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Islands Growth Deal Heads of Terms Islands Growth Deal Heads of Terms Agreement Our signing of this document confirms our joint commitment to achieve full implementation of the Islands Growth Deal. ------------------------------------------- ................................................... Mr Michael Matheson MSP Mr Iain Stewart MP Parliamentary Under Secretary Cabinet Secretary for of State for Scotland Transport, Infrastructure and UK Government Connectivity Scottish Government ................................................... ................................................... Cllr James Stockan Cllr Roddie Mackay Leader, Orkney Islands Council Leader, Comhairle nan Eilean Siar ................................................... Cllr Steven Coutts Leader, Shetland Islands Council 1 EXECUTIVE SUMMARY 1. The Islands Growth Deal was developed by Comhairle nan Eilean Siar, Orkney Islands Council and Shetland Islands Council together with their partners in the public, academic, business and community sectors. It aims to harness the islands’ unique assets to create world class, innovative and globally focussed industries that will help address the islands’ severe demographic challenges and strengthen the distinct and important contribution the islands make to the economic vitality and international reputation of Scotland and the United Kingdom. 2. The three Island Councils are the smallest in Scotland with a combined population of around 72,000 (1.3% of Scotland’s population) and their communities are some of the remotest from the main population centres of Scotland and the UK. Yet despite their size and remoteness, the islands’ profile is global, regularly topping international lists of the best places to visit. The islands make an outsized contribution to the economy, including 50% of Scotland’s aquaculture GVA, 30% of Scottish sea fish GVA, and they handle 13% of the oil and gas produced in UK waters. With 47% of Scotland’s marine estate and 40% of its coastline, the islands also have access to significant untapped blue economy opportunities in areas such as offshore renewable wind, wave and tidal energy, sustainable aquaculture and marine biotechnology. They also contribute substantially to Scottish and UK cultural, historic and natural heritage and are recognised world class tourist destinations. 3. These unique island assets underpin the highly ambitious Islands Growth Deal, which is designed to put the islands at the forefront of the transition to net zero, to strengthen key existing industry sectors and to develop new industries of the future. The projects within the Deal will: • Demonstrate how to achieve Government net zero carbon targets and be the first parts of the country to do this. • Create internationally significant new port infrastructure that will play an important role in supporting Scotland and the UK to achieve net zero targets. • Strengthen the islands’ place as unique ‘living laboratories’ for global innovation in low carbon technologies, wellbeing research and sustainable food production in partnership with their leading universities and research institutes. • Showcase the islands’ outstanding natural environment, heritage, culture and creativity to the world. • Create the foundation for an innovation-focused recovery from the COVID- 19 pandemic and support inclusive growth across all the Island communities. 4. The three island groups of Orkney, Outer Hebrides and Shetland share significant opportunities and challenges, which have been approached through the Islands Growth Deal by working together to combine resources, share access to the best subject matter expertise and strengthen local collaborative capacity and capabilities. 2 5. The Islands Growth Deal programme includes three joint-island innovation- focused proposals in the areas of low carbon technologies, creative industries and wellbeing, and skills and talent attraction. These projects will undertake activity in all three island groups and deliver benefits across all communities. Each island group has responsibility for the coordination of one of these joint programmes, creating strong island-based partnerships between business, academia and research organisations, public agencies and local communities. 6. Whilst there is a history and commitment to cross-island collaboration and shared endeavour, there are also significant differences between each island group and the Islands Growth Deal contains a number of projects that are island-specific and focus on local opportunities and community priorities. While the project investment will be delivered locally, many of these single island projects will deliver outcomes and learning of benefit for all the islands and the partners will seek to maximise this shared value over the period of the Deal. 7. This Heads of Terms document commits the Scottish Government and the UK Government to work collaboratively with the three Island Councils and their partners to deliver a Growth Deal that will help transform their economies. The Scottish Government will invest up to £50 million over 10 years, and the UK Government will invest up to £50 million over 10 years, subject to approval of full business cases for each project outlined in this document. 8. The Islands Growth Deal projects are supported by a wide range of partners from across the public, private and academic sectors who together will invest up to a further £235 million to deliver these projects. This match funding is subject to the development of the full business cases. Contributions will be aligned to shared priorities with both the UK and Scottish Government such as net zero carbon energy and infrastructure, innovation, tourism, skills, creative industries, food and drink, aquaculture and housing. This will result in a Deal worth £335 million, which the partners forecast will create over 1,300 sustainable jobs across the three Island groups. 3 THE COMMITMENTS Leading the way to a Low Carbon Future 9. The ambition of the islands is to be the first parts of the UK to reach the Governments’ net zero carbon emission goals, to be recognised global leaders in the development and adoption of the technologies and processes associated with this transition and to have a thriving low carbon business and research cluster selling products, services, and expertise around the world. 10. All three islands have already demonstrated ground-breaking low carbon innovation and are leaders in community ownership of renewable energy assets. Orkney has developed an international reputation as a centre for zero-carbon energy innovation supported by the European Marine Energy Centre in Stromness and a strong cluster of local business expertise. Orkney and Shetland also have substantial locally based oil and gas related companies with expert local workforces drawn from all three island groups with transferable skills able to support an expanding renewable energy-based economy. Realising their plans as set out in the Islands Growth Deal will mean that all three islands will advance their capacity to provide a substantial part of Scotland’s and the UK’s future energy requirements. 11. The Islands Growth Deal will build on this strong foundation and deliver a programme of investment across five projects designed to accelerate the islands’ transition to net zero. These projects will be supported with investment of up to £27 million from the UK Government and up to £16 million from the Scottish Government, and a further £149 million from the relevant project partners. 12. Central to this programme is the creation of a joint Islands Centre for Net Zero project, supporting the energy transition for all three island groups. The Islands Centre for Net Zero project will address the need for fundamental change in how we approach energy transition. While other centres around the world are working on clean energy technologies, the Islands Centre for Net Zero will work from the ground up with local communities and businesses, empowering the islands to navigate pathways to decarbonisation which will deliver: • Ten percent average reduction per year in carbon emissions for all three island groups over the next ten years. • Sustainable “green” jobs within the islands for 300 people. • Eight times the impact from the Islands Growth Deal investment over the longer term through match funding and generation of new revenue streams. • Significant added value to other low carbon future projects and other Deal strands, ensuring decarbonisation impact across the whole programme. 13. The Islands Centre for Net Zero project will be supported with joint investment of up to £16.5 million from the UK Government and Scottish Government (UKG £16 million/SG £0.5 million). 4 14. The Shetland Clean Energy Project sets out Shetland’s particular ambitions for transforming energy use and calculates that the production of green hydrogen is the preferred way forward to achieve net zero targets. Shetland lies in the windiest marine region in the UK and using its wind resource for green hydrogen production will provide the clean fuel needed, reduce carbon significantly and provide opportunities for business development and skilled islands-based employment. 15. The Shetland Clean Energy project will be supported with investment of up to £5 million as part of the funding for the Islands Centre for Net Zero project. 16. Clean fuels for shipping will be a critical requirement to achieving the UK and Scottish Governments’ net zero targets by 2050 and 2045 respectively. In the short term, cleaner fuels are needed to enable shipping to meet
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