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Why engaging with citizens is key to a just and fair green transition
In this episode of the Leading into Tomorrow podcast, the speakers discuss about the opportunities and challenges of moving to a greener, fairer future in Scotland.
In this episode, Liam Middleton, Head of Critical Energy Infrastructure & Commercial Projects for the Scottish government, talks to presenter and reporter Kait Borsay about using citizen input, investment and innovation to deliver its Just Transition plan. He also shares exciting examples of innovation from around the country and highlights the transformative potential of hydrogen technologies.
Joining the discussion is Philip Milne, Partner, Corporate Finance, Government & Transport, Ernst & Young LLP, based in Scotland. Philip sets out Scotland’s advantages, including natural renewable resources and a highly skilled workforce, and explains why oil and gas will remain a key component of its green transition.
Key takeaways:
Co-designing an energy transition plan with citizens ⏤ particularly those in carbon-intensive industries ⏤ will expose the possible benefits, challenges and risks of moving to net zero.
Huge public and private investment, plus a pivot on the part of business, will be needed to make the shift to renewables.
Tapping into a country’s strengths, such as a skilled workforce in oil and gas or innovation in its rural regions, will help to attract inward investment and create new jobs in the green economy.
If you’d like to read more, a full text transcript of this podcast is available.
Kait Borsay
Hello and welcome to Leading into Tomorrow, a podcast series from EY looking at how governments are using technology-driven strategies to help deliver their visions of a better future.
I'm your host, Kait Borsay, and our theme for this episode is the Scottish government’s ambitious green transition plan, referred to as Just Transition.
Joining me are Liam Middleton, Head of Critical Energy Infrastructure & Commercial Projects for the Scottish government. Hello Liam.
Liam Middleton
Hello Kait.
Borsay
And Philip Milne, Partner, Corporate Finance, Government & Transport, Ernst & Young LLP, based in Scotland. Hello Philip.
Philip Milne
Hello Kait.
Borsay
Liam, let's start with you. The Scottish government is investing almost £5 billion in its energy transformation, Just Transition, the aim being to turn Scotland into a net-zero nation by 2045. So let's start with the big question on this, shall we? What does Just Transition mean to Scotland?
Middleton
I think at the outset it's incredibly important to Scotland, to its citizens and its businesses. And I think the overall purpose is because we have set stretching commitments towards tackling the climate emergency and we've legislated for those targets. And so, by law, they've got to be underpinned by plans — and credible plans at that — to reduce our greenhouse gas emissions, and at the same time try and adapt the impacts that climate change is going to have on our society and our economy.
We talk about a Just Transition; for us, that's about managing that huge change in our economy in what we call a just and fair way.
So that refers to the outcome of that change. So, trying to deliver what our ministers see as a fairer, greener future for all involved. But it's also about the process of how you get there and how you engage with everyone that's going to be impacted along that journey.
And we've identified in the Scottish government the best way to do that is what we call through Just Transition Planning. So the idea that that process is co-designed and it takes a wide range of views from everyone on what that future should look like and the actions that are needed by individuals, communities, regions and businesses to get there.
Borsay
And Liam: North Sea oil production has been so important to Scotland's economy, particularly over the last 50 years or so. We'll talk about the transition of jobs in a moment. But first, how do you plan to move from oil to renewables like offshore wind and hydrogen?
Middleton
So we think there's about 57,000 jobs in the oil and gas sector in Scotland. And we think that's worth about £16 billion to our economy. So it's hugely important for our economic characteristics. Our government's position is that an unlimited extraction of fossil fuels is not consistent with the climate emergency or our climate objectives. And, inevitably, we're going to see the North Sea hydrocarbon resources decline naturally over time. It’s well explored, it’s a mature energy asset. So, to answer your question, it’s about taking the right decisions now, today, to help respond to this change and ensure that at the same time we’ve got ample secure and affordable energy. And that energy is provided in a resilient way that helps our citizens and businesses. But at the same time try and position this for what we see is pretty significant economic potential in those alternative sources of energy, particularly renewables and hydrogen.
So what the Scottish government has done, we've got an energy strategy. It's called the Energy Strategy and Just Transition Plan. And what that looks like in practise is really leveraging the huge talent we think we've got in Scotland. The expertise of our energy sector and the infrastructural assets that we've got. And I think within that mix, oil and gas itself is really critical.
But alongside that sort of policy mission, we need transformational investment in both our infrastructure and then how we commercialize these other alternative technologies. So basically trying to subsidize their adoption and incentivize how these technologies are accelerated to invest in. As you said earlier, £5 billion in the net-zero energy economy in Scotland just across this parliamentary term.
And within that, we've got a large capital investment program and what that is doing is it's targeting investment at the sectors of our economy that are mostly fossil fuel-powered at the moment. Looking at areas of heat, how we heat our homes and businesses. Our transport, how we move around and how we power our large industrial sites. And that's where we're trying to target government’s money and capital to support changes there and at the same time doing all we can to maximize that really rich endowment we've got of natural resources and offshore energy potential in Scotland, looking at offshore wind, also hydrogens, as you say.
Borsay
Philip, let's come to you. What key themes for you, Philip, really stand out as the main challenges of the big transition to net zero, not only for Scotland but for other countries with equally ambitious decarbonization plans?
Milne
A lot of the times we see, particularly around the globe, there are announcements around targets for net zero, but there's not a lot behind those announcements at times. So it's really good to sort of try to work through what an operational plan looks like for achieving net zero. And I think that's what the Scottish government have to set in train here.
I think some of the challenges are not Scotland-specific. So if you look at the domestic economy, it continues to be reliant on oil and gas, particularly in the transport and the heating building sectors. The UK and Scotland in particular have done really well decarbonizing the electricity generation sector, but there's a lot to do in transport and a lot to do in heating buildings.
That probably takes us on to who pays, and that's a challenge, right, for you and me as homeowners: How do we transition our homes, you know, from your traditional boilers fueled by gas through to heat pumps and the retrofit of your own home? So who pays for that, Kait, is the big question, right? And that's a challenge for politicians I think, the one that needs to be addressed.
The other thing as well is that a lot of the technologies to enable the transition are still at an early stage, they're still unproven on scale. So there is a cost element to this.
We've seen that with solar panels over the last 10, 15 years —they've come down, commodity prices, to really, really low levels, but you know they started really high. So we've got a technology cost issue globally, and in Scotland, we've got a “who pays” issue that governments will need to grapple with in terms of policy.
And then the other thing is consumer behavior. How do you force or how do you incentivize consumers to change their behavior and move away from reliance on oil and gas through how you fuel and run your car through to how you heat your home?
Borsay
Liam, I'm sure you're nodding along to this. How then, on the ground, have you been communicating with people in Scotland, in Scottish communities, to engage them with the government's energy strategy?
Middleton
One of the core principles in the Scottish government’s approach to the energy transition is ensuring that change is co-designed with all those that it's going to impact. So the way that we have done that is we have engaged really extensively with people from a range of backgrounds, including workers, community groups, businesses, young people, civil society organizations. We’ve done that through a mixture of events, presentations, online surveys and wider virtual engagement.
And what that engagement has helped us do is expose the possible benefits that we see as we move towards net zero and both some of the risks and the potential challenges that Phil just mentioned there, and it's really given us quite a rich information stream of what stakeholders think.
And importantly, including communities that are situated in carbon-intensive industries, those who work in those industries and those who are affected by both the benefits and the challenges that come with that.
Borsay
So let's talk about investment with you, Philip. And as a small nation, I suppose Scotland, there is a challenge posed to Scotland there. How do they compete for investment to deliver the green transition?
Milne
It’s certainly a challenge in environment, Kait, if you think of what the US has done with the Inflation Reduction Act: really phenomenal level of subsidies to attract investment into the US. We're waiting on the EU's response. So you know, we can't compete as a small nation on that level of subsidy, but I take comfort from the fact that historically, and indeed in the latest figures, Scotland tends to punch above its weight and attract an inward investment into the country.
So we attract foreign investment across the globe. And within the UK setting, Scotland tends to be the favored location outside London, and that's for a number of reasons. But it's an attractive place to locate business. It's got a really strong brand as a country and a nation. It's got a highly skilled workforce, great infrastructure.
And if you combine that with the opportunity to be a global leader in renewables, because the natural resources are there to be exploited, then actually we’ve got a great opportunity. For Scotland, we've got to look at the areas of opportunity, and that might be going into certain niche areas around the supply chains, rather than going for the grand and the bold, you know, “lock, stock and barrel” supply chains coming into Scotland. I think it will be around picking our themes and our targets, particularly around technology as that develops.
We've got great research and universities, great port infrastructure. But I think that's probably where I would encourage the Scottish government to focus on is play to our historical strengths. We've been great at coalescing and getting inward investment into Scotland. Take comfort from that and be clean and bolder around a vision as we move forward.
Borsay
We hear a lot about hydrogen production and usage as being key to energy transition, don't we? Liam, how then does hydrogen fit into the Scottish government’s strategy?
Middleton
Yes, so hydrogen is one of the technologies that I think is going to prove critical in several opportunity areas. And that's because, even though hydrogen takes energy to produce, it's a hugely powerful gas, and it's entirely emission free at the point that gas is used. And because of this potential in Scotland, you've got a specific hydrogen action plan, and we are rather convinced of the transformational prospects for hydrogen in our energy system.
And the reason for that is because, although electrification will do much of the heavy lifting as we move towards net zero, there's still going to be elements of our economy and our energy system that are very difficult to electrify. And we think that hydrogen could provide a solution for those sectors.
So, for instance, if you look at heavy duty on- and off-road transport, shipping, aviation, and in big industrial sites where they have to generate a large volume of uninterruptable heat for their processes, we think hydrogen could be the answer there. And so the Scottish government’s plans and strategies include a renewable and low-carbon hydrogen ambition. And we're going to try and produce five gigawatts. So that's 5,000 megawatts, so a huge volume of energy by 2030 that's hydrogen, and then really accelerate that to 25 gigawatts by 2045.
Borsay
Liam, there are 93 inhabited islands in Scotland with a population of just over 100,000 people. Some of those homes, of course, are completely off grid. What's the government's thinking on Scotland’s rural areas in terms of energy production and usage? How do they fit into this?
Middleton
Intrinsically, there are regional dimensions to how we generate and produce and use energy in Scotland. So, for example, if you look at oil and gas, that upstream oil and gas industry, it's highly concentrated in the northeast, in Aberdeen and Aberdeenshire in particular. If you look at our downstream oil and gas sector, and what I mean by that is when you take oil and gas and you turn it into fuels and petrochemicals, all of that activity is concentrated on the east coast around Grangemouth and Mossmorran.
And then, if you actually look at where's the largest demand for that energy and the ultimate end product, that's in the central belt, around Glasgow and Edinburgh, where more than 80% of our population reside. But you're absolutely right, within that context, I think we have to think very carefully and thoughtfully about our islands. And we're seeing some major innovation, and what I think is pretty inspirational progress, coming through from rural communities in Scotland, particularly if you look at energy generation.
So, for example, in Orkney: Orkney has been really pioneering in how it's leveraged its natural capital. So over 100% of the island's electricity needs are now regularly met from renewable sources. In Orkney, they've got the highest number of electric vehicles per head of population in the UK. And also, we’re seeing really big developments in wave and tidal energy.
More marine energy devices have been tested there than anywhere else in the world. And hydro energy is another area with a really powerful regional story to it. So we're seeing great innovations coming forward in rural localities. So we've now got the UK's largest community-owned hydropower scheme that's situated just off the Barr River and Lochaline.
I think there's a lot that we can learn from what's happening in these regions, and these islands, and see how government and our partners in industry can try and leverage that expertise and really scale it up, because I think it would be a real mix of different technologies that ultimately get us towards net zero.
Borsay
Finally, we mentioned earlier that North Sea oil production has been so important to Scotland's economy historically. How then will these jobs transition to new roles, and new green jobs be created too, to support the economy? Keen to get both your thoughts on this one. Philip, let's start with you.
Milne
I think it's important to make the point that oil and gas will continue to be an important part of the economy moving forward. It's just on a decline curve as we've talked about. So there will be a transition, but oil and gas will remain a key component of that transition.
Our analysis, Kait, showed that the decline in jobs is pretty stark over the next 20 years in oil and gas, about 57,000 jobs, mainly in the northeast as well, which is a concern. But our analysis of the opportunities presented by the energy transition from hydrogen to the new carbon capture, so using the oil fields and the reserves out in the North Sea to store carbon, there is phenomenal opportunity to create those jobs. I think the hard yards go into securing the supply chains and creating the opportunities within Scotland, and that's I guess where Scottish government, through its energy strategy, comes back into play in terms of creating the right environment. Things like investing in port infrastructure, creating the right incentives for companies to locate into Scotland.
But also, business needs to play its role. You'll see a natural repivot of businesses in Scotland because the opportunities will veer towards renewables. So you will see a certain natural pivot. So there's a role for government in terms of now setting the agenda and helping and enabling the transition. And then there's the role for corporates in terms of that repivot.
Borsay
Liam, for you?
Middleton
I think the oil and gas sector itself is fundamental here. So, within that sector, we've got a highly skilled workforce and that oil and gas sector itself is going to be especially key in realizing this change. So it's got the assets that I think will prove to be an essential part of the transition. Some of the innovations around hydrogen and carbon capture storage, they're going to rely upon those assets and the people in that sector to actually implement them and make them happen.
The world-renowned expertise, the engineering credentials — and they know how to operate those technologies. So I think, for the Scottish government, we see the oil and gas sector, its workforce, its assets, its capabilities as being an intrinsic part of how we actually scale up and then implement these alternative technology areas.
Borsay
Well, that's it. Such an interesting discussion. Thank you to both of you, Liam, to you, thank you.
Middleton
Thanks, Kait. Thanks for having us on.
Borsay
And Philip, big thanks to you as well.
Milne
Yes, thank you, Kait, I enjoyed that.
Borsay
Well, do join us again for more insight into how governments are delivering technology-driven strategies. Also, why not subscribe to this series, so you won't miss an episode? From me, Kait Borsay, thanks for listening and bye for now.
Presenters
Kait Borsay
Host, presenter and reporter, Times Radio
Philip Milne
Partner, Corporate Finance, Ernst & Young LLP
Liam Middleton
Head of Critical Energy Infrastructure & Commercial Projects, The Scottish Government
