Chapter 6: Innovation and Cost Reduction
127. Scotland's Energy Strategy set out a commitment to continue our support for offshore wind innovation in Scotland. Since then, we have committed up to £4 million in this area, including £2 million in 2019/20 aimed specifically at reducing costs in the floating wind sector.
128. Over the last 6 years, the Scottish Government has committed over £9.5 million in grant funding to support innovation and skills in offshore wind. We have worked closely with the Carbon Trust, funding the hugely successful Offshore Wind Accelerator programme and the Floating Wind Joint Industry Partnership (JIP). Both of these programmes utilise a market led approach to address technical challenges in order to lower the levelised cost of energy. Scotland is helping industry to achieve cost reductions, but in doing so, we expect to see that investment in innovation not only benefit project cost-competitiveness, and accelerate deployment, but also to lead to employment opportunities in Scotland.
129. The Carbon Trust published the Floating JIP Phase II Summary Report in July, outlining findings across four main themes: turbine requirements and foundations scaling, heavy lift offshore operations, dynamic export cables and monitoring and inspection. The report also includes new market projections from the Carbon Trust, forecasting 70GW of floating wind capacity installed globally by 2040.
130. The Scottish Government also match funded a number of projects last year delivered by ORE Catapult in partnership with industry and the Welsh Government, through their Floating Offshore Wind Centre of Excellence. These projects explored barriers and opportunities for floating wind in Scotland across innovative areas such as: oil platform electrification using floating wind; fixed/floating hybrid offshore wind sites; floating substructure fabrication in Scotland; and, mapping the Scottish supply chain
131. We are currently fully funding a £1 million Floating Wind Technology Acceleration Competition in partnership with Carbon Trust, with the aim of solving key technical challenges in the industry. Eight competition winners, including Scottish engineering specialists AS Mosley, were announced in January, and are currently developing a host of innovative technologies including a 3D concrete anchor, a passive load reduction device, and an adjustable seabed lock. The competition projects are due for completion in Q1 2021, and a case study showing progress to date will be published in before the end of 2020.
132. We have taken on board feedback from industry outlining the importance future funding for research and innovation will remain vital to the success of offshore wind in Scotland. That is we are currently undertaking a review of innovation grant funding across the Scottish Government Energy and Climate Change Directorate, to ensure a coordinated and focused approach to future grant funding. This review aims to develop a funding mechanism, for the financial year 2021/22, that will enable us to prioritise key areas for innovation across and apply a more holistic approach across energy when procuring future innovation work.
133. During the consultation of this document, many respondents also highlighted the potential effect of the UK's departure from the European Union on innovation funding for Scottish energy projects. We are acutely aware that EU funding has played a crucial role in progressing offshore wind research and demonstration across the UK. For the avoidance of doubt, we strongly object to Scotland being removed from the EU against the wishes of 62% of Scotland's voters and we will continue to argue for the closest possible links with our EU partners. We will also continue to challenge the UK Government to take responsibility for its course of action and ensure that, at the very least, our thriving innovation landscape in Scotland is protected in the face of EU exit and the potential harms this may cause to the research community here.
134. Innovation is a key driver in achieving sustainable growth. Scotland is already a world renowned hub for innovation in offshore wind. We are home to the world's first floating offshore wind farm, Equinor's 30 MW Hywind Scotland, with a second, the 50 MW Kincardine project, currently under construction. In addition, some of the most powerful turbines in commercial operation in the world are located in waters off Aberdeen, at Vattenfall's 93 MW European Offshore Wind Deployment Centre. The site demonstrates innovative suction bucket foundations – one of which was installed in a record breaking two hours and forty minutes.
135. The developments referred to above were made possible by unique legislation and support introduced by the Scottish Government in 2013. These changes supported offshore wind test and demonstration sites deploying innovative, new to market turbines, and pilot projects consisting of non-fixed turbines. Regrettably, these financial instruments have been removed by UK Ministers and therefore are not available to Scottish Ministers to stimulate new projects.
136. However, the Scottish Government's leadership together with investment made in these projects has resulted in a huge step forward for the technology, and represent the foundations upon which Scotland future floating wind sector will be built. Although the offshore wind industry has already achieved incredible cost reduction in fixed technologies, floating wind still requires further research and innovation, along with the necessary scale, to bring costs down to a similar level.
Floating Offshore Wind
137. Floating wind pilot projects and test and demonstration sites are beginning to grow across the world. Indeed, Scotland has already become a global leader in the deployment of floating wind. However we recognise that floating wind's ability to become cost competitive with fixed bottom structures will require continued effort and innovation.
138. Scotland's unique deep water profile and high, consistent wind resource means that our waters are ideally suited to floating wind. The Committee on Climate Change (CCC) report in May 2019, which includes a scenario requiring 75 GW of offshore wind in UK waters by 2050 to achieve net zero, suggests that we are likely to need floating wind in our energy system earlier than previously anticipated.
139. However, the higher costs of floating wind mean that without similar intervention or additional support (e.g. through changes to the successor CfD mechanism), this technology is unlikely to develop at the rate or scale required to retain early mover advantages and to exploit supply chain growth opportunities. We made this clear in our response to the BEIS CfD consultation by outlining the critical importance of floating technologies being able to bid in separately to fixed offshore wind. The UK Government must take urgent action in this regard if we are to see the floating offshore wind opportunity in Scotland fully realised.
140. In line with the feedback we received through the consultation for this document, cost reduction in floating offshore wind will remain a key innovation priority for the Scottish Government as we move towards commercial scale development. We will continue to explore both technical challenges and those specific to Scottish waters, whilst ensuring that we take full advantage of Scotland's transferable strengths in other sectors.
Fixed Offshore Wind
141. Fixed-bottom offshore wind has seen incredible cost reduction in recent years, and increase in turbine sizes – helped in part by Scottish Government support for the Carbon Trust Offshore Wind Accelerator programme. This underlines the effectiveness of strategic government intervention at a time when the sector was less mature.
142. Scope for industry led innovation in fixed offshore wind remains, particularly in key areas such as turbines, operations and maintenance – balancing the development potential alongside the needs of the marine environment and other users of the sea.
143. However, as discussed in our 'Barriers to deployment chapter', there are legal and regulatory barriers that would need to be addressed prior to deployment. We would encourage developers to consider this approach early in their project planning stages, and discuss with Marine Scotland and other developers and operators as early as possible. In addition, the drop in levelised cost of fixed-bottom offshore wind has had negative consequences for Scottish and UK supply chain development, with cost reduction and risk being pushed down the supply chain.
Synergies with other Sectors
144 As mentioned in the Future Position section, we received a hugely positive response regarding the potential for hydrogen production from offshore wind. Developers are becoming increasingly interested in the concept of using electricity generated from offshore wind resources to produce large scale green hydrogen via electrolysis. This technology is also referred to as 'power-to-gas'.
145. There is huge export opportunity linked to the production of green hydrogen, however a suitable mechanism is required to facilitate production from renewable sources. This could take the form of dedicated offshore wind projects without a grid connection, or surplus turbines that are part of a wider project that holds a CfD. It is therefore imperative that existing energy innovation hubs and centres focus on exploring innovation in hydrogen production and the use of electrolysers connected to offshore wind developments
146. Hydrogen and offshore wind is a key area of focus for the Scottish Government in terms of innovation and R&D. We are developing our policy response to this opportunity through our Hydrogen Assessment Project, that will inform the publication of a Hydrogen Policy Statement and Action Plan for Scotland by the end of the calendar year.
Oil and Gas
147. Our oil and gas industry and heritage can provide much of the expertise and skills to support our transition to a different energy future. Scotland's oil and gas sector has 40 years' experience of operating in the North Sea, and possesses vital subsea skills which can help overcome the engineering and innovation challenges presented by the move to a low carbon future.
148. For example, Scotland's oil and gas industry has developed a cluster of companies with world class expertise in underwater engineering – approximately half of the subsea installations in the world today are in the North Sea, a strength that can be developed even further.
149. The sector also has extensive experience in heavy steel and concrete fabrication, operations and maintenance of offshore structures and complex large scale project management. It also has access to onshore infrastructure which could be shared – including general service vessels, jack-up rigs and accommodation vessels, as well as geophysical survey kit and sea trenching plant.
150. There is also scope to reduce the offshore wind sector's development and operational costs. The oil and gas sector has made great progress in managing costs and improving efficiencies, and its experience could benefit the offshore wind sector in terms of managing costs and delivery of considerable project benefits.
151. As the floating wind example demonstrates, the energy transition also creates opportunities to more closely connect all forms of offshore energy production. The Oil and Gas Authority (OGA) Energy Integration Project has been hugely valuable in exploring the potential for a more integrated offshore energy sector, including innovative and closer links between oil and gas production and offshore renewables. UKCS Energy Integration: Final Report was published in August, and indicates that the integration of offshore energy systems, including offshore electrification, CCS, and hydrogen, could deliver 30% of the UK's decarbonisation requirements, increasing to 60% with the inclusion of offshore renewables such as wind, wave and tidal. The report finds that the integration of energy technologies would not only support the delivery of net zero ambitions, but also make these technologies more economically attractive.
152. The reports sets out a clear set of recommendations to realise this potential including: Accelerating and enabling energy integration projects: Leveraging oil and gas assets and capabilities to support offshore renewables expansion; the coordination of regulatory processes and; utilising digital and data to enhance visibility of cross industry opportunities
153. Significant work in this area is also being driven by a new venture between the Oil and Gas Technology Centre (OGTC) and ORE Catapult, who recently joined forces to launch a 5 year Energy Transition Alliance with the aim of delivering advanced technologies to accelerate the transition to net zero across the UK.
154. The Scottish Government recognises that the public sector has a significant role to play in ensuring that the synergies between oil and gas and renewables are fully realised. The recently launched £62 million Energy Transition Fund will contribute to this by supporting businesses in the oil, gas and energy sectors from 2020-2025 as they undertake a just transitions into low carbon and renewable sectors.
155. The projects considered for support include the creation of an Energy Transition Zone (ETZ) in Aberdeen and a Global Underwater Hub (GUH), projects aimed at positioning the North East as a hydrogen model region, and a range of innovation projects led by the OGTC's Net Zero Solution Centre. These projects will, as part of their wider aims of leveraging the collective strengths of Scotland's underwater industries, look to accelerate innovation in offshore wind, and support growth in international markets.
156. It is intended that, subject to planning, the ETZ will result in the creation of a business park supporting the technology and innovation environment in Aberdeen by enabling large scale partnered projects focused on offshore wind; hydrogen; CCUS, alongside oil and gas.
157. The GUH will provide a cross-sectoral framework to ensure manufacturing and service companies and research institutions engaged in oil and gas, offshore renewables, CCUS, aquaculture and defence, work collectively and capitalise on the market opportunities, in the UK and internationally.
158. Although Sectoral Marine Plans will identify sites suitable for projects with a generating capacity greater than 100 MW, the Scottish Government remains committed to considering opportunities for innovative offshore wind development within Scottish waters. We recommend early and proactive engagement with Crown Estate Scotland, Marine Scotland and other stakeholders (as appropriate) to discuss any such development proposals.
159. Future rounds of offshore wind development also present the opportunity to explore options for 'hybrid projects' or projects that support the decarbonisation of the oil and gas sector – i.e. sharing transmission infrastructure and assets between projects. This approach may offer potential cost and space savings, as well as potential reductions in environmental impacts.