Scottish Marine Recovery Fund: consultation

5. Applying to the Scottish MRF

5.1. Who can apply to the Scottish MRF

The Scottish MRF will be available to address adverse environmental effects of relevant offshore wind activities, as defined by the Energy Act 2023. For developers wishing to use an MRF to discharge their compensation requirements, it is proposed that the location of anticipated adverse effects on protected sites will determine whether an offshore wind developer would apply to use the Scottish MRF or UK Government MRF.

If the project is to be located in Scotland and expected to have adverse effects on protected sites within Scottish waters^[2], the developer would be able to apply to the Scottish MRF for the required environmental compensation. If the project is to be located in Scotland but is likely to have adverse effects on protected sites beyond Scottish waters (i.e. in English, Welsh or Northern Irish waters), we propose – subject to further negotiation and agreement with the UK Government - that the offshore wind developer would be able to choose whether their application to the Scottish MRF also addresses the adverse effects on these sites.

Offshore wind developers may also be able to apply to the UK Government MRF for compensatory measures to address adverse effects on protected sites beyond Scottish waters. The Scottish MRF may be open to projects located within English, Welsh or Northern Irish waters, primarily in the case of said projects having adverse effects on Scottish protected sites. This is subject to further negotiation and agreement with the UK Government.

The relevant planning and consenting authority, which for projects in Scottish waters is Scottish Ministers, would remain responsible for deciding whether the compensatory measures secured through an MRF are sufficient to meet the compensation requirement for a specific project, regardless of the jurisdiction of the MRF that developers apply to.

5.2. Application process

The process for offshore wind developers to apply to a Scottish MRF will be separate from, but parallel to, the existing Scottish offshore wind consenting process. Primarily, the application process to the Scottish MRF will chronologically align with the established process for applying for a consent under section 36 of the Electricity Act 1989.

The full MRF application process will be detailed in the guidance which will be published alongside the launch of the Scottish MRF. The sections below outline the key stages of the application process for offshore wind developers of projects within and outside Scottish waters.

5.2.1. Projects or plans located in Scottish waters

It is anticipated there will be multiple points parallel to the section 36 application process where offshore wind developers will be able express interest in or apply to the Scottish MRF. In most cases, we expect the developer would initially identify a need for compensatory measures either as they draft their Environmental Impact Assessment (EIA) and supporting application information, or at the submission of their section 36 consent application. At either of these stages the developer will be able to submit an Expression of Interest (EOI) to the Scottish MRF Operator indicating their anticipated compensation needs.

We are continuing to progress work on the plan-level derogation process for the draft updated SMP-OWE, which covers projects from the ScotWind and INTOG leasing rounds and an additional 1GW capacity for potential future test and demonstration projects. If this plan-led approach concludes the draft updated SMP-OWE would have an adverse effect on site integrity, then (subject to completing other requirements of the derogations process) plan level-compensation would need to be identified. Any estimate of compensation need could be used to inform the EOI.

The Scottish MRF Operator will review the EOI and, if suitable compensation is expected to be available in the Scottish MRF, will confirm to the developer that the degree of compensation requested is available. The developer will then pay an initial fee to provisionally reserve access to appropriate compensation through the Scottish MRF. The level of fee required will be set out in due course.

The developer will make a full application to the Scottish MRF following the outcome of the Appropriate Assessment (AA) undertaken by the competent authority, which for projects located in Scottish waters is Scottish Ministers. At this stage, the developer can revise their request for compensation to address the impacts identified by the AA.

The Scottish MRF Operator will consider the full application, including any revisions, and will confirm the total fee required to deliver the compensation through the Scottish MRF. The agreement will then be finalised between the developer and the Scottish MRF Operator, allowing the developer to access compensatory measures through the Scottish MRF, subject to a section 36 consent being granted. A developer may be required to provide this agreement alongside confirmation from the Scottish MRF Operator in support of their section 36 application to evidence that compensatory measures have been agreed in principle and can be secured.

If the developer is subsequently granted a section 36 consent, a requirement to pay into the Scottish MRF may be included as a condition attached to the section 36 consent.

Prior to the formal establishment of the Scottish MRF, offshore wind developers with projects in Scottish waters interested in addressing their compensation requirements through the Scottish MRF when it becomes available should refer to our interim guidance.

Until such time as the Scottish MRF is operational, however, offshore wind developers will be expected to continue to identify other appropriate measures to deliver the necessary compensation for their projects.

5.2.2. Projects or plans located in English, Northern Irish or Welsh waters

Offshore wind developers with projects located in English, Welsh or Northern Irish waters can express interest in or apply to the Scottish MRF to compensate for adverse effects to sites in Scottish waters. It is most likely that the developer would initially identify a need for compensatory measures during the pre-application stage of the consent process, such as whilst drafting the EIA, preparing the draft report to inform the AA or during the Habitats Regulations assessment stages.

The offshore wind developer would make a full application to the Scottish MRF following the outcome of the AA undertaken by the competent authority, which will vary depending on the location of the project. At this stage, the developer can revise their request for compensation to address the impacts identified by the AA.

If the offshore wind developer is subsequently granted a consent, the requirement to pay into the Scottish MRF may be included as a consent condition – subject to any other relevant conditions included by other consenting authorities.

5.3. Securing compensation

As the competent authority, Scottish Ministers will continue to have overarching responsibility for determining the extent to which a payment into the Scottish MRF, either wholly or in part, discharges a compensation condition. Scottish Ministers would also be responsible for deciding which compensatory measures are available for use by the Scottish MRF.

The compensatory measures funded through the Scottish MRF will be developed using relevant and appropriate advice, to ensure they deliver the required environmental benefit. An initial set of potential measures to be funded through the Scottish MRF is currently being considered. The scope of measures which could ultimately be funded through the Scottish MRF would depend on the final approach to reforming the Habitats Regulations outlined in section 3.3 and in our consultation on the strategic compensation policy for offshore wind.

Each measure funded through the Scottish MRF is expected to have an Implementation Plan, potentially including, but not limited to:

• quantified benefits for each target feature
• resources and permissions required for delivery
• plans to engage relevant stakeholders in development and delivery
• detailed costing for delivery, including full cost recovery
• timetable for development, implementation and maintenance
• plans for monitoring and reporting effectiveness, including metrics of success
• plans for adaptive management, where required, to ensure effective compensation is delivered

Subject to an application to use the Scottish MRF being approved, it is expected that the Scottish MRF Operator will assign appropriate compensation to a project based on the adverse effects identified and the measures available.

It is envisaged that the compensation measures will be secured through a combination of the section 36 consent conditions and the payment agreement reached between a developer and the MRF Operator.