GB Energy and the net zero transition

We are concerned that clean energy jobs are not being created at the pace or scale required to match the heavy job losses arising from the decline of the North Sea oil and gas sector. The scale-up of clean energy is progressing more slowly than the decline of the oil and gas sector. The Government should avoid accelerating the decline of North Sea oil and gas production through its policy environment while this remains the case. (Conclusion, Paragraph 52) The Government should urgently address this gap with increased Government investment proportionate to the scale of the challenge. The Government must set out clearly how its investments and policy environment will create the jobs and revenue necessary to replace the jobs being rapidly lost in North Sea oil and gas. (Recommendation, Paragraph 52)

Such an approach is the minimum necessary for a smooth transition of workers, and to avoid the risk of harming UK tax revenues, economic activity, and employment in many Scottish communities, where the effects of the transition will be disproportionately felt. The loss of jobs abroad has detrimental impacts to the UK. This represents not only the loss of world- renowned skills and expertise in the energy sector, but also a significant hit to regional economies, population dynamics, demographics and communities. (Conclusion, Paragraph 53)

We recognise that with time moving to clean energy improves the UK’s overall energy security. However, as fossil fuels are to continue to form part of the UK’s energy mix for decades to come, there are compelling arguments to meet as much of that need as possible from domestic sources. Easing the gradient of production decline means higher economic returns, lower emissions, and anchors jobs and skills in the northeast of Scotland, which will be necessary for the rapid growth of clean energy sectors. (Conclusion, Paragraph 54) 55

The Government should set out how it intends to address the issue of the North Sea oil and gas industry’s decline outstripping the scale-up of clean energy. We urge the Government to take a pragmatic approach to its licensing policy as an outcome of its consultation, Building the North Sea’s Energy Future. In its response to this report, the Government should clarify how developers may be permitted to undertake additional drilling activity under existing exploration licences. (Recommendation, Paragraph 55)

We recognise that maximising economic return from clean energy investments requires supporting and expanding UK-based supply chains. (Conclusion, Paragraph 56) The Government should set out how it intends to increase the proportion of UK-based supply chains used by clean energy generators. (Recommendation, Paragraph 56) Tax and regulatory environment

We welcome the Government’s acknowledgement that it now needs to take action on the oil and gas industry’s fiscal environment. However, a lack of clarity on the fiscal regime beyond 2030 has created uncertainty for industry in the North Sea. The Energy Profits Levy at its current rate of 38%, which brings the headline rate of tax to 78%, is seen by many in industry as no longer proportionate. We are concerned that without reform the levy will accelerate the decline of the North Sea oil and gas industry and its associated supply chain, resulting in job losses. The UK will require oil and gas in its energy mix for decades to come and the fiscal regime should reflect that. (Conclusion, Paragraph 66)

In its response to this report, the Government should commit to a publication date for the outcome of its consultation on the new fiscal regime. To provide much-needed clarity and confidence to the sector, the successor regime should be brought into effect as soon as possible, rather than replacing the Energy Profits Levy from 2030. (Recommendation, Paragraph 67)

We welcome the Government’s publication of updated guidance on environmental impact assessments for new oil and gas fields, providing greater certainty to the sector. Given that each application will be considered on a case-by-case basis and the Government has not shared how factors will be weighted in its assessment, transparency surrounding the process could be improved, especially as this is an area of public interest. (Conclusion, Paragraph 75) 56

We recommend that the Government commit to issuing an explanatory statement after assessing each application, setting out how it has balanced the environmental impact against the economic and energy security benefits of oil and gas fields in its assessment. A justification is vital to ensure the industry and wider public can understand and be confident in the Government’s stewardship of the North Sea continental shelf. (Recommendation, Paragraph 76) Managing the transition

Given what is at stake if transition is mismanaged, we are disappointed that Unite the Union has been unable to share, as promised, its plan to create 35,000 energy transition jobs. The plan might have been a valuable and timely contribution to our inquiry and could have assisted us in developing our recommendations to the Government while it develops its own North Sea transition plan. Unite’s clear failure to supply the plan ultimately casts doubt over its existence. (Conclusion, Paragraph 83)

A coherent transition plan for the North Sea is urgently needed. While we recognise that the Government has been in power for 15 months, plans are not yet in place and the transition is already well underway. The Government’s consultation, Building the North Sea’s Energy Future, which commits to producing a plan in dialogue with industry, trade unions and communities, is a welcome start but is moving too slowly. (Conclusion, Paragraph 89)

The Government should recognise the urgency of the need for a coherent plan for the North Sea by committing to dates for the publication of its consultation response and consequent transition plan. The transition plan should be long-term in scope, provide certainty to the sector, and speak directly to the challenges faced by the communities in the northeast of Scotland, who are disproportionately affected by the UK’s transition away from oil and gas. We recommend that the Government’s transition plan contains specific and measurable outcomes on increasing the transfer of skills from the oil and gas industry to new sectors, with clear commitments from both governments and industry on how to achieve them. This could include target figures for oil and gas workers transitioning into specific industries, for clean energy job creation, and data on the UK supply chain content in both oil and gas and renewable energy activity. (Recommendation, Paragraph 90)

It is vital that the skills of workers who have made Scotland’s oil and gas industry successful are not lost. We welcome the efforts of both governments to support the development of clean energy jobs and the transfer of skills from the oil and gas sector to other industries. In particular, 57 we welcome the establishment of the Oil and Gas Transition Training Fund. Access to an effective training fund will serve as an incentive for workers to transition and shows that the Government is serious about supporting people into the jobs of the future. A Government-led training fund will also improve ministerial accountability and coordination of the North Sea energy transition at a national level. (Conclusion, Paragraph 98)

The forthcoming transition plan should set out how the UK and Scottish governments will work together to deliver the Oil and Gas Training Transition Fund. It should clarify the duration of the funding available and the degree of UK Government involvement in the scheme, to ensure sufficient accountability at a UK level. In its response, the Government should outline whether it has considered how co-investment plans with the private sector or the revenue generated by the Energy Profits Levy could finance the transition fund in the long term. (Recommendation, Paragraph 99)

There has been a failure of communication from consecutive governments to oil and gas workers about the transition and what they need to do to prepare and benefit from it. Government action is required to ensure the visibility and promotion of clean energy jobs, as well as to ensure existing workers are aware of the reality of transition and that these new opportunities are available to both prospective and existing workers. (Conclusion, Paragraph 103)

As part of its North Sea transition plan, we recommend that the Government conduct a communications campaign about the scale of the energy transition and the employment opportunities available, directed at both oil and gas workers and new entrants to the sector. This should include information about skills transferability between oil and gas and other sectors and should also signpost how to find relevant job opportunities. (Recommendation, Paragraph 104) Grangemouth oil refinery

The Grangemouth case is the energy transition’s canary in a coalmine. It has illustrated the need for Government’s active stewardship in the energy transition. Petroineos advised the Committee that the UK and Scottish governments were aware of its plans to cease operations at the refinery five years ago. Both the UK and Scottish governments should have acted sooner to prepare for the resulting job losses and set in motion a feasibility study for future industries at the site at a much earlier point. This lack of action created an employment gap and trauma for the local community that could have been avoided. Petroineos, in collaboration with the Government, local authorities and trade unions, ought to have produced a comprehensive exit plan. (Conclusion, Paragraph 124) 58

In its response to this report, the Government should outline what has been learned from this case and what can be done to ensure that comparable industrial transitions will be better managed in future. Having consulted trade unions and communities during its consultation on Building the North Sea’s Energy Future, we recommend that the Government set out principles in its consultation response which outline the conditions and actions that constitute a just transition for workers and communities and draw on best-practice examples. These principles can act as a guide and create an expectation for transitioning high-carbon companies to produce an exit plan that benefits workers and communities. We recommend principles that emphasise the importance of early government intervention in industrial transition, proactive engagement with workers and communities, and which aim to maximise good, long-term and well-paid jobs. (Recommendation, Paragraph 125)

Continued momentum on the future of Grangemouth is vital. Project Willow must not be left to gather dust while jobs are at stake. We welcome the Scottish Government’s £25 million Just Transition Fund and the UK Government’s commitment of £200 million in ringfenced National Wealth Fund funding to leverage private investment in Grangemouth’s future. However, more clarity is needed on how decisions about investable proposals will be made, and how the Government’s taskforce on Project Willow recommendations will feed into the investment taskforce. This is crucial as it is potentially in the Government’s gift to unlock certain projects through regulatory changes. (Conclusion, Paragraph 137)

The Government should explain in its response to this report how its taskforce on regulatory recommendations will feed into decisions taken by the National Wealth Fund. The Government should make clear the role and influence of the Grangemouth Investment Taskforce Board in relation to the allocation of the £200 million National Wealth Fund funding. It should clarify whether the speed at which a new project at Grangemouth can begin, as well as the number and quality of jobs to be created, will be taken into account when making decisions about investable proposals. (Recommendation, Paragraph 138) 59

The Clean Power by 2030 target is extremely ambitious, and we would suggest the Government must use all the levers it possesses if it is to achieve it. Maintaining public confidence and rebuilding political consensus around the pace, cost and implementation of the energy transition will be essential if the UK is to meet this Government’s clean energy mission. This confidence will be undermined if targets are missed. The UK Government must reflect on this risk and ensure it continues to be realistic about the deliverability of its clean power ambitions. (Conclusion, Paragraph 12)

The risk of undermining confidence in the transition is especially acute for those Scottish communities being asked to host significant new energy infrastructure. In many cases, these communities—often in rural and remote Scotland—already feel disproportionately affected by the costs and impacts of the transition. These communities are also experiencing higher energy costs due to higher standing charges, limitations on the type of fuel they can access, and housing stock which can be harder to heat. Clean power targets will only succeed if communities experience the transition as something that is done with them and not to them. It would be damaging to the UK’s clean power ambitions for there to be a perception that Scottish communities are being disadvantaged as a result of the ambition around clean power. (Conclusion, Paragraph 13)

Great British Energy has important objectives and the backing of a substantial £8.3 billon capital funding allocation. However, the organisation remains in its infancy and is yet to become the fundamental driver of clean energy development it is envisioned to be. To a certain extent, this reflects the fact that it is only one year since it was formally established, but we note that GBE was billed as a key vehicle in the delivery of the Government’s CP2030 mission, now just three and a half years away. It is important that claims made about GBE and its capabilities are realistic, and that public understanding and expectations about its role in the transition are managed accordingly. (Conclusion, Paragraph 21) 50

If Great British Energy is to become the catalyst required to accelerate renewable generation and meet CP30, it must now move quickly beyond the initial start-up phase and scale up delivery. This will be especially important if it is to fully deploy its share of the £8.3 billion capital allocation made to GBE and GBE-Nuclear by the end of this Parliament in a responsible way that maximises value for taxpayer’s money. (Conclusion, Paragraph 22)

The Government’s intention to take a more direct role in determining Great British Energy’s investment in Scotland, rather than allocating funding through existing Scottish Government programmes and public bodies, presents a potential risk of duplication and inefficiency. In its response to this report, the Government should set out how it intends to work with the Scottish Government to mitigate this risk, and ensure taxpayers’ money is spent in the most efficient way. (Recommendation, Paragraph 23)

Given Great British Energy’s core objective is to increase public ownership of clean power, transparency is essential. In its response to this report, the Government should clarify how much of Great British Energy’s £8.3 billion capital allocation has been spent to date and on which projects. It should also set out how it intends to ensure Great British Energy’s spending and returns are regularly reported and accessible to the public moving forward. (Recommendation, Paragraph 24) Upgrading the grid for CP30

Scotland currently faces higher-than-average standing charges, largely reflecting the higher costs of transporting power to rural areas compared with large population centres. The burden of higher standing charges is particularly acute for Scotland’s remote and island communities, who also experience higher levels of fuel poverty and, in many cases, are bearing the brunt of the infrastructure required to deliver UK- wide clean power ambitions. This disparity risks undermining public confidence in the transition and exacerbating inequalities, particularly in the short-term, as increased infrastructure investment pushes up bills. (Conclusion, Paragraph 43)

Following the outcome of Ofgem’s imminent review of energy system costs, the Government should introduce a standing charge that applies consistently to all regions, which would lead to a fairer system for consumers across Great Britain, including in Scotland. (Recommendation, Paragraph 44)

Successive administrations have chronically underinvested in the electricity grid. As a result, grid capacity has not kept pace with the expansion of renewables across the UK system. This causes the perverse outcome 51 of Scottish windfarms being switched off—sometimes more frequently than they are generating—while a fossil fuel power station is fired up elsewhere in the UK. UK energy consumers are currently seeing the costs of curtailments, the expansion of renewables, and grid upgrades added to their energy bills. This does not help to inspire public confidence in the fairness of the energy transition. While we note the UK Government’s demand-side measures, it must do more to reduce current levels of curtailment. (Conclusion, Paragraph 58)

Grid capacity is one of the biggest barriers to achieving Clean Power by

We welcome the Government’s commitment to introduce a mandatory community benefits scheme for new generation infrastructure. However, we remain concerned that the pace of implementation is too slow, with any scheme not expected to take effect until the end of 2027 at the earliest. Many developments—particularly across Scotland’s Highlands and Islands—will already be built out, leaving affected communities potentially feeling that they have been short-changed. (Conclusion, Paragraph 84)

Meaningful community benefit extends far beyond financial payments. Housing availability, access to skills training, and the creation of long-term local jobs are equally important. This is especially true in rural and remote Scotland, where the coming of renewable energy provides an opportunity to leave a transformative legacy of housing, skills and quality employment for communities which have historically seen limited investment. The Government must seize this opportunity by ensuring mandatory community benefit schemes are sufficiently flexible to reflect the differing needs and priorities of Scotland’s diverse communities. (Conclusion, Paragraph 85)

This should include a requirement that companies undertaking major infrastructure projects in rural areas construct worker accommodation to a standard suitable for retention as permanent community housing once the project is complete. (Recommendation, Paragraph 86) 52

While it is important to safeguard the commercial viability of renewable schemes, the Government must ensure that the minimum compensation provided through its mandatory community benefit scheme reflects fair compensation for communities hosting these schemes. The UK Government’s proposed £5,000 per MW community benefit contribution is insufficient, and does not meet this test. (Conclusion, Paragraph 87)

In its response to this report, the Government should set out its rationale for its proposed £5,000 per MW benefit contribution, and what insight it has taken from ten years’ experience of the Scottish Government’s voluntary community benefits guidance, which initially set minimum compensation at the same level. (Recommendation, Paragraph 88)

When determining the minimum compensation offered through its mandatory community benefits scheme, the Government should give careful consideration to the Highland Council’s position that £12,500 is a fair and proportionate level of compensation; this reflects the Council’s first-hand experience of clean energy deployment, as well as the lived experience of communities currently impacted by renewables. A figure in the region of £10,000 to £12,500 would seem appropriate. However, whatever figure is agreed must include a mechanism to maintain value over time. (Recommendation, Paragraph 89)

The mandatory community benefits scheme should also provide clear expectations on the delivery of non-financial benefits, while ensuring sufficient flexibility to reflect local needs. Given the scale of development currently underway, the scheme should be introduced sooner than the end of 2027. (Recommendation, Paragraph 90)

We would encourage the Government to use its existing powers under the Infrastructure Act 2015 to make shared ownership offers by developers of all new renewable energy projects. This would ensure community groups are able to take advantage of the opportunity of an ownership stake. (Recommendation, Paragraph 91) Community ownership of clean power

We welcome the Government’s ambition to accelerate community and locally owned clean energy through the Local Power Plan, delivered jointly with Great British Energy. However, it is disappointing that Scotland is disproportionately disadvantaged from benefitting from the Plan by its current Transmission Impact Assessment thresholds, which restrict opportunities for new community energy projects. It is encouraging that the Government recognises the grid-connection issue is acute in Scotland. However, with the transmission grid effectively fully allocated until 2035, the 53 sector is at a near-standstill. This logjam is at odds with the Government’s renewed ambition to scale up local and community energy and reflects a disconnect between the Local Power Plan’s aspirations and the practical reality in Scotland. We are concerned that Scotland could be effectively excluded from the Plan’s full benefits. (Conclusion, Paragraph 115)

The Government should set out the concrete steps it is taking to address this imbalance and to ensure Scotland can access the full benefits of the Local Power Plan, including grid connection. (Recommendation, Paragraph 116)

Repowering offers a timely opportunity for communities to expand community-owned energy while rebalancing some of the unfair outcomes of the transition. As both the UK and Scottish Governments support the expansion of community energy projects, closer coordination is needed to reduce barriers to decommissioning and repowering. We welcome the Scottish Government’s pilot enabling community groups the opportunity to lease public land to repower wind farms and the Minister’s commitment to consider this idea for use across the UK. (Conclusion, Paragraph 117)

The UK Government should learn from the Scottish Government’s evaluation of its pilot, so that lessons can be learned for possible implementation in other parts of the UK. In its response to this report, the UK Government should set out how, through the Local Power Plan, it will remove barriers to repowering community energy projects at the end of their lifetime, including barriers related to retained grid access and planning consents, which are devolved in Scotland. (Recommendation, Paragraph 118) 54