Information

Scotland's energy sector - unlocking investment: joint business plan

Focusses on the actions a number of stakeholders need to take in order to unlock investment in projects that support net zero, and will generate economic benefit across Scotland and the wider UK over the next few years.


Annex: Developing Technologies

Barriers and actions

Barrier #1 Need for Market Mechanisms to Provide Investment Signals For Storage and Flexibility Technologies/Systems

Stakeholders: UK Government; Ofgem;

  • A de-risking mechanism is urgently needed to provide the investment signal to enable the delivery of crucial Pumped Storage Hydro (PSH) projects by 2030.
  • This should be addressed through the joint BEIS and Ofgem Smart Systems and Flexibility Plan 2.0, looking at options such as introducing a Cap and Floor mechanism for long-duration storage, such as that administered by Ofgem for interconnectors.
  • Market and regulatory frameworks must also continue to incentivise and reward demand side response and other forms of flexibility to reduce system costs via balancing and supporting the efficient use of electricity systems.

Barrier #2: Need for Commercial, Policy and Regulatory Framework and Funding to Support UK CCUS at Scale

Stakeholders: Scottish Government; UK Government; Ofgem;

  • Whilst BEIS have published their response to their consultation on CCUS business models, further clarity is needed to bring forward the investment decisions for critical decarbonisation infrastructure.
  • This must include the creation of a stable policy framework, including business model and financial frameworks for blue hydrogen and for CCUS, in order to build confidence and enable the development of the first CCUS facilities in the UK to be commissioned from the mid-2020s.
  • Funding for CCS/Hydrogen infrastructure is also crucial to open up shipping lanes for CO2 import/ hydrogen export.

Barrier #3: Need for Frameworks to Enable Large Scale Green Hydrogen Production and Integration Into Energy Systems

Stakeholders: UK Government; Ofgem;

  • Enabling large scale green hydrogen production and integration into wider energy systems will require stable policy frameworks including business models and financial instruments to stimulate investment.
  • Deployment funding would also help reduce the prohibitive financial gap between production premium and viable user prices.

Barrier #4: Reform of Contracts for Difference (CfD) Required to Enable Wave and Tidal Generation

Stakeholders: UK Government;

  • Targeted and effective support is required within the CfD mechanism for wave and tidal generation in the form of a reserved quantum for marine projects to compete for within pot 2. There may also be a role for the CfD in supporting the production of green hydrogen from renewable sources such as wave and tidal.

Barrier #5: Need for Access to Affordable Electricity Offshore

Stakeholders: UK Government; Ofgem;

  • Anticipatory investment in offshore grid infrastructure to ensure power to offshore installations, enable integrated renewable generation and development of offshore energy hubs.
  • Commercial models allowing for integrated oil, gas and renewable projects.
  • Complete review of offshore networks policy and ensure alignment with Crown Estate Scotland.

Results

  • Storage technologies are crucial for a high renewables system, to store excess wind output and discharge at times of low wind.
  • Imperial College estimate that three PSH schemes of 4.5GW capacity, 90GWh storage would save up to £690m per year in energy system costs by 2050.
  • CCS will be required to reach net zero by delivering emissions reductions in hard-to-abate industrial sectors.
  • CCS crucial to support Hydrogen as green hydrogen won't be at scale for some time.
  • Flexible low-carbon power-CCS needed to replace unabated fossil fuel generation.
  • Large-scale green hydrogen production may be important in balancing generation and demand, providing flexibility.
  • Scottish waters have potential to generate 10% of Europe's wave power and 25% of Europe's offshore wind and tidal.
  • Access to affordable electricity offshore, enabling electrification of assets.
  • Impactful CO2 emissions reduction offshore.
  • Potential for wider energy integration in the UKCS.

Example projects

  • Coire Glas (SSE) - Could generate continuously for up to 20 hours at full capacity (1.5GW) or for significantly longer at lower capacity. It would have 200x the energy storage capacity of the world's largest battery.
  • Acorn Project (Pale Blue Dot) - Low-cost, low-risk, carbon capture and storage project that provides fundamental CO2 mitigation infrastructure essential for meeting the Scottish/UK Net Zero targets.
  • Peterhead CCS (SSE) - Important flexible generation through decarbonised thermal at Peterhead; creating 1000+ jobs and £1.5bn GVA.
  • CNS Electrification - Create economies of scale, electrify offshore assets, abatement of offshore emissions, potential for integrated energy hubs offshore.

Contact

Email: anthony.kinsella@gov.scot

Back to top