There will be a “just transition” from fossil to renewable power, a huge shift in the way energy is created. But how is a sector which is traditionally seen as reliant on oil and gas coping with this seismic change?
Pretty well, according to Morag Watson, director of policy at Scottish Renewables, who is “absolutely” confident the targets can be achieved, and that the oil and gas sector will have a major role to play.
Scottish Renewables looks to the Climate Change Committee – an independent, statutory body established under the Climate Change Act 2008 – to advise the UK and devolved governments on emissions targets and to report on progress made in reducing greenhouse gas emissions and preparing for and adapting to the impacts of climate change.
Specifically, it looks at the committee’s Sixth Carbon Budget, published at the end of last year, which provided ministers with advice on the volume of greenhouse gases the UK can emit during the period 2033-37.
Based on the Committee’s findings, renewables should make up 80 per cent of electricity generation by 2050.
Watson says: “By that point, most of our heat and transport will be electric so the electricity system won’t be what we think of at the moment. It will have taken on a lot of the heavy lifting of what we are currently fuelling in transport with petrol and diesel and what we are currently fuelling in heat with gas.
“In terms of our de-carbonisation journey, the energy sector is relatively easy – we have the technologies, they are already the cheapest form of electric that we can generate and we know how to do it, and we have very effective mechanisms for bringing forward the volumes of renewable energy that we will need.”
Net-zero on a wider scale will be “trickier”, says Watson, pointing to changes that will be needed in areas such as land use, food, consumption levels and imports.
But a decline in the oil and gas industry does not necessarily mean a large-scale wave of unemployment. Kirsty Nurse, Of Counsel in the energy and climate change team at CMS, says Scotland is well placed for the transition of energy away from fossil fuels towards renewables.
“We are seeing a lot of the big oil and gas companies stepping up and they are setting up their own renewables and sustainability sections of their business. That is a huge step that needed to be taken.
“And in Scotland we have always had quite a pro-renewable government so the policies in place have allowed Scotland to be a forerunner with renewable energy. Our hydro schemes date back 60-plus years and the smaller scale even older. Onshore wind has been a huge development and again it is stepping up with offshore wind, where Scotland has been a real world leader.”
Nurse says the production of renewable power has to increase as oil and gas drops off, something she is confident will happen. “While people are trying to be more economic and sustainable, our energy needs are not going to drop enough and be consistent enough. We are still going need energy, so we need to make sure we are getting it from sustainable sources.”
And one day she sees the possibility of major oil and gas companies becoming solely focused on renewables. “It is a huge opportunity, everyone wants to be part of the energy sector. There are now more funds with banks and institutional lenders more interested in investing in the sector. Not to be crass, but more money means you can do more things.
“Oil and gas are not going to disappear overnight but they will run out, even if we weren’t trying to stop using them for climate change and environmental protection reasons. It is a finite resource. It makes good economic sense for oil and gas companies to make the move.”
She points to Norwegian giant Equinor, formerly Statoil. “They are doing massive renewable projects, and have been doing for years. They have been trailblazers in showing that you can change what your company is known for.”
Nurse also points to other sectors joining the drive to net-zero, not just those working in energy. “Scotland has been working towards it, with the rest of the UK, for decades and now it is really good to see all sectors paying attention to it. Previously climate change was seemingly only an issue for the energy sector whereas now you have United Nations targets and ESG [environmental social governance] – it is no longer a nice thing to have, it is now a requirement for companies to take into account. Banks are now looking at who they are financing and how they are financing and even looking at their own buildings. It is something that all sectors are doing and Scotland has been in a good position to move on that because it has been a general policy for some time now.”
Shepherd and Wedderburn is committed to achieving net-zero itself by 2030. Clare Foster, head of clean energy and a partner in the law firm’s banking team, says: “As a lead advisor in this sector, we understand the existential threat posed by climate change and, while we are working hard with clients to develop more clean energy projects in the transition to a net-zero future, we believe it is also our responsibility to lead by example in protecting and nurturing the natural environment.”
Foster says collaboration between sectors is vital. “Historically, different sectors worked to a large extent in ‘silos’. Now there is a commonality of purpose that means sectors are coming together in ways they never have before. This in itself creates opportunities, as it catalyses action to build the economy.”
The finance and energy sectors are now working very well together, Foster says. “They are working closely to identify solutions to address climate change and that’s encouraging to see. Scotland is rich in natural resources and that provides ample opportunity, both on land and around the coastline.
“But it’s not just about turbines on and offshore. If we are going to achieve net-zero, entire sectors need to be decarbonised. And that’s where working together becomes an imperative. I’d love to see us become a global hub for clean energy, decarbonisation and green financing.”
Meanwhile, the future for those in the oil and gas sector is moving towards renewables. Richard Cockburn, partner and energy sector head at transatlantic law firm Womble Bond Dickinson, sees the opportunities in renewables as being extremely good.
He says: “The oil and gas industry is investing heavily in low-carbon energy and indeed many view it as accelerating the growth of renewables by virtue of its deep pockets. A Goldman Sachs study found that European oil majors might invest as much as $170 billion into renewable energy projects by 2030, taking their share of the global renewables market from 1 per cent to 10 per cent.
“Accordingly, the oil and gas industry’s role as a catalyst for the energy transition should not be overlooked as we have seen with majors such as BP, TotalEnergies and Shell all announcing in recent weeks that they have bid into the current ScotWind offshore wind leasing process.”
And Cockburn says the oil and gas sector still has a role to play in providing energy. “On most scenarios, including those painted out by the International Energy Agency, oil and gas – especiallygas – plays at least some role globally in ensuring that there is enough energy to meet demand out to 2050. The key point is emissions from these activities need to be minimised and captured.
“The oil and gas industry therefore has a vital role to play in getting carbon capture clusters off the ground, and indeed they are very heavily involved in both of the clusters recently announced by the UK Government into Track One[the first wave of government-supported clusters in the UK].”
Although offshore wind will play a vital role in the move to a net-zero Scotland, Watson is also keen to stress the need for onshore wind and solar power, which make up the cheapest forms of renewables.
However, there is a need for a way to produce electricity whatever the weather. “Scotland has 85 per cent of the UK’s hydro and a key thing that will be a part of our transition to net-zero for energy is to be able to balance our grid.”
Scotland currently has two pumped storage hydro power stations which pump water uphill when there is spare electricity in the grid. When the grid is in need of increased supply, the water is sent back down to create hydro electricity. There is the potential for eight more according to Watson, who says they would provide “huge quantities of storage to our grid which will be essential in a renewables-based system”.
“That is another part of generating economic activities and jobs in Scotland that will come from the renewable energy industry.”
This article first appeared in The Scotsman’s Legal Review 2021