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I welcome to the committee Fergus Ewing, the Minister for Energy, Enterprise and Tourism, who is joined today by officials from the energy division at the Scottish Government: Colin Imrie is deputy director of the energy division, Rebecca Carr is a senior policy adviser, and Howard Steele is a policy manager.
Good morning, committee members and clerks. Thank you for inviting me to give evidence on feed-in tariffs, carbon capture and storage, electricity market reform and fracking. I welcome the opportunity to go over the Scottish Government’s position on those matters.
Thank you, minister. You will be aware, talking of—[Interruption.] Whose mobile phone is that? That is a black mark, Mr Steele.
The Scottish Government strongly supported the Longannet CCS project over a long period and we were disappointed by the decision, although we can understand the reasons why it was taken, some of which were set out by Charles Hendry.
Thank you, minister. A number of members want to ask about this, so can we have brief questions and, I hope, fairly brief replies?
You said that the decision on CCS will have an impact on the targets that we will need to meet on a Europe-wide basis. What impact will it have on the targets that we have set here in Scotland?
It is essential that we develop CCS technology for the reasons that I have stated, and that will have an impact across all European countries, including Scotland. It is extremely important that we can use to best advantage the massive expertise on this topic that has built up in Scottish industry and universities. The economic opportunities of doing that are manifest. I am therefore keen to work closely with all involved, including the UK Government, to ensure that Scotland is included in the demonstration of CCS technology.
We have heard about the dialogue that you have had with the UK Government. Could you say something about the discussions that you have had with Scottish Power and its parent company with regard to the impact of the CCS decision, and will you say whether there is scope for the Scottish Government to engage with the company directly to try to support any new initiatives around CCS?
Led by the First Minister, the Scottish Government fought extremely hard to make Longannet succeed, and made representations at every appropriate level. Of course, the representations that we made included discussions with Scottish Power. I met representatives of Scottish Power and I understand the decisions that it took. The £1 billion did not cover the costs of the scheme, as it estimated. That is partly due to reasons that Mr Hendry explained about the deficit and the shortfall being extremely large and it is partly due to the impact that electricity market reform is perceived to have on the continuing use of coal for generating electricity and the carbon tax. That is an economic factor that, plainly, any company would take into account.
In that vein, Patrick Harvie has a question.
I expect that everyone agrees that, if CCS can be made to work, it has an important role to play. My concern remains that both Governments are behaving as though it is something that they know is about to be made real rather than something that still needs to be developed. I understand that you are unable to comment on the specifics of issues that might come up in a planning context—those are questions for another time—but I invite you to go a little bit further than you have in terms of the generality. You have mentioned the Peterhead example. I ask you to agree that, in general, there is a much stronger case for trying to develop CCS at an existing plant than there is for using it at a development that would include additional, unabated capacity. That would be the polar opposite of what CCS is designed to do and would lead to increased emissions, not reduced emissions. I suggest that the Scottish Government should be four-square behind the use of this technology at existing plants, particularly in gas plants.
We have been four-square behind CCS technology: it is difficult to see what more the Scottish Government could have done. I do not think that anyone has seriously advanced any analysis that more could have been done that we did not do. Research indicates that CCS has the potential to reduce CO2 emissions by up to 90 per cent from conventional fossil fuel power stations and that, without CCS, the overall costs of halving emissions by 2050 would rise by 70 per cent, so there is also an economic imperative to ensure that the technology works.
My suggestion is only that developing the technology at existing stations reduces emissions and that, if new capacity is needed, the stations need to be built at a time when we are able to abate the emissions fully. If we built a plant whose emissions would be only, for example, one quarter abated by CCS, that would be the opposite of reducing emissions; it would be a dramatic increase in our emissions.
Existing and new stations will almost certainly require to have CCS applied. I hope that the Scottish and UK Governments will work closely together on the decision-making process for that and the exact order in which the decisions are made, because we were not involved in that process in relation to Longannet, although we made detailed representations.
How does what you said a moment ago about the need to build more gas-fired stations fit with the Scottish Government’s stated ambition of having 100 per cent of our electricity generated from renewables by 2020?
That would be entirely consistent with our plans to move to a low-carbon economy. I have said at every available opportunity that the Scottish Government has a balanced energy policy and recognises that there is a need for continued thermal generation as we move to a low-carbon economy. I think that it was Churchill who said that what was essential for the supply of power was “variety and variety alone”.
Thank you. That would be helpful.
I asked Mr Hendry this question as a result of some of his comments about Longannet. Will older plants be at a disadvantage when bidding for CCS investment as a result of additional costs for work that would be required to bring them up to a particular standard before CCS could be introduced?
By definition, older plants are disadvantaged because they have less of their lives left to run. An older plant may have to close in five, 10 or 15 years’ time and the massive cost of CCS is such that one would have the benefit of reduced emissions only over that limited time. There is a strong, commonsense argument that we should not apply CCS to power stations that are at the end of their lives, because the benefit will be available only for a relatively short time.
No one would suggest that a power station that has about five years left should realistically be considered. However, older power stations that have longer to go before their natural end should be considered. That is the point that I was trying to get an answer on from Mr Hendry, and it is the question that I put to you.
Certainly, power stations can be upgraded by application of the technology. However, for the reasons that I have outlined, if we are going to look at existing power stations, it makes sense to look at those that still have a fair amount of life left in them.
Minister, you said that you did not have the budget to invest in CCS. Is that because it is a reserved issue and you were unable to invest, or is it because the Scottish Government chose not to allocate a budget to it? If it was for the latter reason, have you given any consideration to the fossil fuel levy, which is unallocated and available to invest at the moment?
I will deal with the fossil fuel levy first. We have argued consistently for some considerable time that the fossil fuel levy should be repatriated to Scotland in its entirety. It is attributable to Scotland and always has been. However, we did not get official agreement to that from the UK Government until relatively recently; therefore, that money became available to Scotland only after the decision on Longannet had been made. In addition, the fossil fuel levy is, strictly speaking, to be applied to renewables only; therefore, there is a question of competence as to whether that budget line could have been used. My advice is that it probably could not have been used even had we known that we would have that money before the decision on Longannet was made, which we did not know.
My understanding of the process is that the £1 billion was allocated to DECC as funding for a reserved matter in the comprehensive spending review by the UK Government in 2010. That funding, which was set out as part of the DECC budget reserve, was to have been applied to the winner of the first competition and is now to be rolled over into the next competition.
Does that prohibit the Scottish Government from investing in such technology? I am trying to bottom out whether a decision was made about budget spend or whether the Scottish Government is prohibited from making that budget spend.
The scale of the spend would have been such that it would have been completely beyond the Scottish Government. As you know, our budget is fixed, and I am not aware that we have any specific budgetary provision to enable us to contribute in any substantial way to the massive amounts of capital that would be required.
But you could have made the choice to invest if you had wished to do so. I am not suggesting that you take £500 million out of the Scottish budget to do that, but you could have considered doing that.
I do not think that it is a choice that we could have made. To find £500 million spare in the Scottish budget is an impossible and unrealistic demand in any event. The process took place on a UK basis with a UK budget provision and through a UK procurement exercise because these matters are reserved. That is the reality of it.
Can I just—
I think that we need to move on. I know that Chic Brodie has a question. I will allow you to make one brief comment.
I want to get to the nub of whether the Scottish Government is prohibited from investing in CCS. If the Peterhead proposal needed a much smaller contribution from the Scottish Government to go online, would you be prohibited from making such a contribution or could you do so from within your budget?
That question involves a lot of hypotheticals. Generally speaking, it is not sensible to answer hypothetical questions because, almost always, the situation does not arise in the way in which the question suggested. Plainly, we wish to use every measure that is within our competence to support the development of CCS in Scotland, but we do not have the budget to make it happen. Nonetheless, we are engaging constructively with Westminster on how to achieve that goal.
Thank you, minister. It would be helpful if you could send that letter to the committee, so that we can all see it.
Certainly.
Good morning. I asked this question of the UK minister. I am happy that we have a good working relationship with DECC in London, but who controls energy policy? Is there a clear strategic division, or does the Treasury make decisions on the hoof for its own reasons, which might be understandable? I take the point that, within the existing constraints, the Scottish Government is making highly focused decisions, and I have no reason to dispute the fact that we will achieve our targets by 2020. We are engaged with DECC, but how engaged do you think DECC is with the Treasury on establishing and agreeing the overall energy policy? Who is directing the traffic?
It is rather difficult for me to answer that question; you were correct to address it to Charles Hendry.
At the weekend, I noticed—I am sure that the minister did, too—press reports that suggested that, as part of its austerity package, the Government in Spain has suspended all subsidies for new renewable energy projects. That shows the impact that budgetary pressures will have in this area.
I was slightly dissatisfied by Mr Hendry’s responses to our questions on the review of feed-in tariffs for solar PV for two reasons. First of all, the uptake of that technology in Scotland is much less than you would have expected compared with England and, secondly, the cost on the roof of fitting those technologies does not seem to have come down in Scotland, particularly in the Highlands and Islands, as it has in the south of England. Have you made representations to the UK Government on that?
On 24 October and 3 November, I made detailed representations to DECC in which I strongly opposed the speed with which the Government was seeking to reduce tariff rates for solar PV. On 14 November, I wrote to all solar PV installers in Scotland to seek their views on the predicament. On 8 December, I met a number of installers and we had a useful, practical discussion during which the points that Mr MacKenzie has just highlighted were raised.
A number of members want to ask about this issue. Given the minister’s timetable and the fact that we have other areas to cover, I ask for very brief questions from Rhoda Grant, Stuart McMillan and Chic Brodie.
I understand that the wider subsidy regime—the renewables obligation certificates and the like—is mostly governed by Westminster but that the Scottish Government has the ability to make different tariffs for some things. Where might the Government deviate from Westminster?
The feed-in tariffs are matters for Westminster, although we are consulted. On renewables obligation certificates, we have the ability to make decisions as to incentivisation for various types of renewable energy. We have just finished a consultation on that and an analysis of the responses will, I hope, be made available next week, or perhaps even before that. We do not have specific power over the small scale, although we are consulted. On the larger scale—the ROCs—we have a say.
Do you envisage having a different regime from that in the rest of the UK, or is it too early to tell?
Do you mean in the setting of renewables obligation certificates?
Yes.
Generally speaking, it is better that there is consistency across the UK. That is generally a better approach, but that does not mean that the approach needs to be identical. Without divulging any confidential discussions, I think that it would be fair to say that the Scottish Government has made an impact through the detailed work that my officials have done under my direction, largely behind the scenes, in persuading DECC to give due support to marine renewables, for example. I have not made a decision on ROCs, as I received the analysis of the consultation submissions only last night, because the consultation period has just closed. As a matter of general practice, it is desirable not to have an entirely different system of ROCs, as it is good to generate investor certainty and confidence, which are key components in the field. I cannot overestimate the importance of that. The convener’s reference to Spain perhaps underlines the importance of Scotland not being deflected from its commitment to renewable energy—indeed, we will not be.
You touched on the impact on jobs in Scotland of the changes to the feed-in tariffs for solar PV. I am conscious of time, so can you provide written information on what you have heard from the people whom you have met, so that we can consider that information?
Various views have been expressed to me, some of which have been from individual companies about the impact on their business. Those details should probably remain confidential, unless otherwise authorised. General views about the impact on the sector have also been expressed to me. I have a figure in mind but, rather than mention it now, it would probably be prudent for me to write to the member on the issue. All of us, including Mr Hendry and me, wish to do everything that we can to restore confidence where it has been damaged in the solar sector, which has an important role. We want to ensure that jobs that might be at risk are, as far as possible, preserved and that businesses continue and do not fail. I have visited several of those businesses in my constituency in Inverness and in central Scotland. They are well-run and successful businesses that support many people. Our priority is to try to preserve jobs. I will therefore write to the committee with the best information that we have on the topic.
I want to return to the minister’s answer to Rhoda Grant and to the question that I asked earlier about the Treasury. Andrew Whitehead of SGH Martineau said about the FIT for solar energy:
It is no secret that we would wish to have power over all such matters. If and when we do, we will continue to work closely with our colleagues south of the border, albeit as an independent Scotland. There will be a seamless transition to a continued good relationship from an existing good relationship, if I can put it that way.
We must move on, in view of the time. We have other areas to cover. Let us turn to the issue of fracking, which was raised with Mr Hendry.
There are two specific points on the issue that I would like to explore with you, minister. First, in a series of written answers, you have said that
As Patrick Harvie knows, our whole energy policy is designed to decarbonise the production of electricity in Scotland and to supplant carbon with renewable sources. We are usually criticised for being too ambitious in that regard, and I know that Mr Harvie supports our energy policy. The overall driver of our energy policy is the decarbonisation of electricity generation. Of course, a second driver is the huge economic benefits that are starting to ensue to Scotland, as we saw yesterday in the announcement that Samsung is investing in Methil. Mr Harvie needs to see the overall picture.
Can you clarify the timescale in your electricity supply policy?
The electricity generation policy document looks at how we will continue to supply Scotland’s energy needs over the next several years. Plainly, it looks to the future and makes various estimates as to what will be required.
Yes, but you mentioned a timescale, and I am curious to know what it is.
Our target is to produce 100 per cent of our gross consumption needs for electricity by 2020. The policy will therefore focus on 2020, but it will also, as it must, consider the whole issue in the round as to how, given the lifespan of the existing power stations, our electricity needs will be met from each source, and it will go into some detail on that. However, it will focus primarily on 2020, by which time we assume that precisely zero megawatts will be supplied from shale gas.
Thank you for that clarification.
The minister is perhaps assuming a lot in saying that I support the Government’s energy policy. I certainly support the emphasis on renewables, but there are other aspects that I would like to pursue. He implied that shale gas and fracking have no role at all in Scotland, but I have seen the following in written answers:
In setting our energy policy, we are driven by the desire to move to a decarbonised electricity generation system, so that is plainly uppermost as a factor in our energy policy, as is well known. SEPA has statutory responsibilities that it must consider in relation to any operator who wishes to drill a well. There must be consultation with the Environment Agency in England and Wales or with SEPA in Scotland. Those bodies are also statutory consultees to the local planning authority, which will determine whether an environmental impact assessment is required. I cannot prejudge matters, but I would be astonished if an environmental impact assessment were not required, and rightly so. We can assume that SEPA will look on its statutory obligations in the round.
I would be grateful if the minister could come back to us with that specific answer. I have asked a specific question, in writing and orally, previously and today, about whether the factors referred to by the minister in written answers—in which he points me to the SPP—include the climate impact of CO2 that would be produced from the combustion of shale gas were it to be extracted in Scotland. The Scottish Government has not answered that question. It was answered earlier this morning by the UK minister, who said that it would not be a factor. That is breathtaking. I hope that the Scottish Government answers that specific question.
I am happy to write to the committee on that. I have pointed out that the statutory duty is SEPA’s. It seems self-evident that, in answering a question, one should be careful to check out precisely what the statutory duties are. I am sure that I can clarify that to Mr Harvie in due course.
I am grateful.
In November, SEPA gave a licence to a company to extract coal-bed methane in Dumfries and Galloway. What is the substantive difference between coal-bed methane extraction and fracking for shale gas?
I think that you might be referring to a case last year when SEPA authorised an exploratory drilling operation at Canonbie near Dumfries for the purposes of coal-bed methane extraction. Hydraulic fracturing would be used to develop the seam, but the operation has not yet gone ahead. I am advised that a suitable drilling rig is not available. SEPA expects further applications for development wells in the near future.
That was not what I asked about. I asked what the difference is between extracting coal-bed methane and extracting shale gas by fracking.
The difference is that shale gas and coal-bed methane are natural gases found respectively in shale rock and coal. Natural gas produced from shale or coal is often referred to as unconventional. That term refers to the rock and not the gas, whereas conventional oil and gas refers to hydrocarbons, which have previously been sought in sandstone or limestone. I suppose that the answer is a geological one.
I apologise if I misled you, but what I was trying to get at was whether there is any practical difference in the process of extraction.
The process of obtaining consent to drill a well is the same whether the well is targeted at conventional or unconventional gas.
No, no. I did not mean the process of gaining consent; I meant the process of extraction.
I am not an expert—I am not a miner or an engineer.
Perhaps your officials can help.
I apologise but I am not a miner or an engineer either.
The reason why I asked the question is that, although a licence has been granted for coal-bed methane extraction, you have told the committee that you are not licensing for fracking at this stage. I am trying to determine whether there is a practical difference between the two processes. I am happy for you to write to the committee on the matter.
What I have said is that we are not assuming that those activities will play any part in our energy policy. We do not want to prejudge the outcome of those issues and will keep a watching brief on them because we are aware of the concerns that have been expressed. I have made that view very clear to Mr Harvie on numerous occasions. I have done so in the chamber and in the committee last September.
So there is no presumption on the part of the Scottish Government against fracking.
We are keeping an open mind. By definition, if one does not prejudge an issue, one keeps an open mind. However, we recognise that there are strongly held views on the environmental problems associated with fracking. I concur with the view that I think I heard Mr Hendry express, which is that there are differences between the USA and the UK in this regard—differences that mean that it would be difficult for the process to become as widespread in the UK as it is in the USA.
Thank you. That is clear. I am conscious of the time, so do members have any further questions?
I have a question on a totally different subject, which is wind farms. We have not touched on it today, but we will probably do so in our inquiry. The issue is whether we can achieve the 100 per cent target given the growing opposition to onshore wind power because of its impact on the natural environment. People talk to me about the cumulative impact of more and more wind farms being built. Will there be new guidance in that respect? Will the Government consider its target in the light of the concerns that communities have expressed?
We are confident that our target of meeting 100 per cent of our electricity needs from renewable sources by 2020 will be achieved. It is an ambitious target, but it is achievable. However, I emphasise that it will not be achieved by onshore wind alone. As members will be aware, there are substantial developments in marine renewables—wave and tidal, and offshore wind. In fact, just before Christmas, Mitsubishi signed a memorandum of understanding to work in Dundee with Scottish and Southern Energy and a consortium of other companies. [Fergus Ewing has corrected this contribution. See end of report.] Further, I was delighted to see that just yesterday in Methil, where I visited John Robertson at Burntisland Fabrications in December, Samsung announced its plans to invest heavily there.
We will all look forward to that. Given the time and given that, as the minister indicated, we will explore the issues in greater detail as part of our inquiry, we will call a halt at this point. Looking at the wider picture, I am sure that all committee members will want me to express our support for the bid that has been made for Edinburgh to host the green investment bank. I think that we all want to see that come to Scotland.
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