Economy, Energy and Fair Work Committee

Meeting date: Tuesday, November 24, 2020

Official Report 659KB pdf

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Scottish Offshore Wind Sector Inquiry

Welcome back. Agenda item 3 is our inquiry on BiFab, the offshore wind sector and the Scottish supply chain. Our witnesses join us remotely. I welcome Jim Smith, managing director of SSE Renewables; Nick Sharpe, director of communications and strategy at Scottish Renewables; Matthieu Hue, chief executive officer at EDF Renewables UK; and Allan MacAskill, a director of Kincardine Offshore Windfarm Limited. Some committee members are with me in the room and others join us remotely. I ask witnesses to wait a few seconds before speaking to allow broadcasting colleagues on our sound desk to turn your microphones on.

I will start the questions. You do not all have to respond to every question. In the process of their questioning and discussion with you, committee members may interject and ask further questions, so there is no need to wait for me, as convener, to let you back in. Furthermore, following the evidence session, you can submit in writing any further thoughts that you might have or want to develop on what we discuss today.

What benefits, economic or otherwise, are offshore wind developments bringing to Scotland? What are the possibilities for the future, bearing in mind the UK Government’s very recent announcements? You can raise your hand or type R in the chat box to indicate that you want to respond. Nick Sharpe is indicating that he wants to speak.

I am afraid that we cannot hear Nick. Perhaps the sound desk can do something about that.

Jim Smith also wanted to come in, so we will try him while we try to resolve the sound issue for Nick Sharpe.

Can you hear me, convener?

Yes. Thank you. We can hear you.

I will use Beatrice wind farm as an example. It is currently Scotland’s largest wind farm, although it will soon be overtaken by Moray East wind farm. We estimate that Beatrice wind farm will bring in about £1 billion to the Scottish economy over its lifetime, which demonstrates that offshore wind developments bring real economic benefit to the country. Clearly, we would like to be able to do more, which I am sure will be part of our discussion this morning. However, even at current levels of UK supply, it brings a huge benefit to the country. Our recent decision to progress the Seagreen offshore wind farm will bring similar benefits to the country.

One billion pounds sounds like a big figure, certainly pre-inflation. Can you quickly tell us where that £1 billion to Scotland comes from, a bit more specifically?

I might not have all the numbers broken down exactly; I would be happy to submit them in writing to the committee. A significant part comes through the construction phase, obviously. Beatrice managed to procure some of the foundations from Scotland. There are significant works onshore to do with the grid connection, and there are a number of smaller suppliers. Wind farms operate for 30 years or more and most of the costs associated with the operation are borne in Scotland.

I suppose that that is one of the things that we want to hear about. If parts are sent offshore for construction, the benefit does not necessarily come to Scotland, does it? What basis can we have for thinking that that will change in future, if it has not changed already?

The Offshore Renewable Energy Catapult carried out work to consider the potential in the UK—not just in Scotland. I think that it estimated that, currently, the supply chain could probably provide about 50 per cent of the content—the value—from an offshore wind investment. Clearly, if we want to increase the percentage, that will require investment in the supply chain across a number of areas.

Is it not also about awarding contracts to companies that prefabricate things in Scotland? You said that the current level “could” be 50 per cent, which does not necessarily mean that that actually happens.

We estimated that over the life of Beatrice it would probably be around 50 per cent.

All right. You mentioned one or two things that you could share with the committee. It would potentially be helpful if you did that.

I wonder whether we can hear from Nick Sharpe now. Have you tried unmuting yourself? [Interruption.] I think that you have tried that. Sorry. We will get our technical people to assist; I am not sure what the difficulty is.

Are there comments from other panel members about the economic or other benefits that offshore wind is bringing to Scotland?

I echo what Jim Smith said. Throughout the development phase of our projects, from development to construction and operation, developers seek to work with the local supply chain. We take a proactive approach to engaging with local communities and local and national businesses to offer them a perspective on where the opportunities lie.

An area that we certainly need to consider is how we develop capabilities, to allow businesses to secure more content than the 50 per cent to which Jim Smith referred. There is work to be done to further develop capabilities to enable Scottish businesses to win contracts through the development, construction and operation of wind farms.

There have certainly been benefits. I can speak about the energy project in which we invested directly, through our tier 1 contractors, in the Scottish supply chain. More can be done in future to develop the local content.

I would like to clarify something—it might be my fault for not picking it up. Did Jim Smith talk about 50 or 15 per cent?

He said 50 per cent, unless I am mistaken.

Jim Smith can correct us both, if you are.

That is right; I said 50 per cent.

Thank you.

I think that Nick Sharpe has logged out and logged back in again. We will try to bring him in.

Fingers crossed, we will try again. Can you hear me now?

Yes—excellent. We can hear you loud and clear. Please carry on.

As a representative of the industry body for renewable energy in Scotland, it is my place to set out the overall picture for offshore wind and the economic benefits that it can bring, as well as to say where we are going in that regard, which is important for today’s discussion.

At the moment, we have just under 1GW of offshore wind capacity installed in Scottish waters. The offshore wind policy statement that the Scottish Government published last month agreed that 11GW of offshore wind deployment is possible by 2030. As part of the Scottish offshore wind energy council, we are helping the industry work towards that figure. Obviously, going from 1GW to 11GW represents a large increase. That brings with it enormous potential for economic and environmental impact.

The most recent figures that we have for turnover from the sector are from 2017, when turnover from renewable energy was £5.5 billion, and offshore wind was providing around 10 per cent of that. If we picture that increase—a more than tenfold increase in the amount of offshore wind deployed in Scottish waters—we begin to get a picture of how the figures that Jim Smith and Matthieu Hue talked about can expand to create something truly impressive.

One of my messages today is that Scottish and United Kingdom supply chain companies are not out of the race. This is a sector that has to grow if we are going to deliver our net zero targets and there are still tremendous opportunities within it.

The Scottish Government has hosted some wind supply chain summits. Have any of you attended them?

I see Nick Sharpe nodding to indicate that he has, and I think that Jim Smith has also done so. What have those summits achieved?

One of the reasons why the most recent supply chain summit came together in January was to talk about new methods that the Scottish Government wanted to employ in order to ensure a future for Scottish supply chain companies. That involved something called the supply chain development statement, which I am sure that we will discuss later, as well as this morning’s announcement by the UK Government on changes to the contracts for difference mechanism, which will have a similar effect.

Primarily, the output from the summit in January came from the Scottish offshore wind energy council, which is chaired by Jim Smith’s SSE colleague Brian McFarlane and the Minister for Energy, Connectivity and the Islands, Paul Wheelhouse. The commitment from SOWEC was to bring together a supply chain review. That process is under way, led by Sir Jim McDonald, from the University of Strathclyde. It will look at capacity in the Scottish supply chain, as well as ways in which industry and Government can help foster success there, as we move towards that figure of 11GW and beyond.

Are you saying that what has come out of that summit is an on-going review?

That is my understanding, yes.

Nothing else?

There is also the supply chain development statement, but that is probably a separate issue that we can discuss later.

Jim Smith, can you comment on what has come out of the summits?

I would reiterate what Nick Sharpe said. Part of the work was around the supply chain development plans that have been talked about in relation to the upcoming ScotWind seabed leasing rounds. We have been supportive of that. We have also made it clear that it is important that we must not disadvantage Scottish projects in relation to projects down south. We are in a competitive market and, as long as that competition exists, we need to ensure that we have a level playing field with regard to projects that are being developed in Scotland and those down south.

There are already some significant disadvantages for projects in Scotland, which are subject to higher transmission charges. The water also tends to be deeper, which makes the project more expensive. With the proviso that we do not disadvantage the projects, we are very supportive of the Scottish supply chain development plans.

10:15  

That might be part of the discussion, but part of the problem is that, rather than coming to Scottish companies, contracts go overseas, well beyond these shores, as opposed to south of the border within these isles. However, we will move on, because other committee members want to come in. I will bring in Maurice Golden.

My question, which I will put to Nick Sharpe first, is on jobs that are linked to the offshore wind supply chain. Alex Salmond promised 28,000 green jobs by 2020. Do you have any insight into previous forecasts for the number of offshore wind supply chain jobs in the sector by 2020? I appreciate that, with contracting, job numbers fluctuate, but can you forecast the number of jobs? Is there any data or intelligence on what we might expect, particularly in the offshore wind supply chain in Scotland?

I can absolutely talk to that. The figure of 28,000 green jobs that you mention was taken from a report that Scottish Renewables was involved in drafting, probably around a decade ago. That figure represented the scenario with the highest number of jobs. In fact, the scenario in that report with the lowest number of jobs is what we have today; it is roughly the number of offshore wind jobs in Scotland.

It is important to understand that any projection of future employment is contingent on deployment. We are clear that deployment equals employment. We did some work earlier this year that shows that, for every gigawatt of renewable electricity deployed in Scotland, 1,500 jobs have been created.

What has happened in the intervening decade has not necessarily been to Scotland’s advantage. We have seen considerable, lengthy delays in the offshore wind sector’s deployment, caused by consenting issues, which took a lot longer to get through Scottish Government than we had hoped, and then by judicial review, which was brought against Marine Scotland and successfully defended. That probably put us at least three, if not four, years behind the rest of the UK. We have seen English and Welsh offshore wind projects leap ahead; an enormous industry has developed down there. Places such as Lowestoft in Suffolk and the Humber are now fundamental to the largest offshore wind sector in the world, whereas in Scotland we are just beginning to develop that capacity, as I said.

Therefore, it is important to look at what we have deployed compared with what we employ. That report is actually not that far wrong, if you look at its lowest projection.

On where we are going, 2017 figures showed that offshore wind employed 3,400 people in Scotland. The figure is likely to be much higher now.

Nobody has yet discussed the sector deal that was struck between the UK Government and the offshore wind sector in 2018. That has been a really important way of bringing together supply chain companies, the industry and the Government, with a common goal. The original goal was to raise UK deployment to 30GW by 2030, but the Prime Minister recently raised that to 40GW by 2030. That is a really stretching target. As part of that, the industry is committed to increasing the UK content of projects from the current 48 per cent to 60 per cent by 2030.

We will simply be unable to do that unless we have a robust, competitive supply chain in the UK and in Scotland. It will require not just investments in parts of the supply chain in which we do not currently excel, but, more important, a focus on those areas in which we do excel, whose capacity—and export capacity, which we can come to later—we can boost.

The commitment under the sector deal is to support 27,000 jobs across the UK by 2030, with the majority of those being in coastal communities, as well as increasing the representation of women to at least a third.

I hope that that gives you some idea of where we are going in the UK and why what the report hoped for, in terms of jobs, has not been delivered.

I reiterate what Nick Sharpe said. The number of jobs will be proportionate to the investment in projects. If we think back to 2010, the target for offshore wind that Scotland was talking about at that time was, I think, to have about 3GW in operation by 2020. As Nick says, we have less than 1GW in operation today, which is something like 5 per cent of the UK’s installed capacity in offshore wind. We have been somewhat left behind in the past decade, relative to the rest of the UK. There is clearly an opportunity to catch up. There are two projects in construction that will help, and we hope that there will be more to come. However, if projects are not being built, the numbers of jobs will not be as high.

My organisation, SSE Renewables, does not cover only offshore wind, but in the past 15 years we have increased our employees by a factor of five. We now directly employ more than 1,000 people.

In response to a previous question, Jim Smith mentioned transmission network use of system charging. Has that charging regime changed significantly over the past decade? Is it impacting on the generation of offshore wind in Scotland?

High transmission charges have been an issue in Scotland for a long time. There are constant changes to transmission charging mechanisms. Fundamentally, the issue of high transmission charges is probably, if anything, getting a little worse rather than better, but it has been around for a long time.

Do Scottish customers benefit from TNUOS charging?

It would be difficult to use the word “benefit”. The transmission system has to be paid for, and the question is really how we distribute the charges for that between customers and generators. Ultimately, if we, as generators, have a cost, it will flow through to customers in the price of electricity.

I think that the issue that most generation developers in Scotland have is that we pay considerably more than our counterparts down south. As I said, if we end up paying less, someone will have to pay more. The total cost of generation to the UK as a whole will not change.

Thanks, Jim. That is helpful.

In the past three allocation rounds of contract for difference, Scottish offshore development’s share has fallen. Can you explain why? What can be done to reverse that trend?

We have talked about TNUOS. The cost is significantly higher in Scotland than it is further south. More broadly, if we look at the projects in Scotland, when Beatrice was built it was the deepest offshore wind farm in the world. That comes with a capital cost and a construction cost. Moray East is the same—it is a jacket structure in a similar depth of water. Seagreen is in even deeper water. All that comes at a cost, whereas the projects that have been built down south to date have tended to be in relatively shallow water and therefore use monopile foundations rather than jacket structures.

In onshore wind, we see a fairly significant benefit the further north we move, because of higher wind resource. You do not tend to see that in the offshore industry. The wind resource for some of the wind farms down south is just as good as the wind resource for Scottish projects on the east coast.

Nick Sharpe, what are your thoughts on CFD? How can Scotland get a bigger share?

I can talk to the three auction rounds that we have already had, and to AR4 and AR5, which are coming through. We did some research earlier this year and found that the amount of offshore wind capacity awarded to Scottish projects fell across the first three auction rounds—I think that that is what you were referring to. In auction round 1, 39 per cent of the projects were Scottish. In auction round 2, that figure was 30 per cent and in auction round 3 it was 9 per cent. That is really significant for this discussion; it puts across the situation with deployment and employment. If we are getting only 9 per cent of the projects through from a CFD round, we simply cannot deliver the economic and environmental benefits that this industry wants to deliver for Scotland.

Jim Smith touched on some of the issues that have probably led to that. We have always known that Scottish waters are much deeper and sea-bed conditions much more difficult. We often face rock rather than mud, which makes projects more expensive.

You talked about TNUOS, which is how the transmission network is paid for. We believe that that situation will become significantly worse over the next decade, to the extent that developers in Scotland will be paying tens of millions of pounds more a year than their English counterparts—we can provide evidence on that after the meeting. It is something that we are working on through the Scottish offshore wind energy council, but the grid situation as it stands leads into the way that the contract for difference mechanism works. The CFD was set up in a very different time, back in 2015, when Government focus was very much on the cost of energy to consumers.

As an aside, we must remember that there is only one way for money to flow into the energy industry, and that is through consumer bills. The Government had committed to the cheapest electricity prices in Europe. You might remember that a price cap was Ed Miliband’s key policy when he was Labour leader.

The Government invented the CFD and its job is to drive down the cost of power as low as possible in a competitive auction. It has been phenomenally successful. In terms of offshore wind, Beatrice received a strike price before the first auction round of £140 a megawatt hour. The cheapest project in the first auction round was under £114; in the second, it was £57. In the third auction round, Seagreen 1 received a contract of £41 per megawatt hour.

You can see that that process has driven the cost of offshore wind down to a level that I do not think anybody expected. In 2016, the UK Department for Business, Energy and Industrial Strategy thought that offshore wind would cost £103 per megawatt hour in 2030; the current estimate is £47. Nobody saw that coming. That has led to a lack of money in the system and therefore to a desire to bring down project costs. Jim Smith talked about that earlier.

The grid issue is tied to that through the Office of Gas and Electricity Markets, which has a commitment to drive down costs for consumers. OFGEM does not consider climate change and efforts to cut carbon, as part of its remit. We want to change that.

10:30  

You are not in the room; you are online, as a number of witnesses are. Are you referring to figures that you have on a screen in front of you to assist you in answering the questions? That is something new that has arisen from the different circumstances that we are working in. We would normally have all the witnesses in the committee room. That is not how things are now.

I am interested in your answer as it is useful for the committee to know whether information is coming from a particular source. We usually know that if someone is sitting in the room with us—or they might send us written information later. You have given us a number of figures.

When I spoke to the committee in 2019, I brought a folder with neatly organised tabs and papers. I could flick through that folder on the desk in front of me. The situation is the same now. I spent a couple of weeks preparing a Word document with the data and I can flick through that. I can provide the committee with references for any of the figures after the meeting, or I can give you a short version of the briefing that I am using.

That is helpful. If any other witnesses are referring to documents, it would be helpful if they could share them with the committee. It is important that we know where information is coming from and that we are able to look back at it. We must be transparent, in the reports that we issue, about the information on which we rely. Thank you for being open about that.

We have some time, but not unlimited time, so we will move on to other witnesses.

I have a supplementary question based on an answer that Jim Smith gave. He said that 50 per cent of the supply chain is local. Where are those jobs for Seagreen, Neart na Gaoithe or Moray East? If 50 per cent of the jobs involved in the supply chain are local, where are they?

I was talking about 50 per cent of the value or content of the supply chain during the life of the wind farm. We gave a foundation contract to BiFab for Beatrice. We invested in Wick as our operational base. The substation and the laying of cable to the shore up in Moray was another part of the investment.

There are numerous smaller supplies from tier 1 suppliers who use local content. I would be happy to provide a more detailed breakdown of the £1 billion of value that I mentioned to the committee.

It would be helpful to get a breakdown and to see where the local 50 per cent of the supply chain is and where the non-local 50 per cent is. We would be able to compare what has been let already and what is a future projection.

To clarify, it is not necessarily 50 per cent of jobs. It is 50 per cent of value.

It would be good to get a breakdown of that to see the situation clearly.

That is obviously on a UK basis.

Is it possible to get that on a Scottish basis? Obviously, we are a Scottish Parliament committee and are interested in the Scottish aspect.

We will be able to break that down.

Do you know off the top of your head what the Scottish percentage is?

I would rather not guess a number and get it wrong, so I will ensure that we submit it in the document.

Thank you. You will be aware that Unite the union has assessed the offshore industry as

“a spaghetti bowl of vested interest groups with established supply chains of preference.”

Do you recognise that statement and do you agree with it?

No, I do not. We go out to competitive tender for our tier 1 suppliers. Indeed, on Seagreen, we are using some suppliers that we have not used before. In Dogger Bank, which is our—[Inaudible.]—we hope to make an announcement soon about projects. There are a number of suppliers in there that we have never used before in the supply chain, and we have already made announcements about those. The statement that you quoted is somewhat misleading because, as I said, we go out to competitive tender and look for the best price that can deliver on the quality that we require to deliver the project.

How do you assess quality if you have not used a company before?

When we go through a procurement process, we look at a company’s experience, what it has done in the past and its accreditations, and we visit it. The company might not have worked for us before, but it will have experience elsewhere, so we can make an assessment based on that.

How does somebody new break into the industry if you assess on work done before in the industry? I think that is what Unite the Union is getting at. You might not always use the same company, but people use a small number of companies because they know that they have been used in the past. How can someone break into that?

That can be a bit of a challenge, but at the end of the day everyone working in offshore wind is relatively new to the game. The industry has been in existence only for the past 10 to 15 years and has grown rapidly only in the past five or six years. As Nick Sharpe said, when we look at what is ahead, although there is just over 10GW of operational wind in the UK, the target now is 40GW by 2030. That will require significant expansion of the supply chain, which will mean many new players in the supply chain.

I am sorry to intervene, Rhoda, but I see that Nick Sharpe wants to come in. In addition, this is perhaps the first time that Allan MacAskill has attended a committee as a witness, so he might want to comment on some of what has been said once Rhoda Grant has concluded her discussion with Jim Smith and Nick Sharpe has made his comments.

I want to paint a picture of the situation that we are in today that is in contrast to Unite the union’s statement. It is easy to think of the situation as a David and Goliath one, with large companies not giving projects to small companies, but that is not the case. What I have found through two or three years of looking at the offshore wind supply chain is a great deal of goodwill in Scotland from larger developers towards the smaller companies. Indeed, a tremendous amount has been done by those larger companies to help the smaller companies. The success of the supply chain in Scotland and, indeed, the rest of the UK is a matter for three parties: supply chain companies, Government and developers.

I will give a brief overview of actions that developers are taking to help supply chain companies across the UK and specifically in Scotland. I can send the 1,000 words I have written on that to the committee—I will not go into detail just now. We have talked about the supply chain review that is being done through the Scottish offshore wind energy council. The council also has a supply chain workstream, to which developers in our Scottish Renewables membership are incredibly committed.

A part of the sector deal is the Offshore Wind Growth Partnership, which many members will have heard of. It has committed £100 million to supporting supply chain companies by helping them to foster innovation, boost productivity and increase their competitiveness. That goes to Rhoda Grant’s point about how a company that has not worked in offshore wind previously can enter the sector. The industry has committed £100 million to be spent on helping supply chain companies across the country.

Another part of the sector deal is the collaborating for growth programme, and there is the sharing in growth programme, which has been brought in from aerospace to deliver best practice. The sector deal has a people and skills workstream, which looks at the number of people who are employed in offshore wind across the UK and how we can bring across more people from the oil and gas industry as we transition away from it.

Developers support the offshore wind clusters—Scotland has the DeepWind and Forth and Tay clusters, which have between them more than 200 members. Developers are taking a keen interest in them; many meet the buyer and networking events are taking place to introduce supply chain companies to developers that they might not otherwise have met.

The Offshore Renewable Energy Catapult is running the fit 4 offshore renewables programme for supply chain companies. The UK Government is investing £160 million in port infrastructure, which will benefit supply chain companies. Scottish Renewables is also taking steps.

It is absolutely not the case that the supply chain is adrift; a lot is being done to help supply chain companies to compete. We are at the start of the journey and there is a lot more to come.

I have not said much, largely because the discussion has concentrated on big structures, although I have been involved in them. Jim Smith and I were part of building the Talisman two-turbine demonstrator models adjacent to the Beatrice field, which were the precursor of the Beatrice offshore wind farm. Those turbines had a high level of UK and Scottish content, so significant opportunities arose thereafter.

I cannot comment on what has happened since then—I do not really understand the position in relation to quality and other things—but the opportunity was squandered. I do not know why Scottish companies did not continue to succeed in that industry. I have not been involved in that and I cannot say more. A lot of effort was put in; others would have to comment.

I am now mostly involved in floating systems, which are the future. Just as we pioneered jackets in Talisman, we are now pioneering floating systems at the Kincardine project, which has a significant amount of Scottish content, largely because it is located just off Aberdeen. We are working hard to maximise that and to use the opportunity.

We are the start of the next phase. Jim Smith said that jackets are more expensive; I saw a similar development in the oil and gas business. When I first came to it, everything in it involved fixed structures, which were all that we were going to build. After I came back from Canada, we saw the end of the fixed era and the arrival of the floating era. We will see that happen—as turbines get bigger, we will improve the floating technology and access significantly more of Scotland’s acreage over the next 10 or 20 years.

Do we have more expertise in building floating structures? I would have thought that the oil and gas industry’s presence meant that we had expertise in all such areas.

We have very little expertise in building floating structures—most that were built for the oil and gas business were not built here. The only such project that I was involved in was at the Talisman Ross field, where the Bleo Holm was used. The hull was built in Korea and towed to the UK, and the topside was put on on the Clyde. However, I think that it was about the last topside to go on on the Clyde.

10:45  

Is there a chance that we will lose out on floating structures with offshore wind, or have we got that capacity?

[Inaudible.]—advantages in doing a large amount of the work in and around the ports that we have. We would have done more had the ports been open to us, but they were not because there was not a fit between their capacity and the technology that we were using.

In what way were the ports not open to you?

They were busy doing other things.

We move on to questions from Colin Beattie.

Thank you, convener. I have a direct question for the witnesses: why are other European countries beating Scottish bids for the fabrication of jackets, especially as Scotland should have such an advantage, with an established and fairly innovative oil and gas industry?

Does anyone have an idea?

I can take that question. There are many reasons. I would start with first-mover advantage: Denmark built its first offshore wind farm—the first in the world—in 1991. Europe has moved since then to invest in manufacturing and port capacity, but the UK has not. That has been a fundamental failure of industrial strategy at Government level for many decades. We are talking about very large and complex pieces of equipment that have been produced to a very high standard. Ahead of today’s evidence session, we spoke to some of our members about facilities in Scotland and how they compare with facilities in the rest of the world. The phrase, “We are not comparing apples with apples” came up. We are talking about a complete shift in size and capacity.

I have the Offshore Renewable Energy Catapult report on fabrication facilities in Scotland in front of me, so I will take a second to read out a sentence from that. It was published just ahead of the supply chain summit in January.

“The best in class fabrication facilities for monopiles and jackets are sited at large ports, with excellent logistics, including efficient goods in and goods out routes and processes for movement of thousands of tonnes of raw materials ...The UK has no equivalent to Esbjerg (Denmark), Rotterdam (Netherlands) or Rostock (Germany).”

As I said earlier, everyone has a part to play in the success of supply chain companies—Government, industry and the supply chain companies themselves. Unfortunately, investments that could have been made over decades, which would have seen the UK being able to compete with European supply chain companies on things like fabrication, simply were not made, and we are left with that apples and oranges situation. That is really unfortunate. Through the routes that I talked about in answer to a previous question, we are doing something about it now, but the fact remains that 3 per cent of Denmark’s gross domestic product comes from exporting wind energy products. It has that first-mover advantage, so we will always be at a disadvantage. That is why we should focus on areas where we can succeed and develop green, high-tech, high-quality jobs of the future.

Can I take it from that answer that, as things stand, there is absolutely no chance that Scotland is competitive in the market?

No, that is not the case at all, because, for a supply chain company to feed into an offshore wind farm, you are looking for three things: cost, quality and reliability. While researching the supply chain ahead of committee meetings such as this, Scottish Renewables has found that, primarily, quality has not been an issue. Scottish engineering firms are very skilled. We have that experience from oil and gas, even though large structures have not been built in the UK since the 1990s. There has been a discrepancy on cost, but the Offshore Renewable Energy Catapult found in its report in January that we are only 10 per cent to 15 per cent more expensive than European ports, and what comes into play there is very much the goodwill that Scottish companies building in Scotland have for the smaller supply chain companies. Time and time again, we have demonstrated that we will take on board extra cost in return for the benefit of using a local company to carry out work.

We are currently refreshing a publication from last year, which shows almost 20 great examples of supply chain companies that are succeeding here, are globally competitive, and are working in offshore wind not only in Scotland or the rest of the UK but across northern Europe. There are lots of successes, so it is not right to focus only on the companies that are not. However, challenges do exist.

Can I just press you a little bit on that? You say that parts of the supply chain are good and effective. However, at this moment, do we in Scotland have the capability to compete specifically on the fabrication of jackets?

During the past few weeks I have done a considerable amount of reading on where we are with jackets. In recent years, Scottish yards have competed fiercely against European ones on such contracts and places such as Belgium and Spain were very competitive. At a previous meeting of the committee on the subject of BiFab, we talked about how state-aid rules had led to that situation. However, it has now changed a great deal.

Yesterday I spoke to colleagues at WindEurope, which represents renewable energy businesses across Europe. They have seen a shift away from Europe towards the far east and the middle east that has been driven by the many forms of contract for difference mechanisms that have been adopted by various countries. The cost of offshore wind has been driven down across the world. It is therefore no surprise that companies in the far east are able to produce such large projects at lower cost. Not only are Scotland and the rest of the UK now struggling to compete with Europe, Europe is struggling to compete with the far east. For the price of £40-odd per megawatt hour that I discussed earlier for Seagreen, it would be difficult to build those jackets in Europe. If those companies did not go to the far east for jackets, they could not build their projects. If there were no projects, there would be no economic or environmental benefits for Scotland, and that would be really difficult.

What is the scale of difference in price between Europe and the far east?

I am afraid that I do not have that figure.

Do any of the other witnesses have an indication of that difference, assuming that they agree with Nick Sharpe’s assessment?

I estimate that there is a difference of at least 10 per cent between prices in Europe and those in the far east.

That is quite substantial.

I am just wondering whether to bring in our colleague Graham Simpson, who is also interested in that area. Perhaps Matthieu Hue, who has indicated a desire to comment, might want to respond to a further question from Mr Simpson.

Mr Beattie has rather stolen my thunder with those questions. However, it has been interesting to listen to the discussion, because I am new to this inquiry.

I turn to Nick Sharpe, with whom I used to work in a different sector. What you have said suggests that the issue is partly that, in Britain, the CFD—the money that is in the system—appears to be too low. That might be good for the consumer, but it is too low to enable companies to give more work to British or Scottish companies, therefore they are going elsewhere in the world. They now go to the far east, whereas previously they went to Europe. Is that analysis correct?

That would be a fair assessment.

You mentioned earlier that changes to that contract have been announced today. I have had only a quick look at the UK Government’s large document. Can you summarise those changes?

I am in a similar position: we have not had long to look at those. I asked our policy team to take a look at the document this morning, and I have some brief points to make.

Through its review of the CFD and the supply chain element of that, the UK Government is aiming to do something similar to what the Scottish Government has done with supply chain development statements. It aims to bring some clarity to the process and to allow supply chain companies the confidence to invest in things such as manufacturing capability or in upskilling their workers ahead of offshore wind projects being built.

The challenge that the UK Government faces is one that the Scottish Government faced and about which we have been vocal in the past. Building an offshore wind farm can take a decade or more. For example, the Aberdeen Bay wind farm took 13 years from conception to energisation. Those are long periods of time.

It is really challenging to ask companies to make commitments to specific supply chain companies so early in the process, when they are just applying to lease the seabed to build their project. It is often the case that those companies might not still exist when the project is delivered. They might have merged with other companies or have moved into different sectors. The Scottish Government’s ScotWind leasing process allows companies to revise their supply chain development statement as time goes on.

There is still an issue with companies being forced to commit to supply chain plans early in the process. We believe that that could create a perverse effect whereby companies low-bar themselves and do not commit to as much local content as they could in that process because they are not sure that they can meet that commitment further down the line. The UK Government has addressed that today in its review of the CFD. It is still promising more detail, but the timescale is critical. Allowing developers more flexibility is important. The UK and Scottish Governments are both battling the same issue.

That is useful to know.

Nick Sharpe seems to be speaking for our other witnesses. They may want to say something about why they have not selected Scottish companies to manufacture jackets and piles. Is it all down to price, or do you consider other factors such as working conditions?

Many developers are like EDF Renewables. We definitely seek to work with Scottish and UK supply chains. When we start to develop a project, we are proactive and reach out to companies that might benefit from the project.

Let us take NnG as an example. We started construction earlier this year. We went through a thorough tendering exercise for various parts of the project, from jackets to the offshore substation and the turbines. For each of those contracts, we asked the tier 1 suppliers to consider where they could get some local content. We went further than that in some cases and were specific about where they could find that local content. In the case of the jacket for NnG, we asked all the potential contractors to work with BiFab to look at the opportunities to work together. What we found—which we have just discussed—is that BiFab was unable to compete on price. The price differential was 10 to 15 per cent of what we see elsewhere in Europe and an even higher percentage of what we see outside Europe. It is a global market.

11:00  

In a world in which developers have to compete through a CFD and in which CFDs are awarded to those who offer the lowest price, it is very difficult for developers to accept paying a premium. However, if they are unable to pay a premium, they will not receive the contract and will not be able to develop the project at all.

That does not mean that we are not making an effort in some cases. We worked very hard with Saipem to allow BiFab to secure part of the jacket contract. However, it is not easy—it is a lot of work—and what is missing, effectively, is a competitive supply chain. Without strong investment, the supply chain cannot necessarily compete. We need to consider taking an holistic approach to the opportunities for the Scottish and UK supply chain and where investment would be best targeted. We cannot just pay a premium on an ad-hoc basis to support the supply chain in the long run. What we need is investment and competitiveness that supports winning contracts in the tendering process.

Matthieu Hue, you mentioned investment. There has been a lot of Government investment in BiFab. Why has that not worked?

BiFab is more than just a yard. We spoke about port facilities. The fabrication of the foundation is not the only cost to be accounted for by the contractor. In the case of BiFab, the yard was mothballed and we needed to remobilise the workforce and the yard, which cost money. There might have been some investment, but it was not necessarily all the investment required to be competitive against the European supply chain. In this instance, the fact that that activity did not continue resulted in a significant cost to fabricating the jacket.

Before Colin Beattie comes in with a supplementary question, Jim Smith wants to comment. Is it just price that is making the difference in who gets the contracts?

That is the point that I wanted to make. I wholly support what Matthieu Hue said. I wanted to get across that a CFD auction—or certainly the most recent CFD auction—is extremely competitive—so much so, in fact, that Seagreen managed to get a CFD for only 40 per cent of its capacity. That made the decision about whether to progress the project into construction a really difficult one for us. The only way that we managed to get the 40 per cent was to get to the lowest possible bid price. Any additional costs that would have resulted in a higher bid price would almost certainly have led to our not getting any CFD, and Seagreen would not be progressing at all. We would not be talking about what has or has not gone to Scottish companies; the question would be, “Why hasn’t Scotland won any CFDs for any Scottish offshore wind farms?”

This is really a question for EDF in connection with Government guarantees. Why was a Government guarantee so critical? Do other countries supply such Government guarantees, and in what circumstances would guarantees be called in?

It is normal in contracts for jackets that the developer asks for a guarantee that the work will be completed. That was a request not just of BiFab; we ask all our suppliers and contractors to provide such a guarantee so that, if the work is not completed, we have protection. In this instance, the guarantee was coming from the Scottish Government as a shareholder in BiFab—it was as a shareholder that the Scottish Government came in to provide the guarantee. However, the situation was no different from the situation with any other contractor.

Do other countries in the EU provide such guarantees?

When a company is awarded a contract, it will be asked to provide a guarantee, and it will then choose the source of that guarantee. The guarantee can be provided through a bank or it can be a parent company guarantee. In the case of BiFab, it was the Scottish Government, as a shareholder in the company, that provided the guarantee.

In your experience of other countries in the EU, have Government guarantees been provided in the past?

The simple answer is that I do not know. I can look into that and revert to you with an answer to that question.

I think that we would be very interested to know that.

It would be helpful if you could respond to that question in writing.

The committee understands that welders in Indonesia are paid £2.80 an hour, which is about a fifth of what they would be paid in this country. If a fair work guarantee was incorporated into the contracts, would Scottish manufacturing companies be treated more fairly?

We certainly need to consider what would work for Scotland. We cannot ignore the fact that the market that we are operating in is designed in such a way that, in the case of a CFD, we have to find a contractor that is capable of doing the work to the required quality at a competitive price. The rules do not oblige us to disregard certain contractors or to factor in elements such as the one that you describe. If they were to do that, we would have to be careful, given that contracts for difference apply not just to Scotland but to the UK in general, that we did not introduce rules that could make Scotland uncompetitive in the UK context.

We must be mindful of the fact that the rules that we use need to provide for a level playing field, so that Scotland is not disadvantaged compared with other parts of the UK. If such a rule were to be applied, I think that it should be applied across the board; otherwise it would be to the detriment of Scotland, which would be unable to win a contract at all. As things develop, however, we will be very willing to discuss a change to the rules and to consider the best ways of accommodating common goals.

Are shareholders aware of the work practices that are used under some of the contracts? The wage that I mentioned is an incredibly low one for the job, and we hear about yards in the middle east that have really poor work practices and poor health and safety standards. Is it ethical for companies whose shareholders may be used to being paid more and treated better to be making money from poor work practices?

I can speak only for EDF, but I think that all developers do the same thing. They will employ contractors that treat people fairly and to the health and safety standard that is required. That is definitely a requirement that we put in our tendering process. We would not contract with the supplier unless it met those requirements—[Inaudible.]—in our tendering process. We have some very strict requirements on health and safety when it comes to working conditions. I will have to get back to you on what specific items might be in our tendering process. However, we certainly cover the aspects that I have mentioned.

That would be helpful. Thank you.

It might also be helpful if you could indicate how you follow up to ensure that those standards are met in the contracts that you enter into. It would be helpful to hear from other witnesses on those points.

I presume that, if we get jackets from the middle east, China or wherever, there will be a carbon cost to that because of transport and so on. Is that completely overruled by price, and is that another fault of the CFD?

We have explained how important price is to winning a contract.

We should not lose sight of the fact that, whether we are bringing steel fabrications, the raw steel to make those fabrications or the iron ore to make the steel to the UK, all of that has to be transported to the UK from other parts of the world. Therefore, there is no carbon-free option. For example, the jackets for the Beatrice wind farm were manufactured by BiFab, and significant portions of those—prefabrications, castings and so on—were procured by BiFab from the far east. I do not know whether procuring from a Scottish, UK or European company avoids that carbon footprint.

That is helpful.

State aid is another issue. We sometimes get the impression that both the Scottish and UK Governments are quite nervous about state aid rules and do not want to be challenged on those in comparison with other countries—even other European countries. Do the witnesses from SSE and EDF, or Allan MacAskill from KOWL, have any thoughts on whether our Governments are overly nervous about state aid?

I think that that is a matter for the Government. It is not for us to comment on.

Yes, but we have heard that there needs to be more investment, and I take it that that investment—in ports, for example—could be either public or private. If companies are calling for investment, I would like to know whether it is thought that other countries are investing a bit more supportively.

I have seen the nature of the ownership of ports in other countries. They tend to be differently owned and raise the funds for those investments. That is a different issue; it is not to do with state aid.

You are suggesting that, in other countries, the state or local authority owns the ports in more cases, whereas ours are more privatised.

I do not know the answer to that; I am telling you only what I have seen. That is all that I can comment on. Significant investment is made by the ports.

We can maybe look at that further. I understand that KOWL has got jackets from Europe—perhaps from Spain—and the suggestion is that those purchases were made from a state-owned company that is loss making, which is like a subsidy. Can you tell us whether that is the case?

I cannot comment on that, as I do not know anything about the accounts of the company that you are talking about. However, several companies are involved in the manufacture of such substructures. We tried hard to find allocations in Scotland and the United Kingdom, but there were none.

11:15  

We will move on to Richard Lyle’s question. Perhaps Jim Smith could comment on that if he wishes to add anything.

Part of my question has already been covered. Let us hit the nail on the head. We have been hearing all the get-outs on why there have been no contracts—for example, that there are poor ports, facilities or work practices. Some people say that purchasers simply go on the best price, so BiFab could not possibly win contracts for anything. You might say that that is a ridiculous statement, but it seems to be true.

I ask all our witnesses to say what needs to change if we are to develop a local fabrication supply chain in Scotland. The other aspect of my question has already been mentioned, but I would like to ask it anyway. Can we put a clause in contracts to say that the carbon footprint—by which I mean carbon emissions caused by goods coming from far away—must be taken into account?

I put those questions to Jim Smith first.

There are still challenges. However, as others including Nick Sharpe have said, there are still opportunities. The industry will only get larger. Not only is there the target of achieving 40GW by 2030 in the UK, last week the EU came out with targets of 60GW by 2030 and 300GW by 2050. The scale of the opportunities is huge.

However, the question is about how we can attract investment into manufacturing. That is one for the manufacturers. Investment will be required, and most manufacturers are looking for some form of Government support to enable them to make that decision. There is no doubt that the market is here, but there is a question about where the money for manufacturing investment will come from. We developers are not manufacturers; we are making significant investment in developing such projects and then building them.

On your second point, on carbon, I reiterate Matthieu Hue’s comment. We would welcome a scheme in which carbon accounting for the construction of the project was taken into account, but with the proviso that that would be done across the UK, to ensure that we were competing on a level playing field.

We only need to drive anywhere in Scotland to see the number of wind farms that have developed over the past five or 10 years. Why are BiFab and other companies not getting a fair share of that work? Is it because you are going elsewhere? You really need to tell us.

We have tried more than most to support the Scottish supply chain. You mentioned BiFab. Back in about 2011, we invested £10 million in equity in the company, which we effectively gave away for £1 when it went into administration. We put a further £7 million into BiFab to prevent it from doing so. Earlier in the decade, we stepped in and saved the Wind Towers factory from closure, which kept it going for a while until a manufacturer was able to buy it. However, I know that it has now run into difficulties.

We have tried to make an impact on the Scottish supply chain, but ultimately it will be for manufacturers to do so. As I have said, this message might seem overly simple, but for as long as we have to compete on price we will have no choice but to seek out the lowest-cost supply, otherwise we will not have projects.

What are the views of Nick Sharpe and Matthieu Hue?

I can speak to that. The majority of economic benefit from an offshore wind farm comes not from the fabrication of the steel that makes the wind turbine—I will come back to that aspect in a second, when I discuss carbon—but from its 20 or 25-year operations and maintenance phase. We know that Scotland can compete in that area, because we can develop the skills that the rest of the world will need as it decarbonises its economy. For example, SSE has created 100 jobs in Wick, which is not an area in which it is easy to get one—especially a highly skilled, low-carbon job of the future that involves working in the operations and maintenance of an offshore wind farm. We know that the majority of the benefit comes at that point.

The Offshore Renewable Energy Catapult, the Offshore Wind Growth Partnership, the Offshore Wind Industry Council and the Scottish offshore wind energy council are all considering where we should put our efforts. That is why a number of supply chain reviews are under way. Earlier I mentioned the one that is being headed by Sir Jim McDonald and the Minister for Energy, Connectivity and the Islands, which will consider whether we should support the parts of the supply chain that can compete, helping them to grow and export their skills and to drive economic benefit, or whether we should spend money on supporting areas such as fabrication, in which we know that the majority of such work is now done abroad. For instance, there is no monopile manufacturing facility in the UK. We cannot make monopile, so we would have to start from scratch there. We should ask ourselves whether we want to spend money on those businesses or to support thriving supply chain businesses that are already winning contracts in the offshore wind sector, not only in the UK but in the rest of the world. That is the decision that we have to make. As I have said, the development of the offshore wind sector in Scotland is still at an early stage. We are currently carrying out studies to figure out where the industry and Government public finance should make their investments.

I do not have a figure for the carbon payback period for a wind farm in the offshore wind sector, but the figure for the onshore wind sector is always less than 18 months. We know that no matter how much carbon is generated during the production of steel and transport, the building of foundations and roads, and the setting up of sites, we always pay that back in 18 months or considerably less. The average age of a UK power station is more than 30 years. We have to replace our power infrastructure somehow, but, as Jim Smith set out, there is always a carbon price to pay for building something. For example, if we build a nuclear power station, we use a lot of carbon, so building wind farms that pay back in 18 months or less really is the cheapest and smartest option.

I hope that that is helpful.

Jim Smith and Nick Sharpe have provided good answers. I can only agree with what they have said.

There will be a tremendous amount of opportunity as we go forward. The collaborations that we have put together on the development side—in setting the rules with supply chains so that they understand where the opportunities are, and in articulating with developers how they see developments in technology—will all contribute to Scotland benefiting further from the huge amount of opportunity that is to come.

We can certainly learn from what we have seen, by focusing on getting manufacturers to win contracts. We will not stop trying to do so, but perhaps there is a prize that we can win by working together and targeting the right areas that would most benefit the economy. We all definitely need to focus on that, and the various forums that are in place are trying to do so. There is no magic bullet, but there are a number of elements that we could work on, of which the CFD rules is one. This has been a challenge for all developers. Knowing that we need to be competitive and beat the lowest possible price has limited how much we can do to support local supply chains.

Matthieu, EDF said that it would support BiFab by giving it a contract for the delivery of eight jackets for its wider NnG project. Where are we with that?

We worked very hard with Saipem, our contractor for the jackets, to get eight jackets manufactured at BiFab. Saipem agreed with BiFab to the manufacture of eight jackets a year ago. Unfortunately, BiFab has not been able to follow through and provide the necessary guarantee in order to proceed and sign a contract. Although the contract should have been completed some time ago, that has not been the case.

The situation now is that the wind farm needs the jackets to be manufactured somewhere, and at the moment the chances of them being manufactured at BiFab are very slim indeed. That is because we are running out of time and have commitments to our supply chain and wider shareholders to develop that wind farm. If we do not have jackets, we do not have a project. We are now in the unfortunate position in which, although we have worked extremely hard to make it possible, it is looking unlikely that BiFab will manufacture the eight jackets.

So another opportunity has been lost for Scotland.

I want to come back in on that issue. What does BiFab need to do that it is not doing in order to win that contract?

When we had discussions with BiFab and Saipem agreed to have BiFab manufacture eight jackets for the project, we had requirements in place—as we always do—for the contractor to provide some guarantees so that we are not unduly exposed to risk. Unfortunately, BiFab has not been able to provide those guarantees and we have run out of time and are not able to follow through with BiFab without them.

What guarantees do you need?

The guarantees are for the work for the eight jackets. Without the guarantees, we would be taking the risk that shareholders of BiFab should take. The broker would take the risk that a company’s shareholders should normally take. Given the risk profile related to BiFab and the fact that the company’s shareholders cannot cover it, we are simply not able to go ahead with BiFab at this time.

Are you saying that BiFab could not guarantee that it could complete the work?

That is correct.

We have spoken a lot about CFD contracts. I will not go over what we have already talked about, but I want to ask about the three previous rounds that took place under UK Government ministers.

As part of the bidding process, supply chain plans have to be provided and the three criteria for that are competition, innovation and skills. There is no mention of carbon emissions or security of supply. All of the focus seems to be on affordable energy. As we have heard, the impact of a lack of money in the system is that there is a lack or loss of skilled jobs in Scotland.

Bearing in mind that the UK Government has announced a consultation on supply chain plans, which closes on 18 January, what has to change within supply chain plans to give Scotland a better chance of competing for some of that work?

11:30  

As part of our efforts as an industry body to help the supply chain, not too long ago, we convened a supply chain forum and took evidence from our supply chain members. Scottish Renewables has around 45 supply chain members, and we asked them what they needed in order to compete more effectively.

One of the things that was raised, which we acted on, was having a view of what was coming down the line: being able to see what projects were likely to develop at various stages in the future and where they were in their development processes. The UK Government already provides that information through the renewable energy planning database, and Scottish Renewables has been able to analyse that data as it comes out quarterly and break it down. We provide that service not just for our members but for any company in the supply chain. We break the data down into onshore and offshore wind pipeline, to let those companies see what is coming and have more visibility of the pipeline that they need. Therefore, if they want to invest, they know whether there will be a market for their product down the line.

The supply chain forum brought that back to us as the most important thing that we could do. Contracts for difference is a competitive auction process, and it is a closed process; we do not know who has bid into it. Other developers do not know and the supply chain would just be speculating, so that is a powerful way of giving people sight of the pipeline.

Jim Smith, one of your colleagues, Alistair Phillips-Davies, made a comment about contracts for difference in The Herald last week. He said:

“If people want different outcomes in terms of content then people need to find ways of supporting businesses or insisting on certain content.”

You have already touched on the fact that we might need some kind of carbon pricing, but should other things be included? I know that I am asking you to read your colleague’s mind, but I presume that you have had discussions about that.

The point that Alistair was making is that, if people are not happy with the result of the process that we have now, but they do not change the process, they will keep getting the same answer, so we need to change the process.

If there was an easy solution to achieve the balance between the lowest price for the consumer and getting more jobs in the country, someone would have come up with it by now. I do not know whether it would be illegal to put a mandatory target on it, but if there was a target, developers would need to achieve it. Ultimately, some change needs to be made but I do not have an easy answer for it. Because the targets for building offshore wind are there in front of us, we know that a lot of offshore wind farms will be built, and we need to get confidence and investment in the supply chain. There are a number of different areas; it is wrong to focus on just one element of the supply chain. With our potential supplier, we are working hard on our Dogger Bank project to make an investment in manufacturing in Scotland. I cannot say much more on that, because it has not happened yet and it might not happen, but we are certainly working hard. Many people have talked about that issue but, unless the rules change, we will keep getting the same answer.

I will ask the witnesses for their views on the new ScotWind leasing opportunities and, specifically, the supply chain development statements that are apparently required. Crown Estate Scotland wrote a letter to the committee in July 2020, which said that it had made the decision

“to require all applicants to ScotWind Leasing to submit a Supply Chain Development Statement”.

However, the cabinet secretary, Fiona Hyslop, wrote to us in July and said:

“we cannot require or compel developers to provide a Supply Chain Development Statement (SCDS) as part of their ScotWind application, nor can we specify local content”.

What is your understanding of the status of those supply chain development statements? We will start with Nick Sharpe, who might have an industry overview.

We have concerns about supply chain development statements. We voiced those at the summit with the former finance secretary, Mr Mackay, back in January. I can go into it in a bit more detail. From what the committee has heard, I hope that members understand that offshore wind developers are working very hard. I know that that sounds trite, but it is true. The companies giving evidence to the committee today have spent enormous amounts of time trying to make commitments to Scottish supply chain companies. As I said earlier, several projects are under way to that end. As an industry, we thought that the addition of supply chain development statements to the ScotWind leasing process was unnecessary and potentially counterproductive.

As I said earlier, it is hard to make commitments at such an early stage in the process of developing a wind farm. Neart na Gaoithe and Moray East both got leases in 2009-10 and will be commissioned in 2022. Although it is clear that we need that process to speed up, it is very hard for project developers to commit to supply chain intentions at an early stage in development. There is a risk that the supply chain development statements are counterproductive: in respect of reputational damage—setting aside the financial or termination of lease risk that hangs over supply chain development statements—there is a risk that companies will be tempted to lower the bar of their commitment, which is the opposite of what the policy is trying to achieve.

We recognise that early supply chain engagement is very important and can enable a clear investment pipeline for supply chain companies, so we have suggested that developers set out a baseline commitment on their supply chain, as well as a set of high ambition figures, which could give some indication of what might be possible with greater collaboration between the supply chain, Government and industry.

On the whole, supply chain development statements, whatever their guise—at Scottish Government or UK Government level—are a way to bring more clarity to a complex process. It is important to consider the timing issue and, as other witnesses have said, whether we are making Scotland a less attractive place to invest. If companies do not have the confidence to invest in Scotland, we will not have offshore wind farms at all and we cannot deliver those environmental and economic benefits.

We are working closely with Crown Estate Scotland and it has been very receptive and open to dialogue during the process. I hope that that continues.

What is your understanding of whether those statements will be required, given that the Scottish Government is saying that it cannot “require or compel” developers to provide such statements, yet Crown Estate Scotland has told us that it will be a requirement?

That level of detail is not within my personal experience. I understood that such statements were now part of the ScotWind leasing process. I can ask my colleagues to clarify that. I understand that the committee is hearing from Crown Estate Scotland in a few weeks and I am sure that the committee could get clarification then.

It might be too early in the process, but if your members have experience of the early stages, it would be useful for the committee to have some evidence on how that is developing. Do any other witnesses have comments on that area?

On floating wind, which is the future for Scotland, as a result of our experience with Kincardine, we are addressing the biggest single challenge by chasing the designers. Most of the current designs for floating wind do not work very well in our ports, because they need a depth of 13m and there is a limited number of ports with that facility. We can either fix the ports or we can fix the designs. We are trying to work with designers to find designs that will work in shallower waters and be compatible with more of the facilities that we have on the east coast of Scotland.

I am not an expert on the detail of the supply chain plans that are being talked about, but the point that the cabinet secretary might have been making is that the Government cannot mandate that a percentage of the supply chain is manufactured in Scotland. The supply chain development plan is for developers to set out what they intend to do, but I reinforce the point that Nick Sharpe made: it is very difficult to talk today about our supply chain plans for when we build the thing, which could be in 10 or more years’ time. The supply chain that we are using in 10 years’ time will probably look quite different from the supply chain landscape today.

There are no further questions from committee members, so I thank our witnesses for joining us today.

11:41 Meeting continued in private until 12:37.