Two new investment zones targeting economic growth in Scotland were recently announced. Glasgow City Region and the North East will each be supported by up to £80 million in targeted investment and tax reliefs over the five years following an agreement between the Scottish and UK governments.
This news will receive significant attention in the North East of Scotland where the Port of Aberdeen lost a bid to gain Freeport status and the Acorn project was not granted Track 1 status. However, many questions still remain.
Besides the economic question as to the best way to distribute the funds - small business grants, matching public/private funds, university research bursaries, or tax breaks/incentives - one big question may be where to focus investment. The government press release states the target focus is driving growth in priority sectors including "technology, the creative industries, life sciences, advanced manufacturing, and the green sector". Surely, in Aberdeen, this must include significant attention to transitioning the region from the oil and gas capital of Europe to a renewable energy leader.
Aberdeen boasts years of experience in developing and deploying innovative technology, especially in the subsea sector. What might the technical focus be for a successful energy transition - What is the technology that will most effectively spearhead an Aberdonian Energy Transition? The spring budget set aside £20 billion to support the early development of Carbon Capture, Usage, and Storage (CCUS) technology. This seems to align well with Aberdeen's expertise in the subsea sector. However, several studies have estimated the cost of removing carbon from the atmosphere is not high enough to cover the costs of CCS. Further, the UK government still appears to be spending less on decarbonising than it making on carbon taxes.
Hydrogen offers another possible candidate for investment. However, regulatory uncertainty and questions around the best use-case linger making a predictable hydrogen market potentially still a decade away.
Perhaps the most well-developed technology already in mass deployment is wind power, both on and off-shore. While significant Scotwind targets point to growth in this sector, it is still unclear how much of the next generation of wind power technology will be developed in the UK, and more specifically Scotland. Additionally, recent supply chain and technical issues may have temporarily scared off investors.
The ideal answer to the question of which technology is, of course, to diversify. No one technology should be the sole focus. However, with governments all over the world looking to reach net zero targets, the need to attract private investment to scale at pace may pragmatic answer to the question may require carefully considering the expertise of the region while considering how to maximise a return on investment. It is unlikely a single energy will form the sole supply vector of the future, but spreading resources too thin risks lagging behind, and losing vital investment capital.
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