Climate Change Programme Consultations

Long Term Outcome 2 – Secure Affordable Energy

Target – Secure all Shetland energy consumption from affordable islands-based generation  

Importing energy into Shetland is expensive, this is compounded by our higher than average use and contributes to the high cost of living in these islands.

Shetland has the opportunity to break its current reliance on imported fossil fuels. While the specific fuels and amounts are not yet determined, there is an ample number of research and demonstration projects around the world exploring many different innovative options. Time will tell which of these will work in Shetland. Our vision is to become a welcoming place for investment and demonstrator projects.   

• “a backdrop of exports of oil and gas leaving Sullom Voe Terminal and Shetland Gas Plant each week which exceed Shetlands whole yearly energy consumption; and a very large export of renewable electricity on top of that anticipated soon.” (Future Energy Pricing Report, p.2)  

There may be the opportunity to export excess fuels produced on island to create a new economic market for Shetland.  Existing infrastructure will be repurposed/reused, and there will be new energy technologies filling the roles of traditional fossil fuelled processes.  

Though Shetland is a major extraction area for oil and gas in the UK, the price of the fossil fuels used on the islands is one of the highest in the country. This contradiction is explained by the lack of a refinery on the isles. Oil produced around Shetland is shipped away to be refined before being imported at a much higher cost for consumption. Producing our own clean fuels on island would allow Shetland to bypass import costs and increase energy security for the community.  

The cost of generating electricity using renewable technologies is reducing and this is discussed further in Section 9 Affordable Energy. The vast majority of electricity produced in Shetland will be from renewables following the final commissioning of the Viking Energy Wind Farm in 2024, and as generation far exceeds electricity demand in Shetland exported electricity will contribute towards the UK target to “Decarbonise the UK power system (electricity) by 2035”. However, electricity only represents a proportion of the energy consumed in Shetland and decarbonising other energy use will depend on electrification and the production and utilisation of clean fuels such as biofuels, hydrogen and its derivatives such as ammonia and methanol.  

Energy created in Shetland allows for more controls on costs and less dependence on external sources.   

• Reducing the dependency on imported fossil fuels.  
• Tackling the separate and not always inline concepts of affordability and the drive to produce our own energies.  
• Attracting people and industries  

We will campaign to ensure that regulations and arrangements allow Shetland-generated green energy to be made available to Shetland consumers and businesses at affordable prices to close the current energy affordability gap.   

“Our council’s carbon emissions and those for the wider Shetland community can only be controlled with affordable green electricity and clean alternatives to fossil fuels are generally available locally” (SIC, p 15)  

Long Term Outcome 3 – Create & Retain Local Wealth

Target – Generate £100m a year of diversified economic revenue to the Shetland economy  

Energy transition will have a direct impact on our existing industries, support is available from various routes to encourage the decarbonisation of industry.  The Marine Working Group is an example of where our marine industries are working together to share knowledge and experience. 

Sectoral co-existence is recognised as one of the Energy Development Principles, as competition for space will become a growing issue and will require a measured approach backed up by well-researched data. 

The Scottish Governments Energy Strategy and Just Transition plan scenario development provides a summary of the forecast GVA impact for different decline pathways for oil & gas (O&G). At present the direct GVA per direct job of the O&G extraction sector is £1.1m, 15 times higher than the average for the Scottish economy as a whole.  While an initial target of £100m has been set for energy transition revenue, further analysis needs to be undertaken for Shetland to fully understand the implications of the decline of the oil and gas industry and the opportunities associated with renewable energy generation and clean fuel production. 

In addition to supporting our existing industries economic diversification is also required to strengthen the economy.  That could be achieved through investment in energy transition projects with local or community ownership along with supply chain opportunities.  Supply chain integration is recognised as one of the energy development principles to ensure developers commit and investigate opportunities fully.  That stated, it has to be acknowledged that there will be development of large-scale renewable ventures where local input will be more difficult to achieve. In such circumstances the Shetland Energy Development Principles will be implemented to advance local economic benefits.  

There is also an opportunity to attract high-energy demanding industries and businesses to Shetland, as an alternative to exporting the energy.  For example, ammonia and methanol can be produced from hydrogen and are both energy vectors and industry feedstocks.  Local production closer to the source of energy generation would also support wider emission reductions.

Having a greater certainty on future energy developments will support local businesses to make investment decisions.

Section 8 – Economic Opportunity examines this long-term outcome in greater detail.  

Long Term Outcome 4 – Skills and capacity development

Target – Local supply chain adapted and grown to support new industries in clean energy employing 500 people in Shetland   

Energy transition will impact everyone.  Some changes will be more noticeable than others and as everyone is starting from a different place, our journeys will all be different.

We must ensure no one is left behind.

Lifestyle

Reducing energy use will require behaviour change.  This change can be enabled through consumer demand along with developments in technology.  This is discussed further in Section 7 changing energy use & reducing emissions.    

Workforce

It is estimated that there will be 2,000 jobs in the energy sector (direct & indirect) in Shetland at the peak of the energy developments, during the construction phases.  After the peak, during the operations & maintenance phase, the number of jobs will level out to around 1,500 longer term roles. Many of the roles and skills in the energy sector will be transferrable across technology type and worker experience. 

We acknowledge that increasing the workforce will require wider community planning for an increased population, both permanent and itinerant.

Not all energy jobs will be matched like-for-like. Our vision for skills and workforce goes beyond energy industry jobs to encompass all skillsets that will change alongside the technology and future fuels. Jobs will range from mechanics for EVs to maintenance workers for turbines (on & offshore).   

Section 10 - People powered change looks in further detail at workforce, participation and working together. 

Future Energy Scenarios

The transition to net zero has many unknowns and there are various routes that we can take.  We recognise that external factors will have a huge impact on achieving a Just Transition and the key to managing change most effectively will be through high levels of engagement and communication.

We will see local change and the need to develop local solutions in response to national guidance. 

It is therefore necessary that we consider our energy future and what is feasible for a clean energy vision as there will be various opportunities and challenges associated with the decisions which need to be made. 

The energy strategy uses 3 scenarios, building on those used in the Shetland Net Zero Route Map. 

Scenario 1 – Business as Usual (BAU)

The BAU scenario is intended to show the changes that could occur if no additional local action was taken to mitigate GHG emissions in the Shetland region, beyond those that are already planned and committed.

From the Shetland Net Zero Route Map

What does this look like?

Assumption: no additional local action is taken; no more energy developments beyond those in the construction phase

Reduce Emissions:

• No further energy generation in or around Shetland other than that already consented
• unless consented by another party such as the Energy Consents Unit at the Scottish Government.
• 600 MW interconnector to the UK Mainland with potential for further developments such as the electrification of oil and gas assets in line with national strategies
• Minimal upgrades to the distribution grid, limiting community renewable energy connections or smart grid solutions locally. 
• No additional support for projects to reduce energy consumption
• No further upgrades to ports and harbours beyond that already consented

Secure & Affordable Energy:

• No action and minimal engagement on affordable energy

Create & Retain Local Wealth:

• Limited engagement with developers to maximise opportunities locally which would benefit the local supply chain.
• Limited science backed research to support environmental protection and sectoral co-existence.
• No active pursuit of competitive funding opportunities

Skills & Capacity:

• limited communication and engagement,
• behaviour change limited to reactive change.
• Jobs & Skills -

The BAU scenario assumes that no further renewable energy generation will occur on island beyond what is in the construction phase of development in the year of publication. A Shetland resistant to an energy transition and the accompanying developments could look similar to the Shetland of the 1950s and 1960s before the move of the North Sea oil & gas industry into the region. An active community and Council push back against renewable energy projects both on and offshore could lead to a decline in the energy industry as other locations become more favourable for energy generation projects.

This scenario is very unlikely as there is already a level of collaboration with the energy sector and more developments look like progressing.

Note, there would still be national actions taking place such as offshore wind, which would change renewable energy generation in and around Shetland.  In this scenario we assume that would happen as decisions are made outside Shetland but with minimal local engagement.

How will scenario 1 meet the 4 long term outcomes:

Reduce Emissions:

• Following the completion of the interconnector cable in 2025, the emissions factor for electricity in Shetland will be as per the UK mainland grid.  Renewable electricity generation in Shetland is in excess of our demand and will contribute to the overall national emissions reductions.
• The installation of energy efficiency measures will continue at the same rate. Electrification and the uptake of electric vehicles will reduce wider energy emissions for Shetland but will not be enough to address the harder to decarbonise marine and transport sectors.

Secure & Affordable Energy:

• Electricity market reform will happen but there is no guarantee that this will deliver any local benefit.  The majority of the energy produced on and around Shetland will be used in producing alternative fuels, exported via interconnector cable to the mainland, or used for the electrification of offshore assets through a disjointed network of cables and pipelines.  This disjointed approach will lead to many suboptimal projects which may struggle to compete and add additional costs to the taxpayer. 
• Customers in Shetland will continue to depend upon importing some fuels. There is an expectation that, as is the case now, there will be a premium cost associated with these imported fuels.
• It will not be possible to find local solutions to reduce energy consumption for heat and transport. That would mean Shetland continuing to have the double problem of high prices and high consumption. This will continue the high rates fuel poverty, high cost of living and ongoing inequalities.

Create & Retain Local Wealth:

• This scenario sees high levels of external investment in the decarbonisation of oil & gas assets, the development of offshore wind, CCUS, industrial scale H2 and Power2X.  While this would provide opportunities for the local supply chain, these will not be fully exploited due to lack of engagement and the rush to develop projects. 
• Decarbonisation of the oil and gas sector will lead to a slower decline, although changing government priorities will mean there is an element of unpredictability.
• Competition for marine space will contribute to the decline of our marine sectors which currently make a large contribution to the local economy. Engagement with these sectors will be minimal, resulting in limited support and misunderstandings of the key issues faced.
• Minimal collaboration between local supply chain companies, limiting the size of contracts that the local supply chain can tender for. There is a strong likelihood that energy developers would use the minimally required local content as prescribed by the national government regulation. Shetland firms would be ‘left making the sandwiches’ as opposed to being contracted to lead the large development components. 

Skills and Capacity Development:

• The number of jobs in oil & gas would increase initially in line with the high levels of investment but the majority will be short-term contracts. As the local supply chain is not fully integrated, opportunities for local skilled jobs would be less.  There would also be a decline in Shetland’s other main economic sectors due to competition for space. 
• Without advancing the on-island skills options in line with future projects, there could be a decline in the skilled workforce in Shetland. Competition for these skilled workers would increase. As the transition (something about boom and bust) so employers may seek to outsource short term contracts. With limited capacity for taking on new projects and commissions, the wealth generated from these projects would leave Shetland in preference of mainland companies.

Scenario 2 – Pathway A

Pathway A, is a ‘best guess’ at what a high-ambition, but nonetheless realistic, future might look like. Conceptually it is similar to the Climate Change Committee’s ‘Balanced’ net zero pathway, which ‘makes moderate assumptions on behavioural change and innovation and takes actions in the coming decade to develop multiple options for later roll-out (e.g., use of hydrogen and/or electrification for heavy goods vehicles and buildings). Due to Shetland’s atypical emissions profile, multiple adjustments have been made to this to reflect local circumstances more accurately.

From the Shetland Net Zero Route Map

What does this look like?

Assumption: what we can realistically achieve with high levels of ambition, but investment and collaboration for energy transition projects is limited making them suboptimal.

Reduce Emissions:

• Local energy generation associated with demand on a range of scales
• Engagement with developments in or around Shetland where consented are awarded by another party such as the Energy Consents Unit at the Scottish Government
• 600 MW interconnector to the UK Mainland with potential for further developments such as offshore electrification in line with national strategies,
• Upgrades to the distribution grid to enable further local renewable energy generation and electrification. 
• Additional support for projects to reduce energy consumption for buildings and transport
• Investment in port and harbour infrastructure following engagement with developers to understand what would be required for offshore wind, decommissioning and the use of future fuels within the marine fleet

Secure and Affordable Energy:

• Action and engagement on affordable energy,
• Local solution to the roll out of smart meters, widening the range of options available to customers

Create and Retain Local Wealth:

• Engagement with developers to increase opportunities locally which would benefit the local supply chain.
• Science backed research to support environmental protection and sectoral co-existence

Skills and Capacity Development:

• Good communication and engagement but behaviour change is moderate due to the limits on wider transformational change required to enable behaviour change.
• A Just Transition route map for Shetland prepared

This scenario will require high levels of local investment, and would be difficult to progress without the establishment of an Energy Strategy for Shetland.

How will it or won’t it meet the 4 Long term outcomes:

Reduce Emissions:

• Grid electricity emissions factor as above.
• In this scenario there will be a recognised need to seek local solutions to national guidance.  There will be a focus on reducing energy consumption through energy efficiency works and local transport solutions such as pool cars.  Emissions reductions from heating will be primarily achieved through heat pumps and other forms of electric heating.  Along with maximising opportunities for district heating where appropriate. 
• Local solutions will be found to decarbonise our more difficult marine and transport sectors, investment will be a limiting factor

Secure and Affordable Energy:

• Local change will result in reduced energy consumption for heat and transport contributing to making energy more affordable and reducing inequalities.  Household income would also be supported through local skilled jobs. 
• Energy market reform may only provide a short-term benefit to Shetland.  Other projects such as community district heating projects would be developed to support the delivery of affordable, secure energy but would require high levels of initial investment.
• There would be less local control over energy security and affordability as energy and fuel produced would be exported to the mainland or internationally before returning in a refined form for local consumption. 
• Production of clean fuels on island creates energy security for Shetland and production beyond local demand can be exported to create a new economic market for Shetland. The demand for clean fuels will grow alongside the production of the fuels. Demand comes from transport (both on land and marine), domestic consumption (for heating, etc), and industrial processes.

Create and Retain Local Wealth:

• Pathway A would see encouragement and collaboration with energy developers, and there will be economic benefits of the energy transition for Shetland.  However, as the energy developers are large energy majors, the majority of the wealth would continue to bypass Shetland. Offshore developments would integrate with Shetland, and there would be collaboration between developers to try to minimise the impact on the local fishing and marine economy. 
• The coordination for reuse and adaption of existing infrastructure will happen but opportunities will be missed without an overall masterplan and full engagement. There is a risk of stranded assets for existing infrastructure that might have had a longer life if developed collaboratively. There is a chance that more greenfield sites will be developed than necessary for the transition if each developer builds their own infrastructure separately.
• Local supply chain companies will collaborate on tenders to enable them to bid for contracts and lead on development components.

Skills and Capacity Development:

• Delays in funding and investment falling short of what is required along with the lack of an overall masterplan for energy transition will result in missed opportunities for skills development, the local supply chain, and housing/accommodation.
• In this scenario, there will be energy jobs in Shetland, but the range of energy transition jobs may be less and wider energy transition challenges such as the high cost of living in Shetland and accommodation shortages will result in opportunities being missed. 

Scenario 3 – Pathway B

Pathway B, explores the maximum reduction that could be achieved in a best-case scenario if key sectoral targets were met or exceeded. This would require higher uptake of more costly measures and the removal of various other practical obstacles. Because the aim is not only to reduce emissions, but also to reduce energy demands as much as possible, there are slightly different choices about the technology and fuel mix. Pathway B also assumes that all or most fossil fuel use in business and industry can be phased out, even where there is presently no information available as to the end use of those fuels, which makes it difficult to identify suitable mitigation measures at present. The other key difference is that Pathway B is more optimistic about opportunities to restore peatland and decarbonise agricultural activities.

From the Shetland Net Zero Route Map

What does this look like?

Assumption: How far could we go if money, risk aversion and engagement were no obstacle; doing the most; high levels of collaboration with strategic investment with a holistic approach.

Reduce Emissions:

• Community or shared ownership in energy generation.
• Place based approach to reduce local energy consumption and develop new systems which make it easier for individuals, communities and businesses to transition. 
• A shared energy ecosystem for Shetland maximising the use of existing infrastructure and brownfield sites with full engagement to understand the capabilities required for offshore wind, decommissioning and the use of future fuels within the marine fleet. 
• Overall masterplan where Shetland is an energy hub fully integrated within a network of energy hubs across the North Sea

Secure and Affordable Energy:

• Both long and short term solutions found to deliver affordable energy in Shetland. 
• Energy market reform results in long term stable energy prices.
• Local energy price.
• Community schemes insulating Shetland from global energy markets

Create and Retain Local Wealth:

• Maximum community benefit through a variety of ownership models, supply chain integration, rental, displacement payments and direct community benefit.
• Maximum local content in projects with Shetland becoming a centre of expertise in energy transition, enabling the replication of projects in other sites around the world.
• Supply chain expanded and diversified.
• Fully integrated science backed research to support environmental protection and sectoral co-existence.
• Full engagement and collaboration between the community, developers and the consenting authorities in and around Shetland with a Masterplan for the area to enable sectoral co-existence

Skills and Capacity Development:

• Good communication and engagement with high levels of behaviour change and participation in the energy transition.
• A Just Transition route map for Shetland prepared

A shared energy island vision for Shetland is the basis for this scenario. Shetland’s strategic location in the North Sea provides ample wind, wave, and tidal renewable resources that could be harnessed to help decarbonise beyond just the island’s energy system. With existing energy infrastructure and established collaborative channels, Shetland could offer a strong opportunity to become a leading clean energy hub by generating renewable energy and producing clean fuels on island. Through a proactive approach, Shetland will be able to have a say in the changes that will inevitably be made. 

Realising Shetland as a clean energy hub will require collaboration across organisations & enterprise (in Shetland and internationally), regulatory bodies, local & national governments, academia, and local community. The demand for clean fuels will grow alongside the production of the fuels. Demand comes from transport (both on land and marine), domestic consumption (for heating, etc), and industrial processes. 

A variety of technologies will enable the transition for Shetland: onshore & offshore renewables, electrification, district heating, hydrogen & its derivatives for clean fuels, carbon capture & storage, etc. A whole island approach would centre energy development on existing industrial land. Strategic planning and development will reduce the amount of new infrastructure needed, increase the co-existence with existing economic sectors as well as generate and retain wealth & jobs in Shetland.

An energy transition at this scale requires the full utilisation of the capacities that Shetland based organisations have and can provide, aligning government policy with public and private investment, and willingness for substantial change within the population. 

This scenario will require high levels of local investment and engagement, and could not progress without the establishment of an Energy Strategy for Shetland.

Note: we assume exemplary engagement and that there are global actions to end the extraction of fossil fuels at the fastest rate while achieving a Just Transition for everyone.

How will Pathway B meet the 4 long term outcomes:

Reduce Emissions:

• Emissions from electricity will be as above for the other scenarios.
• This scenario sees the fastest possible just transition for the oil and gas sector as set out in the Scottish Government’s Energy Strategy and Just Transition plan. There will be a focus on reducing energy consumption through energy efficiency works and local transport solutions, such as pool cars.  Emissions reductions from heating will be primarily achieved through heat pumps and other forms of electric heating.   
• High levels of investment will be available to find local solutions to decarbonise our more difficult marine and transport sectors.  

Secure and Affordable Energy:

• Long term affordable energy will be achieved through a reduction in energy consumption and a reform of global energy markets. This scenario will go as far as possible on energy efficiency measures across all sectors. 
• Energy market reform will enable a range of mechanisms to reduce the cost of electricity to customers.  Including cheaper energy prices for customers located close to energy generation through localised pricing and an energy benefit as part of the community benefit package associated with specific developments.  Smart meters and flexible tariffs will support behaviour change, encouraging use at times when energy prices are low. 
• Local energy generation/hub projects involving either a single property or a group of properties (domestic turbines, solar panels, small hydro-dams and district heating schemes) will become accessible and be an important component of the energy system.
• The production of clean fuels in Shetland and ensuring a route to the local market creates energy security for Shetland and reduces the need to import energy at additional cost. 

Create and Retain Local Wealth:

• Pathway B will see the highest level of wealth retention through local ownership where opportunities arise. Developers will go beyond the minimum requirements on local supply chain content providing local supply chain companies a steady work base from planning to operations and maintenance.  Developers will also employ local staff in highly skilled roles.  Energy Developers and the supply chain will collaborate and engage with the local fishing and aquaculture industry to minimise the impact of developments.
• In this scenario there will be an overall masterplan or framework to support a coordinated approach to the reuse and adaption of existing infrastructure and to support collaboration across all sectors and locations.  Examples include updating and/or adapting existing infrastructure to avoid disturbing greenfield sites and marine habitats. Deep water ports will be adapted from oil & gas export by tanker to whichever clean fuel derivative is produced on the island. The pipelines connecting SVT to St. Fergus could be repurposed or adapted to export clean fuels and/or carbon for storage in the EoS or WoS fields. Additionally, clean fuel export via tankers could mean import of captured carbon to be pushed into fields thus creating a circularity of tankers and no empty hauling.   

Skills and Capacity Development:

• In this scenario, jobs will be retained and expanded with a focus on local workers to fill a wide range of skilled roles. There will be some need to bring in external temporary workers during the construction phases, but the long-term maintenance and operation of projects would be filled by the local workforce. 
• Skills would be developed on-island (or regionally) with the aim to retain younger workers. A planned approach and collaborative understanding of the skills needed to fill energy transition jobs would provide security for roles. Workers will be reskilled and upskilled in transitioning industries. The number of high-skilled workers will increase alongside the increase of available diversified roles.

Updating Scenarios

The scenarios will need to be revisited at regular intervals examining specific challenges in further detail, considering the different options available along with interlinkages.  All of linkages should be considered with addressing the scenarios and to identify enabler gaps.

We will statement for Our Energy Future

• We will further reassess the future energy scenarios for Shetland as technology progresses and emerges to support strategy development and identify interdependencies.