Energy transition and the importance of supply chain investment

By Michelle Howell, Head of Investment at Scottish Enterprise

The Scottish Government has set a goal for Scotland to become an international benchmark for how an economy can transform itself, de-carbonise and rebuild natural capital by 2032.?

The transition to net zero emissions requires a re-focusing of capital towards companies and projects which can play a significant part in the decarbonisation of the economy. A key component of this is ensuring that supply chain companies can provide a sustainable and efficient flow of materials, components, technologies and skills to support the transition.

There is an opportunity for us to develop and strengthen the Scottish supply chain of companies that are innovating and growing (across a range of sectors) to directly contribute to this change.

Here are some key facts about Scotland’s energy transition:

• Scotland’s pipeline of offshore wind projects exceeds 39GW.
• Scotland is working towards targets of 5GW of hydrogen production capacity by 2030 and 25GW by 2045.
• Scotland is leading the way with a range of innovations and initiatives to provide green heat for homes and businesses.

Scotland is one of the top ten offshore wind markets worldwide, with significant opportunities for supply chain companies. There are further growth opportunities in hydrogen, clean heat and other cleantech sectors (including energy efficiency, waste reduction and improved efficiency and pollution reduction).

Developing the capacity and capability in the Scottish supply chain to take advantage of these new opportunities, and preparing those companies to seek out opportunities internationally, will be central to Scotland achieving its potential in the new net zero economy.

A strong Scottish energy transition supply chain, serving Scotland and global markets, can support our energy security, bring new company growth and employment, and support a just transition to net zero for all the people of Scotland.

Investment in innovation is essential to enable this strong supply chain

This is where Scottish Enterprise’s focus on entrepreneurship and investment plays a key role, stimulating innovation and the growing pipeline of companies able to contribute to the energy transition supply chain. ?

Our investment activity alongside a diverse mix of private sector investors is underpinning the growth in Scotland’s equity investment market. This is increasing the risk capital available to companies and spin-outs at the critical early stages that have the potential to go on and scale and strengthen our energy supply chain. ?

While we work to increase access to growth capital, our support is also focused on increasing innovation, strengthening management teams, and helping our companies navigate the unique challenges they face as they successfully commercialise new products and enter new markets.?

We have a 20-year track record co-investing in Scotland’s early-stage market and are regularly cited on the top 10 most active investors in the UK. Our investment portfolio is varied and demonstrates some of Scotland’s most groundbreaking technology: ?

• Verlume is a leader in underwater intelligent energy management and storage technologies for a range of power delivery and stabilisation applications offshore. It’s an innovative and internationally ambitious company that’s taking advantage of today’s global energy transition opportunities, and it’s exactly the type of company we want to focus our support on.

• Trojan Energy is a provider of EV charging infrastructure for local authorities and EV owners, and targets those that do not have access to off-street parking.
• Smart Green Shipping is leading the global shipping industry’s green transition through a unique industry collaboration to reduce greenhouse gas emissions and fuel costs through deploying high-tech wings, known as FastRigs, on existing vessels and new builds.
• Celtic Renewables , a leader in green chemicals, produces and researches technology that converts low-value byproducts, residues and waste into ‘bio-chemicals’. These can displace chemicals made from oil and gas when manufacturing products like fuel, medicines and cosmetics.
• MeyGen , located in the Pentland Firth, is the world’s largest planned tidal stream energy?project (up to 398MW, with 86MW consented). The initial installation of 6MW in the first phase demonstrated the technical and commercial feasibility of a MW scale tidal energy array.
• Orbital Marine Power delivers clean, predictable power for homes and businesses with its floating tidal technology. This pioneering technology harnesses flowing currents in a cost-effective way.

Innovating an entire supply chain is no small task

While our ecosystem is well established, in common with other countries, there remain challenges to securing all the investment needed for net zero. Often, early-stage investors look to invest in companies in more developed markets where the technology is less capital intensive and/or well developed.

This is particularly true for new renewable energy technologies and other cleantech technologies, which have the potential for global applications and high returns on investment, but where initial product development is high risk and often requires expensive prototypes with technology development risk. Capital requirements and time-to-market can also create unique funding challenges.

Finding solutions together

We can help unlock private sector investment in challenging sectors by providing early-stage risk capital and tailored, specialist advice to companies with the potential to scale.

We have substantial experience working with private sector investors and early-stage companies critical to the energy transition supply chain. As well as working with domestic investors, we have a long history of working with international and specialist investors who can see the potential and who are able to add value to these companies in a way that helps them to progress to later and larger investment rounds.

We are committed to applying our investment experience to secure new funding into these more challenging parts of the energy transition supply chain. We have ambitions to design new interventions and create even more impactful collaborations with other providers of growth capital and industry.

Our goal is to create a strong and viable pipeline of attractive companies and projects that will attract private investment from around the world.?

Next steps

If your business is looking to understand and access different sources of finance, or if you’re looking for advice and support get in touch or visit our website to find out more about how our Entrepreneurship and Investment team can help.

Make sure you also stay up-to-date with our latest news by signing up for our email updates.