Introduction
The Scottish Government has been busy charting a route to offshore wind delivery, but is it enough to overcome the headwinds and land the fleeting opportunity to cement an industry and secure our energy future? Consultations this spring and summer seek views on three connected strands of offshore wind delivery in Scotland, all designed to give greater clarity and confidence to the offshore consenting regimes.
Proposals in one consultation would put in place a new target of 40 Giga Watts (GW) of offshore wind by 2040.
A second consultation seeks views on the draft updated Sectoral Marine Plan for Offshore Wind Energy (SMP-OWE), the plan which will guide the delivery of the ScotWind and Innovation and Targeted Oil and Gas (INTOG) seabed leasing round projects – the developments intended to contribute to the 40GW target.
A third, paralleled by a UK government consultation on the same subject, seeks views on reforms to habitat and species compensation under the Habitats Regulations. To date, this has represented one of the main limitations in the consenting system to the expansion of offshore wind. Both governments seek views on broadening the way in which offshore wind projects may compensate for effects on such habitats and species which cannot otherwise be mitigated.
The proposed reforms have a real chance of creating a consenting environment that will retain the focus of the international development and investment communities if achieving the stretching 40GW target is appropriately prioritised in the final SMP-OWE and if a means to compensate for the potential adverse effects to protected sites for that full capacity is established.
Consenting is, of course not the complete picture. There still needs to be a route to market (timing and certainty of grid upgrades remain a key concern) and a route to profit (uncertainty over grid charges and subsidy rules have caused recent wobbles to investor confidence).
Progress is being made on these other fronts by UK and Scottish governments, who hold different levers, but getting consenting reform right, and balancing its competing interests appropriately, remains a key issue for both realising the existing pipeline of projects and avoiding the delays to the consenting process (including high profile judicial reviews). Such delays and challenges have knocked and stifled the Scottish offshore wind sector over the last 20 years and postponed the investment which is fundamental to achieving the benefit – in terms of economy, energy security and climate change – which the country’s skills and offshore wind resource offer.
The prize on offer is huge and, with a few tweaks, we remain optimistic that a Scottish consenting regime is taking shape which is fit for purpose and can play its role in seizing the opportunity.
Increasing offshore wind ambition: up to 40GW of capacity by 2040
Under proposed plans the Scottish Government will amend the Offshore Wind Policy Statement to include an updated target of 40GW of new capacity by 2035 – 2040. The Statement originally sought to increase Scotland’s then-2GW of operational/under-construction capacity to 8–11GW. But the current Scotwind and INTOG leasing rounds projects now create a “current reported potential pipeline of over 40GW of offshore wind projects on top of our existing operational capacity” leading government to propose a new target.
This update is welcome and necessary. Welcome, to better signal to industry that ambition extends beyond 2030, a date upon which much UK policy is currently focussed; necessary, to ensure that an ambitious policy target exists which planning decision-makers will require to give positive weight when balancing an application’s pros and cons. The scale and location of offshore wind developments means that development will inevitably include some negative effects. A clear policy target, which will convey a scale of ambition which there is an imperative to deliver, is crucial context within which to judge any individual development.
The new target will also provide important context for judging a project within the Habitats Regulations Assessment (HRA) (particularly the requirement to justify derogation – discussed more below). A stretching target provides recognition that we don’t have the luxury of picking and choosing our favourite schemes; to achieve targets, delivery must be of all (or certainly most) proposed projects. If one possible future project is allowed to be considered an “Alternative” to one under consideration, we enter an endless loop under the HRA where no offshore wind projects can come forward. The stretching target focusses the decision-maker’s mind instead on ensuring that each project being presented is appropriate in its own right, a point now recognised by certain UK policy but which will be bolstered by the new target.
The consultations asks: is the target ambitious enough?
It seems logical that the target be set at a level which is both stretching and achievable. It must also match the likely route to market: how big a share of the generation mix can Scottish offshore wind occupy (with storage being a key part of that) and what will be the opportunities to export?
We will watch with interest how developers’ respond to these questions. However, establishing and maintaining a pipeline with sufficient scale and longevity will clearly be key to unlocking inward investment. The bolder the target that can be justified, the bigger the potential prize is likely to be.
Any target should be a minimum of what we should be striving for rather than capping the opportunity.
Scottish Government’s draft updated Sectoral Marine Plan for Offshore Wind Energy (SMP-OWE)
The long-awaited draft SMP-OWE is currently subject to extensive consultation. The Plan is designed as a framework for the INTOG and ScotWind leasing round projects, setting out the “opportunities and constraints” of their development, identifying and plotting the relevant projects, and providing high level assessment of their impacts and potential mitigation. When Ministers consider consent for such projects they will require to consider how the project, its effects, and mitigations align with the SMP-OWE blueprint.
As drafted, the SMP-OWE will provide a framework to consider projects against but, it leaves certain opportunities unexplored and questions unanswered.
Balancing
There is surprisingly limited policy direction in the draft plan detailing how competing interests should be balanced and resolved. The first “core objective” of the SMP-OWE is maximising the delivery of low carbon electricity from offshore wind farms. Yet, little direction is provided for how decision-makers should balance achieving this objective against the potential adverse impacts that the SMP-OWE identifies. For instance, limited guidance is provided as to how conflict between offshore wind and fisheries should be resolved beyond “Engaging early and meaningfully… to ensure site design and layout facilitates continuation of other activities within arrays where practicable”.
Other recent policy (the UK government’s updated National Policy Statements) has gone materially further by including policy presumptions for decision-makers when weighing such “Critical National Priority Infrastructure” against environmental and other impacts. Policy direction via the National Planning Framework 4 has also had a positive effect in Scottish onshore wind consenting. There is an opportunity in the Scottish offshore wind context to set expectations and give clear direction for how renewable infrastructure can be maximised and prioritised notwithstanding impacts. This chance should not be missed.
Mitigations
The Plan sets out proposed mitigations which provide a useful starting point but, as set out below, do not appear to grapple with balance and prioritisation and – perhaps through their brevity – leave relevant questions unanswered.
Under one mitigation, developers must “optimise” infrastructure layout to “minimise” potential adverse effects on protected features. “Minimising” would appear to require a development to go as far as possible to mitigate an effect, whether or not doing so would be proportionate to the harm otherwise and whether or not the adverse effect is a likely significant one (reference is made only to it being a “potential”).
Other mitigations appear to prioritise reduction in effect (irrespective of level) over flexibility in project design. Recent projects evidence the fact that achieving such flexibility is key to ensuring a project can (1) take advantage of rapidly changing technology, (2) be cost effective and competitive and (3) can justify a final investment decision to go ahead. The mitigation “Utilising turbine foundations that minimise spatial footprint” does not account for the fact that meeting the 2040 target (including with nascent floating wind technologies) requires that turbine foundation choice is based on available technologies and the flexibility to allow the competition in procurement needed to achieve affordable and robust design.
References, in other mitigation, to use of smaller turbines where development is in proximity to tourism receptors does not appear to take into account the wider context that (as acknowledged in previous policy statements) available turbines are getting taller, have greater generation capacity, and therefore can bring greater renewable energy benefit with fewer turbines. Again, balance against the wider goal of the SMP-OWE appears missing.
The draft SMP-OWE describes itself as providing “clarity, certainty and confidence to ensure development is sustainable, responsible and balance[d]”. Clearly, it provides a route map to guide consent applicants and decision-makers. However, further work is needed to acknowledge the priorities and balances that must be grappled with when attempting to deliver major offshore wind development required to hit the 2040 target.
Offshore wind – strategic compensation policy: consultation
Background
Separate UK and Scottish government consultations this summer consider reforms to compensation under the Habitat Regulations – a package of EU-derived Regulations on both sides of the border which set out how decision-makers must deal with effects on certain sites of importance to species, habitats, flora and fauna (Special Protection Areas (SPAs) and Special Areas of Conservation (SACs)).
A project may seek permission to derogate from protections where there is a possibility that it may cause an adverse effect on the integrity of a protected site, but only if it passes strict tests and only if the decision-maker secures compensation for the possible harm. The Habitats Regulations (and the European Directives on which they were originally based) have been interpreted in a manner leading to a very narrow understanding of the form the compensation must take to allow derogation.
The Scottish Government consultation sets out part of the issue in brief:
“Under the current regime, compensatory measures must be secured to ensure that the overall coherence of the protected site network is protected. This has been interpreted to mean ‘like-for-like’ compensatory measures must be secured i.e., the measure should be targeted to the impacted habitat or species (impacted feature).”
This – coupled with the very precautionary approach to predicting possible effects on protected sites –results in very limited compensation options and resultant delays and uncertainty for projects: first, when deciding to bring forward an application; second, in achieving consent; then third, in commencing their operations having discharged pre-commencement obligations.
The proposed compensation reforms seek to tackle this key consenting risk.
Enabling Wider measures
“Enabling wider measures” has been proposed to introduce flexibility, though like-for-like measures will typically be preferred under a proposed tiered approach. The proposals create the opportunity for projects to compensate for environmental effects through measures which have benefits for the network of protected sites generally rather than by addressing the specific species/habitat in the location of effect. In some instances, “benefit could be delivered to the protected site network more widely by targeting large scale pressures that impact a number of protected features or sites, or conservation objectives of another protected feature of the protected site network which may have no link to the impacted feature e.g. measurable wider improvements in water quality, and restoration of habitats in other sites.”
Such measures are not only available where like-for-like is not. When “stepping through” the compensation hierarchy, the Scottish Government makes clear that a Tier 2 measure could, perhaps, be used where a Tier 1 (like-for-like) measure was also available if there “is evidence that a wider measure would have a greater ecological benefit on the protected site network”. UK government similarly propose that a future Statutory Instrument will set out the circumstances where lower tier measures may be used despite higher tier measure availability.
This shows welcome pragmatism which addresses the narrow interpretation long taken and allows best rather than most-specific compensation, paving the way to national site network benefit without the compensatory bottlenecks which risk the achievement of 40GW by 2040.
Compensation at scale; across projects; over extended timeframes
Other parts of the strategic compensation proposals will enable projects’ compensation efforts to be combined to achieve economies of scale. Projects may contribute to off-the-shelf cross-project measures drawn from pre-approved lists in a “Library” (England) or a “Portfolio” (Scotland). The proposals enable the outsourcing of compensation delivery to the operators of a “Marine Recovery Fund”.
Both consultations contemplate that in certain circumstances projects may proceed before such compensation is functional. This may be vital in ensuring projects can contribute capacity in short order where compensation measures confidence is high. Detail is still required, particularly, on establishing sufficient measures within the Library/Portfolio and developing a plan for effective and early delivery of the measures with a fair and clear cost and risk allocation to developers.
Conclusion
Recent years have seen offshore wind-friendly sentiment and policy at UK and Scottish government level. However, the same period has seen development become riskier and investor confidence reduce.
The reasons include factors outside UK governmental control – spiralling supply chain costs, US policy changes with global ripples – and factors closer to home: uncertainty over grid upgrades, pricing, and the Contract for Difference regime, leading to a developer reluctance to make final investment decisions involving billions of pounds.
Uncertainty outside the world of planning demands far greater certainty within it. The question for government and industry is whether these new proposals meet this demand.
Clearly, the ambition of 40GW by 2035 – 40 could be more ambitious but is likely in line with what can be delivered. Arguably, it is better to make good on a target than renege on something more ambitious. However, the target (and the ability to increase) should be kept under review given the growing consensus that the more offshore wind that can usefully be added, the greater the energy independence and security that can be achieved and the greater the socio-economic boost that can be created for Scotland and the wider UK.
The SMP-OWE could (and, during consultation, should) be sharpened to create a tool better able to provide Minsters with straightforward (and quicker) decisions on competing issues. Greater clarity would help manage expectations of potentially competing interests and provide context for statutory consultees – allowing a focus during decision-making on achieving the most effective and considerate project.
The compensation consultations are a welcome signal to the sector that UK and Scottish governments are serious about making offshore wind consenting more efficient and proportionate. A focus on removing barriers to deployment while seeking to achieve best environmental outcome demonstrates a pragmatism which really could raise our markets against other countries fighting for offshore wind developer attention.
Overall, making good on these proposals will be a step in the right direction for increased certainty and confidence in a consenting process that looks increasingly equipped to seize the opportunity of the coming decades.