Official Report 779KB pdf
Our next item of business is an evidence session on Grangemouth’s industrial future. Following the announcement that the refinery at Grangemouth would transition to a finished fuels import terminal and distribution hub, both the Scottish and United Kingdom Governments agreed to support a feasibility study, known as project willow, on the different options for the industrial future of Grangemouth. Last month, the committee heard evidence from Michael Shanks MP, Parliamentary Under-Secretary of State for Energy.
Today, I am delighted to welcome Gillian Martin, Acting Cabinet Secretary for Net Zero and Energy. The cabinet secretary is joined by Scottish Government officials Chris Bryceland, team leader, critical energy infrastructure, and Kenneth MacDermid, head of critical energy infrastructure; and by Jan Robertson, Grangemouth director for Scottish Enterprise. As always, I appeal to members and witnesses to keep questions and answers as brief as possible.
The Acorn project is an integral part of the transition at Grangemouth. I do not want to pre-empt any announcements that might be made today, but there have been reports that the UK Government will commit substantial funding to the Acorn carbon capture project. The Scottish Government’s previous pledge of £80 million was in the programme for government but not in the budget. Is that commitment still there? Why has there been no Scottish Government investment in the project to date?
When I came into post as Minister for Energy, one of my first meetings was with the Scottish cluster, which, at that point, was hopeful of getting track status. It has been marched up a hill so many times, but the previous UK Government never committed to getting it track status. We pledged money to the cluster for the point at which it would need it. I had very strong signals from the cluster that it would ask for the money when it needed it; it did not see it as worth while to take the money that the Scottish Government had pledged when there was no track status guarantee. The pledge absolutely stands, and I really hope that there is an announcement on that today.
Everyone was very surprised that the project did not achieve track status under the previous Government, because it was one of the most viable carbon capture, utilisation and storage projects out there. The core team included Storegga and Petroineos, and other partners included Shell. They all wanted to take advantage of the infrastructure that we have in Scotland, including the geological infrastructure—the empty reservoirs in the North Sea—and to harness some of the work that had been done, even more than 15 years ago, when CCUS was originally funded by the UK Government. That funding was then taken away. The cluster has been very patient.
However, I also want to say that the Acorn project has the biggest capacity in the whole of the UK in relation to the amount of CO2 that can be taken, and it potentially rivals some of the reservoirs that the Norwegians have earmarked for CCUS. There is huge capacity that could take CO2 from all over the UK and also help our European neighbours to decarbonise some of the hard-to-abate sectors across Europe. On many occasions, the Climate Change Committee has said to both the UK and Scottish Governments that CCUS is absolutely essential for us to meet our 2045 net zero target and our UK 2050 net zero target.
I am cautiously hopeful—but very hopeful—that, in the spending review today, the current UK Government will make the commitment that previous Governments failed to make. I will be first in the queue to welcome that.
Will you be first in the queue with that £80 million as well?
Of course.
Effectively, the Government’s position was that the £80 million was on the table, with the caveat that it was contingent on the UK Government confirming a full funding package and timeline in the spending review. What prompted the change? Was it entirely due to discussions with the sector, or was there prompting as a result of the agreement with the Scottish Greens in government? That was what was reported at the weekend.
You are going to have to explain that to me—I have not seen that.
At the weekend, the Sunday Post reported that the Scottish Government changed its position from saying that £80 million was on the table to adding the caveat that it was contingent on the UK Government confirming a full funding package and timeline in the spending review. It reported that that was as a result of discussions with your former coalition partners, who put pressure on you to water down that commitment. Is that not true?
That is certainly not my recollection of the situation. That £80 million was always on the table. It comes back to my first point about those discussions with the Scottish cluster about when it would need the funding.
We have been calling for the new UK Government to step up and give the funding associated with track status to the Acorn project. We are all politicians here—we wanted to prompt that funding as much as possible. There was no point in the £80 million sitting there and never being used because the rest of the funding to get the project off the ground was not forthcoming.
As I said originally, the Scottish cluster told me that it would need the funds at the point at which it knew that the project would be going ahead. I hope that, by this time tomorrow, we will have a clearer indication of what the funding for that will look like and that, at long last, the Scottish cluster and the Acorn project can get going, because we do need them.
Absolutely.
Good morning, and thank you for joining us. Throughout this mini-inquiry, our focus has been on the refinery, and now we are looking forward.
Jan Robertson, there is obviously a great deal of work going on at Scottish Enterprise. Certainly, I have had a large number of approaches, meetings and discussions on the matter, which I have referred on to Scottish Enterprise to triage. It would be useful if you could share what you can about the type and nature of the projects that are coming through. After that, I will have further questions. I appreciate equally well that there will be commercial sensitivities, but it would be useful to put on the record what you are able to say at this point.
Absolutely—I am happy to do that. Thank you for the opportunity to share that with you.
Since the project willow public information document was published, which was a great point at which to showcase the opportunities at Grangemouth, there have been inquiries. We are the front door for those inquiries and we have seen a good number of them coming in. As of today, we have had 84 inquiries and, as you said, we have been working through them and triaging them.
As you said, I cannot share specifics, but I can give you some generalities. Among those 84 inquiries, there is a mixture of types. One type is inquiries that are interested in the site; we are working with and talking to those individuals and inquirers. Other inquiries involve potential projects for the site; again, we are working with those inquirers. There are also some inquiries that we think have a good opportunity of becoming projects in the relatively near term—that is, in the next three to four years. Our approach is to work through the inquiries as quickly as we can in order to make the progress that we want at Grangemouth.
We know that we have an issue around retaining the skills cluster. Given the nature of the funding, which includes £25 million from the Scottish Government, that could perhaps be disaggregated in order to get some shorter-term projects in place—to get some runs on the board now, if you like. The £200 million from the UK Government, via the National Wealth Fund, will involve a much longer and more complex process, including due diligence.
How are you breaking down the nature of projects between short-term ones that might be about job retention just now—but with the ability to go to scale in the future—and longer-term projects? Are you actively considering that?
Yes. There are a couple of aspects to that matter. You are right about the timescales: three time horizons are laid out in project willow, and there are three project sets in there. There is always the expectation that the plastics waste project set could have earlier opportunities. Biofeedstocks would be next, and the conduit for offshore wind would come after that.
We are very much working to those different timescales, and focusing at pace on—and putting a dedicated team around—those projects that we feel that we can move forward because they have the right attributes. Getting the longer-term projects is very much about getting into the market and working with investors, stakeholders, consortiums and the task force that we have in place, so that we can leverage in money from, for example, the National Wealth Fund and the Scottish National Investment Bank.
It is also important to focus on the existing companies on the site. We are blessed with having some very strong, world-class companies there already. There was a great example only a couple of weeks ago, when Scottish Enterprise supported Syngenta with a £2.2 million grant to develop a Seedcare manufacturing facility on the site, which has led to further jobs. We are very much focused on how we can support the growth ambitions of the existing companies on site.
That combination—of working with those companies that are already there, those that want to come in the nearer term and those that want to come in the longer term—will really deliver the maximum opportunity that Grangemouth can provide.
On that point, I will raise a question that has come up, which I asked Michael Shanks when he was before us. A lot of future activity is predicated on Ineos being a landlord of the site, which carries both opportunities and risks. You might well want to come in on this point, cabinet secretary. What is your assessment of the potential risks that any future projects will need to consider in order to work for Ineos—or, rather, not work against Ineos’s commercial interests? What consideration have you given to the risks of the considerable power that Ineos retains?
First, it is not unusual for companies in development to have a landlord. If Ineos does not want to sell the refinery site and if it wants to be the site’s landlord, it will have responsibilities in relation to how the site is developed and it will have an awful lot of infrastructure that it must put right.
On issues that developers might be bringing up about the relationship with Ineos, I will come to Jan Robertson. A lot of the people who are speaking to us in the task force have already spoken to Petroineos. It is working in good faith with the people who approach it, some of whom have been redirected to the task force via Petroineos and vice versa. Conversations about what it would be required to do as a landlord are happening.
Petroineos wants development to happen on the site; it wants to work with us across both Governments, and it wants Scottish Enterprise to secure projects for it. That is in its interests as a landlord—it has not indicated that it would want to take forward any of the projects in project willow.
Quite a lot of work was done with Petroineos previously. When Michael Matheson was the relevant cabinet secretary, the Scottish Government funded studies on turning the site into a biorefinery. However, Petroineos’s board decided not to turn any of those proposals into reality—the shareholders on the board decided that they did not want to go there—and we are where we are, regrettably.
It is a source of regret that the refinery has stopped producing, because we have a situation where workers in the wider Grangemouth area are worried about what the future might hold—I do not have to tell you that, Ms Thomson. However, there have been constructive relationships between us and Petroineos, as well as between Petroineos and those who have come forward with proposals. I am not concerned, because companies build developments and have a landlord in lots of situations, and Ineos Olefins & Polymers will still have a footprint in the cluster.
09:45
My point is that Ineos, as a landlord, could put punitive terms in place. If it was not all that keen on something that it viewed as having the potential to represent competition that it was not looking for, it could do anything that it wanted. Ineos could look at the issue from a commercial perspective, and it would have the power to act in that way. Given that power imbalance, does the Government recognise that there are not only opportunities but risks?
We have to move forward in good faith. We want to work with Ineos, which owns the site. As the constituency member, you are absolutely within your rights to ask such questions. Scottish Enterprise is progressing all the work that it is doing for the task force, and we are triaging all the approaches that come in. Scottish Enterprise is discussing with potential investors how they would want to operate, and discussing any issues that they might bring up around leasing parts of the site is part of that process.
To date, Ineos has certainly worked with us in good faith. It would not be in its interest to set punitive terms. If what it wants out of the process is to be the landlord, it wants to attract people into developing projects, via project willow or anything else, as that will secure it long-term tenancies. Putting punitive terms in place would not be in Ineos’s interest, because that could put off investment.
I am not saying that Ineos would do that; I am only making the point that it could do so, because it has the power. There is more than one way to skin a cat and more than one way to stop a project. I am not claiming that it will do that or even that I see such an intention; I only recognise, for the sake of risk assessment, that it retains considerable power and could make the situation difficult.
To build on what the cabinet secretary said, we absolutely recognise the potential risk. As you said, all the projects at Grangemouth are co-location projects, which means that they need to co-locate with a landlord.
Exactly.
Ineos wants new income streams and new tenants on the site. A key thing that derisks that is project willow. As it was developed and the projects were identified—they might not be the final set, but they are a really good start—synergies arose on site with the existing businesses, which are strategically relevant to Grangemouth. The landlords were part of that process and are excited and motivated by those projects and technologies. As I have said, they integrate and have synergies with Ineos’s business in Scotland and more widely. That is the first point.
I will reflect on the interactions that we have had. We meet the landlord every month at least, and we speak to it regularly. The level of engagement has been huge. Ineos is working with us, but it is also engaging with a lot of companies. Some of them are in the willow technology set, but it is interesting that it is also bringing forward other companies with different technologies that are approaching it, which is another indication that it wants to see new companies on site. It is very interested in new technologies, because the world is transitioning to sustainable chemicals. Ineos and others have an interest in that.
There are lots of positive signs, and we have lots of different forums, which is the other piece that derisks what you outlined. We work with Ineos on the Grangemouth future industry board, and it is part of the leadership forum. It is very integrated not only into the plans for the Grangemouth site but into the overall strategy for it, which helps us move forward.
You have introduced the Scottish speciality chemical cluster, which I had wanted to ask about later. A lot of the focus has been on enabling that, which we will come on to, but I will ask about the latest thinking. You referenced the money that was given to Syngenta. I have asked quite a number of questions in the Parliament about the strategy around the chemical cluster. I sense that there is not the same focus on it, but there should be, because it is excellent, is high value, plays into provenance and brand and has high margins. What is the thinking and the strategy around retaining and growing a specialist chemical cluster?
That is quite interesting. Jan Robertson might be able to give more detail about the near-term projects that have come forward. There is a near-term opportunity from acetone, butanol and ethanol refining—that involves the fermentation of biowaste into chemicals—and the sifting process has bottomed out a number of opportunities in that area. Another near-term opportunity involves the recycling of plastics into hydrolysed oil.
Project willow identified nine key development opportunities—that is the shop window. The Grangemouth site is a great offer, because it is strategically placed when it comes to geography and infrastructure and it is part of an industrial cluster. If it becomes more of a chemical cluster, that is great news, because that will mean high-value jobs. One huge disappointment about the ceasing of the refinery is about jobs, because the jobs that were associated with the refinery were high value. We do not want to lack high-value job opportunities. Sustainable aviation fuel provides an opportunity on the site in the medium term, and potentially in the longer term, that would bring high-value jobs.
In the medium term, we are focused on getting some projects off the ground—specialist work has been done to put teams in place for them—but we are also looking for high-value, sustainable, low-carbon opportunities in the longer term. A few things have to happen in the regulation space—I will come on to that—and in the aviation sector to prompt the demand for SAF. Things have to happen in relation to the regulation of hydroprocessed esters and fatty acids, which is the feedstock that is associated with biorefining. The Scottish Government has given the James Hutton Institute money to do a pilot study on the cover crops that would be required, and we are hoping to do more work to ascertain how we could play our part in that. Quite a lot of things have to happen at the regulation level but, to address your wider point, attracting high-value industries is absolutely at the core of what we are doing.
Perhaps Chris Bryceland can pick this up. We have discussed changing regulations in order to enable SAF, which other people might want to come in on. My point is that, as an attractor, a clear Scottish speciality chemical strategy is needed. I am not yet sufficiently clear about the specific Scottish strategy for speciality chemicals, compared with some of the wider stuff that is going on. If we get the approach right, the specialist chemicals, in and of themselves, will have significant potential to provide added value for all of Scotland.
That work has already kicked off in earnest. Scottish Enterprise is working with Arup, which is developing a cluster strategy for Grangemouth—not only the Ineos bit but Grangemouth more widely. The Earls Gate area, where a lot of the specialist chemicals manufacturers are located, will be included in that strategy.
Another large project that we are working on for Grangemouth involves innovation. We very much recognise that we need an innovation offering to give the site longevity, and chemicals will be at the heart of that. The multiple strands that we have talked about show how we, collectively, can progress that important opportunity.
Good morning, cabinet secretary. I will ask you about funding. If I have picked you up correctly, project willow provides nine key development opportunities, and 84 proposals are on the table. Can you say whether private investors have coalesced around any of those nine projects?
I am not telling you anything that you do not know, but the Scottish Government’s £25 million just transition fund for Grangemouth is in place to support the progression of those projects, as well as ancillary work around the just transition and skills interventions in the area. As part of the Falkirk and Grangemouth growth deal, £50 million has been given for work in the wider area. Jan Robertson will be able to give the specifics of the detail on private finance.
We have an offer, because we have a fund that is in place to support some of the development that is needed to make such proposals commercial. That bridging funding is needed for the projects to get to the commerciality point.
Across the nearer-term projects that we have talked about, a range of finance options are involved. They are all different, as you would imagine. Some already have private sector finance behind them, some need more and some will need access to public sector funding.
As the cabinet secretary explained, many of the companies are at the development expenditure stage, which is quite a risky stage, and they are looking to upscale. Several of the projects will seek to secure public sector funding, but we are working with them to leverage in the private sector, because that is what we want. If we take an approach to those companies that involves the public sector and the private sector, that will give them the best chance of progressing.
In the longer term, bigger sums of money will be required, which is absolutely when we would be looking for the private sector to be leveraged in. We are working with the likes of the National Wealth Fund and the Scottish National Investment Bank to ensure that we pick the best projects and leverage in money. That is very much a mixture, and a big part of our role is to keep leveraging in money through our contacts and networks.
When Michael Shanks appeared before us on 21 May, he said that the £200 million that the National Wealth Fund has allocated will not be released
“until a viable investment proposition is on the table.”—[Official Report, Economy and Fair Work Committee, 21 May 2025; c 17.]
Is enough funding in the system to act as seed funding to get projects off the ground? We are talking about the cost of many projects running into billions of pounds, if any of them take off. Who is providing the seed funding for the projects to get to that stage? If we do not have a viable proposition, we do not unlock the £200 million.
I have great sympathy with what is behind your questions, because I have the same questions. My UK Government partners in the task force know of my concerns. There must be consideration of the flexibility that is needed. The £25 million just transition fund is modest in comparison with the funds that the National Wealth Fund has at its disposal. The UK Government wants what we want—for the projects to be taken forward.
10:00On how the National Wealth Fund operates, it has stated that it will put in money for projects that are commercially viable. We do not want something that could become commercially viable and which just needs an injection of more seed funding not to be supported. I am discussing the issue with the UK Government. Should such a situation arise, I would make the point that the National Wealth Fund must step in so that we do not jeopardise any projects that have the potential to be very successful. I do not think that it would want to jeopardise such projects. There will maybe need to be a bit of flexibility. At what point would the NWF consider something to be sufficiently commercially viable for it to step in? I am concerned that that has not been quantified to me.
The good news is that UK Government ministers and I have been working closely on the issue. That is a real sea change in comparison with what happened previously, when there was not close collaboration. The task force reports to ministers. At least monthly, we have a meeting where we bottom out a lot of these questions. Jan Robertson reports to us on the status of all the projects, too. Therefore, it is not as though we will not know about the risks in relation to growing something—we are in the room, having granular-level updates on the projects.
I have another question on funding, given the difficulties that you have just outlined. The UK Government has set up an advanced fuels fund of £165 million. With that, it wants to build five sustainable aviation fuel plants. Two of those will be in Teesside, one in Immingham and one in Ellesmere Port, leaving one location to be confirmed. I do not know whether Grangemouth will be the location of the fifth plant. If sustainable aviation fuel is to be produced at Grangemouth, have you had any conversations with UK Government about our getting access to a share of that £165 million?
I have had many conversations with UK Government ministers on that. It is no secret to say that I was very disappointed that Grangemouth was not factored in when those initial announcements were made and Teeside was allocated £50 million. Given that project willow had probably just published its report, in which SAF was one of the nine options, it would be an understatement to say that I was surprised about that. I am not telling you anything that Ed Miliband and Michael Shanks do not know. They know how disappointed I was about that.
There is an opportunity for some of that funding to be leveraged into Grangemouth. The refinery is an ideal place for SAF production. Indeed, the Scottish Government funded some studies to allow Petroineos to bottom out its capability to produce SAF in Scotland. One of the reasons why that was not progressed is that, at the time, the previous UK Government was against removing the HEFA cap. That put a limit on Petroineos’s ambitions in that area.
Petroineos was quite up front—this was mentioned at the Grangemouth future industry board, when ministers from the previous UK Government were involved—that the HEFA cap was a real barrier to it progressing anything on sustainable aviation fuel or any biorefining projects, in relation to which the Scottish Government had given it funding to carry out studies. That was a missed opportunity.
What you have asked about, Mr MacDonald, is exactly what I have been putting to the UK Government. I hope that I am being listened to.
Some of the things that I want to ask about have been touched on, but I would like to go into a bit more detail. A broad range of things needs to be done in relation to the project willow opportunities, some of which are complicated and some of which are quite prosaic—some of it boils down to rubbish. With plastics collection, you need to make sure that the materials are disaggregated. With something as complicated as biorefining, it is important to make sure that you have secure feedstocks.
Some of that will come down to things that the Scottish Government will need to do in relation to regulating and co-ordinating. I therefore ask the cabinet secretary to summarise what the Scottish Government needs to do and to set out what work is currently under way. In relation to project willow, it is clear that feasibility studies in all the areas need to be concluded by 2026 if we are to stay on track. Will the cabinet secretary outline her understanding of the Scottish Government dependencies, the work that needs to be done and the work that is under way so that we get to the point at which those feasibility studies can be concluded?
I will try to be as brief as possible.
Do not feel that you need to be. I think that it is important that you are expansive, cabinet secretary.
This will not be easy to summarise.
Recycling is one of our medium-term opportunities. The Circular Economy (Scotland) Act 2024 set the direction of travel in relation to where Scotland wants to be on the circular economy. We also have things happening at a pan-UK level, such as the deposit return scheme and the producer liability stream.
One thing that comes through the Circular Economy (Scotland) Act 2024 is that, wherever possible, we want to take as much as possible of our waste or feedstock to whatever domestic recycling opportunity exists; we do not want to be sending it elsewhere. We are therefore doing an analysis or study of what recycling opportunities look like in Scotland at the moment and where the gaps are, particularly with a view to the development of the DRS and the waste route map. That is a huge opportunity for the Grangemouth cluster, and we are mapping recycling facilities in Scotland and where the gaps and opportunities are. There are massive opportunities in that area. We want to know where the feedstock comes from and about any opportunities to turn plastics into fuels and so on.
We have engaged with a number of potential developers on the recommendation around the aggregation of waste plastics, on which we are working with the Scottish Environment Protection Agency and Zero Waste Scotland.
In relation to HEFA, there is obviously the investment and project side of things, but the other part of the task force’s work is to identify where regulatory change has to happen in order to remove any barriers to investment. A very live and granular conversation is being had about that. Most of the things that need to be done in relation to regulation sit with the UK Government, but it is completely open to looking at that.
We are not standing still and waiting for the regulations to change with regard to the HEFA cap; we are looking at what Scotland could offer in terms of feedstock. That is why the James Hutton Institute and Scotland’s Rural College are doing the pilot study. The study should report in July, after which there will be trials, in late summer, of the type of crops and the viability of those crops. I will be working closely with my colleagues in the rural affairs team in the Scottish Government, because that work will make a material difference to what we grow in Scotland and where the land is for growing it.
I have mentioned some of the issues around sustainable aviation fuel. My assessment is that airlines want to use more SAF, but that there are few opportunities for them to buy that in the UK, which leads to some of the issues that Mr MacDonald mentioned and to them procuring quite a lot of it from Europe. Regulation in that area is reserved to the UK Government.
No one has mentioned hydrogen so far, but we have had some good news around RWE’s plans, which are supported by Ineos. Ineos was successful in the second hydrogen allocation round, which is fantastic news, because it means that there is an opportunity to have RWE come and invest in the Grangemouth area and produce hydrogen there. There is a lot going on around hydrogen, but, again, regulation in that area sits at a UK-Government level.
I assure Daniel Johnson that there is a synergy on the part of the two Governments’ ambitions to remove barriers in order for progress to be made on some of the projects that Jan Robertson and her team are looking at. If there are any regulatory barriers, they will be identified, flushed out and, hopefully, tackled.
I am quite sure the UK Government will furnish you with everything that you wish for, if I can put it glibly.
Is that right? That is on the official record. [Laughter.]
On a similar note, I will sidestep some of the points around aggregation, because I know that Lorna Slater would like to raise those. Instead, I will zero in on the things that are Scottish Government dependencies and drill into a little bit more detail there.
Policies on waste projects and the requirement to increase plastic collection, separation and aggregation clearly fall within the purview of the Circular Economy (Scotland) Act 2024. I would like to understand that situation in a little more detail. What level of resource is looking at those issues? When do you expect that work to conclude? What do you expect the outcomes to be? Will they involve regulations being made under the 2024 act? Will further primary legislation be required? When might we expect clarity about those outcomes and what the Scottish Government needs to do?
Clearly, if you are going to do work in those areas, you need a secure supply chain. However, no investor is going to come in if they do not know whether they are going to get the feedstocks to do the stuff that they want to do.
At the moment, SEPA and Zero Waste Scotland are collaborating on work on aggregation, involving an analysis of where plastics that are not covered under the deposit return scheme would go for processing and what the volume of that plastic is. That information is going to be useful to potential developers.
Whether there would need to be any changes to regulations is not something that has been flagged to me as an issue at all.
Would there not need to be such changes, though? One of the things that occurs to me on that, especially with regard to separation and aggregation, is that, during the passage of the 2024 act, there was a lot of discussion about whether we were taking the right route compared with Wales, for example, where there is standardised collection, which increases the level of collection and potentially allows you to do other things. It strikes me that, if every local authority is doing its own thing, that makes it harder to achieve what you want to achieve. Presumably, an investor will want a very particular kind of plastic, so you cannot just throw a plastic bag in with a plastic bottle—I am making this up, but I am guessing that that is the sort of thing that is important. Making sure that a facility gets absolutely the right kind of feedstock is going to be critically important, and there will probably need to be a degree of standardisation in order to deliver that. Surely that requires regulation. Did we miss an opportunity in that regard during the passage of the 2024 act?
The 2024 act does a lot of that.
Forgive me, but I am asking the current minister.
The previous minister is not making that up; she lived and breathed that legislation, and I took over the bill half way through.
The route map has been developed in collaboration with the Convention of Scottish Local Authorities, individual councils and other stakeholders. We did not want to take a top-down approach and say that all 32 local authorities have to manage their waste in a certain way. What we want is for local authorities to look at good practice that can be shared. The Verity house agreement is in place, and local authorities are in charge of managing their own business.
10:15There will be geographical variations in the types of waste but SEPA and Zero Waste Scotland are doing an analysis of the current gaps in relation to the types of plastics, where they are being sent for reprocessing, whether there is opportunity for reprocessing in Scotland and what the associated volumes are. That will enable them to tell companies such as Celtic Renewables where the opportunities are and work with them to ascertain what they need, with an eye on the opportunity to expand their operations.
We have a really good waste sector in Scotland. We have companies such as Keenan Recycling and Celtic Renewables, which are expanding into different areas. This is an opportunity for them to do that with regard to plastics recycling. I will not reel off a lot of different types of plastics because I would be making it up if I did that, Mr Johnson. However, SEPA and Zero Waste Scotland are doing that analysis on behalf of the Government.
The Circular Economy (Scotland) Act 2024 is robust. It allows flexibility. I do not think that regulatory change will be required but co-ordination of the waste streams will be needed. I refer not only to the waste streams from Scotland. If plastic waste recycling of the types that I mentioned happens in Grangemouth, that will also be an offer to the rest of the UK. There are gaps in the types of plastic recycling that can happen in the UK, not just in Scotland. That is why it is critical that the Scottish Government and the UK Government work together. The intelligence that the UK Government has on the waste streams in the rest of the UK will help the business case for any such projects.
I am slightly struggling with this. To have reliable waste streams, you need consistency, which surely requires standardisation. By “regulatory change”, I do not necessarily mean wholesale change. I mean considering what powers the Scottish Government has under existing legislation to create that standardisation by secondary legislation.
You said that there will be variation. However, it strikes me that, to have reliable feedstocks of the sort that we are talking about, you want to minimise the variation. You want consistency so that you maximise your potential feedstock. Surely that requires updates in regulation through secondary legislation, which will require a bit of thought and planning—or am I missing something?
I will not say that you are missing something, now that I have got to the nub of your question. It is not as if in Scotland we use different plastics from those that are used in the rest of the UK. Standard plastics are used throughout the UK and Europe. We know what they are and whether each one of them is viable as feedstock for the types of operation that are coming through and that Jan Robertson is considering with her team.
SEPA and Zero Waste Scotland are analysing where those different plastic streams go for recycling and where there are gaps—for example, if processing is not happening in Scotland or the wider UK, which might mean that there is an opportunity to do it. They are also assessing the volume. That is important for the business case. The question is where the volume of the feedstock needed to turn plastics into the chemicals that I outlined will come from.
That is critical work that not only has to happen in Scotland but must be done with our UK Government partners. If any streams of plastic waste are being taken elsewhere in Europe or further afield, it is in the interests of both Governments from a carbon footprint point of view and a business development point of view to minimise that as much as possible. That work is happening and is being done by the task force.
Anything that is required in relation to regulation is being fed back to both Governments. I would expect the UK Government to take forward any regulatory changes to enable projects to progress, and the Scottish Government would do the same, should anything land on our desk.
However, you do not have clarity on that right now.
No.
Finally, UK oil production peaked in 1999 and we have known for about a decade that there was uncertainty. Although the most recent announcements and decisions have clearly increased the urgency, it has been clear for some time that Grangemouth would need to change what it produced at some point in the future. When did the work to look at the feasibility of providing feedstocks for biorefining start? Did it start in earnest after Petroineos said that it was looking to close down Grangemouth, or was work done on that before the announcement?
I am glad that you asked me that, because a narrative has been put out there that we are reacting to the decision that the shareholders of Petroineos made last year, when, in fact, work has been on-going for quite a long time. The Scottish Government has been working with Petroineos in particular to prepare for a just transition, or a transition in the type of work that it would do, and I have a list here of the projects that we have worked on.
In 2021, the Scottish Government provided financial support to project GRACE, which investigated a range of potential decarbonisation interventions across Grangemouth. In 2022, the business provided 50 per cent of the funding for a biorefinery pre-appraisal study for biofuels, and the Scottish Government matched the funding. Appraisal studies on fuel switching, net zero and blue hydrogen projects were funded by a 50:50 split between Ineos and the Scottish Government. There was a further study on the biorefinery in 2023, and project willow was completed last year.
It is unfortunate that the shareholders did not want to progress any of those projects. That is a real shame, because I think that there was appetite from the workers and the management of the refinery to progress those opportunities. When I first came into post as Minister for Energy, I visited the refinery to discuss some of the outcomes of the biorefinery appraisal study, and the excitement was palpable. However, the shareholders and owners did not want to take it forward. It is not true to say that project willow was done in an emergency situation—the Government, working with Ineos, has been building the case for the refinery to change what it produced for quite some time. When it comes down to it, the company made a decision not to go forward with any of those projects, based on the views of the shareholders and the board.
The fact is that that work remains: it has been done and it fed into project willow. The study was funded by both Governments, and Petroineos led the work. Up to the point that the study was published, the work was done by EY, and it is now being taken forward by Scottish Enterprise and the task force. A great deal of work has been done in preparation for what we knew could happen.
I am wondering whether you would be able to quantify that. I am not asking for the information right now—you may want to provide it in writing. I want to know what the current commitment is to explore funding as well as the number of full-time equivalent jobs, and what has happened in the past with the FTE commitment in relation to the projects that you have set out, as well as the quantum of funding. It would be useful to have that information as context for the committee.
Kenny MacDermid has just given me what I think is the final figure for the funding to date, which is £87 million. That is for lots of things—the growth deal, additional resources, studies that have been done on hydrogen, and something that I should have mentioned when we were discussing project willow, which is the £2 million funding for the feasibility study on the pipeline. When we think about project willow, project GRACE—or the Grangemouth advanced capture project—the biorefinery and so on, we can see that the numbers all mount up. I can certainly furnish the committee with that information in writing.
That would be very helpful. Thank you.
On that point, cabinet secretary, in a report that was published in May 2024, the committee concluded that it did not consider that sufficient progress had been made in supporting a just transition at Grangemouth. What you are effectively saying is that responsibility for that lay with the company because it did not make the right decisions.
It made commercial decisions. I and Ed Miliband tried very hard to get it to make different decisions—
But Ineos told the committee that it approached the Scottish and UK Governments five years ago. With all due respect, Ed Miliband came in 10 months ago, and I am talking about the work undertaken in the past five years. The company told the committee that it had approached both Governments, seeking a Government-backed plan to transition from fossil fuel refining to low-carbon manufacturing in Grangemouth; it said that
“that piece of work would have had to have been done five years ago ... but”
it
“did not move on.”—[Official Report, Economy and Fair Work Committee, 13 November 2024; c 29.]
What you are saying is that responsibility for that lay with the company, not with the two Governments.
As you have brought the matter up, convener, I have to say that the previous UK Government did not show an interest in putting money into any of those interventions. I have outlined what the Scottish Government did, including providing 50:50 match funding with Ineos to do a lot of those studies. The previous UK Government was not interested in removing the HEFA cap and, although a member of the Grangemouth future industry board, it stayed largely silent and was not interested in doing anything to save the refinery or doing anything like project willow.
We had already started to progress and flesh out project willow with Petroineos before the change in the UK Government. When that change happened, we were delighted that the new UK Government wanted to part-fund the project. Before that point, it had looked as though the Scottish Government and Petroineos would have to fund it, because the previous UK Government was not interested. With the change in Government, though, there was a different mindset, and each of the two Governments took a 50:50 share of the costs associated with project willow.
Personally, I think it is important that we look forward. Project willow has happened, and it has been very well received. Wherever we go, I and my UK Government counterparts have been speaking to investors about it; it is known about in Europe by the likes of RWE in Germany and all the big investors.
As Jan Robertson has outlined, there are 84 proposals coming forward—and that is just to date. The door is not closed on any of them, and I say to anyone who is watching this committee and has projects that they want to bring to us that they should absolutely do so. Of course, there are the approaches that are being made to Petroineos, too.
We could look back five years and start pointing fingers. However, the most important thing is that in the past year—and particularly in the past six months—project willow and the task force have moved things along in a swift, agile and focused way. I am feeling so much more confident than I did this time last year about the prospects for that site.
When will we get the final just transition plan for Grangemouth from the Government? It is in draft at the moment—
Yes.
10:30
You have acknowledged that there was a lack of progress. What confidence can workers elsewhere in Scotland have that we will learn lessons from the lack of action that we have seen on Grangemouth? There will be a transition in many sectors, including oil and gas, and sites such as Torness are facing closure within the next five years. What reassurance can you give those workers that lessons are being learned from that lack of progress—although we might still debate who is responsible for it—to ensure that we do not make the same mistakes again?
Project willow, the task force and the work that has been done in the Grangemouth future industry board—which we have not mentioned, but which has involved stakeholders from communities, Scottish Enterprise, Forth Valley College and so on—have been really important. Not only have lessons been learned from that work; it has provided us with a potential blueprint for how we could work in the future.
We must also look at the just transition plan for Mossmorran and other places that you have mentioned, convener. We are always looking at how we could improve and be not only agile but proactive—we have a just transition plan associated with the oil and gas sector in the north-east, for example.
I add that the just transition plan for Grangemouth should be published next week, subject to Cabinet approval.
That gives us an exclusive.
Good morning. When we had Michael Shanks in several weeks ago, he said that, if he could have, he would have wanted to work on the issue 10 years ago. We might talk about some of the plans that the UK Government has for other sites, but I want to concentrate on the issues that I raised with Mr Shanks concerning Sullom Voe and Flotta, which sit in Orkney and Shetland, in my region. Both sites are operating at the moment but, although Flotta’s operational future was meant to last until the early 2030s, it has seen job losses recently and its ownership will change—NEO NEXT is, I think, the company that will be taking it over from Sinopec—while the plans that EnQuest has for Sullom Voe are all based around transition.
Michael Shanks could not say whether discussions were happening with the operators of both those sites. Are you having conversations with those operators about what the future will be, to ensure that we will not be in the same situation with Flotta and Sullom Voe as we are with Grangemouth?
I am having very regular conversations with all energy producers in Scotland about workforce issues, capacity and potential for changing to different activities associated with the just transition. The Deputy First Minister is having the same conversations with regard to economic growth and the green industrial strategy, and the First Minister is having them as well. That is happening across all the areas that will be involved in the just transition as we decarbonise and look to maximise the opportunities that exist, particularly from Scotland’s renewables proposition. The green industrial strategy is absolutely at the heart of that—of its five main areas, the majority are energy based.
I am conscious of time, so I just want to be clear. Are you saying that conversations are happening between the Government and the operators of Flotta and Sullom Voe about how an operational future will be secured for both sites?
If you are looking for detail on the matter, we can get it to the committee.
That would be very helpful. As I said, Flotta will have new operators next year. Although there are operational issues currently, this session is about the future so I want to confirm that those specific conversations will be had with the new operators.
The enterprise agencies that are involved—such as Highlands and Islands Enterprise—will absolutely discuss all the opportunities for transition with any operators, but I will take that point away to consider.
I will dive into a bit more detail about what Daniel Johnson has discussed. Looking to the big picture, I am glad to see that there is a plan to transition a fossil fuel refinery to projects such as recycling and using the fuels of the future.
One challenge with plastic recycling is simply the ability to make money from it—to make it financially viable. Producing plastics as a by-product of fossil fuels is ridiculously cheap, which is why plastics are so ubiquitous. However, recycling them is expensive.
To build on what Daniel Johnson said, to make recycled plastics economically viable, there would have to be regulatory change. That would mean having measures such as taxes on plastic, which are of course not within the remit of the Scottish Government, or, as the minister alluded to, extended producer responsibility for packaging, which would make producers of plastic packaging pay a fee that could later be used towards recycling it. The deposit return scheme is one such measure. However, there would have to be other regulatory changes, such as introducing a required percentage of recycled plastics in plastic goods, because, if left to its own choice, the market will always go for new plastics as they are much cheaper than recycled ones. What appetite is there for such regulatory change? What discussion has the minister had with the UK Government on the foundational regulations that would be needed to make business plans in that area viable?
As part of the industry task force, as we bottom out some of the more viable projects and as the projects go forward, we will assess the regulation that will be required. As Lorna Slater will know all too well, I am also involved in inter-ministerial conversations among the four nations on everything to do with the circular economy—in fact, I think that I am due to have one next week. We are having conversations not just with the UK Government but with the Governments of Wales and Northern Ireland. In particular, the recycling rates in Wales are very good—I think that they are among the best in Europe—and it wants to go further and to be able to recycle more.
Where regulatory change would be required to enable the feasibility and viability of the projects that we see, we must be agile in looking at the regulation that is associated with any of them. Ms Slater makes a very good point that there is an issue with the investability of recycling plastics, in that the business case for that is perhaps not strong enough to attract investment. However, interestingly, the recycling projects that are coming forward are the ones that are looking the most viable at the moment.
I will bring in Jan Robertson to give a wee bit more detail.
The bulk of the inquiries that come in are on plastics, which is probably not a surprise, because those are the nearer-term technologies. To reflect on some of Lorna Slater’s comments, the cost of recycling and commercial viability absolutely must be key considerations. Quite a few of the companies coming forward use new and innovative technologies, such as those that involve new ways of recycling that do not use as much energy, given that energy cost is a huge consideration for all the projects.
Plastic aggregation is a key consideration. We are working closely with the Scottish Government, because we need certainty and sufficiency of supply going forward. As we look across the projects, we are looking for complementarity so that there are some projects looking for certain types of plastics and some looking for other types. We want to ensure that we can optimise. Our focus at the moment is on the aggregation piece, as well as on innovation and ensuring that companies can produce commercially.
You mentioned supply. My question is substantially about demand, because the market by itself will not demand recycled plastics, as they are more expensive and might be lower quality depending on how they have been manufactured. Are Governments willing to force demand by essentially putting in place taxes on new plastics so that recycled plastics can compete?
We are in a cost of living crisis. One of the unpalatable things that people have to come to terms with is doing things such as taxing polluting products such as new plastic. Are Governments willing to do that? Do we have that appetite?
I will bring in Chris Bryceland to explain the technical aspects and what has already been done at UK level.
You are making a point—I absolutely hear it—about what we have to do across all four nations of the UK to accelerate the recycling of plastic. We have our landfill ban, which is associated with that, and we are moving forward with the deposit return scheme as well. We also have the producer liability duties coming into play. Some of the projects that we are looking at—I guess that we should call those the willow projects—are about making chemicals from plastic. There is a market for that. I will bring in Chris Bryceland on the detail of that.
In answer to the question on packaging taxes, the UK plastic packaging tax will tax plastic packaging that contains less than 30 per cent recycled content from April 2027. Pre-consumer plastic waste will not count towards that percentage. The tax will act as a further incentive to increase recycling content in plastics.
But it will only do that with packaging—plastics, of course, are used ubiquitously. I will leave that one there.
My final question, cabinet secretary, is on another difficult conversation that needs to be had about biofuels, which, as you know, will require increased timber production. We already have difficult conversations with the agriculture sector about land being taken out of agriculture for things like reforestation and, in this case, commercial forestry. The aviation industry wants to convert to biofuels. That is a great idea, except that there is not enough land on planet earth to grow enough timber to keep the aviation industry at its current size. How much of Scotland’s land are we talking about putting under commercial forestry for this? Is there an understanding of the scale of the land that would be required to feed Grangemouth that timber?
That depends on what gets taken forward. Several feedstocks are associated with biorefining. Biofuel does not just involve timber; it could be any kind of hydroprocessed esters and fatty acids.
We need to talk about what we use our land for. We do not want to displace the growing of food unnecessarily. There is a dichotomy: if we displace fruit crops for food, then we will have to import more food, and there is a carbon footprint associated with that. There is a careful balance to strike between what we use land for and the competing demands on our land. There is also quite a lot of degraded peatland that we want to re-wet in order to sequester carbon. That is an additional demand that we are putting on Scotland’s land and there is the spatial squeeze that could be associated with that.
We have these discussions on what land is used for with our rural economy colleagues. We have also recently had advice from the Climate Change Committee on what it sees Scotland’s land being used for. There are competing—actually, “competing” is the wrong word. We do not want to displace high-quality food production, as that would mean that we would have to import more of our food, which would have an associated carbon footprint, and might come from parts of the world that may not, for example, have such high animal welfare standards.
A very careful judgment has to be made. We could use feedstocks for biofuels, but we could effectively be offshoring emissions as a result. Your point is well made and this is a live conversation that we are having across all four nations and also in the Government.
Thank you.
Good morning. We use the term “just transition” a lot and the public hear it a lot, but I am not certain that we know what it means. For me, it means that a community is given the time to adjust to a situation, rather than what has happened, which seems to have been an almost overnight closure and asset-stripping exercise by Ineos. I think back to the days when Diageo announced the closure of the Johnnie Walker plant in Kilmarnock. Even Diageo took three years to effect that closure, which gave our community time to adjust, plan and prepare. Looking at Grangemouth as an outsider, I do not see that. That is anything but a just transition.
10:45To your credit, you have mentioned a number of projects that have been under way for a while, not only since the closure announcement. That is great, but a just transition has to be embraced by all the parties around the table—all the Governments and the company. Do you get the sense that we have such a process in place and that the company is committed to that?
We did not want this situation, Mr Coffey. We wanted Petroineos to make different decisions and potentially take forward some of the things for which the Scottish Government was offering part funding, such as switching to a different type of refinery. I have outlined some of them today. We also wanted Petroineos to extend its refining process in order for there not to be a gap between the cessation of refining and bringing new opportunities on stream. Believe me, we tried our best, but a commercial decision was made by its shareholders and its board to do it the way that it has been done, and it is for them to answer why they did it in such a way.
I want to come back to the point about how well-placed Grangemouth, as an industrial cluster, is for new opportunities. Grangemouth has had it tough in the last year, and the closure is devastating for the wider community—the refinery has been there for more than 100 years and it is totemic. There are 400 or 500 high-value jobs associated with the plant. There are other viable industries in the Grangemouth cluster that are still there and working but looking to the future as to how they can expand and diversify.
As devastating as it is that Petroineos has made the decision to cease refining at Grangemouth, with project willow bringing in other opportunities that are associated not only with the refinery but with the wider cluster, there is an opportunity for Grangemouth to become a real powerhouse. It is connected in the pipeline infrastructure; it is associated with the green port; it is ideally located in the heart of Scotland; it is on the Firth of Forth; and it is an industrial cluster that has a long-term future.
Michelle Thomson mentioned some areas where we could focus our energy on what the site could become in the future. At the moment, our focus is on reducing the gap between the refinery closure and what that future will be, as much as possible. Many of the workers have been redeployed to other parts of the Ineos company, and there have been fairs at which other companies, such as Scottish Power, have offered jobs to workers who are facing redundancy. Forth Valley College is providing those workers with opportunities for reskilling and filling in skills gaps. Those opportunities have been accelerated by the money that has come in from the Scottish and UK Governments. The college has a centre of excellence, which is making a wider offer to the area through the courses that it is providing related to future jobs that are associated with a just transition.
However, the central fact remains that workers were given notice of redundancy and are having to find other work, with the exception of the small percentage of them who are being redeployed to the import terminal, and the ones who are involved in the decommissioning of the site. It is a staged approach, but the fact remains that refining has ceased there.
It is not the way that things should be done. The role for Governments is to try to encourage different decisions to be made. Where we are unable to do that, we are trying to reduce the gap as much as possible. We are working at pace through the task force to say that the site is absolutely open for business in order to bring low-carbon opportunities into that cluster. I hope that, in however many years’ time, we can look back and say that, although we did not want what happened to happen, it was a turning point for Grangemouth that enabled it to become a low-carbon industry cluster.
Thanks for saying that.
I turn to the issue of the workers. How just is it for them to get either a redundancy check or an offer to take their families and move away somewhere else to work? If a just transition were in place, we would surely see people who live in that community being able to transition to these wonderful projects that are coming on stream rather than having to move away. That is what I understand a just transition to mean, and I hope that you share that view, too. I would be keen to hear whether the workers at Grangemouth think that we are in a just transition process, or whether they agree with me that everything has been rather sudden and they have been forced into the situation that they now face.
That is a question directly for them. What I would say is that the workers at the refinery will get other opportunities because of the high level of transferable skills that they have.
A good proportion of the workers at the refinery have always worked there, so they have never had to apply for other jobs or think about what other areas they might want to go into. They have gone from school into college and then into apprenticeships, and have been in the refinery for their whole working lives. That is a very unusual situation, but it is what the refinery has meant for Grangemouth.
The issue is not that the workers do not have transferable skills but that they have never had to think about applying for other jobs. They have never analysed the skills that they have and effectively marketed themselves to new employers. Work is being done at Forth Valley College to assist them to do that, and jobs fairs that are being run in association with that work are bringing in companies that recognise those people’s transferable skills and can offer them work.
However, Mr Coffey, you make a very good point. As marketable and highly skilled as those workers are, at the moment, a lot of the opportunities that they will be offered will require them to move. I come from a family that had to move because of a lack of a just transition—people will have heard me saying that my father was in shipbuilding and had to move in order to get work. The history of Scottish industry is full of stories of families having to relocate. It is not an easy thing to do and it is disruptive for families, so we want to ensure that people will have an opportunity to stay in the Grangemouth and Falkirk area—it is important to remember that it is not only Grangemouth that is affected; the surrounding area is affected, too. We want to prioritise medium-term opportunities for new businesses to come in, but we are also working with Petroineos, Forth Valley College and large Scottish companies who need workers with the skills that those workers have, so that as many of those people as possible can stay in the area.
On the legacy issue, are you convinced that Ineos is committed in that regard? The fact that a bundle of money has been put on the table is really welcome, because Kilmarnock did not get that from Diageo. However, from your engagement with Ineos, are you convinced that it is committed to participating in that legacy process for the community?
The First Minister has met Jim Ratcliffe, and I met him last year, too, along with Ed Miliband. From those meetings, I can say that Ineos wants to stay in the cluster. That is what it is telling us.
Thank you, cabinet secretary. That brings us to the end of the evidence session. I thank all our witnesses for appearing before us today.
I suspend the meeting briefly before we move on to the next item.
10:54 Meeting suspended.