Scotland’s Just Transition Commission said this would “super-charge” Just Transition to net-zero.

Scotland’s Just Transition Commission will write to the Scottish Government, UK Government, energy regulator Ofgem and the Scottish National Investment Bank to highlight key lessons from Shetland’s experience of the energy transition it says can help shape fairer outcomes across the country.

In a new report launched in Lerwick on Tuesday, the Commission said a new statutory right for communities to have a share in renewables developments can “super-charge the creation of community wealth.” 

The report said: “A mechanism for local communities, 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.” 

The Commission said the experience of Shetland showed the ability of communities to access finance for such initiatives is a key barrier to sharing their revenues more equitably, and called on bodies such as Scotland’s development bank, the Scottish National Investment Bank, and the recently announced GB Energy, to take on the job of supporting communities and local authorities who have the ambition of benefitting from new energy projects.

The report has eight key messages, claiming action is required to make sure local communities can make the most of new economic opportunities through community wealth building.

The commission also said communities need to be able to own smaller-scale renewable energy development and have a share in revenues from big energy projects to create long-term community wealth.

They are recommending a new statutory right for communities to purchase a share of renewables developments - which they said will be key in building community wealth, especially in rural and island areas.

A proportion of electricity grid capacity would be reserved for community energy projects, with community benefit funding from new developments having an important role to play, with proper scrutiny and accountability.

Consistent and equitable compensatory mechanisms should be developed for those whose livelihoods are directly impinged upon by infrastructure development and other changes required for Net Zero, the commission added.

The expert body also said there should be action taken to restore trust between key groups working in the marine environment, with local climate strategies applying just transition principles and monitoring progress towards delivering the required changes in the fairest way.

Satwat Rehman, co-chair of the Commission, said: “Speaking to people in Shetland, we have seen again how a striking feature of the climate transition is the way that exciting new renewable energy projects sit alongside people that are struggling to pay for basic needs, and communities with concerns about the long-term sustainability of local economies. 

“Our message today as a Commission is that there is more that government can do to support communities and local authorities in navigating the big changes underway across the country. 

“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.”

The report considers three key areas where the delivery model for making changes in a way that maximises the social and economic benefits are yet to be fully developed: energy, the marine environment and peatland restoration.

The Commission says 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.

But the report warns that action is required to carefully manage the move away from fossil fuels. 

It states: “The current route for Shetland, as we move away from oil and gas through rapid expansion of clean energy, appears unlikely to sustain current levels of investment for meeting local needs, with a risk to the funding model for critical social infrastructure across a rural island setting community striving to support an ageing population, retain young people and attract new residents.”

The Commission also 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. 

“This could include, for example, fishers, crofters, and farmers whose access to natural resources is constrained. Such mechanisms should follow established principles around disturbance payments and compensation for income foregone, so as to ameliorate negative impacts and speed the transition by building consent for major developments through fair, transparent and consistent dealing.”

Prof. Dave Reay, co-chair of the Commission, said: “The Commission’s report sets out a number of practical measures to support local communities, like Shetland, in making the most of the opportunities the transition to a low carbon economy brings for economic and social renewal. Our conversations left us with a sense that Shetland has a number of distinctive assets that will help shape its transition for the better. It has a small, close-knit community with lots of relevant expertise, and it is relatively easy to bring people together for meaningful social dialogue on important questions. There’s also a common belief that if we can find the right process, new forms of economic activity can help to make a better and fairer place.”

The Commission is an independent expert advisory group with members drawn from business, industry, trade unions, environmental and community groups and academia. 

It aims to make sure the benefits and burdens of the major changes involved in Scotland’s net zero transition are shared as fairly as possible, and is tasked by the Scottish Government with making an annual assessment of progress towards a just transition to a low carbon economy.

The Commission visited Shetland earlier this year to meet with local people and organisations. It also worked with researchers from Voar, a Lerwick-based energy consultancy, to capture key data to support a better understanding of the specific character of the changes underway in Shetland as it responds to the climate crisis, and different approaches for delivering community benefit and community wealth-building.

The research was prepared to inform the Commission’s work as well as policymakers, but does not represent the consensus view of the Commission.

Tom Wills, director at Voar and 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. 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 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.”