Shetland, once the heart of North Sea Oil and Gas, now rapid renewables expansion, can provide “lessons” for all of Scotland, said the authors of a new just transition report.

Co-author, Daniel Gear, described the risk of “a development free-for-all”, saying, "What we’re looking at, is a scale and pace of development that has never been seen before.”

The report, launched by Scotland's Just Transition Commission in Lerwick today, advocates that a new statutory right for communities to have a share in renewables developments can “super-charge the creation of community wealth.”

“A mechanism for local communities,” the Commission says, “in the form of local councils or community-based associations, to purchase an appropriate share of a developer’s large-scale renewable development should become the norm.”

Tom Wills co-author of the research report, said: “Shetland’s strong winds, prime development sites and capable workforce make the islands an attractive location for new energy projects. Locals are however concerned that while further large-scale development seems guaranteed, a fair share for the community is not.”

A massive 3,500 MW of offshore and onshore wind -  approximately seventy times Shetland’s peak electrical demand of around 50 MW  - already built or in the planning system. These are projects developed by companies which include the Norwegian state-owned power company Statkraft, Mainstream, Ocean Winds, and ESB, the Irish state power company.

Huge quantities of green hydrogen production are also planned for the isles, with one operator, at the Sullom Voe Terminal, having stated an ambition of producing one million tonnes of green hydrogen per year at the site. Such hydrogen production could require renewable energy generation that would be 200 times Shetland’s peak electrical demand.

But the community benefits of Big Wind have not, so far, delivered for the isles. Shetland's 443  MW  Viking Wind Farm currently provides only the smallest level of community benefits - the voluntary industry standard of £5,000 per MW installed per annum. 

Since wind turbines in Shetland produce around twice the UK onshore average,applying this national standard of benefit in Shetland means that communities receive a lower level of benefit relative to the potential production (the possibility of curtailment notwithstanding).

Also, because the benefit is linked to first power, the £5k/MW, which became an established industry norm in 2010, has not changed.

"Adjusted for inflation," said Mr Wills, "it should be more like £7.5k today. Or, put another way, as time goes on and the £5k/MW figure is maintained, communities are getting progressively less from these projects, even though the payments are index-linked over the lifetime of the projects."

As the report observes, the Viking Wind Farm at first  "promised significant community returns through a 45% stake held by the Shetland Charitable Trust, however the project was eventually constructed as a wholly-owned SSE venture.

"Meanwhile, the 4.5 MW community-owned Garth Wind Farm can generate a level of community returns comparable to what Viking Energy pays into Shetland’s Community Benefit Fund, despite being one hundredth the size.

" This project," it says, "highlights the direct economic potential of locally owned renewable energy projects.”

Though Shetland is one of the wealthiest local authority areas in the UK, its oil funds are in decline, and it has significant levels of inequality. Almost half of working households live below the Minimum Income Standard and fuel poverty rates are the highest in Scotland.

Satwat Rehman, co-chair of the Commission, said: "Shetland teaches us that with the right powers and enough capacity, local communities are best placed to build long-term, shared prosperity and tackle inequalities.”

Report co-author Tom Wills said: “Despite hosting oil and gas terminals and the UK’s most productive onshore wind farm, Shetland suffers from high inequality and fuel poverty. More jobs and economic activity won’t fix this, because Shetland already has low unemployment and relies on fly-in workers. A fair energy transition by fair means retaining a fair share of resource value.

“Our research has explored the opportunities and barriers to greater community ownership, participation and benefit from energy projects. As new energy developments accelerate, we have found that government at all levels – UK, Scottish and local – could be doing more to ensure communities are not left behind.”

The Commission also said that Shetland’s experience managing the development of oil and gas infrastructure at Sullom Voe from the 1970s, combined with the rapid expansion of wind energy over the past decade, “provides significant learnings for the whole country.”

Shetland’s local authority secured special powers through an act of the Westminster parliament in 1974 to allow it to negotiate more effectively with oil companies following the discovery of oil near Shetland, including an ability to act as a port authority, establishing a charitable trust and charging “disturbance payments” to reflect the environmental, social and economic impact of the oil industry on the local area.

Sullom VoeSullom Voe

However, the report also observes that the cliff edge in oil and gas industry jobs feared in places like Grangemouth “is a less critical concern in Shetland”.

It said: “Indeed with consistently low unemployment rates and a pre-existing reliance on fly-in-fly-out workers to deliver major projects, the main question for delivering a just transition in Shetland is less “what will happen to the jobs?”, and more “who will benefit from the resources of this place?”.”

But the net zero transition - which will also include peatland restoration - is set not just to impact oil and gas workers, but also crofters, farmers and fishers.

“Local fishing industry representatives,” the report says, “are deeply concerned that the currently proposed offshore wind developments could be just the start of a progressive displacement of Shetland’s fishing fleet from their traditional grounds in a “spatial squeeze”

Therefore, the Commission says “consistent and equitable compensatory mechanisms need to be developed” for people whose livelihoods are directly impinged upon by infrastructure development and other changes required for Net Zero”. These might include “disturbance payments”.

Seafood, not oil, is Shetland’s biggest industry. The industry represented 35% of Shetland’s total output by value, and 22% of its GRDP. By comparison, the oil and gas industry represented 8%  of total output, and 8% of GRDP.

By contrast with energy extraction, its fleets are also owned by local families.  

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“Shetland,” said Just Transition commissioner Professor Dave Reay, “like Grangemouth is at the “sharp end” of the energy transition. One of the dangers, he observed, is that yet again the result will be “wealth extraction, not wealth creation”.

A Scottish Government spokesperson said: “The Scottish Government will carefully consider this report as it continues the drive to reach net zero emissions by 2045.

“Whilst we encourage developers to offer community benefit and shared ownership opportunities as standard on all renewable energy projects, the powers to mandate community benefits and shared ownership are reserved to the UK Government.

“Despite this, we have made significant progress through our Good Practice Principles framework, with over £26 million worth of benefits offered to communities in the last 12 months and communities in Shetland received a share of £1.5m of funding towards community owned renewable energy projects in their local area.

“Our Green Industrial Strategy, published earlier this month, also sets out how the people of Scotland will see maximum benefits from Scotland’s energy transition. Further details will be included in the Energy Strategy and Just Transition Plan (ESJTP), which will be published shortly and we continue to explore further opportunities to invest in energy-related projects, technology, and infrastructure.”