Big changes in the pipeline for the energy industry
The journey to net zero presents huge challenges – and opportunities – for the North Sea oil and gas sector as well as the whole of the North East of Scotland
A recent black-tie awards
ceremony at Aberdeen’s convention centre in August provided a spotlight on exactly where Scotland is on the journey to net zero.
Claire Mack, the chief executive of Scottish Renewables, the trade body that organised the second annual Net-Zero Energy Transition Awards, said the night was designed to celebrate those whose efforts were helping create a “cleaner, resilient, cheaper and secure energy system”.
Yet the path to destination net zero is uncertain and fraught with difficulty. Reducing the amount of carbon emitted across transport, heating, agriculture and manufacturing to effectively nil is a massive task.
Achieving net zero – by 2045 or 2050 depending on which government target you subscribe to – requires a wholesale revolution in our approach to energy use, from banning gas boilers in our homes and internal combustion engines in our cars to re-engineering heavy-polluting industries such as steel and cement production. It may even require much of the population to give up eating meat.
Meanwhile, as government and industry attempt to chart a 20- to 30-year course for the future shape of energy use and production, urgent debate is taking place in Holyrood and Westminster on the issue of climate change being blamed for extreme weather events around the globe this summer.
At stake in this battle is the future of oil and gas production in the North Sea and the hundreds of thousands of jobs it supports – not just in the industry heartland of the north-east of Scotland, but also down the coast through Teesside and Lowestoft and up to the Cromarty Firth, Orkney and Shetland.
Energy firms, trades unions and skills bodies alike are seeking a ‘just transition’ for workers to the hundreds of thousands of so-called green jobs promised by the transition to clean energy as North Sea production declines – or gets shut down, as environmental campaigners would prefer.
The jobs market however is in what can best be described as a dislocation. Efforts are being led by bodies such as Opito (the Offshore Petroleum Industry Training Organization) and Offshore Energies UK to ensure offshore oil and gas skills transfer to the clean energy sector.
Current high oil prices mean the traditional and ageing North Sea workforce is in high demand – albeit many UK operators are finding it hard to stop talent from being lured to the Middle East. Young people attracted to engineering are seeking opportunities outside of the energy sector. Meanwhile wages in the less mature green jobs sector are far below what those willing to work with ‘the black stuff’ can achieve because budgets are more constrained.
Energy policy makers dub the challenge we face as the ‘energy trilemma’: how can we keep the lights on in a manner that firstly won’t trash the planet, secondly doesn’t rely on supply from regimes such as Russia and thirdly won’t bankrupt ordinary energy consumers.
Playing a central role in energy sustainability and security – two of the trilemma prongs – is ScotWind, one of the world’s most ambitious programmes to develop offshore wind schemes.
Crown Estate Scotland, which leases the seabed to wind farm operators, estimates each of the 17 projects given the green light in the most recent ScotWind announcement could attract investment to the tune of £1.5bn. But vast technical and investment challenges remain not least because many of the proposed developments rely heavily on emerging – and likely expensive – floating offshore wind technology. There are also significant hurdles in developing sufficient port capacity to handle assembly and support.
This is not to mention the pressure that 30GW of proposed electricity production will put on the availability of suitable coastline-to-land cable, and space to build pylons to connect it to the UK’s creaking and largely no longer fit-for-purpose electricity grid.
Strong local opposition has emerged particularly in the Mearns area south of Aberdeen against plans to build a substation and new overhead electricity transmission line between Kintore, Aberdeenshire and Tealing, in Angus. The project, led by SSE’s Scottish and Southern Electricity Networks (SSEN) Transmission division, is among the first of “several other major network upgrades” planned in the North East and on the east coast of Scotland that have been earmarked to meet UK and Scottish government energy targets.
In the wake of growing opposition and in line with a recent report by Electricity Networks Commissioner Nick Winser, SSEN is looking to introduce a £10m community benefit fund to ease the disquiet of those impacted by new pylons and substations.
In a response to the Winser report, Rob McDonald, SSEN Transmission managing director, said: “With the north of Scotland and its vast renewable resources set to make an outsized contribution to delivering UK and Scottish government net-zero targets, we believe it is only right that the region benefits from the leading role it is set to play in the clean energy transition.”
Alongside the move towards green energy, there are emerging technologies aimed at removing carbon pollution. In Scotland a nascent scheme, known as Acorn, to store carbon in disused pipelines and depleted oil reservoirs under the North Sea via Peterhead has at last won the UK Government backing needed to take the next steps and secure investment.
Prime Minister Rishi Sunak this summer went to Peterhead to confirm the Acorn project had won ‘track two’ status as part of a £1bn UK Government competition to deliver carbon capture and sequestration (CCS) technology. This was alongside a more controversial commitment to sanction further North Sea oil and gas licences in a move that was heavily criticised by environmental campaigners. Many also view CCS as a polluter’s get-out-of-carbon-jail-free card, although the Committee for Climate Change sees CCS as necessary to achieving net-zero targets.
The decision to support Acorn was a long time coming, with the project having been sidelined during a process in which two projects in the north of England were selected ahead of it two years ago.
Nick Cooper, the chief executive of Acorn lead developer Storegga, said he was “thrilled” by Sunak’s support which he described as a “defining milestone” for Acorn and a wider series of projects known as a the ‘Scottish Cluster’. This, with Acorn at its heart, seeks to sequester hundreds of millions of tons of carbon, potentially from the likes of Ineos Grangemouth, one of Scotland’s largest polluters, and from businesses across Europe that could ship captured carbon to CCS facilities at the St Fergus Gas Terminal via Peterhead Port.
And while the PM’s belated support was welcome, Storegga insists this does not amount to a blank cheque for the project. Instead it should start clearing the way for a regulatory framework which will enable current backers, including oil and gas firms Shell and Harbour Energy, to invest in CCS capacity.
Of course, having oil and gas companies lead the energy transition does not always sit comfortably with green campaigners, who highlight the puny amounts spent on renewable energy developments when compared to the eye-
watering profits and share buybacks made by oil and gas operators since Russia’s invasion of Ukraine set commodity prices spiralling.
Acorn-backer Harbour, in particular, has warned that its ability to invest in the transition to low-carbon energy following the UK Government’s imposition of windfall taxes – otherwise known as the energy profits levy – could be compromised.
Back at the Aberdeen convention centre, many in the audience as well as the nominees for Net Zero Energy Transition Awards were exemplars of what energy transition means in practice.
The main sponsor of the awards was Total Energies, the French oil and gas firm that is also a leading partner in Dogger Bank, which will be the site of the world’s largest offshore wind farm when it is completed.
One of the winners on the night was Balmoral Group, which won recognition for growth it has achieved in providing goods and services to the renewables industry.
Founded by Sir Jim Milne in a disused mushroom shed on the family farm, Balmoral has risen to prominence having weathered the fluctuating fortunes of the North Sea oil and gas industry for decades.
The company said that while its oil and gas order book remains “robust”, more than 60 per cent of its current enquiries relate to renewables projects, while around 40 per cent of its order intake has come directly from the offshore wind sector in the last year.
And while rising costs have put a dampener on some offshore wind developments in UK waters in recent months, Milne is confident his business is moving in the right direction.
He said: “It’s clear that the energy industry transition is gathering momentum and it’s encouraging to see Scotland embracing the move towards a low-carbon energy future, particularly in the north-east of Scotland.
“As a proud part of Scotland’s story, we’re not just observers; we’re active participants in shaping an industry so these are very exciting times.
“With the exponential growth of offshore wind worldwide, Balmoral believes that by offering industry-leading knowledge, in-house capabilities, experience and scalable manufacturing capacity, it will contribute positively to the on-going efforts in taking the sector to maturity.”
Scottish Renewables’ Claire Mack noted that in the last year its membership has grown by 20 per cent “as a result of the discussion on the energy transition”.
“The backbone of the energy transition is of course our supply chain, companies so many of whom have grown up here in the North East servicing the oil and gas industry and where many are actually now key players in the renewables investment and development machine.
“Scotland in the UK would be a far poorer place were it not for the decades of development that has happened right here from the 1970s until now. And that development will continue with a pipeline of offshore and onshore wind projects that takes us up to the 2040s and beyond.”