Scottish Marine Recovery Fund: Partial 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 establishing the Scottish MRF.

The use of the Scottish MRF will come at a cost to developers, however this will replace expenditure which would otherwise be taken to deliver their own compensation measures. Furthermore, the potential cost of individual measures will not be capable of determination until work is completed on developing Scotland’s portfolio of strategic compensatory measures. The cost to access the Scottish MRF will vary on a case-by-case basis and will depend on the compensatory need arising from individual developments.

Due to the need to account for administration costs and adaptive management, the cost to developers for using the Scottish MRF may be higher than delivering measures themselves, however it is also expected that streamlining in their consent application will also reduce costs for developers in other areas.

Once fully operational, the Scottish MRF will be designed to work at full cost recovery and therefore be cost neutral to the Scottish Government in the long term. As part of consultation, views will be sought on fees and payment structures relating to accessing the Scottish MRF.

Other impacts

The potential impacts of establishing a Scottish MRF are anticipated to be similar to our separate consultation on Scotland’s Strategic Compensation Policy for Offshore Wind: Strategic Compensation Policy for Offshore Wind - Scottish Government consultations - Citizen Space

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 reflect 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, we have consulted 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.

Establishing the Scottish MRF is anticipated to have a positive impact for offshore wind developers and related sectors. These anticipated positive impacts include the following:

• By making it simpler for offshore wind developers to discharge their environmental compensation conditions, the Scottish MRF will help to support timely decision-making on offshore wind applications, helping to increase investor confidence and reducing uncertainty about the viability of new offshore wind projects (noting that it is for the Scottish Ministers to secure suitable compensatory measures, usually through the inclusion of conditions in licences or consents).
• By making it simpler for offshore wind developers to discharge their environmental compensation conditions, the Scottish MRF may help 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 Scottish MRF could 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).
• When coupled with other elements of the OWEIP reforms, the Scottish MRF 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 is anticipated to 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.

The offshore wind sector and its supply chain will support high-quality jobs across a range of roles including construction, planning, engineering, manufacturing and fabrication, procurement and supply chain management, and will support a just transition for the existing energy workforce.

As set out above under ‘Quantified Costs to Businesses’, due to the need to account for administration costs and adaptive management, the cost to developers for use of the Scottish MRF may be higher than delivering measures themselves, however it is also expected that streamlining in their consent application will also reduce costs for developers in other areas.

Commercial fisheries

By supporting the expansion of offshore wind development in Scottish waters, a Scottish MRF 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.

It should also be noted that some offshore wind-related impacts may occur regardless of whether a Scottish MRF is established or not.

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 establishing the Scottish MRF 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 strategic 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.

As with commercial fisheries, some offshore wind-related impacts on other marine users may occur regardless of whether a Scottish MRF is established or not.

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 establishing the Scottish MRF for MD-LOT may include the following:

• A Scottish MRF 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.
• A Scottish MRF is likely to result in additional resourcing pressure for MD-LOT as applications may be brought forward more quickly than a scenario where the Scottish MRF was not established.

The policy underpinning the Scottish MRF is being developed in collaboration with MD-LOT to ensure that potential impacts on licensing and consenting processes are fully understood.

Statutory Nature Conservation Bodies (SNCBs)

Establishing a Scottish MRF is not anticipated to change existing SNCB roles in the offshore wind planning and consenting process. The impacts of the Scottish MRF for SNCBs may include the following:

• A Scottish MRF 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.
• Changes in approach to the governance, monitoring and evaluation of compensatory measures will also have resource/time implications for SNCBs.

Interaction between SNCBs and the identification of strategic compensatory measures for inclusion in a Scottish MRF is still under consideration. In particular, we are currently considering the establishment of a technical advisory group which could provide advice and support on the selection and implementation of strategic compensation for offshore wind in Scotland.

We are considering whether this should include covering relevant costs of SNCBs for advising on the suitability of compensatory measures in the Scottish MRF.

Scottish firms’ international competitiveness

The implementation of a Scottish MRF is anticipated to prevent delays to and support the ability to consent offshore wind developments. This will ultimately increase market certainty for, and investor confidence in, strategic offshore wind investment in Scotland.

Benefits to business

Please see above under ‘Other Impacts’.

Small business impacts

Establishing a Scottish MRF is not anticipated to have any significant impacts on small businesses in addition to the wider impacts set out under “Other Impacts” above.

Investment

The implementation of a Scottish MRF aims to prevent delays to and support the ability to consent offshore wind developments. This will ultimately increase market certainty for, and investor confidence in, strategic offshore wind investment in Scotland.

A Scottish MRF would support the current pipeline of project offshore wind developments in Scotland to come to fruition. By streamlining the consenting processes and preventing delays, the Scottish MRF would also be an enabler for the delivery of the £500m committed by the Scottish Government into the offshore wind supply chain and critical infrastructure over five years. This commitment is expected to leverage significant private capital which will be vital to deliver the ports upgrades and supply chain facilities that offshore wind projects need.

The ScotWind developers’ Supply Chain Development Statement (SCDS) commitments could see an average spend of £1.5BN in Scotland across each of the 20 ScotWind offshore wind projects. This estimate does not include all current or future projects^[2].

Workforce and Fair Work

Establishing a Scottish MRF 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.

As a Scottish MRF could form part of the Scottish Government, staff for the MRF Operator would likely be sourced from recruitment or redeployment. As a Fair Work Employer, all Scottish Government recruitment follows the Civil Service recruitment principles^[3] set out by the Civil Service Commission. Additionally, any contractual work carried out by delivery partners or consultants will follow the Scottish procurement policy handbook^[4].

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 are 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

As a Scottish MRF will attract strategic offshore wind investment in Scotland it may increase competition.

Global investors and developers are already heavily invested in Scotland. ScotWind consortia include major global offshore wind developers and global investors, and opportunities for ports and harbours and supply chain have already started to materialise. For Scotland, a key focus is to streamline and ensure the ability to continue granting consent to developers to ensure that Scotland can be viewed as an attractive investment opportunity.

The offshore wind sector will be instrumental in decarbonising Scotland’s economy and developing key net zero technologies that will allow Scotland to harness the full economic potential of the energy transition. It is also likely to incentivise the use and introduction of new technologies such as floating offshore wind turbines. Floating offshore wind in particular offers early mover advantage for Scotland, to establish a new supply chain here in Scotland, creating thousands of green, highly skilled jobs.