Scottish Marine Recovery Fund: Partial 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.

Ensuring streamlined consenting processes for offshore wind developments, and shortening application and consenting timeframes wherever possible, is an important part of delivering these ambitions. Equally important is ensuring that mechanisms to meet environmental obligations and secure appropriate compensation for any environmental impacts are clear, transparent and delivering maximum benefit.

For these reasons, the Scottish Government has been working collaboratively with the UK Government on the implementation of Part 13 Chapter 1 of the UK Energy Act 2023 which provides for the following:

• 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 MRFs.

Pursuant to these provisions, the Scottish Government is now exploring the potential to establish a Scottish MRF.

Purpose or aim of action and desired effect

The purpose of establishing a Scottish MRF is to support timely decision making on offshore wind applications by enabling developers to discharge their environmental compensation conditions, wholly or in part, by applying to pay the Scottish MRF to deliver compensatory measures on their behalf. Use of a Scottish MRF would be voluntary and offshore wind developers would be able to pursue delivery of their own compensatory measures as they currently do under the current regime for offshore wind licensing and consenting (where required). As well as the benefits for streamlined consenting, a Scottish MRF would enable delivery of environmental compensation more strategically and effectively.

Establishing a Scottish MRF would enable resources to be targeted at strategic compensatory measures which best address both plan- and project-level adverse effects, maximising the environmental benefit in Scotland. A Scottish MRF would also allow Scottish Ministers to have operational oversight and ensure the delivery of compensatory measures aligns with their strategic policy priorities and statutory obligations.

A key focus of the Scottish MRF is to promote investment in strategic compensatory measures, which are defined in the consultation document and include compensatory measures that can be delivered at scale, over extended timeframes, at plan or project level, and across multiple offshore wind projects. Without the Scottish MRF as a delivery mechanism, there is a real risk that Scotland’s offshore wind ambitions would be limited because of the difficulties of coordinating investment in strategic compensation across multiple offshore wind developers.

Options (considered so far or still open)

Approach to consultation

As part of this consultation, we are only proposing to consult on the option of establishing a Scottish MRF.

A Scottish MRF would be established in parallel to but would support Scotland’s licensing and consenting system and be voluntary for offshore wind developers. It would enable optimisation of policy, governance and operational oversight for Scottish Ministers. It would support fund resources targeting the strategic compensatory measures which would best address plan or project-level adverse effects and maximise environmental benefit in Scotland.

The main ambitions for establishing a Scottish MRF include:

• Supporting delivery of Scottish Ministers’ stated goal of accelerating consenting and development of offshore wind;
• Increase market certainty for, and investor confidence in, strategic offshore wind investment in Scotland; and
• Addressing both the twin crises of climate change and biodiversity loss.

‘Do nothing’ approach

In addition, we have considered the option of not establishing a Scottish MRF. This approach could have multiple possible outcomes, including (i) developers of offshore wind projects in Scottish waters not being able to access an MRF mechanism for the delivery of compensatory measures, or (ii) current plans for a UK Government-led ‘three nations’ MRF covering England, Wales and Northern Ireland being extended to also include Scotland (subject to discussions with the UK Government).

This approach was not considered a viable option. As set out above, without the Scottish MRF as a delivery vehicle for strategic compensatory measures, there is a risk that Scotland’s offshore wind ambitions would be limited because of the difficulties in making strategic compensatory measures available to offshore wind developers.

Furthermore, a ‘four nations’ MRF could add new complexities given such an MRF would likely be led by the UK Government whilst the responsibility for the licensing and consenting of offshore wind projects in Scottish waters is devolved to Scottish Ministers. An agreed framework on cooperation between the Scottish and UK Governments to mitigate potential challenges, address the legal complexities and consider the administrative barriers across governments whilst retaining developer confidence would be required, but has delivery challenges. There could also be additional complexities surrounding the allocation of measures to projects across the UK.

Sectors or 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 establishing a Scottish MRF.

Consideration of a Scottish MRF is an important part of the UK Government’s OWEIP and in Scotland the ARROW programme.

Given this, the potential impacts of establishing a Scottish MRF are considered in this partial BRIA consistently with work on related reforms, in particular Scotland’s strategic compensation policy for offshore wind which is currently out for consultation: Strategic Compensation Policy for Offshore Wind - Scottish Government consultations - Citizen Space.

The direct users of the Scottish MRF would be offshore wind developers, if they choose to use it. As part of the consenting process for a new offshore wind project, developers would be able to apply to the Scottish MRF as a means of discharging their environmental compensation conditions, wholly or in part, through making agreed payment(s) to the Scottish MRF.

Related sectors will also be impacted. As of 2021, there were 15,005 full-time equivalent (FTE) roles across diverse industries including manufacturing, construction, science and retail which are supported by the offshore wind sector in Scotland^[1]. These roles are distributed throughout Scotland.

Other sectors and groups are anticipated to be indirectly affected by the establishment of a Scottish MRF, given its purpose is to support the expansion of offshore wind development. This includes commercial fisheries and other marine users. Regulatory bodies will also be impacted by the establishment of the Scottish MRF given the role it would perform in securing and delivering compensatory measures for offshore wind projects.

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