Infrastructure Investment Plan progress report for 2015

Energy

Over the course of 2016 there has been several announcements that relate to accelerating investment in and delivery of community energy and low carbon infrastructure projects.

The Renewable Energy Investment Fund ( REIF) is managed by the Scottish Investment Bank within Scottish Enterprise and prioritises investment in community renewables and marine energy. To date (December 2012- December 2015), £45 million has been invested in:

• 11 community-owned wind and hydro schemes, mainly in the Highlands and Islands;
• 2 community investments in commercial wind farms;
• 11 marine energy projects; and
• 3 'other' projects (innovative offshore wind, innovative onshore wind and heat, and a small-scale wind turbine manufacturer).

Support for community energy has been particularly important with REIF filling a market gap for significant projects such as the largest community-owned wind-farm in the UK - at Point and Sandwick on Lewis. The original concept for REIF was to maximise funds for the private sector, and to date REIF has levered in over £87 million from an investment of £45 million, leverage of nearly 2:1.

Wave Energy Scotland ( WES) was established at the end of 2014 with a budget of up to £14 million to the end of March 2016. WES is funded by Scottish Government and delivered by Highlands and Islands Enterprise ( HIE). It provides up to 100% funding for the development of innovative technologies to produce low cost, efficient and reliable components and subsystems. Investment has already been significant, and in:

• January 2015, WES acquired the intellectual property ( IP) and some of the physical assets previously owned by Pelamis for £305,000. These assets and IP are now being exploited for the benefit of the wider industry;
• July 2015, awards of over £7 million were offered to technology innovators to develop the best power take-off systems for wave energy devices;
• October 2015, wave energy developer Albatern was awarded £720,000 to demonstrate wave energy converters as a means of powering offshore aquaculture installations and remote island communities; and
• November 2015, awards worth over £2.25 million to eight technology developers and consortia, were announced following the competitive call for novel wave energy converters.

Through the Local Energy Challenge Fund ( LECF) £20 million of capital funding was offered 2015-16, to support community-led, collaborative projects demonstrating low carbon technology as part of a local energy system. Collaborations were encouraged from range of bodies, such as local authorities, universities, housing associations, private sector companies, community groups and co-ops with four projects offered capital funding:

• Orkney Surf and Turf;
• EastHeat;
• Levenmouth Community Energy Project; and
• Assisting Communities Connect to Electrical Sustainable Sources

The successful projects are at the cutting edge of innovation, and fit with our drive to create an energy policy focusing on a holistic, local energy system, which could stimulate economic renewal.

Round 2 Phase 1 of the LECF of the application process was completed in May 2015, from which 23 projects successfully progressed to the second phase. Decisions will be made in March 2016. This approach both allow the Scottish Government to accelerate the demonstration of demonstrate community energy systems and encourages replication in other areas of Scotland.

In June 2015 it was announced by Scottish Ministers, that improving the energy efficiency of all of Scotland's buildings will be designated a National Infrastructure Priority. Moving forward the cornerstone of the National Infrastructure Priority will be Scotland's Energy Efficiency Programme.

In March 2015 the £76 million Low Carbon Infrastructure Transition Programme ( LCITP) supported by European Structural Funds was launched. LCITP is a Scotland wide, cross-sector project development unit, to support the development and acceleration of over 100 low carbon infrastructure projects by 2018, with 19 projects receiving financial support at December 2015. The LCITP is a working partnership between Scottish Government, Scottish Enterprise, Highlands & Islands Enterprise, Scottish Futures Trust and Resource Efficient Scotland. This intervention focuses on supporting the acceleration of projects to develop investment grade business cases allowing them to secure existing streams of public and private capital finance. LCITP has already completed a call for Geothermal Energy Projects which has resulted in 4 projects being awarded total feasibility funding of £185,000. It also runs a Water Source Heat Pump Challenge Fund running with funding of £2.3 million available with results due in Spring 2016.

The new programme over the next 2-3 years in conjunction with stakeholders and for the first time align action on the domestic and non-domestic sectors. To support the development of the final programme a series call for Pathfinders supported by up to £14 million was launched up in January 2016. Results of this process will be announced by summer 2016.

Support will continue to be available for our poorest households in the form of grants for installation of new measures, and we will also design new cost-effective financial mechanisms for those households and businesses who can afford to pay, to ensure that they can realise the immediate benefits of the energy saved. It offers a substantial investment opportunity for the public and private sectors, delivering substantial energy cost reductions for households and businesses through cost-effective measures that will pay for themselves (measures across the domestic and non-domestic sectors have been costed at around £6.4 billion plus).

Over the course of 2015 Scottish Government Procurement and Scottish Futures Trust have been taking forward the establishment of a procurement framework to support Public and Third Sector Non-domestic Energy Efficiency retrofit work. The Framework will be open to all public and third sector bodies, launched in March 2016 and has the potential to support up to £300 million of energy efficiency retrofit activity. The economies of scale and standardised approach offered by a pan public sector framework is attractive to both the public sector and private sector - offering both better solutions and better value for money.

The Scottish Government is supportive of Carbon Capture Storage technology and we recognise the existing CCS infrastructure and storage potential in Scotland as a national asset and we believe that the wide scale application of Carbon Capture and Storage is necessary for a successful low cost global response to climate change.

In October 2015 the Scottish Government signed a grant offer of funding of £4.2 million for the Summit Power project. The funding, £2.5 million from Scottish Government and £1.7 million from the UK Government, is allowing the Summit Power Group to undertake substantial industrial research and feasibility studies for their proposed Carbon Capture Storage Clean Energy Project in Grangemouth. The feasibility study will continue through the course of this year and is due to be completed early 2017.

A successful oil and gas sector is a key component in the transition to a more resource efficient, lower carbon economy. Whilst this sector is currently facing a range of challenges, it continues to support employment opportunity across Scotland. At this challenging time, it is essential the correct policy framework is in place to support continued capital investment in the sector.

The Scottish Government has also directed funding towards decommissioning. HIE approved £628,000 to Peterson and a further £1,195,000 to Lerwick Port Authority, including £324,416 through the European Regional Development Fund ( ERDF). Lerwick Port authority has also been awarded £1.2 million from the Scottish Government. Peterson has also been awarded £1.1 million of Regional Selective Assistance ( RSA), from by Scottish Enterprise.