Offshore wind - strategic compensation policy: business and regulatory impact assessment

Section 1: Background, Aims and Options

Background to Policy Issue

Both the Scottish and UK Governments have ambitious plans for offshore wind development in UK waters.

The UK Government’s CP2030 has set an ambition to decarbonise Great Britain’s electricity system by 2030 and sets out GB-wide capacity ranges of 43-50GW of offshore wind in 2030, and 72-89GW in 2035. Delivery of CP2030 is dependent on projects in Scotland's pipeline.

The ScotWind and Innovation and Targeted Oil and Gas (INTOG) leasing rounds promise to be transformational in delivering wider economic supply chain benefits to Scottish businesses and communities for decades to come, while providing a significant boost to Scottish and UK-wide green energy production. ScotWind and INTOG put Scotland at the forefront of offshore wind development globally, with a current reported potential pipeline of over 40GW of offshore wind projects on top of our existing operational capacity.

In Scotland, as in the rest of the UK, we require various environmental assessments to be carried out in relation to offshore wind projects. This includes Habitats Regulations Appraisals (HRA) required under the Habitats Regulations for projects and plans that are likely to have an adverse effect on the site integrity (AEOSI) of a protected site(s) in the UK National Site Network^[2] (referred to as the protected site network). Where a plan or project is not directly connected with or necessary for the management of protected site(s), and where the possibility of a ‘Likely Significant Effect’ (LSE) on these sites cannot be excluded, either alone or in-combination with other plans or projects, an Appropriate Assessment (AA) should be undertaken.

If it is concluded that the plan or project will have an AEOSI on a protected site (either alone or in-combination with other plans or projects), the derogations process will be triggered. The plan or project can only be authorised where the derogation provisions are satisfied.

For offshore wind development in Scotland, the derogations process is anticipated to be triggered at the plan and project level largely due to the impacts of offshore wind development on protected seabird species.

Under the current regime, compensatory measures must be secured to ensure that the overall coherence of the protected site network is protected. This has been interpreted to mean ‘like-for-like’ compensatory measures must be secured i.e., the measure should be targeted to the impacted habitat or species (impacted feature).

This approach creates challenges for delivering Scotland and UK offshore wind ambitions. There have been difficulties identifying suitable compensatory measures that are targeted at the impacted feature by an offshore wind project. To meet the pipeline of upcoming developments, greater flexibility in our approach to environmental compensation (referred to as compensation) under the Habitats Regulations is required.

For these reasons, the Scottish Government has been working collaboratively with the UK Government on the development of cross-UK regulatory reform for offshore wind, using the powers set out in Part 13 Chapter 1 of the UK Energy Act 2023 which provides for reform to the Habitats Regulations as they apply to offshore wind. These provisions allow:

• Regulations to be made relating to the assessment of the environmental effects of relevant offshore wind activities in relation to protected sites and about compensatory measures for adverse environmental effects on those sites;
• Strategic compensatory measures to be taken or secured; and
• Regulations to be made to establish one or more Marine Recovery Funds.

The policy has been developed in accordance with these provisions.

The Energy Act 2023 reforms are an important part of the UK Government’s Offshore Wind Environmental Improvement Package (OWEIP) and in Scotland the Acceleration and Regulatory Reform of Offshore Wind (ARROW) programme, which support the growth of offshore wind by helping to de-risk and accelerate planning decisions while supporting positive investment to protect the marine environment.

Purpose/Aim of Action and Desired Effect

The policy has been developed as part of implementing Part 13 Chapter 1 of the Energy Act 2023. The policy seeks to make a wider range of compensatory measures available to compensate for the adverse effects of offshore wind projects, including measures which would not be considered ‘like-for-like’ because they do not seek to directly benefit the impacted features or species affected by a development.

Coupled with other elements of the OWEIP, the intention of the policy is to help offshore wind developments move efficiently through the consent determination process and proceed to construction and operation, thus accelerating investment in offshore wind. At the same time, the policy seeks to promote positive investment in the marine environment, helping to ensure investment in renewable energy is also supporting natural ecosystems.

Reforming how compensatory measures are secured for offshore wind developments has been recognised as essential for ensuring a clean energy pipeline and its economic benefits, and as a means of delivering net zero and tackling the twin crises of climate change and biodiversity loss. If the policy was not progressed, there is a real risk that Scotland’s offshore wind ambitions would be limited by the availability of compensatory measures.

We wish to ensure that we do not add complexity to the operational landscape by creating a multi-tiered consenting system across UK waters and we are working with UK Government to ensure alignment across Scottish inshore and offshore waters, whilst allowing a responsible approach to development. A collaborative approach between the UK Government and Scottish Government was taken in the development of this policy and the SI/SSI, to ensure a consistent approach across the various consenting regimes.

Options (Considered so Far/Still Open)

Approach to Consultation

As part of this consultation, we are only proposing to consult on one policy approach. This approach would amend the current requirement under the Habitats Regulations (as they apply to offshore wind) for compensatory measures to be secured to ensure that the overall coherence of the UK National Site Network is protected by doing the following:

• Amending this current requirement to require compensatory measures to benefit the network, and to require that benefit to be ‘reasonably proportionate’ to the damage caused or anticipated to be caused.
• Explicitly enabling ‘wider measures’ which may be beneficial to features that are different from the specific protected features affected by the development, or where the link between wider measures and a benefit to a specific feature cannot easily be demonstrated, for example, by targeting broad scale pressures that impact a number of protected features of the protected site network.

This approach has been developed in close collaboration with the UK Government over multiple years. The UK Government will also only be consulting on this one approach. This is a reflection of the fact that a single and consistent licensing and consenting regime for offshore wind is required across the Scottish inshore and offshore regions.

In addition, the Scottish Government will consult on how related elements of policy will apply in light of the above proposed changes to the Habitats Regulations (as they apply to offshore wind). This will include but not be limited to matters such as the timing of compensation, dealing with small impacts, additionality and adaptive management.

‘Do nothing’ Approach

In addition, we have considered not amending the Habitats Regulations and maintaining the current requirement for compensatory measures to be secured to ensure that the overall coherence of the UK National Site Network is protected.

This approach was not considered a viable option. As set out above, the current approach creates challenges for delivering Scotland and UK offshore wind ambitions. There have been difficulties identifying suitable compensatory measures that directly benefit the feature impacted by an offshore wind development. To meet the pipeline of upcoming developments, greater flexibility in our approach to compensation is required.

Sectors/Groups Affected

In preparing this partial BRIA, we have conducted a qualitative assessment of the sectors of the economy and specific groups which are expected to be either directly or indirectly affected by the policy.

On this basis, this BRIA focuses on the potential impacts of the policy for the offshore wind industry and related sectors (e.g., supply chain businesses), commercial fisheries, other marine users, and regulatory bodies.

Further detail is set out in section 3 (Costs, Impacts and Benefits).