Scotland's ports are the gateways to good fortune

SCOTLAND has always been at the forefront of the green energy revolution, and it is now set to further exploit its huge potential for offshore wind.

Last year’s ScotWind auction of seabed options off the coast was a huge success, setting the renewables landscape for the future, supporting a potential generating capacity of up to 27.6 gigawatts of power across 20 projects and netting over £700 million for the public finances.

In total, ScotWind attracted 88 bids, with nearly all the leased sites off the east, north east or northern coasts. The proposals are for both fixed bottom and floating wind farms to be built in the future.

Offshore wind growth presents a major opportunity for Scotland’s ports. As Jamie Grant, Partner at the Scottish legal firm Shepherd and Wedderburn and an authority on ports and harbours, points out, this has become a mature energy sector in short order: and the turbines are getting increasingly bigger and are moving out into deeper waters.

The operating environments may be becoming more challenging for developers and owners in the future, but Scotland, which is generally surrounded by these deeper seas, has an advantage in this.

Mr Grant says that if all the developments licensed under ScotWind come to fruition, it will add an enormous amount of generating capacity. 

“It’s a massive opportunity for Scotland and it is a sector that Shepherd and Wedderburn’s clean energy group is already heavily involved in.  There is a huge amount to do but in terms of Scotland’s economy and clean energy generation it is a good news story at a time when we are battling not only a cost of living crisis but also an energy security of supply crisis.” 

All construction and servicing work for these new farms are expected to be supported by Scottish harbours. “Both fixed and floating developments will involve very large steel structures having to be taken out to sea from somewhere and attached or tethered to the seabed. That means they are going to need very substantial port facilities.”

It makes sense, Mr Grant adds, for the ports to be as physically close as possible to the offshore locations where the turbines are to be sited. “It’s not just about saving fuel. Obviously, anything being done at sea is very weather dependent – nearly all operations out there need to be undertaken in relatively benign conditions of low winds and low waves.

“You need the harbour to be close enough to allow you to predict quite well what the conditions are going to be like when you arrive at the deployment site. You don’t want the weather to have changed by the time you arrive.”

Another issue, Mr Grant says, is an economic one: the giant vessels lifting the infrastructure into position can cost half a million pounds a day to charter, so no-one wants them standing in position unable to work because of unsuitable conditions.

The idea of having a single Scottish superport to service the sector may provisionally seem to be an attractive one but it would ultimately be unsustainable for a variety of reasons.

“The new ScotWind locations may only be in certain parts of Scottish waters – there’s actually only one off the west coast – but they are also quite spread out, so the question of proximity arises.
“Another issue is that so many bids have been awarded at the same time. They will all need space and that means one port wouldn’t work. It’s not just the quayside – it’s the laydown areas.

“The ports need three things – quite deep water alongside the quay; a strong quayside to bear the weight of the steelwork, which can be significant; and land where you can store the materials as you can’t really have a just-in-time policy with this kind of work.”

The Orkney Islands Council Harbour Authority is behind £250m of port improvements centred on the natural deep water harbour of Scapa Flow

Where in Scotland, then, are harbours being developed to cater for this growing industry and its requirements? Existing facilities with the right kind of capability include Leith, Methil and Dundee, although a number of others are in development.

These new locations include a brand-new harbour called Aberdeen South which is partly open at present. Others in the pipeline include an expansion of the infrastructure at Leith by Forth Ports.

This facility is committed to constructing a £50 million offshore wind berth at its outer edge and outside the existing lock. This work has already been reserved by a joint venture that includes BP.

Significant development is also taking place at the deep-water quay near Arnish, south of Stornoway in the Western Isles. This is being developed by the local port authority and is intended to serve both the renewables sector and cruise ships.

It has attracted some £50 million worth of investment.

Another significant port development project is planned at Scapa Flow in Orkney. A former naval harbour, this has the advantage of being sheltered. The Orkney Islands Council Harbour Authority is behind the scheme, the cost of which is estimated to be around £250 million.

An additional Scottish facility which is well placed to attract work, Mr Grant says, is at Nigg in the Cromarty Firth in Easter Ross. This is already recognised as one of the country’s most important energy industry infrastructure facilities.

“There is only a limited amount of suitable quayside space throughout the UK at the moment so inevitably a number of parties will be looking to secure arrangements and there may well be significant competition.” Despite the commercial attraction of harbour development, progressing such large infrastructure projects is, of course, far from simple. There are constraints on what can be done and one of the biggest of these is obtaining the necessary funding.

“These are very big capital projects. If you look at the port at Aberdeen South, which should be fully open during this year, the cost at the end of the day for the work will be about £400 million.

“With the Scapa Flow development, we are probably looking at about £250 million, while the Stornoway and Forth Ports projects are set to come in at about £50 million each. So these are pretty big numbers.”

Possible sources of financing may include the UK Infrastructure Bank. This has already provided backing for an offshore quay development at Teeside, south of the border. “
The Scottish National Investment Bank is another option as it has already committed £30million to the expansion of Aberdeen Harbour.”

Obtaining commercial lending for this kind of development is not always easy, Mr Grant says. “In some cases, the developers are relatively small and the combination of that with undercapitalised statutory bodies means that financing could be challenging.”

Nevertheless, Jamie Grant believes that the potential for Scotland’s ports – or at least for those equipped to cater for the new energy landscape – is an exciting one. And while there may be risks involved, some of the developments are working to broaden their commercial base – for instance, Stornoway and its interest in the cruise ship business.

He also points out that there will be continuing opportunities as the offshore wind industry becomes further established. “Given the government targets for offshore wind deployment there could well be a ScotWind2 round and given the statutory target for achieving net zero there may even be successive rounds. So there may be more of these contracts coming down the track that will also create demand.

“There is also the operation and maintenance element to consider in relation to these projects – you need people to be able to access the turbines and other infrastructure regularly to do things like repairs and monitoring. 

“So there will be plenty of opportunities for job creation and economic activity across a number of areas that, in some cases, badly need it and will welcome investment.” 

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Crusing is back on course

Although passenger numbers have not quite returned to pre-pandemic levels, Scotland‘s ports are relieved to see the revival of the cruise industry, thanks in some degree to increased interest among passengers for voyages to northern destinations, writes Andrew Collier

MSC Meraviglia is the largest ever cruise ship to visit Orkney, carrying almost 5000 passengers 

It was a surreal and highly visible sight. Three ships belonging to the cruise line Azamara came sailing into the King George V Dock in Glasgow, to be laid up there for a year in 2020 as Covid wreaked havoc with the travel industry.

When they finally sailed away again in 2021, hundreds of people lined the bank of the Clyde to see them go and wave them off. 

The cruise industry has since revived and the pandemic is now something of a memory, offering opportunities to Scotland’s ports to regenerate and grow their suddenly stalled cruise business.

Over the last two decades or so, cruising has increased in popularity and Scottish harbours have taken advantage of this. 

Not everyone wants to sail off to the sun and Scottish destinations have proved popular for culture and history voyages in particular.

Ports such as Greenock and Invergordon have become well established in this area of activity – not as destinations in themselves, but because they offer suitable anchorages convenient to tourist spots such as Glasgow, the Highlands and Edinburgh. They also have sheltered and deep water and can accommodate large vessels, including some of the biggest in the world.

The outbreak of Covid dealt the industry and Scotland’s ports business a major blow. “It basically became completely inactive”, explains Jamie Grant, Partner at Shepherd and Wedderburn. 

“In 2022 the sector came back, though it’s not quite at pre-Covid levels yet. Lerwick in Shetland, for instance, has said that its business is about 30 per cent below what it was. This feels pretty typical of the whole Scottish cruise market.”

Other suitable Scottish docking ports for cruise liners include Leith (through lock gates) and Rosyth on the north bank of the Forth.

Other Scottish cruise ports include Oban, Ullapool, Orkney, Scrabster – “people want to go and see the Castle of Mey, where the Queen Mother lived” – Aberdeen, Montrose and Dundee.

Stornoway is another destination, and the harbour there is being expanded with a new deep-water quay, partly to accommodate the growing cruise ship business. 

When completed by 2024, it will be able to berth vessels up to 360 metres, making it the only port in the north west which can receive large ships.

The new terminal will be within walking distance of the centre of the town and is expected to deliver a major boost to the Hebridean economy.

At Greenock, Peel Ports built a new dedicated cruise liner facility supported by the Glasgow City Deal that was almost finished just as Covid struck. It is now back in use and working to recover the investment made. 

Last year the terminal experienced its busiest year for cruises since the outbreak of the pandemic.

At Scrabster in Caithness – the most northerly mainland commercial port in the UK – the St Ola pier has been redeveloped with additional berthing and quayside facilities constructed in order to attract and service the cruise sector. 

Across the Pentland Firth in Orkney, there are plans to develop another quay facility at Hatston on the edge of Kirkwall, which is already the islands’ main cruise terminal. 

Despite the large sums invested in infrastructure development – the figure at Stornoway is about £50 million – Jamie Grant says that competition between ports limits the charges that ports can charge cruise vessels. 

The operators have a good number of ports to choose from, he adds, which means they are able to negotiate hard on pricing. “There’s nowhere that they absolutely have to go, so there’s quite a bit of competition to attract the ship in. They don’t pay absolutely top dollar, but nevertheless they do pay some dollars.”

Despite the huge trading difficulties caused by the outbreak of Covid, Mr Grant says that the cruise market is definitely on the way back. Growth, he believes, will gradually continue.

“Typically, in the past, people wanted to go cruising in the Mediterranean and other places that were warm. But there is now definitely a demand for going on cooler climate voyages.

“There is a lot of historic and cultural interest in northern Europe these days. Arguably people are also not flying so much now, either because they don’t like doing so or they think that it’s environmentally unsustainable.”

Scotland, he thinks, is well placed to tap into this demand for flying-free, culture-based holidays. 

“We’ve got castles, distilleries, trips to places like Skara Brae on Orkney, the Callanish stones on Lewis – places like that. There are many places of interest to see here.”

Scottish ports have recognised the potential of this market and are tapping into it. Cruising is an important part of port revenues in Scotland and is likely to continue to be so. 

Offshore wind is the biggest potential area of activity at present, but as Mr Grant says: “Ports make money in lots of different ways and cruising is one of them.”