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

Section 3: Costs, Impacts and Benefits

Quantified Costs to Businesses

For this draft partial BRIA, the Scottish Government has completed a qualitative assessment of the potential costs, impacts and benefits of the policy, with a focus on the following:

• the offshore wind industry and related sectors (e.g., supply chain businesses);
• commercial fisheries;
• other marine users (e.g., commercial shipping); and
• regulatory bodies.

In considering the costs, impacts and benefits of the policy, we have also considered the quantitative assessments developed as part of the Scottish Government’s draft updated SMP-OWE which is currently out for consultation until 22 August 2025.

Whether these costs, impacts and benefits eventuate will be dependent on individual consenting decisions. For example, although the policy seeks to enable a wider range of compensatory measures to be available for offshore wind development, Scottish Ministers will still need to be satisfied that any compensatory measures package put forward for an offshore wind plan or project is sufficient to compensate for the AEOSI of that development.

As we have completed a qualitative assessment, the potential costs, benefits and impacts are set out below under ‘Other Impacts’.

Other Impacts

Offshore Wind Industry and Related Sectors (e.g., Supply Chain Businesses)

Scotland’s Offshore Wind Policy Statement, published in 2020, set an ambition of 8-11GW (gigawatts) of offshore wind development by 2030. Since then, there has been a significant increase in the number of potential offshore wind developments due to the ScotWind and INTOG leasing rounds which concluded in 2022 and 2023 respectively.

The ScotWind and INTOG leasing rounds symbolise the enormous economic potential of offshore wind and put Scotland at the forefront of development globally, with a current reported potential pipeline of over 40GW of offshore wind projects on top of our existing operational capacity.

In recognition of the significant project pipeline, and to underline Scottish Government’s firm commitment to the offshore wind sector, a consultation is underway until 13 August on proposals which would see Scotland’s offshore wind ambition increased to up to 40GW by 2035-2040, in addition to our existing operational capacity.

The proposed Strategic Compensation Policy for Offshore Wind (the policy) is anticipated to have a positive impact for offshore wind developers and related sectors. These anticipated positive impacts include the following:

• By enabling a wider range of compensatory measures to compensate for the adverse effects of offshore wind development, the policy will help to increase investor confidence and reduce uncertainty about the viability of new offshore wind projects (noting that it is for the Scottish Ministers to secure suitable compensatory measures, usually through conditioning licences/consents).
• The policy is anticipated to assist with streamlining offshore wind consenting processes, helping new projects move from application to construction faster (subject to all relevant consenting decisions). This is anticipated to increase investor confidence.
• By increasing investor confidence, the policy will help offshore wind developers with securing investment and undertaking supply chain planning, including in relation to environmental services (e.g., monitoring, restoration, and marine ecology).
• By increasing investor confidence, the policy is anticipated to have positive impacts on the offshore wind supply chain both regionally and nationally, by providing new or enhanced business opportunities for supply chain businesses.
• When coupled with other elements of the OWEIP reforms, the policy will enable more strategic approaches to be taken to securing compensatory measures, as opposed to the current regime where compensatory measures are undertaken on a project-by-project basis. This may have positive cost implications for offshore wind developers.
• Other related sectors including fabrication, engineering, ports, marine logistics and environmental consulting are also likely to benefit from increased investor confidence leading to a greater demand for these services.

Businesses in the East and Northeast of Scotland may particularly benefit from the policy, given these are the locations where the updated SMP-OWE option areas for ScotWind and INTOG are concentrated.

Offshore wind developers may face additional early-stage costs where compensatory measures must be funded prior to impact (i.e., front-loading expenditure).

Commercial Fisheries

By supporting the expansion of offshore wind development in Scottish waters and increasing the demand on marine space for the implementation of compensatory measures, the policy is anticipated to have a negative impact on fisheries. In particular:

• Over-12m vessels are likely to experience the greatest impacts as they tend to operate closer to those areas where offshore wind development is anticipated to occur. These impacts are likely to be higher in the Northeast and Shetland regions given this is where updated SMP-OWE option areas for ScotWind and INTOG are concentrated.
• Smaller vessels (under 12m) are anticipated to be less impacted as they tend to operate closer to the shore than where most of the updated SMP-OWE option areas for offshore wind development in Scottish waters are located. There may be impacts during construction of export cables, but these are anticipated to be temporary.
• Expanding offshore wind development is likely to have some displacement effects for commercial fisheries, which may result in changes to cost-revenue profiles of fishing vessels, increased conflict with other vessels/gear types, reduced efficiency of fishing leading to higher carbon emissions, and greater environmental/seabed impacts.

Not all compensatory measures are anticipated to have this negative effect or require marine space over time. For example, it may be possible to deliver compensatory measures such as marine litter removal, and predator eradication on Scottish islands, without maintaining a demand for marine space. These types of measures are therefore anticipated to have a reduced impact on commercial fisheries.

Significant further detail on the potential impacts of offshore wind development in Scottish waters for commercial fisheries, including at regional scales, is provided in the Social and Economic Impact Assessment for the draft updated SMP-OWE.

Other Marine Users (e.g., Shipping, Tourism, Aquaculture, Cables)

Impacts on other marine users as a result of adopting the policy are anticipated to vary but mainly relate to spatial conflict with the expansion of offshore wind development and the implementation of compensatory measures in Scottish waters. More specifically:

• Shipping may experience moderate additional costs due to this spatial conflict, which could create a risk of route displacement or changes related to safety concerns. These are anticipated to be higher risks in certain updated SMP-OWE option areas (e.g., N1 and NE1B).
• Delivering a wider range of compensatory measures in Scottish waters could lead to spatial conflicts for power interconnectors and subsea cables, especially in the Northeast and East regions. Existing infrastructure and future network expansion will both need to be considered as part of delivering compensatory measures.
• Marine tourism and recreation may experience visual intrusion and coastal access restrictions from offshore wind development and associated compensatory measures may affect some locations. Impacts are expected to be site-specific and temporary but may require tailored mitigations in popular coastal tourism areas.
• Aquaculture is not anticipated to be directly impacted by the policy, though cumulative spatial pressure in high-use areas (e.g., Shetland) could lead to indirect effects, especially if compensation zones overlap with existing operations.

Not all compensatory measures are anticipated to create spatial conflict over time. For example, it may be possible to deliver compensatory measures such as marine litter removal, and predator eradication on Scottish islands, without maintaining an ongoing demand for marine space.

Regulatory Bodies

Marine Directorate Licensing Operations Team (MD-LOT)

Responsibility for the licensing and consenting of offshore wind projects in Scottish waters is devolved to Scottish Ministers. The processing of offshore wind applications and supporting organisations sits with MD-LOT. More specifically, MD-LOT:

• Determines marine licence applications on behalf of the Scottish Ministers in the Scottish inshore region (within 12nm) under the Marine (Scotland) Act 2010, and in the Scottish offshore region (beyond 12nm) under the Marine and Coastal Access Act 2009.
• Processes applications for consent for offshore wind farms under the Electricity Act 1989 and provides decision making advice to Scottish Ministers. Any proposal to construct, extend or operate a generating station (including offshore wind farms) with a generation capacity in excess of 1 megawatt (MW) situated in the Scottish inshore region (within 12nm), or with a generating capacity in excess of 50MW in the Scottish offshore region (beyond 12nm), will require consent under section 36 of the Electricity Act 1989.
• Provides potential applicants with advice on the application processes including requirements for information to support applications, such as Environmental Impact Assessment (EIA). This includes providing EIA screening and EIA scoping opinions.

The impacts of the policy for MD-LOT may include the following:

• The policy is anticipated to support the streamlining of offshore wind licensing and consenting over time. For example, the delivery of strategic compensation for multiple projects at the same time may have a positive impact on MD-LOT as it could streamline the consideration of compensatory measures across multiple project applications.
• By supporting the expansion of offshore wind development and helping to streamline the identification of potentially suitable compensatory measures, the policy is likely to result in additional resourcing pressure for MD-LOT as applications may be brought forward more quickly than a scenario where the policy was not adopted.
• By enabling a wider range of compensatory measures to be brought forward, the policy is likely to result in additional resourcing pressure for MD-LOT who will be required to assess new kinds of compensatory measures which have not been proposed for previous offshore wind projects. These impacts may be mitigated as a result of the potential streamlining set out in the first point above.
• The timing of implementing the policy is likely to impact the consistency and timing of regulatory processes for MD-LOT; for example, any potential changes to be implemented to current licensing and consenting processes will need to be implemented once the relevant SIs have progressed through the Scottish and UK Parliaments (as applicable).
• The timing of implementing the policy may result in different impacts for projects that are progressing through the licensing and consenting process at different stages. This could create additional complexity and resourcing pressures for MD-LOT.

The policy has been developed in collaboration with MD-LOT to ensure that potential impacts on licensing and consenting processes are fully understood.

Statutory Nature Conservation Bodies (SNCBs)

SNCBs will continue their existing role in providing advice with regard to compensatory measures including with regard to whether measures are likely to meet compensatory measure principles. The policy will not change existing SNCB roles in the offshore wind planning and consenting process. Applicants will continue to be required to consult with SNCBs so they can consider the SNCBs’ advice before submitting their application.

The Statutory Nature Conservation Bodies in Scotland are NatureScot and the Joint Nature Conservation Committee (JNCC). The impacts of the policy for SNCBs may include the following:

• The policy is anticipated to support the streamlining of offshore wind licensing and consenting over time. For example, the delivery of strategic compensation for multiple projects at the same time may have a positive impact on SNCBs as it could streamline the consideration of compensatory measures and their ecological benefits.
• By making a wider range of compensatory measures available for offshore wind development, the policy is likely to result in additional resourcing pressure for SNCBs to consider the ecological benefits of wider/strategic or plan level compensatory measures. This will need to be considered within the public sector reform work being conducted on the charging model for SNCB’s offshore wind support functions.
• By enabling a wider range of compensatory measures to be brought forward, the policy is likely to result in additional resourcing pressure for SNCBs who will be required to assess new kinds of compensatory measures which have not been proposed for previous offshore wind projects. However, this potential impact could be offset by the policy helping to streamline the consideration of compensatory measures, particularly strategic compensation.
• The governance, monitoring and evaluation of compensatory measures and the reforms will also have resource/time implications for SNCBs.

Scottish Firms’ International Competitiveness

The policy is anticipated to increase Scotland’s attractiveness as a destination for global investment. This is because the policy seeks to make a wider range of compensatory measures available to compensate for the adverse effects of offshore wind development.

Benefits to Business

Please see above under “Other Impacts”.

Small Business Impacts

The policy is not anticipated to have any significant impacts on small businesses in addition to the wider impacts set out under “Other Impacts” above. For example, the policy is not anticipated to result in impacts that are likely to be resource intensive for small businesses, or additional obligations in relation to monitoring, reporting and compliance.

Investment

The policy is anticipated to make Scotland a more attractive place for offshore wind investment. This is because the policy seeks to make a wider range of compensatory measures available to compensate for the adverse effects of offshore wind development.

Workforce and Fair Work

The policy is anticipated to have a positive impact on Scotland’s overall workforce. By supporting the development of Scotland’s offshore wind sector, the policy may support job creation, and opportunities for training and upskilling.

The policy is not anticipated to have any specific impacts on the ability of businesses to meet the Fair Work First principles.

Climate Change/Circular Economy

Our current Climate Change Plan sets out policies and proposals for the period up to 2032 and contributes to our vision to end Scotland’s contribution to climate change by 2045. The next plan will cover the period 2026 to 2040 and is due for consultation later in 2025. In accordance with the Climate Change (Emissions Reduction Targets) (Scotland) Act 2024, we will be taking a carbon budget-based approach for setting emissions reduction targets.

The development of offshore wind has the potential to make a significant contribution to Scotland’s net zero transition and decarbonisation of the energy system.

Competition Assessment

By supporting the expansion of offshore wind development in Scottish waters and increasing the demand on marine space for the implementation of compensatory measures, the policy is anticipated to contribute to the creation of competition for marine space with certain sectors (e.g., commercial fisheries).

The potential impacts on competition associated with Scotland’s offshore wind ambitions are set out in detail in the Social and Economic Impact Assessment for the draft updated SMP-OWE.