Party

The guiding light on any of the developments is the sectoral marine plan, which takes into account the consenting process and how stakeholders should feed into it.

I assure the member that people in the fishing community who want to make representations in relation to any development will be able to do so through the normal consenting process. Their voices and views will be taken into account through the normal process for considering such issues.

On how the funding will be utilised, I am sure that the member recognises the very significant amount of funding that will be brought into the Scottish Government. We need to ensure that we utilise the funding so that all Scotland gets the benefit—that includes coastal communities such as the member’s constituency. I assure the member that we will consider that carefully and utilise the funding in a way that maximises the benefits to all parts of the country, including his constituency.

Photo of Stuart McMillan Stuart McMillan Scottish National Party

We can all agree that ScotWind opens up a vast range of opportunities that can be maximised for our economic and social benefit.

Is the cabinet secretary able to give an update on any benefit for the Ferguson Marine shipyard in Port Glasgow in relation to the ships that are required, as per the BP Alternative Energy Investment bid?

Photo of Michael Matheson Michael Matheson Scottish National Party

Within the bidding process, some stakeholders have been engaging with a range of Scottish supply chain companies. We will certainly ensure that those stakeholders take forward the commitments that they have set out in their supply chain development statements, including those that might involve the building of vessels here in Scotland. I have no doubt that the member will want to engage with those companies that have made commitments to businesses that are based in his constituency—businesses that are highly valued in his constituency and that provide a lot of employment there—to ensure that tier 1 companies that have secured lease options live up to the commitments that they have set out in the supply chain development statements in their bids.

Photo of Stephen Kerr Stephen Kerr Conservative

I refer members to my entry in the register of interests.

The cabinet secretary seems to accept that the Scottish National Party did not deliver on its economic promise of making Scotland into the Saudi Arabia of wind power or on the thousands of green jobs that it promised. The cabinet secretary told Liam Kerr and Colin Smyth that the Government will do everything that it can to ensure that we see onshore supply chain development, local manufacturing and the jobs that everyone is talking about. What exactly does the cabinet secretary mean when he says that the Government will do everything that it can?

Photo of Michael Matheson Michael Matheson Scottish National Party

The member seems to have quite a short-term memory issue; he may recall that one of the reasons why there was a sudden halt to the significant level of wind energy development in Scotland was that the UK Government decided to cut the subsidy to support the industry, which resulted in a massive downturn in the sector.

I am sure that the member is aware of the contracts for difference process, which the UK Government is responsible for. I have no doubt that he will want to ensure that that process holds up the commitments that companies have made to help to support supply chain development. That is why, for the first time in the UK, we have required, through our leasing round, supply chain development statements. The purpose behind those is to ensure that we do not make the errors that the UK Government made when it was responsible for the last leasing round, when it made no requirements on the industry. I can assure the member that we will be doing everything that we can to deliver on those commitments and that we will not repeat the mistakes of his colleagues at Westminster in mismanaging Scotland’s oil, gas and renewable energy reserves, as they have done for many, many decades.

Photo of Mr Mark Ruskell Mr Mark Ruskell Green

Unlike Mr Kerr, I found yesterday’s statement breathtaking—the scale of investment, the scale of the increase in renewable energy capacity and the scale of the jobs that will come to our communities. I think that any young person hearing that announcement yesterday would have been inspired, too.

Of course, it is important that we also tackle the nature emergency alongside the climate emergency. What lessons can be learned from the previous offshore consenting rounds to ensure that birds and marine life will be protected?

Photo of Michael Matheson Michael Matheson Scottish National Party

We have a robust consenting process that requires that any proposed project includes a detailed environmental impact assessment and wider impact assessment on any marine environment linked to the development. That process will be applied in all of the proposed developments.

We need to ensure that, as we look to maximise the potential economic benefits to Scotland, we also recognise the potential environmental impacts that those developments can have. The sectoral marine plan is the guiding light in those matters. It is the process that will be used to ensure that those projects are properly assessed. If mitigations need to be put in place, or if it is not appropriate for a development to take place at the scale of the ambition set out by the developer, we have a consenting process that takes all of those matters into account prior to a decision being made, including the importance of protecting our precious natural environment and ensuring that it is not degraded further as the result of a development.

Photo of Fiona Hyslop Fiona Hyslop Scottish National Party

This is an enormous opportunity for Scotland. Can the cabinet secretary confirm that the three main aims of the Scotland leasing round are to move quickly from deployment to licensing; to secure supply chain jobs for Scottish companies; and to optimise the auction and revenue payments for the taxpayer? On Scottish supply chain jobs in particular, when will details of the opportunities be made public, and what powers does the Scottish Government have to ensure that licensees deliver on their proposals for Scottish jobs?

Photo of Michael Matheson Michael Matheson Scottish National Party

The member is correct about those three aims. We have moved quickly with ScotWind. I can also assure her that we are adding additional resources to the consenting process in order to help to ensure that we have the capacity and capability to deal with the scale of the potential bids.

The member rightly points to the supply chain statements and the benefits that will be driven to the domestic supply chain in Scotland. That is hugely welcome and will be transformative in terms of our green energy sector.

In terms of the financial elements, it is clear from the outcome in relation to ScotWind that there are significant financial benefits with regard to not only the leasing options and rental provision, but the investment that will go into our domestic supply chain, which I believe will be transformational in the years ahead. I hope that everyone across the chamber will support that and get behind the success of the ScotWind bidding process.