08 Apr From fossil fuels to wind and hydrogen
Maggie McGinlay, CEO, Energy Transition Zone (ETZ), elaborates on what is being done in the North Sea to keep it at the heart of Europe’s energy concerns for the coming years.
How would you describe the capabilities that exist in Aberdeen and Scotland that would allow it to become a worldwide sustainable energy hub?
Aberdeen, built up on the back of oil and gas over the last 50 years, has truly been pioneering in terms of the offshore workforce, technology and innovation processes, and talent development. Furthermore, they have taken all of that knowledge and knowhow, products and services, and exported it overseas; hence the global reach of Aberdeen abroad. People always say, whichever province in oil and gas you work in, there are always people who either are from Aberdeen or have spent some time in or around the North Sea. There is an inherently pioneering attitude. Strong supply chain companies have grown out of that, namely entrepreneurs who have seen the opportunity and have developed lots of innovative solutions to meet the needs of the oil and gas industry. Thus, we have hundreds of companies in the northeast of Scotland who are small to medium-sized enterprises (SME) who are entrepreneurs at heart and have been remarkably enterprising and innovative in going after opportunities.
We are looking to build on the significant financial capital investment of oil and gas from the large energy majors, and the tier-one companies who have built a large footprint in the region such as Wood, Schlumberger and Halliburton, as well as the innovative approach of this long tail of SMEs .What we are looking to do is capture all of that knowledge and expertise and apply it to accelerate the opportunities in the energy transition, where there is a good fit. What we do best is anything offshore, be that offshore engineering, where we are pioneering and leading in the world; offshore wind; hydrogen; and finally, everything around carbon capture and storage because, one, we have got the storage sites offshore, and two, we have the knowledge and knowhow in terms of how to do it. The big opportunity for us is the global success story of oil and gas. How do we capitalize on the financing, the infrastructure, the assets, the new hire, the capability and the company base to accelerate that drive to net zero?
What technologies, specifically in solar, wind or hydrogen, does the local energy industry specialize in, and what advantages do these solutions have at the global level?
The big new opportunities in which we have a real strength and capability is in offshore fixed wind, which is quite prevalent in the U.K. at the moment. It tends to be in shallow waters fixed to the seabed. Then, the genuinely exciting opportunity is floating wind, where off the northeast of Scotland we have the world’s first floating offshore wind farm, and now the world’s largest floating offshore wind farm. Specifically, there have been two demonstrator projects where you have offshore wind in deeper waters. This is a massive global opportunity, and what we are doing here in the northeast of Scotland is proving how you can get the cost of floating wind down. Then, based on all the knowhow, products and services that are developed, we will look at the export opportunity. Floating offshore wind is interesting because it takes the same subsea knowledge that has been built up for oil and gas and applies it to floating wind. About 75 percent of the global subsea engineering companies are based in the northeast of Scotland. That is why offshore floating wind is so key for us.
On the back of that, there is then the opportunity to develop green hydrogen, and again, that is where there is real capability in dealing with gases and pipelines from offshore to onshor. In short, those are the three big technology subsector areas where we believe the northeast of Scotland has real capability, not only for producing energy for the U.K. but also to export that knowledge and knowhow globally, which is a huge opportunity for us.
What key latest projects in Scotland are setting the ground for development of the green energy hub?
The ScotWind projects are pivotal because they are major commercial projects, a combination of fixed wind, but also floating wind. This is the largest commercial opportunity for floating wind projects in the world. About 70 percent of those projects are within 100 nautical miles of Aberdeen, so they can be easily serviced from here. That is precisely why we have established the Energy Transition Zone.
The ScotWind offshore licensing round will develop up to 25 gigawatts of offshore wind, which is significant and demonstrates the sale of the Scottish government’s ambition. The $454 million investment in the new Aberdeen South Harbour is another factor that will make Aberdeen the ideal place from which to service the offshore wind sites. On top of that, the Energy Transition Zone is developing the onshore infrastructure that is needed to capitalize on this opportunity. So, as well as continuing to build on our strengths in oil and gas, we are also investing for the future, to make sure we have the right companies and skill sets in place to go after the offshore wind opportunity in a big way.
Can you give us an overview of ETZ’s scope of operation? What is it attempting to create, and what hurdles need to be overcome to reach its goals, such as zoning and attracting interest?
The ambition around the Energy Transition Zone is to help the region of Aberdeen and Aberdeenshire become a globally integrated energy cluster delivering on net zero. The integration of our strengths in oil and gas, alongside offshore wind, hydrogen and CCUS is an extraordinary opportunity for us. To this end, we are investing in the land and infrastructure to attract new companies focused on high-value manufacturing to support our existing supply chain and transition from oil and gas to new opportunities. The Energy Transition Zone seeks to attract high-value manufacturing, support the oil and gas supply chain to make that transition to green energy and catalyze investment in innovation and technology development with the right skill sets in place.
We are a not-for-profit company limited by guarantee. We are private sector led, but funded predominantly through the public sector, which is quite unique. Our mission is to ensure ongoing sustainable economic growth for the northeast of Scotland, maintaining and sustaining jobs that may be lost from oil and gas while improving productivity for Scotland and the U.K. We combine our regional focus with a national and international impact in terms of what we do. There is currently a lot of investment going on. In fact, we have secured up to $78 million from a combination of the Scottish government, U.K. government and Opportunity Northeast, which is private sector-funded, to lever further investment from the private sector.
What further work needs to be done to overcome hurdles in policy and incentivize the new industry? What potential gain could be made by also further easing the business environment?
The decisive thing is to ensure that both the Scottish and UK governments continue to support the oil and gas industry so we can meet our energy requirements while reducing our reliance on carbon heavy imports. It is the skills, experience and financial capital of this world-class industry that will allow us to accelerate our transition in new energies. Many of the projects, such as ScotWind, carbon capture projects and hydrogen, will take many years to come on stream. We are accelerating and it is very exciting, but some of the key USPs that the northeast of Scotland has is offshore engineering skill set, the intellectual property, an enterprising culture and a critical mass of talented people who need to be in sustained employment while we transition to green energy at scale.
Beyond that, it is important the private and public sector are working on the same goals in the same direction, playing to each other’s strengths to do the right things. We absolutely need both U.K. and Scottish Government to have the right policy environment to guarantee that where there are major infrastructure issues, such as grid connections, that they are addressed quickly. This will guide the right investments into innovation, R&D and into universities, so that we can solve the problems of the future now and in a timely manner. ETZ is very much working hand in hand with both government and the business community.
When industries are at very early stages, as is the case with floating wind and green hydrogen, they particularly need the government funding to come in and reduce some of the risk until the private sector gets more comfortable with those investments. ETZ is an enabler, using public money to get early wins and quick things happening to then give confidence to the private sector that this is a good place to invest. It is important to note that ScotWind licenses lever $909 million worth of private sector funding into the Scottish government. That is quite a significant amount of money, but it does not take into account the billions and billions of dollars of extra investment in infrastructure capability that will be needed to actually build these structures and put them offshore. While the public sector funding has been a great asset to us in its ability to create the opportunities, we need those levers in the private sector to deliver at scale.
What other funding options exist for players to develop sustainable platforms in Scotland?
For any company involved in the renewable energy sector, there is a range of funding available from Scottish Enterprise and the other economic development agencies that help companies with growth funding. This includes research and development funding as well as support from the Scottish National Investment Bank, for capital infrastructure or equity investment. We have a powerful financial private sector which is very joined up and which creates a cohesive funding environment in Scotland with a strong strategy built up around our key strengths.
What we see as one of the most important things we can offer for the Energy Transition Zone in Aberdeen and Aberdeenshire is access to a workforce that is very experienced, has the knowhow and the capability for dealing with large complex projects offshore, and also have a proven record in technology development. That is critical for any investor coming into the economy. On the back of oil and gas, there have been quite a number of institutions grown up. For example, the Net Zero Technology Center. This is a great example of public sector funding working with industry to develop new technology solutions for oil and gas and now new energies
We are now looking at how you apply those technology solutions to renewable energy and also what new solutions are needed. Not everything is new. Some of the technology that has been developed on the back of oil and gas is very transferable to renewable energy and can help accelerate it. But where there are new solutions needed, we have a very talented workforce, company base, two universities focused on energy transition and the Net Zero Innovation Center. We have all the right assets and infrastructure in place.
One thing we are keen on encouraging is for the both the Scottish and U.K. governments to recognize the importance of supporting oil and gas in the short to medium term to allow us to capitalize on the opportunities that renewables will bring in the longer term.
What kind of international partnerships is ETZ developing to bolster its position globally?
International partnerships are priceless. The scale of opportunity and the need to go at a heightened pace means no one country or sector can do this on their own. It absolutely needs a high level of cooperation. We work with Scottish Development International, which is the Scottish government investor arm, and the U.K. Department for International Trade to identify companies looking to expand their operations internationally and who may want to come and invest in Scotland. Additionally, we look to help companies here take their knowledge and knowhow and apply it overseas. We have several energy specialists based overseas, jointly funded with SDI and Scottish government to identify business opportunities for collaboration.
Those types of partnerships working at a ground level are essential because no one country can do this on its own. We’re also very clear that a lot of this activity is pioneering. Floating wind, for example, needs international companies to get involved, and it needs financial capital. We have had investment from Total, Equinor, and Shell in Aberdeen and Scotland for decades in oil and gas. It is up to us to keep those companies investing in Aberdeen and Scotland for the long term by creating the right environment, with the right workforce and the right opportunities.
What personal goals do you have as CEO of ETZ?
I want to ensure that we achieve the same success economically that we have seen through oil and gas but achieve that as part of green energy. All the valuable knowledge and knowhow that has been invested in oil and gas for the last 40 to 50 years must not be lost, rather applied positively to drive forward and accelerate the energy transition. We have always been seen as being the oil and gas capital of Europe. We absolutely want to be seen as being the net zero energy capital of Europe. My ambition is to play my part in doing that and recognize that to achieve that, we need to bring onboard both the SMEs as well as the major oil companies. My background has been to understand the public sector and economic development, but also to tune into the needs of the private sector and industry and bring both together to move things forward. I want to make sure that we continue to understand the needs of industry, recognize the pace of change we are seeing, and work with government to make sure the right policy and infrastructure is in place, so that collectively, we can really be effective.
To make this happen, we have a great team in place, at ETZ. There is a mix of people who have come from the oil and gas industry, from economic development, and from land and property infrastructure, with a real mix of experience from seasoned veterans to recent graduates. It is about using this diversity to our best advantage. Our target is to continue to deliver sustainable, inclusive jobs for the long term and thus ongoing wealth creation for the community of Aberdeen and northeast of Scotland, making a difference at both a Scottish and U.K. level. We have big ambition and a very strong private sector background behind us, the support of both our governments, and a massive opportunity afoot: the perfect combination. There has been good steady progress in our first year and lots more to do. It is truly exciting.
What’s your final message to our readers?
Our ambition is for Aberdeen to be a globally integrated energy hub delivering on net zero. We have all the right ingredients to do it and we are already delivering on it. There is the strength, the knowledge and expertise the oil and gas history brings, the capability of the workforce, the financial capital, the infrastructure, the assets, and a stellar record of technology solutions offshore. Because of our track record and strength of ambition it is only logical that Aberdeen in the northeast of Scotland be repositioned from being the oil and gas capital of Europe to the net zero energy capital of Europe.